Item 9A. Controls and Procedures
Item 9A. Controls and
Procedures.
Evaluation of Disclosure Controls and Procedures
Based on their evaluation as of December 31, 2020, our management, including the Chief Executive Officer and Chief Financial Officer, has
concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were not effective to provide reasonable assurance because of the material weakness in our
internal control over financial reporting described below.
Material Weakness
A material weakness was identified in our internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a
reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We have the following material weakness in our internal control over financial reporting as of December 31, 2020:
We did not design or maintain an effective control environment commensurate with the financial reporting
requirements. Specifically, we lack a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately while
maintaining appropriate segregation of duties. Without such professionals, we did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures,
including controls over the preparation and review of account reconciliations and journal entries.
The above material
weakness did not result in a material misstatement of our previously issued financial statements, however, it could result in a misstatement of our account balances or disclosures that would result in a material misstatement of our annual or interim
financial statements that would not be prevented or detected.
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Remediation Activities
In order to address the material weakness in internal control over financial reporting described above, management, with direction from the
Audit Committee, has begun the process of remediation to address control deficiencies that led to the material weakness. Specifically, management has:
Increased the number of accounting personnel;
Begun discussions with third party experts to assist management in completing a comprehensive risk assessment to
identify, design and implement control activities; and
Begun reviewing and enhancing business policies, procedures, and related internal controls to standardize
business processes.
Management will continue to review and make necessary changes to the overall design of our internal
control environment, as well as policies and procedures to improve the overall effectiveness of internal control over financial reporting. The material weakness will not be considered remediated, however, until the applicable controls operate for a
sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
Managements Report on
Internal Control Over Financial Reporting
This Annual Report does not include a report of managements assessment regarding
internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition period established by rules of the Securities and Exchange Commission for newly public companies.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting during the three months ended December 31, 2020 that has materially
affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on the Effectiveness Over
Financial Reporting
The effectiveness of any system of internal control over financial reporting, including ours, is subject to
inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over
financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls
may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our
business, but there can be no assurance that such improvements will be sufficient to provide us with effective internal control over financial reporting.
Item 9B. Other Information.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Executive Officers and Directors
The
following table sets forth certain information for our executive officers and directors as of December 31, 2020:
Name
Age
Position(s)
Executive Officers
Randall C. Schatzman, Ph.D.
66
Chief Executive Officer and Director
William P. Quinn
50
Chief Financial Officer
David Dornan, Ph.D.
43
Chief Scientific Officer
Edith A. Perez, M.D.
64
Chief Medical Officer
Grant Yonehiro
57
Chief Business Officer
Non-Employee Directors
Peter Moldt, Ph.D. (2)
61
Chairman of the Board
Edgar G. Engleman, M.D.
75
Director
James I. Healy (3)
55
Director
Ashish Khanna, Ph.D. (1)(2)
49
Director
Kathleen LaPorte (1)
59
Director
Richard A. Miller, M.D. (2)(3)
69
Director
Mahendra G. Shah, Ph.D. (1)(3)
75
Director
(1)
Member of the audit committee
(2)
Member of the compensation committee
(3)
Member of the nominating and corporate governance committee
Executive Officers
Randall C. Schatzman, Ph.D. has served as our Chief Executive Officer and director since July 2019. From 2004 to March 2018,
Dr. Schatzman served as President, Chief Executive Officer and a member of the board of directors of Alder BioPharmaceuticals, Inc. From 1999 to 2004, Dr. Schatzman served as Senior Vice President of Discovery Research at Celltech R&D,
Inc., a wholly-owned subsidiary of Celltech Group plc. From 1995 to 1999, Dr. Schatzman served as Director of Gene Discovery at Mercator Genetics Inc. From 1987 to 1995, Dr. Schatzman served as Section Leader at Roche Bioscience,
previously Syntex Corp., a subsidiary of Roche Holdings Ltd. Dr. Schatzman holds a Ph.D. in Molecular Pharmacology from Emory University and a B.S. in Biochemistry from Purdue University. We believe that Dr. Schatzman is qualified to serve
on our board of directors due to his daily insight into corporate matters as our Chief Executive Officer and his extensive background in the biotechnology industry.
William P. Quinn has served as our Chief Financial Officer since May 2020. From November 2017 to May 2020, Mr. Quinn served as
Chief Financial Officer and Senior Vice President, Finance and Corporate Development, of Sunesis Pharmaceuticals, Inc. From 2011 to November 2017, Mr. Quinn served as President and Chief Executive Officer of Bullet Biotechnology, Inc. From 2003
to 2011, Mr. Quinn served in various positions at Jazz Pharmaceuticals, Inc. From 2001 to 2002, Mr. Quinn served as Chief Operating Officer and Chief Financial Officer at Novation Biosciences. From 1999 to 2001, Mr. Quinn served as
Associate Partner at Mobius Venture Capital, an early-stage venture capital fund. Since 2011, Mr. Quinn has served on the board of directors of A Foundation Building Strength, a non-profit dedicated to
finding treatments for Nemaline Myopathy. Mr. Quinn holds a B.A. and M.A. from Stanford University and an M.B.A. from Stanford Graduate School of Business.
David Dornan, Ph.D. has served as our Chief Scientific Officer since January 2021. From November 2017 to January 2021, Dr. Dornan
served as our Senior Vice President of Research and Manufacturing. From 2012 to
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November 2017, Dr. Dornan held various positions at Gilead Sciences, Inc., including Director and Head of Oncology Research and Senior Research Scientist II, Oncology. From 2002 to 2012,
Dr. Dornan held various positions at Genentech, Inc. Dr. Dornan received a B.Sc. in Biochemistry and Molecular Biology from the University of Strathclyde and a Ph.D. in Molecular Oncology/Biochemistry from the University of Dundee.
Edith A. Perez, M.D. has served as our Chief Medical Officer since April 2020. From 2015 to 2018, Dr. Perez served as Vice
President and Head of the U.S. BioOncology Medical Unit of Genentech, Inc. From 2011 to 2015, Dr. Perez served in multiple senior leadership positions at Alliance for Clinical Trials in Oncology, including Vice President and Group Vice Chair.
Since 1995, Dr. Perez has held various positions at the Mayo Clinic, including Supplemental Consultant in the Departments of Hematology/Oncology and Cancer Biology, Director of the Breast Cancer Translational Genomics Program and Professor of
Medicine. From 2014 to 2018, Dr. Perez served as a member of the board of directors for the American Association for Cancer Research. Dr. Perez received a B.S. in Biology from the University of Puerto Rico, Rio Piedras and an M.D. from the
University of Puerto Rico. Dr. Perez did her training in Internal Medicine at Loma Linda University and completed a Fellowship in Hematology/Oncology at the University of California at Davis. Dr. Perez is board certified in Internal
Medicine, Hematology and Oncology.
Grant Yonehiro has served as our Chief Business Officer since November 2016. From February 2016
to November 2016, Mr. Yonehiro served as Interim Chief Commercial Officer at Vium, Inc., a private biotechnology company. From 2013 to January 2016, Mr. Yonehiro served as Chief Business Officer at Berkeley Lights, a public biotechnology
company. From 2009 to 2013, Mr. Yonehiro served as Chief Executive Officer and President at Perseid Therapeutics LLC, which was acquired by Astellas Pharma, Inc. in 2011. From 2003 to 2009, Mr. Yonehiro served as Chief Business Officer and
Senior Vice President at Maxygen, Inc, a public biopharmaceutical company. From 1997 to 2003, Mr. Yonehiro served in various roles at GenVec, Inc., most recently serving as its Vice President, Drug Development. Mr. Yonehiro received a
B.I.S. in Business, Economics and International Relations from the University of Minnesota, Twin Cities and an M.B.A. from the University of California at Berkeley.
Non-Employee Directors
Peter Moldt, Ph.D. has served as chairman of our board of directors since September 2016. Since May 2012, Dr. Moldt has been
employed as a Senior Partner at Novo Ventures (US) Inc., which provides certain consultancy services to Novo Holdings A/S, a Danish limited liability company that manages investments and financial assets. From 2009 to 2012, Dr. Moldt served as
Partner of Novo Holdings A/S. From 2004 to 2009, Dr. Moldt served as Chief Executive Officer of Curalogic A/S, a publicly listed Danish pharmaceutical company which Dr. Moldt founded. From 2000 to 2004, Dr. Moldt served as Chief
Operating Officer of 7TM Pharma A/S, a private biotechnology company which Dr. Moldt co-founded. From 1989 to 2000, Dr. Moldt held various positions with NeuroSearch A/S, a publicly listed Danish
biotechnology company. Dr. Moldt currently serves on the boards of directors of several private biotechnology and biopharmaceutical companies. He received an M.Sc. and a Ph.D. in Pharmacy and Medicinal Chemistry from the Royal Danish School of
Pharmacy. Dr. Moldt also served as a post-doc with Yale Universitys department of organic chemistry. We believe that Dr. Moldt is qualified to serve on our board of directors due to his
experience in the biotechnology and biopharmaceutical industries and his substantial professional experience.
Edgar G. Engleman,
M.D. has been a member of our board of directors since January 2015, when he founded Bolt. Since 1996, Dr. Engleman has held various positions at Vivo Capital, LLC, a global investment firm focused on healthcare that Dr. Engleman co-founded, and currently serves as Partner, Chief Scientific Advisor. Since 1990, Dr. Engleman has served as Professor of Pathology and Medicine at Stanford University School of Medicine, where he established
the Stanford Blood Center, mentors a wide range of trainees and co-directs the Tumor Immunology and Immunotherapy Program of the Stanford Cancer Institute. Dr. Engleman has
co-founded a number of biopharmaceutical companies, including Cetus Immune Corporation, Genelabs Technologies, Inc., Dendreon Corporation, Medeor Therapeutics and Tranquis Therapeutics. He received a B.A.
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from Harvard University and an M.D. from Columbia University School of Medicine. We believe that Dr. Engleman is qualified to serve on our board of directors due to his experience as founder
of our company and his expertise and experience in the biopharmaceutical industry.
James I. Healy, M.D. has served as a member of
our board of directors since January 2021. Dr. Healy has been a General Partner of Sofinnova Investments (formerly Sofinnova Ventures), a biotech investment firm, since June 2000. Prior to June 2000, Dr. Healy held various positions at
Sanderling Ventures, Bayer Healthcare Pharmaceuticals (as successor to Miles Laboratories) and ISTA Pharmaceuticals, Inc. Dr. Healy is currently on the board of directors of Ascendis Pharma A/S, Coherus BioSciences, Inc., Karuna Therapeutics,
Inc., Natera, Inc., NuCana PLC, ObsEva SA, and Y-mAbs Therapeutics, Inc. and several private companies. Previously, he served as a board member of Amarin Corporation, Auris Medical Holding AG, Edge
Therapeutics, Inc., Hyperion Therapeutics, Inc., InterMune, Inc., Anthera Pharmaceuticals, Inc., Durata Therapeutics, Inc., CoTherix, Inc., Iterum Therapeutics, plc, Movetis NV and several private companies. In 2011, Dr. Healy won the IBF Risk
Innovator Award and was named as one of the industrys top leading Life Science investors in 2013 by Forbes Magazine. Dr. Healy received a B.A. in Molecular Biology and a B.A. in Scandinavian Studies from the University of California,
Berkeley, and received an M.D. and Ph.D. in Immunology from Stanford University School of Medicine. We believe that Dr. Healy is qualified to serve on our board of directors due to his extensive experience in the biopharmaceutical industry,
including as a venture capital investor and a member of the boards of directors of other biopharmaceutical companies.
Ashish
Khanna, Ph.D. has served as a member of our board of directors since July 2018. Since September 2017, Dr. Khanna has served as a Venture Partner at Pivotal bioVenture Partners. Dr. Khanna also serves on the board of directors of
two private biopharmaceutical companies, Evommune, Inc. and Fountain Therapeutics, Inc. From 2013 to August 2017, Dr. Khanna served as Chief Business Officer of Vaxcyte, Inc., a company which he
co-founded. Prior to his role at Vaxcyte, Dr. Khanna was a Principal at SV Life Sciences, a healthcare focused venture capital firm, investing in private biotech and diagnostic companies. Dr. Khanna
holds a B.S. in Pharmacy from the University of Bombay, an M.B.A. in Finance from The Wharton School and a Ph.D. in Pharmaceutics from the State University of New York. We believe that Dr. Khanna is qualified to serve on our board of directors
due to his expertise and experience in the biopharmaceutical industry and his experience in healthcare investing.
Kathleen LaPorte
has served as a member of our board of directors since December 2020. Since 2016, Ms. LaPorte has served on several company boards and currently serves as a director of Precipio, Inc. and as a director of several private biotechnology and
biopharmaceutical companies. From 2014 to 2016, Ms. LaPorte served in multiple senior leadership positions at Nodality Inc., including Chief Business Officer and, most recently, Chief Executive Officer. From 2001 to 2013, Ms. LaPorte
served on the board of Affymax, Inc. From 2002 to 2011, she served as a director for ISTA Pharmaceuticals, Inc. From 2005 to 2011, she was a Managing Director of New Leaf Venture Partners, a spinout from the Sprout Group. From 1994 to 2000,
Ms. LaPorte served on the board of Onyx Pharmaceuticals Inc. From 1993 to 2005, she served as a General Partner of the Sprout Group. Ms. LaPorte received a B.S. in Biology from Yale University and an M.B.A. from the Stanford University
Graduate School of Business. We believe that Ms. LaPorte is qualified to serve on our board of directors due to her experience in the biotechnology and biopharmaceutical industries, her substantial professional experience and the fact that she
is a qualified financial expert.
Richard A. Miller, M.D. has served as a member of our board of directors since July 2017. Since
2014, Dr. Miller has served as Chief Executive Officer, President and Chairman of the Board of Directors of Corvus Pharmaceuticals, Inc., a public biotechnology company developing drugs and biologics for cancer and other diseases. From 2012 to
2014, Dr. Miller served as Chairman and Chief Executive Officer of Graphea, Inc., a privately held chemical company that he founded. From 2010 to 2011, Dr. Miller served as Chief Commercialization Officer, Associate Dean and Research
Professor in Chemistry at The University of Texas at Austin. From 2009 to 2011, Dr. Miller served as President, Chief Executive Officer and Director of Principia Biopharma Inc., which he founded. From 1991 to 2008, Dr. Miller served as
President, Chief Executive Officer
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and Director of Pharmacyclics, Inc., which he co-founded. Since 1991, Dr. Miller has been an Adjunct Clinical Professor of Medicine (Oncology) at
Stanford University Medical Center. Dr. Miller received a B.A. in Chemistry from Franklin & Marshall College and an M.D. from the State University of New York Medical School. He is board certified in both Internal Medicine and Medical
Oncology. We believe that Dr. Miller is qualified to serve on our board of directors due to his expertise and experience in the biotechnology industry and his leadership experience as a senior executive at various biotechnology companies.
Mahendra G. Shah, Ph.D. has served as a member of our board of directors since September 2016. Since 2010, Dr. Shah has served in
multiple positions at Vivo Capital, LLC and currently serves as Managing Director. From 2005 to 2009, Dr. Shah served as Chairman and Chief Executive Officer of NextWave Pharmaceuticals, Inc., a company which he also founded. From 1993 to 2003,
Dr. Shah served as the Chairman and Chief Executive Officer of First Horizon Pharmaceutical Corporation. From 1991 to 1999, Dr. Shah served as Vice President of E. J. Financial Enterprises, Inc., a healthcare-fund management company. From
1987 to 1991, Dr. Shah served as the Senior Director of New Business Development at Fujisawa USA Inc. Dr. Shah received a B.A. and M.A. in Pharmacy from L.M. College of Pharmacy in Gujarat, India and a Ph.D. in Industrial Pharmacy from St.
Johns University. We believe that Dr. Shah is qualified to serve on our board of directors due to his expertise and experience in the biopharmaceutical industry and his experience in healthcare investing.
Family Relationships
There are no family
relationships among any of the directors or executive officers.
Composition of Our Board of Directors
The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our
management. Our board of directors meets on a regular basis and additionally as required. Our board of directors currently consists of seven directors. Our amended and restated certificate of incorporation provides that the authorized number of
directors may be changed only by a resolution approved by a majority of our board of directors. In accordance with our amended and restated certificate of incorporation, our board of directors are divided into three classes with staggered three-year
terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors are divided
among the three classes as follows:
the Class I directors are Drs. Moldt and Shah and their terms expire at the annual meeting of
stockholders to be held in 2022;
the Class II directors are Drs. Engleman, Healy and Schatzman and their terms expire at the annual
meeting of stockholders to be held in 2023; and
the Class III directors are Ms. LaPorte and Drs. Khanna and Miller and their terms expire at the
annual meeting of stockholders to be held in 2024.
Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes
with staggered three-year terms may delay or prevent a change of our management or a change in control.
Director Independence
Under the listing requirements and rules of the Nasdaq Stock Market, independent directors must comprise a majority of our board of directors
as a listed company within one year of the closing of our initial public offering.
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Our board of directors has undertaken a review of its composition, the composition of its
committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has
determined that Drs. Engleman, Healy, Khanna, Miller, Moldt and Shah and Ms. LaPorte do not have any relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each
of these directors is independent as that term is defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the Nasdaq Stock Market. In making this determination, our board of directors
considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their
independence, including the beneficial ownership of our capital stock by each non-employee director.
Committees of our Board of Directors
Our
board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. The composition and responsibilities of each of the committees of our board of directors are described below.
Members serve on these committees until their resignation or until otherwise determined by our board of directors. Our board of directors may establish other committees as it deems necessary or appropriate from time to time. Each committee operates
under a charter that has been approved by our board and has the composition and responsibilities described below. The charters for each committee are available at the investor relations section of our website at www.boltbio.com. Information
contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report, and you should not consider information on or accessible through our website to be part of this Annual Report.
Audit Committee
Our audit committee consists of Kathleen LaPorte, Ashish Khanna and Mahendra Shah. Our board of directors has determined that each member of
the audit committee satisfies the independence requirements under the Nasdaq Stock Market listing standards and Rule 10A-3(b)(1) of the Exchange Act. The chairperson of our audit committee is Ms. LaPorte.
Our board of directors has determined that Ms. LaPorte is an audit committee financial expert within the meaning of SEC regulations. Each member of our audit committee can read and understand fundamental financial statements in
accordance with applicable requirements. In arriving at these determinations, our board of directors has examined each audit committee members scope of experience and the nature of their employment.
The primary purpose of the audit committee is to discharge the responsibilities of our board of directors with respect to our corporate
accounting and financial reporting processes, systems of internal control and financial statement audits, and to oversee our independent registered public accounting firm. Specific responsibilities of our audit committee include:
helping our board of directors oversee our corporate accounting and financial reporting processes;
reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and
procedures;
assisting with design and implementation of our risk assessment functions;
managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as
the independent registered public accounting firm to audit our financial statements;
discussing the scope and results of the audit with the independent registered public accounting firm, and
reviewing, with management and the independent accountants, our interim and year-end operating results;
developing procedures for employees to submit concerns anonymously about questionable accounting or audit
matters;
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reviewing related person transactions;
obtaining and reviewing a report by the independent registered public accounting firm at least annually that
describes our internal quality control procedures, any material issues with such procedures and any steps taken to deal with such issues when required by applicable law; and
approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm.
Compensation Committee
Our compensation committee consists of Ashish Khanna, Peter Moldt and Richard Miller. The chairperson of our compensation committee is
Dr. Moldt. Our board of directors has determined that each member of the compensation committee is independent under the listing standards of the Nasdaq Stock Market, and a non-employee
director as defined in Rule 16b-3 promulgated under the Exchange Act.
The primary purpose
of our compensation committee is to discharge the responsibilities of our board of directors in overseeing our compensation policies, plans and programs and to review and determine the compensation to be paid to our executive officers, directors and
other senior management, as appropriate. Specific responsibilities of our compensation committee include:
reviewing and recommending to our board of directors the compensation of our chief executive officer and other
executive officers;
reviewing and recommending to our board of directors the compensation of our directors;
administering our equity incentive plans and other benefit programs;
reviewing, adopting, amending and terminating incentive compensation and equity plans, severance agreements,
profit sharing plans, bonus plans, change-of-control protections and any other compensatory arrangements for our executive officers and other senior management;
reviewing and establishing general policies relating to compensation and benefits of our employees, including our
overall compensation philosophy; and
reviewing and evaluating with the chief executive officer the succession plans for our executive officers.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of James Healy, Richard Miller and Mahendra Shah. The chairperson of our nominating
and corporate governance committee is Dr. Healy. Our board of directors has determined that each member of the nominating and corporate governance committee is independent under the listing standards of the Nasdaq Stock Market.
Specific responsibilities of our nominating and corporate governance committee include:
identifying and evaluating candidates, including the nomination of incumbent directors for reelection and
nominees recommended by stockholders, to serve on our board of directors;
considering and making recommendations to our board of directors regarding the composition and chairmanship of
the committees of our board of directors;
reviewing with our chief executive officer the plans for succession to the offices of our executive officers and
make recommendations to our board of directors with respect to the selection of appropriate individuals to succeed to these positions;
developing and making recommendations to our board of directors regarding corporate governance guidelines and
matters; and
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overseeing periodic evaluations of the board of directors performance, including committees of the board of
directors.
Code of Business Conduct and Ethics
We have adopted a code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our code of business conduct and ethics is available under the Corporate Governance section of our website at www.boltbio.com.
In addition, we post on our website all disclosures that are required by law or the listing standards of the Nasdaq Stock Market concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not
constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this Annual Report on Form 10-K.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee is currently or has been at any time one of our officers or employees. None of our executive
officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation
committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of our common stock, to
file reports of ownership on Forms 3, 4 and 5 with the SEC. Officers, directors and greater than 10% stockholders are required to furnish us with copies of all Forms 3, 4 and 5 they file.
We did not have a class of equity securities registered pursuant Section 12 of the Exchange Act during the fiscal year ended
December 31, 2020, as our initial public offering was completed in February 2021. As a result, our executive officers and directors, and persons who own more than 10% of a registered class our common stock, were not subject to
Section 16(a) during the fiscal year ended December 31, 2020.
Process for Stockholder Nominations
The Nominating and Corporate Governance Committee shall have the power and authority to consider recommendations for board nominees and
proposals submitted by our stockholders and to establish any policies, requirements, criteria and procedures, including policies and procedures to facilitate stockholder communications with the board of directors, to recommend to the board of
directors appropriate action on any such proposal or recommendation and to make any disclosures required by applicable law in the course of exercising its authority. At this time, the Nominating and Corporate Governance Committee does not have a
policy with regard to the consideration of director candidates recommended by stockholders.
Item 11. Executive
Compensation.
EXECUTIVE COMPENSATION
Our named executive officers for the year ended December 31, 2020, consisting of our principal executive officer and four other most
highly compensated officers serving at the end of such year, were:
Randall Schatzman, Ph.D., our Chief Executive Officer and Director;
William P. Quinn, our Chief Financial Officer;
David Dornan, Ph.D., our Chief Scientific Officer;
Edith A. Perez, M.D., our Chief Medical Officer; and
Grant Yonehiro, our Chief Business Officer.
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Summary Compensation Table
The following table presents all of the compensation awarded to, earned by or paid to our named executive officers during the year ended
December 31, 2020:
Name
Year
Salary
Bonus
Option
Awards (1)
Other
Compensation
Total
Randall C. Schatzman, Ph.D.
2020
$
458,384
$
209,023
(2)
$
897,237
$
38,647
(3)
$
1,603,291
Chief Executive Officer
2019
206,250
96,411
(4)
1,335,341
49,044
(5)
1,687,046
William P. Quinn
2020
(6)
238,636
96,051
(2)
603,376
689
938,752
Chief Financial Officer
David Dornan, Ph.D.
2020
310,167
109,620
(2)
154,286
2,708
576,781
Chief Scientific Officer
2019
275,000
80,438
(4)
168,633
524,071
Edith A. Perez, M.D.
2020
(7)
300,000
295,750
(2) (8)
661,347
11,743
(9)
1,268,840
Chief Medical Officer
Grant Yonehiro
2020
309,000
124,373
(2)
138,130
(2)
700
572,203
Chief Business Officer
2019
300,000
120,750
(4)
201,795
622,545
(1)
The amounts reported in this column do not reflect dollar amounts actually received by the executive officer.
Instead, the amounts reflect the aggregate grant date fair value of the stock options granted to the executive officer during 2019 or 2020, as applicable under our 2015 Equity Incentive Plan, computed in accordance with ASC 718. Assumptions used in
the calculation of these amounts are included in Note 10 to our financial statements included elsewhere in this Annual Report on Form 10-K. During 2020, we granted stock options to our executive officers that
will commence time-based vesting upon the achievement of a financing milestone. We determined that the achievement of the financing milestone is probable and therefore the amounts reported in this column reflect the full grant date fair value of
such stock options. On January 15, 2021, the financing milestone was achieved. As required by SEC rules, the amounts shown for all grants exclude the impact of estimated forfeitures related to service-based vesting conditions.
(2)
Represents amounts earned in 2020, which will be paid in 2021. We based the 2020 annual performance bonuses for
Mr. Quinn, Dr. Perez and Mr. Yonehiro on company performance goals. We based the 2020 annual performance bonuses for Drs. Schatzman and Dornan on company performance (80%) and individual performance (20%). Our 2020 corporate goals
related to clinical, pipeline development, partnering, and financing milestones and objectives. For 2020, the compensation committee of our board of directors determined that Dr. Schatzman, Mr. Quinn, Dr. Dornan, Dr. Perez, and
Mr. Yonehiro were entitled to 114%, 115%, 116%, 115% and 115% of their target bonuses, respectively.
(3)
Dr. Schatzman received $12,449 for commuting reimbursements, $16,419 for housing and other living expenses
reimbursements and $9,779 to cover the tax gross up for such costs.
(4)
Represents amounts earned in 2019, which were paid in February 2020, upon the achievement of corporate goals
and other factors deemed relevant by our board of directors or compensation committee. Our 2019 corporate goals related to clinical, pipeline development, partnering and financing milestones and objectives. For 2019, we determined our named
executive officers annual performance bonus based on attainment of company objectives. For 2019, the compensation committee of our board of directors determined that Dr. Schatzman, Mr. Yonehiro and Dr. Dornan were entitled to 115%, 115% and
125% of their target bonuses, respectively.
(5)
Dr. Schatzman received $16,631 for commuting reimbursements, $19,665 for housing and other living expenses
reimbursements and $12,748 to cover the tax gross up for such costs.
(6)
Mr. Quinn commenced his employment with us in May 2020.
(7)
Dr. Perez commenced her employment with us in April 2020.
(8)
Dr. Perez received a $175,000 signing bonus in 2020 in connection with the commencement of her employment.
(9)
Dr. Perez received commuting reimbursements, an electronics stipend, and payments for waiver of healthcare
insurance.
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Outstanding Equity Awards as of December 31, 2020
The following table presents the outstanding equity incentive plan awards held by each named executive officer as of December 31, 2020.
All awards were granted under our 2015 Equity Incentive Plan.
Option Awards
Stock Awards
Name
Grant Date
Vesting
Commencement
Date (1)
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
Option
Exercise
Price
($) (2)
Option
Expiration
Date
Number
of Shares
of Stock
That
Have Not
Vested
(#)
Market
Value of
Shares of
Stock
That
Have Not
Vested
($)
Randall C. Schatzman, Ph.D.
9/6/2019
7/15/2019
(3)(4)
791,185
$
2.73
9/5/2029
9/3/2020
9/3/2020
(4)(5)
100,000
$
4.34
9/2/2030
9/3/2020
1/15/2021
(6)
178,571
$
4.34
9/2/2030
William P. Quinn
5/4/2020
(7)
$
12,698
55,999
(7)(8)
7/29/2020
5/4/2020
(9)
152,301
$
2.80
7/28/2030
9/3/2020
9/3/2020
(10)
35,714
$
4.34
9/2/2030
9/3/2020
1/15/2021
(11)
42,857
$
4.34
9/2/2030
David Dornan, Ph.D.
1/17/2018
12/1/2017
(3)
48,428
16,143
$
2.03
1/16/2028
4/4/2018
2/14/2018
(3)
9,706
3,996
$
2.03
4/3/2028
1/11/2019
7/23/2018
(3)
15,986
10,474
$
2.24
1/10/2029
11/13/2019
7/2/2019
(5)
27,827
50,744
$
2.73
11/13/2029
9/3/2020
9/3/2020
(4)(5)
12,142
$
4.34
9/2/2030
9/3/2020
1/15/2021
(6)
35,714
$
4.34
9/2/2030
Edith A. Perez, M.D.
7/29/2020
4/1/2020
(3)
225,000
$
2.80
7/28/2030
9/3/2020
9/3/2020
(12)
12,142
$
4.34
9/2/2030
9/3/2020
1/15/2021
(13)
45,000
$
4.34
9/2/2030
Grant Yonehiro
1/18/2017
11/1/2016
(3)
64,285
$
2.10
1/17/2027
1/17/2018
11/1/2016
(3)
13,207
$
2.03
1/16/2028
4/4/2018
2/14/2018
(3)
11,648
4,796
$
2.03
4/3/2028
1/11/2019
7/23/2018
(3)
19,983
13,092
$
2.24
1/10/2029
11/13/2019
7/2/2019
(5)
32,886
59,971
$
2.73
11/12/2029
9/3/2020
9/3/2020
(4)(5)
12,142
$
4.34
9/2/2030
9/3/2020
1/15/2021
(6)
30,714
$
4.34
9/2/2030
(1)
The unvested shares underlying these options became subject to accelerated vesting as described in
Item 11. Executive CompensationSeverance and Change in Control Plan below.
(2)
All of the option awards were granted with a per share exercise price equal to the fair market value of one
share of our common stock on the date of grant, as determined in good faith by our board of directors or compensation committee.
(3)
Twenty-five percent of the shares subject to the option vest on the
one-year anniversary of the vesting commencement date and 1/48 th of the shares subject to the option vest monthly thereafter.
(4)
This stock option is early exercisable and, to the extent shares subject to this option are issued and unvested
as of a given date, such shares will remain subject to a right of repurchase held by us. As of December 31, 2020, the named executive officer had not early exercised the option.
(5)
1/48 th of the shares subject to the option vest monthly
measured from the vesting commencement date.
(6)
This option is immediately exercisable and vests monthly over a four-year period beginning upon the closing of
our Series C-2 financing on January 15, 2021. As of December 31, 2020, the named executive officer had not early exercised the option.
(7)
The shares, which were acquired pursuant to an early exercise provision, vest in full on May 4, 2021 and
such shares will remain subject to a right of repurchase held by us until such date.
(8)
This amount reflects the fair market value of our common stock of $4.41 per share as of December 31, 2020
as determined by our compensation committee.
(9)
This option vests over a four-year period with 28,551 shares vesting on May 4, 2021 and the remainder
vesting monthly over 36 months from May 4, 2021.
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(10)
This option is immediately exercisable and vests over a four-year period with 6,696 shares vesting on
June 3, 2021 and the remainder vesting monthly over 39 months from June 3, 2021.
(11)
This option is immediately exercisable and vests over a four-year period with 3,571 shares vesting on
May 15, 2021 and the remainder vesting monthly over 44 months from May 15, 2021.
(12)
This option is immediately exercisable and vests over a four-year period with 1,770 shares vesting on
April 3, 2021 and the remainder vesting monthly over 41 months from April 3, 2021.
(13)
This option is immediately exercisable and vests over a four-year period with 2,812 shares vesting on
April 15, 2021 and the remainder vesting monthly over 45 months from April 15, 2021.
Emerging Growth Company Status
We are an emerging growth company, as defined in the JOBS Act. As an emerging growth company, we are exempt from certain requirements
related to executive compensation, including, but not limited to, the requirements to hold a nonbinding advisory vote on executive compensation and to provide information relating to the ratio of total compensation of our Chief Executive Officer to
the median of the annual total compensation of all of our employees, each as required by the Investor Protection and Securities Reform Act of 2010, which is part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Nonqualified Deferred Compensation
Our
named executive officers did not participate in, or earn any benefits under, any nonqualified deferred compensation plan sponsored by us during the year ended December 31, 2020. Our board of directors may elect to provide our officers and other
employees with nonqualified deferred compensation benefits in the future if it determines that doing so is in our best interests.
Pension and Defined
Benefit Plan Retirement Benefits
Our named executive officers did not participate in, or otherwise receive any benefits under, any
pension or defined benefit retirement plan sponsored by us during 2020.
Employment Arrangements
The employment agreements and offer letters with our executive officers generally provide for at-will
employment and set forth the executive officers initial base salary, annual target bonus and eligibility to participate in our employee benefit plans. In addition, each of our executive officers has executed our standard confidential
information and invention assignment agreement. The key terms of these agreements are described below.
Randall C. Schatzman, Ph.D.
In June 2019, we entered into an offer letter with Dr. Schatzman, which governs the terms of his employment with us. For
2021, Dr. Schatzman was entitled to an annual base salary of $545,000, and is eligible to receive an annual performance bonus with a target amount of 50% of his annual base salary, payable based on the achievement of certain annual performance
milestones or objectives as agreed by and between him and the board of directors on an annual basis, and subject to his continued employment through the time of payment of the bonus. Dr. Schatzman is also entitled to receive reimbursement for
reasonable travel and lodging expenses of up to $15,000 per month. To the extent that these travel and lodging expenses were taxable to Dr. Schatzman, we also provide Dr. Schatzman with tax gross-up
payments, subject to his continued service through and including such gross-up payment date.
In
September 2019, pursuant to his offer letter Dr. Schatzman was granted an option to purchase 791,185 shares of our common stock at an exercise price of $2.73 per share. This option is immediately exercisable and
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vests over a four year period with 25% of the shares vesting in July 2020 and the remainder vesting monthly over 36 months from July 2020. Upon execution of the underwriting agreement for
our initial public offering, Dr. Schatzman was granted an additional option to purchase 340,000 shares of our common stock at an exercise price equal to our initial public offering price. This option is immediately exercisable and vests monthly
over a four year period commencing upon the date of grant. Please see Item 11. Executive CompensationOutstanding Equity Awards as of December 31, 2020 for information regarding equity awards granted to Dr. Schatzman.
William P. Quinn
In April 2020, we entered into an offer letter with Mr. Quinn, which governs the terms of his employment with us. For 2021, Mr. Quinn
is entitled to an annual base salary of $395,000 and is eligible to receive an annual performance bonus with a target amount of 40% of his annual base salary, based on his achievement of certain individual and company performance goals and his
continued employment through the time of payment of the bonus.
In July 2020, pursuant to his offer letter Mr. Quinn was granted two
options to purchase an aggregate of 164,999 shares of our common stock at an exercise price of $2.80 per share. The first option was for 12,698 shares of our common stock. This option was immediately exercisable and vests in full in May 2021. Mr.
Quinn exercised the option in full in August 2020. The second option was for 152,301 shares of our common stock. This option vests over a four-year period with 28,551 vesting in May 2021 and the remainder vesting monthly over 36 months from May
2021. Upon execution of the underwriting agreement for our initial public offering, Mr. Quinn was granted an additional option to purchase 100,000 shares of our common stock at an exercise price equal to our initial public offering price. This
option is immediately exercisable and vests monthly over a four year period commencing upon the date of grant. Please see Item 11. Executive CompensationOutstanding Equity Awards as of December 31, 2020 for information
regarding equity awards granted to Mr. Quinn.
David Dornan, Ph.D.
In November 2017, we entered into an offer letter with Dr. Dornan, which governs the terms of his employment with us. For 2021,
Dr. Dornan is entitled to an annual base salary of $405,000, and is eligible to receive an annual performance bonus with a target amount of 40% of his annual base salary, based on his achievement of certain personal annual performance
milestones, as established by us, and corporate goals as outlined in our performance incentive program, and subject to his continued employment through the time of payment of the bonus.
In January 2018, pursuant to the offer letter Dr. Dornan was granted an option to purchase 64,571 shares of our common stock at an
exercise price of $2.03 per share. This option vests over a four-year period with 25% of the shares vesting in December 2018 and the remainder vesting monthly over 36 months from December 2018. Upon execution of the underwriting agreement for our
initial public offering, Dr. Dornan was granted an additional option to purchase 110,000 shares of our common stock at an exercise price equal to our initial public offering price. This option is immediately exercisable and vests monthly over a
four-year period commencing upon the date of grant. Please see Item 11. Executive CompensationOutstanding Equity Awards as of December 31, 2020 for information regarding equity awards granted to Dr. Dornan.
Edith A. Perez, M.D.
In March 2020, we entered into an offer letter with Dr. Perez, which governs the terms of her employment with us. For 2021, Dr. Perez
is entitled to an annual base salary of $435,000 and is eligible to receive an annual performance bonus with a target amount of 40% of her annual base salary, based on her achievement of certain individual and company performance goals and her
continued employment through the time of payment of the bonus. In 2020, we paid Dr. Perez a one-time cash signing bonus of $175,000. The signing bonus is subject to
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100% repayment in the event of Dr. Perezs voluntary resignation without good reason (as defined in her offer letter) prior to the first anniversary of her employment start date and 50%
repayment in the event of her voluntary resignation without good reason prior to the second anniversary of her employment start date. Dr. Perez is also entitled to receive a $1,000 monthly travel allowance.
In July 2020, pursuant to her offer letter Dr. Perez was granted an option to purchase 225,000 shares of our common stock at an exercise
price of $2.80 per share. This option vests over a four-year period with 25% of the shares vesting in April 2021 and the remainder vesting monthly over 36 months from April 2021. Upon execution of the underwriting agreement for our initial public
offering, Dr. Perez was granted an additional option to purchase 100,000 shares of our common stock at an exercise price equal to our initial public offering price. This option is immediately exercisable and vests monthly over a four-year period
commencing upon the date of grant. Please see Item 11. Executive CompensationOutstanding Equity Awards as of December 31, 2020 for information regarding equity awards granted to Dr. Perez.
Grant Yonehiro
In
October 2016, we entered into an offer letter with Mr. Yonehiro, which governs the terms of his employment with us. For 2021, Mr. Yonehiro is entitled to an annual base salary of $370,000, and is eligible to receive an annual performance
bonus with a target amount of 40% of his annual base salary, based on his achievement of certain annual performance milestones, as determined by us, and subject to his continued employment through the time of payment of the bonus.
In January 2017, pursuant to his offer letter Mr. Yonehiro was granted an option to purchase 64,285 shares of our common stock at an
exercise price of $2.10 per share. This option vests over a four-year period with 25% of the shares vesting in November 2017 and the remainder vesting monthly over 36 months from November 2017. Upon execution of the underwriting agreement for our
initial public offering, Mr. Yonehiro was granted an additional option to purchase 100,000 shares of our common stock at an exercise price equal to our initial public offering price. This option is immediately exercisable and vests monthly over
a four-year period commencing upon the date of grant. Please see Item 11. Executive CompensationOutstanding Equity Awards as of December 31, 2020 for information regarding equity awards granted to Mr. Yonehiro.
Severance and Change in Control Plan
The Severance and Change in Control Plan, or the Severance Plan, provides severance benefits to each of our employees selected for
participation in the Severance Plan, subject to execution of a participation agreement for the Severance Plan. Upon the closing of our initial public offering, each of our executive officers and vice presidents, including our named executive
officers, became participants in the Severance Plan. The benefits provided under the Severance Plan supersede any similar severance benefits described in a participants offer letter or employment agreement. Participants in our Severance Plan
will be entitled to receive continued payment of their base salary (12 months for our Chief Executive Officer, nine months for our other executive officers, senior vice presidents and certain other executives as designated by our board of directors
and six months base salary for our vice presidents and all other participants so designated by our board) upon either an involuntary termination without cause or a resignation for good reason (as each such term is defined in the Severance Plan)
following such termination. In addition, each such participant with a qualifying termination is also eligible for payment of continued group health plan premiums during the period of base salary continuation. Our chief executive officer, our other
executive officers and senior vice presidents are also eligible to receive a prorated bonus at the target level for the year of termination, paid in equal installments over the period of base salary continuation. Our chief executive officer will
also be entitled to an additional amount equal to any then earned but unpaid performance bonus for the calendar year preceding such termination, if our annual performance bonus plan is amended so that it does not require the chief executive
officers continued service through the bonus payment date in order to earn such annual performance bonus, such that this provision will become applicable.
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In the event that an involuntary termination without cause or a resignation for good reason
occurs in the period commencing three months prior to and ending 12 months following a change in control, the participant will be entitled to receive a lump sum cash payment (equal to 18 of months base salary for our Chief Executive Officer, 12
months of base salary for our other executive officers, senior vice presidents and certain other executives as designated by our board of directors and nine months of base salary for our vice presidents and all other participants so designated by
our board) and a lump such cash payment in respect of such participants target annual cash bonus (such payment at 150% of the annual target amount for the chief executive officer, 100% of target for our other executive officers, senior vice
presidents and other executives as designated by our board of directors or 75% of target for our vice presidents and all other participants so designated by our board). In addition, each such participant with a qualifying change in control
termination is also eligible for payment of continued group health plan premiums for a period of time equal to the number of months of base salary severance that is paid in a lump sum as specified above. Also in the event of a change in control
termination, the unvested portion of any equity awards granted to any participant will fully vest and become exercisable at the later of such participants execution of a release or the effective date of such change in control. All such
severance benefits are subject to the participant signing a general release of all known and unknown claims in substantially the form provided in the Severance Plan, as well as the participants compliance with certain post-termination
restrictive covenants.
Our chief executive officer is also entitled to immediate vesting acceleration of any equity awards granted to our
chief executive officer if the chief executive officer remains in our continued services through the date of such change in control.
Employee Benefit
and Stock Plans
2021 Equity Incentive Plan
Our board of directors adopted the 2021 Equity Incentive Plan, or the 2021 Plan, in January 2021, and our stockholders approved the 2021 Plan
in January 2021. The 2021 Plan became effective upon the execution of the underwriting agreement for our initial public offering. The 2021 Plan is the successor to our 2015 Equity Incentive Plan, or the 2015 Plan, which is described below. No
further grants will be made under the 2015 Plan.
Types of Awards . Our 2021 Plan provides for the grant of incentive stock options,
or ISOs, nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based awards and other awards, or collectively, awards. ISOs may be granted only to our employees, including
our officers, and the employees of our affiliates. All other awards may be granted to our employees, including our officers, our non-employee directors and consultants and the employees and consultants of our
affiliates.
Authorized Shares. Initially, the maximum number of shares of our common stock that may be issued under our 2021 Plan
is 8,075,000 shares, which is the sum of (1) 4,200,000 new shares, plus (2) returning shares, if any, subject to outstanding stock options or other stock awards as of the effective date of the 2021 Plan that were granted under the 2015 Plan and
which are forfeited, terminate, expire or are otherwise not issued. In addition, the number of shares of our common stock reserved for issuance under our 2021 Plan will automatically increase on January 1 of each calendar year that commences
after our 2021 Plan becomes effective and continuing through and including January 1, 2031, in an amount equal to 5% of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of each
automatic increase, or a lesser number of shares determined by our board of directors or compensation committee. The maximum number of shares of our common stock that may be issued on the exercise of incentive stock options under our 2021 Plan is
24,000,000 shares.
Shares issued under our 2021 Plan are authorized but unissued or reacquired shares of common stock. Shares subject to
awards granted under our 2021 Plan that expire or terminate without being exercised in full, or
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that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under our 2021 Plan. Additionally, shares issued pursuant to awards under our 2021
Plan that we repurchase or that are forfeited, as well as shares used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award, will become available for future grant under our 2021 Plan.
The maximum number of shares of common stock subject to stock awards granted under the 2021 Plan or otherwise during any period that begins
after the 2021 Plan becomes effective and commences on the date of the companys annual meeting of stockholders for a particular year and ends on the day immediately prior to the date of the companys annual meeting of stockholders for the
next subsequent year to any non-employee director, taken together with any cash retainers paid by us to such non-employee director during such period for service on the
board of directors, will not exceed $1.0 million in total value (calculating the value of any such stock awards based on the grant date fair value of such stock awards for financial reporting purposes), or, with respect to the period in which a
non-employee director is first appointed or elected to our board of directors, $1.5 million.
Plan Administration . Our board, or a duly authorized committee of our board, may administer our 2021 Plan. Our board has delegated
concurrent authority to administer our 2021 Plan to the compensation committee under the terms of the compensation committees charter. We sometimes refer to the board, or the applicable committee with the power to administer our equity
incentive plans, as the administrator. The administrator may also delegate to one or more of our officers the authority to (1) designate employees (other than officers) to receive specified awards, and (2) determine the number of shares
subject to such awards.
The administrator has the authority to determine the terms of awards, including recipients, the exercise,
purchase or strike price of awards, if any, the number of shares subject to each award, the fair market value of a share of common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form of
consideration, if any, payable upon exercise or settlement of the award and the terms of the award agreements for use under our 2021 Plan.
In addition, subject to the terms of the 2021 Plan, the administrator also has the power to modify outstanding awards under our 2021 Plan,
including the authority to reprice any outstanding option or stock appreciation right, cancel and re-grant any outstanding option or stock appreciation right in exchange for new stock awards, cash or other
consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any materially adversely affected participant.
Stock Options . ISOs and NSOs are granted pursuant to stock option agreements adopted by the administrator. The administrator determines
the exercise price for a stock option, within the terms and conditions of the 2021 Plan, provided that the exercise price of a stock option generally cannot be less than 100% of the fair market value of common stock on the date of grant. Options
granted under the 2021 Plan vest at the rate specified in the stock option agreement by the administrator.
The administrator determines
the term of stock options granted under the 2021 Plan, up to a maximum of ten years. Unless the terms of an optionholders stock option agreement provide otherwise, if an optionholders service relationship with us, or any of our
affiliates, ceases for any reason other than disability, death or cause, the optionholder may generally exercise any vested options for a period of three months following the cessation of service. The option term may be extended in the event that
either an exercise of the option or an immediate sale of shares acquired upon exercise of the option following such a termination of service is prohibited by applicable securities laws or our insider trading policy. If an optionholders service
relationship with us or any of our affiliates ceases due to disability or death, or an optionholder dies within a certain period following cessation of service, the optionholder or a beneficiary may generally exercise any vested options for a period
of 12 months in the event of disability and 18 months in the event of death. In the event of a termination for cause, options generally terminate immediately upon the termination of the individual for cause. In no event may an option be exercised
beyond the expiration of its term.
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Acceptable consideration for the purchase of common stock issued upon the exercise of a
stock option will be determined by the administrator and may include (1) cash, check, bank draft or money order, (2) a broker-assisted cashless exercise, (3) the tender of shares of common stock previously owned by the optionholder,
(4) a net exercise of the option if it is an NSO, and (5) other legal consideration approved by the administrator.
Options may
not be transferred to third-party financial institutions for value. Unless the administrator provides otherwise, options generally are not transferable except by will, the laws of descent and distribution or pursuant to a domestic relations order.
An optionholder may designate a beneficiary, however, who may exercise the option following the optionholders death.
Tax
Limitations on ISOs. The aggregate fair market value, determined at the time of grant, of common stock with respect to ISOs that are exercisable for the first time by an option holder during any calendar year under all of our stock plans may not
exceed $100,000. Options or portions thereof that exceed such limit will be treated as NSOs. No ISOs may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting
power or that of any of our parent or subsidiary corporations, unless (1) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and (2) the term of the ISO does not
exceed five years from the date of grant.
Restricted Stock Awards . Restricted stock awards are granted pursuant to restricted
stock award agreements adopted by the administrator. Restricted stock awards may be granted in consideration for cash, check, bank draft or money order, services rendered to us or our affiliates or any other form of legal consideration. Common stock
acquired under a restricted stock award may, but need not, be subject to a share repurchase option in our favor in accordance with a vesting schedule to be determined by the administrator. A restricted stock award may be transferred only upon such
terms and conditions as set by the administrator. Except as otherwise provided in the applicable award agreement, restricted stock awards that have not vested may be forfeited or repurchased by us upon the participants cessation of continuous
service for any reason.
Restricted Stock Unit Awards . Restricted stock unit awards are granted pursuant to restricted stock unit
award agreements adopted by the administrator. Restricted stock unit awards may be granted in consideration for any form of legal consideration. A restricted stock unit award may be settled by cash, delivery of stock, a combination of cash and stock
as deemed appropriate by the administrator, or in any other form of consideration set forth in the restricted stock unit award agreement. Additionally, dividend equivalents may be credited in respect of shares covered by a restricted stock unit
award. Except as otherwise provided in the applicable award agreement, restricted stock units that have not vested will be forfeited upon the participants cessation of continuous service for any reason.
Stock Appreciation Rights . Stock appreciation rights are granted pursuant to stock appreciation right grant agreements adopted by the
administrator. The administrator determines the strike price for a stock appreciation right, which generally cannot be less than 100% of the fair market value of common stock on the date of grant. Upon the exercise of a stock appreciation right, we
will pay the participant an amount equal to the product of (1) the excess of the per share fair market value of common stock on the date of exercise over the strike price, multiplied by (2) the number of shares of common stock with respect
to which the stock appreciation right is exercised. A stock appreciation right granted under the 2021 Plan vests at the rate specified in the stock appreciation right agreement as determined by the administrator.
The administrator determines the term of stock appreciation rights granted under the 2021 Plan, up to a maximum of ten years. Unless the terms
of a participants stock appreciation right agreement provide otherwise, if a participants service relationship with us or any of our affiliates ceases for any reason other than cause, disability or death, the participant may generally
exercise any vested stock appreciation right for a period of three months following the cessation of service. The stock appreciation right term may be further extended in the event that exercise of the stock appreciation right following such a
termination of service is prohibited by applicable securities laws. If a participants service relationship with us, or any of our affiliates, ceases due to disability or
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death, or a participant dies within a certain period following cessation of service, the participant or a beneficiary may generally exercise any vested stock appreciation right for a period of 12
months in the event of disability and 18 months in the event of death. In the event of a termination for cause, stock appreciation rights generally terminate immediately upon the occurrence of the event giving rise to the termination of the
individual for cause. In no event may a stock appreciation right be exercised beyond the expiration of its term.
Performance
Awards . Our 2021 Plan permits the grant of performance-based stock and cash awards. The compensation committee can structure such awards so that the stock or cash will be issued or paid pursuant to such award only following the achievement of
certain pre-established performance goals during a designated performance period. Performance awards that are settled in cash or other property are not required to be valued in whole or in part by reference
to, or otherwise based on, the common stock.
The performance goals may be based on any measure of performance selected by the board of
directors. The compensation committee may establish performance goals on a company-wide basis, with respect to one or more business units, divisions, affiliates or business segments, and in either absolute terms or relative to the performance of one
or more comparable companies or the performance of one or more relevant indices. Unless specified otherwise (i) in the award agreement at the time the award is granted or (ii) in such other document setting forth the performance goals at
the time the goals are established, the compensation committee will appropriately make adjustments in the method of calculating the attainment of the performance goals as follows: (1) to exclude restructuring and/or other nonrecurring charges;
(2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects
of items that are unusual in nature or occur infrequently as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any
business divested by us achieved performance objectives at targeted levels during the balance of a performance period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock by reason of any
stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common
stockholders other than regular cash dividends; (9) to exclude the effects of stock-based compensation and the award of bonuses under our bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures
that are required to be expensed under generally accepted accounting principles; and (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles.
Other Awards . The administrator may grant other awards based in whole or in part by reference to common stock. The administrator will
set the number of shares under the award and all other terms and conditions of such awards.
Changes to Capital Structure . In the
event there is a specified type of change in our capital structure, such as a stock split, reverse stock split or recapitalization, appropriate adjustments will be made to (1) the class and maximum number of shares reserved for issuance under
the 2021 Plan; (2) the class and maximum number of shares by which the share reserve may increase automatically each year; (3) the class and maximum number of shares that may be issued upon the exercise of ISOs and (4) the class and
number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding awards.
Corporate
Transactions . The following applies to stock awards under the 2021 Plan in the event of a corporate transaction, unless otherwise provided in a participants stock award agreement or other written agreement with us or one of our affiliates
or unless otherwise expressly provided by the administrator at the time of grant. Under the 2021 Plan, a corporate transaction is generally the consummation of (1) a sale or other disposition of all or substantially all of our assets,
(2) a sale or other disposition of at least 50% of our outstanding securities, (3) a merger, consolidation or similar transaction following which we are not the surviving corporation or (4) a merger, consolidation or similar
transaction following which we are the surviving corporation but the shares of common stock outstanding immediately prior to such transaction are converted or exchanged into other property by virtue of the transaction.
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In the event of a corporate transaction, outstanding stock awards may be assumed, continued
or substituted for similar stock awards by the surviving or acquiring corporation. If any surviving or acquiring corporation fails to assume, continue or substitute such stock awards, the vesting of stock awards held by participants whose
continuous service has not terminated will be accelerated in full to a date prior to the corporate transaction as determined by the plan administrator. All stock awards not assumed, continued or substituted for similar stock awards by the
surviving or acquiring corporation will terminate upon the corporate transaction. In addition, the plan administrator may also provide, in its sole discretion, that the holder of a stock award that will terminate upon the occurrence of a
corporate transaction will receive a payment, if any, equal to the excess of the value of the property the participant would have received upon exercise of the stock award over the exercise price otherwise payable in connection with the stock award.
Transferability . A participant may not transfer awards under our 2021 Plan other than by will, the laws of descent and
distribution or as otherwise provided under our 2021 Plan.
Plan Amendment or Termination . Our board has the authority to amend,
suspend or terminate our 2021 Plan, provided that such action does not materially impair the existing rights of any participant without such participants written consent. Certain material amendments also require the approval of our
stockholders. No ISOs may be granted after the tenth anniversary of the date our board adopted our 2021 Plan. No awards may be granted under our 2021 Plan while it is suspended or after it is terminated.
2015 Equity Incentive Plan
Our board and stockholders adopted the 2015 Plan in April 2015. The 2015 Plan provides for the grant of ISOs, NSOs, stock appreciation rights,
restricted stock awards and restricted stock unit awards to our employees, directors and consultants or our affiliates. ISOs may be granted only to our employees or employees of our affiliates.
The 2015 Plan terminated on the date the 2021 Plan became effective. However, any outstanding awards granted under the 2015 Plan will remain
outstanding, subject to the terms of our 2015 Plan and the applicable award agreements, until such outstanding options are exercised or until any awards terminate or expire by their terms.
Authorized Shares . Upon the effective date of the 2021 Plan, we will no longer grant awards under our 2015 Plan. As of
December 31, 2020, options to purchase 3,800,402 shares were outstanding and 147,852 shares of common stock remained available for future grants under our 2015 Plan. The options outstanding as of December 31, 2020 had a weighted-average
exercise price of $3.16 per share.
Plan Administration . Our board or a duly authorized committee of our board administers
our 2015 Plan and the awards granted under it. Our board has delegated concurrent authority to administer our 2015 Plan to the compensation committee under the terms of the compensation committees charter. The administrator has the unilateral
authority to reprice any outstanding option. The administrator may otherwise modify outstanding awards with the consent of any adversely affected participant.
Our board has delegated limited authority to grant options under the 2015 Plan to an equity grant committee with Dr. Schatzman serving as
the sole committee member in his capacity as a director. The equity grant committee has the authority to select the non-officer employees and consultants to receive such option grants, whether the option will
be an ISO or NSO, and the number of shares subject to those grants.
Acquisitions or Other Combinations of the Company . Our 2015
Plan provides that if we are subject to an acquisition or other combination, as such terms are defined under our 2015 Plan, outstanding awards will be subject to the treatment specified in the transaction agreement. Under the 2015 Plan, an
acquisition is generally (1) a sale or other disposition of all or substantially all of our assets, (2) a sale or other disposition of at least 50%
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of our outstanding voting securities by our stockholders, or (3) a merger, consolidation or similar transaction following which our stockholders do not own at least 50% of the surviving
entity. Under the 2015 Plan, an other combination is generally (1) a consolidation or merger involving us where we are not the surviving corporation or (2) our conversion into another form of entity; provided, in each case, that such
transaction is not also an acquisition.
In the event we are subject to an acquisition or other combination, the transaction agreement
will provide for one or more of the following treatments with respect to all outstanding 2015 Plan awards:
the assumption, continuation or substitution of the award by a successor corporation, or the acquiring
corporations parent company;
acceleration, in whole or in part, of the vesting or exercisability of the award and its termination prior to the
transaction if not exercised prior to the effective time of the corporate transaction;
cancellation of the award prior to the transaction in exchange for the full value of the award if any, as
determined by the administrator, and payable in cash, cash equivalents or securities of the successor entity (or its parent, if any); or
cancellation of the award prior to the transaction in exchange for no consideration.
Transferability . Except as otherwise permitted by the administrator and the 2015 Plan terms, a participant may not transfer awards
under our 2015 Plan other than by will, the laws of descent and distribution.
Plan Amendment or Termination . Our administrator has
the authority to suspend or terminate our 2015 Plan at any time, provided that such action will not impair a participants rights under such participants outstanding award without his or her written consent. Certain material amendments
also require the approval of our stockholders. As described above, our 2015 Plan terminated upon the effective date of the 2021 Plan so that no future awards will be granted under the 2015 Plan.
2021 Employee Stock Purchase Plan
Our board of directors and stockholders adopted our 2021 Employee Stock Purchase Plan, or the ESPP, in January 2021. The ESPP became effective
upon the execution of the underwriting agreement for our initial public offering. The purpose of the ESPP is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to
exert maximum efforts toward our success and that of our affiliates. The ESPP includes two components. One component is designed to allow our eligible U.S. employees to purchase common stock in a manner that may qualify for favorable tax treatment
under Section 423 of the Internal Revenue Code. In addition, purchase rights may be granted under a component that does not qualify for such favorable tax treatment when necessary or appropriate to permit participation by our eligible employees
who are foreign nationals or employed outside of the United States while complying with applicable foreign laws.
Authorized
Shares . The maximum aggregate number of shares of common stock that may be issued under our ESPP is 420,000 shares. The number of shares of common stock reserved for issuance under our ESPP will automatically increase on January 1 of each
calendar year that commences after the ESPP becomes effective and continuing through and including January 1, 2031, by the lesser of (1) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding
calendar year, (2) 840,000 shares, and (3) a number of shares determined by our board. Shares subject to purchase rights granted under our ESPP that terminate without having been exercised in full will not reduce the number of shares
available for issuance under our ESPP.
Plan Administration . Our board, or a duly authorized committee thereof, will administer our
ESPP. Our board has delegated concurrent authority to administer our ESPP to the compensation committee under the terms of the compensation committees charter. The ESPP is implemented through a series of offerings with specific
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terms approved by the administrator and under which eligible employees are granted purchase rights to purchase shares of common stock on specified dates during such offerings. Under the ESPP, we
may specify offerings with durations of not more than 27 months, and may specify shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of common stock will be purchased for our eligible
employees participating in the offering. An offering under the ESPP may be terminated under certain circumstances.
Payroll
Deductions . Generally, all regular employees, including executive officers, employed by us or by any of our designated affiliates, may participate in the ESPP and may contribute, normally through payroll deductions, up to 15% of their earnings
(as defined in the ESPP) for the purchase of common stock under the ESPP. Unless otherwise determined by the administrator, common stock will be purchased for the accounts of employees participating in the ESPP at a price per share equal to the
lower of (a) 85% of the fair market value of a share of common stock on the first date of an offering or (b) 85% of the fair market value of a share of common stock on the date of purchase. For the initial offering, which commenced upon the
execution and delivery of the underwriting agreement relating to our initial public offering, the fair market value on the first day of the initial offering will be the price at which shares were first sold to the public.
Limitations . Our employees, including executive officers, or any of our designated affiliates may have to satisfy one or more of the
following service requirements before participating in our ESPP, as determined by the administrator: (1) customary employment with us or one of our affiliates for more than 20 hours per week and more than five months per calendar year, or
(2) continuous employment with us or one of our affiliates for a minimum period of time, not to exceed two years, prior to the first date of an offering. An employee may not be granted rights to purchase stock under our ESPP if such employee
(1) immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of common stock, or (2) holds rights to purchase stock under our ESPP that would accrue at a rate that exceeds $25,000 worth
of our stock for each calendar year that the rights remain outstanding.
Changes to Capital Structure . In the event that there
occurs a change in our capital structure through such actions as a stock split, merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend,
liquidating dividend, combination of shares, exchange of shares, change in corporate structure or similar transaction, the board of directors will make appropriate adjustments to (1) the number of shares reserved under the ESPP, (2) the
maximum number of shares by which the share reserve may increase automatically each year, (3) the number of shares and purchase price of all outstanding purchase rights and (4) the number of shares that are subject to purchase limits under
ongoing offerings.
Corporate Transactions . In the event of certain corporate transactions, including: (1) a sale of all or
substantially all of our assets, (2) the sale or disposition of 50% of our outstanding securities, (3) the consummation of a merger or consolidation where we do not survive the transaction, and (4) the consummation of a merger or
consolidation where we do survive the transaction but the shares of our common stock outstanding immediately before such transaction are converted or exchanged into other property by virtue of the transaction, any then-outstanding rights to purchase
our stock under the ESPP may be assumed, continued or substituted for by any surviving or acquiring entity (or its parent company). If the surviving or acquiring entity (or its parent company) elects not to assume, continue or substitute for such
purchase rights, then the participants accumulated payroll contributions will be used to purchase shares of common stock within 10 business days prior to such corporate transaction, and such purchase rights will terminate immediately.
ESPP Amendment or Termination . The administrator has the authority to amend or terminate our ESPP, provided that except in
certain circumstances such amendment or termination may not materially impair any outstanding purchase rights without the holders consent. We will obtain stockholder approval of any amendment to our ESPP as required by applicable law or
listing requirements.
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Health and Welfare Benefits
All of our current named executive officers are eligible to participate in our employee benefit plans, including our medical, dental, vision,
life, disability and accidental death and dismemberment insurance plans, in each case on the same basis as all of our other employees. We pay the premiums for the life, disability and accidental death and dismemberment insurance for all of our
employees, including our named executive officers. We generally do not provide perquisites or personal benefits to our named executive officers.
401(k) Plan
We
currently maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. The 401(k) plan is intended to qualify as a
tax-qualified plan under the Internal Revenue Code. Our named executive officers are eligible to participate in the 401(k) plan on the same basis as our other employees. The Internal Revenue Code allows
eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan.
Limitations of Liability and Indemnification Matters
Our amended and restated certificate of incorporation contains provisions that limit the liability of our current and former directors for
monetary damages to the fullest extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for any breach of fiduciary duties as directors, except liability for:
any breach of the directors duty of loyalty to the corporation or its stockholders;
any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
unlawful payments of dividends or unlawful stock repurchases or redemptions; or
any transaction from which the director derived an improper personal benefit.
Such limitation of liability does not apply to liabilities arising under federal securities laws and does not affect the availability of
equitable remedies such as injunctive relief or rescission.
Our amended and restated certificate of incorporation authorizes us to
indemnify our directors, officers, employees and other agents to the fullest extent permitted by Delaware law. Our amended and restated bylaws provide that we are required to indemnify our directors and officers to the fullest extent permitted by
Delaware law and may indemnify our other employees and agents. Our amended and restated bylaws also provide that, on satisfaction of certain conditions, we will advance expenses incurred by a director or officer in advance of the final disposition
of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to
indemnify him or her under the provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors and executive officers. With certain exceptions, these agreements provide for indemnification for
related expenses, including attorneys fees, judgments, fines and settlement amounts incurred by any of these individuals in connection with any action, proceeding or investigation. We believe that the amended and restated certificate of
incorporation and amended and restated bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain customary directors and officers liability
insurance.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and
amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an
action, if successful, might benefit us and other stockholders. Further, a stockholders investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as required by
these indemnification provisions.
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Insofar as indemnification for liabilities arising under the Securities Act may be permitted
for directors, executive officers or persons controlling us, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Rule 10b5-1 Sales Plans
Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they
will contract with a broker to buy or sell shares of common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or executive officer
when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1 plan in some circumstances and may terminate a plan at any time. Our directors and
executive officers also may buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, subject to compliance with the terms of our insider
trading policy. Prior to the end of the 180th day after the date of execution of the underwriting agreement for our initial public offering (subject to potential early release or termination without notice), the sale of any shares under such plan
would be subject to the lock-up agreement that the director or executive officer has entered into with Morgan Stanley & Co. LLC and SVB Leerink LLC on behalf of the underwriters.
Non-Employee Director Compensation
Prior to the adoption of the Non-Employee Director Compensation Policy described below, we provided
equity-based compensation to our non-employee directors who are not affiliated with our investors for the time and effort necessary to serve as a member of our board of directors. In addition, all of our
independent directors were entitled to reimbursement of direct expenses incurred in connection with attending meetings of the board or committees thereof.
The following table sets forth information regarding the compensation earned for service on our board of directors during the year ended
December 31, 2020. Randall C. Schatzman, Ph.D., our Chief Executive Officer, is also a member of our board of directors, but did not receive any additional compensation for his service as a director. Dr. Schatzmans compensation
as an executive officer is set forth in Item 11. Executive CompensationSummary Compensation Table.
Name
Fees Earned
or Paid in
Cash
Option
Awards (1)(2)
Total
Peter Moldt, Ph.D.
$
$
$
Edgar G. Engleman, M.D.
James I. Healy, M.D. (3)
Ashish Khanna, Ph.D.
Kathleen LaPorte (4)
$
91,915
(5)
$
91,915
Richard A Miller, M.D.
Jason Pitts, Ph.D. (6)
Mahendra G. Shah, Ph.D.
(1)
The amounts reported in this column do not reflect dollar amounts actually received by the non-employee director. Instead, the amounts reflect the aggregate grant date fair value of the stock options granted to the non-employee directors during 2020 under our 2015
Equity Incentive Plan, computed in accordance with ASC 718. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The amounts reported in this column reflect the
accounting cost for these stock options and do not correspond to the actual economic value that may be received by the non-employee directors upon the exercise of the stock options or any sale of the
underlying shares of common stock.
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(2)
As of December 31, 2020, our non-employee directors held options
to purchase the following number of shares of our common stock: Ms. LaPorte, 27,857 shares; Dr. Miller, 10,808 shares. In addition, Dr. Miller holds 7,708 shares, which were acquired pursuant to an early exercise provision and subject
to a right of repurchase, which lapses in accordance with the vesting schedule.
(3)
Dr. Healy became a member of our board of directors in January 2021.
(4)
Ms. LaPorte became a member of our board of directors in December 2020.
(5)
In December 2020, we granted Ms. LaPorte an option to purchase 27,857 shares with an exercise price of
$4.41 per share, which vests in 36 equal monthly installments, for so long as Ms. LaPorte continues to provide service to us through such vesting date.
(6)
Dr. Pitts resigned as a member of our board of directors in January 2021.
Non-Employee Director Compensation Policy
We adopted a non-employee director compensation policy which became effective upon the closing of our
initial public offering in February 2021 pursuant to which our non-employee directors are eligible to receive cash and equity compensation for service on our board of directors and committees of our board of
directors.
Commencing upon our initial public offering, each non-employee director received an
annual cash retainer of $35,000 for serving on our board of directors.
The chairperson of our board of directors is entitled to a cash
retainer of $65,000 in lieu of the annual retainer received by other non-employee directors for serving as our lead director.
The chairperson and members of the following three committees of our board of directors are entitled to the following additional annual cash
retainers:
Board Committee
Chairperson
Fee
Member
Fee
Audit Committee
$
15,000
$
7,500
Compensation Committee
10,000
5,000
Nominating and Corporate Governance Committee
8,000
4,000
All annual cash retainers are payable in equal quarterly installments in arrears, on the last day of each
fiscal quarter for which the service occurred, pro-rated based on the number of days served in the applicable fiscal quarter, provided that for the fiscal quarter which includes the closing date of our initial
public offering, the cash compensation amounts will be pro-rated based on the number of days served in such fiscal quarter commencing on the closing date of our initial public offering.
Each new non-employee director who joins our board of directors after our initial public offering will
receive an option to purchase 27,860 shares of our common stock under our 2021 Equity Incentive Plan. The shares subject to this option will vest on a monthly basis over 36 months commencing on the grant date, subject to the non-employee directors continuous service with us on each applicable vesting date. Such newly joining director will also receive a prorated initial annual option grant consisting of an option to purchase a
number of shares of our common stock determined by multiplying 13,930 by the percentage obtained by dividing the number of calendar days from the date such new director joins us to the date of the next scheduled annual stockholder meeting by the
total number of calendar days scheduled to follow the date of the last annual stockholder meeting through the date of the next annual stockholder meeting. Such prorated initial annual option will vest in full on the date immediately preceding the
date of next annual stockholder meeting, subject to the non-employee directors continuous service through such vesting date.
On the date of each annual meeting of our stockholders, each continuing non-employee director will
receive an option to purchase 13,930 shares of our common stock under the 2021 Equity Incentive Plan, vesting on the earlier of the one-year anniversary of the grant date or the date immediately prior to the
next annual stockholder meeting date, subject to the non-employee directors continuous service with us on the applicable vesting date.
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The exercise price per share of each stock option granted under the non-employee director compensation policy will be the closing price of our common stock as reported by the Nasdaq Stock Market on the date of grant. Each stock option will have a term of ten years from the date of
grant, subject to earlier termination in connection with a termination of the non-employee directors continuous service with us. Each stock option and other equity award granted to our non-employee directors is also entitled to immediate vesting acceleration upon a change in control if the non-employee director remains in our continued services through the
date of such change in control.
Each non-employee director is subject to an annual director
compensation limit. In any one-year period measured as commencing on the date of each annual meeting of shareholders that is held following the closing of our initial public offering and ending on the day
immediately prior to the date of the subsequent annual meeting of shareholders, the aggregate value of all compensation granted or paid to each non-employee director may not exceed (i) $1,000,000 in total
value or (ii) in the event such non-employee director is first appointed or elected during such annual period, $1,500,000 in total value, in each case calculating the value of any equity awards based on
the grant date fair market value for financial reporting purposes.
Item 12. Security Ownership of Certain Beneficial
Owners and Management and Related Stockholder Matters.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial ownership of our common stock as of March 1, 2021, for:
each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock;
each of our named executive officers;
each of our directors; and
all of our directors and executive officers as a group.
We have determined beneficial ownership in accordance with the rules and regulations of the SEC, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Except as indicated by the footnotes below, we believe, based on information furnished to us, that the persons and entities named in the table below have sole voting and sole investment power
with respect to all shares that they beneficially own, subject to applicable community property laws.
Applicable percentage ownership is
based on 36,319,766 shares of common stock outstanding as of March 1, 2021. In computing the number of shares beneficially owned by a person and the percentage ownership of such person, we deemed to be outstanding all shares subject
to options and warrants held by the person that are currently exercisable, or exercisable within 60 days of March 1, 2021. However, except as described above, we did not deem such shares outstanding for the purpose of computing the
percentage ownership of any other person.
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Unless otherwise indicated, the address of each beneficial owner listed below is c/o Bolt
Biotherapeutics, Inc., 900 Chesapeake Drive, Redwood City, California 94063. We believe, based on information provided to us, that each of the stockholders listed below has sole voting and investment power with respect to the shares beneficially
owned by the stockholder unless noted otherwise, subject to community property laws where applicable.
Shares Beneficially
Owned
Name of Beneficial Owner
Shares
%
Principal Stockholders
Novo Holdings A/S (1)
4,503,991
12.4
%
Entities affiliated with Vivo
Capital (2)
3,871,291
10.7
Sofinnova Venture Partners X,
L.P. (3)
2,754,437
7.6
Citadel Multi-Strategy Equities Master Fund
Ltd. (4)
2,942,007
8.1
Entities affiliated with RA
Capital (5)
2,378,325
6.5
Pivotal bioVenture Partners Fund I,
L.P. (6)
1,891,467
5.2
Entities affiliated with Rock Springs Capital Management LP (7)
2,205,494
6.1
Directors and Executive Officers
Randall C. Schatzman, Ph.D. (8)
1,411,256
3.7
William P. Quinn (9)
192,469
*
David Dornan, Ph.D. (10)
275,077
*
Edith A. Perez, M.D. (11)
213,392
*
Grant Yonehiro (12)
296,729
*
Peter Moldt, Ph.D.
Edgar G. Engleman, M.D. (13)
3,551,232
9.8
James I. Healy, M.D. (3)
2,754,437
7.6
Ashish Khanna, Ph.D. (14)
5,741
*
Kathleen LaPorte (15)
4,295
*
Richard A. Miller, M.D. (16)
20,330
*
Mahendra G. Shah, Ph.D. (17)
1,448,286
4.0
All directors and executive officers as a group (12 persons) (18)
10,173,244
26.3
%
*
Represents beneficial ownership of less than 1%.
(1)
Consists of 4,503,991 shares of common stock held directly by Novo Holdings A/S. Novo Holdings A/S,
through its board of directors (the Novo Board), has the sole power to vote and dispose of the shares. The Novo Board may exercise voting and dispositive control over the shares only with the support of a majority of the Novo Board. As
such, no individual member of the Novo Board is deemed to hold any beneficial ownership or reportable pecuniary interest in the shares. Peter Moldt, Ph.D., one of our directors, is employed as a senior partner at Novo Ventures (US), Inc.,
which provides certain consultancy services to Novo Holdings A/S, and Dr. Moldt is not deemed to have beneficial ownership of the shares held by Novo Holdings A/S. The business address of Novo Holdings A/S is Tuborg Havnevej 19, 2900 Hellerup,
Denmark.
(2)
Consists of: (i) 1,997,216 shares of common stock held directly by Vivo Capital Fund VIII, L.P., of which
Vivo Capital VIII, LLC (Vivo GP) is the general partner; (ii) 275,789 shares of common stock held directly by Vivo Capital Surplus Fund VIII, L.P., of which Vivo GP is the general partner; (iii) 1,448,286 shares of common
stock held directly by Vivo PANDA Fund, L.P. (Vivo PANDA LP), of which Vivo PANDA, LLC (Vivo PANDA GP) is the general partner; and (iv) 150,000 shares of common stock held directly by Vivo Opportunity Fund, L.P.
(Vivo Opportunity LP), of which Vivo Opportunity, LLC (Vivo Opportunity GP) is the general partner. The voting members of Vivo GP are Frank Kung, Edgar Engleman and Shan Fu. Dr. Engleman is a member of our board of
directors. Mahendra G. Shah, Ph.D., one of our directors, is a managing member of Vivo PANDA GP. The principal business address of Vivo Capital is 192 Lytton Avenue, Palo Alto, CA 94301.
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(3)
Consists of 2,754,437 shares of common stock held directly by Sofinnova Venture Partners X, L.P.
(SVP X). Sofinnova Management X, L.L.C. (SM X) is the general partner of SVP X. Each of James I. Healy, Maha Katabi and Michael F. Powell is a managing member of SM X and may, along with SM X, be deemed to have shared
voting and dispositive power over the shares owned by SVP X. Such persons disclaim beneficial ownership of such shares except to the extent of their pecuniary interest therein. Dr. Healy, a member of our board of directors, is a general partner
at Sofinnova Investments, Inc. The address for SM X is 3000 Sand Hill Road, Bldg. 4, Suite 250, Menlo Park, CA 94025.
(4)
Consists of 2,942,007 shares of common stock held directly by Citadel Multi-Strategy Equities Master Fund
Ltd., or Citadel. Citadel Advisors LLC, or Citadel Advisors, acts as the portfolio manager of Citadel. Citadel Advisors Holdings LP, or CAH, is the sole member of Citadel Advisors, and Citadel GP LLC, or CGP, is the general partner of CAH. Kenneth
Griffin owns a controlling interest in CGP and may be deemed to share voting and dispositive power over shares held by Citadel. The address for this entity is c/o Citadel Advisors, 601 Lexington Avenue, New York, New York 10022.
(5)
Consists of: (i) 139,937 shares of common stock held directly by Blackwell Partners LLCSeries A;
(ii) 1,806,307 shares of common stock held directly by RA Capital Healthcare Fund, L.P.; and (iii) 432,081 shares of common stock held directly by RA Capital Nexus Fund, L.P. RA Capital Management, L.P. is the investment manager for
Blackwell Partners LLCSeries A (Blackwell), RA Capital Healthcare Fund, L.P. (RA Healthcare) and RA Capital Nexus Fund L.P. (Nexus Fund). The general partner of RA Capital Management, L.P. is RA Capital
Management GP, LLC, of which Peter Kolchinsky and Rajeev Shah are the managing members. RA Capital Management, L.P., RA Capital Management GP, LLC, Peter Kolchinsky and Rajeev Shah may be deemed to have voting and investment power over the
shares held of record by Blackwell, RA Healthcare and Nexus Fund. RA Capital Management, L.P., RA Capital Management GP, LLC, Peter Kolchinsky and Rajeev Shah disclaim beneficial ownership of such shares, except to the extent of any pecuniary
interest therein. The address of the entities listed above is 200 Berkeley Street, 18th Floor, Boston, Massachusetts 02116.
(6)
Consists of 1,891,467 shares of common stock held directly by Pivotal bioVenture Partners Fund I, L.P.
Pivotal bioVenture Partners Fund I G.P., L.P. is the general partner of Pivotal bioVenture Partners Fund I, L.P. and Pivotal bioVenture Partners Fund I U.G.P., Ltd is the general partner of Pivotal bioVenture Partners Fund I G.P., L.P. Richard
Coles, Peter Bisgaard and Vincent Sai Sing Cheung are directors of Pivotal bioVenture Partners Fund I U.G.P., Ltd, and may, along with Pivotal bioVenture Partners Fund I U.G.P., Ltd be deemed to have shared voting and investment control and power
over the shares owned by Pivotal bioVenture Partners Fund I, L.P. Such persons disclaim beneficial ownership of such securities except to the extent of any pecuniary interest therein. The principal business address of Pivotal bioVenture Partners
Fund I, L.P. is 501 Second Street, Suite 200, San Francisco, CA 94107.
(7)
Consists of: (i) 1,946,246 shares of common stock held directly by Rock Springs Capital Master Fund LP
(the Master Fund); and (ii) 259,248 shares of common stock held directly by Four Pines Master Fund LP (Four Pines). Rock Springs Capital Management LP (RSCM) serves as the investment manager to each of the Master
Fund and Four Pines. Rock Springs Capital LLC (RSC) is the general partner of RSCM. In such capacities, RSCM and RSC, and Kris Jenner, Gordon Margraf Bussard and Graham McPhail, the members of RSC, may be deemed to share
voting and dispositive power of the shares held by the Master Fund and Four Pines. Messrs. Jenner, Bussard and McPhail disclaim beneficial ownership over such shares, expect to the extent of their pecuniary interest therein. The principal business
address of RSCM and RSC is 650 South Exeter, Suite 1070, Baltimore, Maryland 21202, and the principal business address of the Master Fund and Four Pines is c/o Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand
Cayman KY1-9008, Cayman Islands.
(8)
Consists of: (i) 1,500 shares of common stock held directly; and (ii) 1,409,756 shares
issuable pursuant to stock options exercisable within 60 days of March 1, 2021.
(9)
Consists of: (i) 13,898 shares of common stock held directly, 12,698 of which were unvested and
remained subject to a repurchase right in favor of us as of March 1, 2021; and (ii) 178,571 shares issuable pursuant to stock options exercisable within 60 days of March 1, 2021.
(10)
Consists of 275,077 shares issuable pursuant to stock options exercisable within 60 days of March 1,
2021.
(11)
Consists of 213,392 shares issuable pursuant to stock options exercisable within 60 days of March 1,
2021.
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(12)
Consists of 296,729 shares issuable pursuant to stock options exercisable within 60 days of March 1,
2021.
(13)
Consists of: (i) 635,371 shares of common stock held directly by the Engleman Family Trust; (ii) 321,428 shares
of common stock held directly by the Erik Nathan Engleman Irrevocable Trust dated December 6, 2012; (iii) 321,428 shares of common stock held directly by the Jason Engleman Irrevocable GST Trust dated December 06, 2012;
(iv) 1,997,216 shares of common stock held directly by Vivo Capital Fund VIII, L.P.; and (v) 275,789 shares of common stock held directly by Vivo Capital Surplus Fund VIII, L.P.. Dr. Engleman is trustee of the Engleman
Family Trust. Dr. Englemans spouse is the trustee of the Erik Nathan Engleman Irrevocable Trust and the Jason Engleman Irrevocable GST Trust. Vivo GP is the general partner of both Vivo Capital Fund VIII, L.P. and Vivo Capital Surplus
Fund VIII, L.P. The voting members of Vivo GP are Frank Kung, Edgar Engleman and Shan Fu and may be deemed to have shared voting and dispositive power over the shares owned by both Vivo Capital Fund VIII, L.P. and Vivo Capital Surplus Fund VIII,
L.P.
(14)
Consists of: (i) 1,200 shares of common stock and 3,541 shares issuable pursuant to stock options
exercisable within 60 days of March 1, 2021 held by Dr. Khannas spouse; and (ii) 1,000 shares of common stock held directly by Dr. Khanna.
(15)
Consists of (i) 1,200 shares of common stock held directly, and (ii) 3,095 shares issuable pursuant to
stock options exercisable within 60 days of March 1, 2021.
(16)
Consists of (i) 15,602 shares of common stock held directly, and (ii) 4,728 shares issuable
pursuant to stock options exercisable within 60 days of March 1, 2021.
(17)
Consists of 1,448,286 shares of common stock held directly by Vivo PANDA LP. Dr. Shah is a managing
member of Vivo PANDA GP and has shared voting and dispositive power over the shares owned by Vivo PANDA LP. Dr. Shah disclaims beneficial ownership of such shares except to the extent of any pecuniary interest therein.
(18)
Consists of: (i) 7,132,255 shares of common stock directly or indirectly held by all current
executive officers and directors as a group; and (ii) 2,384,889 shares of common stock issuable pursuant to options exercisable within 60 days of March 1, 2021.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table shows certain information with respect to all of our equity compensation plans in effect as of December 31, 2020.
Plan Category
Number of
securities to be
issued upon
exercise
of
outstanding
stock options
(a)
Weighted-
average
exercise price
of outstanding
stock options
(b)
Number of
securities
remaining
available
for
issuance under
equity
compensation
plans
(excluding
securities
reflected
in column (a))
Equity compensation plans approved by
stockholders (1)
3,800,402
$
3.16
147,852
Equity compensation plans not approved by stockholders
Total
3,800,402
$
3.16
147,852
(1)
The equity compensation plans approved by security holders are described in Note 10 to our financial
statements included in this Annual Report on Form 10-K for the year ended December 31, 2020.
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Item 13. Certain Relationships and Related Transactions, and Director
Independence.
The following is a summary of transactions since January 1, 2019, to which we have been a participant in which the
amount involved exceeded or will exceed $120,000, and in which any of our directors, executive officers or holders of more than five percent of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a
direct or indirect material interest, other than compensation arrangements which are described in Item 11. Executive Compensation.
We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below
were comparable to terms available or the amounts that would be paid or received, as applicable, in arms-length transactions.
Preferred Stock Financings
In multiple
closings held between July 2018 and July 2019, we issued and sold an aggregate of 6,645,906 shares of our Series B preferred stock and issued warrants to purchase an aggregate of 249,218 of common stock to 11 accredited investors at a purchase price
of $8.0458 per share for an aggregate purchase price of $53.5 million.
In June 2020, we issued and sold an aggregate of 5,162,173
shares of our Series C-1 preferred stock to 17 accredited investors at a purchase price of $8.05 per share for an aggregate purchase price of $41.6 million.
In January 2021, we issued and sold an aggregate of 5,611,059 shares of our Series C-2 preferred stock
to 17 accredited investors at a purchase price of $9.2575 per share for an aggregate purchase price of $51.9 million.
The following
table summarizes the Series C-1 and Series C-2 preferred stock purchased by holders of more than five percent of our capital stock and their affiliated entities and our
directors since January 1, 2020. None of our executive officers purchased shares of preferred stock.
Name of Stockholder
Series B
Preferred
Stock
Common
Stock
Warrants
Series C-1
Preferred
Stock
Series C-2
Preferred
Stock
Aggregate
Purchase Price
Novo Holdings A/S (1)
2,050,758
76,903
421,670
458,337
$
24,137,511
Entities affiliated with Vivo
Capital (2)
1,715,178
64,319
361,823
393,286
22,353,535
Sofinnova Venture Partners X,
L.P. (3)
1,104,209
1,200,228
19,999,999
Citadel Multi-Strategy Equities Master Fund Ltd.
828,157
900,171
14,999,999
Entities affiliated with RA Capital
Management (4)
828,156
900,169
14,999,999
Rock Springs Capital Master Fund
LP (5)
745,341
810,153
13,499,998
Pivotal bioVenture Partners Fund I,
L.P. (6)
1,242,884
46,608
168,655
183,320
13,054,761
(1)
Dr. Moldt, a member of our board of directors, is employed as a Senior Partner at Novo Ventures (US) Inc.,
which provides certain consultancy services to Novo Holdings A/S.
(2)
Includes shares of preferred stock and warrants to purchase common stock purchased by (a) Vivo Capital
Fund VIII, L.P., (b) Vivo Capital Surplus Fund VIII, L.P. and (c) Vivo PANDA Fund, L.P., or Vivo PANDA LP. Dr. Engleman, a member of our board of directors, is a founding member of Vivo Capital Fund. Mahendra G. Shah, Ph.D., one of our
directors, is a managing director of Vivo PANDA GP.
(3)
Dr. Healy, a member of our board of directors, is a General Partner of Sofinnova Investments.
(4)
Includes shares of preferred stock purchased by (a) RA Capital Healthcare Fund, L.P., (b) RA Capital Nexus
Fund, L.P. and (c) Blackwell Partners LLCSeries A.
(5)
Includes shares of preferred stock purchased by (a) Rock Springs Capital Master Fund LP and (b) Four
Pines Master Fund LP.
(6)
Dr. Khanna, a member of our board of directors, is a venture partner of Pivotal BioVenture Partners.
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Upon the closing of our initial public offering, each share of preferred stock was converted
into one share of common stock. For a description of the material rights and privileges of the preferred stock, see Note 8 to our audited financial statements included elsewhere in this Annual Report on Form
10-K.
Investor Rights Agreement
In June 2020, we entered into an amended and restated investor rights agreement, or IRA, with certain holders of our preferred stock and common
stock, including entities affiliated with Citadel Multi-Strategy Equities Master Fund Ltd., Novo Holdings A/S, Pivotal bioVenture Partners LLC, entities affiliated with RA Capital Management, entities affiliated with Rock Springs Capital, Sofinnova
Investments, Inc. and Vivo Capital and including certain members of, and affiliates of, our directors. The IRA provides the holders of our preferred stock with certain registration rights, including the right to demand that we file a registration
statement or request that their shares be covered by a registration statement that we are otherwise filing. Dr. Moldt, Dr. Khanna and Dr. Healy, members of our board of directors, are affiliated with Novo Holdings A/S, Pivotal
bioVenture Partners LLC and Sofinnova Investments, Inc., respectively. Dr. Engleman and Dr. Shah, members of our board of directors, are both affiliated with Vivo Capital. The IRA also provides these stockholders with information rights,
which terminated upon the closing of our initial public offering, and a right of first refusal with regard to certain issuances of our capital stock, which did not apply to, and terminated upon, the closing of our initial public offering. After the
closing of our initial public offering, the holders of 21,712,540 shares of common stock issuable on conversion of outstanding preferred stock, are entitled to rights with respect to the registration of their shares of common stock under the
Securities Act under this agreement.
Relationship with Stanford University
In May 2015, we entered into a license agreement with Stanford, pursuant to which Stanford was issued 37,551 shares of our common stock and two
co-inventors were issued an aggregate of 14,850 shares of our common stock in September 2016. In June 2018, we entered into a second license agreement with Stanford covering two additional inventions. During
2019 and 2020, we made payments to Stanford of $193,420 and $155,457 for annual license fees and patent expense reimbursement.
Dr. Engleman, a member of our board of directors, is a professor at Stanford. Dr. Engleman is a
co-inventor of some of the patents that we license from Stanford. Pursuant to our 2015 license agreement with Stanford, a trust associated with Dr. Engleman was issued 7,425 shares of our common stock in
September 2016. Under Stanfords policies, as a co-inventor Dr. Engleman is entitled to receive a share of any royalties that we pay to Stanford under the agreements with respect to the covered
intellectual property. No royalty payments have been made to date.
Employment Arrangements
We have entered into employment agreements and offer letters with certain of our executive officers. For more information regarding these
agreements with our executive officers, see Item 11. Executive CompensationEmployment Arrangements.
Equity Grants
We have granted options to certain of our directors and executive officers. For more information regarding the options granted to our directors
and named executive officers, see Item 11. Executive Compensation.
Indemnification Agreements
Our amended and restated certificate of incorporation contains provisions limiting the liability of directors, and our amended and restated
bylaws provides that we will indemnify each of our directors and officers to the fullest extent permitted under Delaware law. Our amended and restated certificate of incorporation and amended
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and restated bylaws also provide our board of directors with discretion to indemnify our employees and other agents when determined appropriate by the board.
In addition, we have entered into an indemnification agreement with each of our directors and executive officers, which requires us to
indemnify them. For more information regarding these agreements, see Item 11. Executive CompensationLimitations of Liability and Indemnification Matters.
Policies and Procedures for Related Person Transactions
Our board of directors adopted a related person transaction policy setting forth the policies and procedures for the identification, review and
approval or ratification of related person transactions. This policy covers, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or
relationship, or any series of similar transactions, arrangements or relationships, in which we and a related person were or will be participants and the amount involved exceeds $120,000, including purchases of goods or services by or from the
related person or entities in which the related person has a material interest, indebtedness and guarantees of indebtedness. In reviewing and approving any such transactions, our audit committee will consider all relevant facts and circumstances as
appropriate, such as the purpose of the transaction, the availability of other sources of comparable products or services, whether the transaction is on terms comparable to those that could be obtained in an arms length transaction,
managements recommendation with respect to the proposed related person transaction and the extent of the related persons interest in the transaction.
Director Independence
Please see
Item 10. Directors, Executive Officers and Corporate GovernanceDirector Independence and Committees of our Board of Directors for information regarding the independence of the board of directors and the
committees of the board of directors.
Item 14. Principal Accounting Fees and Services.
Audit and All Other Fees
The following table presents
fees for services rendered by PricewaterhouseCoopers LLP, our independent registered public accounting firm, for 2019 and 2020 in the following categories:
Years ended December 31,
2019
2020
Audit Fees (1)
$
310,000
$
1,300,000
Tax Fees
All Other Fees
$
310,000
$
1,300,000
(1)
Audit fees consist of fees professional services rendered for the annual audit, of our financial statements and
review of the interim financial statements and services normally provided in connection with documents filed with the SEC. For the year ended December 31, 2020, the audit fees included professional services rendered for Form S-1 related to our
initial public offering.
Pre-Approval Policies and Procedures
The audit committee is required to pre-approve the audit and
non-audit services performed by our independent registered public accounting firm in order to assure that the provision of such services does not impair the auditors independence. Any proposed services
exceeding pre-approved cost levels require specific pre-approval by the audit committee.
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The audit committee at least annually reviews and provides general pre-approval for the services that may be provided by the independent registered public accounting firm; the term of the general pre-approval is 12 months from the date
of approval, unless the audit committee specifically provides for a different period. If the audit committee has not provided general pre-approval, then the type of service requires specific pre-approval by the audit committee.
The audit committee may delegate
pre-approval authority to its chairman. The chairman must report any pre-approval decisions to the full audit committee at its next scheduled meeting. The annual audit
services, engagement terms, and fees are subject to the specific pre-approval of the audit committee. All services performed and related fees billed by PricewaterhouseCoopers LLP during 2020 and 2019 were pre-approved by the audit committee pursuant to regulations of the SEC.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a)(1) The financial statements required to be filed by Items 8 and 15(c) of this Annual Report on Form 10-K, and filed
herewith, are as follows:
Page
Report of Independent Registered Public Accounting Firm
F-2
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Convertible Preferred Stock and Stockholders
Deficit
F-5
Statements of Cash Flows
F-6
Notes to the Financial Statements
F-7
(a)(2) Financial statement schedules required to be filed by Item 8 of this form, and by paragraph (b) below have been
omitted as they are not applicable.
(a)(3) Exhibits
The following is a list of Exhibits filed, furnished or incorporated by reference as part of the Annual Report on Form 10-K:
Exhibit
Number
Description of Exhibit
Form
File No.
Exhibit
Filing Date
Filed
Herewith
3.1
Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect.
8-K
001-39988
3.1
2/9/2021
3.2
Amended and Restated Bylaws of the Registrant, as currently in effect.
S-1
333-252136
3.4
1/15/2021
4.1
Reference is made to Exhibits 3.1 and 3.2.
4.2
Form of common stock certificate of the Registrant.
S-1
333-252136
4.1
1/15/2021
4.3
Description of Securities.
X
10.1
Amended and Restated Investor Rights Agreement, dated June
26, 2020, by and among the Registrant and the investors listed on Schedule A thereto.
S-1
333-252136
10.1
1/15/2021
10.2+
2015 Equity Incentive Plan, as amended.
S-1/A
333-252136
10.2
2/1/2021
10.3+
Forms of Option Agreement, Stock Option Grant Notice and Notice of Exercise under the 2015 Equity Incentive Plan.
S-1
333-252136
10.3
1/15/2021
10.4+
2021 Equity Incentive Plan.
S-1/A
333-252136
10.4
2/1/2021
10.5+
Forms of Option Agreement, Stock Option Grant Notice and Notice of Exercise under the 2021 Equity Incentive Plan.
S-1/A
333-252136
10.5
2/1/2021
10.6+
Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the 2021 Equity Incentive Plan.
S-1/A
333-252136
10.6
2/1/2021
10.7+
2021 Employee Stock Purchase Plan,
S-1/A
333-252136
10.7
2/1/2021
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Table of Contents
Exhibit
Number
Description of Exhibit
Form
File No.
Exhibit
Filing Date
Filed
Herewith
10.8
Form of Indemnification Agreement, by and between the Registrant and each of its directors and executive officers.
S-1
333-252136
10.8
1/15/2021
10.9
Form of Warrant to Purchase Common Stock.
S-1
333-252136
10.9
1/15/2021
10.10+
Offer of Employment by and between the Registrant and Randall C. Schatzman, dated June 10, 2019.
S-1
333-252136
10.10
1/15/2021
10.11+
Offer Letter by and between the Registrant and William Quinn, dated April 14, 2020.
S-1
333-252136
10.11
1/15/2021
10.12+
Offer Letter by and between the Registrant and David Dornan, dated November 29, 2017.
S-1
333-252136
10.12
1/15/2021
10.13+
Offer Letter by and between the Registrant and Edith Perez, dated March 16, 2020.
S-1
333-252136
10.13
1/15/2021
10.14+
Offer Letter by and between the Registrant and Grant Yonehiro, dated October 26, 2016.
S-1
333-252136
10.14
1/15/2021
10.15+
Severance Agreement by and between the Registrant and Grant Yonehiro, dated January 26, 2017.
S-1
333-252136
10.15
1/15/2021
10.16
Lease Agreement by and between the Registrant and Metropolitan Life Insurance Company, dated August 31, 2017.
S-1
333-252136
10.16
1/15/2021
10.17
Sublease Agreement by and between the Registrant and Armo Biosciences, Inc., dated April 18, 2019.
S-1
333-252136
10.17
1/15/2021
10.18
Consent to Sublease Agreement by and between the Registrant, Armo Biosciences, Inc. and HCP LS Redwood City, LLC, dated June
14, 2019.
S-1
333-252136
10.18
1/15/2021
10.19
Britannia Seaport Centre Lease by and between the Registrant and HCP LS Redwood City, LLC, dated August 7, 2020
S-1
333-252136
10.19
1/15/2021
10.20
Exclusive (Equity) Agreement by and between the Registrant and The Board of Trustees of the Leland Stanford Junior University, dated May
18, 2015, as amended by Amendment No. 1 to Exclusive (Equity) Agreement by and between the Registrant and The Board of Trustees of the Leland Stanford Junior University, dated August 2, 2016, and Amendment
No. 2 to Exclusive (Equity) Agreement by and between the Registrant and The Board of Trustees of the Leland Stanford Junior University dated June 25, 2018.
S-1
333-252136
10.20
1/15/2021
155
Table of Contents
Exhibit
Number
Description of Exhibit
Form
File No.
Exhibit
Filing Date
Filed
Herewith
10.21
Exclusive Agreement by and between the Registrant and The Board of Trustees of the Leland Stanford Junior University, dated June 1,
2018.
S-1
333-252136
10.21
1/15/2021
10.22
Supply Agreement by and between the Registrant and EirGenix, Inc., dated March 10, 2019.
S-1
333-252136
10.22
1/15/2021
10.23
Master Services Agreement by and between the Registrant and Piramal Healthcare UK Ltd, dated June 26, 2018
S-1
333-252136
10.23
1/15/2021
10.24+
Severance and Change in Control Plan.
S-1
333-252136
10.24
1/15/2021
23.1
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.
X
24.1
Power of Attorney (see signature page to this Annual Report on Form 10-K).
X
31.1
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
31.2
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
X
32.1
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
+
Indicates a management contract or compensatory plan, contract or arrangement.
The certifications attached as Exhibit 32.1 and Exhibit 32.2 that accompany this Annual Report on Form 10-K, are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Bolt Biotherapeutics, Inc. under the Securities Act of 1933, as
amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such
filing.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 31, 2021
BOLT BIOTHERAPEUTICS, INC.
By:
/s/ Randall C. Schatzman, Ph.D.
Randall C. Schatzman, Ph.D.
Chief Executive
Officer
KNOW ALL PERSON S BY THESE PRESENTS , that each person whose signature appears below constitutes
and appoints Randall C. Schatzman, Ph.D. and William P. Quinn, and each of them, as his or her true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this report, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Randall C. Schatzman, Ph.D.
Randall C. Schatzman, Ph.D.
Chief Executive Officer and Director
(Principal Executive Officer)
March 31, 2021
/s/ William P. Quinn
William P. Quinn
Chief Financial Officer
(Principal Financial and Accounting Officer)
March 31, 2021
/s/ Peter Moldt, Ph.D.
Peter Moldt, Ph.D.
Chairman of the Board of Directors
March 31, 2021
/s/ Edgar G. Engleman, M.D.
Edgar G. Engleman, M.D.
Director
March 31, 2021
/s/ James I. Healy, M.D.
James I. Healy, M.D.
Director
March 31, 2021
/s/ Ashish Khanna, Ph.D.
Ashish Khanna, Ph.D.
Director
March 31, 2021
/s/ Kathleen LaPorte
Kathleen LaPorte
Director
March 31, 2021
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Table of Contents
Signature
Title
Date
/s/ Richard A. Miller, M.D.
Richard A. Miller, M.D.
Director
March 31, 2021
/s/ Mahendra G. Shah, Ph.D.
Mahendra G. Shah, Ph.D.
Director
March 31, 2021
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BOLT BIOTHERAPEUTICS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm
F-2
Balance Sheets
F-3
Statements of Operations and Comprehensive Loss
F-4
Statements of Convertible Preferred Stock and Stockholders Equity (Deficit)
F-5
Statements of Cash Flows
F-6
Notes to the Financial Statements
F-7
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Bolt Biotherapeutics, Inc.
Opinion on the Financial Statements
We have
audited the accompanying balance sheets of Bolt Biotherapeutics, Inc. (the Company) as of December 31, 2020 and 2019, and the related statements of operations and comprehensive loss, 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 financial statements). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of
America.
Basis for Opinion
These financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our audits. We are a public accounting firm registered with the Public Company
Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission
and the PCAOB.
We conducted our audits of these 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 financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 31,
2021
We have served as the Companys auditor since 2019.
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BOLT BIOTHERAPEUTICS, INC.
BALANCE SHEETS
(in thousands, except share and per share amounts)
December 31,
2020
2019
Assets
Current assets:
Cash and cash equivalents
$
5,542
$
34,826
Short-term investments
17,296
Prepaid and other current assets
2,523
1,074
Total current assets
25,361
35,900
Property and equipment, net
4,083
1,387
Operating lease
right-of-use asset
12,267
10,079
Finance lease
right-of-use asset
34
51
Restricted cash
1,565
584
Deferred offering costs
2,357
Other assets
875
446
Total assets
$
46,542
$
48,447
Liabilities, Convertible Preferred Stock and Stockholders Equity (Deficit)
Current liabilities:
Accounts payable
$
1,598
$
2,095
Accrued expenses and other current liabilities
6,663
2,866
Deferred revenue
1,502
599
Operating lease liabilities
1,501
3,096
Total current liabilities
11,264
8,656
Operating lease liabilities, net of current portion
9,376
7,089
Deferred revenue
972
Convertible preferred stock purchase right liability,
non-current
25,224
Other long-term liabilities
329
71
Total liabilities
46,193
16,788
Commitments and contingencies (Note 7)
Convertible preferred stock, $0.00001 par value, authorized shares20,843,367 shares and
11,934,449 shares authorized at December 31, 2020 and 2019, respectively; 15,232,275 shares and 10,070,102 shares issued and outstanding at December 31, 2020 and 2019, respectively; liquidation preference of $121,728 and $80,172 at
December 31, 2020 and 2019, respectively
105,296
77,505
Stockholders equity (deficit)
Common stock, $0.00001 par value; 198,000,000 shares and 126,000,000 shares authorized at
December 31, 2020 and 2019; respectively; 2,130,139 and 1,921,642 shares issued and outstanding at December 31, 2020 and 2019, respectively
Additional paid-in capital
3,452
1,825
Accumulated deficit
(108,399
)
(47,671
)
Total stockholders equity (deficit)
(104,947
)
(45,846
)
Total liabilities, convertible preferred stock and stockholders equity (deficit)
$
46,542
$
48,447
See accompanying notes to the financial statements.
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BOLT BIOTHERAPEUTICS, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
Years Ended December 31,
2020
2019
Collaboration revenue
$
231
$
215
Operating expenses:
Research and development
40,357
26,002
General and administrative
9,056
5,182
Total operating expenses
49,413
31,184
Loss from operations
(49,182
)
(30,969
)
Other income (expense), net:
Interest income
199
524
Change in fair value of convertible preferred stock purchase right liability
(11,745
)
(42
)
Total other income (expense), net
(11,546
)
482
Net loss and comprehensive loss
$
(60,728
)
$
(30,487
)
Net loss per share, basic and diluted
$
(28.89
)
$
(15.29
)
Weighted-average shares outstanding, basic and diluted
2,102,328
1,993,477
See accompanying notes to the financial statements.
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BOLT BIOTHERAPEUTICS, INC.
STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS EQUITY (DEFICIT)
(in thousands, except share amounts)
Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders
Equity
(Deficit)
Shares
Amount
Shares
Amount
Balance at December 31, 2018
4,368,156
$
28,367
1,911,349
$
$
1,241
$
(17,184
)
$
(15,943
)
Issuance of Series T convertible preferred stock for cash, net of issuance costs of $2
717,514
8,509
Issuance of Series B convertible preferred stock for cash and extinguishment of convertible
preferred stock purchase right liability of $543, net of issuance costs of $18
4,984,432
40,629
Issuance of common stock upon exercise of stock options
10,293
55
55
Vesting of early exercised options and restricted stock awards
21
21
Stock-based compensation
508
508
Net loss
(30,487
)
(30,487
)
Balance at December 31, 2019
10,070,102
77,505
1,921,642
1,825
(47,671
)
(45,846
)
Issuance of Series C-1 convertible preferred stock, net of
issuance costs of $285 and convertible preferred stock purchase right liability of $13,479
5,162,173
27,791
Issuance of common stock upon exercise of stock options
119,077
158
158
Issuance of common stock upon exercise of warrants
89,420
6
6
Vesting of early exercise options and restricted stock awards
43
43
Stock-based compensation
1,420
1,420
Net loss
(60,728
)
(60,728
)
Balance at December 31, 2020
15,232,275
$
105,296
2,130,139
$
$
3,452
$
(108,399
)
$
(104,947
)
See accompanying notes to the financial statements.
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BOLT BIOTHERAPEUTICS, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2020
2019
Cash flows from operating activities
Net loss
$
(60,728
)
$
(30,487
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
611
335
Stock-based compensation
1,420
508
Accretion of premium/discount on short-term investments
34
Change in fair value of convertible preferred stock purchase right liabilities
11,745
42
Non-cash lease expense
1,893
994
Changes in operating assets and liabilities:
Prepaid expenses and other assets
(1,878
)
(620
)
Accounts payable and accrued expenses
2,882
2,121
Operating lease liabilities
(3,389
)
(823
)
Deferred revenue
(69
)
1,571
Other long-term liabilities
171
16
Net cash used in operating activities
(47,308
)
(26,343
)
Cash flows from investing activities
Purchase of property and equipment
(3,262
)
(508
)
Purchases of short-term investments
(33,229
)
Maturities of short-term investments
15,899
Net cash used in investing activities
(20,592
)
(508
)
Cash flows from financing activities
Repayments of financing lease obligations
(40
)
Proceeds from issuance of convertible preferred stock, purchase rights and warrants, net of
issuance costs
41,270
48,595
Payments of deferred offering costs
(1,967
)
Proceeds from issuance of common stock and warrants
294
72
Net cash provided by financing activities
39,597
48,627
Net (decrease) increase in cash, cash equivalents and restricted cash
(28,303
)
21,776
Cash, cash equivalents and restricted cash at beginning of year
35,410
13,634
Cash, cash equivalents and restricted cash at end of year
$
7,107
$
35,410
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
$
5,542
$
34,826
Restricted cash
1,565
584
Total cash, cash equivalents and restricted cash
$
7,107
$
35,410
Supplemental schedule of non-cash investing and
financing activities
Issuance of convertible preferred stock upon extinguishment of convertible preferred stock
purchase liabilities
$
$
543
Vesting of early exercised options and restricted stock awards
$
49
$
21
Purchases of property and equipment included in accounts payable and accrued liabilities
$
28
$
161
Deferred offering costs included in accounts payable and accrued liabilities
$
390
$
See accompanying notes to the financial statements.
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BOLT BIOTHERAPEUTICS, INC.
NOTES TO FINANCIAL STATEMENTS
1. Description of the Business
Bolt
Biotherapeutics, Inc. (the Company) was incorporated in Delaware on January 22, 2015 under the name Bolt Therapeutics, Inc. and is headquartered in Redwood City, California. The Company changed its name to Bolt Biotherapeutics,
Inc. on July 29, 2015. The Company is a clinical-stage immuno-oncology company developing tumor-targeted therapies that leverage the innate and adaptive immune systems.
Basis of Presentation
The Companys financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S.
GAAP).
Reverse Stock Split
On January 26, 2021, the Company amended and restated its amended and restated certificate of incorporation to effect a 1-for-7 reverse stock split of the Companys common stock and convertible preferred stock. The par value and authorized shares of the common stock were not adjusted as a
result of the reverse stock split. All issued and outstanding common stock, options to purchase common stock, early exercised options and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the
reverse stock split for all periods presented.
Liquidity
The Company has incurred operating losses and negative cash flows from operations since its inception and had an accumulated deficit of
$108.4 million as of December 31, 2020. To date, none of the Companys product candidates have been approved for sale and therefore the Company has not generated any revenue from product sales. The Company expects operating
losses and negative cash flows from operations to continue for the foreseeable future. Based on the Companys current business plan, management believes that existing cash and cash equivalents, in addition to the net proceeds of
$51.9 million received from the sale of 5,611,059 shares of C-2 convertible preferred stock in January 2021 and net proceeds of $241.7 million from its initial public offering (IPO) which closed in
February 2021 (see Note 14) will be sufficient to fund the Companys obligations for at least 12 months after these financial statements are issued.
The Company will be required to raise additional capital, however, there can be no assurance as to whether additional financing will be
available on terms acceptable to the Company, if at all. If sufficient funds on acceptable terms are not available when needed, it would have a negative impact on the Companys financial condition and could force the Company to delay,
limit, reduce, or terminate product development or future commercialization efforts or grant rights to develop and market product candidates that the Company would otherwise plan to develop and market itself.
Other Risks and Uncertainties
The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, changes in
any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations: risks related to the successful discovery and development of its product candidates, ability to
raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain chemical or biological intermediates from such suppliers required for the synthesis of the Companys product candidates,
including due to the impact of the current COVID-19 pandemic, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights, and
regulatory clearance and market acceptance of the Companys products.
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The current COVID-19 pandemic, which is
impacting worldwide economic activity, poses the risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns
that may be requested or mandated by governmental authorities. The extent to which the COVID-19 pandemic will impact the Companys business will depend on future developments that are highly
uncertain and cannot be predicted at this time.
The Company relies on single source manufacturers and suppliers for the supply of its
product candidates. Disruption from these manufacturers or suppliers would have a negative impact on the Companys business, financial position and results of operations.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, the Company evaluates its
estimates and assumptions, including those related to revenue recognition, the valuation of common stock, stock-based compensation and convertible preferred stock purchase right liabilities. Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ materially from those estimates.
Deferred Offering Costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly related to the
Companys in-process equity financings, including the IPO, until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction of the
proceeds received as a result of the offering. Should a planned equity financing be abandoned, terminated or significantly delayed, the deferred offering costs are immediately written off to operating expenses. There were no deferred offering costs
capitalized as of December 31, 2019. At December 31, 2020, deferred offering costs totaling $2.4 million are included as non-current assets in the accompanying balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and short-term
investments. At December 31, 2020 and 2019, most of the Companys funds are invested with a registered investment manager and custodied at one financial institution, with working capital kept at a separate financial institution, and
account balances may at times exceed federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial strength of the depository institutions where the funds are held.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of
December 31, 2020 and 2019, cash and cash equivalents consisted primarily of bank deposits and money market funds which were unrestricted as to withdrawal or use.
Short-Term Investments
The Company classifies its short-term investments as
available-for-sale and records such assets at estimated fair value in the balance sheets, with unrealized gains and losses that are determined to be temporary, if any,
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reported as a component of other comprehensive income (loss) within the statements of operations and comprehensive loss and as a separate component of stockholders equity. Investments are
regularly reviewed for other-than-temporary declines in fair value. The review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of investments in an unrealized loss
position, the severity and duration of the unrealized losses, and whether it is more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis. A decline in the fair value of any
security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. The Company classifies short-term investments with remaining maturities greater than one year, if
any, as current assets because such marketable securities are available to fund the Companys current operations. The Company invests its excess cash balances primarily in corporate debt securities with strong credit ratings. Realized gains and
losses are calculated on the specific identification method and recorded as interest income and were immaterial for all periods presented.
Restricted Cash
As of December 31, 2020 and 2019, the Company had $1.6 million and $0.6 million, respectively, of long-term restricted cash
deposited with a financial institution. The restricted cash is held in separate bank accounts to support letter of credit agreements related to the Companys facility leases which expire in 2025 and 2031 (see Note 7).
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and amortization begin at the time
the asset is placed in service. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets of five years. Leasehold improvements are amortized over the shorter of the lease term or the
estimated useful lives of the assets. Maintenance and repairs are expensed as incurred. Upon sale or retirement of assets, the cost and accumulated depreciation and amortization are removed from the balance sheet and any resulting gain or loss is
reflected in the statement of operations and comprehensive loss in the period realized.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, primarily comprised of property and equipment, for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the estimated undiscounted future cash flows, which the assets or asset groups are expected to
generate. If such assets are considered to be impaired, the impairment to be recognized at the amount by which the carrying amount of the assets or asset groups exceeds the estimated fair value of the assets or asset groups. There have been no such
impairments of long-lived assets during the periods presented.
Convertible Preferred Stock Purchase Right Liability
The Company determined the right of the investors to purchase shares of Series B and Series C-2
convertible preferred stock at a future date met the definition of a freestanding instrument and was recognized as a liability at fair value upon the initial issuance of Series B convertible preferred stock in July 2018 and Series C-1 convertible preferred stock in June 2020. The liabilities are subject to remeasurement at each balance sheet date, with changes in fair value recognized in other income (expense), net in the statement of
operations and comprehensive loss. Upon the closing of the convertible preferred stock, the associated liabilities are extinguished and the marked-to-market fair value
of the liability is included in the carrying value of the convertible preferred stock issued. In January 2021, the Company issued the additional shares of Series C-2 convertible preferred stock and
accordingly, this contractual obligation was settled and the preferred stock purchase right liability was remeasured to fair value and reclassified to permanent equity (see Note 14).
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Convertible Preferred Stock
The Company records convertible preferred stock at fair value on the dates of issuance, net of issuance costs. The convertible preferred stock
is recorded outside of stockholders deficit because the shares contain liquidation features that are not solely within the Companys control. The Company has elected not to adjust the carrying values of the convertible preferred stock to
the liquidation preferences of such shares because it is uncertain whether or when an event would occur that would obligate the Company to pay the liquidation preferences to holders of shares of convertible preferred stock. Subsequent adjustments to
the carrying values to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur. In February 2021, in connection with the Companys IPO, all outstanding shares of convertible preferred
stock were converted into shares of the Companys common stock (see Note 14).
Common Stock Purchase Warrants
The Company classifies common stock purchase warrants and other freestanding derivative financial instruments as equity in accordance with
ASC 480. Warrants that meet the definition are classified as a component of equity and no subsequent remeasurement is required.
Revenue Recognition
To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the following steps are
performed: (i) identification of a contract to provide goods or services to a customer; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the
contract; (iii) measurement of the transaction price, including the constraint on variable consideration, if any; (iv) where a contract contains multiple performance obligations, the Company must allocate the transaction price to the
performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) each performance obligation is satisfied.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled
to in exchange for the goods or services it transfers to the customer.
At contract inception, once the contract is determined to be
within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes
as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
As part of the accounting for these arrangements, the Company develops assumptions that require judgment to determine the stand-alone selling
price for each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include development timelines, reimbursement rates for personnel costs, discount rates, and
probabilities of technical and regulatory success. The Company evaluates each performance obligation and determines if it is satisfied over time. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore,
excluded from the transaction price.
If the license to the Companys intellectual property is determined to be distinct from the
other performance obligations identified in the arrangement, the Company recognizes revenues allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are
bundled with other promised goods or services, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if
over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary,
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adjusts the measure of performance and related revenue recognition. Any change made to estimated progress towards completion of a performance obligation due to changes in the estimated activities
required to complete the performance obligation and, therefore, revenue recognized will be recorded as a change in estimate.
The Company
receives payments from its collaborators based on billing schedules established in each contract. Upfront payments and other payments may require deferral of revenue recognition to a future period until the Company performs its obligation under its
collaboration arrangements. Amounts are recorded as accounts receivable when the Companys right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at
contract inception is such that the payment by the customer is akin to a deposit for research and development services.
To date, all of
the Companys revenue has been derived from its development agreement with Toray Industries, Inc. (Toray) as described in Note 6.
Research and Development Expenses
Research and development costs are charged to expense as incurred. Research and development expenses include certain payroll and personnel
expenses, laboratory supplies, consulting costs, external contract research and development expenses, and allocated overhead, including rent, equipment depreciation and utilities. Advance payments for goods or services for future research and
development activities are deferred and expensed as the goods are delivered or the related services are performed.
The Company estimates
preclinical studies and clinical trial expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and trials on the Companys behalf.
In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the third-party service providers and the
Companys estimates of accrued expenses and on information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual
accordingly.
Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The carrying amounts of the
Companys financial instruments, including cash, accounts payable, accrued expenses and other current liabilities approximate fair value due to their short-term maturities. Refer to Note 3 for the methodologies and assumptions used in
valuing financial instruments.
Stock-Based Compensation Expense
The Company accounts for stock-based compensation by measuring and recognizing compensation expense for all share-based payments made to
employees and non-employees based on estimated grant-date fair values. For stock-based payments with service conditions only, the Company uses the straight-line method to allocate compensation cost to
reporting periods over each awards requisite service period, which is generally the vesting period. For stock-based payments with both performance and service conditions, the Company recognizes expense based on the fair value of the
Performance Awards over the estimated service period (under the graded vesting method) to the extent the achievement of the related performance criteria is estimated to be probable. The Company estimates the fair value of stock options using the
Black-Scholes option-pricing model. The Black-Scholes model requires the input of subjective assumptions, including expected volatility, expected dividend yield, expected term, risk-free interest rate, and the estimated fair value of the underlying
common stock on the date of grant. The Company accounts for forfeitures as they occur.
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The fair value of restricted stock awards is valued as of the grant date using the estimated
fair value of the Companys common stock.
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Changes
in deferred tax assets and liabilities are recorded in the provision for income taxes.
Realization of deferred tax assets is dependent
upon future earnings, the timing and amount of which are uncertain. A valuation allowance is provided against deferred tax assets unless it is more likely than not that they will be realized.
The Company utilizes a two-step approach to recognize and measure uncertain tax positions. The first
step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related
appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Companys policy is to recognize interest and penalties
related to the underpayment of income taxes as a component of income tax expense or benefit. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the
period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For
purposes of the diluted net loss per share calculation, convertible preferred stock, stock options, common stock subject to repurchase related to unvested restricted stock awards and early exercise of stock options are considered to be potentially
dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a
participating security because it participates in dividends with common stock. The Company also considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of all series of convertible preferred stock and the holders of early exercised shares subject to
repurchase do not have a contractual obligation to share in the Companys losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per
share is the same as basic net loss per share for all periods presented as potentially dilutive securities were anti-dilutive.
Comprehensive Loss
Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources,
including unrealized gains and losses on short-term investments. During the year ended December 31, 2020, the items qualifying as other comprehensive loss was immaterial, and, therefore, the Companys comprehensive loss was the same as its
reported net loss for these periods. During the year ended December 31, 2019, there were no items qualifying as other comprehensive loss and, therefore, the Companys comprehensive loss was the same as its reported net loss for these
periods.
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Segment Reporting
The Company has one operating segment. Operating segments are identified as components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.
Recent Accounting Standards
From time to time, new accounting standards are issued by the Financial Accounting Standards Board (the FASB), or other standard
setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Companys financial position or
results of operations upon adoption.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, Disclosure FrameworkChanges
to the Disclosure Requirements for Fair Value Measurement . The primary focus of the standard is to improve the effectiveness of the disclosure requirements for fair value measurements. The standard is effective for fiscal years and interim
periods beginning after December 15, 2019. The Company adopted the standard on January 1, 2020 and the adoption did not have a material impact on the financial statements and related disclosures.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to
simplify various aspects related to accounting for income taxes. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021. ASU 2019-12 is effective for the Company
beginning January 1, 2022. Early adoption is permitted. The Company has early adopted the standard during the year ended December 31, 2020 and the adoption did not have a material impact on the financial statements and related disclosures.
3. Fair Value Measurements and Fair Value of Financial Instruments
The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements
as follows:
Level 1 Quoted prices in active markets for identical assets or
liabilities.
Level 2 Observable inputs other than Level 1 prices, such as quoted
prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their
entirety based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make
judgments and consider factors specific to the asset or liability.
During the year ended December 31, 2020, financial assets
measured on a recurring basis consist of cash invested in money market accounts and short-term investments. The fair value of short-term investments is based upon market prices quoted on the last day of the fiscal period or other observable market
inputs. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, bids and/or offers.
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Financial liabilities measured at fair value on a recurring basis include the convertible preferred stock purchase rights liabilities described below.
During the year ended December 31, 2019, the Companys financial instruments consist of Level 1 assets and Level 3 liabilities. Level 1
assets that are measured at fair value on a recurring basis consist of cash invested in money market accounts totaling $34.4 million at December 31, 2019.
There were no transfers within the hierarchy during the years ended December 31, 2020 and 2019.
Short-term investments, all of which are classified as
available-for-sale securities, consisted of the following at December 31, 2020 (in thousands):
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Market
Value
Asset backed securities
$
2,639
$
$
$
2,639
U.S treasury securities
1,300
1,300
Commercial paper
6,795
6,795
Corporate debt securities
6,562
1
(1
)
6,562
$
17,296
$
1
$
(1
)
$
17,296
All short-term investments held at December 31, 2020 had maturity dates of less than 12 months.
At December 31, 2020, the fair values of the Companys assets and liabilities, which are measured at fair value on a recurring
basis, were determined using the following inputs (in thousands):
Fair Value Measurements at Reporting Date Using
Total
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Assets:
Money market funds, included in cash and cash equivalents and restricted cash
$
3,921
$
3,921
$
$
U.S. treasury securities, included in short-term investments
1,300
1,300
Asset backed securities, included in short-term investments
2,640
2,640
Commercial paper, included in short-term investments
6,795
6,795
Corporate debt securities, included in short-term investments
6,561
6,561
$
Total
$
21,217
$
5,221
$
15,996
$
Liabilities:
Preferred stock purchase rights liability
$
25,224
$
$
$
25,224
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Level 3 liabilities that are measured at fair value on a recurring basis consist of the
convertible preferred stock purchase right liabilities. The following table provides a summary of changes in the estimated fair value of the financial instruments using significant Level 3 inputs (in thousands):
Series B
Convertible
Preferred Stock
Purchase Right
Liability
Series C
Convertible
Preferred Stock
Purchase Right
Liability
Total
Convertible
Preferred Stock
Purchase Right
Liabilities
Balance at December 31, 2018
$
501
$
$
501
Change in fair value
42
42
Extinguishment of Series B convertible preferred stock purchase right liability
(543
)
(543
)
Balance at December 31, 2019
Fair value of purchase right liability recognized in connection with the issuance of Series C
convertible preferred stock
13,479
13,479
Change in fair value
11,745
11,745
Balance at December 31, 2020
$
$
25,224
$
25,224
The fair value of the convertible preferred stock purchase right liabilities is estimated using an
income-based approach incorporating probability considerations for different scenarios. The main assumptions include the probability and timing of the tranche closing. The estimated probability and timing related to the second closing of Series B
convertible preferred stock was 95% and 0.25 years as of December 31, 2018. In July 2019, the Company issued the second tranche of the Series B convertible preferred stock and the Series B convertible preferred stock purchase right
liability was extinguished. The estimated probability and timing related to the second closing of Series C convertible preferred stock was 35% and 0.68 years at the June 26, 2020 issuance date. At December 31, 2020, the fair value of
the convertible preferred stock purchase right liability increased to $25.2 million as a result of the estimated probability of the occurrence of the second closing of Series C convertible preferred stock increasing to 70%, timing related to
the occurrence of the second closing decreasing to 0.10 years and the increase in the future expected value of the Series C preferred shares to $2.25 per share. In January 2021, the Company issued the additional shares of Series C-2 convertible
preferred stock and accordingly, this contractual obligation was settled and the preferred stock purchase right liability was remeasured to fair value and reclassified to permanent equity (see Note 14).
4. License and Equity Agreement
License and Equity Agreement with Related Party
In May 2015, the Company entered into an exclusive Equity and License Agreement (the 2015 Stanford Agreement), as amended, with The
Board of Trustees of the Leland Stanford Junior University (Stanford). The 2015 Stanford Agreement provides the Company exclusive licenses to certain inventions in order to further develop and commercialize the resulting products. As
consideration, the Company issued Stanford shares of its common stock in September 2016. Dr. Engleman, a founder and member of the board of directors of the Company, who is a professor at Stanford, was issued shares of common stock as part of
the transaction in September 2016. Additionally, the Company is obligated to pay Stanford annual license and milestone fees and royalties once commercial sales of the licensed products commence.
In November 2016 and June 2018, the Company entered into an agreement with Stanford for the exclusive license of two additional product
candidates in order to develop and commercialize the products (together with the 2015 Stanford Agreement, the Stanford Agreements).
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During the years ended December 31, 2020 and 2019, the Company paid Stanford $50,000
and $40,000, respectively, in license and milestone fees under each of the Stanford Agreements, respectively. In addition, the Company paid Stanford $0.1 million and $0.2 million during the years ended December 31, 2020 and 2019,
respectively, for reimbursement of patent maintenance costs which is included as part of general and administration expense.
The Company
is required in each of the Stanford Agreements to make milestone payments up to an aggregate of $0.4 million for the first licensed product that meets certain patent issuance, clinical and regulatory milestones, and an additional milestone
payment of $0.2 million for each additional regulatory approval. The Company also agreed in each of the Stanford Agreements to pay Stanford tiered royalties on its and its sublicensees net sales of licensed products, at a low single digit
percentage rates, subject to certain reductions. Dr. Engleman is entitled to receive a share of any royalties that the Company pays to Stanford under each of the Stanford Agreements with respect to the covered intellectual property. No
royalty payments have been made to date.
5. Balance Sheet Components
Property and Equipment, net
Property and equipment, net, consist of the following (in thousands):
December 31,
2020
2019
Laboratory equipment
$
5,253
$
2,004
Office equipment
69
28
5,322
2,032
Less accumulated depreciation and amortization
(1,239
)
(645
)
Total
$
4,083
$
1,387
Depreciation expense related to property and equipment was $0.6 million and $0.3 million for the
years ended December 31, 2020 and 2019, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
December 31,
2020
2019
Accrued research and development
$
3,199
$
1,031
Accrued compensation
2,885
1,452
Accrued other
579
383
Total
$
6,663
$
2,866
6. Collaborations
Joint Development and License Agreement with Toray Industries, Inc.
In March 2019, the Company entered into a Joint Development and License Agreement (the Toray Development Agreement) with Toray to
jointly develop and commercialize a Boltbody ISAC containing Torays proprietary antibody to treat cancer. The Company determined that the Toray Development Agreement is a contract with a customer and should be accounted for under ASC 606. In
conjunction with the Toray Development Agreement, the Company entered into a Series T Convertible Preferred Stock Purchase Agreement
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(the Series T Agreement) for the issuance of 717,514 shares of Series T convertible preferred stock to Toray (see Note 8). These contracts have been evaluated together and the
consideration in excess of the fair value of the Series T convertible preferred stock of $1.5 million has been allocated to the Toray Development agreement and included in the total consideration for collaboration revenue. In the Toray
Development Agreement, the Company has identified one performance obligation which includes the license rights, research and development services, and services associated with participation on a joint steering committee. The Toray Development
Agreement includes optional additional items which will be accounted for as contract modifications when development advances past certain milestones and the parties both exercise their opt-in rights. Under the
Toray Development Agreement, no material right was determined to exist. Although the legal term of the agreement is until collaboration products are no longer sold in the Territory, the parties have present enforceable rights and obligations through
the end of the first Phase I clinical trial, after which both parties can opt out of continued development under the agreement. As such, the accounting term of the Toray Development Agreement was considered to terminate upon completion of the first
Phase I clinical trial.
The Toray Development Agreement contains one performance obligation so the full transaction price is
allocated to the single bundled performance obligation. The Toray Development Agreement includes both fixed and variable consideration. Under the Toray Development Agreement, the Company will receive full reimbursement for early stage development
and manufacturing activities based on agreed full-time equivalent rates and actual out of pocket costs incurred through the completion of the first Phase I clinical trial for the lead product candidate. After the completion of the Phase I
clinical trial, either party may exercise step-down or opt-out rights which allow for either party to decrease or eliminate their financial participation in later stage development activities. If the jointly
developed intellectual property or products are monetized, in any case, the Companys share of any revenue will initially go to Toray until 50% of the early stage development costs are repaid. Unless earlier terminated by either party, the
Toray Development Agreement will continue until collaboration products are no longer sold in the Territory, but the royalty obligations will terminate on a region by region basis until the expiration of the last valid claim under the patent rights
of the party receiving a royalty or under the collaboration product specific patent rights, whichever is longer.
The Company has one
bundled performance obligation under the Toray Development Agreement comprised of a development license and funded research and development services. The Company determined that the development license is not capable of being distinct due to the
specialized nature of the research services to be provided by the Company, and, accordingly, this promise was combined with the research and development services and participation in the joint research committee as one single performance obligation.
Collaboration revenue is recognized over time proportionate to the costs that the Company has incurred to perform the services using an input method as a measure of progress towards satisfying the performance obligation, which is based on project
hours. Using the hours-based input method, which the Company determined most faithfully measures the fulfillment of its performance obligation to Toray, the Company recognizes revenue based on actual FTE hours incurred as a percentage of total
estimated FTE hours as the Company completes its performance obligation. Amounts are billed based on estimated variable consideration in the quarter ahead of performance and are trued up on the subsequent quarters invoice following the work
performed. Payments are typically due within 45 days. The cumulative effect of revisions to estimated hours to complete the Companys performance obligation will be recorded in the period in which changes are identified and amounts can be
reasonably estimated. Deferred revenue allocated to the unsatisfied performance obligation is recorded as a contract liability on the balance sheet and will be recognized over time as the services are performed, which is expected to take place
through 2022.
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The following table presents changes in the Companys contract liability (in
thousands).
Balance at December 31, 2018
$
Additionupfront payment
1,489
Additionvariable consideration
297
Revenue recognized
(215
)
Balance at December 31, 2019
1,571
Additionvariable consideration
162
Revenue recognized
(231
)
Balance at December 31, 2020
$
1,502
As of December 31, 2020 and 2019, amounts receivable under the Toray Development Agreement totaled
$12,000 and $0.3 million, respectively, and were recorded in Prepaid expenses and other current assets on the balance sheet.
7. Commitments
and Contingencies
Leases
2017 and 2019 Leases
The
Company determines whether an arrangement is a lease at inception. Specifically, it considers whether it controls the underlying asset and has the right to obtain substantially all the economic benefits or outputs from the asset. If the contractual
arrangement contains a lease, the Company then determines the classification of the lease, operating or finance, using the classification criteria described in ASU 2016-02. The Company has elected not to
separate lease components from non-lease components, such as common area maintenance charges, and instead accounts for the lease and non-lease components as a single
component.
On October 31, 2017, the Company executed a non-cancelable operating lease
agreement for 9,400 square feet of office and laboratory space for its former headquarters facility in Redwood City, California, which began in November 2017 and expires in January 2023 (the 2017 Lease). At December 31, 2020,
minimum rental commitments under this lease are approximately $0.5 million for each of the years ended December 31, 2021 and 2022. The Company has accounted for the lease as an operating lease.
On July 15, 2019, the Company executed a non-cancellable lease agreement for 25,956 square feet
of office and laboratory space for its new headquarters facility in Redwood City, California, which began in July 2019 and expires in July 2025 (the 2019 Lease). At December 31, 2020, minimum rental commitments under this lease are
approximately $1.4 million, $1.5 million, $1.6 million, $1.6 million and $1.0 million during the years ended December 31, 2021, 2022, 2023, 2024, and thereafter, respectively. The Company accounted for the lease as an
operating lease.
2020 Lease
On August 7, 2020, the Company executed a non-cancellable lease agreement for 71,646 square feet
of space in Redwood City, California (the Chesapeake Master Lease). The Chesapeake Master Lease consists of 45,690 square feet of additional office, laboratory and vivarium space and includes an extension of the 25,956 square feet under
the 2019 Lease. The Chesapeake Master Lease has an initial term of ten years, following the Commencement Date with an option to extend the lease for an eight-year term. The Chesapeake Master Lease contains rent escalation and the Company is also
responsible for certain operating expenses and taxes throughout the lease term. In addition, the Company is entitled to up to $4.8 million of tenant improvement allowance, which the Company has not received as of December 31, 2020.
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Upon execution of the non-cancellable lease
agreement, the Company took control of 10,000 square feet of space. The Company expects the remaining 35,690 square feet of additional office, laboratory, and vivarium space to commence in the second quarter of 2021 and the extension of the 25,956
square feet under the 2019 Lease to commence in 2025.
As of December 31, 2020, the operating lease right-of-use assets and operating lease liabilities were $3.6 million and $3.8 million, respectively, which represents the portion of the Chesapeake Master Lease that was controlled by the Company.
As the Company had not taken control of the remaining space and the lease term had not yet commenced, no operating lease right-of-use assets or operating lease
liabilities for the remaining space has been recorded.
In connection with the execution of the Chesapeake Master Lease, the Company
entered into two operating lease agreements to sublease portions of the premises to two unrelated third parties. The first sublease agreement is to sublease 10,000 square feet which commenced on August 7, 2020 and expires on July 31, 2022.
Rent is subject to scheduled annual increases and the subtenant (Subtenant A) is responsible for certain operating expenses and taxes throughout the term under the first sublease agreement. Subtenant A has no option to extend the
sublease term. Sublease income under the first sublease agreement for the year ended December 31, 2020, was approximately $0.2 million.
The second sublease agreement is to sublease 10,500 square feet, is expected to commence in the second quarter of 2021 and will expire 36
months thereafter. Rent is subject to scheduled annual increases and the subtenant (Subtenant B) is responsible for certain operating expenses and taxes throughout the term under the second sublease agreement. Subtenant B has no option
to extend the sublease term. No sublease income under the second sublease agreement was recognized for the year ended December 31, 2020 as the lease term had not yet commenced.
Deposits in the amount of approximately $0.2 million are held by the lessor in connection with the Companys 2017 Lease agreement as
of December 31, 2020. Cash required as security for the 2019 Lease is secured by a letter of credit on behalf of the lessor in the amount of approximately $0.6 million and is recorded as restricted cash on the balance sheet as of
December 31, 2020 and 2019. Cash required as security for the 2020 Lease is secured by a letter of credit on behalf of the lessor in the amount of approximately $1.0 million and is recorded as restricted cash on the balance sheet as of
December 31, 2020.
At December 31, 2020 and 2019, finance
right-of-use leases are used to finance capital equipment such as printers or ozone generators.
The weighted-average remaining lease term and discount rate related to the Companys lease liabilities as of December 31, 2020 were
6.3 years and 9.5%, respectively, for the operating leases. The weighted-average remaining lease term and discount rate related to the Companys lease liabilities as of December 31, 2019 were 5.2 years and 6.7%, respectively, for the
operating leases. The Company lease discount rates are based on estimates of its incremental borrowing rate, as the discount rates implicit in the Companys leases cannot be readily determined. As the Company does not have any outstanding
debt, the Company estimates the incremental borrowing rate based on its estimated credit rating and available market information.
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The components of lease expense were as follows (in thousands):
Years Ended
December 31,
2020
2019
Total operating lease cost
$
2,508
$
1,367
Finance lease cost:
Amortization of
right-of-use assets
$
17
$
17
Interest on lease liabilities
1
Total finance lease cost
$
17
$
18
Supplemental cash flow information related to leases was as follows (in thousands):
Years Ended
December 31,
2020
2019
Operating cash flows from operating leases
$
4,144
$
1,196
Operating cash flows from finance leases
$
$
1
Financing cash flows from finance leases
$
$
40
The following is a schedule by year for future maturities of the Companys operating lease liabilities
and sublease income to be received as of December 31, 2020 (in thousands):
Operating
Lease
Sublease
income
2021
$
2,299
$
459
2022
2,701
362
2023
2,239
2024
2,317
2025
1,685
Thereafter
4,254
Total minimum lease payments/sublease income
15,495
$
821
Less: imputed interest
(4,618
)
Total future minimum lease payments
10,877
Less: current obligations under leases
(1,501
)
Noncurrent lease obligations
$
9,376
Supply Agreement
The Company has entered into a supply agreement with a contract manufacturer pursuant to which the Company may be required to pay milestone
payments upon the achievement of specified regulatory milestones. The agreement is cancelable by the Company upon delivering the appropriate prior written notice. At December 31, 2020, potential future milestone payments under this agreement
were up to $2.0 million.
Guarantees and Indemnifications
In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general
indemnification. The Companys exposure under these agreements is
F-20
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unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its
indemnification obligations. As of December 31, 2020, the Company does not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.
Legal Proceedings
The Company is subject to claims and assessments from time to time in the ordinary course of business but is not aware of any such matters,
individually or in the aggregate, that will have a material adverse effect on the Companys financial position, results of operations or cash flows.
8. Convertible Preferred Stock
Amended and Restated Certificate of Incorporation
In March 2019, the Company amended and restated its certificate of incorporation and increased the total authorized convertible preferred
shares to 11,934,450, which included the designation of 717,514 shares of Series T convertible preferred stock with a par value of $0.00001.
In June 2020, the Company amended its certificate of incorporation to increase the number of authorized shares of convertible preferred stock
to a total of 20,843,367 shares. Further, the amendment decreased the number of authorized shares of Series B convertible preferred stock to 6,645,916 and created two new series of convertible preferred stock, par value $0.00001, designated Series C-1 and C-2, with total authorized shares of 5,162,180 and 5,611,065, respectively.
Issuance of Series B Convertible Preferred Stock
In July 2018, the Company entered into a convertible preferred stock purchase agreement (the Series B Agreement) with existing and
new investors to raise up to $68.5 million in two separate tranches. The first tranche closed in July 2018 and the Company raised $13.1 million, net of issuance costs of $0.2 million, and allocated value for the common stock warrants
of $0.8 million issued in conjunction with the financing. The investors agreed to buy, and the Company agreed to sell, additional shares of such convertible preferred stock at the original issue price upon the achievement of pre-defined milestones. The Company issued 1,661,474 shares of Series B convertible preferred stock at $8.0458 per share and 249,218 common stock warrants.
The commitment is considered a separate freestanding financial instrument and was recorded as a Convertible Preferred Stock Purchase Right
Liability in the amount of $0.5 million upon the issuance of the first tranche of the Series B convertible preferred stock in July 2018. The commitment was accounted for at fair value during the period it was outstanding with changes in fair
value at these reporting dates recorded as other income (expense) in the statement of operations and comprehensive loss.
On July 1,
2019, the Company issued 4,984,432 shares of Series B convertible preferred stock at $8.0458 per share for proceeds of $40.1 million, net of issuance costs, $17.7 million of which was received in June 2019. Simultaneously with the
issuance of the second tranche of the Series B convertible preferred stock in July 2019, the Series B Convertible Preferred Stock Purchase Right Liability was extinguished.
Issuance of Series T Convertible Preferred Stock
On March 20, 2019, the Company entered into a convertible preferred stock purchase agreement (the Series T Agreement)
concurrent with the Toray Development Agreement with a new investor (see Note 6). The Company raised a total of $10.0 million, net of issuance costs, from the sale of shares of Series T convertible preferred stock, including
consideration allocated to the Toray Development Agreement. The fair value of the shares of Series T convertible preferred stock at the issuance date was $8.5 million, net of issuance costs.
F-21
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Issuance of Series C-1 Convertible Preferred
Stock
In June 2020, the Company entered into a preferred stock purchase agreement (the Series C Agreement) with
existing and new investors to raise up to $93.5 million in two separate tranches. The first tranche closed in June 2020 and the Company raised $41.3 million, net of issuance costs of $0.2 million, and issued 5,162,173 shares of Series C-1 convertible preferred stock at $8.05 per share. In addition, the investors agreed to buy and the Company agreed to sell up to 5,611,065 shares of
Series C-2 convertible preferred stock at a price per share of $9.2575, for potential additional gross proceeds of $51.9 million, upon the achievement of certain milestones as defined in the
agreement. In the event that an investor that participated in the June 2020 Series C Closing fails to purchase all of their required shares in the subsequent Series C-2 closing, each of the Series C-1 convertible preferred shares held by such purchaser shall automatically convert into one share of common stock.
The commitment made by the investors to invest in the second tranche of the Series C Agreement is considered a separate freestanding financial
instrument and was recorded as a Convertible Preferred Stock Purchase Right Liability in the amount of $13.5 million upon the issuance of the first tranche of the Series C-1 convertible preferred stock in
June 2020. The commitment was accounted for at fair value during the period it was outstanding with changes in fair value recorded as other income (expense) in the statement of operations and comprehensive loss. Since issuance and as of
December 31, 2020, changes in fair value of this liability totaling $11.7 million have been recorded in other income (expense) in the statement of operations and comprehensive loss. In January 2021, the Company issued the additional shares
of Series C-2 convertible preferred stock and accordingly, this contractual obligation was settled and the preferred stock purchase right liability was remeasured to fair value and reclassified to permanent equity (see Note 14).
As of December 31, 2020, convertible preferred stock consisted of (in thousands, except share and per share numbers):
Shared
Authorized
Shares
Issued and
Outstanding
Per Share
Original
Issuance
Price
Liquidation
Preference
Carrying
Value
Series Seed
270,416
270,411
$
2.5886
$
700
$
685
Series A-1
2,436,276
2,436,271
6,5674
16,000
15,807
Series B
6,645,916
6,645,906
8.0458
53,472
52,504
Series C-1
5,162,180
5,162,173
8.0500
41,556
27,791
Series C-2
5,611,065
9.2575
Series T
717,514
717,514
13.9370
10,000
8,509
Total
20,843,367
15,232,275
$
121,728
$
105,296
As of December 31, 2019, convertible preferred stock consisted of (in thousands, except share and per
share numbers):
Shared
Authorized
Shares
Issued and
Outstanding
Per Share
Original
Issuance
Price
Liquidation
Preference
Carrying
Value
Series Seed
270,416
270,411
$
2.5886
$
700
$
685
Series A-1
2,436,276
2,436,271
6,5674
16,000
15,807
Series B
8,510,243
6,645,906
8.0458
53,472
52,504
Series T
717,514
717,514
13.9370
10,000
8,509
Total
11,934,449
10,070,102
$
80,172
$
77,505
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The rights, preferences and privileges of the convertible preferred stock were as follows:
Voting Rights
The holders of the Companys convertible preferred stock are entitled to that number of votes on all matters presented to stockholders
equal to the number of shares of common stock then issuable upon conversion of such convertible preferred stock.
Dividends
Dividends on convertible preferred stock are payable in preference to and prior to any payments of any dividends on common stock. The holders
of the Companys convertible preferred stock are entitled to receive, when, as and if declared by the board of directors, noncumulative dividends of $8.05, $9.2575, $1.11496, $0.64365, $0.52539, and $0.20706 per share (as adjusted for any stock
dividends, stock splits, combinations or other similar recapitalizations with respect to such series of the Companys convertible preferred stock) for Series C-1 convertible preferred stock, Series C-2 convertible preferred stock, Series T convertible preferred stock, Series B convertible preferred stock, Series A-1 convertible preferred stock
and Series Seed convertible preferred stock, respectively, and any dividends declared and paid to common stockholders on a pro rata basis based on the number of as converted shares. No dividends have been declared as of December 31, 2020.
Conversion
Preferred stock is convertible, at the option of the holder, into fully paid, non-assessable shares of
common stock as determined by dividing the original issue price by the conversion price for such series of convertible preferred stock in effect on the date of the conversion.
Each share of convertible preferred stock will automatically convert into common stock, upon either (a) the closing of the sale of shares
of common stock to the public at a price per share of at least 1.25 times the original issue price of the Series C-1 convertible preferred stock (subject to appropriate adjustment in the event of any
stock dividend, stock split, combination or other similar recapitalization with respect to the common stock), in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as
amended, resulting in at least $75,000,000 of gross proceeds to the Company or (b) the date and time, or the occurrence of an event, specified by vote or written consent of holders of at least a majority of the outstanding shares of the Series C-1 and C-2 convertible preferred stock.
Liquidation
In
the event of a Deemed Liquidation Event, as defined below, each holder of Series C-1 convertible preferred stock and Series C-2 convertible preferred stock is
entitled to receive, on a pari passu basis, prior and in preference to any distributions to the holders of Series T convertible preferred stock, Series B convertible preferred stock, A-1 convertible
preferred stock, Series Seed convertible preferred stock and common stock, an amount equal to the greater of (i) the original issue price per share respectively, plus any declared but unpaid dividends thereon or (ii) the amount such holder
would have received if such holder had converted its shares of Series C-1 convertible preferred stock and/or Series C-2 convertible preferred stock, as applicable,
into shares of common stock immediately prior to such Deemed Liquidation Event. Subject to the prior payment of all amounts due to holders of Series C-1 convertible preferred stock and Series C-2 convertible preferred stock, each holder of Series T convertible preferred stock and Series B convertible preferred stock is entitled to receive, prior and in preference to any distributions to the
holders of Series A-1 convertible preferred stock, Series Seed convertible preferred stock and common stock, an amount equal to the greater of (i) the original issue price per share respectively,
plus any declared but unpaid dividends thereon or (ii) the amount such holder would have received if such holder had converted its shares of Series T convertible preferred stock and/or Series B convertible preferred stock, as
applicable, into shares of common stock immediately prior to such Deemed Liquidation
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Event. Subject to the prior payment of all amounts due to holders of Series C-1 convertible preferred stock,
Series C-2 convertible preferred stock, Series T convertible preferred stock and Series B convertible preferred stock, each holder of Series A-1
convertible preferred stock and Series Seed convertible preferred stock is entitled to receive, prior and in preference to any distributions to the holders of common stock, an amount equal to the greater of (i) the original issue price per
share respectively, plus any declared but unpaid dividends thereon or (ii) the amount such holder would have received if such holder had converted its shares of Series A-1 convertible preferred stock
or Series Seed convertible preferred stock, as applicable, into shares of common stock immediately prior to such Deemed Liquidation Event. In the event that the assets available for distribution to the holders of convertible preferred stock are
insufficient to pay such holders the full amounts to which they are entitled, the assets available for distribution will be distributed on a pro rata basis among the holders of the convertible preferred stock in proportion to the respective amounts
that would otherwise be payable in respect of such stock. After all preferential payments have been made to the holders of convertible preferred stock, the remaining amounts will be distributed among the holders of the common stock, pro rata based
on the number of shares held by each holder.
Deemed Liquidation
Each of the following events are considered a Deemed Liquidation Event: (i) a liquidation, dissolution or winding up of the
Company, either voluntary or involuntary, (ii) a merger or consolidation of the Company, and (iii) the closing or the sale, lease or transfer, exclusive license or other disposition of all or substantially all of the Companys assets.
9. COMMON STOCK
Amended and
Restated Certificate of Incorporation
In March 2019 and June 2020, the Company amended and restated its certificate of
incorporation to increase the authorized number of shares of common stock to 126,000,000 and 198,000,000, respectively.
Common
Stock Warrants
In July 2018, the Company issued 249,218 warrants to purchase common stock to the Series B investors in the
first tranche. The warrants were deemed to be freestanding instruments indexed to the Companys common stock and also met the requirements for equity classification. The warrants expire on July 26, 2028 and are exercisable at the option of
the warrant holder for $0.07 per share. As of December 31, 2020 and 2019, 82,895 and 172,315 warrants, respectively, were outstanding.
Common Stock
In
2016, 157,130 shares of common stock were sold to one of the Companys employees in exchange for a note receivable of $99,000. The note is subject to repayment over five years and is collateralized only by the stock purchased. Of the total
157,130 common shares issued, 53,571 shares were vested upon grant, 28,571 shares vested upon the achievement of a milestone, which was achieved in 2019, and 74,988 shares vested ratably over 48 months.
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For accounting purposes, the unvested shares related to restricted stock awards and common
stock issued in exchange for notes are not considered to be outstanding. As of December 31, 2020 and December 31, 2019, the unvested shares are zero and 16,664, respectively.
Common Stock Reserved for Future Issuance
The following shares of common stock were reserved for future issuance:
December 31,
2020
2019
Convertible preferred stock
15,232,275
10,070,102
Conversion of convertible preferred stock issuable in future closings
5,611,065
Common stock options issued and outstanding
3,800,402
2,015,544
Common stock available for future issuance under the 2015 Plan
147,852
890,546
Warrants to purchase common stock
82,895
172,315
Total
24,874,489
13,148,507
10. STOCK-BASED COMPENSATION
In 2015, the Company adopted the 2015 Equity Incentive Plan (the 2015 Plan), under which stock options, restricted stock awards,
restricted stock units, stock appreciation rights could be granted to employees, officers, directors, and consultants of the Company. Under the 2015 Plan, both incentive stock options (ISOs) and
non-qualified stock options (NSOs) could be granted. ISOs may be granted only to Company employees. The exercise price of other ISOs generally may not be less than 100% of the fair market
value of the related common stock on the grant date and shall have terms no more than ten years from the date of grant. Stock options generally include a one-year cliff vest of 25% of the respective award,
followed by monthly vesting in equal installments over the next 36 months, and grants that vest monthly over 48 months. The terms and conditions governing the other stock awards under the 2015 Plan are at the sole discretion of the board of
directors.
In 2019, the 2015 Plan was amended to increase the shares of common stock available for issuance under the 2015 Plan by
1,503,387 shares to a total of 3,126,421 shares. In June 2020, concurrent with the close of the Series C-1 convertible preferred stock financing, the 2015 Plan was amended to increase the number of shares
of common stock available for issuance by 516,113 shares to a total of 3,642,534 shares. On September 3, 2020, the 2015 Plan was amended to increase the number of shares of common stock available for issuance by 645,143 shares to a total of
4,287,677 shares. At December 31, 2020 and 2019, 147,852 shares and 890,546 shares respectively, remained available for future issuance.
Performance and Service Based Stock Options
In September 2020, the compensation committee of the Companys board of directors granted 526,018 options to employees that will commence
vesting upon the achievement of a certain financing milestone and, once achieved, generally vest monthly over 48 months (the Performance Awards). The Company recognizes expense based on the fair value of the Performance Awards over the
estimated service period (under the graded vesting method) to the extent the achievement of the related performance criteria is estimated to be probable. The Company determined that the achievement of the financing milestone is probable as of
December 31, 2020 and stock-based compensation expense for the year ended December 31, 2020 related to the Performance Awards was recognized approximately $0.1 million. The weighted-average grant date fair value of the Performance Awards
was $3.24 per share.
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Stock option activity under the 2015 Plan is as follows:
Options
Outstanding
Weighted-
average
Exercise
Price
Weighted-
average
Remaining
Contractual
Term
(in years)
Weighted-
average
Grant
Date Fair
Value
Aggregate
Intrinsic
Value
(in thousands)
Outstanding at December 31, 2018
287,573
$
2.06
$
51
Granted
1,753,477
$
2.65
$
1.64
Exercised
(10,293
)
$
2.21
Canceled/forfeited
(15,213
)
$
2.15
Outstanding at December 31, 2019
2,015,544
$
2.57
9.3
$
319
Granted
1,941,024
$
3.71
$
2.76
Exercised
(119,092
)
$
2.47
Cancelled / Forfeited
(37,074
)
$
2.43
Outstanding at December 31, 2020
3,800,402
$
3.16
9.1
$
4,721
Exercisable at December 31, 2020
1,634,553
$
2.83
8.5
$
2,585
Vested or expected to vest at December 31, 2020
3,800,402
$
3.16
9.1
$
4,721
The intrinsic value of options exercised was $0.2 million during the year ended December 31, 2020
and was immaterial during the year ended December 31, 2019. The fair value of options vested was $1.1 million and $0.4 million during the years ended December 31, 2020 and December 31, 2019, respectively. As of
December 31, 2020, there was approximately $7.2 million of unrecognized stock-based compensation related to unvested stock options, which the Company expects to recognize over a weighted-average period of 3.2 years.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following
assumptions:
Years Ended December 31,
2020
2019
Expected volatility
90-97
%
68-70
%
Risk-free interest rate
0.3-0.5
%
1.4-2.6
%
Expected option life (in years)
5.0-6.3
5.5-6.1
Expected dividend yield
0.0
%
0.0
%
Fair value per share of common stock
$
2.80-$4.41
$
2.24-$2.73
Expected Term The expected term of options granted represents the period of time that the options
are expected to be outstanding. Due to the lack of historical exercise history, the expected term of the Companys employee stock options has been determined utilizing the simplified method for awards that qualify as plain-vanilla options.
Expected Volatility The estimated volatility was based on the historical volatility of the common stock of a group of publicly
traded companies deemed comparable to the Company.
Risk-Free Interest Rate The risk-free interest rate is the implied yield in
effect at the time of the option grant based on U.S. Treasury securities with contract maturities equal to the expected term of the Companys stock options.
Dividend Rate The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any
dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used.
Fair Value of Common
Stock Prior to our IPO in February 2021, the fair value of the Companys common stock was determined by the Companys board of directors with assistance from management and
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an independent third-party valuation firm using an approach consistent with the methods outlined in the American Institute of Certified Public Accountants Practice Aid, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation . Determining the best estimated fair value of the Companys common stock required significant judgment and management considered several factors, including the Companys
stage of development, equity market conditions affecting comparable public companies, significant milestones and progress of research and development efforts.
Stock-Based Compensation Expense
The following table summarizes the components of stock-based compensation expense recognized in the Companys statement of operations and
comprehensive loss (in thousands):
Years Ended
December 31,
2020
2019
Research and development
$
734
$
295
General and administrative
686
213
Total stock-based compensation expense
$
1,420
$
508
Early Exercise Liability
Some of the options granted under the 2015 Plan may be exercised prior to the time that the options have vested, provided that such shares
remain subject to repurchase until such time as they have vested. The right to repurchase these shares lapses over the four-year vesting period. As of December 31, 2020 and 2019, there were 47,180 and 16,215, respectively, of unvested shares
representing an early exercise liability of approximately $0.1 million and $35,000, respectively. The unvested shares purchased by the employees are not deemed, for accounting purposes, to be outstanding.
The following table summarizes the activity of the unvested stock outstanding from the early exercise of stock options:
Years Ended
December 31,
2020
2019
Unvested at beginning of year
16,215
17,613
Early exercised during the year
48,412
6,780
Vested
(17,447
)
(8,178
)
Unvested at end of year
47,180
16,215
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11. Net Loss Per Share
The following table sets forth the computation of the Companys basic and diluted net loss per share attributable to common stockholders,
which excludes shares which are legally outstanding, but subject to repurchase by the Company (in thousands, except share and per share amounts):
Years Ended December 31,
2020
2019
Numerator:
Net loss
$
(60,728
)
$
(30,487
)
Denominator:
Weighted-average common shares outstanding
1,989,208
1,919,696
Warrants to purchase common stock
147,550
172,318
Common stock outstanding subject to repurchase related to unvested early exercised stock options
and restricted stock awards
(34,430
)
(98,537
)
2,102,328
1,993,477
Net loss per share attributable to common stockholders, basic and diluted
$
(28.89
)
$
(15.29
)
Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so
would be anti-dilutive are as follows (in common stock equivalent shares):
December 31,
2020
2019
Convertible preferred stock
15,232,275
10,070,102
Common stock options issued and outstanding
3,800,402
2,015,544
Common stock outstanding subject to repurchase related to unvested early exercised stock options
and restricted stock awards
47,180
32,879
Total
19,079,857
12,118,525
12. 401(K) Savings Plan
The Company established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code of 1986, as amended
(Code). The 401(k) Plan covers all employees who meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretax basis. The Company has not made any contributions
to the 401(k) Plan as of December 31, 2020.
13. Income Taxes
The Company recorded a current state tax provision of zero and approximately $2,000 related to state minimum taxes for the years ended
December 31, 2020 and 2019, respectively, which is recorded in general and administrative expenses in the accompanying statement of operations and comprehensive loss.
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A reconciliation of the Companys effective tax rate and federal statutory tax rate is
summarized as follows (in thousands):
Years Ended
December 31,
2020
2019
Income tax expense (benefit) at statutory rates
$
(12,753
)
$
(6,402
)
State income tax, net of federal benefit
1
Permanent items
11
19
Valuation allowance
11,002
7,437
Stock-based compensation
192
72
Research and development tax credits
(918
)
(1,134
)
Preferred tranche liability fair value adjustment
2,466
9
Provision for income taxes
$
$
2
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences
between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Companys deferred tax assets and liabilities for federal and state income taxes
are summarized as follows (in thousands):
December 31,
2020
2019
Deferred tax assets:
Net operating loss carryforward
$
23,901
$
13,801
Research tax credits
3,840
2,227
Intangible assets
210
230
Reserves and accruals
588
98
Stock-based compensation
190
57
Lease liability
3,240
3,039
Total deferred tax assets
31,969
19,452
Less valuation allowance
(28,050
)
(16,330
)
Net deferred tax assets
3,919
3,122
Deferred tax liabilities:
Right-of-use
assets
(3,654
)
(3,008
)
Property and equipment
(198
)
(107
)
Prepaid assets
(67
)
(7
)
Total deferred tax assets
(3,919
)
(3,122
)
Net deferred tax assets
$
$
A valuation allowance is required to be established when it is more likely than not that all or a portion of a
deferred tax asset will not be realized. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. A full review of all positive and negative evidence needs to be considered. The Company has
established a full valuation allowance against the net deferred tax assets as of December 31, 2020 and 2019 due to historical losses and uncertainty surrounding the use of such assets. The valuation allowance increased by $11.7 million
between December 31, 2020 and December 31, 2019 and by $10.8 million between December 31, 2019 and December 31, 2018 due primarily to the generation of operating losses.
As of December 31, 2020, the Company has net operating loss carryforwards for federal and state income tax purposes of $94.2 million
and $46.5 million, respectively. The federal net operating loss carryforwards
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generated prior to 2018 and state net operating loss carryforwards, if not utilized, will expire beginning in 2035. Federal net operating losses aggregating $89.8 million are not subject to
expiration.
The Company has research credit carryforwards for federal and state income tax purposes of approximately $2.7 million
and $2.3 million, respectively, as of December 31, 2020. The federal credits begin to expire in 2038 and the state credits can be carried forward indefinitely.
Utilization of some of the federal and state net operating loss and credit carryforwards may be subject to annual limitations due to the
change in ownership provisions of the Code and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company has not performed a study under Section 382 of the
Code to determine if a change in control did occur and, as such, is not able to determine the impact on the net operating loss carryforwards, if any, as of the date of the financial statements.
The Company files tax returns in the United States and California. The Company is not currently under examination in any of these
jurisdictions and all of the Companys tax years remain effectively open to examination due to net operating loss carryforwards.
The
Company recognizes a tax benefit from uncertain tax positions when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits.
Due to the existence of the full valuation allowance, future changes in unrecognized tax benefits will not impact the Companys effective tax rate. The Company does not foresee material changes to its liability for uncertain tax benefits within
the next 12 months.
The following table summarizes the activity in the Companys gross unrecognized tax benefits (in
thousands):
Years Ended
December 31,
2020
2019
Balance at beginning of period
$
605
$
227
Increase related to current year positions
520
378
Balance at end of the year
$
1,125
$
605
During the years ended December 31, 2020 and 2019, no interest or penalties were recorded. In the event
the Company should need to recognize interest and penalties related to unrecognized income tax liabilities, this amount will be recorded as an increase to income tax expense.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES Act) was signed into law. Among other things, the
CARES Act permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding
taxable years to generate a refund of previously paid income taxes. The CARES Act also contains modifications on the limitation of business interest for tax years beginning in 2019 and 2020. The modifications to Section 163(j) increase the
allowable business interest deduction from 30% of adjusted taxable income to 50% of adjusted taxable income. The CARES Act did not have a significant impact to the Company for any years.
On June 29, 2020, California Governor Newsom signed to law the states budget package which included Assembly Bill 85 (AB 85). AB 85
contained two major tax changes: (1) it suspends the usage of net operating losses (NOLs) for certain taxpayers; and (2) it limits certain business tax credits for tax years 2020, 2021, and 2022. The Company is in a taxable loss position
in 2020 and thus the bill has no impact on the 2020 provision. The Company will continue monitor the impact of AB 85, if any, on future periods.
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14. Subsequent Events
Series C-2 Preferred Stock Financing
In January 2021, the Company sold 5,611,059 shares of its Series C-2 preferred stock for net
proceeds of $51.9 million.
Initial Public Offering and Related Transactions
In February 2021, the Company completed its IPO of 13,225,000 shares of its common stock, including the full exercise of the
underwriters option to purchase 1,725,000 shares, at a price per share of $20.00. Proceeds from the IPO, net of underwriting discounts, commissions and offering costs of approximately $22.8 million, were approximately $241.7 million.
In addition, each of the following occurred on February 4, 2021 in connection with the completion of the Companys IPO:
the conversion of all outstanding shares of convertible preferred stock into 20,843,334 shares of the
Companys common stock; and
the amendment and restatement of the Companys certificate of incorporation, authorizing 200,000,000 shares
of common stock and 10,000,000 shares of undesignated preferred stock.
Approval of 2021 Equity Incentive Plan and
2021 Employee Stock Purchase Plan
In January 2021, the Companys board of directors adopted the 2021 Equity Incentive Plan,
or the 2021 Plan, and the Companys stockholders approved the 2021 Plan. The 2021 Plan authorize issuance of up to 8,074,373 shares of common stock and it became effective upon the execution of the underwriting agreement for the Companys
initial public offering.
In addition, in January 2021, the Companys board of directors and stockholders adopted the 2021 Employee
Stock Purchase Plan, or the ESPP. The ESPP authorize issuance of up to 840,000 shares of common stock and it became effective upon the execution of the underwriting agreement for the Companys initial public offering.
Issuance of New Option Awards
In January 2021, the Companys compensation committee of the board of directors approved option grants to employees under the 2015 Plan.
These options vest over four years and total 92,141 shares with an exercise price of $4.41 per share.
In January 2021, the Companys
compensation committee of the board of directors approved option grants to employees under the 2021 Plan. These options became effective upon the execution of the underwriting agreement for the Companys initial public offering. These options
vest over four years and total 1,253,950 shares of common stock with an exercise price equal to the Companys initial public offering price.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.