What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-12 compared with 2021-06-10 · 191 added, 143 removed, 237 unchanged (58% of the section changed)

15 unchanged sentences

$ 190,418 $ 96,398

Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Deficit:

Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit):

Current liabilities:

1 unchanged sentence

$ 3,193 $ 1,021

Accrued expenses

Accrued expenses and other current liabilities

Operating lease liability, current

Other current liabilities

Total current liabilities

4 unchanged sentences

Redeemable convertible preferred stock:

Series A redeemable convertible preferred stock, par value $ 0.0001 per share, 80,247 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020;

liquidation preference of $ 118,765 and $ 69,012 at March 31, 2021 and December 31, 2020, respectively

118,765 69,012

Series B redeemable convertible preferred stock, par value $ 0.0001 per share, 78,222 shares authorized, issued and outstanding at March 31, 2021 and December 31, 2020;

liquidation preference of $ 117,333 and $ 72,070 at March 31, 2021 and December 31, 2020, respectively

117,333 72,070

Stockholders’ deficit:

Common stock, $ 0.0001 par value, 196,000 shares and 193,500 shares authorized as of March 31, 2021 and December 31, 2020, respectively;

1,760 and 1,746 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Series A redeemable convertible preferred stock, par value $ 0.0001 per share, no shares and 80,247 shares authorized, issued and outstanding at June 30, 2021 and December 31, 2020, respectively;

liquidation preference of $ 69,012 at December 31, 2020

Series B redeemable convertible preferred stock, par value $ 0.0001 per share, no shares and 78,222 shares authorized, issued and outstanding at June 30, 2021 and December 31, 2020, respectively;

liquidation preference of $ 72,070 at December 31, 2020

Stockholders’ equity (deficit):

Preferred stock, $ 0.0001 par value, 5,000 shares and no shares authorized at June 30, 2021 and December 31, 2020, respectively;

no shares issued or outstanding as of June 30, 2021 or December 31, 2020

Common stock, $ 0.0001 par value, 200,000 shares and 193,500 shares authorized as of June 30, 2021 and December 31, 2020, respectively;

27,568 and 1,746 shares issued as of June 30, 2021 and December 31, 2020, respectively;

27,134 and 1,184 shares outstanding as of June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

1 unchanged sentence

( 221,268 ) ( 51,865 )

Total stockholders’ deficit

Total stockholders’ equity (deficit)

181,556 ( 51,863 )

Total liabilities, redeemable convertible preferred stock, and stockholders’ deficit

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

$ 190,418 $ 96,398

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Operating expenses:

2 unchanged sentences

General and administrative

3,691 1,285 6,326 2,416

Total operating expenses

10,956 5,065 18,408 8,959

Operating loss

1 unchanged sentence

Other income:

Interest income, net

Other expense, net

Change in fair value of preferred stock tranche liability

— 7,301 — 7,301

Interest income

Other expense

( 16 ) ( 3 ) ( 32 ) ( 3 )

Total other income

35 7,322 52 7,389

Net (loss) income

( 10,921 ) 2,257 ( 18,356 ) ( 1,570 )

Accretion of redeemable convertible preferred stock to redemption value

Net loss attributable to common stockholders

( 56,926 ) ( 31 ) ( 151,942 ) ( 31 )

Net loss per share attributable to common stockholders, basic and diluted

Net (loss) income attributable to common stockholders

$ ( 67,847 ) $ 2,226 $ ( 170,298 ) $ ( 1,601 )

Weighted-average common shares outstanding, basic and diluted

Net (loss) income per share attributable to common stockholders, basic

$ ( 3.82 ) $ 2.35 $ ( 17.86 ) $ ( 1.80 )

Net (loss) income per share attributable to common stockholders, diluted

$ ( 3.82 ) $ 0.22 $ ( 17.86 ) $ ( 1.80 )

Weighted-average common shares outstanding, basic

17,750 947 9,535 891

Weighted-average common shares outstanding, diluted

17,750 10,327 9,535 891

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

Werewolf Therapeutics, Inc.

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit (unaudited)

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity (unaudited)

(amounts in thousands)

8 unchanged sentences

Balance at March 31, 2020 48,675 34,073 — — 1,737 2 159 ( 28,235 ) ( 28,074 )

Stock-based compensation expense — — — — — — 221 — 221

Accretion of redeemable convertible preferred stock to redemption value — 31 — — — — ( 31 ) — ( 31 )

Issuance of Series A Preferred Stock, net of issuance costs of $ 31

31,571 22,069 — — — — — — —

— — — — — — — 2,257 2,257

Balance at June 30, 2020 80,246 $ 56,173 — $ — 1,737 $ 2 $ 349 $ ( 25,978 ) $ ( 25,627 )

Series A Redeemable Convertible Preferred Stock

2 unchanged sentences

Accumulated Deficit

Total Stockholders’ Deficit

Total Stockholders’ (Deficit) Equity

Balance at December 31, 2020 80,247 $ 69,012 78,222 $ 72,070 1,746 $ 2 $ — $ ( 51,865 ) $ ( 51,863 )

4 unchanged sentences

Balance at March 31, 2021 80,247 118,765 78,222 117,333 1,760 2 — ( 153,756 ) ( 153,754 )

Stock-based compensation expense — — — — — — 781 — 781

Exercise of common stock options — — — — 28 — 131 — 131

Accretion of redeemable convertible preferred stock to redemption value — 29,619 — 27,307 — — ( 335 ) ( 56,591 ) ( 56,926 )

Issuance of common stock from initial public offering, net of issuance costs of $ 2,379

— — — — 7,500 — 109,221 — 109,221

Conversion of redeemable convertible preferred stock to common stock upon closing of initial public offering ( 80,247 ) ( 148,384 ) ( 78,222 ) ( 144,640 ) 18,280 — 293,024 — 293,024

— — — — — — — ( 10,921 ) ( 10,921 )

Balance at June 30, 2021 — $ — — $ — 27,568 $ 2 $ 402,822 $ ( 221,268 ) $ 181,556

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

2 unchanged sentences

(amounts in thousands)

Three Months Ended

Six Months Ended

Operating activities:

1 unchanged sentence

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

Stock-based compensation

Stock-based compensation expense

Depreciation expense

Non-cash lease expense

Change in fair value of preferred stock tranche liability

Changes in operating assets and liabilities:

1 unchanged sentence

Accounts payable

Accrued expenses

( 1,331 ) ( 47 )

Accrued expenses and other current liabilities

Right of use assets and operating lease liability

1 unchanged sentence

Other liabilities

( 31 ) ( 14 )

Net cash used in operating activities

6 unchanged sentences

Financing activities:

Deferred financing costs

Stock option exercise

Net cash used in financing activities

Net decrease in cash and cash equivalents

Proceeds from issuance of Series A redeemable convertible preferred stock — 22,100

Proceeds from initial public offering of common stock 111,600 —

Payment of equity issuance costs ( 2,087 ) ( 26 )

Proceeds from stock option exercises

Net cash provided by financing activities

109,665 22,074

Net increase in cash and cash equivalents

91,755 13,886

Cash, cash equivalents and restricted cash—beginning of period

4 unchanged sentences

Non-cash accretion of Series A and Series B redeemable convertible preferred stock

$ 151,942 $ 31

Issuance costs in accounts payable and accrued expenses

15 unchanged sentences

The gross proceeds from the IPO were $ 120.0 million and the net proceeds were approximately $ 109.2 million, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

Upon completion of the Company’s IPO, all of the Company’s then outstanding preferred stock as of March 31, 2021 was automatically converted into an aggregate of 18,279,712 shares of common stock.

The Company had cash and cash equivalents of $ 84.6 million at March 31, 2021.

The Company expects that its cash and cash equivalents, including the net proceeds from its IPO, will enable it to fund its operating expenses and capital expenditure requirements for at least twelve months from June 10, 2021, the filing date of this Quarterly Report on Form 10-Q.

Upon completion of the Company’s IPO, all of the Company’s then outstanding preferred stock was automatically converted into an aggregate of 18,279,712 shares of common stock.

The Company had cash and cash equivalents of $ 183.2 million at June 30, 2021.

The Company expects that its cash and cash equivalents will enable it to fund its operating expenses and capital expenditure requirements for at least twelve months from the filing date of this Quarterly Report on Form 10-Q.

However, additional funding will be necessary beyond this point to fund future preclinical and clinical activities.

2 unchanged sentences

Basis of Presentation

The accompanying condensed consolidated financial statements as of March 31, 2021, and for the three months ended March 31, 2021 and 2020, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”) for condensed consolidated financial information.

The accompanying condensed consolidated financial statements as of June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”) for condensed consolidated financial information.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

1 unchanged sentence

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s final prospectus for its IPO dated April 29, 2021 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the “Prospectus”).

The information presented in the condensed consolidated financial statements and related notes as of March 31, 2021, and for the three months ended March 31, 2021 and 2020, is unaudited.

The information presented in the condensed consolidated financial statements and related notes as of June 30, 2021, and for the three and six months ended June 30, 2021 and 2020, is unaudited.

The December 31, 2020 condensed consolidated balance sheet included herein was derived from the audited financial statements as of that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.

Interim results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021, or any future period.

Interim results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021, or any future period.

The accompanying condensed consolidated financial statements include the accounts of Werewolf Therapeutics, Inc.

3 unchanged sentences

The significant accounting policies and estimates used in the preparation of the condensed consolidated financial statements are described in the Company’s audited financial statements for the year ended December 31, 2020, and the notes thereto, which are included in the Prospectus.

There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2021.

There have been no material changes in the Company’s significant accounting policies during the six months ended June 30, 2021.

Use of Estimates

19 unchanged sentences

The carrying amounts reflected in the condensed consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values, due to their short-term nature.

Assets measured at fair value on a recurring basis as of March 31, 2021 were as follows (in thousands):

Assets measured at fair value on a recurring basis as of June 30, 2021 were as follows (in thousands):

Quoted Price in

15 unchanged sentences

$ 92,570 $ — $ — $ 92,570

There were no changes in valuation techniques during the three months ended March 31, 2021.

There were no liabilities measured at fair value on a recurring basis as of March 31, 2021 or December 31, 2020.

There were no changes in valuation techniques during the three or six months ended June 30, 2021.

There were no liabilities measured at fair value on a recurring basis as of June 30, 2021 or December 31, 2020.

Preferred Stock Tranche Liability — During 2019, the Company issued 48,675,140 shares of Series A redeemable convertible preferred stock (“Series A Preferred Stock”) which contained the preferred stock tranche liability.

1 unchanged sentence

The preferred stock tranche liability was settled in June 2020 upon the closing of the second tranche of the Series A Preferred Stock.

There was no change in the fair value of the preferred stock tranche liability for the three months ended March 31, 2020.

Restricted Cash

The Company maintained non-current restricted cash of $ 0.3 million and $ 0.2 million at March 31, 2021 and December 31, 2020, respectively.

This amount is comprised solely of letters of credit required pursuant to the Company’s leased office spaces.

Accrued Expenses

Accrued expenses as of March 31, 2021 and December 31, 2020 were comprised as follows (in thousands):

The Company maintained restricted cash of $ 1.3 million and $ 0.2 million at June 30, 2021 and December 31, 2020, respectively.

At June 30, 2021, $ 0.1 million of the Company’s restricted cash balance is included within “Prepaid expenses and other current assets” in the accompanying condensed consolidated balance sheets.

These amounts are comprised solely of letters of credit required pursuant to the Company’s leased office spaces.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of June 30, 2021 and December 31, 2020 were comprised as follows (in thousands):

2021 December 31,

4 unchanged sentences

Contract research

Total accrued expenses

Total accrued expenses and other current liabilities

$ 3,456 $ 3,586

In May 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Pacific Western Bank (“PWB”).

Under the terms of the Loan Agreement, PWB made available a term loan up to $ 6.0 million (“Term Loan A”).

Based on the satisfaction of certain conditions defined in the Loan Agreement, PWB is also obligated to make available an additional term loan in the amount of up to $ 8.0 million until November 29, 2021 (“Term Loan B”, or collectively with Term Loan A, the “Term Loans”).

The Company satisfied the conditions to draw Term Loan B in June 2020.

Although Term Loan A was made available to the Company at the closing date, the Company elected to forgo making a draw, thereby incurring a delayed draw fee of $ 25,000 with PWB.

As of June 30, 2021, the Company had no t drawn down any Term Loans and had no outstanding borrowings under the Loan Agreement.

The Term Loans will bear interest on the outstanding daily balance at a floating annual rate equal to greater of:

(i) 1.75 % above the prime rate then in effect or (ii) 5.00 %.

If the prime rate changes throughout the term, the interest rate will be adjusted effective on the date of the prime rate change.

All interest chargeable under the Loan Agreement is computed on a 360-day year for the actual number of days elapsed, with interest payable monthly.

The Company is obligated to pay PWB a fee of 5.00 % of the amount drawn under the Term Loans upon the occurrence of the Company achieving certain conditions defined in the Loan Agreement (the “Success Fee”).

The Success Fee will survive ten years from the date of payment of the Term Loan in full, such that, if the Loan Agreement is terminated prior to the payment of the Success Fee, the Company will remain obligated to pay the Success Fee upon the occurrence of a Success Fee Event (as described in the Loan Agreement).

The Company determined that the Success Fee constitutes a freestanding financial instrument and should be accounted for as a liability in connection with ASC 480— Distinguishing Liabilities from Equity.

The Company determined that the fair value of the Success Fee was immaterial at both issuance and as of June 30, 2021.

Borrowings under the Loan Agreement are secured by the Company’s personal property (exclusive of any intellectual property) and are subject to acceleration in the event of default.

In the event of a late payment or default, the Company is obligated to pay a fee equal to 5.0 % of such unpaid amounts.

In connection with the Loan Agreement, the Company is required to comply with certain covenants, which among other things, restrict the Company from (i) effectuating a merger or consolidation with or into any other business organization, (ii) paying dividends or making certain other distributions and (iii) making investments in any entities or instruments other than certain investments specified in the Loan Agreement.

In addition, the Loan Agreement contains standard affirmative covenants, including with respect to the issuance of audited consolidated financial statements, insurance, and maintenance of good standing and government compliance in the Company’s state of formation.

The Company is also required to maintain unrestricted cash balances of at least 2.5 times its monthly cash burn, and has covenanted not to make any capital expenditures in excess of $ 0.4 million in the aggregate in any fiscal year without the prior written consent of PWB.

In December 2020, the Loan Agreement was amended to allow the Company to make investments in its subsidiary, Werewolf Therapeutics Mass Securities, Inc., subject to certain conditions described in the Loan Agreement.

In February 2021, the Loan Agreement was amended such that the Company may not make any capital expenditures in excess of $ 2.0 million in the aggregate in 2021 and $ 0.5 million in the aggregate in any fiscal year thereafter without the prior written consent of PWB.

PWB has the right to accelerate all obligations of the Company in the event of a material adverse effect on (i) the operations, business or financial condition of the Company, (ii) the Company’s ability to repay any portion of the Term Loans or perform any of its other obligations under the Loan Agreement and (iii) the Company’s interest in, or the value, perfection or priority of PWB’s security interest in the collateral.

As of June 30, 2021, the Company had $ 14.0 million available to draw on the Term Loans and had no outstanding principal.

Common and Preferred Stock

The Company is authorized to issue 200.0 million shares of common stock.

Common stockholders are entitled to dividends if and when declared by the Company’s board of directors.

As of June 30, 2021, no dividends on common stock had been declared by the Company.

The Company had reserved shares of common stock for issuance as follows (in thousands):

As of June 30, As of December 31,

Redeemable convertible preferred stock outstanding

Options issued and outstanding

Warrants issued and outstanding

Redeemable Convertible Preferred Stock

The Company’s Series A and Series B redeemable convertible preferred stock, together referred to as “Preferred Stock,” has been classified as temporary equity on the accompanying condensed consolidated balance sheets in accordance with authoritative guidance for the classification and measurement of redeemable securities as the preferred stock was redeemable upon the occurrence of a deemed liquidation event.

Upon completion of the Company’s IPO, all of the Company’s then outstanding preferred stock as of March 31, 2021 was automatically converted into an aggregate of 18.3 million shares of common stock.

The Company’s Series A and Series B redeemable convertible preferred stock, together referred to as “Preferred Stock,” was classified as temporary equity on the accompanying condensed consolidated balance sheets in accordance with authoritative guidance for the classification and measurement of redeemable securities as the preferred stock was redeemable upon the occurrence of a deemed liquidation event.

Upon completion of the Company’s IPO, all of the Company’s then outstanding preferred stock was automatically converted into an aggregate of 18.3 million shares of common stock.

Series A Preferred Stock

As of March 31, 2021, 80,246,565 shares of Series A Preferred Stock were issued and outstanding.

These shares were issued at various closing dates between 2019 and 2020 for a purchase price of $ 0.70 per share.

The Series A Preferred Stock shares were issued at various closing dates between 2019 and 2020 for a purchase price of $ 0.70 per share.

The shares were issued in exchange for cash proceeds of $ 44.0 million, net of issuance costs of $ 0.2 million, and the exchange of approximately $ 12.0 million in outstanding convertible notes, including accrued interest.

15 unchanged sentences

Series B Preferred Stock

As of March 31, 2021, 78,222,173 shares of Series B redeemable convertible preferred stock (“Series B Preferred Stock”) were authorized, issued and outstanding.

These shares were issued for a purchase price of $ 0.92 per share.

The Series B Preferred Stock shares were issued for a purchase price of $ 0.92 per share.

The issuance resulted in cash proceeds of $ 71.8 million, net of issuance costs of $ 0.3 million.

Rights, preferences, privileges, and restrictions:

The holders of Preferred Stock had the rights, preferences, privileges, and restrictions as set forth below:

The holders of Preferred Stock were entitled to receive non-cumulative dividends when, as and if declared by the Company’s board of directors at a rate of $ 0.056 per share and $ 0.0737 per share, respectively.

The Company could only declare dividends on the common stock if the holders of Preferred Stock simultaneously received dividends at the same rate and same time as the common stock, with the holders of Preferred Stock participating on an as-if converted basis.

No dividends were declared or paid as of March 31, 2021.

Voting Rights:

The holders of Preferred Stock were entitled to voting rights equal to the number of shares of common stock into which the shares of Preferred Stock were convertible.

As long as at least 15,000,000 shares of Preferred Stock remained outstanding, the holders of Series A Preferred Stock, exclusively and as a separate class, were entitled to elect four members of the Company’s board of directors, and the holders of Series B Preferred Stock, exclusively and as a separate class, were entitled to elect two members of the Company’s board of directors.

If the holders of the Preferred Stock failed to elect a sufficient number of directors to fulfill directorships for which they were entitled to elect directors, then any directorship would have remained vacant until the holders of Preferred Stock elected a person.

The holders of common stock, and any other class or series of voting stock (including Preferred Stock) exclusively and voting together as a single class, were entitled to elect the balance of the total number of directors of the Company.

Liquidation Rights:

In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Preferred Stock had liquidation preferences, before any distribution or payment would have been made to holders of common stock, in an amount per share equal to the greater of (i) the original issue price of $ 0.70 per share for Series A Preferred Stock and the original issue price of $ 0.92 per share for Series B Preferred Stock, respectively, or (ii) an amount per share that would have been payable had, in the case of the Series A Preferred Stock, all shares of Series A Preferred Stock and, in the case of the Series B Preferred Stock, all shares of Series B Preferred Stock been converted to common stock.

If the assets and funds to be distributed among the holders of Preferred Stock were insufficient to permit the payment to such holders, then the entire assets and funds of the Company legally available for distribution would have been distributed ratably among the holders of Preferred Stock in proportion to the preferential amount each such holder was otherwise entitled to receive.

Upon completion of the payment of the full liquidation preference of Preferred Stock, the remaining assets of the Company, if any, would have been distributed among the holders of common stock, pro rata based on the number of shares held by each common stockholder.

Each share of Preferred Stock was convertible into shares of common stock, at the option of the holder, at any time after date of issuance.

As of March 31, 2021, each share of Preferred Stock was automatically convertible into the number of shares of common stock determined in accordance with the conversion rate upon the earlier of (i) the closing of a public offering, in which the gross cash proceeds are at least $ 75.0 million and the initial offering price to the public is at least $ 24.01 per share (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations, reorganizations, reclassifications or the like) or (ii) the occurrence of an event, specified by vote or written consent of the holders of 67 % of the Series B Preferred Stock.

As of March 31, 2021, the Preferred Stock was not redeemable.

Upon certain change in control events that are outside of the Company’s control, including liquidation, sale or transfer of control of the Company, the Preferred Stock was contingently redeemable.

2 unchanged sentences

As the Preferred Stock approached becoming redeemable due to the passage of time, the Company recorded changes in the redemption value and accreted the Preferred Stock immediately to redemption value as it occurred.

Protective Provisions:

As long as at least 20,000,000 shares of Preferred Stock were outstanding, as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations, reorganizations, reclassifications or the like, the Company could not, either directly or by amendment, merger, consolidation, reclassification or otherwise, do any of the following without the approval of the holders of a majority of the shares of outstanding Preferred Stock, including at least 67 % of the then-outstanding shares of Series B Preferred Stock:

(i) effect the consummation of a liquidation event or any other merger or consolidation, (ii) amend, alter or repeal any provision of the Company’s certificate of incorporation of bylaws in a manner that adversely affects the powers, preferences or rights of the Preferred Stock, (iii) create, or authorize the creation of, or obligate the Company to issue any equity security unless such security is junior to the Preferred Stock, (iv) subject to certain exceptions, purchase or redeem, or pay or declare or make any distribution on, any shares of the capital stock, (v) create, or authorize the creation of, or issue, or authorize the issuance of certain debt securities, (vi) change the authorized number of directors of the Company, (vii) increase the number of authorized shares of Preferred Stock, (viii) alter or change the powers, preferences or rights of the Preferred Stock, (ix) create, or hold capital stock in, any subsidiary that is not wholly owned or (x) enter into any transactions between the Company and any Company affiliate.

In May 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Pacific Western Bank (“PWB”).

Under the terms of the Loan Agreement, PWB made available a term loan up to $ 6.0 million (“Term Loan A”).

Based on the satisfaction of certain conditions defined in the Loan Agreement, PWB is also obligated to make available an additional term loan in the amount of up to $ 8.0 million (“Term Loan B”, or collectively with Term Loan A, the “Term Loans”).

The Company satisfied the conditions to draw Term Loan B in June 2020.

Although Term Loan A was made available to the Company at the closing date, the Company elected to forgo making a draw, thereby incurring a delayed draw fee of $ 25,000 with PWB.

As of March 31, 2021, the Company had no t drawn down any Term Loans and had no outstanding borrowings under the Loan Agreement.

The Term Loans will bear interest on the outstanding daily balance at a floating annual rate equal to greater of:

(i) 1.75 % above the prime rate then in effect or (ii) 5.00 %.

If the prime rate changes throughout the term, the interest rate will be adjusted effective on the date of the prime

All interest chargeable under the Loan Agreement is computed on a 360-day year for the actual number of days elapsed, with interest payable monthly.

The Success Fee will survive ten years from the date of payment of the Term Loan in full, such that, if the Loan Agreement is terminated prior to the payment of the Success Fee the Company will remain obligated to pay the Success Fee upon the occurrence of a Success Fee Event.

The Company determined that the fair value of the Success Fee was immaterial at both issuance and as of March 31, 2021.

Borrowings under the Loan Agreement are secured by the Company’s personal property (exclusive of any intellectual property) and are subject to acceleration in the event of default.

In the event of a late payment or default, the Company is obligated to pay a fee equal to 5.0 % of such unpaid amounts.

PWB has the right to accelerate all obligations of the Company in the event of a material adverse effect on (i) the operations, business or financial condition of the Company (ii) the Company’s ability to repay any portion of the Term Loans or perform any of its other obligations under the Loan Agreement and (iii) the Company’s interest in, or the value, perfection or priority of PWB’s security interest in the collateral.

As of March 31, 2021, the Company had $ 14.0 million available to draw on the Term Loans and had no outstanding principal.

Common stockholders are entitled to dividends if and when declared by the Company’s board of directors subject to the rights of the preferred stockholders.

As of March 31, 2021, no dividends on common stock had been declared by the Company.

The Company had reserved shares of common stock for issuance as follows (in thousands):

As of March 31, As of December 31,

Redeemable convertible preferred stock outstanding

18,280 18,280

Options issued and outstanding

Warrants issued and outstanding

20,740 20,398

Preferred Stock

The Company is authorized to issue 5.0 million shares of undesignated preferred stock in one or more series.

As of June 30, 2021, no shares of preferred stock were issued or outstanding.

Stock-based Compensation

In 2017, the Company adopted the 2017 Stock Incentive Plan (the “Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards to eligible employees, officers, directors and consultants.

2017 Stock Incentive Plan

In December 2017, the Company adopted the 2017 Stock Incentive Plan (the “2017 Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), stock appreciation rights and other stock-based awards to eligible employees, officers, directors and consultants.

The terms of stock options and restricted stock awards, including vesting requirements, are determined by the board of directors, subject to the provisions of the Plan.

As of March 31, 2021, the maximum number of shares of common stock authorized to be issued under the Plan was 3,728,307 shares, of which 28,893 shares were available for future issuance under the Plan.

2021 Stock Incentive Plan

In April 2021, the board of directors adopted and the Company’s stockholders approved the 2021 Stock Incentive Plan (the “2021 Plan”), which became effective immediately prior to the effectiveness of the Company’s IPO.

Upon the adoption of the 2021 Plan, no further awards will be made under the 2017 Plan.

The 2021 Plan provides for the grant of ISOs, non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards.

The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2021 Plan.

The terms of awards, including vesting requirements, are determined by the board of directors, subject to the provisions of the 2021 Plan.

The Company initially registered 3,352,725 shares of common stock under the 2021 Plan pursuant,to a Registration Statement on Form S-8 filed with the SEC on April 30, 2021, which was comprised of (i) 2,843,116 shares of common stock reserved for issuance under the 2021 Plan, (ii) 31,884 shares of common stock originally reserved for issuance under the 2017 Plan that became available for issuance under the 2021 Plan upon the completion of the Company’s IPO, and (iii) 477,725 shares of unvested restricted stock subject to repurchase by us that may become issuable under the 2021 Stock Incentive Plan following such repurchase.

The 2021 Plan also provides that an additional number of shares will be added annually to the shares authorized for issuance under the 2021 Plan on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2022 and continuing until, and including, the fiscal year ended December 31, 2031.

The number of shares added each year will be equal to the lesser of (i) 5 % of the number of outstanding common stock on such date and (ii) such amount as determined by the board of directors.

As of June 30, 2021, there were 2,361,250 shares available for future issuance under the 2021 Plan.

2021 Employee Stock Purchase Plan

In April 2021, the board of directors adopted and the Company’s stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective immediately prior to the effectiveness of the Company’s IPO.

The Company initially reserved 244,000 shares of common stock for future issuance under the 2021 ESPP.

The 2021 ESPP provides that an additional number of shares will automatically be added to the shares reserved for issuance on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2022 and continuing for each fiscal year until, and including, the fiscal year ending on December 31, 2032.

The number of shares added each year will be equal to the lowest of (i) 488,000 shares of common stock, (ii) 1 % of the number of shares of outstanding common stock on such date, and (iii) such amount as determined by the board of directors.

No offering periods under the 2021 ESPP had been initiated as of June 30, 2021.

Stock-Based Compensation Expense

Total stock-based compensation expense recognized in the condensed consolidated statements of operations for the three months ended March 31, 2021 and 2020 was as follows (in thousands):

Total stock-based compensation expense recognized in the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020 was as follows (in thousands):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Research and development

$ 212 $ 36 $ 352 $ 71

General and administrative

569 185 968 207

Total stock-based compensation

$ 781 $ 221 $ 1,320 $ 278

Restricted Stock Activity

Restricted stock issued under the Plan allow the Company, at its discretion, to repurchase unvested shares at the initial purchase price if the employees or non-employees terminate their service relationship with the Company.

The Company may, at its discretion, repurchase unvested shares of restricted stock issued pursuant to the 2017 Plan at the initial purchase price if the employees or non-employees terminate their service relationship with the Company.

The shares are recorded in stockholders’ deficit as they vest.

The following table summarizes restricted stock award activity during the three months ended March 31, 2021 (in thousands, except per share amounts):

The following table summarizes restricted stock award activity during the six months ended June 30, 2021 (in thousands, except per share amounts):

Shares/Units Weighted-Average

3 unchanged sentences

( 128 ) $ 1.54

Unvested at March 31, 2021 498 $ 1.54

As of March 31, 2021, there was unrecognized stock-based compensation expense related to unvested restricted stock awards of $ 0.8 million, which the Company expects to recognize over a weighted-average period of approximately 2.0 years.

The aggregate fair value of restricted stock awards that vested during the three months ended March 31, 2021 and 2020, based upon the fair values of the stock underlying the restricted stock awards on the day of vesting, was $ 0.3 million and $ 0.1 million, respectively.

Unvested at June 30, 2021 434 $ 1.54

As of June 30, 2021, there was unrecognized stock-based compensation expense related to unvested restricted stock awards of $ 0.7 million, which the Company expects to recognize over a weighted-average period of approximately 1.8 years.

The aggregate fair value of restricted stock awards that vested during the three months ended June 30, 2021 and 2020, based upon the fair values of the stock underlying the restricted stock awards on the day of vesting, was $ 0.8 million and $ 0.3 million, respectively.The aggregate fair value of restricted stock awards that vested during the six months ended June 30, 2021 and 2020, based upon the fair values of the stock underlying the restricted stock awards on the day of vesting, was $ 1.1 million and $ 0.4 million, respectively.

Stock Option Activity

The fair value of stock options granted during the three months ended March 31, 2021 and 2020 was calculated on the date of grant using the following weighted-average assumptions:

The fair value of stock options granted during the three and six months ended June 30, 2021 and 2020 was calculated on the date of grant using the following weighted-average assumptions:

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Risk-free interest rate

1.1 % 0.4 % 1.0 % 0.5 %

Expected term (in years)

6.0 6.1 6.0 6.1

Dividend yield

— % — % — % — %

Expected volatility

78.9 % 88.7 % 79.3 % 88.5 %

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the three months ended March 31, 2021 and 2020 was $ 4.23 and $ 1.12 per share, respectively.

The following table summarizes stock option activity during the three months ended March 31, 2021 (in thousands, except per share amounts):

Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted during the three months ended June 30, 2021 and 2020 was $ 10.80 and $ 1.14 per share, respectively.

The weighted-average grant date fair value of stock options granted during the six months ended June 30, 2021 and 2020 was $ 8.15 and $ 1.14 per share, respectively.

The following table summarizes stock option activity during the six months ended June 30, 2021 (in thousands, except per share amounts):

Options Outstanding

3 unchanged sentences

( 42 ) $ 3.64

Outstanding, March 31, 2021 2,402 $ 4.16 9.58

Exercisable at March 31, 2021 54 $ 3.25 9.14

The aggregate intrinsic fair value of stock options exercised during the three months ended March 31, 2021 was $ 0.1 million.

There were no stock options exercised during the three months ended March 31, 2020.

As of March 31, 2021, there was unrecognized stock-based compensation expense related to unvested stock options of $ 6.2 million, which the Company expects to recognize over a weighted-average period of approximately 3.6 years.

( 40 ) $ 9.82

Outstanding, June 30, 2021 2,884 $ 6.30 9.42

Exercisable at June 30, 2021 108 $ 3.86 8.91

The aggregate intrinsic fair value of stock options exercised during the three and six months ended June 30, 2021 was $ 0.2 million and $ 0.3 million, respectively.

There were no stock options exercised during the three or six months ended June 30, 2020.

As of June 30, 2021, there was unrecognized stock-based compensation expense related to unvested stock options of $ 11.2 million, which the Company expects to recognize over a weighted-average period of approximately 3.4 years.

Related Parties

For the three months ended March 31, 2020, the Company recorded $ 8,000 of general and administrative expense in the accompanying condensed consolidated statements of operations related to the MPM Capital management services.

The Company did no t incur any expense with MPM Capital for the three months ended March 31, 2021.

For the three and six months ended June 30, 2020, the Company recorded $ 6,700 and $ 14,300 , respectively, of general and administrative expense in the accompanying condensed consolidated statements of operations related to the MPM Capital management services.

The Company did no t incur any expense with MPM Capital for the three or six months ended June 30, 2021.

In December 2019, the Company entered into a consulting agreement with Briggs Morrison, M.D., a member of the Company’s board of directors, for the provision of consulting, advisory and related services.

Pursuant to the consulting agreement, in December 2019, the Company issued Dr.

Morrison a stock option for 46,570 shares of our common stock at an aggregate grant date fair value of $ 50,000 , and agreed to reimburse certain of Dr.

Morrison a stock option grant for 46,570 shares of common stock at an aggregate grant date fair value of $ 50,000 , and agreed to reimburse certain of Dr.

Morrison’s expenses in connection with the performance of services under the agreement.

The stock option has an exercise price of $ 1.56 per share and is scheduled to vest with respect to 2.0833 % of the shares underlying the stock option in equal monthly installments over four years following November 2019, subject to continuous service.

The Company recognized $ 3,000 of expense related to this award in the research and development line in the condensed consolidated statements of operations for both the three months ended March 31, 2021 and 2020.

Net Loss Attributable to Common Stockholders per Share

For purposes of the diluted net loss attributable to common stockholders per share calculation, redeemable convertible preferred stock, outstanding stock options, unvested restricted stock awards and warrants to purchase common stock are considered to be potentially dilutive securities, however the following weighted-average amounts were excluded from the calculation of diluted net loss attributable to common stockholders per share because their effect would be anti-dilutive (in thousands):

As of March 31,

options have an exercise price of $ 1.56 per share and are scheduled to vest with respect to 2.0833 % of the shares underlying the grant in equal monthly installments over four years following November 2019, subject to continuous service.

The Company recognized $ 17,300 and $ 20,400 of expense related to this award in the research and development line in the condensed consolidated statements of operations for the three and six months ended June 30, 2021, respectively and recognized $ 3,100 and $ 6,200 in expenses for the three and six months ended June 30, 2020, respectively.

Net (Loss) Income Attributable to Common Stockholders per Share

Basic net (loss) income per share is calculated based on the weighted-average number of shares of common stock outstanding during the period, excluding the outstanding stock options and restricted stock awards that have been issued but are not yet vested.

Diluted net (loss) income per share is calculated based upon the weighted-average number of shares of common stock outstanding during the period plus the dilutive impact of weighted-average common-equivalent stock outstanding during the period.

The potentially dilutive shares of common stock resulting from the assumed exercise of outstanding stock options and the assumed vesting of the restricted stock awards were determined under the treasury stock method.

The following table summarizes the calculation of basic and diluted net (loss) income attributable to common stockholders per share (in thousands, except per share amounts):

Three Months Ended

June 30, Six Months Ended

2021 2020 2021 2020

Net (loss) income attributable to common stockholders

$ ( 67,847 ) $ 2,226 $ ( 170,298 ) $ ( 1,601 )

Weighted-average common shares outstanding, basic

17,750 947 9,535 891

Dilutive effect of redeemable convertible preferred stock (as converted)

Dilutive effect of outstanding stock options

Dilutive effect of unvested restricted common stock

Dilutive effect of warrants to purchase common stock

Weighted-average common shares outstanding, diluted

17,750 10,327 9,535 891

Net (loss) income per share attributable to common stockholders, basic

$ ( 3.82 ) $ 2.35 $ ( 17.86 ) $ ( 1.80 )

Net (loss) income per share attributable to common stockholders, diluted

$ ( 3.82 ) $ 0.22 $ ( 17.86 ) $ ( 1.80 )

The following table sets forth the outstanding shares of common stock equivalents, presented based on amounts outstanding at each period end, which were excluded from the calculation of diluted net (loss) income attributable to common stockholders per share because their effect would be anti-dilutive, including the preferred shares that were outstanding as of June 30, 2020 that would have been issued under the if-converted method (in thousands):

Redeemable convertible preferred stock (as converted)

2 unchanged sentences

Warrants to purchase common stock

Subsequent Events

Reverse Stock Split

In connection with preparing for its initial public offering, the Company’s board of directors and stockholders approved an amendment to the Company’s certificate of incorporation, which became effective on April 23, 2021.

The amendment, among other things, effected a 1-for-8.6691 reverse stock split of the Company’s common stock and a proportional adjustment to the conversion price for each series of preferred stock and to the exercise prices and number of shares of common stock underlying the outstanding stock options, and modified the requirements for the automatic conversion of all outstanding shares of preferred stock.

All share and per share amounts in the condensed consolidated financial statements and notes thereto have been retroactively adjusted for all periods presented to give effect to the reverse stock split.

Amendments to Articles of Incorporation

In connection with the completion of the IPO, the board of directors and stockholders approved the amended and restated certificate of incorporation to, among other things, provide for 200,000,000 authorized shares of common stock with a par value of $ 0.0001 per share and 5,000,000 authorized shares of preferred stock with a par value of $ 0.0001 per share.

The Company's board of directors adopted and the Company's stockholders approved the 2021 stock incentive plan ("2021 Plan"), which became effective immediately prior to the effectiveness of the Company's IPO.

The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards.

The Company's employees, officers, directors and consultants and advisors are eligible to receive awards under the 2021 Plan.

The Company's board of directors adopted and the Company's stockholders approved the 2021 employee stock purchase plan, which became effective upon the closing of the Company's IPO.

In June 2021, the Company entered into an office lease agreement (the “Lease”) for approximately 25,778 square feet of laboratory and office space in Watertown, Massachusetts, which will serve as the Company’s headquarters.

The lease term is targeted to commence in March 2022 and has an approximate eight year term.

Total estimated base rent payments over the term of the lease are approximately $ 17.9 million.

The Company will also pay its proportional share of operating expenses and tax obligations.

The Company provided the landlord with a security deposit in the form of a letter of credit in the amount of $ 1.0 million upon signing.

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

What changed 10-Q

Item 1. Financial Statements