Dyne Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management, under the supervision and with the participation of our Chief Executive Officer and Vice President, Accounting & Administration (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Vice President, Accounting & Administration concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level. Exemption from Management’s Report on Internal Control over Financial Reporting This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d‑15(f) under the Exchange Act) that occurred during the three months ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 139 PART III Item 10. Directors, Executive Officers and Corporate Governance. Except to the extent provided below, the information required by this Item 10 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders which we intend to file not later than 120 days after the end of our fiscal year ended December 31, 2020 and is incorporated herein by reference. We have adopted a written code of business conduct and ethics that applies to our directors, officers, employees and designated agents, including our principal executive officer, principal financial officer, principal accounting officer, or persons performing similar functions. A current copy of the code is posted on the investor relations section of our website, which is located at http://www.dyne-tx.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website. Item 11. Executive Compensation. The information required by this Item 11 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item 12 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item 13 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. The information required by this Item 14 will be included in our definitive proxy statement to be filed with the SEC with respect to our 2021 Annual Meeting of Stockholders and is incorporated herein by reference. 140 PART IV Item 15. Exhibits, Financial Statement Schedules. (1) Consolidated Financial Statements The following documents are included on pages F-1 through F-24 attached hereto and are filed as part of this Annual Report on Form 10-K. Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 (2) Financial Statement Schedules All financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto. (3) Exhibits The following is a list of exhibits filed as part of this Annual Report on Form 10-K. Exhibit Number Description 3.1 Restated Certificate of Incorporation of the registrant (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K, File No. 001-39509, filed September 21, 2020). 3.2 Amended and Restated Bylaws of the registrant (incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K, File No. 001-39509, filed September 21, 2020). 4.1 Specimen Stock Certificate evidencing the shares of common stock (incorporated by reference to Exhibit 4.1 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed September 10, 2020). 4.2 Amended and Restated Investors’ Rights Agreement dated as of August 7, 2020 by and among the registrant and the other parties thereto (incorporated by reference to Exhibit 4.2 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 4.3* Description of Securities Registered Under Section 12 of the Exchange Act 10.1# 2018 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed September 10, 2020). 10.2# Form of Stock Option Agreement under 2018 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.3# Form of Restricted Stock Agreement under 2018 Stock Incentive Plan (incorporated by reference to Exhibit 10.3 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 141 10.4# 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.4 to Amendment No. 1 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed September 10, 2020). 10.5# Form of Stock Option Agreement under 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.5 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.6# Form of Restricted Stock Agreement under 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.6 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.7# Form of Restricted Stock Unit Agreement under 2020 Stock Incentive Plan (incorporated by reference to Exhibit 10.7 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.8# 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed September 10, 2020). 10.9 Sublease Agreement, dated May 20, 2019, by and between Arrakis Therapeutics, Inc., as sublandlord, and the registrant, as subtenant (incorporated by reference to Exhibit 10.9 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.10# Form of Indemnification Agreement between the registrant and each of its executive officers and directors (incorporated by reference to Exhibit 10.10 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.11 † License Agreement, dated as of April 27, 2020, by and between the registrant and the University of Mons (incorporated by reference to Exhibit 10.11 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.12# Offer letter, dated as of September 19, 2019, by and between the registrant and Joshua Brumm (incorporated by reference to Exhibit 10.13 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.13# Offer letter, dated as of March 21, 2018, by and between the registrant and Romesh Subramanian (incorporated by reference to Exhibit 10.14 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.14# Employment side letter, dated as of November 29, 2018, by and between the registrant and Romesh Subramanian (incorporated by reference to Exhibit 10.15 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.15# Offer letter, dated as of December 21, 2018, by and between the registrant and Jonathan McNeill (incorporated by reference to Exhibit 10.16 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.16# Offer letter, dated as of December 12, 2019, by and between the registrant and Oxana Beskrovnaya (incorporated by reference to Exhibit 10.17 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 142 10.17# Offer letter, dated as of November 8, 2019, by and between the registrant and Richard Scalzo (incorporated by reference to Exhibit 10.18 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.18# Offer letter, dated as of July 24, 2020, by and between the registrant and Susanna High (incorporated by reference to Exhibit 10.19 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.19# Executive Severance and Change in Control Benefits Plan (incorporated by reference to Exhibit 10.20 to the registrant’s Registration Statement on Form S-1, File No. 333-248414, filed August 25, 2020). 10.20 Lease, by and between Dyne Therapeutics, Inc. and BP3-BOS1 1560 Trapelo Road LLC, dated as of December 4, 2020, as amended (incorporated by reference to Exhibit 10.20 to the registrant’s Registration Statement on Form S-1, File No. 333-252194 filed January 19, 2021 ). 10.21* Offer letter, dated as of December 17, 2020, by and between the registrant and Wildon Farwell 21.1* Subsidiaries of the Registrant 23.1* Consent of Deloitte & Touche LLP, independent registered public accounting firm. 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. 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. 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. 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. 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF XBRL Taxonomy Extension Definition Linkbase Document 101.LAB XBRL Taxonomy Extension Label Linkbase Document 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document * Filed herewith. † Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. # Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of the Instructions to the Annual Report on Form 10-K. 143 Item 16. Form 10-K Summary None. 144 SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . Company Name Date: March 4, 2021 By: /s/ Joshua Brumm Joshua Brumm President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Joshua Brumm President, Chief Executive Officer and Director (principal executive officer) March 4, 2021 Joshua Brumm /s/ Richard Scalzo Vice President of Accounting and Administration and Treasurer (principal financial and accounting officer) March 4, 2021 Richard Scalzo /s/ Jason Rhodes Director and Chairman of the Board March 4, 2021 Jason Rhodes /s/ Ed Hurwitz Director March 4, 2021 Ed Hurwitz /s/ Dirk Kersten Director March 4, 2021 Dirk Kersten /s/ Lawrence Klein Director March 4, 2021 Lawrence Klein, Ph.D. /s/ David Lubner Director March 4, 2021 David Lubner /s/ Catherine Stehman-Breen Director March 4, 2021 Catherine Stehman-Breen, M.D. 145 Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F-3 Consolidated Statements of Operations and Comprehensive Loss F-4 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 Report of Independent R egistered Public Accounting Firm To the stockholders and board of directors of Dyne Therapeutics, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Dyne Therapeutics, Inc. and subsidiary (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ equity (deficit), and cash flows for the years then ended and the related notes to the financial statements (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 each of 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 Company’s management. Our responsibility is to express an opinion on the Company’s 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 regulation of the Securities and Exchange Commission and the PCAOB. We conducted our audits 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the 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/ Deloitte & Touche LLP Boston, Massachusetts March 4, 2021 We have served as the Company’s auditor since 2020. F-2 Dyne Therapeutics, Inc. Consolidated Balance Sheets December 31, (in thousands, except share and per share data) 2020 2019 Assets Current assets: Cash and cash equivalents $ 300,852 $ 14,632 Marketable securities 44,462 — Prepaid expenses and other current assets 3,773 127 Total current assets 349,087 14,759 Property and equipment, net 1,946 1,486 Restricted cash and other assets 2,301 191 Total assets $ 353,334 $ 16,436 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 3,440 $ 1,256 Accrued expenses and other current liabilities 7,527 1,102 Total current liabilities 10,967 2,358 Deferred rent — 42 Total liabilities 10,967 2,400 Commitments and contingencies (Note 12) Stockholders’ equity Convertible preferred stock (Note 7) — 27,429 Preferred stock, $0.0001 par value; 10,000,000 shares authorized at December 31, 2020 — — Common stock, $0.0001 par value; 200,000,000 and 68,000,000 shares authorized at December 31, 2020 and 2019, respectively; 45,446,903 and 3,239,017 shares issued and 45,076,574 and 2,586,535 shares outstanding at December 31, 2020 and 2019, respectively 5 1 Additional paid-in capital 421,572 6,352 Accumulated other comprehensive loss (27 ) — Accumulated deficit (79,183 ) (19,746 ) Total stockholders’ equity 342,367 14,036 Total liabilities and stockholders’ equity $ 353,334 $ 16,436 The accompanying notes are an integral part of these financial statements. F-3 Dyne Therapeutics, Inc. Consolidated Statements of Operations and Comprehensive Loss Year Ended December 31, (in thousands, except share and per share data) 2020 2019 Operating expenses: Research and development $ 45,200 $ 11,040 General and administrative 13,447 2,786 Total operating expenses 58,647 13,826 Loss from operations (58,647 ) (13,826 ) Other (expense) income: Interest income 56 290 Interest expense (396 ) — Change in fair value of preferred stock tranche obligations — (1,323 ) Change in success fee obligation (450 ) — Total other (expense) income, net (790 ) (1,033 ) Net loss $ (59,437 ) $ (14,859 ) Net loss per share, basic and diluted $ (4.13 ) $ (6.08 ) Weighted average common shares outstanding, basic and diluted 14,395,955 2,442,872 Comprehensive loss: Net loss $ (59,437 ) $ (14,859 ) Other comprehensive loss: Unrealized losses on marketable securities (27 ) — Comprehensive loss $ (59,464 ) $ (14,859 ) The accompanying notes are an integral part of these financial statements. F-4 Dyne Therapeutics, Inc. Consolidated Statements of Redeemable Convertible P referred Stock and Stockholders’ Equity (Deficit) Redeemable Convertible Preferred Stock Convertible Preferred Stock Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity (Deficit) (in thousands, except share data) Shares Amount Shares Amount Shares Amount Balance at January 1, 2019 12,500,000 $ 9,061 — $ — 2,110,404 $ 1 $ 7 $ — $ (4,887 ) $ (4,879 ) Issuance of Series A redeemable convertible preferred stock, net of issuance costs of $0.1 million 20,000,000 19,989 — — — — — — — — Settlement of Tranche Right I — (1,621 ) — — — — — — — — Reclassification of redeemable convertible preferred stock and preferred stock tranche obligations (32,500,000 ) (27,429 ) 32,500,000 27,429 — — 6,319 — — 33,748 Stock-based compensation — — — — — — 26 — — 26 Vesting of restricted shares — — — — 476,131 — — — — — Net loss — — — — — — — — (14,859 ) (14,859 ) Balance at December 31, 2019 — — 32,500,000 27,429 2,586,535 1 6,352 — (19,746 ) 14,036 Issuance of Series A convertible preferred stock, net of issuance costs of $0.1 million — — 19,500,000 19,467 — — — — — 19,467 Issuance of Series B convertible preferred stock, net of issuance costs of $0.4 million — — 41,159,724 115,319 — — — — — 115,319 Conversion of convertible preferred stock into common stock upon initial public offering — — (93,159,724 ) (162,215 ) 28,086,375 3 162,212 — — — Issuance of common stock upon initial public offering, net of issuance costs of $2.6 million — — — — 14,089,314 1 246,387 — — 246,388 Exercise of stock options — — — — 32,197 — 30 — — 30 Stock-based compensation — — — — — — 6,591 — — 6,591 Vesting of restricted shares — — — — 282,153 — — — — — Unrealized gains on marketable securities — — — — (27 ) — (27 ) Net loss — — — — — — — — (59,437 ) (59,437 ) Balance at December 31, 2020 — $ — — $ — 45,076,574 $ 5 $ 421,572 $ (27 ) $ (79,183 ) $ 342,367 The accompanying notes are an integral part of these financial statements. F-5 Dyne Therapeutics, Inc. Consolidated Statements of Cash Flows Year Ended December 31, (in thousands) 2020 2019 Cash flows from operating activities: Net loss $ (59,437 ) $ (14,859 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 6,591 26 Depreciation and amortization expense 700 271 Amortization of debt discount 64 — Amortization (accretion) of premium (discount) on marketable securities 12 — Changes in fair value of preferred stock tranche obligations — 1,323 Changes in success fee obligation 450 — Changes in operating assets and liabilities: Prepaid expenses and other assets (3,455 ) (284 ) Accounts payable and other liabilities 8,567 1,689 Net cash used in operating activities (46,508 ) (11,834 ) Cash flows from investing activities: Purchases of property and equipment (1,161 ) (1,647 ) Purchases of marketable securities (44,500 ) — Net cash used in investing activities (45,661 ) (1,647 ) Cash flows from financing activities: Proceeds from initial public offering of common stock, net of issuance costs 246,388 — Settlement of success fee obligation (450 ) — Proceeds from issuance of convertible preferred stock, net of issuance costs 134,786 19,989 Proceeds from issuance of debt, net of issuance costs 9,936 — Repayment of debt (10,000 ) — Proceeds from exercise of stock options 30 — Net cash provided by financing activities 380,690 19,989 Net increase in cash, cash equivalents and restricted cash 288,521 6,508 Cash, cash equivalents and restricted cash, beginning of year 14,632 8,124 Cash, cash equivalents and restricted cash, end of year $ 303,153 $ 14,632 Supplemental cash flow information: Cash paid for interest and taxes $ 328 $ — Supplemental disclosure of non-cash investing and financing information: Reclassification of preferred stock tranche obligation liability to permanent equity $ — $ 6,319 Conversion of convertible preferred stock to common stock $ 162,215 $ — Settlement of Tranche Right I $ — $ 1,621 The accompanying notes are an integral part of these financial statements. F-6 Dyne Therapeutics, Inc. Notes to Consolidated F inancial Statements 1. Nature of business and basis of presentation Dyne Therapeutics, Inc. (the “Company”) is building a leading muscle disease company focused on advancing innovative life-transforming therapeutics for people living with genetically driven diseases that was incorporated in Delaware on December 1, 2017 and has a principal place of business in Waltham, Massachusetts. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for its product candidates, fluctuations in operating results, compliance with government regulations, the ability to establish clinical- and commercial-scale manufacturing processes, the impact of the COVID-19 pandemic and the ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization of a product. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. On September 21, 2020, the Company completed its initial public offering (“IPO”) pursuant to which it issued and sold 14,089,314 shares of its common stock, including 1,837,736 shares pursuant to the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $19.00 per share, resulting in net proceeds of $246.4 million, after deducting underwriting discounts and commissions and offering expenses. Upon the closing of the IPO, all of the Company’s then outstanding convertible preferred stock automatically converted into shares of common stock. On January 25, 2021, the Company completed a follow-on public offering of common stock pursuant to which it issued and sold 6,000,000 shares of its common stock at a public offering price of $28.00 per share, resulting in net proceeds of $157.3 million, after deducting underwriting discounts and commissions and offering expenses. The accompanying consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. Since inception, the Company has funded its operations with proceeds from the sales of preferred stock and common stock, including the IPO completed in September 2020 and the follow-on offering completed in January 2021. The Company expects to continue to generate operating losses for the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance of these consolidated financial statements. To continue its development efforts, the Company will need to obtain substantial additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and/or licensing arrangements in order to fund its research and development and ongoing operating expenses. The Company may not be able to obtain financing on acceptable terms, when needed or at all, and the Company may not be able to enter into collaborations, strategic alliances or licensing arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Any collaborations, strategic alliances or licensing arrangements may require the Company to relinquish rights to certain of its technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to the Company. If the Company is unable to obtain funding, F-7 the Company could be forced to delay, limit, reduce or eliminate some or all of its research and development programs, pipeline expansion or future commercialization efforts or grant rights to develop and market product candidates, which could adversely affect its business prospects. Although management will continue to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations when needed or at all. To date, the Company has not experienced material business disruptions, including with its vendors, as a result of the COVID-19 pandemic. In March 2020, the Company implemented a remote working policy for many of its employees and began restricting non-essential travel, and on May 18, 2020, when Massachusetts began its staged reopening plan, the Company began implementing a return-to-work plan, in accordance with the guidance and requirements of federal and state authorities. The Company expects to continue to take actions as may be required or recommended by government authorities or as it determines are in the best interests of its employees and other business partners. The Company is continuing to monitor the potential impact of the pandemic, but cannot be certain what the overall impact will be on its business, financial condition, results of operations and prospects. 2. Summary of significant accounting policies The accompanying consolidated financial statements reflect the operations of the Company and the Company’s wholly owned subsidiary, Dyne Therapeutics Securities Corporation. Intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States of America. Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of research and development expenses and stock-based compensation expense. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions. Concentrations of credit risk and of significant suppliers Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and marketable securities. The Company believes the depository institutions in which the cash and cash equivalents are held are of high-credit quality. The Company maintains its cash equivalents in money market funds that invest in U.S. treasury securities. The Company’s marketable securities as of December 31, 2020 consisted of commercial paper and corporate debt securities. The Company has adopted an investment policy that limits the amounts the Company may invest in the securities of any single issuer with the exclusion of the U.S. government. The Company has not experienced any credit losses. The Company is dependent on a small number of third-party suppliers for its drug substance and drug product. In particular, the Company relies, and expects to continue to rely, on third-party suppliers for certain materials and components required for the development of its programs and future production of any product candidates it may develop for its programs. These programs could be adversely affected by a significant interruption in the supply process. F-8 Cash and cash equivalents Cash includes cash in readily available checking accounts and cash equivalents include all highly liquid investments maturing within 90 days from the date of purchase. Restricted cash Amounts included in restricted cash represent amounts pledged as collateral for letters of credit required for security deposits on the Company’s leased facilities. Restricted cash totaled $2.3 million and $0.0 million at December 31, 2020 and 2019, respectively. These amounts are classified as restricted cash on the Company’s consolidated balance sheets. Marketable securities The Company’s marketable securities as of December 31, 2020 consisted of commercial paper, certificates of deposit and corporate debt securities and are classified as available-for-sale and are reported at fair value. Unrealized losses on available-for-sale debt securities are reported as a component of accumulated other comprehensive loss in stockholders’ equity. Realized gains and losses are based on the specific identification method and are included as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company evaluates its marketable securities with unrealized losses for other-than-temporary impairment. When assessing marketable securities for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented. Deferred rent Payment escalations, rent holidays and other lease incentives that may be included in lease agreements are accrued or deferred as appropriate such that rent expense for each lease is recognized on a straight-line basis over the respective lease term. Adjustments for such items are recorded as deferred rent and amortized over the respective lease terms. Property and equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows: Estimated Useful Life Laboratory equipment 3 years Furnitures and fixtures 5 years Computer equipment 3 years Leasehold improvements Shorter of life of lease or 10 years Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance which do not improve or extend the life of the respective assets are charged to expense as incurred. F-9 Impairment of long-lived assets Long-lived assets consist of property and equipment. The Company evaluates the recoverability of its long-lived assets when circumstances indicate that an event of impairment may have occurred. The Company recognizes an impairment loss only if the carrying amount of a long-lived asset is not recoverable based on its undiscounted future cash flows. Impairment is measured based on the difference between the carrying value of the related assets and the fair value of such assets. The Company has not recorded any impairment charges in the periods presented in these financial statements. Segment information 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, or decision-making group, in making decisions on how to allocate resources and assess performance. The Company’s chief operating decision maker is the chief executive officer (“CEO”). The CEO views the Company’s operations and manages the business as one operating segment. Research and development costs Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including salaries and bonuses, stock-based compensation, employee benefits, facilities costs, laboratory supplies, depreciation and amortization, manufacturing expenses and external costs of vendors engaged to conduct preclinical development activities as well as the cost of licensing technology. Upfront payments and milestone payments made for the licensing of technology are expensed as research and development expenses in the period in which they are incurred. Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are consumed or the services are performed. Research and manufacturing contract costs and accruals The Company has entered into various research and development and manufacturing contracts. These agreements are generally cancelable, and related payments are recorded as the corresponding expenses are incurred. The Company records accruals for estimated ongoing costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the research studies and manufacturing activities, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs. Patent costs All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses. Income taxes The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it F-10 believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. Fair value measurements Certain assets and liabilities are carried at fair value. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: • Level 1—Unadjusted quoted prices in active markets that are accessible to the reporting entity at the measurement date for identical assets and liabilities. • Level 2—Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include the following: • quoted prices for similar assets and liabilities in active markets; • quoted prices for identical or similar assets or liabilities in markets that are not active; • observable inputs other than quoted prices that are used in the valuation of the asset or liabilities (e.g., interest rate and yield curve quotes at commonly quoted intervals); and • inputs that are derived principally from or corroborated by observable market data by correlation or other means. • Level 3—Unobservable inputs for the assets or liability (i.e., supported by little or no market activity). Level 3 inputs include management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Net loss per share The Company follows the two-class method when computing net income (loss) per share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. During periods of loss, the Company does not allocate loss to participating securities because they have no contractual obligation to share in the losses of the Company. Basic net loss per share is computed by dividing the net income loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss is computed by adjusting net loss to F-11 reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share is computed by dividing the diluted net loss by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents. Redeemable convertible preferred stock The Company recorded redeemable convertible preferred stock at fair value upon issuance, net of any issuance costs. The Company classified stock that was redeemable in circumstances outside of the Company’s control outside of permanent equity. No accretion was recognized as the contingent events that could give rise to redemption were not deemed probable. Stock-based compensation The Company accounts for stock-based awards at fair value, and measures fair value using the Black-Scholes option-pricing model. Stock-based compensation costs are recognized as expense over the requisite service period, which is generally the vesting period, on a straight-line basis for all time-vested awards. Forfeitures are recognized as they occur. Success fee obligation The Company’s loan and security agreement (the “Loan Agreement”) entered into in 2020 required the Company to pay a success fee of $0.5 million upon the occurrence of a specified liquidity event, as described in the Loan Agreement, which included the Company’s IPO. The liability was initially deemed immaterial upon entering into the Loan Agreement and was subsequently remeasured to fair value at each reporting date. Following the completion of the IPO, the success fee of $0.5 million was paid in September 2020. Comprehensive loss Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. For the year ended December 31, 2020, the Company’s only element of other comprehensive loss was unrealized gains (losses) on marketable securities. Accounting pronouncements issued and not adopted In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires that all lessees recognize the assets and liabilities that arise from leases on the balance sheet and disclose qualitative and quantitative information about its leasing arrangements. The Company plans to adopt ASU 2016-02 on January 1, 2021 using the modified retrospective approach transition method as of the date of adoption such that prior periods will not be restated. The Company will also elect a package of practical expedients, under which an entity need not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases, or initial direct costs for any existing leases. The adoption of the new standard is expected to result in the recognition of material liabilities and right-of-use assets, however, the Company has not completed the assessment. F-12 3. Marketable securities and f air value measurements Marketable securities by security type at December 31, 2020 consisted of the following: (in thousands) Amortized Cost Unrealized Gains Unrealized Losses Total Commercial paper 6,412 — — 6,412 Certificates of deposit 1,504 — — 1,504 Corporate debt securities 36,572 — (27 ) 36,545 Total $ 44,489 $ — $ (27 ) $ 44,462 The Company did not have marketable securities as of December 31, 2019. The following tables set forth by level, within the fair value hierarchy (see Note 2), the assets carried at fair value on a recurring basis for the periods presented: Fair Value Measurements as of December 31, 2020 (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents Money market funds 155,017 — — 155,017 Commercial paper 2,999 — — 2,999 Certificates of deposit — 5,309 — 5,309 Marketable securities Commercial paper 6,412 — 6,412 Certificates of deposit — 1,504 — 1,504 Corporate debt securities — 36,545 — 36,545 Total $ 164,428 $ 43,359 $ — $ 207,787 Fair Value Measurements as of December 31, 2019 (in thousands) Level 1 Level 2 Level 3 Total Assets: Cash equivalents Money market funds $ 14,420 — — $ 14,420 Total $ 14,420 $ — $ — $ 14,420 The fair value of U.S. government money market funds and commercial paper were determined by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. Certificates of deposit and corporate debt securities were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. During the years ended December 31, 2020 and 2019, there were no transfers between Level 1, Level 2 and Level 3. The following table summarizes the scheduled maturity for the Company’s marketable securities at December 31, 2020: (in thousands) December 31, 2020 Maturing in one year or less $ 28,623 Maturing after one year through two years 24,147 Maturing after two years — Total $ 52,770 There were no sales of marketable securities during the year ending December 31, 2020. The fair value of the preferred stock tranche obligations in connection with the unfunded tranches associated with the Series A Preferred Stock Purchase Agreement (see Note 7) was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair F-13 value hierarchy. The fair value of the preferred stock tranche obligations was determined by considering as inputs the future value of the Series A Preferred Stock, the difference between the future value of the Series A Preferred Stock and the contract price, the number of shares underlying the contract, the probability of achieving the funding of the tranches, expected timing of the tranche closing and the discount rate. The future value of Series A Preferred Stock was estimated by calibrating, or backsolving, to the price of the Series A Preferred Stock as set forth in the Series A Preferred Stock Purchase Agreement. The contractual price of the shares to be issued in addition to the number of shares underlying the contract are both provided for by the Series A Preferred Stock Purchase Agreement. The probability of achieving the funding of the tranches and the expected timing of those closings were estimates made by the Company. The discount rate was equal to the risk-free rate for the estimated timing of each tranche closing. The fair value of the liability recognized in connection with the contingent success fee associated with the Loan Agreement (see Note 6) was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the liability was determined using the probability-weighted expected return method (“PWERM”), which considered as inputs the probability of occurrence of a specified liquidity event, the expected timing of a liquidity event, the amount of the success fee and a risk-adjusted discount rate. The initial fair value of the liability was de minimis due to the low probability of the events probable of triggering payment. As of September 21, 2020, the closing date of the IPO, the event occurred and the probability increased to 100% and the discount rate was assessed to be 0%. Based on these inputs, the Company determined that the fair value of the derivative liability was $0.5 million as of September 21, 2020. Following the completion of the IPO, the success fee of $0.5 million was paid in September 2020. The following table presents a roll-forward of the aggregate fair values of the Company’s liabilities for which fair value is determined by Level 3 inputs: (in thousands) Preferred Stock Tranche Obligations Success Fee Obligation Balance—January 1, 2019 $ 3,375 $ — Settlement of Tranche Right I 1,621 — Change in fair value 1,323 — Reclassification of Tranche Right II to equity (6,319 ) — Balance—December 31, 2019 — — Initial fair value of success fee obligation — — Change in fair value — 450 Settlement of derivative instrument — (450 ) Balance—December 31, 2020 $ — $ — Financial instruments not recorded at fair value The carrying values of cash, cash equivalents, accounts payable and accrued expenses that are reported on the balance sheets approximate their fair value due to the short-term nature of these assets and liabilities. F-14 4. Property and equipment Property and equipment consisted of the following: December 31, (in thousands) 2020 2019 Laboratory equipment $ 2,744 $ 1,705 Office and computer equipment 78 62 Leasehold improvements 14 14 Construction in process 105 — Property and equipment—at cost 2,941 1,781 Less accumulated depreciation and amortization (995 ) (295 ) Property and equipment—net $ 1,946 $ 1,486 Depreciation expense totaled $0.7 million and $0.3 million for the years ended December 31, 2020 and 2019, respectively. 5. Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following: December 31, (in thousands) 2020 2019 Payroll and benefits $ 2,105 $ 540 Consulting services 263 60 Legal services 325 — Research and development 4,782 484 Facility costs 52 18 Total $ 7,527 $ 1,102 6. Debt financing On February 20, 2020, the Company entered into a Loan Agreement pursuant to which the lender made term loans to the Company in an aggregate principal amount of $10.0 million. Borrowings under the Loan Agreement were collateralized by substantially all of the Company’s assets, excluding intellectual property. Interest on the outstanding loan balance accrued at a variable annual rate equal to the greater of (i) the lender’s prime rate plus 0.25% and (ii) 5.00%, and the Company was required to make interest-only payments on the loans on a monthly basis through August 2021. The outstanding borrowings were repaid in October 2020. As part of the Loan Agreement, a success fee of $0.5 million was required in the event of a liquidation event, including an IPO. The success fee represented an embedded derivative which the Company bifurcated from the debt arrangement and carried at fair value. In September 2020, the Company completed its IPO and paid the success fee of $0.5 million. F-15 7 . C onvertible preferred stock Since inception, the Company issued Series A convertible preferred stock (the “Series A Preferred Stock”) and Series B convertible preferred stock (the “Series B Preferred Stock”). Collectively the Series A Preferred Stock and the Series B Preferred Stock are referred to as the Preferred Stock. Upon the closing of the IPO in September 2020, the Company’s Preferred Stock automatically converted into 28,086,375 shares of common stock. Series A Preferred Stock On November 29, 2018, the Company entered into the Series A Preferred Stock Purchase Agreement with its initial investors committing to purchase an aggregate of $50.0 million in shares of Series A Preferred Stock. At the initial closing, 12,500,000 shares of Series A Preferred Stock were issued by the Company at a purchase price of $1.00 per share, for gross cash proceeds of $7.5 million. Of the 12,500,000 shares issued, 5,000,000 shares were issued upon conversion of the then outstanding SAFEs, which had a fair value of $5.0 million. In April 2019, the Company issued an additional 20,000,000 shares of Series A Preferred Stock under the terms of the Series A Preferred Stock Purchase Agreement at a purchase price of $1.00 per share for total gross proceeds of $20.0 million. Issuance costs associated with each closing of the Series A Preferred Stock financing were $0.1 million. On March 18, 2020, the Company entered into a separate Series A Preferred Stock Purchase Agreement with an additional investor and issued 2,000,000 shares of Series A Preferred Stock at a purchase price $1.00 per share for gross cash proceeds of $2.0 million. In July 2020, the Company issued and sold 17,500,000 shares of Series A Preferred Stock at a price of $1.00 per share, for gross proceeds of $17.5 million. Series B Preferred Stock In August 2020, the Company issued and sold 41,159,724 shares of Series B Preferred Stock at a price of $2.81 per share for gross proceeds of $115.7 million. Tranche Rights Included in the terms of the November 2018 Series A Preferred Stock Purchase Agreement were certain rights (“Tranche Rights”) granted to the investors who purchased the Series A Preferred Stock purchased in November 2018. The Tranche Rights contingently obligated the investors to purchase, and the Company to sell, up to an aggregate of 37,500,000 shares of Series A Preferred Stock at $1.00 per share upon the satisfaction of specified research and development milestones by the Company. The Tranche Rights are also exercisable at the option of the holders of the Series A Preferred Stock. The Tranche Rights were divided into separate rights and obligations to purchase 20,000,000 shares (“Tranche Right I”) and 17,500,000 shares (“Tranche Right II”) based on the achievement of specified milestones for each tranche. The Company concluded that the Tranche Rights met the definition of a freestanding financial instrument, as the Tranche Rights were legally detachable and separately exercisable from the Series A Preferred Stock. Therefore, the Company allocated the proceeds from the November 2018 issuance between the Tranche Rights and the Series A Preferred Stock. As the Series A Preferred Stock was redeemable upon a deemed liquidation event at the election of the holder-controlled Board, and therefore outside of the control of the Company, the Tranche Rights were initially classified as a liability and were initially recorded at their fair value of $3.4 million. The Tranche Rights were then remeasured at fair value at each reporting period, with changes in fair value recorded in the statement of operations. The estimated fair value of the Tranche Rights was determined at each reporting date using a probability-weighted present value model that considers the probability of closing a tranche, the estimated future value of the Series A Preferred Stock to be issued at each closing, and the investment required at each closing. Future values were converted to present value using a discount rate appropriate for probability-adjusted cash flows. F-16 In April 2019, Tranche Right I was settled when the Company closed on the issuance of 20,000,000 shares Series A Preferred Stock. The fair value of the Tranche Right I as of the closing date was reclassified from a liability to Series A Preferred Stock within equity. In September 2019, the size of the Board was increased from five to six members, including three independent members, which allowed the Company to conclude that the redemption rights of the holders of the Series A Preferred Stock was within the control of the Company. As a result, the Company concluded that Tranche Right II qualified for equity classification as of that date. The preferred stock tranche obligation liability, with a fair value of $6.3 million, was reclassified into permanent equity and was no longer remeasured at fair value. In July 2020, Tranche Right II was settled when the Company closed on the issuance of 17,500,000 shares Series A Preferred Stock. The Preferred Stock had the followings rights and privileges: Dividends Holders of the Preferred Stock were entitled to receive non-cumulative dividends when, as and if declared by the Board. The Company did not declare dividends on any class of preferred or common stock. Liquidation In the event of any liquidation, dissolution, or winding-up of the Company, which would include the sale of the Company, the Preferred Stock was senior to common stock. Voting The holders of the Preferred Stock were entitled to the number of votes equal to the number of shares of common stock into which the shares of Preferred Stock held by each holder were then convertible. Conversion The holders of the Preferred Stock were able to convert, at any time, each share of Preferred Stock into shares of common stock at the stated conversion price. 8. Equity As of December 31, 2020, the Company’s restated certificate of incorporation authorized the Company to issue 200,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. As of December 31, 2019, the Company had authorized 68,000,000 shares of common stock. The voting, dividend and liquidation rights of the holders of the Company’s common stock was subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock as set forth above. 9. Stock-based compensation 2018 Stock incentive plan The Company’s 2018 Stock Incentive Plan (the “2018 Plan”) provided for the Company to sell or issue incentive stock options or nonqualified stock options, restricted stock, and other equity awards to employees, directors and consultants of the Company. The 2018 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions were determined at the discretion of the board of directors. F-17 The total number of shares of common stock authorized under the 2018 Plan was 8,267,252 shares . Upon the effectiveness of the 2020 Plan, the Company ceased granting awards under the 2018 Plan, and the 1,928,487 shares of common stock remaining under the 2018 Plan became available for future issuance under the 2020 Plan. 2020 Stock incentive plan In August 2020 the Company’s board of directors adopted and the Company’s stockholders approved the 2020 Plan (together with the 2018 Plan the “Plans”), which became effective on September 16, 2020. The 2020 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards to employees, directors, consultants and advisors of the Company. The 2020 Plan is administered by the Company’s board of directors or by a committee appointed by the board of directors. Upon the effectiveness of the 2020 Plan, the Company ceased granting awards under the 2018 Plan. The number of shares initially reserved for issuance under the 2020 Plan was 4,884,233. The number of shares of common stock reserved for issuance under the 2020 Plan automatically increases on the first day of each fiscal year, beginning with the fiscal year commencing on January 1, 2021 and continuing for each fiscal year until, and including the fiscal year commencing on, January 1, 2030, in an amount equal to the lower of (1) 5% of the shares of common stock outstanding on such date and (2) an amount determined by the Company’s board of directors. On January 1, 2021, 2,272,345 shares were added to the shares reserved for issuance under the 2020 Plan in the first of these annual increases. As of December 31, 2020, 3,237,244 shares remained available for future issuance under the 2020 Plan. 2020 Employee Stock Purchase Plan In August 2020 the Company’s board of directors adopted and the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which became effective September 16, 2020. The 2020 ESPP is administered by the Company’s board of directors or by a committee appointed by the board of directors. The 2020 ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 488,414 shares of common stock. The number of shares of common stock reserved for issuance under the 2020 ESPP will automatically increase on the first day of each fiscal year, beginning with the fiscal year commencing on January 1, 2021 and continuing for each fiscal year until, and including the fiscal year commencing on, January 1, 2030, in an amount equal to the lowest of (1) 1,953,656 shares of common stock, (2) 1% of the shares of common stock outstanding on such date, and (3) an amount determined by the board of directors. As of December 31, 2020, no offering periods have commenced under the 2020 ESPP and 488,414 shares remained available for issuance. Stock option valuation The Company typically grants stock options at exercise prices deemed by the Board to be equal to the fair value of the common stock at the time of grant. In the periods prior to the IPO, the fair value of the common stock was determined by the Board at each measurement date based on a variety of different factors, including the results obtained from independent third-party appraisals, the Company’s financial position and historical financial performance, the status of development of the Company’s programs, the current climate in the marketplace, the illiquid nature of the common stock, the effect of the rights and preferences of the preferred stockholders, and the prospects of a liquidity event, among others. In the periods following the IPO, the fair value is determined based upon the quoted price of the Company’s common stock. The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. F-18 The assumptions that the Company used to determine the grant-date fair value of options granted were as follows: Year Ended December 31, 2020 Year Ended December 31, 2019 Expected volatility 75% 74% Risk-free interest rate 0.31% — 1.67% 1.46% — 2.50% Expected term (in years) 6 6 Expected dividend yield — — Stock option activity The following table summarizes the option activity: (in thousands, except share and per share data) Options Weighted Average Exercise Price Weighted Average Remaining Life (in years) Aggregate Intrinsic Value Outstanding January 1, 2020 311,303 $ 0.93 9.5 $ 30 Granted 6,252,967 7.13 Exercised (32,197 ) 0.93 Canceled (110,484 ) 1.04 Outstanding December 31, 2020 6,421,589 $ 6.97 9.5 $ 90,112 Options exercisable— December 31, 2020 447,925 $ 4.74 9.2 $ 7,282 Options vested or expected to vest— December 31, 2020 6,421,589 $ 6.97 9.5 $ 90,112 The weighted-average grant date fair value of the options granted during the years ended December 31, 2020 and 2019 was $4.50 per share and $0.62 per share, respectively. As of December 31, 2020 there was $20.3 million of unrecognized compensation expense, which the Company expects to recognize over a weighted-average period of 2.71 years. Additionally, as of December 31, 2020, the Company has unrecognized compensation cost related to unvested stock-based awards with performance-based vesting conditions for which performance has not been deemed probable of $2.6 million. Restricted stock units A restricted stock unit (“RSU”) represents the right to receive one share of common stock upon vesting of the RSU. The Company grants RSUs with service conditions that vest in four equal annual installments provided that the employee remains employed with the Company. The Company also grants RSUs with performance conditions that vest upon the achievement of specified milestones. The fair value of each RSU is based on the closing price of the Company’s common stock on the date of grant. A summary of the Company’s RSU activity and related information for the 2020 Plan for the year ended December 31, 2020 is as follows: Number of Shares Underlying RSUs Weighted Average Grant Date Fair Value Issued and unvested as of January 1, 2020 — — Granted 403,355 $ 23.60 Vested — — Forfeited — — Issued and unvested as of December 31, 2020 403,355 $ 23.60 F-19 As of December 31, 2020, there was $7.7 million of unrecognized compensation costs ​​​​​​​related to unvested RSUs, which are expected to be recognized over a weighted-average period of 2.75 years. Additionally, as of December 31, 2020, the Company has unrecognized compensation cost of $0.6 million related to unvested stock-based awards with performance-based vesting conditions for which performance has not been deemed probable. Restricted common stock During the year ended December 31, 2018, the Company granted restricted common stock with service-based vesting conditions. Shares of unvested restricted common stock may not be sold or transferred by the holder. These restrictions lapse according to the time-based vesting conditions of each award. The grant date fair value of these shares was immaterial. The following table summarizes the Company’s restricted common stock award activity for the year ended December 31, 2020: Number of Restricted Shares Issued and unvested as of January 1, 2020 652,482 Vested (282,153 ) Issued and unvested as of December 31, 2020 370,329 The Company recorded stock-based compensation expense in the following expense categories of its statements of operations: Year Ended December 31, (in thousands) 2020 2019 Research and development $ 2,699 $ 13 General and administrative 3,892 13 Total $ 6,591 $ 26 10. Income taxes There is no provision for income taxes because the Company has historically incurred net operating losses and maintains a full valuation allowance against its deferred tax assets. The reported amount of income tax expense/benefit for the years ended December 31, 2020 and 2019 differs from the amount that would result from applying domestic federal statutory rates to pretax losses primarily because of changes in the valuation allowance. A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows: Year Ended December 31, 2020 2019 Federal income tax expense at statutory rate 21 % 21 % State taxes—net of federal benefit 5 6 Change in fair value of preferred stock tranche obligations — (2 ) Other permanent differences — (1 ) Federal & state R&D credits 1 4 Increase in valuation allowance (27 ) (28 ) Effective income tax rate 0 % 0 % F-20 Significant components of the Company’s net deferred tax assets at December 31, 2020 and 2019 are as follows: Year Ended December 31, (in thousands) 2020 2019 Deferred tax assets: Stock-based compensation $ 1,349 $ 1 Net operating loss carryforwards 18,858 4,848 Credit carryforwards 1,155 612 Intangible assets — 12 Accrued expenses 580 161 Total deferred tax assets 21,942 5,634 Valuation allowance (21,899 ) (5,607 ) Total net deferred tax assets 43 27 Deferred tax liabilities: Fixed assets (43 ) (27 ) Total deferred tax liability (43 ) (27 ) Total deferred tax assets (liabilities) $ — $ — As of December 31, 2020, the Company had federal and state net operating loss carryforwards of $69.1 million and $68.9 million, respectively. The federal net operating loss carryforwards are indefinite lived and the state net operating loss carryforwards begin to expire in 2038. As of December 31, 2020, the Company also had federal and state research and development tax credit carryforwards $0.8 million and $0.4 million, respectively, which begin to expire in 2039 and 2033, respectively. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position. The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and research and development tax credit carryforwards. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and concluded that it is more likely than not that the Company will not recognize the benefits of its federal and state deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2020 and 2019. The increase in the valuation allowance for deferred tax assets during the years ended December 31, 2020 and 2019 totaled $16.3 million and $4.2 million, respectively, and related primarily to the increase in net operating loss carryforwards. The Company’s policy is to record estimated interest and penalties related to uncertain tax positions in income tax expense. The Company has no amounts recorded for any unrecognized tax positions, accrued interest or penalties as of December 31, 2020 and 2019. F-21 The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates, including the United States and the Commonwealth of Massachusetts. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax returns are open under statute from 2018 to the present. 11. Net loss per share Basic and diluted net loss per share was calculated as follows: Year Ended December 31, (in thousands, except share and per share data) 2020 2019 Numerator: Net loss $ (59,437 ) $ (14,859 ) Denominator: Weighted-average common shares outstanding—basic and diluted 14,395,955 2,442,872 Net loss per share—basic and diluted $ (4.13 ) $ (6.08 ) The following potentially dilutive common stock equivalents, presented based on amounts outstanding at each period end, were excluded from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect: Year Ended December 31, 2020 2019 Options to purchase common stock 6,421,589 311,303 Unvested restricted common stock 370,329 652,482 Unvested restricted stock units 403,355 — Convertible preferred stock (as converted to common stock) — 9,798,298 Total 7,195,273 10,762,083 12. Commitments and contingencies Operating leases In May 2019, the Company entered into a sublease agreement for laboratory and office space in Waltham, Massachusetts. The term of the sublease commenced on July 1, 2019 and expires on December 31, 2021. In December 2020, the Company entered into a lease agreement (the “Lease”), pursuant to which the Company will lease approximately 68,187 square feet of additional office and laboratory space located in Waltham, Massachusetts (the “Premises”). The Lease will have a term of eight years and six months that will commence when the Premises are ready for occupancy. The Company’s obligation for the payment of base rent for the Premises begins six months after the commencement date and will be $0.4 million per month, increasing up to $0.5 million during the term of the Lease. The Company has two options to extend the term of the Lease, each for a period of an additional five years. The Company expects the Premises to be ready for occupancy in the second half of 2021. Rent expense for the years ended December 31, 2020 and 2019 totaled $0.8 million and $0.7 million, respectively. Future minimum lease payments under the non-cancelable operating leases consisted of the following as of December 31, 2020: F-22 Year Ending December 31, (in thousands) 2021 $ 800 2022 4,603 2023 4,741 2024 4,883 2025 5,029 Thereafter 21,672 Total $ 41,728 Legal proceedings The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to any such legal proceedings. Other contractual obligations The Company enters into contracts in the normal course of business with third parties for preclinical research studies, clinical trials and testing and manufacturing services. These contracts typically do not contain minimum purchase commitments and are generally cancelable by the Company upon written notice. Payments due upon cancellation consist of payments for services provided or expenses incurred, including noncancelable obligations of the service providers, up to the date of cancellation and in the case of certain arrangements may include non-cancelable fees. The Company has also entered into a license agreement (the “UMONS Agreement”) with the University of Mons (“UMONS”) in April 2020, pursuant to which UMONS granted to the Company an exclusive, worldwide license to certain patents and patent applications and a non-exclusive, worldwide license to existing, related know-how. Each of the issued patents licensed to the Company under the UMONS Agreement is scheduled to expire in 2031. The licenses under the UMONS Agreement confer on the Company the right to research, develop and commercialize products (“licensed products”), and to practice processes, in each case, covered by the licensed patents and existing, related know-how. Under the UMONS Agreement, the Company is obligated to use commercially reasonable efforts to develop at least one licensed product and, to the extent regulatory approval is obtained in such jurisdictions, to commercialize at least one licensed product in the United States and the United Kingdom or a member country of the European Union. Unless terminated earlier, the UMONS Agreement will remain in effect until the last to expire of the licensed patent rights on a licensed product-by-licensed product and country-by-country basis. UMONS may terminate the UMONS Agreement in the event of a material breach by the Company and the Company’s failure to cure such breach within a specified time period. The Company may voluntarily terminate the UMONS Agreement with prior notice to UMONS. In connection with the Company’s entry into the UMONS Agreement, the Company paid UMONS an upfront payment of €0.1 million. The Company also agreed to make milestone payments to UMONS upon the achievement of specified development and regulatory milestones up to a maximum aggregate total of €0.4 million for the first licensed product to achieve such milestones and up to a maximum aggregate total of €0.2 million for each subsequent licensed product to achieve each such milestones, as well as a low single-digit percentage royalty on net sales of licensed products by the Company, its affiliates and sublicensees. These royalty obligations continue on a licensed product-by-licensed product and country-by-country basis until the expiration of the last licensed patent rights covering such licensed product in such country. In addition, if the Company sublicenses rights under the UMONS Agreement, the Company is required to pay a low double-digit percentage of the sublicense revenue to UMONS. Additionally, if the Company chooses to file, prosecute or maintain any patents included in the licensed patent rights under the UMONS Agreement, it will be required to bear the full cost and expenses of preparing, filing, prosecuting and maintaining any such patents. F-23 No amounts have been accrued under this arrangement with respect to potential milestone payment obligations or royalty obligations given the uncertainty of achieving the specified milestones and commercial sales of any licensed products. 13. Subsequent events For the year ended December 31, 2020, subsequent events were evaluated through March 4, 2021, the date on which the audited consolidated financial statements were issued. F-24