Vor Biopharma Inc

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of the Business

Vor Biopharma Inc. (the “Company”) is a clinical-stage cell and genome engineering company that combines a novel patient engineering approach with targeted therapies to provide a single company solution for patients suffering from hematological malignancies. The Company’s proprietary platform leverages its expertise in hematopoietic stem cell (“HSC”) biology, genome engineering and targeted therapy development to genetically modify HSCs to remove surface targets expressed by cancer cells. The Company is headquartered in Cambridge, Massachusetts. The Company was incorporated on December 30, 2015.

Risks and Uncertainties

The Company is subject to a number of risks common to development stage companies in the biotechnology industry, including, but not limited to, risks of failure of preclinical studies and clinical trials, dependence on key personnel, protection of proprietary technology, reliance on third party organizations, risks of obtaining regulatory approval for any product candidate that it may develop, development by competitors of technological innovations, compliance with government regulations, adverse macroeconomic conditions and the need to obtain additional financing.

The Company anticipates that it will continue to incur significant operating losses for the next several years as it continues to develop its product candidates. As a result, the Company’s continued operations are dependent on its ability to raise additional funding. If the Company is unable to obtain additional funding on a timely basis, it may be forced to significantly curtail, delay, or discontinue one or more of its planned research or development programs or be unable to expand its operations.

Liquidity and Capital Resources

As of September 30, 2024, the Company had$62.8 million of cash, cash equivalents and marketable securities and an accumulated deficit of$426.3 million. The Company anticipates that it will continue to incur significant operating losses for the next several years as it continues to develop its product candidates. As a result, the Company’s continued operations are dependent on its ability to raise additional funding. Based on its current business plan and current capital resources, combined with the need to raise additional funding and the uncertainty regarding the availability of such additional funding, management has concluded that there is substantial doubt regarding the Company’s ability to continue as a going concern within one year after the date these condensed consolidated financial statements are issued. Management's plans to alleviate the conditions that raise substantial doubt regarding the Company’s ability to continue as a going concern include obtaining additional funding through equity or debt offerings and/or pursuant to collaboration or licensing arrangements. However, additional funding may not be available on terms acceptable to the Company or at all. The Company may also seek to reduce current spending requirements where necessary. Management has concluded the likelihood that its plans to successfully obtain sufficient additional funding from one or more of these sources, or adequately reduce expenditures, while reasonably possible, is less than probable.

If, for any reason, the Company utilizes its capital resources more quickly than anticipated or is unable to obtain additional funding on a timely basis, it may be required to revise its business plan and strategy. This may result in the Company significantly curtailing, delaying or discontinuing one or more of its research and development programs. As a result, the Company’s business, financial condition, and results of operations could be materially affected. The accompanying condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets and liabilities that may be necessary if the Company were unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain comparative amounts have been reclassified to conform to the current period presentation, including the presentation of non-cash lease expense in the condensed consolidated statements of cash flows. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) issued by the Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed consolidated financial statements and the reported amount of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies in developing the estimates and assumptions that are used in the preparation of the condensed consolidated financial statements. Management must apply significant judgment in this process. Management’s estimation process often may yield a range of potentially reasonable estimates and management must select an amount that falls within that range of reasonable estimates. Estimates are used in the following areas, among others: accrued expenses and research and development expenses.

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the information furnished reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the results for the reported interim periods. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

The accompanying condensed consolidated balance sheet as of December 31, 2023 has been derived from the Company’s audited consolidated financial statements for the year ended December 31, 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited annual consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).

During the nine months ended September 30, 2024, there have been no changes to the Company’s significant accounting policies as described in the 2023 Annual Report.

3. Marketable Securities

The amortized cost and estimated fair value of marketable securities, by remaining contractual maturity, are as follows:

The Company did not have any individual securities in an unrealized loss position as of September 30, 2024. The following table summarizes the fair value and gross unrealized losses aggregated by category and the length of time that individual securities were in an unrealized loss position as of December 31, 2023:

The Company didnot record any impairments to marketable securities or reserves for credit losses related to its marketable debt securities during the periods presented.

4. Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:

The fair value of the Company’s cash equivalents and restricted cash equivalents is based on quoted market prices in active markets with no valuation adjustment. The fair value of marketable securities was determined based on observable market inputs. There wereno transfers between levels during thenine months ended September 30, 2024.

Prepaid expenses, accounts payable and accrued expenses are stated at their respective historical carrying values, which approximate fair value due to their short-term nature.

5. Property and Equipment, Net

Property and equipment, net consisted of the following:

Depreciation expense for the three and nine months ended September 30, 2024 was$0.9 million and $2.7 million, respectively, and for the three and nine months ended September 30, 2023 was $0.9 million and $2.6 million, respectively.

6. Accrued Liabilities

Accrued liabilities consisted of the following:

7. Stock-Based Compensation

2023 Inducement Plan

As of September 30, 2024, the Company had 2,635,312 shares of its common stock available for future issuance under the 2023 Inducement Plan.

2021 Equity Incentive Plan

As of September 30, 2024, the Company had 2,457,705 shares of its common stock available for future issuance under its 2021 Equity Incentive Plan.

Stock Options

The Company’s stock options generally vest over 48 months with 25% vesting afterone year followed by ratable monthly vesting over the remaining three years and have a contractual term of 10 years. The weighted-average assumptions used principally in determining the fair value of options granted were as follows:

During the nine months ended September 30, 2024 and 2023, the Company granted stock options to purchase 2,174,100 shares and 2,247,844 shares of its common stock, respectively, with a weighted-average grant-date fair value of$1.49 and $3.65 pershare, respectively. As of September 30, 2024, total unrecognized compensation expense related to stock options was$9.3 million, which is expected to be recognized over a weighted-average period of 2.5 years.

As of September 30, 2024, options for 2,575 shares of Company common stock with a weighted-average exercise price of$4.90 were exercised and unvested. An immaterial amount of underlying proceeds from the unvested exercises is recorded in other current liabilities on the condensed consolidated balance sheet.

Restricted Stock Units

During the nine months ended September 30, 2024 and 2023, the Company granted 1,196,217 restricted stock units and 659,672 restricted stock units, respectively, with a weighted-average grant date fair value of$2.29 and$5.49 per share, respectively. As of September 30, 2024, total unrecognized compensation expense related to restricted stock units was$3.9 million, which is expected to be recognized over a weighted-average period of 2.4 years.

Employee Stock Purchase Plan

As of September 30, 2024, the Company had 1,894,294 shares of its common stock available for issuance under its Employee Stock Purchase Plan (“ESPP”).

During the nine months ended September 30, 2024, the Company issued 74,326 shares of common stock with a weighted-average purchase price of $1.48 under the ESPP, which resulted in an immaterial amount of compensation expense. During the nine months ended September 30, 2023, the Company issued 44,977 shares of common stock with a weighted-average purchase price of $3.76 under the ESPP, which resulted in an immaterial amount of compensation expense.

Stock-Based Compensation

Stock-based compensation expense was allocated as follows:

8. Leases

Cambridgepark Lease Amendments

On June 15, 2021, the Company entered into the first lease amendment (“First Lease Amendment”) and second lease amendment (“Second Lease Amendment” and, together with the First Lease Amendment, the “Lease Amendments”) with PPF Off 100 Cambridge Park Drive, LLC (the “Landlord”). The Lease Amendments amended the Company’s lease agreement for its corporate office and laboratory facilities with the Landlord in Cambridge, Massachusetts to add additional leased space in the same building (the “Amended Cambridgepark Lease”).

The First Lease Amendment and Second Lease Amendment commenced for accounting purposes on January 28, 2022 and April 29, 2022, respectively. The terms of the Lease Amendments are through September 2030 for approximately $8.4 million and $22.3 million in fixed payments for the First Lease Amendment and Second Lease Amendment, respectively. There areno options to extend the Lease Amendments.

Payments due associated with the Lease Amendments include fixed and variable payments. Variable payments relate to the Company’s share of the Landlord’s operating costs associated with the underlying assets and are recognized when the event on which those payments are assessed occurs. The Amended Cambridgepark Lease does not contain a residual value guarantee. The Lease Amendments term end dates are coterminous with the existing lease agreement. In conjunction with the Lease Amendments, the Company was required to increase its irrevocable standby letter of credit to $2.4 million for the benefit of the Landlord, which has been secured by money market investments and is presented as restricted cash equivalents.

For further information regarding the Company’s Cambridgepark lease, please see Note 9 to the consolidated financial statements included in the 2023 Annual Report.

The elements of lease expense were as follows:

Amounts reported in the condensed consolidated balance sheets and the weighted-average lease term and discount rate information were as follows:

The following table represents other lease activity:

9. Significant Agreements

Since December 31, 2023, there have been no material changes to the key terms of the Company’s license agreements. For further information regarding the Company’s existing license agreements, please see Note 10 to the consolidated financial statements included in the 2023 Annual Report.

10. Net Loss Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share for thethree and nine months ended September 30, 2024 and 2023:

The Company’s potentially dilutive securities were stock options, unvested restricted stock and restricted stock units. Based on the amounts outstanding as of September 30, 2024 and 2023, the Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect: