siox-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37418

Sio Gene Therapies Inc.

(Exact name of registrant as specified in its charter)


Delaware						85-3863315
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

130 West 42nd St., 26th Floor, New York, NY						10036
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (877) 746-4891

N/A

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

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

Title of each Class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.00001 per share

SIOX

The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

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

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

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


Large accelerated filer			☐			Accelerated filer			☐


Non-accelerated filer			☒			Smaller reporting company			☒


						Emerging growth company			☐

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

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

The number of shares outstanding of the Registrant’s common stock, $0.00001 par value per share, on November 10, 2021, was 73,488,721.

SIO GENE THERAPIES INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets as of Se p temb e r 30, 2021 and March 31, 2021			5
Condensed Consolidated Statements of Operations for the Three and Six -Months Ended September 30, 2021 and 2020			6
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six -Months Ended Septemb e r 30, 2021 and 2020			7
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six -Months Ended September 30, 2021 and 2020			8
Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2021 and 2020			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			18
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			29
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			31
Item 1A. Risk Factors			32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			81
Item 3. Defaults Upon Senior Securities			81
Item 4. Mine Safety Disclosures			81
Item 5. Other Information			81
Item 6. Exhibits			82

SIGNATURES			83

Summary of the Material Risks Associated with Our Business

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business. These risks include, but are not limited to, the following:

•Our business, operations and clinical development plans and timelines could continue to be adversely impacted by the effects of health epidemics, including the recent COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our contract manufacturers, contract research organizations, or CROs, shippers and others.

•We have a limited operating history and have never generated any product revenues.

•We are heavily dependent on the success of our gene therapy product candidates, which are still in early stages of clinical development. If we are unable to successfully develop and commercialize any of our product candidates, our business will be harmed.

•We may be required to continue to make significant payments to third parties under the agreements pursuant to which we acquired our gene therapy product candidates.

•Gene therapies are novel, complex, difficult and expensive to manufacture. We do not have our own manufacturing capabilities and will rely on third parties to produce clinical and commercial supplies of our product candidates. Delays in manufacturing processes, including recently at Oxford, may result in delays in our planned clinical trials that would otherwise harm our business and prospects.

•Our business plan may lead to the initiation of one or more gene therapy development programs, the discontinuation of one or more development programs, or the execution of one or more transactions that you do not agree with or that you do not perceive as favorable to your investment.

•Clinical trials are expensive, time-consuming, difficult to design and implement and involve an uncertain outcome.

•If we are not able to obtain required regulatory approvals, we will not be able to commercialize our gene therapy product candidates, and our ability to generate revenue will be materially impaired.

•The intended tax effects of our corporate structure prior to and following the Domestication (as defined below) and our corporate reorganization to align our corporate structure with current and future business activity (the "Reorganization"), and intercompany arrangements prior to the Domestication and Reorganization, depend on the application of the tax laws of various jurisdictions and on how we operate our business.

•We expect to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

•We will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of our product candidates.

•Interim "top-line" and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

•Our gene therapy product candidates may cause adverse effects or have other properties that could delay or prevent their regulatory approval or limit the scope of any approved label or market acceptance.

•Enrollment and retention of patients in clinical trials is an expensive and time-consuming process and could be made more difficult or rendered impossible by multiple factors outside our control.

•If we are unable to establish sales, marketing and distribution capabilities either on our own or in collaboration with third parties, we may not be successful in commercializing our product candidates, even if approved.

•If the market opportunities for any product candidates we may develop are smaller than we believe they are, our revenues, if any, may be adversely affected, and our business may suffer. Because the target patient populations for many of the product candidates we may develop are small, we must be able to successfully identify patients and achieve a significant market share to achieve and maintain profitability and growth.

•We face significant competition from other biotechnology and pharmaceutical companies, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer or more advanced or effective than ours and our operating results will suffer if we fail to compete effectively.

•We may not be able to protect our intellectual property rights throughout the world, which could impair our business.

•Third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights may delay or prevent the development and commercialization of our product candidates.

•The market price of our common stock has been and is likely to continue to be highly volatile, and you may lose some or all of your investment.

The summary risk factors described above should be read together with the text of the full risk factors below, in the section titled “Risk Factors” in Part II, Item 1A. and the other information set forth in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us, or that we currently deem to be immaterial, may also harm our business, financial condition, results of operations and future growth prospects.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

SIO GENE THERAPIES INC.

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except share and per share amounts)


	September 30, 2021		March 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	101,695	$	118,986
Restricted cash	1,184		—
Receivable from sale of long-term investment	—		4,343
Prepaid expenses and other current assets	4,321		7,348
Income tax receivable	1,733		1,656
Total current assets	108,933		132,333
Long-term restricted cash	—		1,184
Operating lease right-of-use assets	1,052		1,152
Property and equipment, net	548		478
Total assets	$	110,533	$	135,147
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,673	$	1,341
Accrued expenses	7,366		9,196
Current portion of operating lease liabilities	269		311
Total current liabilities	10,308		10,848
Operating lease liabilities, net of current portion	865		932
Total liabilities	11,173		11,780
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock, par value $0.00001 per share, 1,000,000,000 shares authorized, 72,941,507 and 69,377,567 issued and outstanding at September 30, 2021 and March 31, 2021, respectively	1		1
Additional paid-in capital	923,198		914,100
Accumulated deficit	(824,176)		(791,069)
Accumulated other comprehensive income	337		335
Total stockholders’ equity	99,360		123,367
Total liabilities and stockholders’ equity	$	110,533	$	135,147

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

SIO GENE THERAPIES INC.

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except share and per share amounts)


	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Operating expenses:
Research and development expenses
(includes stock-based compensation expense of $489 and $458 for the three months ended September 30, 2021 and 2020 and $921 and $1,021 for the six months ended September 30, 2021 and 2020, respectively)	$	11,448	$	5,058	$	19,506	$	10,252
General and administrative expenses
(includes stock-based compensation expense of $6,809 and $650 for the three months ended September 30, 2021 and 2020 and $7,698 and $1,677 for the six months ended September 30, 2021 and 2020, respectively)	9,748		4,491		13,607		9,131
Total operating expenses	21,196		9,549		33,113		19,383
Other (income) expenses:
Interest expense	11		1		12		797
Other expense (income)	30		580		10		(1,486)
Loss before income tax benefit	(21,237)		(10,130)		(33,135)		(18,694)
Income tax benefit	—		(146)		(28)		(116)
Net loss	$	(21,237)	$	(9,984)	$	(33,107)	$	(18,578)
Net loss per share of common stock — basic and diluted	$	(0.29)	$	(0.21)	$	(0.45)	$	(0.41)
Weighted-average shares of common stock outstanding — basic and diluted	72,941,507		46,731,666		72,901,906		45,018,855

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

SIO GENE THERAPIES INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited, in thousands)


	Three Months Ended September 30,				Six Months Ended September 30,
	2021		2020		2021		2020
Net loss	$	(21,237)	(9,984)		$	(33,107)	(18,578)
Other comprehensive income:
Foreign currency translation adjustment	—		348		2		392
Total other comprehensive income	—		348		2		392
Comprehensive loss	$	(21,237)	$	(9,636)	$	(33,105)	$	(18,186)

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

SIO GENE THERAPIES INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited, in thousands, except share amounts)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity

	Shares	Amount
Balance at March 31, 2020	39,526,299	$	—	$	820,257	$	(758,644)	$	(55)	$	61,558
Shares issued upon settlement of restricted stock units	53,653	—		—		—		—		—
Shares sold in connection with at-the-market offering, net of brokerage fees and offering expenses of $0.5 million	1,393,428	—		3,930		—		—		3,930
Stock-based compensation expense	—	—		1,590		—		—		1,590
Capital contribution received from affiliate	—	—		53		—		—		53
Foreign currency translation adjustment	—	—		—		—		44		44
Net loss	—	—		—		(8,594)		—		(8,594)
Balance at June 30, 2020	40,973,380	$	—	$	825,830	$	(767,238)	$	(11)	$	58,581
Shares issued for restricted stock units	60,676	—		—		—		—		—
Shares sold in connection with at-the-market offering, net of brokerage fees and offering expenses of $0.7 million	6,215,673	—		19,598		—		—		19,598
Stock-based compensation expense	—	—		1,108		—		—		1,108
Capital contribution received from affiliate	—	—		22		—		—		22
Foreign currency translation adjustment	—	—		—		—		348		348
Net loss	—	—		—		(9,984)		—		(9,984)
Balance at September 30, 2020	47,249,729	$	—	$	846,558	$	(777,222)	$	337	$	69,673


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity

	Shares	Amount
Balance at March 31, 2021	69,377,567	$	1	$	914,100	$	(791,069)	$	335	$	123,367
Shares issued upon settlement of restricted stock units	82,542	—		—		—		—		—
Shares sold in connection with at-the-market offering, net of brokerage fees and offering expenses of $0.0 million

SEC Form 10-Q filed by Sio Gene Therapies Inc.