What changed in this filing

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Item 1. Financial Statements

2020-11-05 compared with 2020-08-14 · 86 added, 65 removed, 391 unchanged (28% of the section changed)

2 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

15 unchanged sentences

no shares authorized, issued

or outstanding as of June 30, 2020;

or outstanding as of September 30, 2020;

70,378,661 shares authorized and 60,533,313

3 unchanged sentences

10,000,000 shares authorized;

issued or outstanding as of June 30, 2020;

issued or outstanding as of September 30, 2020;

no shares authorized, issued or

2 unchanged sentences

200,000,000 and 100,000,000 shares

authorized as of June 30, 2020 and December 31, 2019, respectively;

and 702,510 shares issued and outstanding as of June 30, 2020 and December 31,

authorized as of September 30, 2020 and December 31, 2019, respectively;

and 702,510 shares issued and outstanding as of September 30, 2020 and December 31,

2019, respectively

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

5 unchanged sentences

Interest income

Other expense

Other income (expense)

Total other income (net)

5 unchanged sentences

Other comprehensive income:

Unrealized gains on investments (net)

Unrealized gain (loss) on investments (net)

Comprehensive loss

17 unchanged sentences

Balance at June 30, 2019

Stock-based compensation

Unrealized gain on

Balance at September 30, 2019

CONVERTIBLE PREFERRED STOCK

27 unchanged sentences

Balance at June 30, 2020

Exercise of stock options

Stock-based compensation

Unrealized loss on

Balance at September 30, 2020

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

1 unchanged sentence

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

29 unchanged sentences

Property and equipment purchases included in accrued expenses

Unrealized gain on investments

Unrealized gain (loss) on investments

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the periods shown above:

Six Months Ended

Nine Months Ended

September 30,

Cash and cash equivalents

20 unchanged sentences

The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of convertible preferred stock and proceeds from the IPO.

As of June 30, 2020, the Company had cash, cash equivalents, and investments of $106.3 million and an accumulated deficit of approximately $72.2 million.

As of September 30, 2020, the Company had cash, cash equivalents, and investments of $96.1 million and an accumulated deficit of approximately $84.6 million.

The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts.

The Company believes its cash, cash equivalents and investments as of June 30, 2020 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

The Company believes its cash, cash equivalents and investments as of September 30, 2020 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

The Company will need additional funding to support its planned operating activities.

9 unchanged sentences

The unaudited condensed consolidated interim financial statements have been prepared on the same basis as the audited financial statements.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of June 30, 2020, the results of its operations for the three and six months ended June 30, 2020 and 2019 and cash flows for the six months ended June 30, 2020 and 2019.

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated interim financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of September 30, 2020, the results of its operations for the three and nine months ended September 30, 2020 and 2019 and cash flows for the nine months ended September 30, 2020 and 2019.

Such adjustments are of a normal and recurring nature.

The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

The results for the three and nine months ended September 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.

Principles of Consolidation

3 unchanged sentences

The significant accounting policies and estimates used in the preparation of the accompanying unaudited condensed consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s Registration Statement on Form S-1/A filed with the SEC on March 10, 2020.

There have been no material changes in the Company’s significant accounting policies during the three and six months ended June 30, 2020.

There have been no material changes in the Company’s significant accounting policies during the three and nine months ended September 30, 2020.

Use of Estimates

12 unchanged sentences

Comprehensive loss includes net loss and certain changes in stockholders’ equity (deficit) that are excluded from net loss.

The Company’s comprehensive loss was equal to net loss for the three and six months ended June 30, 2019.

For the three and six month period ended June 30, 2020, as a result of the Company’s investments in available-for-sale securities, the Company’s comprehensive loss includes unrealized gains and unrealized losses on those available-for-sale securities.

The Company’s comprehensive loss includes unrealized gains and unrealized losses on available-for-sale securities for the three and nine months ended September 30, 2020 and 2019.

Recently Issued Accounting Pronouncements

20 unchanged sentences

The amendments align the contractual term under Topic 326 and Topic 842 (Leases) to be consistent, and also clarifies when an entity should record an allowance for credit losses in accordance with Topic 326.

This standard became effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

The Company is currently evaluating the impact of this new guidance on the Company’s consolidated financial statements and related disclosures, but does not expect the adoption of ASU 2020-03 or 2016-13 to be material.

Fair Value of Financial Assets a nd Liabilities

This standard becomes for the Company for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Fair Value of Financial Assets and Liabilities

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values (in thousands):

June 30, 2020

September 30, 2020

Quoted Prices in

20 unchanged sentences

Total financial assets

As of June 30, 2020 and December 31, 2019, the Company’s Level 1 financial assets consisted of cash equivalents held in money market funds, which are valued using quoted market prices in active markets without any valuation adjustment , and United States treasury bills, which are based on quoted market prices in active markets.

As of September 30, 2020 and December 31, 2019, the Company’s Level 1 financial assets consisted of cash equivalents held in money market funds, which are valued using quoted market prices in active markets without any valuation adjustment , and United States treasury bills, which are based on quoted market prices in active markets.

The financial assets valued based on Level 2 inputs consist of corporate debt securities and commercial paper, which consist of investments in highly-rated investment-grade securities.

3 unchanged sentences

The Company validates the prices provided by its third-party pricing sources by understanding the models used, obtaining market values from other pricing sources and analyzing pricing data in certain instances.

During the three and six months ended June 30, 2020 and the year ended December 31, 2019, there were no transfers between fair value measurement levels.

During the three and nine months ended September 30, 2020 and the year ended December 31, 2019, there were no transfers between fair value measurement levels.

The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

As of June 30, 2020 and December 31, 2019, the Company had short-term investments consisting of United States treasury bills, corporate debt securities, and commercial paper, which are considered to be available-for-sale investments.

As of September 30, 2020, the Company had short-term investments consisting of United States treasury bills, corporate debt securities, and commercial paper, which are considered to be available-for-sale investments.

As of December 31, 2019, the Company had short-term investments consisting of corporate debt securities and commercial paper.

These are included in short-term investments on the condensed consolidated balance sheets, even though the stated maturity date may be one year or more beyond the current balance sheet date, as the Company views those securities as available for use in current operations, if needed.

The following table summarizes the Company’s investments (in thousands):

June 30, 2020

September 30, 2020

Amortized Cost

1 unchanged sentence

Gross Unrealized

United States Treasury Bills

Corporate debt securities

United States Treasury Bills

Commercial Paper

5 unchanged sentences

Corporate debt securities

As of June 30, 2020, the Company had four available-for-sale securities with an aggregate value of approximately $14.5 million in immaterial unrealized loss positions for less than twelve months.

As of December 31, 2019, the Company had no available-for-sale securities in unrealized loss positions The Company has the intent and ability to hold such securities until recovery.

The Company determined that there was no material change in the credit risk of these investments .

As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of June 30, 2020 and December 31, 2019.

As of September 3 0 , 2020 and December 31, 2019, the Company had no available-for-sale securities in unrealized loss positions.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

September 30,

Accrued research and development expenses

13 unchanged sentences

The Company also agreed to pay tiered royalties based on net sales of all products licensed under the agreement in the low single-digit percentages.

To date, pursuant to the license agreement, the Company has made cash payments to Lundbeck of $1.8 million consisting of an upfront payment and ongoing milestone payments, which were recorded as research and development expense s .

No payments were made during the year ended December 31, 2019 , or for the three and six months ended June 3 0 , 2020 .

No payments were made during the year ended December 31, 2019, or for the three and nine months ended September 30, 2020.

As partial consideration for the license, the Company issued 167,523 shares of common stock to Lundbeck, which represented 8.0% of the Company’s then outstanding equity pursuant to a restricted stock agreement.

The shares were fully vested on the date of issuance.

The Company also allowed Lundbeck to participate in the fourth tranche of its Serie s A p referred s tock financing in November 2018 at $1.00 per share.

The Company also allowed Lundbeck to participate in the fourth tranche of its Series A preferred stock financing in November 2018 at $1.00 per share.

The Lundbeck Agreement can be terminated by the Company at any time with 180 days’ written notice.

4 unchanged sentences

The agreement for this space terminated on August 17, 2019.

The Company recorded rent expense of less than $0.1 million during the three and six months ended June 30, 2019.

The Company recorded rent expense of less than $0.2 million during the three and nine months ended September 30, 2019.

In May 2019, the Company entered into a new operating lease agreement for office space totaling 4,210 square feet, located in Boston, Massachusetts with a 62-month term.

2 unchanged sentences

In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, in accordance with the terms of the Lease Agreement.

The Company provided a security deposit of approximately $0.1 million in May 2019, which is included as a component of other assets on the Company’s unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019.

The Company occupied the space in August 2019 and commenced recognition of rent expense.

The Company recorded rent expense of less than $0.1 million during the three months ended June 30, 2020, and approximately $0.1 million during the six months ended June 30, 2020.

The Company recorded rent expense of approximately $0.1 million during the three months ended September 30, 2020, and approximately $0.2 million during the nine months ended September 30, 2020.

The following table summarizes the future minimum lease payments due under the Company’s operating lease (in thousands):

September 30,

Legal Proceedings

The Company may from time to time be party to litigation arising in the ordinary course of business.

The Company was not subject to any material legal proceedings during the three and six months ended June 30, 2020 and year ended December 31, 2019, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

The Company was not subject to any material legal proceedings during the three and nine months ended September 30, 2020 and year ended December 31, 2019, and no material legal proceedings are currently pending or, to the best of its knowledge, threatened.

Indemnification Obligations

14 unchanged sentences

No dividends have been declared by the Company’s Board of Directors since inception.

As of December 31, 2019, preferred stock consisted of the following (in thousands, except share data):

As of December 31, 2019, p referred s tock consisted of the following (in thousands, except share data):

December 31, 2019

5 unchanged sentences

Common stockholders are entitled to receive dividends, as may be declared by the Board, if any, subject to the preferential dividend rights of any preferred stock then outstanding.

Through June 30, 2020, no cash dividends have been declared or paid.

As of June 30, 2020, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.

As of June 30, 2020 and December 31, 2019, the Company has reserved for future issuance the following shares of common stock:

Through September 30, 2020, no cash dividends have been declared or paid.

As of September 30, 2020, 10,000,000 shares of preferred stock were authorized and no shares of preferred stock were issued or outstanding.

As of September 30, 2020 and December 31, 2019, the Company has reserved for future issuance the following shares of common stock:

September 30,

Conversion of outstanding preferred stock

13 unchanged sentences

(1) 1,220,283 shares of the Company’s common stock;

plus (2) the number of shares (up to a maximum of 2,091,969 shares) equal to the sum of (x) 228,852 shares, which represents the Company’s common stock reserved for issuance under the 2016 Plan that remained available for grant under the 2016 Plan as of March 11, 2020 and (y) the number of shares of the Company’s common stock subject to outstanding awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right.

awards granted under the 2016 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right .

The number of shares reserved shall be annually increased on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2021 and continuing until, and including, the fiscal year ending December 31, 2030, equal to the lesser of (i) 4% of the number of shares of the Company’s common stock outstanding on the first day of such fiscal year and (ii) an amount determined by the Company’s board of directors.

No more than 8,541,982 shares of common stock may be issued as incentive stock options under the 2020 Plan .

The shares of common stock underlying any awards that expire, terminate, or are otherwise surrendered, cancelled, forfeited or repurchased by the Company under the 2016 Plan or the 2020 Plan will be added back to the shares of common stock available for issuance under the 2020 Plan

As of June 30, 2020, there were 1,321,261 shares available for future issuance under the 2020 Plan.

The shares of common stock underlying any awards that expire, terminate, or are otherwise surrendered, cancelled, forfeited or repurchased by the Company under the 2016 Plan or the 2020 Plan wil l be added back to the shares of common stock available for issuance under the 2020 Plan

As of September 30, 2020, there were 1,277,645 shares available for future issuance under the 2020 Plan.

For financial reporting purposes, the Company performed common stock valuations with the assistance of a third-party specialist through October 23, 2019 to determine stock-based compensation expense for stock options.

5 unchanged sentences

Outstanding as of December 31, 2019

Outstanding as of June 30, 2020

Options vested and exercisable as of June 30, 2020

Outstanding as of September 30, 2020

Options vested and exercisable as of September 30, 2020

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the period.

The weighted-average grant date fair value of the Company’s stock options granted during the three and six months ended June 30, 2020 was $10.36 and $10.16, respectively.

The weighted-average grant date fair value of the Company’s stock options granted during each of the three and six months ended June 30, 2019 was $3.42.

The assumptions that the Company used to determine the grant date fair value of stock options granted to employees, non-employees and members of the Board during the three and six months ended June 30 , 2020 and 2019 were as follows, presented on a weighted -average basis Stock-based compensation expense was allocated as follows (in thousands) :

Three Months Ended June 30,

Six Months Ended June 30,

The weighted-average grant date fair value of the Company’s stock options granted during the three and nine months ended September 30, 2020 was $12.99 and $11.30, respectively.

The weighted-average grant date fair value of the Company’s stock options granted during the nine months ended September 30, 2019 was $3.42.

The Company did not grant any stock options during the three months ended September 30, 2019.

The assumptions that the Company used to determine the grant date fair value of stock options granted to employees, non-employees and members of the Board during the three and nine months ended September 30, 2020 and the nine months ended September 30, 2019 were as follows, presented on a weighted-average basis Stock-based compensation expense was allocated as follows (in thousands):

Three Months Ended

September 30,

Nine Months Ended

September 30,

Expected term (in years)

5 unchanged sentences

Vesting of these options was contingent on the closing of the second tranche of Series B Preferred Stock financing.

Stock-based compensation expense associated with performance-based stock options is recognized if the performance conditions are considered probable of being achieved, using management’s best estimates.

As a result of the performance condition being met on February 25, 2020, these options will vest as to 25% of the shares underlying each option on February 25, 2021 and as to the remainder of the shares in equal quarterly installments for three years thereafter.

The Company recognized stock-based compensation expense of less than $0.1 million for these options during the three and six months ended June 30, 2020, respectively.

Stock-based compensation expense associated with performance-based stock options is recognized if the performance conditions are

considered probable of being achieved, using management’s best estimates.

As a result of the performance condition being met on February 25, 2020, these options will vest as to 25% of the share s underlying each option on February 25, 2021 and as to the remainder of the shares in equal quarterly installments for three years thereafter.

The Company recognized stock-based compensation expense of less than $ 0.1 million and $0.2 million for these opt ions during the three and nine months ended September 30 , 2020 , respectively .

Stock-Based Compensation

Stock-based compensation expense included in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

1 unchanged sentence

Total stock-based compensation expense

As of June 30, 2020 and December 31, 2019, total unrecognized compensation cost related to the unvested stock-based awards was $5.6 million and $3.3 million, respectively, which is expected to be recognized over a weighted-average period of 3.03 and 3.17 years, respectively.

As of September 30, 2020 and December 31, 2019, total unrecognized compensation cost related to the unvested stock-based awards was $6.9 million and $3.3 million, respectively, which is expected to be recognized over a weighted-average period of 3.06 and 3.17 years, respectively.

2020 Employee Stock Purchase Plan

6 unchanged sentences

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”).

The Cares Act includes provisions relating to refundable payroll tax credits, deferment of the employer portion of certain payroll taxes, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qual ified improvement property.

The CARES Act also established a Paycheck Protection Program whereby certain small businesses are eligible for a loan to fund payroll expenses, rent, and related costs.

2 unchanged sentences

Basic and diluted net loss per share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period.

Net loss applicable to common stockholders for the six months ended June 30, 2020 did not equal net loss due to the accretion of the beneficial conversion feature of Series B Preferred Stock in the amount of $7.9 million.

Net loss attributable to common stockholders for the nine months ended September 30, 2020 did not equal net loss due to the accretion of the beneficial conversion feature of Series B Preferred Stock in the amount of $7.9 million.

The beneficial conversion feature was initially recorded as a discount on the Series B Preferred Stock with a corresponding amount recorded to Additional Paid-in Capital.

4 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Series Seed Preferred Stock

8 unchanged sentences

Lundbeckfond Invest A/S also purchased 187,500 shares of common stock in the IPO.

This reflects a 6.9% and a 9.3% ownership interest on a fully diluted basis as of June 30, 2020 and December 31, 2019, respectively.

This reflects a 7.4% and a 9.3% ownership interest on a fully diluted basis as of September 30, 2020 and December 31, 2019, respectively.

Mette Kirstine Agger, a member of our board of directors, is a Managing Partner at Lundbeckfonden Ventures, which is an affiliate of Lundbeckfond Invest A/S.

2 unchanged sentences

All shares of preferred stock converted into shares of common stock upon closing of the IPO.

This reflects a 2.5% and a 4.2% ownership interest on a fully diluted basis as of June 30, 2020 and December 31, 2019, respectively.

This reflects a 2.7% and a 4.2% ownership interest on a fully diluted basis as of September 30, 2020 and December 31, 2019, respectively.

Lundbeck did not participate in the Series B Preferred Stock financing.

4 unchanged sentences

James McArthur was the Company’s founder, President and Chief Executive Officer, a member of the Company’s board of directors and a holder of more than 5% of the Company’s capital stock and the Chief Scientific Officer of Cydan.

As of June 30, 2020, Cydan is no longer considered a related party.

The Company paid Cydan less than $0.1 million during the three and six months ended June 30, 2019 related to the Business Services Agreement, all of which was recorded as research and development expense.

As of September 30, 2020, Cydan is no longer considered a related party.

The Company paid Cydan less than $0.1 million during the three and nine months ended September 30, 2019 related to the Business Services Agreement, all of which was recorded as research and development expense.

The Company agreed with Cydan to terminate the Business Services Agreement and all related services rendered by Cydan to the Company effective as of August 17, 2019.

Accordingly, there were no amounts due to Cydan as of June 30, 2020 and December 31, 2019.

Accordingly, there were no amounts due to Cydan as of September 30, 2020 and December 31, 2019.

Benefit Plans

4 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