What changed in this filing

/stocks — the workspaceLOADING

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2023-03-09 compared with 2022-03-17 · 117 added, 89 removed, 530 unchanged (28% of the section changed)

6 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Cash Flows

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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, 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”).

and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations and comprehensive loss, 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, 2022 and 2021, 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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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.

Those standards require that we plan and perform the audits 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.

5 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter

As discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund future operations.

Management’s evaluation of the events and conditions and plans to mitigate this matter are also described in Note 1.

/s/ PricewaterhouseCoopers LLP

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Black Diamond Therapeutics, Inc.

Consolidated Statements of Operations

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

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Other income (expense):

Interest expense — ( 1 )

Interest income 2,031 3,464

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

Other income (expense) ( 354 ) ( 2,188 )

Gain on sale of IP 2,232 —

Total other income (expense), net 3,909 1,276

Equity in (losses) of unconsolidated entities ( 2,250 ) —

Net loss $ ( 91,169 ) $ ( 125,596 )

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

Black Diamond Therapeutics, Inc.

Black Diamond Therapeu tics, Inc.

Consolidated Statements of Cash Flows

11 unchanged sentences

Loss on disposal of property and equipment — 3

Changes in current assets and liabilities:

Gain on sale of property and equipment ( 1 ) —

Gain on sale of IP ( 2,232 ) —

Equity in (losses) of unconsolidated entities 2,250 —

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 1,018 ( 1,628 )

6 unchanged sentences

Purchases of equipment ( 192 ) ( 2,710 )

Proceeds from disposal of equipment 9 —

Proceeds from sales and maturities of investments 113,690 182,831

Purchases of investments ( 60,141 ) ( 49,508 )

Net cash used in investing activities 130,613 ( 281,691 )

Net cash provided by investing activities 53,366 130,613

Cash flows from financing activities:

Proceeds from exercise of common stock options and ESPP 177 729

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

Net cash provided by financing activities 177 729

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Supplemental disclosure of non-cash investing and financing activities:

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 $ ( 181 ) $ 21,505

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

Purchases of equipment included in accounts payable and accrued expenses $ — $ 148

Equity method investment acquired for non-cash consideration $ 18 $ —

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

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paid-in capital

Accumulated other comprehensive income Accumulated deficit Total

Accumulated other comprehensive income (loss) Accumulated deficit Total

stockholders’

equity (deficit)

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

Conversion of preferred stock to common stock upon closing of the initial public offering 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 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 gains on investments — — — 614 — 614

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

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

2 unchanged sentences

Vesting of restricted stock units 62,196 — — — — —

Surrender of shares for taxes ( 11,428 ) — ( 28 ) — — ( 28 )

Issuance of common stock related to ESPP 53,662 — 189 — — 189

Stock-based compensation 90,270 — 12,197 — — 12,197

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

Unrealized (loss) gains on investments — — — ( 1,410 ) — ( 1,410 )

Net loss — — — — ( 91,169 ) ( 91,169 )

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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 drug discovery engine.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry.

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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.

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.

On November 14, 2022, the Company filed a shelf registration statement on Form S-3 (the Shelf Registration Statement), 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 up to a maximum offering price of $ 500 million.

The Company simultaneously entered into an Open Market Sale Agreement SM with Jefferies LLC (Jefferies), 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 (the ATM Program).

The Shelf Registration Statement became effective on November 22, 2022.

As of December 31, 2022, 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.

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

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

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

As of March 17, 2022, 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 2024.

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

As of March 9, 2023, the issuance date of the consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its currently planned operations for at least the next 12 months from the filing date of these audited consolidated financial statements.

The Company will 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.

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, and reduce headcount and general and administrative costs, 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 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.

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 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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Actual results may differ from those estimates or assumptions.

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.

The Company continues to monitor the impact of the COVID-19 pandemic on all aspects of its business and has considered the impact of COVID-19 on estimates within its financial statements.

The extent to which future COVID-19 developments may impact the Company’s business, results of operations or financial condition are uncertain and cannot be predicted with confidence and there may be changes to its 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.

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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

9 unchanged sentences

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

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

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 consolidated statements of operations and comprehensive loss.

Equity method investment

The Company utilizes the equity method to account for an investment when it possesses the ability to exercise significant influence, but not control, over the operating and financial decisions of the investee.

Generally, the ability to exercise significant influence is presumed when the investor possesses more than 20% of the voting interests of the investee.

This presumption may be overcome based on specific facts and circumstances that demonstrate that the ability to exercise significant influence is not present.

The Company applies the equity method to an investment in common stock of a nonconsolidated entity.

In applying the equity method, the Company’s investment was initially recorded at fair value on the consolidated balance sheet.

The Company contributed IPR&D in exchange for its investment, so it also recognized a gain on sale of IPR&D in the consolidated statements of operations and comprehensive loss on the transaction date.

The Company subsequently adjusted the carrying amount of the investment by the Company’s proportionate share of the net losses of the investee based on the Company’s percentage of common stock ownership during the reporting period.

The Company recorded its share of the losses of the investee as losses from investment in equity method investee in the consolidated statements of operations and comprehensive loss.

The Company then evaluated whether there was a basis difference between the carrying value and fair value of the Company’s proportionate share of the investee’s underlying net assets.

The investee was not deemed a business as defined in ASC 805 – Business Combinations, so the Company immediately expensed the basis difference to the extent it related to IPR&D.

The Company is not obligated to make additional capital contributions for its equity method investment and does not have guaranteed obligations or additional financial support requirements to the investee.

Therefore, it only recorded losses up to the amount of its total investment.

The Company’s share of losses of the equity method investee on a cumulative basis exceeded its total investment amount, so the Company discontinued equity method loss recognition.

The Company will resume recording its share of losses in future periods if the investee subsequently reports net income and the Company’s share of the earnings of the equity method investee equals the Company’s share of losses not recognized during the suspended period.

Equity method investments are reviewed for indicators of other-than-temporary impairment at each reporting period and are written down to fair value if there is evidence of a loss in value that is other-than-temporary.

The Company presents income/losses from equity investments and any impairment related to equity method investments as losses from investments in equity method investees on the consolidated statements of operations and comprehensive loss.

The carrying value of the Company’s equity method investment was zero as of December 31, 2022, therefore, an impairment assessment is not required.

See Note 6 to our consolidated audited financial statements for additional information on the Company’s equity method investment.

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, 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.

As of December 31, 2022 and 2021, the Company had $ 1,168 and $ 1,223 , respectively, 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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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.

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• 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 — Unobservable inputs for the assets or liabilities (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).

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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.

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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.

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

The 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.

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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.

Recently adopted 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”).

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

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

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

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 $ 32,278 $ — $ — $ 32,278

Commercial paper — 3,747 — 3,747

Corporate bonds — 45,643 — 45,643

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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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Unrealized Gains Unrealized Losses Fair Value

Commercial paper $ 3,748 $ — $ ( 1 ) $ 3,747

Corporate bonds 46,443 — ( 800 ) 45,643

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Unrealized Gains Unrealized Losses Fair Value

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

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

1 unchanged sentence

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

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.

As of December 31, 2022, all marketable securities held by the Company had remaining contractual maturities of one year or less, except for U.S.

government agencies, corporate bonds and commercial paper with a fair value of $ 13,687 that had maturities of one to three years.

As of December 31, 2022, all marketable securities held by the Company were in a loss position.

As of December 31, 2021, the marketable securities held by the Company in a loss position had remaining contractual maturities of one year or less, except for U.S.

government agencies and corporate bonds with a fair value of $ 86,187 that had maturities of one to three years.

As of December 31, 2022, the Company reviewed its investment portfolio to assess whether the unrealized losses on its available-for-sale investments were temporary.

In determining whether the decline in fair value of these securities was temporary, the Company evaluated whether it intended to sell the security and whether it was more likely than not that the Company would be required to sell the security before recovering its amortized cost basis.

There have been no impairments of the Company’s assets measured and carried at fair value during the years ended December 31, 2022 and 2021.

PROPERTY AND EQUIPMENT

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Depreciation expense for the years ended December 31, 2022 and 2021 was $ 508 and $ 205 , respectively.

EQUITY METHOD INVESTMENT

In December 2022, the Company received 9,000,000 shares of common stock in a newly formed antibody-focused precision oncology company, Launchpad Therapeutics, Inc.

(Launchpad), in exchange for contributing early discovery-stage antibody programs and granting Launchpad a license to use its MAP drug discovery engine to discover, develop and commercialize large molecule therapeutics.

As of the transaction date and as of December 31, 2022, the Company has a 39.1 % voting interest in Launchpad and one seat on Launchpad’s Board of Directors which provide the Company with significant influence over Launchpad.

The remaining voting interest in Launchpad is held by Versant Ventures and New Enterprise Associates (NEA), who are shareholders of the Company.

The Company accounted for the transaction under the equity method and recorded the carrying value of the Company’s investment in Launchpad common shares of $ 2,250 in equity method investments in the consolidated balance sheets.

The contributed IPR&D had zero basis on the Company’s books prior to the transaction, therefore the Company recognized a gain on sale of IPR&D of $ 2,232 in the consolidated statements of operations and comprehensive loss.

The Company also recognized a loss from investments in equity method investee of $ 1,540 in the consolidated statement of operations and comprehensive loss, associated with the Company’s proportionate share of Launchpad’s losses.

The assets contributed by the Company were principally IPR&D and were not deemed a business by Launchpad, therefore the Company determined its remaining basis difference of $ 710 was substantially related to IPR&D and immediately expensed it.

As of December 31, 2022, the carrying value of the investment in Launchpad was reduced to zero .

Since the Company has no obligation to provide financing support to Launchpad, the Company is not required to record further losses exceeding the carrying value of the investment.

The Company also determined that its investment in Launchpad is not material or significant to its operations or financial position.

ACCRUED EXPENSES

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Professional and consulting fees 1,182 1,935

Legal fees 83 199

Current portion of operating lease liability 2,841 320

Total accrued expenses and other current liabilities $ 13,384 $ 19,535

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.

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.

STOCK-BASED COMPENSATION

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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 Stock Option and Incentive Plan (the 2020 Plan) was approved by the Company’s 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 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.

The number of shares initially reserved for issuance under the 2020 Plan was 6,665,891 , which was 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 committee of the board of directors.

As of December 31, 2022, 5,764,159 shares remained available for issuance under the 2020 Plan.

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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.

The 2020 Employee Stock Purchase Plan (the 2020 ESPP) was approved by the Company’s 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.

A total of 326,364 shares of common stock were initially reserved for issuance under this plan, which was 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 committee of the board of directors.

As of December 31, 2022, 592,904 shares remained available for issuance under the 2020 Plan.

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Cancelled or forfeited ( 1,453,647 ) $ 15.18

Expired ( 241,469 ) $ 14.58

Outstanding December 31, 2022 5,359,400

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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

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The aggregate fair value of restricted stock that vested during the years ended December 31, 2022 and 2021 was $ 556 and $ 714 , respectively.

The Company had 19,000 performance restricted stock units outstanding at the beginning of the year ended December 31, 2022.

For the year ended December 31, 2022, the Company granted 248,125 performance restricted stock units to its employees related to the achievement of certain clinical development, research and/or financing milestones and had 27,650 performance restricted stock units forfeited.

As of December 31, 2022, the Company had 239,475 performance restricted stock units outstanding.

Recognition of stock-based compensation expense associated with performance restricted stock units commences when the performance conditions are considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.

As of December 31, 2022 and 2021, for performance-based restricted stock units that were outstanding, the achievement of milestones was considered probable for 3,063 shares and no shares, respectively.

During the year ended December 31, 2022, one milestone for outstanding performance restricted stock units was achieved and the Company recognized stock-based compensation expense related to this milestone of $ 7 .

The milestones that had not been met were considered not probable, and therefore no expense has been recognized related to these awards in the years ended December 31, 2022 and 2021.

Stock-based compensation expense

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$ 12,197 $ 14,037

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.

For the years ended December 31, 2022 and 2021, the Company issued 90,270 and 12,456 shares, respectively, of common stock out of the 2020 Plan under the Company’s 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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As of December 31, 2022, total unrecognized compensation cost related to the unvested restricted stock units was $ 326 , which is expected to be recognized over a weighted average period of 0.9 years.

Employee stock purchase plan

The 2020 ESPP enables eligible employees to purchase shares of the Company's common stock at the end of each six -month offering period at a price equal to 85 % of the fair market value of the shares on the first business day or the last business day of the offering period, whichever is lower.

Eligible employees generally includes all employees.

Offering periods begin on the first trading day of January and July of each year and end on the last trading day in June and December of each year.

Share purchases are funded through payroll deductions of up to 10 % of an employee’s eligible compensation for each payroll period, up to $ 25 each calendar year.

For the years ended December 31, 2022 and 2021, there were 53,662 and 6,162 shares, respectively, issued under the 2020 ESPP.

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

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Research and development tax credits 7,934 5,439

Capitalized R&D 11,559 —

Operating lease liabilities 7,194 7,172

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Net deferred tax assets $ — $ —

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was signed into law.

Under the TCJA provisions, effective with tax years beginning on or after January 1, 2022, taxpayers can no longer immediately expense qualified research and development expenditures.

Taxpayers are now required to capitalize and amortize these costs over five years for research conducted within the United States or 15 years for research conducted abroad.

As a result, the Company capitalized $ 49,991 of research and development expenses for the year ended December 31, 2022.

As of December 31, 2022, the Company had gross federal net operating loss carryforwards of $ 241,019 , of which $ 2,556 begin to expire in 2036 and the remainder do not expire but are subject to 80% limitation.

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As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2022 and 2021.

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.

The valuation allowance increased by $ 24,482 during the year ended December 31, 2022 primarily as a result of net operating losses generated during the period along with capitalized research and development expenses.

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 attributable to common stockholders $ ( 91,169 )

$ ( 125,596 )

Weighted average common shares outstanding, basic and diluted 36,325,586

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Shares issuable under employee stock purchase plan 48,805 24,806

Unvested performance restricted stock units

239,475 19,000

Warrants to purchase shares of common stock 10,757

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

In December 2022, the Company entered into an agreement to sublease 14,439 square feet of its Cambridge office to a subtenant through August 2028.

Sublease income is recognized on a straight-line basis over the term of the sublease agreement.

The Company was not relieved of its primary obligation under the Cambridge office lease as a result of the sublease.

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.

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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.

The Company enters 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.

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BENEFIT PLANS

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”).

The Company has 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 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.

During the years ended December 31, 2022 and 2021, the Company contributed $ 1,146 and $ 927 , respectively, to the 401(k) Plan.

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