What changed in this filing

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Item 1. Financial Statements

2021-08-09 compared with 2021-05-10 · 88 added, 71 removed, 351 unchanged (31% of the section changed)

1 unchanged sentence

DESIGN THERAPEUTICS, INC.

BALANCE SHEETS

CONDENSED BALANCE SHEETS

(in thousands, except share and par value data)

15 unchanged sentences

Convertible preferred stock, $ 0.0001 par value;

no shares and 22,500,000 shares authorized, no shares and 22,012,499 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively;

liquidation preference of zero and $45,625 as of March 31, 2021 and December 31, 2020, respectively

no shares and 22,500,000 shares authorized, no shares and 22,012,499 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively;

liquidation preference of zero and $ 45,625 as of June 30, 2021 and December 31, 2020, respectively

Stockholders’ equity (deficit):

Common stock, $ 0.0001 par value;

200,000,000 and 60,000,000 shares authorized, 55,617,322 and 16,604,774 shares issued, 55,042,550 and 15,957,821 shares outstanding at March 31, 2021 and December 31, 2020, respectively

200,000,000 and 60,000,000 shares authorized, 55,617,322 and 16,604,774 shares issued, 55,114,729 and 15,957,821 shares outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

5 unchanged sentences

DESIGN THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Grant revenue

9 unchanged sentences

DESIGN THERAPEUTICS, INC.

STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive gain (loss):

3 unchanged sentences

DESIGN THERAPEUTICS, INC.

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(in thousands, except share data)

2 unchanged sentences

Comprehensive

Balance at March 31, 2021

Vesting of restricted stock

Stock-based compensation

Unrealized loss on investments

Balance at June 30, 2021

Balance at December 31, 2020

2 unchanged sentences

Initial public offering of common shares, net of $ 21,728 of issuance costs

Vesting of restricted common stock

Vesting of restricted stock

Stock-based compensation

Unrealized loss on investments

Balance at June 30, 2021

Balance at March 31, 2020

Preferred Stock

Comprehensive

Stockholders’

Vesting of restricted stock

Stock-based compensation

Unrealized gain on investments

Balance at June 30, 2020

Balance at December 31, 2019

2 unchanged sentences

Settlement of bifurcated conversion liability

Vesting of restricted common stock

Vesting of restricted stock

Stock-based compensation

Unrealized gain on investments

Balance at March 31, 2020

Balance at June 30, 2020

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

DESIGN THERAPEUTICS, INC.

STATEMENTS OF CASH FLOWS

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

20 unchanged sentences

Proceeds from issuance of convertible preferred stock, net of issuance costs

Proceeds from the exercise of stock options and vesting of restricted stock

Proceeds from the issuance of notes payable, net of issuance costs—related party

91 unchanged sentences

Forfeitures are recognized as they occur.

Stock-based compensation expense recognized in the Company’s statements of operations during the three months ended March 31, 2021 and 2020, were as follows (in thousands):

Three Months ended March 31,

Stock-based compensation expense recognized in the Company’s statements of operations during the three and six months ended June 30, 2021 and 2020, were as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

1 unchanged sentence

Recent Accounting Pronouncements

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

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

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

ASU 2021-04 is effective for annual beginning after December 15, 2021, inclding interim periods within those fiscal years.

Early adoption is permitted, including adoption in an interim period.

The Company is currently evaluating the impact that this new guidance will have on its condensed consolidated financial statements and does not currently expect the adoption will have a material impact on its financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity .

4 unchanged sentences

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding for 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 shares and dilutive common stock equivalents outstanding for the period determined using the treasury-stock and if-converted methods.

Dilutive common stock equivalents are comprised of convertible preferred stock, restricted common stock subject to repurchase, stock options outstanding under the Company’s equity incentive plans, employee stock purchase rights under the Company’s ESPP, and shares of common stock that are issuable under convertible debt, as applicable.

For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding as inclusion of the potentially dilutive securities would be antidilutive.

More specifically, as of March 31, 2021 and 2020, convertible preferred stock, stock options, employee stock purchase rights, and unvested common stock subject to repurchase, as applicable, totaling approximately 2,604,000 shares and 14,511,000 shares, respectively, were excluded from the calculation of diluted net loss per share because to do so would be anti-dilutive.

Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and dilutive common stock equivalents outstanding for the period determined using

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

the treasury-stock and if-converted methods.

Dilutive common stock equivalents are comprised of convertible preferred stock, restricted common stock subject to repurchase, stock options outstanding under the Company’s equity incentive plan s , employee stock purchase rights under the Company’s ESPP, and shares of common stock that are issuable under convertible debt , as applicable .

More specifically, as of June 30, 2021and 2020, convertible preferred stock, stock options, employee stock purchase rights, and unvested common stock subject to repurchase, as applicable, totaling approximately 2,687,000 shares and 14,431,000 shares, respectively, were excluded from the calculation of diluted net loss per share because to do so would be anti-dilutive.

Fair Value Measurements

10 unchanged sentences

None of the Company’s non-financial assets or liabilities are recorded at fair value on a non-recurring basis and no transfers between levels have occurred during the periods presented.

The following table summarize the Company’s financial instruments measured at fair value on a recurring basis at March 31, 2021 and December 31, 2020 (in thousands):

The following table summarize the Company’s financial instruments measured at fair value on a recurring basis at June 30, 2021 and December 31, 2020 (in thousands):

Fair Value Measurement at End of Period Using:

Quoted Prices

As of March 31, 2021:

As of June 30, 2021:

Money market funds ( 1)

6 unchanged sentences

Included in cash and cash equivalents on the accompanying balance sheets.

Interest bearing money market accounts and certificates of deposit are valued at amortized cost, which approximates fair value.

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

Interest bearing money market accounts and certificates of deposit are valued at amortized cost, which approximates fair value.

Investment Securities

1 unchanged sentence

In accordance with the Company’s investment policy, it has invested funds in marketable securities.

The cost, gross unrealized holding gains, gross unrealized holding losses, allowances for credit losses and fair value of available-for-sale investments by types, maturies and classes of securities at March 31, 2021 and December 31, 2020 consisted of the following (in thousands):

March 31, 2021

The cost, gross unrealized holding gains, gross unrealized holding losses, allowances for credit losses and fair value of available-for-sale investments by types, maturies and classes of securities at June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

As of June 30, 2021

Certificates of deposits

Within 1 year

Treasury securities

Within 1 year

Certificates of deposits

1 year to 2 years

Treasury securities

1 year to 2 years

December 31, 2020

As of December 31, 2020

Certificates of deposits

3 unchanged sentences

The Company reviews its investments at each reporting date to identify and evaluate whether a decline in fair value below the amortized cost basis of available-for-sale securities is due to credit-related factors and determines if such unrealized losses are the result of credit losses that requires impairment.

Factors considered in determining whether an unrealized loss is the result of a credit loss or other factors include the length of time and extent to which fair value has been less than the cost basis, any changes to the rating of the security by a rating agency, the financial condition and near-term prospects of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any adverse legal or regulatory events affecting the issuer or issuer’s industry, any significant deterioration in economic condition and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

At March 31, 2021 there was one security in an unrealized loss position.

The Company evaluated this security for other-than-temporary impairment and considered the decline in market value to be primarily attributable to changes in interest rates.

The security remained at a high credit quality rating and not been in a continuous loss position for more than 12 months.

Further, the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis which may be at maturity.

Factors considered in determining whether an unrealized loss is the result of a credit loss or other factors include the extent to which the fair value is less than the cost basis, any changes to the rating of the security by a rating agency, the financial condition and near-term prospects of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any adverse legal or regulatory events affecting the issuer or issuer’s industry, any significant deterioration in economic condition and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

At June 30, 2021 there were eight securities in an unrealized loss position.

The Company evaluated the securities individually for other-than-temporary impairment and considered the decline in market value to be primarily attributable to changes in interest rates.

Each security remained at a high credit quality rating and the unrealized losses of each security was immaterial.

Further, there had been no adverse conditions noted for any of the issuers and Company does not intend to sell any of the securities prior to maturity.

As such, the Company has classified the losses as temporary in nature and the Company did not record a reserve for credit losses.

At December 31, 2020, there were no securities in an unrealized loss position.

As of March 31, 2021, the Company held three domestic certificates of deposit with amortized costs at the Federal Deposit Insurance Corporation (“FDIC”) insured limit.

Accrued interest receivable on available-for-sale investment securities, included in prepaids and other current assets on the Company’s balance sheets, was less than $0.1 million at March 31, 2021 and December 31, 2020.

As of June 30, 2021, the Company held eight domestic certificates of deposit with amortized costs below the Federal Deposit Insurance Corporation (“FDIC”) insured limit.

Accrued interest receivable on available-for-sale investment securities, included in prepaids and other current assets on the Company’s balance sheets, was less than $ 0.1 million at June 30, 2021 and December 31, 2020.

DESIGN THERAPEUTICS, INC.

7 unchanged sentences

Laboratory equipment

Computer equipment and software

Less accumulated depreciation

Accrued liabilities consisted of the following (in thousands):

Accrued research and development costs

Accrued personnel costs

Accrued offering costs

Accrued research and development costs

Accrued other

Grant Revenue

The Company recognizes revenue pursuant to these grants, as described further in Note 2, by measuring the progress of the applicable research and development services provided over time, based on the effort the Company expends and costs incurred, relative to the estimated total effort and costs to be incurred under the grant.

The Company recognizes revenue pursuant to grants, as described further in Note 2, by measuring the progress of the applicable research and development services provided over time, based on the effort the Company expends and costs incurred, relative to the estimated total effort and costs to be incurred under the grant.

This results in a percentage that the Company multiplies by the grant award amount to determine the amount of grant revenue to be recognized each period.

1 unchanged sentence

If the Company’s estimates or judgements change over the course of the term of the grant, it may affect the timing and amount of revenue that it recognizes in the current and future periods.

During the three months ended, March 31, 2020, the Company recognized $0.1 million of grant revenue from awards by the NSF, NIH and FARA, respectively.

No grant revenue was recognized for the three months ended March 31, 2021.

During the three and six months ended June 30, 2020, the Company recognized less than $ 0.1 million and $ 0.2 million of grant revenue, respectively, from awards by the NSF, NIH and FARA, respectively.

No grant revenue was recognized for the three and six months ended June 30, 2021.

Commitments and Contingencies

6 unchanged sentences

The principal and interest payable on the January Note were repaid in full in 2020.

In November 2019, the Company issued an unsecured promissory note to borrow up to $ 0.5 million to a co-founder (the “November Note”) for working capital.

The November Note bore interest at prime plus 4.5% and matured on or before January 1,

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

2022 and included a final payment of 3 % on the amounts advanced at maturity.

In November 2019, the Company issued an unsecured promissory note to borrow up to $ 0.5 million to a co-founder (the “November Note”) for working capital.

The November Note bore interest at prime plus 4.5 % and matured on or before January 1, 2022 and included a final payment of 3 % on the amounts advanced at maturity.

In December 2019 and January 2020, the Company borrowed a total of $ 0.4 million under the November Note with interest payable at 9.25 % per annum.

9 unchanged sentences

In May 2019 the Company entered into an agreement, as subsequently amended, to lease laboratory space pursuant to a three-month, automatically renewing lease.

The lease is subject to annual rent increases of 3% and the Company had paid security deposits totaling $90,000 as of March 31, 2021 which was included in prepaid expenses and other current assets on the Company’s balance sheets.

The lease is subject to annual rent increases of 3 % and the Company had paid security deposits totaling $ 0.1 million as of June 30, 2021 which was included in prepaid expenses and other current assets on the Company’s balance sheets.

Due to the short-term nature of the lease, it has not been included as an operating lease right of use asset nor as an operating lease liability on the Company’s balance sheets.

6 unchanged sentences

Lease payments are subject to annual increases of 3 % and the Company is responsible for its share of operating expenses and taxes.

Future minimum payments under the Lease as of March 31, 2021 are as follows (in thousands):

Rent expense for the three months ended March 31, 2021 and 2020 was $76,000 and $12,000, respectively.

Future minimum payments under the Lease as of June 30, 2021 are as follows (in thousands):

Rent expense for the three months ended June 30, 2021 and 2020 was $ 136,000 and $ 22,000 , respectively.

Rent expense for the six months ended June 30, 2021 and 2020 was $ 212,000 and $ 34,000 , respectively.

Contingencies

1 unchanged sentence

The Company accrues a liability for such matters when it is probable that the future expenditures will be made and such expenditures can be reasonably estimated.

The Company had no such contingent liabilities as of March 31, 2021 or December 31, 2020.

License Agreement

In February 2019, the Company entered into a Human Therapeutics Exclusive License Agreement (the “License Agreement”) with the Wisconsin Alumni Research Foundation (“WARF”).

Under the License Agreement, the Company licensed the exclusive, worldwide, royalty-bearing, sublicensable, rights to certain WARF patents and the nonexclusive worldwide rights to certain know-

The Company had no such contingent liabilities as of June 30, 2021 or December 31, 2020.

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

how to develop and commercialize products for the prevention, diagnosis and treatment of disease.

License Agreement

In February 2019, the Company entered into a Human Therapeutics Exclusive License Agreement (the “License Agreement”) with the Wisconsin Alumni Research Foundation (“WARF”).

Under the License Agreement, the Company licensed the exclusive, worldwide, royalty-bearing, sublicensable, rights to certain WARF patents and the nonexclusive worldwide rights to certain know-how to develop and commercialize products for the prevention, diagnosis and treatment of disease.

As consideration for the license, the Company agreed to pay an upfront fee of $ 250,000 , which the Company immediately expensed as research and development expense in its statements of operations as there was no alternative future use for the license.

The Company paid $25,000 of the upfront fee upon execution of the agreement and the remaining $225,000 was due upon on the earlier of the first anniversary of the License Agreement or the Company receiving a certain level of gross proceeds from an equity financing.

The Company paid $ 25,000 of the upfront fee upon execution of the agreement and the remaining $ 225,000 was due upon the earlier of the first anniversary of the License Agreement or the Company receiving a certain level of gross proceeds from an equity financing.

At December 31, 2019, the second payment of $ 225,000 was recorded as an accrued liability on the Company’s balance sheet.

4 unchanged sentences

Further, the Company may be required to pay sublicense fees in the mid-single digits percentage for fees, royalties or other payments earned from the granting of sublicenses to the WARF patents and know-how.

The Company has paid no milestone or royalty payments as of March 31, 2021.

The Company has paid no milestone or royalty payments as of June 30, 2021.

The Company is responsible for reimbursing WARF for costs incurred in connection with prosecuting and maintaining patent rights that are specific to the License Agreement.

Expenses recognized in connection with legal patent fees under this License Agreement were less than $0.1 million for the three months ended March 31, 2021 and 2020, respectively, which were recorded as general and administrative expenses in the statements of operations.

Expenses recognized in connection with legal patent fees under this License Agreement were less than $ 0.1 million for the three and six months ended June 30, 2021 and 2020, respectively, which were recorded as general and administrative expenses in the statements of operations.

The Company may terminate the License Agreement with 90 days written notice or for certain breaches of the agreement.

12 unchanged sentences

In January 2021, the Company issued 19,083,979 shares of Series B convertible preferred stock at $ 6.55 per share for net cash proceeds of approximately $ 124.7 million.

All shares of convertible preferred stock outstanding at the Company’s IPO were converted into shares of the Company’s common stock.

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

Equity Incentive Award Plan s

All shares of convertible preferred stock outstanding at the Company’s IPO were converted into shares of the Company’s common stock.

Equity Incentive Award Plans

In March 2021, the Company’s board of directors and stockholders adopted the 2021 Plan, which became effective on March 25, 2021, the date of the underwriting agreement related to the Company’s IPO.

11 unchanged sentences

Vested shares

Balance at March 31, 2021

Balance at June 30, 2021

2021 Employee Stock Purchase Plan

3 unchanged sentences

A total of 600,000 shares of common stock were approved to be initially reserved for issuance under the ESPP.

In addition, the number of shares of common stock available for issuance under the ESPP will automatically increase on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase and (ii) 1,200,000 shares;

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

the number of shares of common stock available for issuance under the ESPP will automatically increase on January 1 of each calendar year, starting on January 1, 2022 through January 1, 2031, in an amount equal to the lesser of (i) 1% of the total number of shares of the Company’s common stock on the last day of the calendar month before the date of each automatic increase and (ii) 1,200,000 shares;

provided that before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii).

As of March 31, 2021, no shares of the Company’s common stock have been purchased under the ESPP.

As of June 30, 2021 , no shares of the Company’s common stock have been purchased under the ESPP.

Related Party Transactions

2 unchanged sentences

Further, Marlinspike Group provides the use of approximately 2,120 square feet of its office space in Carlsbad, California to the Company on an as-available basis from time to time pursuant to the agreement.

The Company’s Executive Chairperson, co-founder and member of its board of directors is an

DESIGN THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS—(Continued)

executive officer of Marlinspike Group and, the Company’s Chief Operating Officer was an executive officer of Marlinspike Group until February 2020.

The Company’s Executive Chairperson, co-founder and member of its board of directors is an executive officer of Marlinspike Group and, the Company’s Chief Operating Officer was an executive officer of Marlinspike Group until February 2020.

The term of the 2019 Consulting Agreement was for a one-year period, subject to automatic one-month renewals unless terminated upon 14 days’ written notice.

5 unchanged sentences

Expenses recognized by the Company under the 2020 Consulting Agreement during the periods presented were as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

3 unchanged sentences

Ansari, Ph.D.

Asnsari, a co-founder.

provides consulting services and oversees certain research and development activities (the “Research Consulting Agreement”).

Asnsari, a co-founder, provides consulting services and advises on certain research and development activities (the “Research Consulting Agreement”).

Pursuant to the Research Consulting Agreement, as amended, Dr.

1 unchanged sentence

Expenses recognized by the Company under the Research Consulting Agreement during the periods presented were as follows (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

Total expenses

As of March 31, 2021 and December 31, 2020, the Company had accounts payable of $20,000 pursuant to its related party consulting agreements.

As of June 30, 2021 and December 31, 2020, the Company had accounts payable of $ 20,000 pursuant to its related party consulting agreements.

Convertible Notes and Notes Payable

5 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements