What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-03-17 compared with 2021-03-25 · 135 added, 245 removed, 484 unchanged (44% of the section changed)

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

Consolidated Balance Sheets

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Consolidated Statements of Cash Flows

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

Consolidated Statements of Stockholders' Equity

Report of Independent Registered Public Accounting Firm

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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”).

and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations, of stockholders’ equity 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, 2021 and 2020, 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.

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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.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

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.

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Restricted cash 1,223

Deferred offering costs —

Right-of-use asset 8,402 —

Right-of-use assets 27,705 8,402

Other non-current assets 16

Total assets $ 247,682

Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)

Liabilities and Stockholders' Equity

Current liabilities:

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Total current liabilities 23,642

Derivative liabilities —

Non-current operating lease liability 28,140 7,694

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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

Stockholders' equity (deficit):

Preferred stock, $ 0.0001 par value;

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

10,000,000 shares and 10,000,000 shares authorized at December 31, 2021 and 2020, respectively;

no shares issued or outstanding at December 31, 2021 and 2020

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Additional paid-in capital 440,129

Accumulated other comprehensive income 614 —

Accumulated other comprehensive (loss) income ( 414 ) 614

Accumulated deficit ( 243,820 )

Total stockholders' equity (deficit) 307,758

Total liabilities, convertible preferred stock and stockholders' equity (deficit) $ 329,670

Total stockholders' equity 195,900

Total liabilities and stockholders' equity $ 247,682

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

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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)

Research and development $ 96,829 $ 48,209

General and administrative 30,043 21,361

Total operating expenses 126,872 69,570

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Interest income 3,464 4,041

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

Other (expense) income ( 1,724 ) 6

Other expense ( 2,188 ) ( 1,724 )

Total other income (expense), net 1,276 2,316

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 )

Net loss $ ( 125,596 ) $ ( 67,254 )

Net loss per share, basic and diluted $ ( 3.47 ) $ ( 2.05 )

Weighted average common shares outstanding, basic and diluted 36,189,002 32,907,100

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Net loss $ ( 125,596 ) $ ( 67,254 )

Other comprehensive income:

Change in unrealized gain on investments, net 614 —

Other comprehensive (loss) income:

Change in unrealized (loss) gain on investments, net ( 1,028 ) 614

Comprehensive loss $ ( 126,624 ) $ ( 66,640 )

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Stock-based compensation expense 14,037 7,765

Change in fair value of derivative liabilities — 6,393

Depreciation expense 205 52

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Gain on sale of investments ( 10 ) ( 24 )

Other non-cash items ( 5 ) —

Loss on disposal of property and equipment 3 —

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Accounts payable 1,569 1,069

Amounts due to related party — ( 1,707 )

Accrued expenses and other current liabilities 8,714 8,026

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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 exercise of common stock options and ESPP 729 1,100

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

Payment of deferred offering costs — ( 1,743 )

Net cash provided by financing activities 729 214,944

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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 $ 21,505 $ 8,474

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

Right-of-use asset derecognized upon early lease termination $ 476 $ —

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

Black Diamond Therapeutics, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

Convertible preferred stock Common stock

Common stock Additional

paid-in capital

Accumulated other comprehensive income Accumulated deficit

Accumulated other comprehensive income Accumulated deficit Total

stockholders’

equity (deficit)

Amount Shares

BALANCE - December 31, 2019 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 — — — — — —

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 21,499,770 3 200,570 — — 200,573

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BALANCE - December 31, 2020 36,078,383 $ 5 $ 425,363 $ 614 $ ( 118,224 ) $ 307,758

Exercise of common stock options 110,621 — 665 — — 665

Vesting of restricted stock units 27,002 — — — — —

Issuance of common stock related to ESPP 6,162 — 64 — — 64

Stock-based compensation 12,456 — 14,037 — — 14,037

Unrealized loss on investments — — — ( 1,028 ) — ( 1,028 )

Net loss — — — — ( 125,596 ) ( 125,596 )

BALANCE - December 31, 2021 36,234,624 $ 5 $ 440,129 $ ( 414 ) $ ( 243,820 ) $ 195,900

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

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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”) is a precision oncology medicine company pioneering the discovery and development of MasterKey therapies.

The Company was originally organized as a limited liability company in December 2014 under the name ASET Therapeutics LLC.

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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.

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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”).

In addition, the Company is dependent upon the services of its employees, consultants and service providers.

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.

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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.

On February 1, 2021, the Company filed a shelf registration statement on Form S-3 ASR (the “Shelf”), with the Securities and Exchange Commission (the “SEC”), which covers the offering, issuance and sale of the Company’s common stock, preferred stock, debt securities, warrants and/or units of any combination thereof.

The Company simultaneously entered into an Open Market Sale Agreement SM with Jefferies LLC, as sales agent, to provide for the issuance and sale by the Company of up to $ 150 million of its common stock from time to time through Jefferies as its sales agent (the “ATM Program”).

The Shelf became automatically effective upon filing on February 1, 2021.

As of December 31, 2021, no sales have been made pursuant to the ATM Program.

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.

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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.

The ongoing COVID-19 pandemic continues to present a substantial public health and economic challenge around the world, 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.

The Company has been closely monitoring the impact of the ongoing COVID-19 pandemic on all aspects of the Company’s business, including how it has impacted and may 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.

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

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 but if we or any of the third parties with whom we engage were to experience prolonged business shutdowns or other disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively affected, which could have a material adverse impact on our business, results of operations and financial condition.

The estimates of the impact on our business may change based on new information that may emerge concerning COVID-19 and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

The extent to which COVID-19 ultimately impacts the Company’s business, results of operations or financial condition will depend on future developments, which, despite progress in vaccination efforts, remain highly uncertain and cannot be predicted with confidence, such as the duration of the COVID-19 pandemic, new strains of the virus which may impact rates of infection and vaccination efforts, developments or perceptions regarding the safety of vaccines, new information that may emerge concerning the severity of COVID-19, and any additional preventative and protective actions taken to contain the pandemic or treat its impact, among others.

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

While certain measures have been relaxed in certain parts of the world as increasing numbers of people have received COVID-19 vaccines, others have remained in place with some areas continuing to experience renewed outbreaks and surges in infection rates.

The extent to which such measures are removed or new measures are put in place will depend upon how the pandemic evolves, as well as the distribution of available vaccines, the rates at which they are administered and the emergence of new variants of the virus.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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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.

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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 full extent to which the ongoing 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.

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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.

At December 31, 2021 and 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 consist of marketable securities with original maturities greater than 90 days.

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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.

As of December 31, 2021 and 2020, the Company had $ 1,223 of restricted cash, which has been classified as a non-current asset on the consolidated balance sheet.

Concentrations of credit risk

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The Company did not record any impairment losses on long-lived assets during the periods presented.

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

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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.

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

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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.

For purposes of this calculation, outstanding options, unvested restricted common stock and shares issuable under the employee stock purchase plan 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 reported a net loss attributable to common stockholders for the years ended December 31, 2021 and 2020.

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.

The Company determines if an arrangement is a lease at contract inception.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term.

When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

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.

The Company uses the implicit interest rate when readily determinable and uses the Company’s incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the commencement date in determining the present value of the lease payments.

The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation, when determinable, and are recognized in the Company’s operating lease assets in the Company’s consolidated balance sheets.

The Company’s operating leases are reflected in the right-of-use operating asset;

operating lease liability, current portion;

and non-current operating lease liability in the Company’s consolidated balance sheets.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

Variable lease payments are the amounts owed by the Company to a lessor that are not fixed, such as reimbursement for common area maintenance and utilities costs for facility leases and maintenance.

Variable lease payments are expensed when incurred.

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

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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 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.

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 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.

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 May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force) (“ASU-2021-04”).

ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.

The ASU provides guidance that will clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share (EPS) effects, if any, or (2) an expense and, if so, the manner and pattern of recognition.

The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted, including adoption in an interim period.

The Company adopted this standard on December 1, 2021 on a prospective basis, and it did not have a material impact on its disclosures, financial position or results or operations upon adoption.

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

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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.

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

The new standard was effective for the Company beginning January 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on the Company's disclosures, financial position or results or operations upon adoption.

FAIR VALUE MEASUREMENTS

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Money market funds $ 63,730 $ — $ — $ 63,730

Commercial paper — 35,559 — 35,559

Corporate bonds — 104,066 — 104,066

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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

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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.

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 $ —

As of December 31, 2021, investments were comprised of the following:

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Unrealized Gains Unrealized Losses Fair Value

Corporate bonds $ 104,261 $ 47 $ ( 242 ) $ 104,066

Government agencies 40,140 — ( 219 ) 39,921

Total $ 144,401 $ 47 $ ( 461 ) $ 143,987

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

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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.

As of December 31, 2021 and 2020, all marketable securities held by the Company had remaining contractual maturities of three years or less.

As of December 31, 2021and 2020, the marketable securities in a loss position have a maturity of three years or less.

There have been no impairments of the Company’s assets measured and carried at fair value during the year ended December 31, 2021and 2020.

PROPERTY AND EQUIPMENT

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Laboratory equipment $ 682 $ 253

Furniture and fixtures 17 —

Computer and office equipment 120 83

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Current portion of operating lease liability 320 1,047

Total accrued expenses $ 11,680 $ 2,899

Total accrued expenses and other current liabilities $ 19,535 $ 11,680

STOCKHOLDERS’ EQUITY

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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

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.

STOCK-BASED COMPENSATION

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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.

The number of shares initially reserved for issuance under the 2020 Plan was 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, 2021, 5,211,827 shares remained available for issuance under the 2020 Plan.

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Exercised ( 110,621 ) $ 6.02

Canceled or forfeited ( 39,764 ) $ 4.11

Cancelled or forfeited ( 734,928 ) $ 22.24

Outstanding December 31, 2021 4,903,839

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Vested ( 27,002 ) $ 26.46

Cancelled or forfeited ( 6,667 ) $ 1.21

Unvested restricted common stock as of December 31, 2021 30,667 $ 29.53

The aggregate fair value of restricted stock that vested during the years ended December 31, 2021 and 2020 was $ 714 and $ 200 , 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 in the following award type categories included within its consolidated statements of operations and comprehensive loss:

Stock options $ 12,964 $ 7,344

Restricted stock units 812 404

Employee Stock Purchase Plan and Other 261 17

$ 14,037 $ 7,765

For the years ended December 31, 2021 and 2020, the Company issued 12,456 and 505 shares, respectively, of common stock out of our 2020 Plan under our policy where non-employee directors may elect to receive their compensation in the form of common stock in lieu of cash.

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:

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General and administrative 7,713

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, 2021, total unrecognized compensation cost related to the unvested stock options was $ 31,192 , which is expected to be recognized over a weighted average period of 2.5 years.

As of December 31, 2021, total unrecognized compensation cost related to the unvested restricted stock units was $ 636 , which is expected to be recognized over a weighted average period of 1.4 years.

Income (loss) before income tax expense consists of the following:

Domestic $ ( 125,328 ) $ ( 66,992 )

Foreign ( 268 ) ( 262 )

Total loss before income taxes

$ ( 125,596 ) $ ( 67,254 )

For the years ended December 31, 2021 and 2020, 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.

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Permanent differences

Stock compensation ( 0.4 ) % ( 0.8 ) %

Research and development credits

Change in valuation allowance

0.7 % ( 0.2 ) %

Effective income tax rate

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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.

As of December 31, 2021, the Company had gross federal net operating loss carryforwards of $ 209,607 , of which $ 2,557 begin to expire in 2036 and the remainder do not expire but are subject to 80% limitation.

As of December 31, 2021, the Company had state net operating loss carryforwards of $ 135,422 that begin to expire in 2036.

The Company also has net operating loss carryforwards in Canada of $ 463 that are set to expire beginning in 2039.

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As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2021 and 2020.

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.

The valuation allowance increased by $ 34,305 during the year ended December 31, 2021 primarily as a result of net operating 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.

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Net loss per share, basic and diluted $ ( 3.47 )

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:

The Company’s unvested restricted common shares at December 31, 2021 and 2020 have been excluded from the computation of basic net loss per share attributable to common stockholders.

The Company’s potentially dilutive securities, which include options, unvested restricted stock, shares issuable under the employee stock purchase plan and warrants to purchase common stock, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share 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 for the periods indicated because including them would have had an anti-dilutive effect:

Options to purchase common stock 4,903,839

Unvested restricted stock 30,667

Preferred stock (as converted to common stock) —

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

Shares issuable under employee stock purchase plan 24,806 —

Warrants to purchase shares of common 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.

As of December 31, 2021, the Company had two 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.

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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 lease on the first floor commenced on August 1, 2020 and the lease on the second floor commenced March 9, 2021.

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

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

The Company previously leased an office space in Cambridge, MA under a lease that commenced in February 2019 for approximately 2,357 square feet of office space, which was set to expire on April 30, 2022, subject to an option to extend the lease for three additional years.

Effective June 15, 2021, the lease was terminated, and the remaining right-of-use asset and lease liability were derecognized.

A gain of $ 5 was recognized for the termination of the lease.

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

The Company has an option to extend the lease for five additional years.

The lease commenced August 26, 2021 and the related lease balance was recognized on the consolidated balance sheet.

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 years ended December 31, 2021 and 2020:

Operating lease cost $ 3,032 $ 767

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Total lease liability $ 29,468

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, 2021 and 2020 was $ 3,921 and $ 1,545 , respectively.

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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.

License Agreements

The Company is party to license agreements, which include contingent payments.

These payments will become payable if and when certain development, regulatory and commercial milestones are achieved.

As of December 31, 2021, the satisfaction and timing of the contingent payments is uncertain and not reasonably estimable.

Indemnification agreements

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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.

In 2021, the Company transitioned from a Simplified Employee Pension (“SEP”) defined-contribution savings plan to a tax-qualified 401(k) and Profit Sharing defined contribution plan (the “401(k) Plan”).

Under the 401(k) Plan, the Company provides an employer safe harbor matching contribution equal to 100 % of a participant’s eligible contributions of up to 6 % of eligible compensation, subject to limits established by the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”).

All matching contributions are fully vested when made.

During the year ended December 31, 2021 and 2020, the Company contributed $ 927 to the 401(k) Plan and $ 592 to the SEP plan, respectively.

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.

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 June 30,

2020 September 30,

2020 December 31,

(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 )

2019 June 30,

2019 September 30,

2019 December 31,

(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 )

The Company was party to a services agreement with Ridgeline, which was entered into in March 2017 and expired December 31, 2020.

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

There was no amount due to Ridgeline at December 31, 2021 and 2020.

Total service fees incurred were $ 2,364 for the year ended December 31, 2020 and no fees were incurred in 2021.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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