美國
證券交易委員會
華盛頓特區20549
表格
(標記一個)
根據1934年證券交易法第13或15(d)條款的季度報告。 |
截至2024年6月30日季度結束
或
根據1934年證券交易法第13或15(d)條款的過渡報告 |
為過渡期由 至
委員會檔案編號：
（根據其章程所指定的正式名稱）
( 其他司法管轄區或 的註冊地或組織地點) |
(國稅局雇主 |
(總部辦公地址) |
(郵遞區號) |
(
(註冊人電話號碼，包括區號)
根據法案第12(b)條規定註冊的證券：
每種類別的名稱 |
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交易 標的 |
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每個註冊交易所的名稱 |
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The |
請在核對標記上打勾，確認申報人（1）已在前12個月（或申報人被要求提交此類申報的縮短期間）內提交證券交易所法案第13條或第15(d)條要求申報的所有報告，以及（2）過去90天一直處於此類申報要求的範圍內。
請打勾表明申報人在過去的12個月（或申報人需在該較短期間內提交這些檔案）中已根據《對S-t法規（本章節第232.405條）的規定405條》提交了所有必須提交的交互式資料檔案。
勾選表示登記人是大型加速申報人、加速申報人、非加速申報人、較小型申報公司或新興成長公司。詳細定義請參閱《交易所法》第1202條中“大型加速申報人”、“加速申報人”、“較小型申報公司”和“新興成長公司”的定義。
大型加速歸檔人 |
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☐ |
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加速歸檔人 |
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☐ |
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☒ |
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小型報告公司 |
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新興成長型企業 |
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如果一家新興成長型公司，請用勾選標記表示該申報人已選擇不使用根據證交所法案13(a)條款提供的任何新的或修訂過的財務會計準則的延長過渡期。
請勾選是否為外殼公司 (依照交易所法規定定義的外殼公司條款120億2)。是 ☐ 不是
股票類別 |
|
2024年11月11日現時股本 |
A利股份，每股面值$0.0001 |
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每股面值$0.0001的B類普通股 |
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\`
目錄
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頁面 |
第一部分。 |
2 |
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項目 1。 |
2 |
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2 |
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3 |
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4 |
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5 |
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9 |
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10 |
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項目2。 |
24 |
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項目3。 |
31 |
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項目4。 |
31 |
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第二部分。 |
32 |
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項目 1。 |
32 |
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项目1A。 |
32 |
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項目2。 |
32 |
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項目3。 |
32 |
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項目4。 |
32 |
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项目5。 |
33 |
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第6項。 |
33 |
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34 |
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i
第一部分-財務信息
項目 1總合簡明財務報表。
ProKidney 公司。
總合縮減 資產負債表
(以千為單位，除每股數據外)
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2024年9月30日 |
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2023年12月31日 |
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(未經審計) |
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資產 |
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現金及現金等價物 |
$ |
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$ |
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可市場證券 |
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應收利息 |
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預付資產 |
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預付的臨床費用 |
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其他流動資產 |
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流動資產總額 |
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固定資產，扣除累計折舊和攤銷 |
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使用權資產，淨額 |
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總資產 |
$ |
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$ |
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負債及股東赤字 |
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應付賬款 |
$ |
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$ |
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租賃負債 |
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應付費用及其他負債 |
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應付所得稅 |
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流動負債總額 |
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應付所得稅，扣除當前部分 |
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租賃負債，扣除當期部分 |
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總負債 |
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可贖回非控制權益 |
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股東赤字 |
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A類普通股，每股 $ |
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B類普通股，$ |
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資本公積額額外增資 |
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累積其他全面損失（或收益） |
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累積虧損 |
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( |
) |
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( |
) |
股東總赤字 |
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( |
) |
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( |
) |
總負債及股東虧損 |
$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ProKidney Corp.
Condensed Consolidated Statements of Operations - Unaudited
(in thousands, except for share and per share data)
|
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Operating loss |
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( |
) |
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( |
) |
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( |
) |
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( |
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Other income (expense): |
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Interest income |
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Interest expense |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net loss before income taxes |
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( |
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( |
) |
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( |
) |
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( |
) |
Income tax (benefit) expense |
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( |
) |
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( |
) |
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Net loss before noncontrolling |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net loss attributable to noncontrolling interest |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Net loss available to Class A ordinary shareholders |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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Weighted average Class A ordinary shares outstanding: |
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Basic and diluted |
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Net loss per share attributable to Class A ordinary shares: |
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Basic and diluted |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ProKidney Corp.
Condensed Consolidated Statements of Comprehensive Loss - Unaudited
(in thousands, except for share and per share data)
|
|
Three Months Ended September 30, |
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Nine Months Ended September 30, |
|
||||||||||
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2024 |
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2023 |
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2024 |
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2023 |
|
||||
Net loss including noncontrolling interest |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Other comprehensive income: |
|
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Unrealized income (loss) on marketable securities |
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( |
) |
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Other comprehensive income |
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( |
) |
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Total comprehensive loss including noncontrolling interest |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Less: Total comprehensive loss attributable to noncontrolling interest |
|
|
( |
) |
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( |
) |
|
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( |
) |
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|
( |
) |
Total comprehensive loss attributable to Class A ordinary shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ProKidney Corp.
Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit - Unaudited
(in thousands, except for share and per share data)
|
|
For the Three Months Ended September 30, 2024 |
|
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|||||||||
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Class A Ordinary Shares |
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Class B Ordinary Shares |
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|||||||||||||||
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Redeemable Noncontrolling Interest |
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Shares |
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Amount |
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Shares |
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Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss |
|
|
Accumulated Deficit |
|
|
Total Shareholders' Deficit |
|
|||||||||
Balance as of July 1, 2024 |
|
$ |
|
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|
$ |
|
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|
$ |
|
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$ |
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
||||||
Equity-based compensation |
|
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– |
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– |
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– |
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– |
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– |
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– |
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|||
Issuance of Class A ordinary shares, net of offering costs |
|
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– |
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– |
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– |
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– |
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– |
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||||
Vesting of Class B restricted stock rights |
|
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– |
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– |
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– |
|
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|
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|
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– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Exchange of Class B ordinary shares for Class A ordinary shares |
|
|
( |
) |
|
|
|
|
|
|
– |
|
|
|
( |
) |
|
|
– |
|
|
|
|
|
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– |
|
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|
– |
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|
|||
Exercise of stock options |
|
|
– |
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Impact of equity transactions on redeemable noncontrolling interest |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
Unrealized income on marketable securities |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
|
|||
Net loss |
|
|
( |
) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2024 |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
ProKidney Corp.
Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit - Unaudited
(in thousands, except for share and per share data)
|
|
|
|
|
|
For The Three Months Ended September 30, 2023 |
|
||||||||||||||||||||||||||||||
|
|
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|
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|
Class A Ordinary Shares |
|
|
Class B Ordinary Shares |
|
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
Redeemable Noncontrolling Interest |
|
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|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss |
|
|
Accumulated Deficit |
|
|
Total Shareholders' Deficit / Members' Equity |
|
|||||||||
Balance as of July 1, 2023 |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
||||||
Equity-based compensation |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|||
Vesting of Class B restricted stock rights |
|
|
– |
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Exchange of Class B ordinary shares for Class A ordinary shares |
|
|
( |
) |
|
|
|
|
|
|
– |
|
|
|
( |
) |
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|||
Impact of equity transactions on redeemable noncontrolling interest |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
Unrealized loss on marketable securities |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
|
|||
Net loss |
|
|
( |
) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
( |
) |
Change in redemption value of noncontrolling interest |
|
|
( |
) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
|
||
Balance as of September 30, 2023 |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
ProKidney Corp.
Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit - Unaudited
(in thousands, except for share and per share data)
|
|
For the Nine Months Ended September 30, 2024 |
|
||||||||||||||||||||||||||||||||||
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
Class A Ordinary Shares |
|
|
Class B Ordinary Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
Redeemable Noncontrolling Interest |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss |
|
|
Accumulated Deficit |
|
|
Total Shareholders' Deficit |
|
|||||||||
Balance as of January 1, 2024 |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||||
Equity-based compensation |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|||
Issuance of Class A ordinary shares, net of offering costs |
|
|
– |
|
|
|
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
||||
Vesting of Class B restricted stock rights |
|
|
– |
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Exchange of Class B ordinary shares for Class A ordinary shares |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
||||
Exercise of stock options |
|
|
– |
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Impact of equity transactions on redeemable noncontrolling interest |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
Unrealized loss on marketable securities |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
|
|||
Net loss |
|
|
( |
) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
( |
) |
Balance as of September 30, 2024 |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
ProKidney Corp.
Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit - Unaudited
(in thousands, except for share and per share data)
|
|
For The Nine Months Ended September 30, 2023 |
|
||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
Class A Ordinary Shares |
|
|
Class B Ordinary Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
Redeemable Noncontrolling Interest |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Additional Paid-in Capital |
|
|
Accumulated Other Comprehensive Loss |
|
|
Accumulated Deficit |
|
|
Total Shareholders' Deficit |
|
|||||||||
Balance as of January 1, 2023 |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
– |
|
|
$ |
( |
) |
|
$ |
( |
) |
||||||
Equity-based compensation |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|||
Issuance of Class A ordinary shares |
|
|
– |
|
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Vesting of Class B restricted stock rights |
|
|
– |
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
Exchange of Class B shares for Class A ordinary shares |
|
|
( |
) |
|
|
|
|
|
|
– |
|
|
|
( |
) |
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
|||
Impact of equity transactions on redeemable noncontrolling interest |
|
|
( |
) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
|
||
Unrealized loss on marketable securities |
|
|
( |
) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
– |
|
|
|
( |
) |
Net loss |
|
|
( |
) |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
( |
) |
Change in redemption value of noncontrolling interest |
|
|
|
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
– |
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of September 30, 2023 |
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
ProKidney Corp.
Condensed Consolidated Statements of Cash Flows – Unaudited
(in thousands)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net loss before noncontrolling interest |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss before noncontrolling interest to net cash flows used |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Equity-based compensation |
|
|
|
|
|
|
||
Gain on marketable securities, net |
|
|
( |
) |
|
|
( |
) |
Impairment charges |
|
|
|
|
|
|
||
Loss on disposal of equipment |
|
|
|
|
|
|
||
Changes in operating assets and liabilities |
|
|
|
|
|
|
||
Interest receivable |
|
|
( |
) |
|
|
( |
) |
Prepaid and other assets |
|
|
( |
) |
|
|
|
|
Accounts payable and accrued expenses |
|
|
( |
) |
|
|
|
|
Income taxes payable |
|
|
( |
) |
|
|
|
|
Net cash flows used in operating activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Cash flows from investing activities |
|
|
|
|
|
|
||
Purchases of marketable securities |
|
|
( |
) |
|
|
( |
) |
Sales and maturities of marketable securities |
|
|
|
|
|
|
||
Purchase of equipment and facility expansion |
|
|
( |
) |
|
|
( |
) |
Net cash flows provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Cash flows from financing activities |
|
|
|
|
|
|
||
Proceeds from sales of Class A ordinary shares, net of offering costs |
|
|
|
|
|
|
||
Payments on finance leases |
|
|
( |
) |
|
|
( |
) |
Net cash flows provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Net change in cash and cash equivalents |
|
|
|
|
|
( |
) |
|
Cash, beginning of period |
|
|
|
|
|
|
||
Cash, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of non-cash investing and financing activities: |
|
|
|
|
|
|
||
Right of use assets obtained in exchange for lease obligations |
|
$ |
|
|
$ |
|
||
Exchange of Class B ordinary shares |
|
$ |
|
|
$ |
|
||
Impact of equity transactions and compensation on redeemable noncontrolling interest |
|
$ |
|
|
$ |
|
||
Change in redemption value of noncontrolling interest |
|
$ |
|
|
$ |
|
||
Equipment and facility expansion included in accounts payable and |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
ProKidney Corp.
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1: Description of Business and Basis of Presentation
Description of Business
ProKidney Corp. (the “Company” or “ProKidney”) was originally incorporated as Social Capital Suvretta Holdings Corp. III (“SCS”). SCS was a blank check company incorporated as a Cayman Islands exempted company on
On January 18, 2022, SCS executed a definitive business combination agreement (the “Business Combination Agreement”), with ProKidney LP (“PKLP”), a limited partnership under the laws and regulations of Ireland. Pursuant to the terms of the Business Combination Agreement, PKLP became a subsidiary of SCS and was organized in an umbrella partnership corporation (“Up-C”) structure, which would provide potential future tax benefits for SCS when the equity holders ultimately exchanged their pass-through interests for Class A ordinary shares. The business combination between SCS and PKLP (the “Business Combination”) closed (the “Closing”) on July 11, 2022 (the “Closing Date”). Upon consummation of the transaction, SCS changed its name to ProKidney Corp.
The Business Combination was accounted for as a reverse recapitalization transaction between entities under common control, through which PKLP was considered the accounting acquiror and predecessor entity. The Business Combination was reflected as the equivalent of PKLP issuing stock for the net assets of SCS accompanied by a recapitalization with no goodwill or intangible assets recognized.
ProKidney Corp., through its operating subsidiaries, ProKidney, which is incorporated under the Cayman Islands Companies Act (as amended) as an exempted company (“ProKidney-KY”) and ProKidney LLC, a limited liability company under the laws of Delaware (“ProKidney-US”) is focused on the development of rilparencel, which has the potential to preserve kidney function in patients with chronic kidney disease or delay or eliminate the need for dialysis and organ transplantation.
Principles of Consolidation
ProKidney is a holding company, and its principal asset is a controlling equity interest in PKLP and its wholly-owned operating subsidiaries ProKidney-KY and ProKidney-US. The Company has determined that PKLP is a variable-interest entity for accounting purposes and that ProKidney is the primary beneficiary of PKLP because (through its managing member interest in PKLP and the fact that the senior management of ProKidney is also the senior management of PKLP) it has the power and benefits to direct all of the activities of PKLP, which include those that most significantly impact PKLP’s economic performance. The Company has therefore consolidated PKLP’s results pursuant to Accounting Standards Codification Topic 810, “Consolidation” in its Condensed Consolidated Financial Statements. As of September 30, 2024, various holders own non-voting interests in PKLP, representing a
All intercompany transactions and balances have been eliminated.
.
Note 2: Significant Accounting Policies
Unaudited Interim Financial Statements
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying Condensed Consolidated Balance Sheet as of September 30, 2024, Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023, Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2024 and 2023, Condensed Consolidated Statement of Changes in Redeemable Noncontrolling Interest and Shareholders’ Deficit for the three and nine months ended September 30, 2024 and 2023 and Condensed Consolidated Statements of Cash Flows for the nine months ended September 30,
10
2024 and 2023 are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.
The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2024, the results of operations for the three and nine months ended September 30, 2024 and 2023 and cash flows for the nine months ended September 30, 2024 and 2023. Certain prior year amounts have been reclassified to conform to the current year presentation. The December 31, 2023 Condensed Consolidated Balance Sheet included herein was derived from the audited financial statements but does not include all disclosures or notes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited financial statements and the accompanying notes for the year ended December 31, 2023, contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2024.
Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). These unaudited consolidated financial statements are presented in U.S. Dollars.
Interim results are not necessarily indicative of results for an entire year.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements, in accordance with GAAP, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the condensed consolidated financial statements, and the amounts of expenses during the reported periods. Certain estimates in these condensed consolidated financial statements have been made in connection with the calculation of research and development expenses, equity-based compensation expense and the provision for or benefit from income taxes. The Company bases its estimates on historical experience and various other assumptions, including in certain circumstances future projections, which management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.
Cash Equivalents and Marketable Securities
The Company considers all highly liquid investments with an original maturity of 90 days or less on the date of purchase to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the short-term nature of these items.
The Company’s investments in marketable debt securities have been classified and accounted for as available-for-sale. The Company classifies its marketable debt securities as short-term due to its availability for use in its current operations. The cost of securities sold is determined using the specific identification method.
The Company considers all available evidence to evaluate if a credit loss exists, and if so, recognizes an allowance for credit loss.
Concentrations of Credit Risk
Cash and equivalents are the primary financial instruments held by the Company that are potentially subject to concentrations of credit risk. The Company’s cash and equivalents are deposited in accounts at large financial institutions, and such amounts may exceed federally insured limits.
11
Accrued Expenses
Accrued expenses as presented in the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 consisted of the following (in thousands):
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Compensation |
$ |
|
|
$ |
|
||
Severance |
|
|
|
|
|
||
Clinical study related costs |
|
|
|
|
|
||
Facility related costs |
|
|
|
|
|
||
Accrued legal costs |
|
|
|
|
|
||
Investment purchases payable |
|
|
|
|
|
||
Manufacturing improvement costs |
|
|
|
|
|
||
Accrued consulting and professional fees |
|
|
|
|
|
||
Other accrued expenses |
|
|
|
|
|
||
Total accrued expenses and other |
$ |
|
|
$ |
|
||
Research and Development Costs
Research and development costs are expensed as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries, benefits, third party license fees, and external costs of outside vendors engaged to conduct manufacturing and preclinical development activities and clinical trials.
The Company records accruals based on estimates of services received, efforts expended, and amounts owed pursuant to contracts with numerous contract research organizations. In the normal course of business, the Company contracts with third parties to perform various clinical study activities in the ongoing development of potential products. The financial terms of these agreements are subject to negotiation and variation from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events and the completion of portions of the clinical study or similar conditions. The objective of the Company’s accrual policy is to match the recording of expenses in its financial statements to the actual services received and efforts expended. As such, expense accruals related to clinical studies are recognized based on the company’s estimate of the degree of completion of the event or events specified in the specific clinical study.
The Company records nonrefundable advance payments it makes for future research and development activities as prepaid expenses. Prepaid expenses are recognized as expense in the Condensed Consolidated Statement of Operations and Comprehensive Loss as the Company receives the related goods or services.
Costs incurred in obtaining technology licenses are charged to research and development expense as purchased in-process research and development if the technology licensed has not reached technological feasibility and has no alternative future use.
Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation. Generally, expenditures for maintenance and repairs are charged to expense and major improvements or replacements are capitalized. The Company computes depreciation and amortization using the straight-line method over the estimated useful life of the asset. Leasehold improvements are amortized over the lesser of the life of the lease or the estimated useful life of the leasehold improvement.
Buildings |
|
Computer equipment and software |
|
Furniture and equipment |
|
Leasehold improvements |
12
Fixed assets consisted of the following (in thousands):
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Land |
$ |
|
|
$ |
|
||
Buildings |
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
||
Furniture and equipment |
|
|
|
|
|
||
Computer equipment and software |
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
||
Less: accumulated depreciation |
|
( |
) |
|
|
( |
) |
Total fixed assets, net |
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended September 30, 2024 and 2023 was $
Impairment of Long-Lived Assets
Long-lived assets such as fixed assets and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.
Due to a change in the planned use for the Company’s Greensboro facility, the Company performed an impairment analysis to compare the building’s carrying value with its estimated fair value. The fair value was determined through review of prices for similar assets and expected ranges of prices that the Company may be expected to receive upon sale of the property which are considered Level 3 inputs under the fair value hierarchy. This analysis resulted in the recognition of a non-cash impairment charge of $
Income Taxes
The Company uses the liability method in accounting for income taxes as required by ASC Topic 740 — Income Taxes, under which deferred tax assets and liabilities are recorded for the future tax consequences attributable to the differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, available taxes in the carryback periods, projected future taxable income and tax planning strategies in making this assessment. Accordingly, the Company has provided a full valuation allowance to offset the net deferred tax assets at September 30, 2024 and December 31, 2023.
Interest and penalties related to income taxes are included in the expense for income taxes in the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss. The Company has not incurred any significant interest or penalties related to income taxes in any of the periods presented.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three‑level fair value hierarchy that prioritizes the inputs used to measure fair value is described below. The three levels of inputs used to measure fair value are as follows:
13
For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data are based primarily upon estimates and are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, fair value measurements cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, could significantly affect the calculated current or future fair values. The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.
The carrying values of cash equivalents, accounts payable, and accrued liabilities approximate fair value due to the short‑term nature of these instruments.
Leases
The Company determines if an arrangement is a lease at inception. Balances recognized related to the Company’s operating and finance leases are included in right-of-use assets, net and lease liabilities in the Condensed Consolidated Balance Sheets. Right of use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Lease terms may include options to extend or terminate the lease if it is reasonably certain that the Company will exercise the option. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. The right of use asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. The Company has elected a practical expedient to not separate its lease and non-lease components and instead account for them as a single lease component. Leases with a term of 12 months or less are not recorded on the balance sheet.
Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Lease payments for short-term leases are recorded to operating expense on a straight-line basis and variable lease payments are recorded in the period in which the obligation for those payments is incurred.
Contingent Liabilities
The Company records reserves for contingent liabilities when it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements, and the amount of the loss can be reasonably estimated.
Equity-Based Compensation
Compensation expense for equity-based compensation awards issued is based on the fair value of the award at the date of grant, and compensation expense is recognized for time-vested awards earned over the service period on a straight-line basis. The Company recognizes equity-based compensation for options containing performance-based vesting conditions over the requisite service period if it is probable that the performance conditions will be satisfied. The Company records forfeitures of equity-based compensation awards as they occur.
Segments
Recently Issued Accounting Pronouncements
In March 2024, the Financial Accounting Standards Board (“FASB”) issued a new standard that provides additional guidance for determining whether profits interests and similar awards should be accounted for in accordance with Topic 718, Compensation - Stock
14
Compensation, of the Accounting Standards Codification. The standard will be effective for the Company beginning with our annual reporting for fiscal year 2025 and interim periods in that year, with early adoption permitted. We do not believe that the adoption of this standard will have an impact on the classification of the profits interests that were granted to participants prior to the Business Combination.
Note 3: Investments
Cash equivalents and marketable securities are measured at fair value and within Level 2 in the fair value hierarchy, because we use quoted market prices to the extent available or alternative pricing sources and models utilizing market observable inputs to determine fair value.
The following tables summarize our cash equivalents and marketable securities measured at fair value on a recurring basis as of September 30, 2024 (in thousands):
|
Fair Value Hierarchy |
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
|
Cash Equivalents |
|
|
Marketable Securities |
|
||||||
Money market funds |
Level 2 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Time deposits |
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial paper |
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Asset backed securities |
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Government bonds |
Level 2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate debt securities |
Level 2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||||
Total |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|||||
The following table shows the fair value of the Company’s cash equivalents and marketable securities, by contractual maturity, as of September 30, 2024 (in thousands):
|
September 30, 2024 |
|
|
Due in 1 year or less |
$ |
|
|
Due in 1 year through 5 years |
|
|
|
Total |
$ |
|
|
The following table shows fair values and gross unrealized losses recorded to accumulated other comprehensive income, aggregated by category and the length of time that individual securities have been in a continuous loss position as of September 30, 2024 (in thousands):
|
Less than 12 months |
|
|
12 Months or Greater |
|
|
Total |
|
|||||||||||||||
|
Fair Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
|
Fair Value |
|
|
Unrealized Loss |
|
||||||
Corporate debt securities |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||||
Total |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
||||
The Company holds debt securities of companies with high credit quality and has determined that there was no material change in the credit risk of its debt securities during the three and nine months ended September 30, 2024 and 2023. As such, the Company has
ProKidney is considered to be an exempted Cayman Islands company and is presently not subject to income taxes or income tax filing requirements in the Cayman Islands or the United States.
The Company’s subsidiary, PKLP, is organized as a limited partnership and is classified as a partnership for U.S. income tax purposes, and as such, only records a provision for federal and state income taxes on its subsidiaries organized as C corporations or which have elected to be treated as corporations for U.S. federal income tax purposes.
The Company’s subsidiary, ProKidney-US, is treated as a C corporation, and therefore a provision for federal and state taxes has been recorded. The difference between the Company’s effective tax rates and the U.S. statutory rate of
15
The Company’s subsidiary, ProKidney-KY, has been granted, by the Government in Council of the Cayman Islands, tax concessions under an undertaking certificate exempting it from any tax levied on profits, income, gains or appreciations in relation to its operations or in the nature of estate duty or inheritance tax for a period of twenty years from January 20, 2016. ProKidney-KY elected to be treated as an entity disregarded from its owner for U.S. tax purposes, and as a result, it has not recorded an income tax provision.
As discussed in Note 6, the Company is party to a tax receivable agreement with a related party which provides for the payment by the Company to holders of PKLP prior to the Closing (“Closing ProKidney Unitholders”) of
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, available taxes in the carryback periods, projected future taxable income and tax planning strategies in making this assessment.
There were
There were no significant changes in the Company’s uncertain tax positions during the three and nine months ended September 30, 2024 and 2023.
Note 5: Leases
The Company has operating leases for real estate (primarily its operating facilities) and certain equipment with various expiration dates. The Company also has one finance lease for certain equipment. Rent expense was $
The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 (in thousands):
|
|
September 30, 2024 |
|
|
December 31, 2023 |
|
||
Operating leases: |
|
|
|
|
|
|
||
Right of use assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Operating lease liabilities, current |
|
$ |
|
|
$ |
|
||
Operating lease liabilities, noncurrent |
|
|
|
|
|
|
||
Total operating lease liabilities |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Finance leases: |
|
|
|
|
|
|
||
Right of use assets |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Finance lease liabilities, current |
|
$ |
|
|
$ |
|
||
Finance lease liabilities, noncurrent |
|
|
|
|
|
|
||
Total finance lease liabilities |
|
$ |
|
|
$ |
|
||
16
Maturities of lease liabilities for the Company’s operating and finance leases are as follows as of September 30, 2024 (in thousands):
|
|
Operating Leases |
|
|
Finance Leases |
|
|
Total |
|
|||
2024 (remaining three months) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2025 |
|
|
|
|
|
|
|
|
|
|||
2026 |
|
|
|
|
|
|
|
|
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
2028 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
Total lease payments |
|
|
|
|
|
|
|
|
|
|||
Less: imputed interest |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Present value of lease liabilities |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The weighted average remaining lease term for operating leases is
Note 6: Related Party Transactions
Exchange Agreement
On the Closing Date, the Company entered into an exchange agreement with PKLP and certain Closing ProKidney Unitholders (the “Exchange Agreement”) pursuant to which, subject to the procedures and restrictions therein, from and after the waiver or expiration of any contractual lock-up period (including pursuant to the Lock-Up Agreement (as defined below)) the holders of Post-Combination ProKidney Common Units as defined in the Exchange Agreement (or certain permitted transferees thereof) have the right from time to time at and after 180 days following the Closing to exchange their Post-Combination ProKidney Common Units and an equal number of Class B ordinary shares of the Company on a one-for-one basis for Class A ordinary shares of the Company (the “Exchange”); provided, that, subject to certain exceptions, the Company, at its sole election, subject to certain restrictions, may, other than in the case of certain secondary offerings, instead settle all or a portion of the Exchange in cash based on a volume weighted average price (“VWAP”) of a Class A ordinary share. The Exchange Agreement provides that, as a general matter, a holder of Post-Combination ProKidney Common Units will not have the right to exchange Post-Combination ProKidney Common Units if the Company determines that such exchange would be prohibited by law or regulation or would violate other agreements with the Company and its subsidiaries to which the holder of Post-Combination ProKidney Common Units may be subject, including the Second Amended and Restated ProKidney Limited Partnership Agreement and the Exchange Agreement.
Lock-Up Agreement
On the Closing Date, the Company, SCS Sponsor III LLC and certain Closing ProKidney Unitholders entered into a lock-up agreement (the “Lock-Up Agreement”). The Lock-Up Agreement contains certain restrictions on transfer with respect to the SCS Sponsor III LLC and the Closing ProKidney Unitholders party thereto. Such restrictions began at the Closing and end on the earlier of (i) the date that is 180 days after the Closing and (ii)(a) for 33% of the Lock-Up Shares (other than the Earnout Shares and the PIPE Shares), the date on which the last reported sale price of a Class
During January 2023, the lock-up period for
17
Tax Receivable Agreement
On the Closing Date, the Company entered into a tax receivable agreement (the “Tax Receivable Agreement”) with the Closing ProKidney Unitholders. Pursuant to the Tax Receivable Agreement, among other things, the Company will be required to pay the Closing ProKidney Unitholders party thereto
Earnout Rights
At the Closing, certain shareholders were issued an aggregate of
Consulting Services Agreement between ProKidney-KY and Nefro Health
On January 1, 2020, ProKidney-KY (formerly known as inRegen) entered into a consulting services agreement with Nefro Health (“Nefro”), an Irish partnership controlled and majority-owned by Mr. Pablo Legorreta, a director of the Company, ProKidney GP Limited, a private limited company incorporated under the laws of Ireland (“Legacy GP”) and a holder of over 5% of Class A Units in PKLP, pursuant to which Nefro provides consulting services for the research and development of the Company’s product candidates, including the conduct of clinical trials in North America and the European Union, the design and manufacturing of ProKidney’s product candidates as well as pre-commercialization activities, which are primarily performed by Mr. Legorreta. Under the agreement, Nefro receives $
Consulting Services Agreement between ProKidney-US and Nefro Health
On January 1, 2020, ProKidney-US (formerly known as Twin City Bio, LLC) entered into a consulting services agreement with Nefro, pursuant to which Nefro provides consulting services for the research and development of the Company’s product candidates, including the conduct of clinical trials in North America and the European Union, the design and manufacturing of the Company’s product candidates as well as pre-commercialization activities, which are primarily performed by Mr. Legorreta. Under the agreement, Nefro receives $
18
Note 7: Redeemable Noncontrolling Interest
The Company is subject to the Exchange Agreement with respect to the Post-Combination ProKidney Common Units representing the outstanding
The redeemable noncontrolling interest is recognized at the higher of (1) its initial fair value plus accumulated earnings/losses associated with the noncontrolling interest or (2) the redemption value as of the balance sheet date. At September 30, 2024, the redeemable noncontrolling interest was recorded based on its initial fair value plus accumulated losses associated with the noncontrolling interest which was higher than the redemption value as of the balance sheet date.
Changes in the Company’s ownership interest in PKLP while the Company retains its controlling interest in PKLP are accounted for as equity transactions, and the Company is required to adjust noncontrolling interest and equity for such changes.
|
For the Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net loss available to Class A ordinary shareholders |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
(Increase)/Decrease in ProKidney Corp. accumulated deficit for impact of |
|
|
|
|
|
|
|
|
|
|
|
||||
(Increase)/Decrease in ProKidney Corp. additional paid-in capital for exchange |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
(Increase)/Decrease in ProKidney Corp. additional paid-in capital for vesting of |
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Change from net loss available to Class A ordinary shareholders and change |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Note 8: Shareholders’ Equity
In June 2024, the Company sold
In January 2024, the Company entered into an Open Market Sale AgreementSM (“Sales Agreement”) with Jefferies LLC (“Jefferies”) as the sales agent, pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its Class A ordinary shares having an aggregate offering price of up to $
During the three months ended September 30, 2024, the Company sold
Note 9: Net Loss per Share
Basic net loss per share is calculated by dividing net loss attributable to Class A ordinary shareholders by the weighted-average shares of Class A ordinary shares outstanding without the consideration for potential dilutive securities. Diluted net loss per share
19
represents basic net loss per share adjusted to include the effects of all potentially dilutive shares. Diluted net loss per share is the same as basic loss per share for all periods as the inclusion of potentially issuable shares would be antidilutive.
The following table sets forth the computation of basic and diluted net loss per share for the three months ended September 30, 2024 and 2023 (in thousands, except share and per share amounts):
|
Three Months Ended September 30, |
|
|
For the Nine Months Ended September 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Numerator |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Less: Net loss attributable to noncontrolling interests |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net loss available to Class A ordinary shareholders of ProKidney Corp., |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average Class A ordinary shares or ProKidney Corp. outstanding, |
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per Class A ordinary share |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per Class A ordinary share of ProKidney Corp., basic and diluted |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following:
|
As of September 30, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Antidilutive securities |
|
|
|
|
|
||
ProKidney Corp. Class B ordinary shares |
|
|
|
|
|
||
Unvested Restricted Stock Rights |
|
|
|
|
|
||
Earnout Rights |
|
|
|
|
|
||
Stock options granted under the 2022 Equity Incentive Plan |
|
|
|
|
|
||
Note 10: Equity Based Compensation
2022 Incentive Equity Plan
On July 11, 2022, the shareholders of the Company approved the ProKidney Corp. 2022 Incentive Equity Plan (the “2022 Plan”) which provides for the issuance of equity based awards to the Company’s employees, non-employee directors, individual consultants, advisors and other service providers. The 2022 Plan provides for the issuance of equity awards in the form of incentive stock options, which are intended to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or nonqualified stock options, which are not intended to meet those requirements, stock appreciation rights, restricted stock, restricted stock units, performance awards or other cash or stock-based awards as determined appropriate by the plan administrator. In settlement of its obligations under this plan, the Company will issue new Class A ordinary shares.
The Company has issued incentive and non-qualified stock option awards under the 2022 Plan to certain employees, individual consultants and non-employee directors of the Company. Given that the Company has established a full valuation allowance against its deferred tax assets, the Company has recognized no tax benefit related to these awards.
Time-Vested Awards
The Company uses the Black-Scholes option pricing model to calculate the fair value of time-vested stock options granted. These awards generally vest ratably over a three or four-year period and the option awards expire after a term of ten years from the date of grant.
20
|
|
Nine Months Ended September 30, |
||
|
|
2024 |
|
2023 |
Expected volatility |
|
|
||
Expected life of options, in years |
|
|
||
Risk-free interest rate |
|
|
||
Expected dividend yield |
|
|
||
The following table summarizes the activity related to the Company’s time-vested stock option awards granted under the 2022 Plan for the nine months ended September 30, 2024:
|
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
||
Time-vested options outstanding at January 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Exercised |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Time-vested options outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Time-vested options exercisable at September 30, 2024 |
|
|
|
|
$ |
|
||
Weighted average remaining contractual life |
|
|
|
|
|
|||
Time-vested options vested and expected to vest at September 30, 2024 |
|
|
|
|
$ |
|
||
Weighted average remaining contractual life |
|
|
|
|
|
|||
As of September 30, 2024, the Company had total unrecognized stock-based compensation expense of approximately $
The aggregate intrinsic value of the in-the-money time-vested awards outstanding and those exercisable as of September 30, 2024 was $
Performance-Based Awards
The Company has issued stock options to certain of its employees which vest based on the achievement of both operational performance metrics and service rendered over a specific time period.
|
|
Number of Shares |
|
|
Weighted Average Exercise Price |
|
||
Performance-based options outstanding at January 1, 2024 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Performance-based options outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
Performance-based options exercisable at September 30, 2024 |
|
|
|
|
$ |
|
||
Performance-based options vested and expected to vest at September 30, 2024 |
|
|
|
|
$ |
|
||
Weighted average remaining contractual life |
|
|
|
|
|
|||
As of September 30, 2024, the Company had total unrecognized stock-based compensation expense of approximately $
Market-Vested Awards
In previous periods, the Company had granted market-vested options to its former Chief Executive Officer, these awards were forfeited upon the termination of his employment in November 2023. There were
Legacy Profits Interests
The Deed for the Establishment of a Limited Partnership of PKLP, dated as of August 5, 2021 (the “Limited Partnership Agreement”) which replaced the Amended and Restated Limited Liability Company Agreement of ProKidney LLC as the governing
21
document of the parent entity in the Company, allowed for the issuance of Profits Interests (as defined in the Limited Partnership Agreement) to employees, directors, other service providers of the Company and others denominated in the form of one or more Class B Units of PKLP (as defined in the Limited Partnership Agreement).
Under the Limited Partnership Agreement, Legacy GP determined the terms and conditions of the Profits Interests issued. The threshold value assigned to each grant was not to be less than the fair market value of PKLP on the date of grant.
On January 17, 2022, PKLP amended and restated its Limited Partnership Agreement (the “Amended and Restated Limited Partnership Agreement”) which provided that certain qualified distribution events would result in holders of Profits Interests receiving disproportionate distributions from PKLP until each such holder’s valuation threshold had been reduced to zero in order to “catch up” such holder’s distributions to its pro rata share of aggregate cumulative distributions, and once sufficient distributions to a holder of Profits Interests had been made in accordance with the foregoing, the associated Class B Units of PKLP would automatically be converted into Class A Units of PKLP (as defined in the Limited Partnership Agreement).
Upon consummation of the Business Combination discussed in Note 1, PKLP’s existing Class B and B-1 Units were “caught up” and were converted into Class A Units of PKLP. The resulting vested and unvested Class A Units of PKLP were then recapitalized into Post-Combination ProKidney Common Units or Restricted Common Units of the Company, respectively. This recapitalization resulted in a decrease in the number of awards held by each participant. As such, the number of Profits Interests and related per unit values within these financial statements have been adjusted to reflect this recapitalization. Upon recapitalization, the Restricted Common Units maintained the vesting schedules associated with the original Profits Interest awards.
The following table summarizes the activity related to the Profits Interest awards for the nine months ended September 30, 2024:
|
|
Number of Shares |
|
|
Weighted Average Grant Date Fair Value |
|
||
Unvested awards outstanding at January 1, 2024 |
|
|
|
|
$ |
|
||
Vested |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Unvested awards outstanding at September 30, 2024 |
|
|
|
|
$ |
|
||
As of September 30, 2024, the unrecognized compensation expense related to these awards was $
Modification to Equity Based Compensation Awards
During the nine months ended September 30, 2023, the Company modified the vesting terms of outstanding time-based stock options issued to certain personnel upon their separation. This amendment constituted a modification of the awards under the provisions of ASC Topic 718 and resulted in the recognition of an additional $
Equity Based Compensation Expense
Compensation expense related to equity-based awards is included in research and development and general and administrative expense as follows (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Research and development |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity-based compensation expense |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
22
The following table summarizes our equity based compensation by type of award (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Time-vested stock options |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Performance-based stock options |
|
|
|
|
|
|
|
|
|
|
|
||||
Market-vested stock options |
|
|
|
|
|
|
|
|
|
|
|
||||
Legacy profits interests |
|
|
|
|
|
|
|
|
|
|
|
||||
Total equity-based compensation expense |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
As used in this Quarterly Report on Form 10-Q, the “Company”, the “Registrant”, “we” or “us” refer to ProKidney Corp. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear elsewhere in this report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, assumptions and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed in the Risk Factors section of the Annual Report on Form 10-K filed with the Securities and Exchange Commission, and elsewhere in this report under “Part II, Other Information—Item 1A, Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies and operations, financing plans, potential growth opportunities, potential market opportunities, potential results of our drug development efforts or trials, and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s plans, estimates, assumptions and beliefs only as of the date of this report. Except as required by law, we assume no obligation to update these forward-looking statements publicly or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Overview
We are a clinical-stage biotechnology company with a transformative proprietary cell therapy platform that has the potential to treat multiple chronic kidney diseases using a patient’s own cells isolated from the patient intended for treatment. Our approach seeks to redefine the treatment of chronic kidney disease (“CKD”), shifting the emphasis away from management of kidney failure to the preservation, if not improvement, of kidney function. Our lead product candidate, rilparencel (which we sometimes refer to as REACT®), is designed to preserve kidney function in a CKD patient’s diseased kidneys. Rilparencel is a product that includes autologous Selected Renal Cells (“SRC”) prepared from a patient’s own (autologous) kidney cells. SRC are formulated into a product for reinjection into the patient’s kidneys using a minimally invasive outpatient procedure that is repeatable, if necessary. Because rilparencel is a personalized treatment composed of cells prepared from a patient’s own kidney, there is no need for treatment with immunosuppressive therapies that are required during a patient’s lifetime when a patient receives a kidney transplant from another, allogeneic donor.
We are currently conducting a global Phase 3 development program and one ongoing Phase 2 clinical trial for rilparencel in subjects with moderate to severe diabetic kidney disease (“DKD”). We also completed a Phase 1 clinical trial for rilparencel in subjects with CKD due to congenital anomalies of the kidney and urinary tract (“CAKUT”) for which the last subject visit occurred in January 2023 and the clinical study report was submitted to the United States Food and Drug Administration (“FDA”) in December 2023. Rilparencel has, to date, been generally well tolerated by subjects with moderate to severe CKD in Phase 1 and 2 clinical testing.
Since our inception, we have devoted substantially all of our resources to organizing and staffing our Company, business and scientific planning, conducting discovery and research activities, acquiring or discovering product candidates, establishing and protecting our intellectual property portfolio, developing and progressing rilparencel, raising capital and preparing for clinical trials, establishing arrangements with third parties for the manufacture of component materials, and providing general and administrative support for these operations. We do not have any product candidates approved for sale and have not generated any revenue from product sales.
Recent Developments
REGEN-006/PROACT 1 trial:
REGEN-006 (PROACT 1) is an ongoing Phase 3, randomized, blinded, bi-lateral kidney dose, sham control arm, controlled safety and efficacy study of rilparencel in subjects with advanced kidney disease caused by type 2 diabetes. The related study protocol has been amended to focus on a subset of patients with Stage 4 CKD (estimated glomerular filtration rate (“eGFR”)) between 20 and 30 mL/min/1.73m2) and late Stage 3b CKD (eGFR between 30 and 35 mL/min/1.73m2) with accompanying albuminuria (urinary albumin-creatinine ratio (“UACR”) between 300 and 5000 mg/g). PROACT 1 has resumed enrolling patients under the amended protocol.
24
REGEN-016/PROACT 2 trial:
REGEN-016 (PROACT 2) was a planned Phase 3, randomized, blinded, sham control arm, bi-lateral kidney dose, controlled safety and efficacy study of rilparencel in subjects with Stages 3b and 4 CKD caused by type 2 diabetes (specifically eGFR between 20 and 44 mL/min/1.73m2 with moderate to severe albuminuria (UACR between 300 and 5,000 mg/g)).
In the third quarter of 2024, we completed a comprehensive internal and external review, including engaging with ex-FDA officials and seasoned regulatory experts, to determine the optimal path to bring rilparencel to patients in the U.S. with type 2 diabetes and advanced CKD – a market where there is high unmet clinical and economic need. An important conclusion of this review was that under the provisions of the Regenerative Medicine Advanced Therapy (“RMAT”) designation, we believe rilparencel is eligible for initial FDA approval under an expedited approval pathway based upon successful completion of the ongoing Phase 3 REGEN-006 (PROACT 1) trial. We believe that the Phase 3 REGEN-016 (PROACT 2) trial is not required for initial U.S. registration. Thus, we have discontinued PROACT 2, which was focused on enrollment outside the U.S.
In October 2024, we had a Type B meeting with the FDA to discuss updates to rilparencel’s registrational trial strategy. The FDA confirmed that PROACT 1 could be sufficient to support a potential Biologics License Application (“BLA”) submission. Additionally,the FDA confirmed that the accelerated approval pathway is available to rilparencel and that the Company could consider eGFR slope as a surrogate endpoint for accelerated approval. We will continue to engage with the FDA, under our RMAT designation, to further define the details supporting this accelerated pathway.
Real Estate Matters:
Due to a change in the planned use for our Greensboro, North Carolina facility, we performed an impairment analysis to compare the building’s carrying value with its estimated fair value. This analysis resulted in the recognition of a non-cash impairment charge of $5.3 million during the three and nine months ended September 30, 2024.
Financial Operations Overview
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all. If our development efforts for rilparencel or any other product candidates are successful and result in marketing approval, or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such agreements.
Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with our research and development activities, including the development of rilparencel.
Research and development costs include:
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated balance sheets as prepaid clinical or as a component of total accrued expenses and other. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is
25
no alternative future use for the research and development. The capitalized amounts are recorded as prepaid clinical and are expensed as the related goods are delivered or the services are performed.
Research and development activities are central to our business model. We expect that our research and development expenses will increase significantly for the foreseeable future as rilparencel moves into later stages of clinical development.
The successful development of rilparencel and any product candidates we may develop in the future is highly uncertain. Therefore, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development and commercialization of any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of rilparencel or potential future product candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, many of which are outside of our control, including the uncertainty of:
Any changes in the outcome of any of these variables could mean a significant change in the costs and timing associated with the development of our product candidates. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development. We may never obtain regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, including salaries, bonuses, benefits and equity-based compensation expenses for individuals involved in our executive, finance, corporate and administrative functions, as well as expenses for outside professional services, including legal, audit, accounting and tax-related services and other consulting fees, facility-related expenses, which include depreciation costs and other allocated expenses for rent and maintenance of facilities, insurance costs, recruiting costs, travel expenses and other general administrative expenses.
26
We expect that our general and administrative expenses will increase significantly for the foreseeable future as our business expands and we hire additional personnel to support our operations. We also anticipate increased expenses associated with being a public company, including costs for legal, audit, accounting, investor and public relations, tax-related services, director and officer insurance, and regulatory costs related to compliance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) as well as listing standards applicable to companies listed on a national securities exchange.
Other Income (Expense)
Other income consists primarily of interest income earned on cash, cash equivalents and marketable securities.
Income Tax Expense
Income tax expense reflects federal and state taxes on income earned by our subsidiary that is organized as a C corporation for U.S. income tax purposes.
Results of Operations
Comparison of Three Months Ended September 30, 2024 and 2023
The following table summarizes our results of operations for the three months ended September 30, 2024 and 2023 (in thousands):
|
|
Three Months Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
31,250 |
|
|
$ |
32,198 |
|
|
$ |
(948 |
) |
General and administrative |
|
|
17,723 |
|
|
|
14,419 |
|
|
|
3,304 |
|
Total operating expense |
|
|
48,973 |
|
|
|
46,617 |
|
|
|
2,356 |
|
Loss from operations |
|
|
(48,973 |
) |
|
|
(46,617 |
) |
|
|
(2,356 |
) |
Interest income |
|
|
5,580 |
|
|
|
5,541 |
|
|
|
39 |
|
Interest expense |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
– |
|
Net loss before taxes |
|
|
(43,395 |
) |
|
|
(41,078 |
) |
|
|
(2,317 |
) |
Income tax (benefit) expense |
|
|
(2,342 |
) |
|
|
913 |
|
|
|
(3,255 |
) |
Net loss before noncontrolling interest |
|
|
(41,053 |
) |
|
|
(41,991 |
) |
|
|
938 |
|
Net loss attributable to noncontrolling interest |
|
|
(23,143 |
) |
|
|
(31,007 |
) |
|
|
7,864 |
|
Net loss available to Class A ordinary shareholders |
|
$ |
(17,910 |
) |
|
$ |
(10,984 |
) |
|
$ |
(6,926 |
) |
Research and development expenses
The decrease in research and development expenses of approximately $0.9 million was primarily driven by the following:
General and administrative expenses
The increase in general and administrative expenses of approximately $3.3 million was primarily driven by the following:
27
Income tax (benefit) expense
The change in income tax (benefit) expense is due to the impact of the change in the treatment of specified research and development expenses by our U.S. subsidiary due to recent guidance issued by the Internal Revenue Service such that these costs are no longer required to be capitalized and amortized ratably over a five-year period.
Comparison of Nine Months Ended September 30, 2024 and 2023
The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
87,887 |
|
|
$ |
84,179 |
|
|
$ |
3,708 |
|
General and administrative |
|
|
44,218 |
|
|
|
43,133 |
|
|
|
1,085 |
|
Total operating expense |
|
|
132,105 |
|
|
|
127,312 |
|
|
|
4,793 |
|
Loss from operations |
|
|
(132,105 |
) |
|
|
(127,312 |
) |
|
|
(4,793 |
) |
Interest income |
|
|
14,960 |
|
|
|
16,803 |
|
|
|
(1,843 |
) |
Interest expense |
|
|
(7 |
) |
|
|
(9 |
) |
|
|
2 |
|
Net loss before taxes |
|
|
(117,152 |
) |
|
|
(110,518 |
) |
|
|
(6,634 |
) |
Income tax (benefit) expense |
|
|
(2,300 |
) |
|
|
3,205 |
|
|
|
(5,505 |
) |
Net loss before noncontrolling interest |
|
|
(114,852 |
) |
|
|
(113,723 |
) |
|
|
(1,129 |
) |
Net loss attributable to noncontrolling interest |
|
|
(74,944 |
) |
|
|
(83,956 |
) |
|
|
9,012 |
|
Net loss available to Class A ordinary shareholders |
|
$ |
(39,908 |
) |
|
$ |
(29,767 |
) |
|
$ |
(10,141 |
) |
Research and development expenses
The increase in research and development expenses of approximately $3.7 million was primarily driven by the following:
General and administrative expenses
The increase in general and administrative expenses of approximately $1.1 million was primarily driven by the following:
28
Income tax expense
The change in income tax (benefit) expense was driven by a change in the treatment of specified research and development expenses by our U.S. subsidiary due to recent guidance issued by the Internal Revenue Service such that these costs are no longer required to be capitalized and amortized ratably over a five-year period.
Liquidity and Capital Resources
Sources of liquidity
Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. From our inception through September 30, 2024, we funded our operations primarily through capital contributions from the holders of PKLP, the proceeds obtained through the Business Combination and related private placement financing, and an underwritten public offering and registered direct offering in June 2024.
As noted above, in June 2024, the Company sold 46,886,452 of its Class A ordinary shares in an underwritten public offering at a price of $2.42 per share. Additionally, in June 2024, the Company sold 11,030,574 of its Class A ordinary shares to certain investment entities at a price of $2.42 per share in a concurrent registered direct offering pursuant to share purchase agreements. The net proceeds to the Company from the offerings were approximately $136.7 million, after deducting the underwriting discounts and commissions and offering expenses payable by the Company. The shares were offered and sold pursuant to the Company’s shelf registration statement on Form S-3.
In January 2024, we entered into an Open Market Sale AgreementSM (“Sales Agreement”) with Jefferies LLC (“Jefferies”) as the sales agent, pursuant to which we may offer and sell, from time to time, through Jefferies, our Class A ordinary shares having an aggregate offering price of up to $100.0 million by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act. The shares are offered and sold pursuant to the Company’s shelf registration statement on Form S-3. As of September 30, 2024, we have sold $7.9 million worth of Class A ordinary shares under the Sales Agreement for net proceeds of $7.7 million, leaving $92.1 million available to be sold.
We expect that our existing cash, cash equivalents and marketable securities held at September 30, 2024, will enable us to fund our operating expenses and capital expenditure requirements into mid-2026. We have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.
We expect our expenses to increase substantially if, and as, we:
In addition, since the closing of the Business Combination we have begun incurring additional costs associated with operating as a public company, including significant legal, audit, accounting, investor and public relations, regulatory, tax-related, director and officer insurance premiums and other expenses. Developing pharmaceutical products, including conducting clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any product candidate for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product that we do not expect to be commercially available for at least several years, if ever.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the public or private sale of equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders. 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 are unable to obtain additional funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or
29
any commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. If we raise funds through strategic collaborations or other similar arrangements with third parties, we may have to relinquish valuable rights to our technology, future- revenue streams, research programs or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our shares. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and disruptions to and volatility in the credit and financial markets in the United States and worldwide. Because of the numerous risks and uncertainties associated with product development, we cannot predict the timing or amount of increased expenses, and there is no assurance that we will ever be profitable or generate positive cash flow from operating activities.
Cash Flows
Cash Flows for the Nine Months Ended September 30, 2024 and 2023
The following table provides information regarding our cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash flows used in operating activities |
|
$ |
(102,180 |
) |
|
$ |
(64,685 |
) |
Net cash flows provided by (used in) investing activities |
|
|
5,334 |
|
|
|
(234,139 |
) |
Net cash flows provided by (used in) financing activities |
|
|
144,285 |
|
|
|
(39 |
) |
Net change in cash and cash equivalents |
|
$ |
47,439 |
|
|
$ |
(298,863 |
) |
Operating Activities
Net cash used in operating activities was approximately $102.2 million for the nine months ended September 30, 2024, reflecting a net loss of approximately $114.9 million and uses driven by changes in working capital of approximately $13.6 million. Such uses were partially offset by non-cash charges and gains on investments of $26.1 million. The non-cash charges primarily consisted of equity-based compensation expense of $22.4 million, an impairment charge of $5.3 million and depreciation and amortization expense of $3.9 million. The changes in working capital primarily relate to the timing of payments made to our vendors for services performed and the recognition of receivable amounts related to interest on our marketable security investments.
Net cash used in operating activities was approximately $64.7 million for the nine months ended September 30, 2023, reflecting net loss of $113.7 million, partially offset cash provided by changes in working capital of approximately $12.8 million and non-cash charges and gains on investments of $36.2 million. The non-cash charges primarily consisted of equity-based compensation expense of $37.2 million and depreciation and amortization expense of $2.7 million.
The approximately $37.4 million increase in cash used in operating activities for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was primarily driven by an increase in net loss after adjusting for the non-cash charges and gains on investments of approximately $11.3 million coupled with an increase in the use of cash related to the timing of payments to our vendors and receipt of interest amounts due.
Investing Activities
Net cash provided by (used in) investing activities was approximately $5.3 million and $(234.1 million) for the nine months ended September 30, 2024 and 2023, respectively. The cash provided by investing activities during the nine months ended September 30, 2024 was primarily related to withdrawal of cash from our investments for use in operations. The cash used in investing activities during the nine months ended September 30, 2023, was driven by the investment of a portion of the proceeds raised through the Business Combination in marketable securities as well as the purchase of our facility in Greensboro, North Carolina.
Financing Activities
Net cash from financing activities for the nine months ended September 30, 2024 includes proceeds of $144.3 million related to the sale of our Class A ordinary shares. Net cash used in financing activities for the nine months ended September 30, 2023 was an insignificant amount.
30
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements. Our condensed consolidated financial statements are prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
Recent Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards applicable to public companies, allowing them to delay the adoption of those standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period under the JOBS Act. As a result, our consolidated financial statements may not be comparable to the financial statements of companies that are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our ordinary shares less attractive to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Interest Rate Risk
The Company’s exposure to changes in interest rates relates primarily to the Company’s investment portfolio. The goals of our investment strategy are preservation of capital, fulfillment of liquidity needs and fiduciary control of cash and investments. We also seek to maximize income from our investments without assuming significant risk. To achieve our goals, we maintain a portfolio of cash equivalents and investments in a variety of securities that management believes to be of high credit quality. All securities in our investment portfolio are not leveraged and are, due to their short-term nature, subject to minimal interest rate risk. Because of the short-term maturities of our investments, we do not believe that an increase in market rates would have a material negative impact on the value of our investment portfolio.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations, other than its impact on the general economy. To the extent our costs are impacted by general inflationary pressures, we may not be able to fully offset such higher costs through price increases or manufacturing efficiencies. Our inability or failure to do so could harm our business, financial condition, and results of operations.
Foreign Currency Risk
We do not have any material foreign currency exposure.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of September 30, 2024. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, our disclosure controls and procedures were effective in causing material information relating to us (including our consolidated subsidiaries) to be recorded, processed,
31
summarized and reported by management on a timely basis and to ensure the quality and timeliness of our public disclosures pursuant to SEC disclosure obligations.
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, with the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error and mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of controls.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, a control may become inadequate because of changes in conditions or because the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.
Changes to Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Website Availability of Reports and other Corporate Governance Information
The Company maintains a comprehensive corporate governance program, including Corporate Governance Guidelines for its Board of Directors, Board Guidelines for Assessing Director Independence and charters for its Audit Committee, Nominating and Corporate Governance Committee and Talent and Compensation Committee. The Company maintains a corporate investor relations website, https://investors.prokidney.com/, where stockholders and other interested persons may review, without charge, among other things, corporate governance materials and certain SEC filings, which are generally available on the same business day as the filing date with the SEC on the SEC’s website http://www.sec.gov. The contents of our website are not made a part of this Quarterly Report on Form 10-Q.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently a party to any material legal proceedings.
Item 1A. Risk Factors.
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully in the section entitled “Risk Factors” in our Annual Report on Form 10-K filed with the SEC on March 22, 2024 (the “2023 Annual Report”). There have been no material changes to the risk factors described in the 2023 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no sales of unregistered equity securities during the three months ended September 30, 2024.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
32
Item 5. Other Information.
During the quarter ended September 30, 2024, none of the Company’s directors or officers
Item 6. Exhibits.
Exhibit Number |
|
Description |
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1* |
|
|
|
|
|
32.2* |
|
|
|
|
|
101* |
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets (unaudited), (ii) Condensed Consolidated Statements of Operations (unaudited), (iii) Condensed Consolidated Statements of Comprehensive Loss (unaudited), (iv) Condensed Consolidated Statements of Changes in Redeemable Noncontrolling Interest and Stockholders’ Deficit (unaudited), (v) Consolidated Statements of Cash Flows (unaudited) and (vi) Notes to Condensed Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags. |
|
|
|
104* |
|
The cover page from this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL. |
|
|
|
† Management contract or compensatory plan or arrangement
* Filed herewith.
33
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.
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Company Name |
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Date: November 12, 2024 |
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By: |
/s/ Bruce Culleton |
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Name: Bruce Culleton |
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Title: Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 12, 2024 |
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By: |
/s/ James Coulston |
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Name: James Coulston |
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Title: Chief Financial Officer |
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(Principal Financial and Accounting Officer) |
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