What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2021-03-25 compared with 2020-03-24 · 255 added, 260 removed, 474 unchanged (52% of the section changed)

36 unchanged sentences

Cash and cash equivalents $ 34,605

Investments 280,462 —

Prepaid expenses and other current assets 4,487

Total current assets 319,554

Equipment, net 164

Property and equipment, net 385

Restricted cash 1,223

Deferred offering costs —

Right-of-use asset 8,402 —

Other non-current assets 106

3 unchanged sentences

Accounts payable $ 2,538

Amounts due to related party —

Accrued expenses and other current liabilities 11,680

1 unchanged sentence

Derivative liabilities —

Non-current operating lease liability 7,694 —

Total liabilities 21,912

2 unchanged sentences

$ 0.0001 par value;

64,871,795 shares authorized at December 31, 2019 and 44,867,089 shares authorized at December 31, 2018;

64,839,353 shares issued and outstanding at December 31, 2019 and 33,668,075 shares issued and outstanding at December 31, 2018;

aggregate liquidation preference of $ 194,727 at December 31, 2019 and $ 65,002 at December 31, 2018

64,871,795 shares authorized at December 31, 2019;

64,839,353 shares issued and outstanding at December 31, 2019;

aggregate liquidation preference of $ 194,727 at December 31, 2019

Stockholders' equity (deficit):

Preferred stock, $ 0.0001 par value;

10,000,000 shares and no shares authorized at December 31, 2020 and 2019, respectively;

no shares issued or outstanding at December 31, 2020 and 2019

Common stock;

3 unchanged sentences

Additional paid-in capital 425,363

Accumulated other comprehensive income 614 —

Accumulated deficit ( 118,224 )

13 unchanged sentences

Other income (expense):

Interest expense ( 1 ) —

Interest income 4,041 461

Change in fair value of derivative liabilities — ( 6,393 )

Other income (expense) 6 ( 16 )

Other (expense) income ( 1,724 ) 6

Total other income (expense), net 2,316 ( 5,926 )

2 unchanged sentences

Weighted average common shares outstanding, basic and diluted 32,907,100 2,075,753

Comprehensive loss:

Net loss $ ( 67,254 ) $ ( 35,258 )

Other comprehensive income:

Change in unrealized gain on investments, net 614 —

Comprehensive loss $ ( 66,640 ) $ ( 35,258 )

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

9 unchanged sentences

Depreciation expense 52 47

Amortization of premium on investments 1,725 —

Noncash rent expense 548 —

Gain on sale of investments ( 24 ) —

Loss on disposal of property and equipment — 38

5 unchanged sentences

Accrued expenses and other current liabilities 8,026 1,791

Non-current operating lease liability ( 567 ) —

Net cash used in operating activities ( 52,146 ) ( 24,674 )

1 unchanged sentence

Purchases of equipment ( 142 ) ( 21 )

Proceeds from sales and maturities of investments 90,928 —

Purchases of investments ( 372,477 ) —

Net cash used in investing activities ( 281,691 ) ( 21 )

1 unchanged sentence

Proceeds from issuance of convertible preferred stock, net — 129,499

Proceeds from exercise of common stock options 1,100 —

Proceeds from initial public offering, net of issuance costs of $ 1,275

Payment of deferred offering costs — ( 1,743 )

7 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities:

Issuance of series B convertible preferred stock tranche right $ — $ 4,000

Deferred offering and stock issuance costs included in accounts payable and accrued expenses and other current liabilities $ — $ 656

Purchases of equipment included in accounts payable and accrued expenses $ 94 $ —

Conversion of preferred stock into common stock upon closing of initial public offering $ 200,573 $ —

Right-of-use assets obtained in exchange for operating lease obligation $ 8,474 $ —

Exercise of series B convertible preferred stock tranche right $ — $ 6,393

5 unchanged sentences

paid-in capital

Accumulated deficit

Accumulated other comprehensive income Accumulated deficit

stockholders’

2 unchanged sentences

BALANCE - December 31, 2018 33,668,075 60,770 2,173,684 1 169 — ( 15,712 ) ( 15,542 )

$ 12,458 2,081,187

Grant of restricted common stock awards — — 62,988 — — — — —

Issuance of series A convertible preferred stock, net 10,000,000

Issuance of series B convertible preferred stock, net 11,751,154 55,066 — — — — — —

Issuance of series C convertible preferred stock, net 19,420,124 84,737 — — — — — —

Stock-based compensation — — — — 3,643 — — 3,643

Net loss — — — — — — ( 35,258 ) ( 35,258 )

BALANCE - December 31, 2019 64,839,353 $ 200,573 2,236,672 $ 1 $ 3,812 $ — $ ( 50,970 ) $ ( 47,157 )

Grant of restricted common stock awards — — 62,988 — — — —

Issuance of series B convertible preferred stock, net 11,751,154 55,066 — — — — —

Issuance of series C convertible preferred stock, net 19,420,124 84,737 — — — — —

Conversion of preferred stock to common stock upon closing of the initial public offering ( 64,839,353 ) ( 200,573 ) 21,499,770 3 200,570 — — 200,573

Issuance of common stock, net of issuance costs — — 12,174,263 1 212,100 — — 212,101

Reclassification of warrants to additional paid-in capital — — — — 16 — — 16

Exercise of common stock options — — 160,509 — 1,100 — — 1,100

Vesting of restricted stock units — — 6,664 — — — — —

Stock-based compensation — — 505 — 7,765 — — 7,765

Unrealized gains on investments — — — — — 614 — 614

Net loss — — — — — — ( 67,254 ) ( 67,254 )

23 unchanged sentences

The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business.

From its inception through December 31, 2019, the Company has funded its operations primarily with proceeds from the sale of convertible preferred and common stock and borrowings under convertible promissory notes.

The Company has incurred recurring losses since its inception, including net losses of $ 35,258 and $ 8,931 for the years ended December 31, 2019 and 2018, respectively.

In addition, as of December 31, 2019 and 2018, the Company had an accumulated deficit of $ 50,970 and $ 15,712 , respectively.

Historically, the Company has funded its operations primarily with proceeds from the sale of convertible preferred stock.

The Company expects to continue to generate operating losses for the foreseeable future.

As of March 24, 2020, the issuance date of the consolidated financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital requirements into 2023.

As of March 25, 2021, the issuance date of the consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital requirements into 2023.

The Company may seek additional funding through private or public equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

3 unchanged sentences

Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.

The ongoing global outbreak of the novel coronavirus disease (“COVID-19”), which began in December 2019, was reported to have surfaced in Wuhan, China, and has since spread to other regions and countries worldwide.

The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures.

Such orders, restrictions and recommendations, and the perception that additional orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses not deemed “essential,” work stoppages, slowdowns and delays, work-from-home policies, travel restrictions and cancellation of events.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of the Company’s business, including how it has and will continue to impact the Company’s operations and the operations of its suppliers, vendors and business partners, and may take further precautionary and preemptive actions as may be required by federal, state or local authorities.

In addition, the Company has taken steps to minimize the current environment’s impact on its business and strategy, including devising contingency plans and securing additional resources from third party service providers.

Furthermore, for the safety of the Company’s employees and families, the Company has introduced enhanced safety measures for scientists to be present in its labs and increased the use of third party service providers for the conduct of certain experiments and studies for research programs.

Certain of the Company’s third party service providers have also experienced shutdowns or other business disruptions.

The Company does not yet know the full extent of potential delays or impacts on the Company’s business, clinical trials, research programs, healthcare systems or the global economy and cannot presently predict the scope and severity of any potential business shutdowns or disruptions.

The extent to which COVID-19 ultimately impacts the Company’s business, results of operations or financial condition will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain the pandemic or treat its impact, among others.

In addition, a recurrence or “additional waves” of COVID-19 cases could cause other widespread or more severe impacts depending on where infection rates are highest.

While states and jurisdictions have rolled back “stay at home” and quarantine orders and reopened in phases, it is difficult to predict what the lasting impact of the pandemic will be, and any prolonged material disruption to the Company’s employees or third party service providers could negatively impact the Company’s ability to conduct business in the manner and on the timelines presently planned, which could have a material adverse impact on the Company’s business, results of operations and financial condition.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The accompanying consolidated financial statements have been prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries, Black Diamond Therapeutics (Canada), Inc.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company and its wholly owned subsidiaries, Black Diamond Therapeutics (Canada), Inc.

and Black Diamond Therapeutics Security Corporation, after elimination of all significant intercompany accounts and transactions .

1 unchanged sentence

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of expenses during the reporting periods.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuation of common stock, the valuation of stock-based awards and the valuation of derivative liabilities.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuation of common stock before the Company’s initial public offering, the valuation of stock-based awards and the valuation of derivative liabilities.

The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.

2 unchanged sentences

Actual results may differ from those estimates or assumptions.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets.

The Company has considered the impact of COVID-19 on estimates within its financial statements and there may be changes to those estimates in future periods.

As of the date of issuance of these consolidated financial statements, the Company has not experienced material business disruptions or incurred impairment losses in the carrying value of its assets as a result of the pandemic and is not aware of any specific related event or circumstance that would require it to update its estimates.

Subsequent events

9 unchanged sentences

At December 31, 2019, cash consisted of cash on deposit at commercial banks.

Investments consist of marketable securities with original maturities greater than 90 days.

The Company has classified its investments with maturities beyond one year as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.

The Company considers its investment portfolio of marketable securities to be available-for-sale.

Accordingly, these investments are recorded at fair value, which is based on quoted market prices.

Unrealized gains and losses are reported as the accumulated other comprehensive items in stockholders’ equity.

Amortization and accretion of premiums and discounts are recorded in other income (expense).

Realized gains or losses on debt securities are included in interest income or interest expense, respectively.

If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s statement of operations and comprehensive income (loss).

Restricted cash

1 unchanged sentence

As of December 31, 2020, the Company had $ 1,223 of restricted cash, which has been classified as a non-current asset on the consolidated balance sheet.

At December 31, 2018 the Company had no restricted cash.

At December 31, 2019 the Company had $ 55 restricted cash.

Concentrations of credit risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash.

The Company generally maintains balances in various operating accounts at financial institutions in amounts that may exceed federally insured limits.

The Company has not experienced any losses related to its cash and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Equipment is recorded at cost less accumulated depreciation.

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities.

The Company maintains accounts for all cash and cash equivalents at accredited financial institutions, in amounts that exceed federally insured limits.

The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation.

Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

3 unchanged sentences

Computer and office equipment

Leasehold improvements Shorter of the useful life or remaining lease term

When assets are retired or otherwise disposed of, the cost of assets disposed of and the related accumulated depreciation is removed from the accounts and any resulting gain or loss is included in the consolidated statements of operations in the period of disposal.

1 unchanged sentence

Impairment of long - lived assets

Long-lived assets consist of equipment.

Long-lived assets consist of property and equipment.

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

10 unchanged sentences

As of December 31, 2019, the Company recorded deferred offering costs of $ 2,303 .

After consummation of the IPO, which closed on February 3, 2020, these costs were recorded in stockholders' equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.

Fair value measurements

14 unchanged sentences

Derivative liabilities

In connection with certain preferred stock financings, the Company has identified certain embedded and freestanding derivatives, which are recorded as liabilities on the consolidated balance sheets and are remeasured to fair value at each reporting date until the derivative is settled.

In connection with certain preferred stock financings, the Company has identified certain embedded and freestanding derivatives, which were recorded as liabilities on the consolidated balance sheets and are remeasured to fair value at each reporting date until the derivative is settled.

Changes in the fair value of the derivative liabilities are recognized in the consolidated statements of operations.

Classification of convertible preferred stock

The Company’s convertible preferred stock is classified outside of stockholders’ deficit because the holders of such shares have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company.

The Company’s convertible preferred stock was classified outside of stockholders’ deficit because the holders of such shares have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company.

Segment information

17 unchanged sentences

Stock-based compensation

The Company measures all stock-based awards granted to employees and directors based on the fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

The Company measures all stock-based awards granted to employees, non-employees and directors based on the fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

Generally, the Company issues stock options and restricted stock units with only service-based vesting conditions and records the expense for these awards using the straight-line method.

For stock options or restricted stock units issued with performance-based vesting conditions, the stock compensation expense related to these awards is recognized based on the grant date fair value when achievement of the performance condition is deemed probable.

The Company would apply the graded-vesting method to all stock-based awards with performance-based vesting conditions or to awards with both service-based and performance based vesting conditions.

Forfeitures are accounted for as they occur.

Generally, the Company issues awards with only service-based vesting conditions and records the expense for these awards using the straight-line method.

The Company accounts for stock-based awards granted to employees and non-employees at fair value, which is measured using the Black-Scholes option-pricing model.

The measurement date for employee awards is generally the date of grant.

Prior to the adoption of Accounting Standards Update (“ASU”) No.

2018-07, Compensation — Stock Compensation (Topic 718) ("ASU 2018-07"), which simplifies the accounting for non-employee share based payment transactions and is discussed below under "Recently Adopted Accounting Pronouncements," the fair value measurement date for non-employee awards was the date the performance of services was completed.

Stock-based compensation costs are recognized as expenses over the requisite service period, which is generally the vesting period, on a straight-line basis for all time-vested awards.

Upon adoption of ASU 2018-07 on October 1, 2019, the measurement date for non-employee awards is the date of grant.

The compensation expense for non-employees is recognized, without changes in the fair value of the award, over the requisite service period, which is the vesting period of the respective award.

The impact on the Company’s consolidated financial statements was immaterial.

The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of the Company’s common stock on that same date.

The fair value of each option grant is estimated on the date of grant using the single option award approach, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate, and expected dividends (see Note 8).

The Company historically has been a private company and lacks company-specific historical and implied volatility information for its stock.

Therefore, it estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

The expected term of options granted to non-employees is equal to the contractual term of the option award.

The fair value of each stock option grant is estimated on the date of grant using the Black- Scholes option-pricing model.

The Company lacks sufficient company-specific historical and implied volatility information.

Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

The Company uses the simplified method prescribed by Securities and Exchange Commission Staff Accounting Bulletin No.

107, Share-Based Payment , to calculate the expected term of options granted to employees, non-employees and directors.

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns.

10 unchanged sentences

Comprehensive loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders.

For the years ended December 31, 2019 and 2018, there was no difference between net loss and comprehensive loss in the accompanying consolidated financial statements.

Comprehensive loss is composed of net loss and other comprehensive income (loss).

Other comprehensive income (loss) consists of unrealized gains and losses on investments.

Net income (loss) per share

5 unchanged sentences

Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common stock.

For purpose of this calculation, outstanding options, unvested restricted common stock and convertible preferred stock are considered potential dilutive common stock and are excluded from the computation of net income (loss) per share as their effect is anti-dilutive.

For purposes of this calculation, outstanding options, unvested restricted common stock and convertible preferred stock are considered potentially dilutive common stock and are excluded from the computation of net income (loss) per share when their effect is anti-dilutive.

The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company.

2 unchanged sentences

The Company reported a net loss attributable to common stockholders for the years ended December 31, 2020 and 2019.

Effective January 1, 2020, the Company adopted Accounting Standards Updated (“ASU”) No.

2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”), using the modified retrospective method and utilized the effective date as its date of initial application, with prior periods presented in accordance with previous guidance under ASC 840, Leases (“ASC 840”).

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.

Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term.

Certain adjustments to the right-of-use asset may be required for items such as incentives received.

The interest rate implicit in lease contracts is typically not readily determinable.

As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

The Company has elected not to recognize leases with an original term of one year or less on the consolidated balance sheet.

The Company typically only includes an initial lease term in its assessment of a lease arrangement.

Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.

Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification.

A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use.

When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.

The Company elected the following practical expedients, which must be elected as a package and applied consistently to all of its leases at the transition date (including those for which the entity is a lessee or a lessor):

i) the Company did not reassess whether any expired or existing contracts are or contain leases;

ii) the Company did not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with ASC 840 are classified as operating leases, and all existing leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases);

and iii) the Company did not reassess initial direct costs for any existing leases.

For leases that existed prior to the date of initial application of ASC 842 (which were previously classified as operating leases), a lessee may elect to use either the total lease term measured at lease inception under ASC 840 or the remaining lease term as of the date of initial application of ASC 842 in determining the period for which to measure its incremental borrowing rate.

In transition to ASC 842, the Company utilized the remaining lease term of its leases in determining the appropriate incremental borrowing rates.

In accordance with ASC 842, components of a lease should be split into three categories:

lease components, non-lease components, and non-components.

The fixed and in-substance fixed contract consideration (including any consideration related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.

Entities may elect not to separate lease and non-lease components.

The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only.

Recently adopted accounting pronouncements

In July 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-07, Codification Updates to SEC Sections (“ASU 2019-07”), which clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating redundancies and making the codification easier to apply.

The Company prospectively adopted this update upon issuance, and it did not have a material impact on its financial position and results of operations.

In June 2018, the FASB issued ASU No.

2018-07, Compensation — Stock Compensation (Topic 718):

Improvements to Non-Employee Share-Based Payment Accounting (“ASU 2018-07”), which simplifies the accounting for non-employee share-based payment transactions by making the guidance consistent with the accounting for employee share-based compensation.

The Company adopted this ASU on October 1, 2019 and applied the standard prospectively in accordance with the guidance.

The impact on the Company's consolidated financial statements was immaterial.

In May 2017, the FASB issued ASU No.

2017-09, Compensation—Stock Compensation (Topic 718):

Scope of Modification Accounting (“ASU 2017-09”), which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification.

Under the new guidance, modification accounting is required only if the fair value, the vesting conditions or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions.

ASU 2017-09 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.

Early adoption is permitted.

The Company adopted ASU 2017-09 as of the required effective date of January 1, 2018.

The adoption of ASU 2017-09 will have an impact on the modification of share-based awards, if any, after the date of adoption.

In August 2016, the FASB issued ASU No.

2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”).

This guidance addresses diversity in practice in how certain cash receipts and cash payments are presented in the statement of cash flows.

The standard is effective for fiscal years beginning after December 15, 2018, and early adoption is permitted.

The adoption of ASU 2016-15 is required to be applied retrospectively.

The Company adopted ASU 2017-09 as of January 1, 2019, and the adoption did not have a material impact on the Company’s consolidated statement of cash flows.

In March 2016, the FASB issued ASU No.

2016-09, Compensation—Stock Compensation (Topic 718):

Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”).

ASU 2016-09 addresses several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross share compensation expense with actual forfeitures recognized as they occur, and classification on the statement of cash flows.

Certain of these changes are required to be applied retrospectively, while other changes are required to be applied prospectively.

The Company adopted ASU 2016-09 effective as of January 1, 2018 and elected prospectively to account for forfeitures as they occur rather than apply an estimated forfeiture rate to share-based compensation expense.

The adoption of ASU 2016-09 did not have a material impact on the Company’s financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No.

2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which supersedes existing revenue recognition guidance under GAAP.

The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The standard defines a five-step process to achieve this principle and will require companies to use more judgment and make more estimates than under the current guidance.

The Company expects that these judgments and estimates will include identifying performance obligations in the customer contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.

ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts.

In August 2015, the FASB issued ASU No.

2015-14, Revenue from Contracts with Customers (Topic 606):

Deferral of the Effective Date , which delays the effective date of ASU 2014-09 such that the standard is effective for annual periods beginning after December 15, 2018.

The FASB subsequently issued amendments to ASU 2014-09 that have the same effective date and transition date.

The Company adopted ASU 2014-09 as of January 1, 2019 and the adoption did not have an impact on the Company’s consolidated financial statements as the Company does not currently have any revenue-generating arrangements.

Recently issued accounting pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill.

The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted.

Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively.

The Company is currently assessing the impact of this standard on our financial condition and results of operations.

In April 2019, the FASB issued ASU No.

2019-4, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments .

This update provides clarifications for three topics related to financial instruments accounting.

The Company adopted this standard on December 1, 2020 on a prospective basis, and it did not have a material impact on its financial position and results of operations upon adoption.

In August 2018, the FASB issued ASU No.

2 unchanged sentences

The new standard removes certain disclosures, modifies certain disclosures and adds additional disclosures related to fair value measurement.

The new standard will be effective beginning January 1, 2020.

The adoption of ASU 2018-13 is not expected to have a material impact on the Company's financial position or results of operations upon adoption.

The new standard was effective for the Company beginning January 1, 2020.

The adoption of ASU 2018-13 did not have a material impact on the Company's disclosures, financial position or results or operations upon adoption.

In July 2017, the FASB issued ASU No.

2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I (“ASU 2017-11”).

2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) (“ASU 2017-11”).

Accounting for Certain Financial Instruments with Down Round Features II.

3 unchanged sentences

ASU 2017-11 is required to be adopted for annual periods beginning after December 15, 2019.

This standard is effective for the Company on January 1, 2020.

The Company is currently assessing the impact of this standard on our financial condition and results of operations.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases on their balance sheet date.

The new standard was effective for the Company beginning January 1, 2020.

The adoption of ASU 2017-11 did not have a material impact on the Company’s financial position or results of operations upon adoption.

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Statements .

The new standard, as amended, requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses.

It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases.

The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments.

The Company adopted this standard on D ecember 1, 2020 on a prospective basis and the adoption did not have a material impact on its financial position and results of operations.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases on their balance sheet date.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2018.

6 unchanged sentences

The modified retrospective method includes several optional practical expedients that entities may elect to apply, as well as transition guidance specific to nonstandard leasing transactions.

The Company has completed its assessment of the impact ASU 2016-02 will have on its financial position, results of operations, and related footnotes.

The Company elected to utilize the available package of practical expedients permitted under the transition guidance within the new standard, which does not require the reassessment of the following:

The Company adopted Topic 842 on January 1, 2020.

In adopting Topic 842, the Company elected to utilize the available package of practical expedients permitted under the transition guidance within the new standard, which does not require the reassessment of the following:

i) whether existing or expired arrangements are or contain a lease, ii) the lease classification of existing or expired leases, and iii) whether previous initial direct costs would qualify for capitalization under the new lease standard.

Additionally, the Company made an accounting policy election to keep leases with an initial term of 12 months or less off of its balance sheet.

The Company’s assessment included identifying the Company’s lease population, assessing significant leases under the new guidance and identifying changes to processes and controls.

The adoption of the new standard will result in the recognition of right-of-use assets and lease liabilities of approximately $ 476 and $ 480 , respectively, on the Company’s consolidated balance sheet.

The adoption of the new standard will not have a material impact on the Company’s consolidated statement of operations or its liquidity.

Additionally, the Company made an accounting policy election to not record leases with a term of 12 months or less off.

Adoption of this standard resulted in the recording of material operating lease liabilities and right-of-use assets on the Company’s consolidated balance sheet (see Note 11).

The adoption of the standard did not have a material effect on the Company’s consolidated statements of operations and comprehensive loss, consolidated statements of cash flows or accumulated deficit.

Recently issued accounting pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes (“ASU 2019-12”).

The standard is effective for annual and interim periods beginning after December 15, 2020.

Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively.

The adoption is not expected to have a material impact on the Company’s consolidated financial statements.

FAIR VALUE MEASUREMENTS

2 unchanged sentences

Level 2 Level 3 Total

Cash equivalents:

Money market funds $ 32,501 $ — $ — $ 32,501

Total $ 24,157 $ — $ — $ 24,157

Derivative liabilities $ — $ — $ 16 $ 16

Commercial paper — 35,559 — 35,559

Corporate bonds — 192,573 — 192,573

Government agencies — 52,330 — 52,330

Total $ 32,501 $ 280,462 $ — $ 312,963

Fair value measurements at December 31, 2019 using:

Level 1 Level 2

Level 2 Level 3 Total

Money market funds $ 24,157 $ — $ — $ 24,157

Total $ 24,157 $ — $ — $ 24,157

Derivative liabilities $ — $ — $ 16 $ 16

Total $ — $ — $ 16 $ 16

The Company did not hold any cash equivalents as of December 31, 2018.

Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.

During the years ended December 31, 2018 and 2019, there were no transfers between Level 1, Level 2 and Level 3.

When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs.

When available, the Company uses quoted market prices to measure fair value.

The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets.

If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates.

In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.

There were no transfers in or out of Level 3 categories in the periods presented.

Valuation of derivative liabilities

The fair value of the derivative liabilities related to the the series B tranche right and warrants to purchase series A convertible preferred stock (see Note 6) is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

Tranche rights

The Company’s issuance of series A and series B convertible preferred stock (see Note 6) provided investors the right to participate in subsequent offerings of series A and series B convertible preferred stock, respectively, in the event specified developmental and regulatory milestones were achieved.

The Company classifies the tranche rights as derivative liabilities on its consolidated balance sheet as it was determined that the tranche rights met the definition of a freestanding financial instrument since they are legally detachable.

It was also determined that such instruments represent forward sale contracts on redeemable shares and, accordingly, the instruments should be accounted for as a liability separate from the convertible preferred stock.

The Company remeasured the derivative liabilities associated with tranche rights to fair value at each reporting date, and recognized changes in the fair value of the derivative liabilities in the consolidated statements of operations.

The fair value of the derivative liabilities was determined using a back solve approach based on the price paid for the underlying series A and B convertible preferred stock and the derivative liability.

The derivative liabilities were valued as forward contracts which considered inputs including, but not limited to, the probability of attaining milestones, market-based assumptions for expected term and the risk free rate.

Series B tranche right

The fair value of the tranche right related to the Company’s series B convertible preferred stock (see Note 6) upon issuance in December 2018 was $ 4,000 .

The change in fair value between the issuance date of December 21, 2018 and December 31, 2018 was not material.

In August 2019, the Company executed a waiver of the developmental milestone whereby the tranche right was executed and an additional 11,294,902 series B preferred shares were issued, resulting in the extinguishment of the related derivative liability.

The change in the fair value of the tranche right between December 2018 and the date of extinguishment was $ 6,393 .

Warrants to purchase series A convertible preferred stock

In March 2017, the Company issued warrants to purchase 32,442 shares of series A convertible preferred stock.

The Company accounts for the warrants to purchase series A convertible preferred stock as a liability as these warrants are freestanding financial instruments that may require the Company to transfer assets upon exercise.

Such liability is not material to the consolidated financial statements, and is included in derivative liabilities.

The following table presents the key inputs of the tranche rights derivative liabilities, which were extinguished in August 2019:

Risk-free interest rate 0.0 % 2.6 %

Expected term (in years) 0.0 2.0

Expected volatility 0.0 % 65.0 %

Expected dividend yield 0.0 % 0.0 %

The fair value of the derivative liabilities related to the warrants to purchase series A convertible preferred stock is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

Upon completion of the IPO in February 2020, the warrants to purchase series A convertible preferred stock converted to warrants to purchase 10,757 shares of common stock and the fair value of the derivative liability was reclassified to additional paid-in capital.

As a result, we will no longer remeasure the fair value of the warrant liability at each reporting date.

Derivative liabilities consisted of the following:

Derivative liabilities

Balance - December 31, 2018 $ 4,023

Issuance of series B preferred stock tranche right 4,000

Change in fair value 6,393

Balance - December 31, 2018 4,023

Change in fair value 6,393

Exercise of series B preferred stock tranche right ( 10,400 )

Balance - December 31, 2019 16

Reclassification to additional paid-in capital in connection with IPO ( 16 )

Balance - December 31, 2020 $ —

As of December 31, 2020, investments were comprised of the following:

Amortized Cost

Unrealized Gains Unrealized Losses Fair Value

Commercial paper $ 35,543 $ 21 $ ( 5 ) $ 35,559

Corporate bonds 191,977 608 ( 12 ) 192,573

Government agencies 52,328 22 ( 20 ) 52,330

Total $ 279,848 $ 651 $ ( 37 ) $ 280,462

As of December 31, 2020, all marketable securities held by the Company had remaining contractual maturities of three years or less.

As of December 31, 2020, the marketable securities in a loss position have a maturity of one to three years.

There have been no impairments of the Company’s assets measured and carried at fair value during the year ended December 31, 2020.

As of December 31, 2019, the Company did no t hold any investments.

PROPERTY AND EQUIPMENT

Equipment, net consisted of the following (in thousands):

Property and equipment, net consisted of the following:

Laboratory equipment $ 253 $ 218

Furniture and fixtures — —

Computer and office equipment 83 58

Equipment 276 234

Leasehold improvements 66 —

Construction in process 147 —

Property and equipment 549 276

accumulated depreciation ( 164 ) ( 112 )

Total Equipment, net $ 164 $ 134

Total Property and Equipment, net $ 385 $ 164

Depreciation expense for the years ended December 31, 2020 and 2019 was $ 52 and $ 47 , respectively.

ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

December 31,

Accrued expenses and other current liabilities consisted of the following:

Contracted research services $ 5,102 $ 434

2 unchanged sentences

Legal fees 199 299

Current portion of operating lease liability 1,047 —

Total accrued expenses $ 11,680 $ 2,899

CONVERTIBLE PREFERRED STOCK

As of December 31, 2019, the Company’s Certificate of Incorporation, as amended and restated (the “Amended Certificate of Incorporation”), designated 64,871,795 authorized shares to be issued as convertible preferred stock with a par value of $ 0.0001 per share, of which 22,533,945 shares have been further designated as series A convertible preferred stock (the “series A preferred stock”), 22,917,726 shares have been further designated as series B convertible preferred stock (the “series B preferred stock”) and 19,420,124 shares have been further designated as series C convertible preferred stock (the “series C preferred stock”).

The holders of preferred stock have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company.

Therefore, the series A, series B, and series C preferred stock (collectively, the “preferred stock”) are classified outside of stockholders’ deficit.

Series A preferred stock financing

In March 2017, the Company issued and sold 5,000,000 shares of series A preferred stock at a price of $ 1.00 per share for proceeds of $ 4,924 , net of issuance costs of $ 76 .

The sale of series A preferred shares met the definition of a qualified equity financing, which triggered the automatic conversion of the Company’s outstanding notes payable plus unpaid interest into 2,501,503 series A preferred shares.

The series A preferred stock financing included a provision for the issuance of an additional 5,000,000 series A preferred shares at a price of $ 1.00 in exchange for gross proceeds of $ 5,000 in the event the Company achieved certain developmental milestones.

The Company classified this tranche right as a derivative liability on its consolidated balance sheet on the date of issuance, and the fair value of the tranche right on the date of issuance of $ 500 was recorded as both a derivative liability and as a reduction to the carrying value of the series A preferred stock.

In December 2017, the Company executed a waiver of the developmental milestones whereby the tranche right was executed and an additional 5,000,000 series A preferred shares were issued.

In August 2018, the Company issued and sold an additional 5,000,000 series A preferred shares at a price of $ 1.00 per share for proceeds of $ 4,899 , net of issuance costs of $ 101 .

The issuance of series A preferred shares included a provision for the issuance of an additional 5,000,000 series A preferred shares at a price of $ 1.00 in exchange for gross proceeds of $ 5,000 , provided the purchase occurred before December 15, 2018.

In November 2018, the additional series A preferred shares were issued.

Series B preferred stock financing

In December 2018, the Company issued 11,166,572 series B preferred shares at a price of $ 3.81 for proceeds of $ 42,414 , net of issuance costs of $ 86 .

The series B preferred stock financing included a provision for the issuance of an additional 11,166,572 series B preferred shares at a price of $ 3.81 in exchange for gross proceeds of $ 42,500 in the event the Company achieved a regulatory milestone.

The Company classified this tranche right as a derivative liability on its consolidated balance sheet on the date of issuance, and the fair value of the tranche right on the date of issuance of $ 4,000 was recorded as both a derivative liability and as a reduction to the carrying value of the series B preferred shares.

In July 2019, the Company issued and sold an additional 456,252 shares of its series B preferred stock at a price of $ 3.81 per share for gross proceeds of $ 1,736 and increased the series B tranche right provision for the issuance of an additional 128,330 series B preferred shares at a price of $ 3.81 .

In August 2019, the Company waived the clinical milestone requirement and exercised the tranche right for the second tranche of its series B preferred stock and issued an additional 11,294,902 shares of its series B preferred stock.

Series C preferred stock financing

In November 2019, the Company issued 19,420,124 series C preferred shares at a price of $ 4.38 for proceeds of $ 84,737 , net of issuance costs of $ 263 .

As of each balance sheet date, the preferred stock consisted of the following:

STOCKHOLDERS’ EQUITY

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

As of December 31, 2019, the Company’s convertible preferred stock consisted of the following (in thousands, except for share data):

December 31, 2019

6 unchanged sentences

64,871,795 64,839,353 $ 200,573 $ 194,727 21,499,770

December 31, 2018

authorized Shares

outstanding Carrying

value Liquidation

preference Common stock issuable upon conversion

Series A convertible preferred stock 22,533,945 22,501,503 $ 22,357 $ 22,502 7,461,168

Series B convertible preferred stock 22,333,144 11,166,572 38,413 42,500 3,702,677

44,867,089 33,668,075 $ 60,770 $ 65,002 11,163,845

The holders of the preferred stock have the following rights and preferences:

The holders of preferred stock are entitled to vote, together with the holders of common stock, on all matters submitted to stockholders for a vote.

Each holder of outstanding shares of preferred stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of preferred stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.

Except as provided by law or by the other provisions of the Amended Certificate of Incorporation, holders of preferred stock vote together with the holders of common stock as a single class.

The holders of record of the shares of series B preferred stock, exclusively and as a separate class, are entitled to elect two directors of the Company (the “series B directors”);

the holders of record of the shares of series A preferred stock, exclusively and as a separate class, are entitled to elect two directors of the Company (the “series A directors” and together with the series B directors, the “preferred directors”).

Each share of preferred stock shall be convertible, at the option of the holder, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of common stock as is determined by dividing the original issue price by the conversion price (as defined below) in effect at the time of conversion.

The series A original issue price and series A conversion price were equal to $ 1.00 ($ 3.02 post stock split) as of December 31, 2018 and 2019.

The series B original issue price and series B conversion price were equal to $ 3.81 ($ 11.48 post stock split) as of December 31, 2018 and 2019.

The series C original issue price and series C conversion price were equal to $ 4.38 ($ 13.20 post stock split) as of December 31, 2019.

Such series A, series B and series C original issue prices and series A, series B and series C conversion prices, the rate at which each series of preferred stock may be converted into common stock, are subject to adjustment from time to time to reflect future stock dividends, splits, combinations, recapitalizations and similar events.

The series A, series B and series C conversion prices are also subject to adjustments based on weighted-average anti-dilution provisions set forth in the Amended Certificate of Incorporation in the event that additional securities are issued at a purchase price less than the series A conversion price and/or the series B conversion and/or series C conversion price then in effect.

As of December 31, 2018 and 2019, each share of series A preferred stock was convertible into one share of common stock.

As of December 31, 2018 and 2019, each share of series B preferred stock was convertible into one share of common stock.

As of December 31, 2019, each share of series C preferred stock was convertible into one share of common stock.

Upon either (a) the closing of the sale of shares of common stock to the public at a price per share of at least $ 4.50 , subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the common stock in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $ 75,000 of gross proceeds to the Company, a qualified IPO, or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the requisite preferred holders, then (i) all outstanding shares of preferred stock shall automatically be converted into shares of common stock, at the then effective conversion rate and (ii) such stock may not be reissued by the Company.

The holders of the preferred stock are entitled to receive noncumulative dividends when and if declared by Company’s board of directors.

The Company may not declare, pay or set aside any dividends on any other class or series of stock of the Company, other than dividends on common stock payable in common stock, unless the holders of the preferred stock first receive, or simultaneously receive, a dividend on each outstanding preferred stock equal to (a) in the case of a dividend on any class of common stock or any class or series that is convertible into common stock, that dividend per preferred stock as would equal the product of (i) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into common stock and (ii) the number of common stock issuable upon conversion of a stock the applicable series of preferred stock, or (b) in the case of a dividend on any class or series that is not convertible into common stock, at a rate per preferred stock determined by (i) dividing the amount of the dividend payable on each share of such class or series of stock by the original issue price of such class or series (subject to appropriate adjustment in the event of any bonus stock, stock dividend, stock split, combination of or other similar recapitalization with respect to such class or series) and (ii) multiplying such fraction by an amount equal to the applicable series A, series B or series C original issue price.

No cash dividends were declared or paid during the years ended December 31, 2018 or 2019.

Liquidation preference

In the event of any liquidation, dissolution or winding up of the Company, the holders of shares of series C preferred stock, series B preferred stock and series A preferred stock then outstanding, on a pro rata, as converted and pari passu basis, shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, an amount per share equal to the applicable original issue price for such class or series of preferred stock, plus any dividends declared but unpaid thereon.

If upon any such liquidation, dissolution or winding up of the Company or deemed liquidation event, the assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of preferred stock the full amount to which they shall be entitled, the holders of shares of series C, series B and series A preferred stock shall stock ratably, on a pari passu basis, in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the stock held by them upon such distribution if all amounts payable on or with respect to such stock were paid in full.

Unless a majority of the holders of the then outstanding preferred stock, on an as-if-converted to common stock basis, elect otherwise, a deemed liquidation event shall include a merger or consolidation (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring company or corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company.

The Amended Certificate of Incorporation do not provide redemption rights to the holders of preferred stock.

The holders of shares of convertible preferred stock have liquidation rights in the event of a deemed liquidation that, in certain situations, are not solely within the control of the Company.

Therefore, the preferred stock is classified outside of stockholders’ deficit.

Upon issuance of each class of preferred stock, the Company assessed the embedded conversion and liquidation features of the securities.

The Company determined that each class of preferred stock did not require the Company to separately account for the liquidation features.

The Company also concluded that no beneficial conversion feature existed upon the issuance date of the series A preferred stock, series B preferred stock or series C preferred stock as of December 31, 2019 or 2018.

As of December 31, 2018, the Amended Certificate of Incorporation authorized the Company to issue 57,803,522 shares of common stock with a par value of $ 0.0001 .

As of December 31, 2019, the Amended Certificate of Incorporation authorized the Company to issue 80,000,000 shares of common stock with a par value of $ 0.0001 .

The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock as set forth above.

The Company had reserved 24,027,604 shares and 12,785,541 shares as of December 31, 2019 and 2018, respectively, of common stock for the conversion of outstanding shares of preferred stock (see Note 6), the exercise of outstanding stock options, the number of shares remaining available for grant under the Company’s 2017 Equity Incentive Plan (see Note 8) and the exercise of the outstanding warrants to purchase shares of series A preferred stock, assuming all warrants to purchase shares of series A preferred stock became warrants to purchase shares of common stock at the applicable conversion ratio.

On January 3, 2020, in connection with the IPO, the Company filed a restated Certificate of Incorporation, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 510,000,000 shares, of which (i) 500,000,000 shares shall be a class designated as common stock, par value $ 0.0001 per share, and (ii) 10,000,000 shares shall be a class designated as undesignated preferred stock, par value $ 0.0001 per share.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

Common stockholders are entitled to receive dividends, as may be declared by the board of directors.

These dividends are subject to the preferential dividend rights of the holders of the Company’s preferred stock.

When dividends are declared on shares of common stock, the Company must declare at the same time a dividend payable to the holders of preferred stock equivalent to the dividend amount they would receive if each preferred share were converted into common stock.

The Company may not pay dividends to common stockholders until all dividends declared but unpaid on the preferred stock have been paid in full.

No cash dividends were declared or paid during the years ended December 31, 2019 or 2018.

Upon closing of the IPO on February 3, 2020, all of the preferred stock converted into an aggregate of 21,499,770 shares of common stock.

On February 3, 2020, in connection with the closing of the IPO, the Company filed an amended and restated certificate of incorporation, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 510,000,000 shares, of which (i) 500,000,000 shares shall be a class designated as common stock, par value $ 0.0001 per share, and (ii) 10,000,000 shares shall be a class designated as undesignated preferred stock, par value $ 0.0001 per share.

As of December 31, 2020, no preferred stock was outstanding.

STOCK-BASED COMPENSATION

2017 Equity Incentive Plan

The Company’s 2017 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2017 Plan”), provides for the Company to grant qualified incentive options, nonqualified options, stock grants and other stock-based awards to employees and non-employees to purchase the Company’s common stock.

The 2017 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board of directors.

The total number of shares of common stock that may be issued under the 2017 Plan was 1,795,102 as of December 31, 2018 and 8,336,573 as of December 31, 2019, of which 1,563,187 and 138,603 shares remained available for future grant as of December 31, 2018 and 2019, respectively.

The exercise price for incentive options is determined at the discretion of the board of directors.

All incentive options granted to any person possessing less than 10% of the total combined voting power of all classes of stock may not have an exercise price of less than 100 % of the fair market value of the common stock on the grant date.

All incentive options granted to any person possessing more than 10% of the total combined voting power of all classes of stock may not have an exercise price of less than 110 % of the fair market value of the common stock on the grant date.

The option term for incentive awards may not be greater than ten years from the date of the grant.

Incentive options granted to persons possessing more than 10% of the total combined voting power of all classes of stock may not have an option term of greater than five years from the date of the grant.

The vesting period for equity-based awards is determined at the discretion of the board of directors, which is generally four years .

For awards granted to employees and non-employees with four -year vesting terms, 25 % of the option vests on the first anniversary of the grant date and the remaining stock vest equally each month for three years thereafter.

Shares that are expired, terminated, surrendered or canceled under the 2017 Plan without having been fully exercised will be available for future awards.

The Company’s 2017 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2017 Plan”), provided for the Company to grant qualified incentive options, nonqualified options, stock grants and other stock-based awards to employees and non-employees to purchase the Company’s common stock.

Upon the effectiveness of the 2020 Plan (as defined below), no further issuances were made under the 2017 Plan.

2020 Stock Option and Incentive Plan

2 unchanged sentences

The number of shares initially reserved for issuance under the 2020 Plan is 6,665,891 , which shall be cumulatively increased on January 1, 2021 and each January 1 thereafter by 4 % of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation, nomination, and corporate governance committee of the board of directors.

As of December 31, 2020, 5,050,607 shares remained available for issuance under the 2020 Plan.

The number of authorized shares reserved for issuance under the 2020 Plan was increased by 1,443,135 shares effective as of January 1, 2021.

2020 Employee Stock Purchase Plan

1 unchanged sentence

A total of 326,364 shares of common stock were initially reserved for issuance under this plan, which shall be cumulatively increased on January 1, 2021 and each January 1 thereafter by 1 % of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation, nomination and corporate governance committee of the board of directors.

As of December 31, 2020, 326,364 shares remained available for issuance under the 2020 Plan.

The number of authorized shares reserved for issuance under the 2020 Plan was increased by 326,364 shares effective as of January 1, 2021.

Option valuation

The assumptions that the Company used to determine the grant-date fair value of options granted to employees and directors were as follows, presented on a weighted-average basis:

Risk-free interest rate 1.68 %

Expected term (in years) 6.0

Expected volatility 62.2 %

Expected dividend yield 0 %

The assumptions that the Company used to determine the fair value of options granted to non-employees were as follows, presented on a weighted-average basis:

The assumptions that the Company used to determine the grant-date fair value of options granted were as follows, presented on a weighted-average basis:

Risk-free interest rate 0.91 %

2 unchanged sentences

Expected dividend yield 0 %

Through December 31, 2019, all options granted by the Company under the 2017 Plan were for the purchase of shares of common stock.

The following table summarizes option activity under the 2017 Plan since December 31, 2018 (in thousands, except share and per share amounts):

The following table summarizes the stock option activity under the Company’s equity awards plans:

(in thousands)

1 unchanged sentence

Granted 1,574,543

Exercised ( 160,509 ) $ 6.85

Canceled or forfeited ( 39,764 ) $ 4.11

Outstanding December 31, 2020 3,752,744

Options vested or expected to vest as of December 31, 2019 2,378,474

Options exercisable as of December 31, 2019 111,633

Options vested or expected to vest at December 31, 2020 3,752,744 $ 15.71 9.0 $ 62,842

Options exercisable at December 31, 2020 706,696 $ 7.67 8.6 $ 17,226

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock.

5 unchanged sentences

Subject to the continued employment (or other engagement of the recipient by the Company as described in the restricted stock agreements), all shares of restricted common stock become fully vested within three years of the vesting commencement date.

On December 5, 2019 the Company’s board of directors approved the acceleration of vesting for all unvested shares of restricted stock so that they were fully vested as of December 5, 2019.

The following table summarizes restricted stock activity since December 31, 2017:

Unvested restricted common stock as of December 31, 2017 91,680 $ 0.30

The following table summarizes restricted stock activity since January 1, 2019:

Unvested restricted common stock as of January 1, 2019 132,645 $ 0.51

Granted 62,988 $ 5.22

7 unchanged sentences

Stock-based compensation expense

The Company recorded stock-based compensation expense in the following expense categories of its consolidated statements of operations (in thousands):

The Company recorded stock-based compensation expense related to stock options and restricted stock units in the following expense categories of its consolidated statements of operations and comprehensive loss:

Research and development $ 3,607

General and administrative 4,158

In December 2020, the Company adopted a policy whereby non-employee Directors may, at initial appointment and then annually thereafter, elect to receive their compensation in the form of common stock in lieu of cash.

As of December 31, 2020, the Company issued 505 shares of common stock under this policy.

The shares were issued out of the 2020 Stock Option Plan.

In connection with this issuance, the Company recorded $ 17 of stock‑based compensation expense, equal to the aggregate fair value of this common stock on the date of issuance.

For options granted in June 2019, the board of directors determined that the fair value of the Company’s common stock was $ 3.20 per share as of the grant date.

1 unchanged sentence

Accordingly, stock-based compensation recorded during the year ended December 31, 2019 was based on the adjusted fair value for the options granted in June 2019.

As of December 31, 2018 and 2019, total unrecognized compensation cost related to the unvested stock-based awards was $ 335 and $ 11,315 , respectively, which is expected to be recognized over a weighted average period of 3.3 and 3.5 years, respectively.

As of December 31, 2020, total unrecognized compensation cost related to the unvested stock options was $ 28,388 , which is expected to be recognized over a weighted average period of 2.8 years.

As of December 31, 2020, total unrecognized compensation cost related to the unvested restricted stock units was $ 1,405 , which is expected to be recognized over a weighted average period of 1.9 years.

For the years ended December 31, 2020 and 2019, the Company recorded no income tax benefit for the net operating losses incurred each year, due to its uncertainty of realizing a benefit from those items.

8 unchanged sentences

Effective income tax rate

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows (in thousands):

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows:

Tax year ended December 31,

2 unchanged sentences

Research and development tax credits 2,477 1,014

Accrual to cash adjustment — 657

Operating lease liabilities 2,147 —

Accruals and other 680 280

3 unchanged sentences

Subtotal 2,088 7

Right-of-use assets ( 2,063 ) —

Net fixed assets ( 25 ) ( 7 )

2 unchanged sentences

These amounts begin to expire in 2036.

The federal net operating losses generated in 2018 and 2019 can be carried forward indefinitely.

The federal net operating losses generated in 2018-2020 can be carried forward indefinitely.

The Company also has net operating loss carryforwards in Canada of $ 498 that are set to expire beginning in 2038.

40 unchanged sentences

Preferred stock (as converted to common stock) —

Warrants to purchase shares of series A preferred stock (as converted to common stock) 10,757

COMMITMENTS AND CONTINGENCIES

Lease agreements

In February 2019, the Company entered into an agreement to lease approximately 2,357 square feet of office space for its principal office, which is located in Cambridge, MA.

Warrants to purchase shares of series A preferred stock (as converted to common warrants to purchase stock) 10,757

The Company has historically entered into lease arrangements for its facilities.

As of December 31, 2020, the Company had three operating leases with required future minimum payments.

In applying the transition guidance under ASC 842, the Company determined the classification of these leases to be operating leases and recorded right-of-use assets and lease liabilities as of the effective dates.

The Company’s leases generally do not include termination or purchase options.

Operating Leases

In July 2020, the Company entered into a seven-year agreement with an option to extend for five additional years to lease two floors totaling approximately 25,578 square feet of office space for its principal office, which is located in Cambridge, MA.

The lease on the first floor commenced on August 1, 2020 and the Company currently expects the lease of the second floor to commence in the second quarter 2021 when the landlord delivers the space in accordance with the lease terms.

The Company recognizes the respective lease balances on the consolidated balance sheets when the lease of each floor has commenced.

Under the terms of the lease, the Company is required to make up to $ 18,751 in total minimum payments during the term, the table below excludes the minimum rental payments of $ 8,222 for the floor that has not commenced as of December 31, 2020.

The Company was also required to issue a $ 1,168 letter of credit as security for the lease.

The Company also leases additional office space in Cambridge, MA.

The lease commenced in February 2019 for approximately 2,357 square feet of office space.

The lease expires on April 30, 2022, subject to an option to extend the lease for three additional years.

The Company classifies the lease as an operating lease and records rent expense on a straight-line basis over the term of the lease.

The Company is obligated to make minimum lease payments under the facility lease as follows (in thousands):

In December 2020, the Company entered into an eleven-year agreement with an option to extend for five additional years to lease approximately 18,120 square feet of office and laboratory space in New York, NY.

The Company currently expects the lease to commence in the third quarter 2021 when the landlord delivers the space in accordance with the lease terms.

The Company recognizes the lease balance on the consolidated balance sheet when the lease has commenced.

Under the terms of the lease, the Company is required to make up to $ 21,373 in total minimum payments during the term of the lease.

The table below excludes the minimum rental payments for the lease that has been executed but not commenced as of December 31, 2020.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating lease for the year ended December 31, 2020:

Year Ended December 31, 2020

Operating lease cost $ 767

Short-term lease cost 769

Variable lease cost 44

Total lease cost $ 1,580

Other Operating Lease Information

Cash paid for amounts included in the measurement of lease liability $ 432

Weighted-average remaining lease term 7.5

Weighted-average discount rate 5.4 %

The variable lease costs for the year ended December 31, 2020 include common area maintenance and other operating charges.

As the Company’s leases do not provide an implicit rate, the Company utilized its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Future minimum lease payments under the Company’s operating leases as of December 31, 2020 were as follows:

Thereafter 3,803

Total lease payments 10,624

interest ( 1,883 )

Total lease liability $ 8,741

As of December 31, 2019, future minimum lease payments under the Company’s lease obligations under ASC 840 were as follows:

Years Ending December 31,

Rent expense for the years ended December 31, 2020 and 2019 was $ 1,545 and $ 415 , respectively.

COMMITMENTS AND CONTINGENCIES

We enter into contracts in the normal course of business with contract research organizations ("CROs"), contract manufacturing organizations ("CMOs") and other third parties for preclinical research studies, Clinical Trials and testing and manufacturing services.

18 unchanged sentences

RELATED-PARTY TRANSACTIONS

The Company is party to a services agreement, which was entered into in March 2017 and amended in November 2017, with Ridgeline, an entity owned by one of its investors, whereby an individual who is a Company director and was executive officer until September 2019 and other employees of Ridgeline provide the Company with management, scientific, business development and other operational services.

The agreement is effective until either party elects to terminate.

Under the services agreement the Company will pay for services based on the costs incurred plus a markup of ten percent ( 10 %) and reimburse for certain pass-through costs.

The services agreement was further amended in December 2018.

Subsequent to this amendment, in connection with the services provided, the Company pays Ridgeline $ 950 per month, which is reconciled on a quarterly basis with the actual expenses incurred by Ridgeline on its behalf.

The Company was party to a services agreement, which was entered into in March 2017 and amended in November 2017 and March 2020, with Ridgeline.

Ridgeline is an entity owned by one of the Company’s investors, whereby employees of Ridgeline provided the Company with scientific consulting services.

In 2019, the Company paid Ridgeline $ 950 per month, which was reconciled on a quarterly basis with the actual expenses incurred by Ridgeline on its behalf.

In 2020 the Company transitioned to a more limited consulting arrangement whereby Ridgeline invoiced the Company for services performed on an ongoing monthly basis.

The services agreement expired December 31, 2020.

There was no amount due to Ridgeline at December 31, 2020.

Total prepaids with related party were $ 916 as of December 31, 2019.

Total amounts due to related party were $ 1,707 as of December 31, 2018.

Total service fees incurred were $ 2,364 and $ 10,411 , for the years ended December 31, 2020 and 2019.

On March 20, 2020, the services agreement was further amended in order to transition from the previous service model to a more limited consulting arrangement with Ridgeline in 2020.

Under the amendment Ridgeline will invoice the Company for services performed on an ongoing monthly basis.

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

22 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk