Black Diamond Therapeutics, Inc. 10-K

Item 7A. Quantitative and Qualitative Disclosure About Market Risk We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. 129 Table of Contents Item 8. Consolidated Financial Statements and Supplementary Data BLACK DIAMOND THERAPEUTICS, INC. Index to Consolidated Financial Statements Page No. Report of Independent Registered Public Accounting Firm 131 Consolidated Balance Sheets 132 Consolidated Statements of Operations 133 Consolidated Statements of Cash Flows 134 Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) 136 130 Table of Contents Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Black Diamond Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Black Diamond Therapeutics, Inc. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of convertible preferred stock and stockholders’ equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP Boston, Massachusetts March 25, 2021 We have served as the Company’s auditor since 2019. 131 Table of Contents Black Diamond Therapeutics, Inc. Consolidated Balance Sheets (in thousands, except share and per share data) December 31, 2020 2019 Assets Current assets: Cash and cash equivalents $ 34,605 $ 154,666 Investments 280,462 — Prepaid expenses and other current assets 4,487 1,048 Total current assets 319,554 155,714 Property and equipment, net 385 164 Restricted cash 1,223 55 Deferred offering costs — 2,303 Right-of-use asset 8,402 — Other non-current assets 106 59 Total assets $ 329,670 $ 158,295 Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit) Current liabilities: Accounts payable $ 2,538 $ 1,964 Accrued expenses and other current liabilities 11,680 2,899 Total current liabilities 14,218 4,863 Derivative liabilities — 16 Non-current operating lease liability 7,694 — Total liabilities 21,912 4,879 Commitments and contingencies (Note 12) — — Convertible preferred stock (series A, B and C); $ 0.0001 par value; 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 — 200,573 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; $ 0.0001 par value; 500,000,000 shares authorized at December 31, 2020 and 80,000,000 shares authorized at December 31, 2019; 36,078,383 shares issued and outstanding at December 31, 2020 and 2,236,672 shares issued and outstanding at December 31, 2019 5 1 Additional paid-in capital 425,363 3,812 Accumulated other comprehensive income 614 — Accumulated deficit ( 118,224 ) ( 50,970 ) Total stockholders' equity (deficit) 307,758 ( 47,157 ) Total liabilities, convertible preferred stock and stockholders' equity (deficit) $ 329,670 $ 158,295 The accompanying notes are an integral part of these consolidated financial statements. 132 Table of Contents Black Diamond Therapeutics, Inc. Consolidated Statements of Operations (in thousands, except share and per share data) Year Ended December 31, 2020 2019 Operating expenses: Research and development (inclusive of $ 2,364 and $ 9,966 , respectively, with a related party) $ 48,209 $ 21,753 General and administrative (inclusive of $ 0 and $ 445 , respectively, with a related party) 21,361 7,579 Total operating expenses 69,570 29,332 Loss from operations ( 69,570 ) ( 29,332 ) Other income (expense): Interest expense ( 1 ) — Interest income 4,041 461 Change in fair value of derivative liabilities — ( 6,393 ) Other (expense) income ( 1,724 ) 6 Total other income (expense), net 2,316 ( 5,926 ) Net loss attributable to common stockholders $ ( 67,254 ) $ ( 35,258 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 2.05 ) $ ( 16.99 ) 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. 133 Table of Contents Black Diamond Therapeutics, Inc. Consolidated Statements of Cash Flows (in thousands) Year Ended December 31, 2020 2019 Cash flows from operating activities: Net loss $ ( 67,254 ) $ ( 35,258 ) Adjustment to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 7,765 3,643 Change in fair value of derivative liabilities — 6,393 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 Changes in current assets and liabilities: Prepaid expenses and other current assets ( 3,439 ) ( 1,024 ) Other non-current assets ( 47 ) ( 51 ) Accounts payable 1,069 1,454 Amounts due to related party — ( 1,707 ) 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 ) Cash flows from investing activities: 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 ) Cash flows from financing activities: 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 $ 1,275 213,844 — Payment of deferred offering costs — ( 1,743 ) Net cash provided by financing activities 214,944 127,756 Net increase (decrease) in cash and cash equivalents ( 118,893 ) 103,061 Cash, cash equivalents and restricted cash, beginning of year 154,721 51,660 Cash, cash equivalents and restricted cash, end of year $ 35,828 $ 154,721 Cash and cash equivalents, end of year $ 34,605 $ 154,666 Restricted cash, end of year 1,223 55 Cash, cash equivalents and restricted cash, end of year $ 35,828 $ 154,721 134 Table of Contents Supplemental disclosure of non-cash investing and financing activities: Deferred offering and stock issuance costs included in accounts payable and accrued expenses and other current liabilities $ — $ 656 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 The accompanying notes are an integral part of these consolidated financial statements. 135 Table of Contents Black Diamond Therapeutics, Inc. Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (in thousands, except share data) Convertible preferred stock Common stock Additional paid-in capital Accumulated other comprehensive income Accumulated deficit Total stockholders’ equity (deficit) Shares Amount Shares Par Value BALANCE - December 31, 2018 33,668,075 60,770 2,173,684 1 169 — ( 15,712 ) ( 15,542 ) 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 — — — — — — 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 ) 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 ) BALANCE - December 31, 2020 — $ — 36,078,383 $ 5 $ 425,363 $ 614 $ ( 118,224 ) $ 307,758 The accompanying notes are an integral part of these consolidated financial statements. 136 Table of Contents Black Diamond Therapeutics, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Amounts in thousands, except share and per share amounts) 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION Black Diamond Therapeutics, Inc. (the “Company”) is a precision oncology medicine company pioneering the discovery and development of small molecule, tumor-agnostic therapies. The Company was originally organized as a limited liability company in December 2014 under the name ASET Therapeutics LLC. In September 2016 the Company was converted to a corporation under the laws of the State of Delaware under the name ASET Therapeutics, Inc. The Company changed its name to Black Diamond Therapeutics, Inc. in January 2018. Since its inception, the Company has devoted substantially all of its efforts to raising capital, obtaining financing, and incurring research and development costs related to the development of its mutation, allostery, and pharmacology computational and discovery platform. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products developed will obtain necessary government regulatory approval or that any products, if approved, will be commercially viable. The Company operates in an environment of rapid technological innovation and substantial competition from pharmaceutical and biotechnological companies. In addition, the Company is dependent upon the services of its employees, consultants and service providers including a related party Ridgeline Therapeutics GmbH (“Ridgeline”). Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. On January 21, 2020, the Company effected a 1-for- 3.01581 reverse stock split of the Company’s common stock. All shares, stock options, warrants and per share information presented in the consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis for all periods presented. There was no change in the par value of the Company’s common stock. On February 3, 2020, the Company completed an initial public offering (the “IPO”) of 12,174,263 shares of its common stock, including the exercise in full by the underwriters of their option to purchase up to 1,587,947 additional shares of common stock, for aggregate gross proceeds of $ 231,311 and its shares started trading on The Nasdaq Global Select Market under the ticker symbol “BDTX.” The Company received $ 212,101 in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. Upon closing of the IPO, all of the Company's outstanding shares of convertible preferred stock automatically converted into 21,499,770 shares of common stock. 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. 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 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. 137 Table of Contents The Company may seek additional funding through private or public equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. 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. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of consolidation 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 . 138 Table of Contents Use of estimates 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 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. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. 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 The Company considers events or transactions that occur after the balance sheet date but before the final financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. Foreign currency and currency translation The functional currency for the Company’s wholly owned foreign subsidiary, Black Diamond Therapeutics (Canada), Inc. is the United States dollar. Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in other income (expense), net in the consolidated statements of operations, as incurred. Cash and cash equivalents The Company classifies deposits in banks, money market funds and cash invested temporarily in various instruments with maturities of three months or less at the time of purchase as cash and cash equivalents. At December 31, 2020, cash and cash equivalents includes cash on deposit at commercial banks and a money market fund that invests in U.S. Government securities. At December 31, 2019, cash consisted of cash on deposit at commercial banks. Investments 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. 139 Table of Contents 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 In connection with its operating lease commitments, the Company maintains certain balances for security deposits that are classified as restricted cash on the consolidated balance sheets . 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, 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, 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: Estimated useful life Laboratory equipment 5 years Furniture and fixtures 5 years Computer and office equipment 3 years 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. Expenditures for repairs and maintenance are charged to expense as incurred. Impairment of long - lived assets 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. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized in loss from operations when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows. The Company did not record any impairment losses on long-lived assets during the periods presented. 140 Table of Contents Deferred offering costs The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process preferred stock or common stock financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of convertible preferred stock or in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should a planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statements of operations. The Company had no deferred offering costs as of December 31, 2020. 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 Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1 — Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities. • Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: • quoted prices for similar assets and liabilities in active markets • quoted prices for identical or similar assets or liabilities in markets that are not active • observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals) • inputs that are derived principally from or corroborated by observable market data by correlation or other means • Level 3 — Unobservable inputs for the assets or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). The carrying values of the Company’s prepaid expenses and other current assets, and accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. Derivative liabilities 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. 141 Table of Contents Classification of convertible preferred stock 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 The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s singular focus is the development of selective medicines for patients with genetically defined cancers driven by oncogenes activated by allosteric mutations. Research and development costs Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs of outside vendors engaged to conduct preclinical development activities. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered. Research contract costs and accruals The Company has entered into various research and development-related contracts with companies both inside and outside of the United States. The related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs. Patent costs All patent-related costs incurred in connection with filing and prosecuting patent applications to operations are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses. Stock-based compensation 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. 142 Table of Contents 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 and does not expect to pay any cash dividends in the foreseeable future. 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. Income taxes 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. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. To date, the Company has not taken any uncertain tax positions or recorded any reserves, interest or penalties. Comprehensive loss 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 The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated, and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. 143 Table of Contents Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. 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 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. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to be outstanding if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2020 and 2019. Leases 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. 144 Table of Contents 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 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. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The new standard removes certain disclosures, modifies certain disclosures and adds additional disclosures related to fair value measurement. 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) (“ASU 2017-11”). Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. ASU 2017-11 is required to be adopted for annual periods beginning after December 15, 2019. 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. 145 Table of Contents 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. In July 2018, an amendment was made that allows companies the option of using the effective date of the new standard as the initial application date (at the beginning of the period in which the new standard is adopted, rather than at the beginning of the earliest comparative period). This update includes a short-term lease exception for leases with a term of 12 months or less, in which a lessee can make an accounting policy election not to recognize the associated lease assets and lease liabilities on its balance sheet. Additionally, in March 2019, the FASB issued ASU 2019-01 (“ASU No. 2019-01”). ASU No. 2019-01 clarifies the transition guidance related to interim disclosures provided in the year of adoption. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operating leases, using classification criteria that are substantially similar to the previous guidance. For lessees, the recognition, measurement, and presentation of expenses and cash flows arising from a lease did not significantly change from previous U.S. GAAP. 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 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 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”). 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 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. 146 Table of Contents 3. FAIR VALUE MEASUREMENTS The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values: Fair value measurements at December 31, 2020 using: Level 1 Level 2 Level 3 Total Assets: Cash equivalents: Money market funds $ 32,501 $ — $ — $ 32,501 Investments: Commercial paper — 35,559 — 35,559 Corporate bonds — 192,573 — 192,573 U.S. 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 3 Total Assets: Money market funds $ 24,157 $ — $ — $ 24,157 Total $ 24,157 $ — $ — $ 24,157 Liabilities: Derivative liabilities $ — $ — $ 16 $ 16 Total $ — $ — $ 16 $ 16 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 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. 147 Table of Contents 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 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 $ — 4. INVESTMENTS 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 U.S. 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. 5. PROPERTY AND EQUIPMENT Property and equipment, net consisted of the following: December 31, 2020 2019 Laboratory equipment $ 253 $ 218 Computer and office equipment 83 58 Leasehold improvements 66 — Construction in process 147 — Property and equipment 549 276 Less: accumulated depreciation ( 164 ) ( 112 ) Total Property and Equipment, net $ 385 $ 164 Depreciation expense for the years ended December 31, 2020 and 2019 was $ 52 and $ 47 , respectively. 148 Table of Contents 6. ACCRUED EXPENSES Accrued expenses and other current liabilities consisted of the following: December 31, 2020 2019 Contracted research services $ 5,102 $ 434 Payroll and related expenses 3,729 1,182 Professional and consulting fees 1,603 984 Legal fees 199 299 Current portion of operating lease liability 1,047 — Total accrued expenses $ 11,680 $ 2,899 7. 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 Shares authorized Shares issued and outstanding Carrying value Liquidation preference Common stock issuable upon conversion Series A preferred stock 22,533,945 22,501,503 $ 22,357 $ 22,502 7,461,168 Series B preferred stock 22,917,726 22,917,726 93,479 87,225 7,599,178 Series C preferred stock 19,420,124 19,420,124 84,737 85,000 6,439,424 64,871,795 64,839,353 $ 200,573 $ 194,727 21,499,770 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. 8. STOCK-BASED COMPENSATION 2017 Equity Incentive Plan 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. 149 Table of Contents 2020 Stock Option and Incentive Plan The 2020 Stock Option and Incentive Plan (the “2020 Plan”) was approved by our board of directors on December 5, 2019, and the Company’s stockholders on January 14, 2020 and became effective on the date immediately prior to the date on which the registration statement for the Company’s IPO was declared effective. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, directors and consultants. 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 The 2020 Employee Stock Purchase Plan (the “2020 ESPP”) was approved by the Company’s board of directors on December 5, 2019, and our stockholders on January 14, 2020, and became effective on the date immediately prior to the date on which the registration statement for the Company’s IPO was declared effective. 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 were as follows, presented on a weighted-average basis: December 31, 2020 2019 Risk-free interest rate 0.91 % 1.68 % Expected term (in years) 6.1 6.0 Expected volatility 63.8 % 62.2 % Expected dividend yield 0 % 0 % 150 Table of Contents Options The following table summarizes the stock option activity under the Company’s equity awards plans: Options Weighted Average Exercise Price Weighted Average Remaining Life (in Years) Intrinsic Value (in thousands) Outstanding December 31, 2019 2,378,474 $ 8.03 9.7 $ 6,722 Granted 1,574,543 $ 26.10 Exercised ( 160,509 ) $ 6.85 Canceled or forfeited ( 39,764 ) $ 4.11 Outstanding December 31, 2020 3,752,744 $ 15.71 9.0 $ 62,842 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. The weighted-average grant-date fair value per share of options granted during the years ended December 31, 2020 and 2019 was $ 15.18 and $ 4.82 , respectively. The total fair value of options vested during the years ended December 31, 2020 and 2019 was $ 4,198 and $ 319 , respectively. Restricted stock Under terms of the restricted stock agreements covering the common stock, shares of restricted common stock are subject to a vesting schedule. The majority of restricted stock vests over a three -year period during which time all unvested stock will immediately be forfeited to the Company if the relationship between the recipient and the Company ceases. 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. 151 Table of Contents The following table summarizes restricted stock activity since January 1, 2019: Number of shares Weighted average grant date fair value Unvested restricted common stock as of January 1, 2019 132,645 $ 0.51 Granted 62,988 $ 5.22 Vested ( 195,633 ) $ 5.94 Unvested restricted common stock as of December 31, 2019 — $ — Granted 61,000 $ 29.65 Vested ( 6,664 ) $ 30.00 Unvested restricted common stock as of December 31, 2020 54,336 $ 29.68 The aggregate fair value of restricted stock that vested during the years ended December 31, 2020 and 2019 was $ 200 and $ 420 , respectively. The Company recorded stock-based compensation expense for restricted stock of $ 404 and $ 1,973 , during the years ended December 31, 2020 and 2019, respectively. Stock-based compensation expense 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: December 31, 2020 2019 Research and development $ 3,607 $ 3,171 General and administrative 4,158 472 $ 7,765 $ 3,643 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. However, the fair value of the Company’s common stock at the date of the grant was adjusted to $ 4.13 per share in connection with a retrospective fair value assessment solely for accounting purposes. 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, 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. 152 Table of Contents 9. INCOME TAXES 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. A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations as of December 31, 2020 and 2019, respectively, is as follows: December 31, 2020 2019 U.S. federal statutory income tax rate 21.0 % 21.0 % State and local taxes, net of federal benefit 3.4 % 1.6 % Permanent differences ( 0.8 ) % ( 4.2 ) % Research and development credits 2.2 % 1.6 % Change in valuation allowance ( 26.5 ) % ( 19.8 ) % Other 0.7 % ( 0.2 ) % Effective income tax rate 0.0 % 0.0 % 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, 2020 2019 Deferred tax assets (liabilities): Net operating loss carryforwards $ 24,059 $ 9,512 Research and development tax credits 2,477 1,014 Operating lease liabilities 2,147 — Accruals and other 680 280 Stock-based compensation 1,434 196 Total deferred tax assets 30,797 11,002 Valuation Allowance ( 28,709 ) ( 10,995 ) Subtotal 2,088 7 Right-of-use assets ( 2,063 ) — Net fixed assets ( 25 ) ( 7 ) Net deferred tax assets $ — $ — As of December 31, 2020, the Company had federal and state net operating loss carryforwards of $ 96,644 and $ 59,515 , respectively, which may be used to offset future taxable income, if any. These amounts begin to expire in 2036. 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. Additionally, the Company had federal research and development tax credit carryforwards of $ 2,477 that expire at various dates through 2040. 153 Table of Contents In assessing the realizability of the net deferred tax asset, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Management believes that it is more likely than not that the Company’s deferred income tax assets will not be realized. As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2020 and 2019. The valuation allowance increased by $ 17,714 during the year ended December 31, 2020 primarily as a result of net losses generated during the period. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position. The Company also has not conducted a study of its research and development credit carryforwards, which may result in an adjustment to research and development credit carryforwards. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations if an adjustment were required. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position. The Company applies the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. As of December 31, 2020 and 2019, the Company had no unrecognized tax benefits. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax positions. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. As of December 31, 2020 and 2019, the Company’s tax years are still open under statute from 2017 to the present. The Company’s foreign subsidiary has incurred losses since inception and the Company had no undistributed earnings as of December 31, 2020. 154 Table of Contents 10. NET LOSS PER SHARE Net loss per share The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company (in thousands, except share and per share amounts): December 31, 2020 2019 Net loss attributable to common stockholders $ ( 67,254 ) $ ( 35,258 ) Weighted average common shares outstanding, basic and diluted 32,907,100 2,075,753 Net loss per share, basic and diluted $ ( 2.05 ) $ ( 16.99 ) The Company’s unvested restricted common shares at December 31, 2020 have been excluded from the computation of basic net loss per share attributable to common stockholders. The Company had no unvested restricted common shares outstanding at December 31, 2019 (see Note 8). The Company’s potentially dilutive securities, which include options, unvested restricted stock, convertible preferred stock and warrants to purchase convertible preferred stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders as the effect would be to reduce the net loss per share attributable to common stockholders. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect: December 31, 2020 2019 Options to purchase common stock 3,752,744 2,378,474 Unvested restricted stock 54,336 — Preferred stock (as converted to common stock) — 21,499,770 Warrants to purchase shares of series A preferred stock (as converted to common warrants to purchase stock) 10,757 10,757 3,817,837 23,889,001 11. LEASES 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. 155 Table of Contents 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. 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 Lease Cost 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. 156 Table of Contents Future minimum lease payments under the Company’s operating leases as of December 31, 2020 were as follows: 2021 $ 1,485 2022 1,343 2023 1,298 2024 1,331 2025 1,364 Thereafter 3,803 Total lease payments 10,624 Less: 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, 2021 $ 223 2022 228 2023 77 2024 — Total $ 528 Rent expense for the years ended December 31, 2020 and 2019 was $ 1,545 and $ 415 , respectively. 12. 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. These contracts do not contain minimum purchase commitments and are cancelable upon prior written notice. Payments due upon cancellation consist only of payments for services provided or expenses incurred, including noncancelable obligations of service providers, up to the date of cancellation. Indemnification agreements In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any indemnification arrangements that could have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2020 or 2019. 157 Table of Contents Legal proceedings The Company is not currently party to and is not aware of any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings. 13. BENEFIT PLANS In 2018 the Company established a Simplified Employee Pension (“SEP”) defined-contribution savings plan. This plan covers substantially all employees who meet minimum age and service requirements. The Company provides contributions of 6 % of each participant’s salary. Employees are immediately and fully vested in the Company’s contribution. During the year ended December 31, 2020 and 2019, the Company contributed $ 592 and $ 200 to the plan, respectively. 14. RELATED-PARTY TRANSACTIONS 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 service fees incurred were $ 2,364 and $ 10,411 , for the years ended December 31, 2020 and 2019. 15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following table contains quarterly financial information for 2020 and 2019. The Company believes that the following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. 2020 March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 Total (in thousands, except per share data) Revenue $ — $ — $ — $ — $ — Total operating expenses 12,879 15,028 18,480 23,183 69,570 Loss from operations ( 12,879 ) ( 15,028 ) ( 18,480 ) ( 23,183 ) ( 69,570 ) Net loss attributable to common stockholders ( 12,145 ) ( 14,571 ) ( 17,912 ) ( 22,626 ) ( 67,254 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.51 ) $ ( 0.41 ) $ ( 0.50 ) $ ( 0.63 ) $ ( 2.05 ) 158 Table of Contents 2019 March 31, 2019 June 30, 2019 September 30, 2019 December 31, 2019 Total (in thousands, except per share data) Revenue $ — $ — $ — $ — $ — Total operating expenses 3,841 6,999 8,148 10,344 29,332 Loss from operations ( 3,841 ) ( 6,999 ) ( 8,148 ) ( 10,344 ) ( 29,332 ) Net loss attributable to common stockholders ( 3,828 ) ( 12,287 ) ( 9,268 ) ( 9,875 ) ( 35,258 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 1.87 ) $ ( 5.99 ) $ ( 4.50 ) $ ( 4.63 ) $ ( 16.99 ) * * * * * * Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.