What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-02-26 compared with 2020-03-24 · 461 added, 311 removed, 581 unchanged (57% of the section changed)

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Based on such evaluation, our principal executive officer and principal financial officer have concluded that as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

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Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2020.

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firm due to an exemption provided by the JOBS Act for “emerging growth companies.”

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Pursuant to Section 404(c) of the Sarbanes-Oxley Act, our independent registered public accounting firm has issued an attestation report on the effectiveness of our internal control over financial reporting for the year ended December 31, 2020, which is included below.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Gossamer Bio, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Gossamer Bio, Inc.’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework, (the COSO criteria).

In our opinion, Gossamer Bio, Inc.

(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”) and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

San Diego, California

February 26, 2021

Other Information.

Directors, Executive Ofﬁcers and Corporate Governance.

Directors, Executive Officers and Corporate Governance.

The information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission in connection with our 2021 Annual Meeting of Stockholders, or the Definitive Proxy Statement, which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2020, under the headings “Election of Directors,” “Corporate Governance,” “Our Executive Officers,” and, if applicable, “Delinquent Section 16(a) Reports,” and is incorporated herein by reference.

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The information required by this item will be set forth in the section headed “Security Ownership of Certain Beneficial Owners and Management” in our Definitive Proxy Statement and is incorporated herein by reference.

The information required by Item 201(d) of Regulation S-K will be set forth in the section headed "Executive Compensation" in our Proxy Statement and is incorporated herein by reference.

The information required by Item 201(d) of Regulation S-K will be set forth in the section headed "Executive Compensation and Other Information" in our Proxy Statement and is incorporated herein by reference.

Certain Relationships and Related Transactions, and Director Independence.

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Exhibits, Financial Statement Schedules.

All ﬁnancial statements

(1) All Financial statements

The consolidated financial statements of Gossamer Bio, Inc., together with the report thereon of Ernst & Young LLP, an independent registered public accounting firm, are included in this annual report on Form 10-K beginning on page F-1.

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Notes to Consolidated Financial Statements

Report of Independent Regist ered Public Accounting Firm

To the Stockholders and the Board of Directors of Gossamer Bio, Inc.

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Gossamer Bio, Inc.

Opinion on the Financial Statements

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generally accepted accounting principles.

Adoption of ASU No.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No.

2016-02, “Leases” (Topic 842), and the related amendments.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework, and our report dated February 26, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

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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.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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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.

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accrued Research and Development Expenses

Description of the Matter

As of December 31, 2020, the Company accrued $10.4 million for research and development expenses.

As described in Note 2 of the consolidated financial statements, the Company records accruals for estimated research and development costs, comprising payments due for work performed by third party contractors, laboratories, participating clinical trial sites, and others.

Some of these contractor’s bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones.

For the latter, the Company accrues the expenses as goods or services are used or rendered.

Clinical trial site costs are accrued as patients enter and progress through the trial.

Auditing management’s accounting for accrued research and development expenses is especially challenging as evaluating the progress or stage of completion of the activities under the Company’s research and development agreements is dependent upon a high volume of data from third-party service providers and internal clinical personnel, which is tracked in spreadsheets and other end user computing programs.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design and tested the operating effectiveness of controls over the accounting for accrued research and development expenses.

This included controls over management's assessment of the assumptions and accuracy of data underlying the accrued research and development expenses estimate.

To test the completeness of the Company’s accrued research and development expenses, among other procedures, we obtained supporting evidence of the research and development activities performed for significant clinical trials.

We corroborated the status of significant research and development activities through meetings with accounting and clinical project managers.

To verify the appropriate measurement of accrued research and development costs, we compared the costs for a sample of transactions against the related invoices and contracts, confirmed amounts incurred to-date with third-party service providers, and performed lookback analyses.

We also examined a sample of subsequent payments to evaluate the completeness of the accrued research and development expenses

Convertible Senior Notes

Description of the Matter

On May 21, 2020, the Company issued $200.0 million aggregate principal amount of 5.00% convertible senior notes due in 2027 in a public offering.

As described in Note 2 of the consolidated financial statements, the Convertible Notes include conversion terms that require the Company to account for the debt and equity components of the Convertible Notes separately including allocating value to the debt component with the remaining value allocated to the equity component reflected as a debt discount to be amortized to interest expense over the terms of the notes.

Auditing management’s conclusions related to the value allocated to the debt portion of the Convertible Note is complex and involves estimation to determine the effective yield that the Company would have received on the debt issuance had it not included the conversion feature.

How We Addressed the Matter in Our Audit

We obtained an understanding and evaluated the design and tested the operating effectiveness of controls over the Company’s process to determine the allocation between debt and equity components, including the valuation model and assumptions.

To test the value assigned to each component, we performed audit procedures that included, among others, evaluating the Company’s valuation methodology.

We tested the completeness and accuracy of the calculation used to estimate the fair value of the debt component.

In addition, we involved our valuation specialists to assist in testing the concluded effective yield used to determine the value allocated to the debt component by performing an independent credit analysis including comparison to market rates for similarly rated instruments.

/s/ Ernst & Young LLP

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San Diego, California

March 24, 2020

February 26, 2021

GOSSAMER BIO, INC.

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Operating lease right-of-use assets 10,550 10,303

Other assets 1,027 1,559

Total assets $ 539,433 $ 426,604

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS' EQUITY

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Total current liabilities 38,650 36,923

Long-term convertible senior notes 143,642 —

Long-term debt 28,744 28,459

Operating lease liabilities - long-term 7,713 8,737

Accrued expenses - long-term

Total liabilities 218,749 74,119

Commitments and contingencies

Series Seed convertible preferred stock, $0.0001 par value;

no shares issued and outstanding as

of December 31, 2019 and 20,000,000 shares issued and outstanding as of December 31, 2018;

liquidation preference of $0 and $20,000 as of December 31, 2019 and

December 31, 2018, respectively

Series A convertible preferred stock, $0.0001 par value;

no shares issued and outstanding as of

December 31, 2019 and 45,714,286 shares issued and outstanding as of December 31, 2018;

liquidation preference of $0 and $80,000 as of December 31, 2019 and December 31, 2018,

Series B convertible preferred stock, $0.0001 par value;

no shares issued and outstanding as of

December 31, 2019 and 71,506,513 shares issued and outstanding as of December 31, 2018;

liquidation preference of $0 and $230,000 as of December 31, 2019 and December 31, 2018,

Stockholders' equity (deficit)

Stockholders' equity

Common stock, $ 0.0001 par value;

700,000,000 shares authorized as of December 31, 2019 and

49,160,177 shares authorized as of December 31, 2018;

66,284,003 shares issued and

61,635,477 shares outstanding as of December 31, 2019, and 15,533,450 shares issued and

8,051,418 shares outstanding as of December 31, 2018

700,000,000 shares authorized as of December 31, 2020 and December 31, 2019;

75,524,254 shares issued and 73,874,904 shares outstanding as of December 31, 2020, and 66,284,003 shares issued and 61,635,477 shares outstanding as of December 31, 2019

Additional paid-in capital 897,607 686,390

Accumulated deficit ( 577,530 ) ( 334,170 )

Accumulated other comprehensive income (loss)

Total stockholders' equity (deficit)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

Accumulated other comprehensive income 599 258

Total stockholders' equity 320,684 352,485

Total liabilities and stockholders' equity $ 539,433 $ 426,604

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

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Years Ended December 31,

2020 2019 2018

Operating expenses:

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Loss from operations ( 233,962 ) ( 186,139 ) ( 148,993 )

Other income (expense), net

Other income (expense)

Interest income 3,442 5,563 1,720

Interest expense ( 12,666 ) ( 1,938 ) ( 12 )

Other income (expense) ( 174 ) 2,207 316

Total other income (expense), net ( 9,398 ) 5,832 2,024

Net loss $ ( 243,360 ) $ ( 180,307 ) $ ( 146,969 )

Other comprehensive income:

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(in thousands, except share amounts)

preferred stock

preferred stock Series A

preferred stock Series B

preferred stock Common stock Additional

capital Accumulated

deficit Accumulated

comprehensive

stockholders'

income (loss)

income (loss) Total

equity (deficit)

Balance as of

December 31, 2016

Balance as of

December 31, 2017

Issuance of Series A

preferred stock for

cash, net of $0.4

million in offering

Issuance of stock for

Issuance of Series A

preferred stock to

convert debt and

accrued interest

Issuance of Series B

preferred stock for

cash, net of $0.5

million in offering

Vesting of restricted

Incremental vesting

conditions placed

on previously issued

common shares

Other comprehensive

income (loss)

Balance as of

December 31, 2018

Issuance of common

stock in connection

with a public offering,

net of underwriting

and offering costs

Conversion of

convertible preferred

stock into common

Vesting of restricted

Shares Amount Shares Amount Shares Amount Shares Amount

Balance as of December 31, 2017 — $ — — $ — — $ — 9,160,888 $ — $ 32 $ ( 6,894 ) $ — $ ( 6,862 )

Issuance of Series A preferred stock for cash, net of $ 0.4 million in offering costs

— — 42,215,077 73,491 — — — — — — — —

Issuance of stock for acquisition 20,000,000 29,200 — — — — 1,101,278 1 2,874 — — 2,875

Issuance of Series A preferred stock to convert debt and accrued interest — — 3,499,209 6,124 — — — — — — — —

Issuance of Series B preferred stock for cash, net of $ 0.5 million in offering costs

— — — — 71,506,513 229,552 — — — — — —

Vesting of restricted stock — — — — — — 2,369,696 1 — — — 1

Incremental vesting conditions placed on previously issued common shares — — — — — — ( 4,580,444 ) — — — — —

Stock-based compensation — — — — — — — — 30,947 — — 30,947

Net loss — — — — — — — — — ( 146,969 ) — ( 146,969 )

Other comprehensive income (loss) — — — — — — — — — — ( 61 ) ( 61 )

Balance as of December 31, 2018 20,000,000 $ 29,200 45,714,286 $ 79,615 71,506,513 $ 229,552 8,051,418 $ 2 $ 33,853 $ ( 153,863 ) $ ( 61 ) $ ( 120,069 )

Issuance of common stock in connection with a public offering, net of underwriting discounts, commissions, and offering costs — — — — — — 19,837,500 2 291,309 — — 291,311

Conversion of convertible preferred stock into common stock ( 20,000,000 ) ( 29,200 ) ( 45,714,286 ) ( 79,615 ) ( 71,506,513 ) ( 229,552 ) 30,493,460 3 338,364 — — 338,367

Vesting of restricted stock — — — — — — 2,833,506 — — — — —

Exercise of stock options — — — — — — 419,593 — 2,045 — — 2,045

Other comprehensive

income (loss)

Balance as of

December 31, 2019

Stock-based compensation — — — — — — — — 20,819 — — 20,819

Net loss — — — — — — — — — ( 180,307 ) — ( 180,307 )

Other comprehensive income (loss) — — — — — — — — — — 319 319

Balance as of December 31, 2019 — $ — — $ — — $ — 61,635,477 $ 7 $ 686,390 $ ( 334,170 ) $ 258 $ 352,485

Issuance of common stock in connection with a public offering, net of underwriting discounts, commissions, and offering costs — — — — — — 9,433,963 1 117,093 — — 117,094

Equity component of convertible note issuance — — — — — — — — 53,635 — — 53,635

Debt issuance costs attributable to convertible feature — — — — — — — — ( 109 ) — — ( 109 )

Vesting of restricted stock — — — — — — 2,557,375 — — — — —

Exercise of stock options — — — — — — 134,803 — 534 — — 534

Stock-based compensation — — — — — — — — 38,748 — — 38,748

Issuance of common stock pursuant to Employee Stock Purchase Plan — — — — — — 113,286 — 1,300 — — 1,300

Other additional paid-in capital — — — — — — — — 16 — — 16

Net loss — — — — — — — — — ( 243,360 ) — ( 243,360 )

Other comprehensive income (loss) — — — — — — — — — — 341 341

Balance as of December 31, 2020 — $ — — $ — — $ — 73,874,904 $ 8 $ 897,607 $ ( 577,530 ) $ 599 $ 320,684

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

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Years Ended December 31,

2020 2019 2018

Cash flows from operating activities

Net loss $ ( 243,360 ) $ ( 180,307 ) $ ( 146,969 )

Adjustments to reconcile net loss to net cash used in operating activities:

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Prepaid expenses and other current assets ( 1,641 ) ( 4,393 ) ( 2,827 )

Other assets 532 2,714 ( 584 )

Operating lease liabilities ( 2,851 ) ( 2,108 ) —

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Purchase of property and equipment ( 1,503 ) ( 2,966 ) ( 3,490 )

Net cash used in investing activities

Net cash provided by (used in) investing activities 215,342 ( 147,144 ) ( 144,711 )

Cash flows from financing activities

Proceeds from issuance of convertible note

Proceeds from issuance of common stock in a public offering, net 117,110 291,311 —

Proceeds from the issuance of long-term debt,

net of debt discount and issuance costs of $1,778

Proceeds from issuance of convertible senior notes, net 193,596 — —

Proceeds from the issuance of long-term debt, net of debt discount and issuance costs $ 1,778

Purchase of shares pursuant to Employee Stock Purchase Plan 1,300 — —

Proceeds from the exercise of stock options 534 2,045 —

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Supplemental disclosure of noncash investing and financing activities:

Acquisition of in-process research and development

through issuance of stock

Issuance of Series A convertible preferred stock to convert

debt and accrued interest

Acquisition of in-process research and development through issuance of stock $ — $ — $ 19,284

Issuance of Series A convertible preferred stock to convert debt and accrued interest $ — $ — $ 6,124

Unpaid deferred offering costs - net $ — $ — $ 1,545

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Conversion of convertible preferred stock to common stock $ — $ 338,367 $ —

Change in unrealized gain on marketable securities, net of tax

Change in unrealized gain (loss) on marketable securities, net of tax $ ( 100 ) $ 331 $ ( 61 )

Unpaid property and equipment $ 15 $ 183 $ —

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

Gossam er Bio, Inc.

Gossamer Bio, Inc.

Notes to Consolidated Financial Statements

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As of December 31, 2020 and 2019, the Company had an accumulated deficit of $ 577.5 million and $ 334.2 million, respectively.

From the Company’s inception through the year ended December 31, 2019, the Company has funded its operations primarily through equity financings.

The Company raised $601.3 million from October 2017 through February 2019 through Series A and Series B Convertible Preferred Stock, convertible note financings, and the completed IPO, after deducting underwriting discounts, commissions, and offering expenses.

From the Company’s inception through the year ended December 31, 2020, the Company has funded its operations primarily through equity financings and debt issuance.

The Company raised $ 942.0 million from October 2017 through December 31, 2020 through Series A and Series B convertible preferred stock financings, a convertible note financing, its IPO, its Credit Facility (as defined in Note 5 below), and concurrent underwritten public offerings of its 5.00 % convertible senior notes due 2027 (the "2027 Notes") and common stock in May 2020.

See Note 5 for additional information regarding the Credit Facility and the 2027 Notes.

In addition, the Company received $ 12.8 million in cash in connection with the January 2018 acquisition of AA Biopharma Inc.

O n May 2, 2019 the Company as guarantor, and its wholly-owned subsidiary GB001, as borrower, entered into a credit, guaranty and security agreement, as amended on September 18, 2019 (the “Credit Facility), with MidCap Financial Trust (“MidCap”), an agent and as lender, and the additional lenders party thereto from time to time (together with MidCap, the “Lenders”), pursuant to which the Lenders, including affiliates of MidCap and Silicon Valley Bank, agreed to make term loans available to the Company for working capital and general business purposes, in a principal amount of up to $150.0 million in term loan commitments, including a $30.0 million term loan that was funded at the closing date.

Under the Credit Facility, the Company has the ability to access the remaining $120.0 million in three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions.

As of December 31, 2019, no other tranches under the Credit Facility have been drawn.

See Note 5 for additional information regarding the Credit Facility.

The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable.

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There can be no assurance that the Company will be successful in acquiring additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

The COVID-19 pandemic has caused significant business disruption around the globe.

The extent of the impact of COVID-19 on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the pandemic and the impact on the Company’s clinical trials, employees and vendors.

At this point, the degree to which COVID-19 has impacted and may continue to impact the Company’s financial condition or results of operations is uncertain.

A prolonged pandemic could have a material and adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to complete certain clinical trials and other efforts required to advance the development of its product candidates and raise additional capital.

For example, the Company temporarily paused enrollment in its Phase 1b clinical trial in pulmonary arterial hypertension ("PAH") in 2020 as a result of the ongoing COVID-19 pandemic.

In addition, due to the challenges of enrolling patients posed by the COVID-19 pandemic, the Company may experience delays in enrollment of patients in its Phase 2 clinical trials of GB004 in ulcerative colitis and of seralutinib, also known as GB002, in PAH, as well as delays in reporting data results from its ongoing trials.

Note 2— Summary of Significant Accounting Policies

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Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the

consolidated financial statements and the reported amounts of expenses during the reporting period.

The most significant estimates in the Company’s consolidated financial statements relate to accrued re search and development expenses, the valuation of stock options and the valuation allowance of deferred tax assets resulting from net operating losses.

These estimates and assumptions are based on current facts, historical experience and various other fact ors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

Actual resul ts could differ from those estimates.

The most significant estimates in the Company’s consolidated financial statements relate to the allocation of the 2027 Notes into liability and equity components and accrued research and development expenses.

These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

Actual results could differ from those estimates.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.

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The estimated fair value of the marketable securities is determined based on quoted market prices or rates for similar instruments.

The Company evaluates securities with unrealized losses to determine whether such losses, if any, are other than temporary.

The Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors.

The Company records an allowance for credit losses when unrealized losses are due to credit-related factors.

Realized gains and losses are calculated using the specific identification method and recorded as interest income or expense.

The Company does not generally intend to sell the investments and it is not more likely than not that it will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

The Company has determined that there were no other than temporary declines in fair values of its investments as of December 31, 2019.

The Company has determined that there were no material declines in fair values of its investments due to credit-related factors as of December 31, 2020.

Restricted Cash

The Company had no restricted cash as of December 31, 2019.

Restricted cash as of December 31, 2020, and 2019 represents cash held as collateral for the Company's facility leases.

Restricted cash as of December 31, 2018 served as collateral for the Company’s corporate credit card program.

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Depreciation is computed over the estimated useful lives of the respective assets, generally three to seven years, using the straight-line method.

Deferred Offering Costs

The Company capitalizes certain legal and other third-party fees that are directly associated with in process equity financings as deferred offering costs until such financings are consummated.

After consummation of the equity financing, these costs are recorded as a

reduction of the proceeds generated as a result of the offering.

There were no deferred offering costs as of December 31, 2019.

Deferred offering costs amounted to $ 2.1 million as of December 31 , 201 8 and was recorded as a component of o ther assets on the consolidated balance sheets.

Convertible Senior Notes

In accounting for the issuance of the 2027 Notes, the Company separated the 2027 Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of similar debt instruments that do not have associated convertible features.

The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the par value of the 2027 Notes.

The equity component is not remeasured as long as it continues to meet the condition for equity classification.

The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized to interest expense over the term of the 2027 Notes.

The Company allocated the issuance costs incurred to the liability and equity components of the 2027 Notes based on their relative fair values.

Issuance costs attributable to the liability component were recorded as a reduction to the liability portion of the 2027 Notes and are being amortized to interest expense over the term of the 2027 Notes.

Issuance costs attributable to the equity component, representing the conversion option, were netted with the equity component in stockholders' equity.

In accordance with Accounting Standards Update (“ASU”) No.

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Operating leases are included in the balance sheet as right-of-use assets and operating lease liabilities at the present value of the lease payments calculated using the Company’s incremental borrowing rate, unless the implicit rate is readily available.

The Company applied the short-term lease recognition exemption for leases with terms at inception not greater than 12 months and elected to not separate lease and non-lease components for its long-term leases.

The Company records rent expense on a straight-line basis over the term of the lease.

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All research and development costs are expensed as incurred.

Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services), in process research and development expenses and license agreement expenses.

Payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

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The Company is subject to taxation in the United States and California, Ireland and Luxembourg.

As of December 31, 2019, the Company’s tax years since inception are subject to examination by taxing authorities due to the Company’s unutilized NOLs and tax credits.

As of December 31, 2020, the Company’s tax years since inception are subject to examination by taxing authorities due to the Company’s unutilized net operating losses ("NOLs") and tax credits.

Stock-Based Compensation

The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date fair value of the awards.

The Company records the expense for stock-based compensation awards subject to performance-based milestone vesting over the remaining service period when management determines that achievement of the milestone is probable.

The Company records the expense for stock-based compensation awards subject to performance-based milestone vesting over the requisite service period when management determines that achievement of the milestone is probable.

Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

The Company estimates the fair value of stock option grants and shares purchasable under the Company's 2019 Employee Stock Purchase Plan ("ESPP") using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

The Company estimates the fair value of restricted stock units based on the closing price of the Company's common stock on the date of grant.

The Company accounts for forfeitures as they occur.

All share-based compensation costs are recorded in the statements of operations based upon t he underlying employees or non-employee’s roles within the Company.

All share-based compensation costs are recorded in the statements of operations based upon the underlying employees or non-employee’s roles within the Company.

Foreign Currency

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Recent Accounting Pronouncements—To Be Adopted

In August 2020, the FASB issued ASU 2020-06, Debt:

Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) (“ASU 2020-06”), which simplifies the accounting for convertible instruments and contracts in an entity's own equity.

This guidance is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2020.

The Company is currently assessing the impact this standard will have on its consolidated financial statements or related financial statement disclosures.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses:

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This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2018.

The Company has evaluated ASU 2016-13 and determined that the adoption of the new standard will not have a material impact on the Company's consolidated financial statements or related financial statement disclosures.

Recently Adopted Accounting Pronouncements

The Company adopted ASU No.

2016-02, Leases (Topic 842) (“ASC 842”), as of January 1, 2019, using the optional transition method.

The optional transition method provides a method for recording existing leases at adoption and a cumulative catch up adjustment on January 1, 2019 for any differences between ASC 842 and the legacy guidance provided in ASC 840, Leases that would have impacted our income statement.

No retrospective restatements are required under the optional transition method.

In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification.

The Company also applied the short-term lease recognition exemption for leases with terms at inception not greater than 12 months and elected to not separate lease and non-lease components for its long-term leases.

Adoption of the new standard resulted in the recording of additional operating lease right-of-use assets and operating lease liabilities of approximately $12.5 million and $13.2 million, respectively, as of January 1, 2019.

The difference between the operating lease right-of-use assets and lease liabilities are due to accrued deferred rent and unamortized lease incentives.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU simplifies the accounting for income taxes by eliminating certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences.

It also clarifies and simplifies other aspects of the accounting for income taxes.

The guidance is effective for fiscal years beginning after December 15, 2020, with early adoption permitted in any annual or interim period for which financial statements have not yet been issued or made available for issuance.

The Company early adopted this standard as of October 1, 2019.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements or related disclosures.

The Company adopted ASU 2016-13 as of January 1, 2020.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements or related financial statement disclosures.

Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted net loss per share excludes the potential impact of Series Seed Convertible Preferred Stock, Series A Convertible Preferred Stock, and Series B Convertible Preferred Stock, common stock options and unvested shares of restricted stock because their effect would be anti-dilutive due to the Company’s net loss.

The Company uses the if-converted method for assumed conversion of the 2027 Notes to compute the weighted average shares of common stock outstanding for diluted net loss per share.

Diluted net loss per share excludes the potential impact of the Company's Series Seed convertible preferred stock, Series A convertible preferred stock, and Series B convertible preferred stock, common stock options and unvested shares of restricted stock and the potential shares issuable upon conversion of the 2027 Notes because their effect would be anti-dilutive due to the Company’s net loss.

Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

The table below provides potentially dilutive securities not included in the calculation of the diluted net loss per share because to do so would be anti-dilutive:

Shares issuable upon conversion of Series Seed Convertible

Preferred Stock

Shares issuable upon conversion of Series A Convertible

Preferred Stock

Shares issuable upon conversion of Series B Convertible

Preferred Stock

2020 2019 2018

Shares issuable upon conversion of Series Seed convertible preferred stock — — 4,444,444

Shares issuable upon conversion of Series A convertible preferred stock — — 10,158,710

Shares issuable upon conversion of Series B convertible preferred stock — — 15,890,306

2027 Notes 12,321,900 — —

Shares issuable upon exercise of stock options 9,401,082 8,538,060 5,107,329

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Operating lease liabilities, current 3,633 2,354

Accrued in process research and development

Accrued consulting fees 1,919 1,337

Accrued interest, current 1,094 —

Accrued other 742 1,126

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Accrued accounting fees 285 173

Accrued in process research and development 225 1,600

Total accrued expenses $ 20,711 $ 16,709

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Fair Value Measurements at End of Period Using:

Quoted Market

Other Observable

Fair Value Quoted Market

Identical Assets

(Level 1) Significant

Other Observable

(Level 2) Significant

As of December 31, 2020

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Treasury and agency securities 18,280 18,280 — —

Commercial paper

Corporate debt securities 26,573 — 26,573 —

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Money market funds $ 82,125 $ 82,125 $ — $ —

Treasury securities

Treasury and agency securities 91,717 91,717 — —

Commercial paper 37,411 — 37,411 —

Corporate debt securities 156,277 — 156,277 —

The Company did not reclassify any investments between levels in the fair value hierarchy during the periods presented.

Fair Value of Other Financial Instruments

As of December 31, 2019 and December 31, 2018, the carrying amounts of the Company’s financial instruments, which include cash, interest and securities receivable, accounts payable and accrued expenses, approximate fair values because of their short maturities.

As of December 31, 2020 and December 31, 2019, the carrying amounts of the Company’s financial instruments, which include cash, interest receivable, accounts payable and accrued expenses, approximate fair values because of their short maturities.

Interest receivable as of December 31, 2020 and December 31, 2019 was $ 0.2 million and $ 1.5 million, respectively, and is recorded as a component of prepaid expenses and other current assets on the condensed consolidated balance sheets.

Securities receivable reflect the timing differences of maturities or settlements of investments and the ultimate reinvestment of such amounts.

The Company believes that its Credit Facility bears interest at a rate that approximates prevailing market rates for instruments with similar characteristics and, accordingly, the carrying value of the Credit Facility approximates fair value.

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Based on the assumptions used to value these liabilities at fair value, the debt instrument is categorized as Level 2 in the fair value hierarchy.

As of December 31, 2020 the fair value of the Company's 2027 Notes was $ 198.5 million.

The fair value was determined on the basis of market prices observable for similar instruments and is considered Level 2 in the fair value hierarchy (see Note 5).

Available for Sale Investments

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Treasury and agency securities and debt instruments of corporations and commercial obligations, which are classified as available-for-sale investments.

These investments are carried at fair value and are included in the tables above.

The Company evaluates securities with unrealized losses to determine whether such losses, if any, are other than temporary.

These investments are carried at fair value and are included in the tables below.

The Company evaluates securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors.

Realized gains and losses are calculated using the specific identification method and recorded as interest income or expense.

The Company does not generally intend to sell the

investments and it is not more likely than not that it will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity.

The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in marketable securities and long-term investments as of December 31, 2020 are as follows (in thousands):

Marketable securities

Treasury and agency securities

Commercial paper

Corporate debt securities $ 26,396 $ 177 $ — $ 26,573

Total marketable securities $ 26,396 $ 177 $ — $ 26,573

As of December 31 , 2019, the Company classified $18.7 million of assets with original maturities of 90 days or less as cash equivalents.

None of the investments have been in a gross unrealized loss for a period greater than 12 months.

At each reporting date, the Company perform s an evaluation of impairment to determine if any unrealized losses are other-than-temporary.

Factors considered in dete rmining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, and our intent and ability to hold the investment until recovery of the amort ized cost basis.

The Company intend s and ha s the ability to hold its investments in unrealized loss positions until their amortized cost basis has been recovered.

Further, based on its evaluation, the Company determined that unrealized losses were not other-than-temporary as of December 31, 2019.

As of December 31, 2020 and 2019, the Company classified $ 18.3 million and $ 18.7 million, respectively, of assets with original maturities of 90 days or less as cash equivalents.

At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are due to credit-related factors.

The Company records an allowance for credit losses when unrealized losses are due to credit-related factors.

Factors considered when evaluating available-for-sale investments for impairment include the severity of the impairment, changes in underlying credit ratings, the financial condition of the issuer, the probability that the scheduled cash payments will continue to be made and the Company’s intent and ability to hold the investment until recovery of the amortized cost basis.

The Company intends and has the ability to hold its investments in unrealized loss positions until their amortized cost basis has been recovered.

As of December 31, 2020, there were no material declines in the market value of the Company's available-for-sale investments due to credit-related factors.

Contractual maturities of available-for-sale debt securities, as of December 31, 2020, were as follows (in thousands):

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One to two years —

The Company has the ability, if necessary, to liquidate any of its cash equivalents and marketable securities to meet its liquidity needs in the next 12 months.

Accordingly, those investments with contractual maturities greater than one year from the date of purchase are classified as current assets on the accompanying consolidated balance sheets.

Note 5—Long-term Debt

On May 2, 2019, the Company entered into the Credit Facility described in Note 1, pursuant to which the Lenders agreed to make term loans available to the Company for working capital and general business purposes, in a principal amount of up to $150.0 million in term loan commitments, including a $30.0 million term loan that was funded at the closing date, with the ability to access the remaining $120.0 million in three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions.

The second tranche is available no earlier than February 1, 2020 and no later than July 31, 2020.

The third tranche is available no earlier than May 1, 2020 and no later than October 31, 2020.

The fourth tranche is available no earlier than February 1, 2021 and no later than July 31, 2021.

The Credit Facility is secured by substantially all of the Company’s and its domestic subsidiaries’ personal property, including intellectual property, and includes affirmative and negative covenants applicable to the Company.

Total $ 26,573

Note 5— Indebtedness

Credit Facility

On May 2, 2019, the Company entered into a credit, guaranty and security agreement, as amended on September 18, 2019 and July 2, 2020 (the “Credit Facility”), with MidCap Financial Trust (“MidCap”), as agent and lender, and the additional lenders party thereto from time to time (together with MidCap, the “Lenders”), pursuant to which the Lenders, including affiliates of MidCap and Silicon Valley Bank, agreed to make term loans available to the Company for working capital and general business purposes, in a principal amount of up to $ 150.0 million in term loan commitments, including a $ 30.0 million term loan that was funded at the closing date, with the ability to access the remaining $ 120.0 million in two additional tranches (each $ 60.0 million), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions.

The Company, GB001, Inc., GB002, Inc., and GB004, Inc., each wholly-owned subsidiaries of the Company, are designated as co-borrowers to the Credit Facility, whereas GB003, Inc., GB005, Inc., GB006, Inc., GB007, Inc., GB008, Inc., and Gossamer Bio Services, Inc.,each wholly-owned subsidiaries of the Company, are designated as guarantors.

The remaining two tranches are available no earlier than the satisfaction of the applicable funding conditions, including the applicable clinical development milestones, and no later than December 31, 2022.

As of December 31, 2020, no other tranches under the Credit Facility have been available.

The Credit Facility is secured by substantially all of the Company’s and its domestic subsidiaries’ personal property, including intellectual property.

Each term loan under the Credit Facility bears interest at an annual rate equal to the sum of (i) one-month LIBOR (customarily defined, with a change to prime rate if LIBOR funding becomes unlawful or impractical) plus (ii) 7.00 %, subject to a LIBOR floor of 2.00 %.

The borrower is required to make interest-only payments on the term loan for all payment dates prior to June 1, 2021.

The term loans under the Credit Facility will begin amortizing on June 1, 2021, with equal monthly payments of principal plus interest being made by the Company to the Lenders in consecutive monthly installments following such interest-only period for 36 months or, for any funding of the fourth tranche occurring after June 1, 2021, the number of months until the Credit Facility matures on May 1, 2024.

Upon final repayment of the term loans, the borrower must pay an exit fee of 1.75% of the amount borrowed under the Credit Facility, less any partial exit fees previously paid.

Upon partial prepayment of a portion of the term loans, the borrower must pay a partial exit fee of 1.75% of the principal being prepaid.

At the borrower’s option, the borrower may prepay the outstanding principal balance of the term loan in whole or in part, subject to a prepayment fee of 3.0% of any amount prepaid if the prepayment occurs through and including the first anniversary of the closing date, 2.0% of the amount prepaid if the prepayment occurs after the first anniversary of the closing date through and including the second anniversary of the closing date, and 1.0% of any amount prepaid after the second anniversary of the closing date and prior to May 1, 2024.

The Company is required to make interest-only payments on the term loan for all payment dates prior to July 1, 2022.

The term loans under the Credit Facility will begin amortizing on July 1, 2022, with equal monthly payments of principal plus interest being made by the Company to the Lenders in consecutive monthly installments following

such interest-only period until the Credit Facility matures on January 1, 2025.

Upon final repayment of the term loans, the Company must pay an exit fee of 1.75 % of the amount borrowed under the Credit Facility, less any partial exit fees previously paid.

Upon partial prepayment of a portion of the term loans, the Company must pay a partial exit fee of 1.75 % of the principal being prepaid.

At the Company’s option, the Company may prepay the outstanding principal balance of the term loan in whole or in part, subject to a prepayment fee of 3.00 % of any amount prepaid if the prepayment occurs through and including the first anniversary of the second amendment effective date, 2.00 % of the amount prepaid if the prepayment occurs after the first anniversary of the second amendment effective date through and including the second anniversary of the second amendment effective date, and 1.00 % of any amount prepaid after the second anniversary of the second amendment effective date and prior to January 1, 2025.

The Credit Facility includes affirmative and negative covenants applicable to the Company and certain of its subsidiaries.

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As of December 31, 2020, the Company was in compliance with these covenants.

Company and/or certain of its subsidiaries, and the collateral sec uring the Credit Facility, including foreclosure against the properties securing the credit facilities, including cash.

These events of default include, among other things, failure to pay any amounts due under the Credit Facility, a breach of covenants un der the Credit Facility, insolvency or the occurrence of insolvency events, the occurrence of a change in control, the occurrence of certain U.S.

F ood and Drug Administration (“ FDA ”) and regulatory events, failure to remain registered with the SEC and list ed for trading on N asdaq , the occurrence of a material adverse change, the occurrence of a default under a material agreement reasonably expected to result in a material adverse change, the occurrence of certain defaults under certain other indebtedness in an amount greater than $2,500,000 and the occurrence of certain defaults under subordinated indebtedness and convertible indebtedness.

The Credit Facility also includes events of default, the occurrence and continuation of which could cause interest to be charged at the rate that is otherwise applicable plus 3.00 % and would provide MidCap, as agent, with the right to exercise remedies against the Company and/or certain of its subsidiaries, and the collateral securing the Credit Facility, including foreclosure against the properties securing the credit facilities, including cash.

These events of default include, among other things, failure to pay any amounts due under the Credit Facility, a breach of covenants under the Credit Facility, insolvency or the occurrence of insolvency events, the occurrence of a change in control, the occurrence of certain U.S.

Food and Drug Administration ("FDA") and regulatory events, failure to remain registered with the SEC and listed for trading on Nasdaq, the occurrence of a material adverse change, the occurrence of a default under a material agreement reasonably expected to result in a material adverse change, the occurrence of certain defaults under certain other indebtedness in an amount greater than $ 2.5 million and the occurrence of certain defaults under subordinated indebtedness and convertible indebtedness.

Long-term debt as of December 31, 2020 consisted of the following (in thousands):

December 31, 2020

Term loan $ 30,000

Debt discount and issuance costs ( 1,256 )

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December 31, 2020

Note 6—Convertible Note Financing

On October 2, 2017, the Company issued a convertible promissory note (the “Note”) in an amount of $6.0 million to an investor.

The Note accrued interest at 8% per year and had a maturity date of October 2, 2018.

The Note was subject to an automatic conversion upon a qualified equity financing defined as a raise of $40.0 million, excluding the conversion of the Note and other indebtedness.

The conversion was equal to the outstanding principal amount of the Note plus all accrued and previously unpaid interest thereon, divided by the lowest price per share paid by investor for qualified equity financing.

On January 4, 2018, the Note converted into 3,499,209 shares of Series A Convertible Preferred Stock.

Total $ 30,000

5.00% Convertible Senior Notes due 2027

On May 21, 2020, the Company issued $ 200.0 million aggregate principal amount of 5.00 % convertible senior notes due 2027 in a public offering.

The 2027 Notes were registered pursuant to the Company’s Shelf Registration Statement (as defined in Note 8 below).

The interest rate on the 2027 Notes is fixed at 5.00 % per annum.

Interest is payable semi-annually in arrears on June 1 and December 1 of each year, commencing on December 1, 2020.

The 2027 Notes will mature on June 1, 2027.

The net proceeds from the offering, after deducting the underwriting discounts and commissions and other offering costs, were approximately $ 193.6 million.

The 2027 Notes may be settled in cash, shares of the Company’s common stock, or a combination thereof, solely at the Company’s election.

The initial conversion rate of the 2027 Notes is 61.6095 shares per $1,000 principal amount, which is equivalent to a conversion price of approximately $ 16.23 per share, subject to adjustments.

In addition, following certain corporate events that occur prior to the maturity date or if the Company issues a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2027 Notes in connection with such a corporate event during the related redemption period in certain circumstances.

The 2027 Notes are senior unsecured obligations of the Company, ranking senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the 2027 Notes, and are effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness, including all indebtedness under the Credit Facility.

Holders may convert their notes at their option only in the following circumstances:

(1) during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on September 30, 2020, if the last reported sale price per share of the Company’s common stock exceeds 130 % of the conversion price for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter;

(2) during the five consecutive business days immediately after any 10 consecutive trading day period (such 10 consecutive trading day period, the “measurement period”) in which the trading price per $ 1,000 principal amount of notes for each trading day of the measurement period was less than 98 % of the product of the last reported sale price per share of the Company’s common stock on such trading day and the conversion rate on such trading day;

(3) upon the occurrence of certain corporate events or distributions on the Company’s common stock;

(4) if the Company calls such notes for redemption;

and (5) at any time from, and including, March 1, 2027 until the close of business on the scheduled trading day immediately before the maturity date.

The Company will not have the right to redeem the 2027 Notes prior to June 6, 2024.

On or after June 6, 2024 and on or before the 50th scheduled trading day immediately before the maturity date, the Company may redeem the 2027 Notes, in whole or in part, if the last reported sale price of the Company’s common stock has been at least 130 % of the conversion price then in effect on (1) each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice;

and (2) the trading day immediately before the date the Company sends such notice.

In the case of any optional redemption, the Company will redeem the 2027 Notes at a redemption price equal to 100 % of the principal amount of such Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

If the Company undergoes a fundamental change prior to the maturity date of the 2027 Notes, holders of the 2027 Notes may require the Company to repurchase for cash all or part of their 2027 Notes at a repurchase price equal to 100 % of the principal amount of the 2027 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The indenture governing the 2027 Notes provides for customary terms and covenants, including that upon certain events of default, either the trustee or the holders of not less than 25 % in aggregate principal amount of the 2027 Notes then outstanding may declare the unpaid principal amount of the 2027 Notes and accrued and unpaid interest, if any, thereon immediately due and payable.

As of December 31, 2020, the Company was in compliance with these covenants.

In the case of certain events of bankruptcy, insolvency or reorganization, the principal amount of the 2027 Notes together with accrued and unpaid interest, if any, thereon will automatically become and be immediately due and payable.

As of December 31, 2020, there were no events or market conditions that would allow holders to convert the 2027 Notes.

At the time the 2027 Notes become convertible within 12 months of the balance sheet date, the carrying value of the 2027 Notes will be reclassified to short-term.

In accounting for the issuance of the 2027 Notes, the Company separated the 2027 Notes into liability and equity components.

The carrying amount of the liability component was calculated by measuring the fair value of similar debt instruments that do not have associated convertible features.

The carrying amount of the equity component representing the conversion option was $ 53.5 million and was determined by deducting the fair value of the liability component from the par

value of the 2027 Notes.

The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

The debt discount is amortized to interest expense over the term of the 2027 Notes at an effective interest rate of 11.17 % over the contractual terms of the 2027 Notes.

In accounting for the debt issuance costs of $ 0.4 million related to the 2027 Notes, the Company allocated the total amount incurred to the liability and equity components of the 2027 Notes based on their relative fair values.

Issuance costs attributable to the liability component were $ 0.3 million and will be amortized to interest expense using the effective interest method over the contractual terms of the 2027 Notes.

Issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity.

The net carrying amount of the liability component of the 2027 Notes was as follows (in thousands):

December 31, 2020 December 31, 2019

Principal amount $ 200,000 $ —

Unamortized debt discount ( 56,080 ) —

Unamortized debt issuance cost ( 278 ) —

Net carrying amount $ 143,642 $ —

The net carrying amount of the equity component of the 2027 Notes was as follows (in thousands):

December 31, 2020 December 31, 2019

Debt discount related to the value of conversion option $ 53,635 $ —

Debt issuance cost ( 109 ) —

Net carrying amount $ 53,526 $ —

The following table sets forth the interest expense recognized related to the 2027 Notes (in thousands):

Years Ended December 31,

December 31, 2020 December 31, 2019 December 31, 2018

Contractual interest expense $ 6,139 $ — $ —

Amortization of debt discount 3,555 — —

Amortization of debt issuance cost 17 — —

Total interest expense related to the 2027 Notes $ 9,711 $ — $ —

Note 6— License and Asset Acquisitions

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License from Pulmokine, Inc.

(Seralutinib)

On October 2, 2017, the Company, entered into a license agreement with Pulmokine, Inc.

under which it was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Pulmokine to develop and commercialize GB002 and certain backup compounds for the treatment, prevention and diagnosis of any and all disease or conditions.

under which it was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Pulmokine to develop and commercialize seralutinib and certain backup compounds for the treatment, prevention and diagnosis of any and all disease or conditions.

The Company also has the right to sublicense its rights under the license agreement, subject to certain conditions.

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The development activities cannot be performed without significant cost and effort by the Company.

The agreement will remain in effect from the effective date, unless terminated earlier, until, on a licensed product-by-licensed product and country-by-country basis, the later of ten years from the date of first commercial sale or when there is no longer a valid patent claim covering such licensed product or specified regulatory exclusivity for the licensed product in such country.

Company is obligated to make future development and regulatory milesto ne payments of up to $63.0 million, commercial milestone payments of up to $45.0 million, and sales milestone payments of up to $190.0 million.

licensed product or specified regulatory exclusivity for the licensed product in such country.

The Company is obligated to make future development and regulatory milestone payments of up to $ 58.0 million, commercial milestone payments of up to $ 45.0 million, and sales milestone payments of up to $ 190.0 million.

The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from the mid-single digits to the high single-digits.

The Company made an upfront payment in the year ended December 31, 2017, recorded as IPR&D of $5.5 million.

As of December 31, 201 9 , no milestones had been accrued as the underlying contingencies had n ot yet been resolved.

The Company made an upfront payment of $ 5.5 million in October 2017.

In December 2020, the Company accrued a milestone payment of $ 5.0 million in connection with the initiation of the first Phase 2 clinical trial of seralutinib.

AA Biopharma Inc.

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(“Aerpio”) under which the Company was granted an exclusive worldwide license and sublicense to certain intellectual property rights owned or controlled by Aerpio to develop and commercialize GB004, and certain other related compounds for all applications.

The Company made an upfront payment of $ 20.0 million in June 2018, which represented the purchase consideration for an asset acquisition.

On May 11, 2020, the Company entered into an amendment to the license agreement with Aerpio pursuant to which the Company made an upfront payment of $ 15.0 million to Aerpio for a reduction in future milestone payments and royalties.

Under the amended license agreement, the Company is obligated to make future approval milestone payments of up to $ 40.0 million and a sales milestone payment of $ 50.0 million.

The Company also has the right to sublicense its rights under the license agreement, subject to certain conditions.

The Company is obligated to make future development and regulatory milestone payments of up to $55.0 million, commercial milestone payments of up to $85.0 million and sales milestone payments of up to $260.0 million.

The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from a high single-digit to mid-teens, subject to certain customary reductions.

The Company made an upfront payment of $20.0 million, which represented the purchase consideration for an asset acquisition.

The Company is also obligated to pay tiered royalties on sales for each licensed product, at percentages ranging from low- to mid-single digits, subject to certain customary reductions.

Aerpio retains its twenty percent ( 20.00 %) participation right on a disposition of GB004.

As of December 31, 2020, no milestones had been accrued as the underlying contingencies had not yet been resolved.

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Years Ended December 31,

2020 2019 2018

Seralutinib $ 5,000 $ — $ —

GB004 15,000 — 20,000

GB1275 — 1,000 7,501

GB001 — — 19,148

Other preclinical programs 3,380 2,600 3,010

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The amount of net loss before taxes for the years ended December 31, 2020, 2019, and 2018 is as follows:

2020 2019 2018

(in thousands)

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Loss before income taxes $ 243,360 $ 180,307 $ 146,969

A reconciliation of income tax expense for the years ended December 31, 201 9 , 201 8 , and 201 7 is as follows:

(in thousands)

Total current income tax expense

Total deferred income tax expense

Total income tax expense

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

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The change in the valuation allowance for the year ended December 31, 2020 was an increase of $ 38.9 million.

2020 2019 2018

(in thousands)

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Tax credits, net 17,372 9,196 1,131

Amortization 10,939 6,597 6,267

Stock-based compensation 4,448 1,388 —

Lease liability 2,383 2,329 —

Accrued compensation 2,137 1,476 834

Stock-based compensation

Other 16 383 154

Total gross deferred tax assets 115,241 64,995 22,828

Deferred tax liabilities:

Convertible senior notes ( 10,592 ) — —

Right of use asset ( 2,215 ) ( 2,164 ) —

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Net deferred tax asset $ — $ — $ —

At December 31, 2019, the Company has federal and California net operating losses (“NOL”) carryforwards of approximately $175.8 million and $1.1 million, respectively.

At December 31, 2020, the Company has federal and California NOL carryforwards of approximately $ 310.7 million and $ 1.1 million, respectively.

The federal NOL carryforwards generated prior to January 1, 2018 begin to expire in 2034.

The federal NOL generated after 2017 of $172.9 million can be carried forward indefinitely and be available to offset up to 80% of future taxable income each year.

The federal NOL generated after 2017 of $ 307.7 million can be carried forward indefinitely but may only be used to offset up to 80 % of the Company's taxable income in taxable years beginning after December 31, 2020.

The California NOL carryforwards begin to expire in 2036.

At December 31, 2019, the Company has Irish NOL carryforwards of approximately $53.0 million.

The Irish NOL can be carried forward indefinitely.

At December 31, 201 9 , the Company also ha s orphan drug credit and federal research tax credit carryforwards of approximately $ 9 .

6 million and California research tax credits of $ 2.7 million.

The federal research tax credit carryforwards begin to expire in 2038 and the California research tax credit carryforward does not expire and can be carried forward indefinitel y until utilized.

At December 31, 2020, the Company has foreign NOL carryforwards of approximately $ 101.1 million that can be carried forward indefinitely.

At December 31, 2020, the Company also has orphan drug credit and federal research tax credit carryforwards of approximately $ 17.9 million and California research tax credits of $ 5.4 million.

The federal research tax credit carryforwards begin to expire in 2038 and the California research tax credit carryforward does not expire and can be carried forward indefinitely until utilized.

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:

2020 2019 2018

Federal statutory income tax rate 21.00 % 21.00 % 21.00 %

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Change in valuation allowance ( 19.50 %) ( 22.12 %) ( 13.17 %)

Change in tax law

Research and experimentation credits 2.76 % 3.81 % 0.77 %

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In process research and development — % — % ( 3.92 %)

Other ( 0.80 %) ( 0.85 %) ( 0.34 %)

Provision for income taxes — % — % — %

The NOL carryforward may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986 (the “Code”), and similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax respectively.

In general, an ownership change as defined by Section 382 and 383, results from the transactions increasing ownership of certain stockholders or public groups in the stock of the corporation of more than 50 percentage points over a three-year period.

As of December 31, 2019, the Company completed a Section 382 and 383 analysis regarding the limitation of NOL and credit carryforwards.

In general, an ownership change as defined by Section 382 and 383, results from the transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period.

In connection with the Company’s IPO in February 2019, the Company experienced an ownership change for the purposes of Section 382 and 383 of the Code.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits for 2020, 2019, and 2018, excluding interest and penalties, is as follows:

2020 2019 2018

(in thousands)

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Balance at the end of the year $ 5,060 $ 2,754 $ 408

Included in the balance of unrecognized tax benefits at December 31, 201 9 is $ 2.

6 million that, if recognized, would not impact the Company’s income tax benefit or effective tax rate as long as our deferred tax asset remains subject to a full valuation allowance.

Included in the balance of unrecognized tax benefits at December 31, 2020 is $ 5.1 million that, if recognized, would not impact the Company’s income tax benefit or effective tax rate as long as our deferred tax asset remains subject to a

full valuation allowance.

The Company does not expect any significant increases or decreases to our unrecognized tax benefits within the next 12 months.

Note 9—Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Convertible Preferred Stock

Series Seed Convertible Preferred Stock

On January 4, 2018, the Company issued an aggregate of 20,000,000 shares of Series Seed Convertible Preferred Stock in connection with the merger agreement with AA Biopharma Inc.

(See Note 7).

Series A Convertible Preferred Stock

In January and March 2018, the Company issued an aggregate of 45,714,286 shares of Series A Convertible Preferred Stock at $1.75 per share for approximately $73.9 million in cash and the conversion of approximately $6.1 million in principal and accrued interest under the Note (See Note 6).

Series B Convertible Preferred Stock

On July 20, 2018, the Company issued an aggregate of 71,506,513 shares of Series B Convertible Preferred Stock at $3.2167 per share for approximately $230.0 million in gross proceeds.

The Series Convertible Preferred Stock was classified outside of stockholders’ equity (deficit) because the shares contained certain redemption features that were not solely within the control of the Company.

Note 8— Stockholders’ Equity

In connection with the Company’s IPO, the outstanding shares of the Company’s Series Seed, Series A, and Series B convertible preferred stock automatically converted into 30,493,460 shares of common stock.

On December 3, 2015, the Company issued 9,160,888 shares of common stock as founder shares for services rendered to the Company, valued at $0.0001 par value per share, for a total of approximately $4,100 (the “Founders’ Equity”).

Each share of common stock is entitled to one vote.

Common stock owners are entitled to dividends when funds are legally available and declared by the Board.

Shelf Registration Statement and Stock Offering

On April 10, 2020, the Company filed a universal shelf registration statement on Form S-3, covering the offering from time to time of common stock, preferred stock, debt securities, warrants and units, which registration statement became automatically effective on April 10, 2020 (the “Shelf Registration Statement”).

On May 21, 2020, the Company completed a public offering of 9,433,963 shares of its common stock at a public offering price of $ 13.25 per share.

The net proceeds from the offering, after deducting underwriting discounts and commissions and other offering costs, were approximately $ 117.1 million.

The shares sold in the offering were registered pursuant to the Company’s Shelf Registration Statement.

Shares of Common Stock Subject to Repurchase

On December 3, 2015, the Company issued 9,160,888 shares of common stock as founder shares for services rendered to the Company, valued at $ 0.0001 par value per share, for a total of approximately $ 4,100 (the “founder shares”).

On January 4, 2018, incremental vesting conditions were placed on the previously issued founder shares.

Fifty percent of the previously issued founder shares vested on January 4, 2018, and the remaining founder shares are subject to vesting restrictions over a period of five years .

These shares are subject to repurchase by the Company upon a founder's termination of employment or service to the Company.

Pursuant to the employment agreements with the Company’s founders executed January 4, 2018, the Company provided for certain potential additional issuances of common stock (the “anti-dilution shares”) to each of the founders to ensure the total number of shares of common stock held by them and their affiliates (inclusive of any shares subject to equity awards granted by the Company and the Founders’ Equity) would represent 15 % of the Company’s fully-diluted capitalization until such time as the Company raised $ 300.0 million in equity capital, including the capital raised in the Series A financing.

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In addition, on September 6, 2018, the Company issued 1,795,023 shares of common stock to the founders for services rendered to the Company, valued at $ 9.63 per share, with an additional 1,795,023 shares of restricted stock subject to the same vesting restrictions and vesting period as the founder shares.

Each share of common stock is entitled to one voting right.

Common stock owners are entitled to dividends when funds are legally available and declared by the Board.

Shares of Common Stock Subject to Repurchase

In November 2017, in connection with the issuance of the Series A Convertible Preferred Stock, certain employees entered into stock restriction agreements, whereby 1,305,421 shares are subject to forfeiture by the Company upon the stockholder’s termination of employment or service to the Company.

In January 2018, the Company’s founders entered into stock restriction agreements, whereby 4,580,444 of previously unrestricted shares of common stock were subject to service vesting conditions.

These shares are also subject to forfeiture by the Company upon the stockholders’ termination of employment or service to the Company.

In November 2017, in connection with the issuance of the Series A convertible preferred stock, certain employees entered into stock restriction agreements, whereby 1,305,421 shares are subject to repurchase by the Company upon the stockholder’s termination of employment or service to the Company.

For the year ended December 31, 2020, 441,801 shares were forfeited due to termination of employment.

Any shares subject to repurchase by the Company are not deemed, for accounting purposes, to be outstanding until those shares vest.

As such, the Company recognizes the measurement date fair value of the restricted stock over the vesting period as compensation expense.

For the years ended December 31, 2019, 2018 and 2017, 4,648,526 shares, 7,482,032 shares and 1,305,421 shares of common stock, respectively, were subject to repurchase by the Company.

As of December 31, 2020, 2019 and 2018, 1,649,348 shares, 4,648,526 shares and 7,482,032 shares of common stock, respectively, were subject to repurchase by the Company.

The unvested stock liability related to these awards is immaterial to all periods presented.

Note 9— Equity Incentive Plans

Approval of the 2019 Equity Incentive Plan

2019 Equity Incentive Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Incentive Award Plan (the “2019 Plan”).

The 2019 Plan became effective on February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO.

The 2019 Plan became effective on February 6, 2019, the day prior to the

effectiveness of the registration statement filed in connection with the IPO.

Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock or cash-based awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries.

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In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten -year term of the 2019 Plan, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 5 % of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors.

As of December 31, 2019, an aggregate of 1,751,485 shares of common stock were available for issuance under the 2019 Plan and 4,003,040 shares of common stock were subject to outstanding options under the 2019 Plan.

Approval of the 2019 Employee Stock Purchase Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the 2019 Employee Stock Purchase Plan (the “ESPP”).

As of December 31, 2020, an aggregate of 1,609,830 shares of common stock were available for issuance under the 2019 Plan and 7,140,993 shares of common stock were subject to outstanding awards under the 2019 Plan.

2019 Employee Stock Purchase Plan

In January 2019, the Company’s board of directors and stockholders approved and adopted the ESPP.

The ESPP became effective as of February 6, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO.

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In addition, the number of shares of common stock available for issuance under the ESPP will be automatically increased on the first day of each calendar year during the first ten-years of the term of the ESPP, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to 1 % of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors.

During the year ended December 31, 2020, 113,286 shares were issued pursuant to the ESPP.

As of December 31, 2020, an aggregate of 1,249,554 shares of common stock were available for issuance under the ESPP.

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The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model.

The Company, prior to the IPO on February 12, 2019, was a private company and lacked company-specific historical and implied volatility information.

Therefore, it estimated its expected volatility based on the historical volatility of a publicly traded set of peer companies.

The Company estimates its expected volatility based on the historical volatility of a publicly traded set of peer companies.

Due to the lack of historical exercise history, the expected term of the Company’s stock options for employees has been determined utilizing the “simplified” method for awards.

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Expected dividend yield is zero 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.

Th e following assumptions were used to estimate the fair value of stock option awards granted to employees under the Company’s equity incentive plans and the shares purchasable under the ESPP during the periods presented :

The following assumptions were used to estimate the fair value of stock option awards granted to employees under the Company’s equity incentive plans and the shares purchasable under the ESPP during the periods presented:

Year Ended December 31,

2020 2019 2018

Employee Stock Options

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2.65 % - 2.96 %

Volatility 84.38 % - 87.23 %

70.25 % - 86.92 %

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1.46 % - 1.87 %

Volatility 85.50 % - 99.13 %

72.08 % - 78.70 %

Dividend yield

Dividend yield — — N/A

Stock Options

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Shares Subject to

Options Outstanding

Options Outstanding Weighted-

(Years) Aggregate

Intrinsic Value

Shares Weighted-

(in thousands)

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Options granted 5,143,551 $ 7.49

Option exercised

Options exercised — $ —

Options forfeited/cancelled ( 36,222 ) $ 4.85

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Options granted 4,194,624 $ 20.11

Option exercised

Options exercised ( 419,593 ) $ 4.87

Options forfeited/cancelled ( 344,300 ) $ 11.64

Outstanding as of December 31, 2019 8,538,060 $ 13.67 9.0 $ 35,385

Options granted 2,712,372 $ 13.78

Options exercised ( 134,803 ) $ 3.96

Options forfeited/cancelled ( 1,714,547 ) $ 15.99

Outstanding as of December 31, 2020 9,401,082 $ 13.42 8.1 $ 10,182

Options vested and exercisable as of December 31, 2020 3,749,170 $ 12.66 7.5 $ 6,293

No stock options were granted for the year ended December 31, 2017.

The weighted-average grant date fair value per share for the stock options granted during the year ended December 31, 2020, 2019 and 2018 was $ 9.82 , $ 13.17 and $ 4.87 , respectively.

The aggregate fair value of stock options that vested during the years ended December 31, 2019 and 2018 was $7.2 million and $0.1 million, respectively.

The aggregate fair value of stock options that vested during the years ended December 31, 2020, 2019 and 2018 was $ 29.9 million, $ 7.2 million and $ 0.1 million, respectively.

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s common stock price and the exercise price of the stock options.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2019 was $6.9 million.

The aggregate intrinsic value of stock options exercised during the year ended December 31, 2020 and 2019 was $ 1.1 million and $ 6.9 million, respectively.

There were no stock options exercised during the year ended December 31, 2018.

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The summary of the Company’s restricted stock activity during the years ended December 31, 2020, 2019 and 2018 is as follows:

Outstanding Weighted-

Nonvested at December 31, 2017 1,305,421 $ 0.09

Granted 8,673,584 5.53

Vested ( 2,369,696 ) 7.58

Forfeited ( 127,277 ) 0.09

Nonvested at December 31, 2018 7,482,032 $ 4.01

Vested ( 2,833,506 ) 4.05

Forfeited — —

Nonvested at December 31, 2019 4,648,526 $ 3.98

Granted 2,003,900 10.96

Vested ( 2,557,377 ) 4.00

Forfeited ( 764,228 ) 8.30

Nonvested at December 31, 2020 3,330,821 $ 7.16

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Stock-based compensation expense has been reported in the Company’s consolidated statements of operations as follows (in thousands):

Year Ended December 31,

2020 2019 2018

Research and development $ 18,997 $ 10,227 $ 679

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Total stock-based compensation $ 38,748 $ 20,819 $ 30,947

As of December 31, 2019, total unrecognized compensation expense related to the ESPP was $1.3 million, which the Company expects to recognize over a weighted-average period of approximately 1.1 years.

In connection with the departure of the Company's former President and Chief Executive Officer in November 2020, the Company recognized $ 5.5 million of incremental stock-based compensation expense during the year ended December 31, 2020, due to a modification of the executive's existing restricted stock award, which included 18 months of accelerated vesting of the executive's outstanding restricted stock in accordance with the terms of the executive's transition agreement.

As of December 31, 2020, total unrecognized compensation expense related to the ESPP was $ 1.4 million, which the Company expects to recognize over a weighted-average period of approximately 1 year.

Note 10— Property and Equipment, Net

The Company’s property and equipment, net consisted of the following (in thousands):

(in years) December 31,

2020 December 31,

Office equipment 3 - 7

$ 1,153 $ 1,097

Computer equipment 5 123 124

Software 3 116 87

Lab equipment 2 - 5

Leasehold improvements 6 - 7

Construction in process

Construction in process N/A 15 48

Total property and equipment 8,157 6,639

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Property and equipment, net $ 5,534 $ 5,425

Depreciation expense for the year s ended December 31, 201 9 and December 31, 2018 was approximately $0.9 million and $0.3 million , respectively, and was recorded in general and administrative expense in the Consolidated Statements of Operations.

No deprecia tion expense was recorded for the year ended December 31, 201 7 .

Depreciation expense for the years ended December 31, 2020, 2019 and 2018 was approximately $ 1.4 million, $ 0.9 million and $ 0.3 million, respectively, and was recorded in general and administrative expense in the consolidated statements of operations.

Note 11— Commitments and Contingencies

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The options to extend must be exercised prior to the termination of the original lease agreement.

The period covered by the options was not included in the non-cancellable lease term as it not was not determined to be reasonably certain to be executed.

The period covered by the options was not included in the non-cancellable lease term as it was not determined to be reasonably certain to be executed.

The lease agreement also includes a one-time termination option for the expansion space only whereby the Company can terminate the lease with advance written notice.

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The option to extend must be exercised nine months prior to the termination of the original lease agreement.

The period covered by the option was not included in the non-cancellable lease term as it not was not determined to be reasonably certain to be executed.

The period covered by the option was not included in the non-cancellable lease term as it was not determined to be reasonably certain to be executed.

The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 3 % increase each subsequent year.

In June 2020, the Company entered into a sublease agreement for the permanent space with a third party.

The sublease commenced on July 1, 2020 and expires on December 31, 2021.

The sublessee pays the monthly base rent of $ 63,425 , subject to an annual 3 % increase, and is obligated to pay for common area maintenance and other costs.

The sublessee received a 6 months base rent abatement.

The Company determined that there was no impairment on the original right-of-use asset and will continue to account for the permanent space as it did before the commencement of the sublease.

The Company recognized $ 0.2 million in sublease income for the year ended December 31, 2020.

On July 29, 2020, the Company entered into a lease assignment agreement, whereby it became the assignee to a lease for certain office and laboratory space in Ann Arbor, Michigan.

The lease term expires on December 31, 2026 and the Company has the option to extend the term of the lease by up to five years .

The period covered by the option was not included in the non-cancellable lease term as it was not determined to be reasonably certain to be executed.

The monthly base rent for the space is $ 28,495 .

The lease is subject to charges for common area maintenance and other costs, and base rent is subject to an annual 2.5 % increase on January 1 of each year.

Monthly rent expense is recognized on a straight-line basis over the term of the leases.

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Lease costs were comprised of the following (in thousands):

December 31, 2019

Year ended December 31, 2020

Operating lease cost $ 3,615

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Total lease cost $ 3,693

Cash paid for amounts included in the measurement of operating lease liabilities for the year ended December 31, 2019 was $3.0 million.

Cash paid for amounts included in the measurement of operating lease liabilities for the years ended December 31, 2020 and 2019 was $ 3.6 million and $ 3.0 million , respectively.

Gross future minimum annual rental commitments as of December 31, 2020, were as follows (in thousands):

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Present value $ 11,346

Current portion of operating lease liabilities (included as a

component of accrued expenses and other current liabilities)

Current portion of operating lease liabilities (included as a component of accrued expenses and other current liabilities) 3,633

Noncurrent operating lease liabilities 7,713

Total operating lease liability $ 11,346

Future minimum payments under the non-cancelable operating lease as of December 31, 2018 were as follows (in thousands):

Years ending December 31,

For the years ended December 31, 2019 and December 31, 2018, the Company recorded approximately $3.1 million and $1.5 million, respectively, in rent expense.

The sublease did not commence until January 15, 2018, therefore there was no rent expense for the year ended December 31, 2017.

The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims.

From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

Note 1 3 —Selected Quarterly Financial Information (Unaudited)

The following is a summary of the quarterly results of the Company for the years ended December 31, 2019 and 2018 ( unaudited, in thousands, except for per share data ):

Year Ended December 31, 2019

Operating loss

Per common share:

Loss per share, basic and diluted

Year Ended December 31, 2018

Operating loss

Per common share:

Loss per share, basic and diluted

For the years ended December 31, 2020, 2019 and 2018, the Company recorded approximately $ 4.0 million, $ 3.1 million and $ 1.5 million, respectively, in rent expense.

Gossamer Bio, Inc., et.

On April 3, 2020, Scott Kuhne, individually and on behalf of all others similarly situated, filed a putative class action lawsuit against the Company, certain of its executive officers and directors, and the underwriters of its IPO in the United States District Court for the Southern District of California (Case No.

3:20-cv-00649-DMS-DEB).

The first amended complaint was filed on August 31, 2020, and the second amended complaint was filed on November 20, 2020.

The second amended complaint was filed on behalf of all investors who purchased the Company's securities pursuant to or traceable to the Company's February 8, 2019 IPO.

The second amended complaint alleges that the Company, certain of its executive officers and directors, and the underwriters of its IPO made false and/or misleading statements and failed to disclose material adverse facts about its business, operations and prospects in violation of Sections 11 and 15 of the Securities Act of 1933, as amended.

The plaintiff seeks damages, interest, costs, attorneys’ fees, and other unspecified equitable relief.

The Company moved to dismiss the second amended complaint on January 19, 2021, and Plaintiff filed an opposition to the motion on February 18, 2021.

The Company’s deadline to file a reply in support of the motion to dismiss is March 22, 2021.

The Company intends to vigorously defend this matter.

Given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from this action.

EXHIBIT INDEX

Exhibit Description

Incorporated by Reference

Number Exhibit Description Incorporated by Reference Filed

Form Date Number

3.1 Amended and Restated Certificate of Incorporation.

8-K 2/12/2019 3.1

3.2 Amended and Restated Bylaws.

10-Q 5/12/2020 3.2

4.1 Form of Common Stock Certificate.

S-1/A 1/23/2019 4.1

4.2 Amended and Restated Investors’ Rights Agreement, dated July 20, 2018, by and among the Registrant and certain of its stockholders.

S-1 12/21/2018 4.2

4.3 Description of Securities Registered under Section 12 of the Exchange Act.

4.4 Indenture, dated as of May 21, 2020, by and between the Registrant and Wilmington Trust, National Association.

8-K 5/21/2020 4.1

4.5 First Supplemental Indenture, dated May 21, 2020, by and between the Registrant and Wilmington Trust, National Association.

8-K 5/21/2020 4.2

4.6 Form of Global Note representing 5.00% Convertible Senior Notes due 2027 (included as part of Exhibit 4.

8-K 5/21/2020 4.3

10.1# Gossamer Bio, Inc.

2017 Equity Incentive Plan, as amended.

S-1 12/21/2018 10.1

10.2# Form of stock option grant notice and stock option agreement under Gossamer Bio, Inc.

2017 Equity Incentive Plan, as amended.

S-1 12/21/2018 10.2

10.3# Form of restricted stock grant notice and restricted stock agreement under Gossamer Bio, Inc.

2017 Equity Incentive Plan, as amended.

S-1 12/21/2018 10.3

10.4# Form of Founder restricted stock grant notice and restricted stock agreement.

S-1 12/21/2018 10.4

10.5# Gossamer Bio, Inc.

2019 Incentive Award Plan and form of stock option grant notice and stock option agreement thereunder.

S-1/A 1/23/2019 10.5

10.6# Gossamer Bio, Inc.

2019 Employee Stock Purchase Plan.

S-1/A 1/23/2019 10.6

10.7# Gossamer Bio, Inc.

Non-Employee Director Compensation Program.

S-1/A 1/23/2019 10.7

10.8# Gossamer Bio, Inc.

Restricted Stock Unit Agreement under the 2019 Equity Incentive Plan.

10-Q 5/12/2020 10.1

10.9# Employment Letter, dated January 4, 2018, by and between Sheila Gujrathi, M.D.

and the Registrant.

Letter Agreement, dated June 3, 2019, by and between Faheem Hasnain and the Registrant

S-1 12/21/2018 10.8

10.10# Transition Agreement, dated November 17, 2020, by and between Sheila Gujrathi, M.D.

and the Registrant.

10.11# Letter Agreement, dated November 16, 2020, by and between Faheem Hasnain and the Registrant.

10.12# Employment Letter, dated December 4, 2018, by and between Bryan Giraudo and the Registrant.

S-1 12/21/2018 10.10

10.13# Employment Letter, dated December 4, 2018, by and between Christian Waage and the Registrant.

Employment Letter, dated December 4, 2018, by and between Jakob Dupont, M.D.

and the Registrant.

S-1 12/21/2018 10.11

10.14# Employment Letter, dated December 4, 2018, by and between Luisa Salter-Cid, Ph.D.

and the Registrant.

S-1 12/21/2018 10.13

10.15# Form of Indemnification Agreement.

S-1 12/21/2018 10.14

10.16 Sublease Agreement, dated December 29, 2017, by and between The Medicines Company and the Registrant.

S-1 12/21/2018 10.15

10.17 First Amendment to Sublease Agreement, dated August 24, 2018, by and between The Medicines Company and the Registrant.

S-1 12/21/2018 10.16

10.18† Exclusive License Agreement, dated October 2, 2017, by and between GB002, Inc., the Registrant and Pulmokine, Inc.

S-1 12/21/2018 10.17

10.19† License Agreement, dated June 24, 2018, by and between Aerpio Pharmaceuticals, Inc.

and GB004, Inc.

S-1 12/21/2018 10.18

10.20† Amendment No.

1 to License Agreement, dated May 11, 2020, by and between GB004, Inc.

and Aerpio Pharmaceuticals, Inc.

10-Q 8/11/2020 10.2

10.21 Credit, Guaranty and Security Agreement, dated May 2, 2019, by and among GB001, Inc., as Borrower, Gossamer Bio, Inc., as Guarantor, MidCap Financial Trust, as Agent and Lender, and the additional lenders from time to time party thereto.

8-K 5/3/2019 10.1

Number Exhibit Description Incorporated by Reference Filed

Form Date Number

10.22 First Amendment to Credit, Guaranty and Security Agreement, dated September 18, 2019, by and among GB001, Inc., as borrower, the Registrant, as guarantor, the other guarantors from time to time party thereto and MidCap Financial Trust, as Agent and as Lender, and the additional lenders from time to time party thereto.

10-Q 11/12/2019 10.1

10.23 Second Amendment to Credit, Guaranty and Security Agreement, dated July 2, 2020, by and among the Registrant , GB001, Inc., GB002, Inc.

and GB004, Inc., as co-borrowers, the other guarantors from time to time party thereto and MidCap Financial Trust, as Agent and as a Lender and the additional lenders from time to time party thereto.

8-K 7/2/2020 10.1

21.1 List of Subsidiaries of the Registrant.

10-K 3/24/2020 21.1

23.1 Consent of Ernst & Young LLP, independent registered public accounting firm.

Exhibit Description

Incorporated by Reference

31.1 Certification of Chief Executive Officer of Gossamer Bio, Inc., as required by Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934, as amended.

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32.2* Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XBRL Report Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Label Linkbase Document

XBRL Presentation Linkbase Document

101.INS XBRL Report Instance Document X

101.SCH XBRL Taxonomy Extension Schema Document X

101.CAL XBRL Taxonomy Calculation Linkbase Document X

101.DEF XBRL Taxonomy Extension Definition Linkbase Document X

101.LAB XBRL Taxonomy Label Linkbase Document X

101.PRE XBRL Presentation Linkbase Document X

# Indicates management contract or compensatory plan.

Confidential treatment has been granted for certain information contained in this Exhibit.

Such information has been omitted and filed separately with the SEC.

Portions of this exhibit (indicated by asterisks) have been omitted for confidentiality purposes pursuant to Item 601(b)(10)(iv) of Regulation S-K.

* These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C.

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GOSSAMER BIO, INC.

/s/ Sheila Gujrathi

Sheila Gujrathi, M.D.

/s/ Faheem Hasnain

Faheem Hasnain

President and Chief Executive Officer

March 24, 2020

Date February 26, 2021

SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

/s/ Sheila Gujrathi

Sheila Gujrathi, M.D.

President, Chief Executive

Officer and Director

(principal executive officer)

March 24, 2020

/s/ Bryan Giraudo

Bryan Giraudo

Chief Financial Officer

(principal financial and

accounting officer)

March 24, 2020

/s/ Faheem Hasnain

Signature Title Date

/s/ Faheem Hasnain President, Chief Executive Officer and Chairman of the Board of Directors

(principal executive officer) February 26, 2021

Faheem Hasnain

Chairman of the Board of Directors

March 24, 2020

/s/ Bryan Giraudo Chief Financial Officer

(principal financial and

accounting officer) February 26, 2021

Bryan Giraudo

/s/ Joshua H.

Bilenker Director February 26, 2021

Bilenker, M.D.

March 24, 2020

/s/ Kristina Burow

/s/ Kristina Burow Director February 26, 2021

Kristina Burow

March 24, 2020

/s/ Russell Cox

March 24, 2020

/s/ Russell Cox Director February 26, 2021

/s/ Thomas Daniel, M.D.

Director February 26, 2021

Thomas Daniel, M.D.

March 24, 2020

/s/ Renée Galá

March 24, 2020

/s/ Renée Galá Director February 26, 2021

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

What changed 10-K

Item 9A. Controls and Procedures