What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-12 compared with 2021-05-13 · 96 added, 75 removed, 308 unchanged (36% of the section changed)

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We have not yet successfully completed any pivotal clinical trials, nor have we obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities.

Prior to the Business Combination (as defined below), we have primarily financed our operations through the sale of convertible preferred stock, borrowings under convertible promissory notes and borrowings from our term loan facility with Silicon Valley Bank, (“SVB”).

On February 5, 2021 (the “Closing Date”), FS Development Corporation, a Delaware corporation (“FSDC”), consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of October 15, 2020 (as amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among Gemini Therapeutics, Inc., a Delaware corporation (“Old Gemini”), Shareholder Representative Services LLC, a Colorado limited liability company solely in its capacity as the representative, agent and attorney-in-fact of the Company Securityholders (the “Stockholders’ Representative”), FSDC and FSG Merger Sub Inc., a Delaware corporation (“Merger Sub”).

FSDC was incorporated in Delaware on June 25, 2020 and was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

On the day prior to the Closing Date, Old Gemini changed its name to “Gemini Therapeutics Sub, Inc.” Pursuant to the Merger Agreement, on the Closing Date, (i) FSDC changed its name to “Gemini Therapeutics, Inc.”, and (ii) Old Gemini merged with and into Merger Sub (the “Merger”), with Old Gemini as the surviving company in the Merger and, after giving effect to such Merger, Old Gemini becoming a wholly-owned subsidiary of Gemini.

Upon the closing of the Business Combination, and pursuant to the terms of the Merger Agreement, the existing shareholders of Old Gemini exchanged their interests for shares of common stock of Gemini.

In connection with the Business Combination, certain investors purchased an aggregate of $95.1 million of our Common Stock in a private placement of public equity (the “PIPE Financing”).

Together with FSDC’s cash resources and funding of the PIPE Financing, we received net proceeds of approximately $195.9 million.

We accounted for the Business Combination as a reverse recapitalization, which is the equivalent of Old Gemini issuing stock for the net assets of FSDC, accompanied by a recapitalization, with FSDC treated as the acquired company for accounting purposes.

The net assets of FSDC were stated at historical cost with no goodwill or other intangible assets recorded.

Reported results from operations included herein prior to the Business Combination are those of Old Gemini.

The shares and corresponding capital amounts and loss per share related to Old Gemini’s outstanding convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect the conversion ratio established in the Merger Agreement (1.00 Old Gemini share for .2180 shares of New Gemini), or the Conversion Ratio.

For additional information on the Business Combination, please read Note 3, Business Combination , to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

Prior to the Business Combination (as defined below), we primarily financed our operations through the sale of convertible preferred stock, borrowings under convertible promissory notes and borrowings from our term loan facility with Silicon Valley Bank, (“SVB”).

Risks & liquidity

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We have incurred significant operating losses since inception.

Our net losses were $40.8 million for the year ended December 31, 2020 and $19.0 million for the three months ended March 31, 2021.

As of March 31, 2021, we had an accumulated deficit of $131.9 million.

Our net losses were $40.8 million for the year ended December 31, 2020 and $35.5 million for the six months ended June 30, 2021.

As of June 30, 2021, we had an accumulated deficit of $148.3 million.

We expect to continue to incur net losses for the foreseeable future and expect our research and development expenses and general and administrative expenses to continue to increase.

We expect that our expenses and capital requirements will increase substantially in connection with our ongoing development activities, particularly if and as we:

continue development activities for GEM103, our first product candidate being tested in AMD, including the completion of our Phase 2a clinical trial in geographic atrophy, the ongoing Phase 2a clinical trial in patients with macular atrophy receiving anti-VEGF therapy and the initiation of a Phase 2b clinical trial in geographic atrophy;

continue research and development activities allowing us to nominate our CFH potentiating antibody as a product candidate;

continue research and development activities allowing us to nominate our CFH AAV as a product candidate;

initiate additional clinical trials and preclinical studies for our other current and future product candidates;

initiate additional clinical trials and preclinical studies for our other current and potential future product candidates;

maintain, expand and protect our intellectual property portfolio;

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Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

If we raise additional funds through collaborations or other strategic

transactions with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us.

If we raise additional funds through collaborations or other strategic transactions with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be favorable to us.

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all.

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If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

We have incurred significant operating losses since our inception and as of March 31, 2021, had an accumulated deficit of $131.9 million and have not yet generated revenues.

In addition, we expect to continue to incur significant and increasing expenses and operating losses for the foreseeable future.

We believe that our cash resources will enable us to fund our operating expenses and capital expenditure requirements into 2023.

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Our future viability beyond that point is dependent on our ability to raise additional capital to finance our operations.

For additional information on the Business Combination, please read Note 3, Business Combination , to the unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

COVID-19 pandemic

In March 2020, the WHO declared the COVID-19 outbreak a pandemic.

The COVID-19 outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred;

In March 2020, the World Health Organization declared the novel coronavirus (“COVID-19”) outbreak a pandemic.

The COVID-19 outbreak and the increased prevalence of variants of the virus, and government measures taken in response, have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred;

supply chains have been disrupted;

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and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.

The COVID-19 pandemic continues to present significant business challenges in 2021, and the future progression of the outbreak and its effects on our business and operations are uncertain.

We and our third-party contract manufacturers (“CMOs”), contract research organizations (“CROs”) and clinical sites may experience disruptions in supply of product candidates and/or procuring items that are essential for our research and development activities, including raw materials used in the manufacturing of our product candidates, medical and laboratory supplies used in our clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the outbreak.

The COVID-19 pandemic has resulted in and will likely continue to result in significant disruptions to the global economy, and businesses and capital markets around the world.

The Company cannot predict the future progression or full impact of the outbreak and its effects on the Company’s business and operations.

We and our third-party contract manufacturers (“CMOs”), contract research organizations (“CROs”) and clinical sites have experienced and may continue to experience disruptions in supply of product candidates and/or procuring items that are essential for our research and development activities, including raw materials used in the manufacturing of our product candidates, medical and laboratory supplies used in our clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the outbreak.

Additionally, we have enrolled, and will seek to enroll, patients in our clinical trials at sites located both in the United States and internationally.

Most of our clinical trial sites are in areas affected by COVID-19 and, as a result, our trials are being impacted.

Most of our clinical trial sites are in areas affected by COVID-19 and, as a result, our trials have been and may continue to be impacted.

We cannot predict how long or impactful these delays may be on our clinical trials.

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We have not incurred impairment losses in the carrying values of our assets as a result of the COVID-19 pandemic, and we are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in our condensed consolidated financial statements.

Although the COVID-19 pandemic did not have a significant impact on our financial results in the first quarter of 2021, the full extent to which the COVID-19 pandemic will impact our business, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain, and the estimates of the impact on our business may change based on new information that may emerge concerning COVID-19, including the duration of the pandemic, any potential subsequent waves or strains of COVID-19 infection, the effectiveness, distribution and acceptance of COVID-19 vaccines and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

Although the COVID-19 pandemic did not have a significant impact on our financial results in the second quarter of 2021, the full extent to which the COVID-19 pandemic will impact our business, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain, and the estimates of the impact on our business may change based on new information that may emerge concerning COVID-19, including the duration of the pandemic, any potential subsequent waves or strains of COVID-19 infection, the effectiveness, distribution and acceptance of COVID-19 vaccines and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

Business Combination

In connection with the Business Combination, certain investors purchased an aggregate of $95.1 million of our Common Stock in a private placement of public equity (the “PIPE Financing”).

Together with FSDC’s cash resources and funding of the PIPE Financing, we received net proceeds of approximately $195.9 million.

The net assets of FSDC were stated at historical cost with no goodwill or other intangible assets recorded.

Reported results from operations included herein prior to the Business Combination are those of Old Gemini.

The shares and corresponding capital amounts and loss per share related to Old Gemini’s outstanding convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect the conversion ratio established in the Merger Agreement (1.00 Old Gemini share for 0.2180 shares of the Company), or the Conversion Ratio.

For additional information on the Business Combination, please read Note 3, Business Combination , to our unaudited condensed consolidated financial statements included elsewhere in this Form 10-Q.

On February 8, 2019, we entered into a term loan facility of up to $10.0 million (the “Term Loan”) with SVB.

The proceeds were used for general corporate and working capital purposes.

Concurrent with the Term Loan, we issued SVB warrants to purchase 15,257 shares of Old Gemini’s Series A preferred stock at an exercise price of $5.46.

At the closing of the Business Combination, these warrants were automatically exercised for 15,257 shares of our common stock.

As of March 31, 2021 and December 31, 2020, we had $9.2 million and $10.0 million, respectively, in principal outstanding under the Term Loan.

Concurrent with the Term Loan, we issued SVB warrants to purchase 15,257 shares

of Old Gemini’s Series A preferred stock at an exercise price of $ 5.46 .

At the closing of the Business Combination, these warrants were automatically exercised for 15,257 shares of our c ommon s tock.

As of June 30, 2021 and December 31, 2020 , we had $ 7.9 million and $10.0 million , respectively, in principal outstanding under the Term Loan.

The Term Loan is governed by a loan and security agreement, dated February 8, 2019, between Gemini and SVB (the “SVB Loan Agreement”).

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On April 18, 2019, we borrowed $7.5 million under the first tranche, and on December 17, 2019, we borrowed $2.5 million under the second tranche having satisfied the milestone requirement.

The Term Loan matures on January 1, 2023 and accrues interest at a floating rate per annum equal to the greater of 3.75% or the prime rate minus 1.5% (1.75% as of March 31, 2021).

The Term Loan matures on January 1, 2023 and accrues interest at a floating rate per annum equal to the greater of 3.75% or the prime rate minus 1.5% (1.75% as of June 30, 2021).

The Term Loan provides for monthly interest-only payments until February 2021.

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Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

As a result, we expect that our research and development expenses will increase substantially over the next several years as we continue our existing, and commence additional, planned clinical trials for GEM103, as well as conduct other preclinical and clinical development, including submitting regulatory filings for our other product candidates.

As a result, we expect that our research and development expenses will continue to increase substantially over the next several years as we continue our existing, and commence additional, planned clinical trials for GEM103, as well as conduct other preclinical and clinical development, including submitting regulatory filings for our other product candidates.

We also expect our discovery research efforts and related personnel costs will increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, will increase above historical levels.

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We expense general and administrative costs as incurred.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued development of our product candidates.

We also anticipate that we will incur significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

We anticipate that our general and administrative expenses will continue to increase in the future as we increase our headcount to support the continued development of our product candidates.

We also anticipate that we will continue to incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.

We also expect to incur additional intellectual property-related expenses as we file patent applications to protect innovations arising from our research and development activities.

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In February 2019, in conjunction with our term loan, we issued warrants to purchase 15,257 shares of Old Gemini’s Series A preferred stock.

We account for, and classify, these warrants as a liability on our balance sheet because the warrants are freestanding financial instruments.

We remeasure this liability to fair value at each reporting date and recognize changes in the fair value of the warrant liability in our statements of operations.

We accounted for, and classified, these warrants as a liability on our balance sheet because the warrants were freestanding financial instruments.

We remeasured this liability to fair value at each reporting date and recognized changes in the fair value of the warrant liability in our statements of operations.

At the closing of the Business Combination, these warrants were automatically exercised for 15,257 shares of our common stock.

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Results of operations

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020 ( in thousands ):

Comparison of the three months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the three months ended June 30, 2021 and 2020 ( in thousands ):

Three Months Ended

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Interest income

Other expense

Net loss and comprehensive loss

Research and development expenses

Research and development expenses were $10.8 million for the three months ended June 30, 2021, compared to $5.5 million for the three months ended June 30, 2020.

The increase of $5.3 million was primarily due to an increase in external research and development costs related to clinical trial activities of GEM103.

In addition, research and development personnel costs were higher period over period, including stock-based compensation, due to an increase in headcount in our research and development function to support the advancement of our programs.

General and administrative expenses

General and administrative expenses were $5.5 million for the three months ended June 30, 2021, compared to $1.1 million for the three months ended June 30, 2020.

The increase of $4.4 million was primarily due to higher personnel-related costs, including stock-based

compensation, in support of organizational growth and higher legal and other professional fees incurred in connection with operating as a public company.

Interest expense

Interest expense was $0.1 million for each of the three months ended June 30, 2021 and 2020 and consisted of interest expense associated with our Term Loan with SVB.

Interest income

Interest income was less than $0.1 million for the three months ended June 30, 2021 and consisted of interest income associated with our money market funds.

Other expense

Other expense was less than $0.1 million for the three months ended June 30, 2021 and consisted of foreign currency exchange loss.

Comparison of the six months ended June 30, 2021 and 2020

The following table summarizes our results of operations for the six months ended June 30, 2021 and 2020 ( in thousands ):

Six Months Ended

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense):

Interest expense

Interest income

Loss on conversion of convertible notes

Change in fair value of warrant liability

Other expense

Net loss and comprehensive loss

Research and development expenses

Research and development expenses were $11.8 million for the three months ended March 31, 2021, compared to $8.2 million for the three months ended March 31, 2020.

Research and development expenses were $22.6 million for the six months ended June 30, 2021, compared to $13.7 million for the six months ended June 30, 2020.

The increase of $8.9 million was primarily due to an increase in external research and development costs related to clinical trial activities of GEM103.

In addition, research and development personnel costs were higher period over period due to an increase in headcount in our research and development function to support the advancement of our programs.

General and administrative expenses

General and administrative expenses were $4.7 million for the three months ended March 31, 2021, compared to $1.4 million for the three months ended March 31, 2020.

General and administrative expenses were $10.2 million for the six months ended June 30, 2021, compared to $2.6 million for the six months ended June 30, 2020.

The increase of $7.6 million was primarily due to higher personnel-related costs, including stock-based compensation, in support of organizational growth and higher legal and other professional fees incurred in connection with operating as a public company.

Interest expense

Interest expense was $1.9 million for the three months ended March 31, 2021, compared to $0.2 million for the three months ended March 31, 2020.

Interest expense was $2.0 million for the six months ended June 30, 2021, compared to $0.3 million for the six months ended June 30, 2020.

The increase of $1.7 million is due to the accretion of the beneficial conversion feature discount recognized at the issuance date of the Notes.

Interest income

Interest income was less than $0.1 million for the three months ended March 31, 2021 and 2020 and consisted of interest income associated with our money market funds.

Interest income was less than $0.1 million for each of the six months ended June 30, 2021 and 2020 and consisted of interest income associated with our money market funds.

Loss on conversion of convertible notes

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The change in fair value of warrant liability reflects a de minimis reduction of the fair value of the Series A preferred stock warrant.

Other expense

Other expense was less than $0.1 million for the six months ended June 30, 2021 and consisted of foreign currency exchange loss.

Liquidity and capital resources

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We have not yet commercialized any of our product candidates and do not expect to generate revenue from sales of any product candidates for several years, if at all.

We have funded our operations to date primarily with proceeds from the sale of preferred stock, borrowings under convertible promissory notes and borrowings under loan agreements.

Through March 31, 2021, we have received net proceeds of $195.9 million in connection with the closing of the Business Combination, gross proceeds of $76.0 million from sales of our preferred stock, gross proceeds of $16.9 million from borrowings under convertible promissory notes and $10.0 million of cash proceeds from our term loan with SVB.

As of March 31, 2021, we had cash and cash equivalents of $185.0 million.

Prior to the Business Combination, we funded our operations to date primarily with proceeds from the sale of preferred stock, borrowings under convertible promissory notes and borrowings under loan agreements.

Through June 30, 2021, we have received gross proceeds of $76.0 million from sales of our preferred stock, gross proceeds of $16.9 million from borrowings under convertible promissory notes and $10.0 million of cash proceeds from our term loan with SVB.

In connection with the Business Combination, we received net proceeds of $195.9 million.

As of June 30, 2021, we had cash and cash equivalents of $167.5 million.

We have incurred operating losses and experienced negative operating cash flows since inception, and we anticipate that we will continue to incur losses for at least the foreseeable future.

Our net losses totaled $40.8 million for the year ended December 31, 2020 and $19.0 million for the three months ended March 31, 2021.

As of March 31, 2021, we had an accumulated deficit of $131.9 million.

Our net losses totaled $40.8 million for the year ended December 31, 2020 and $35.5 million for the six months ended June 30, 2021.

As of June 30, 2021, we had an accumulated deficit of $148.3 million.

Continued cash generation is highly dependent on our ability to finance our operations through a combination of equity offerings, debt financings, collaboration arrangements and strategic transactions.

Due to our significant research and development expenditures, we have experienced periods of negative cash flows from operations as we have yet to generate any revenue.

For the three months ended March 31, 2021, we experienced a loss from operations and negative cash flows from operations.

We anticipate to incur operating losses and negative cash flows from operations for the foreseeable future, particularly as we move forward with our clinical-stage programs.

We do not expect to generate revenue from product sales for several years, if at all.

For the six months ended June 30, 2021, we experienced a loss from operations and negative cash flows from operations.

We anticipate incurring operating losses and negative cash flows from operations for the foreseeable future, particularly as we move forward with our clinical-stage programs.

Until required for use in our business, we typically invest our cash in investments that are highly liquid, readily convertible to cash with original maturities of 90 days or less at the date of purchase.

We attempt to minimize the risks related to our cash and cash equivalents by maintaining balances in accounts only with accredited financial institutions and, consequently, we do not believe we are subject to unusual credit risk beyond the normal credit risk associated with ordinary commercial banking relationships.

The following table summarizes our cash flows for the three months ended March 31, 2021 and 2020 ( in thousands ):

Three Months Ended

The following table summarizes our cash flows for the six months ended June 30, 2021 and 2020 ( in thousands ):

Six Months Ended

Net cash used in operating activities

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We have historically experienced negative cash flows from operating activities as we invested in developing our platform, drug discovery efforts and related infrastructure.

During the three months ended March 31, 2021, we used cash in operating activities of $15.0 million, reflecting a net loss of $19.0 million, partially offset by non-cash charges of $4.2 million and a net change of $0.1 million in our operating assets and liabilities.

The non-cash charges consist primarily of $1.6 million accretion of the discount on the Notes, $1.6 million of stock-based compensation expense, $0.7 million of expense related to the conversion of the Notes and $0.2 million of non-cash interest expense.

During the six months ended June 30, 2021, we used cash in operating activities of $30.9 million, reflecting a net loss of $35.5 million, partially offset by non-cash charges of $7.1 million and a net change of $2.5 million in our operating assets and liabilities.

The non-cash charges consist primarily of $4.5 million of stock-based compensation expense, $1.6 million accretion of the discount on the Notes, $0.7 million of expense related to the conversion of the Notes and $0.2 million of non-cash interest expense.

The net change in our operating assets and liabilities was primarily due to an increase in prepaid expenses and other current currents, other assets and accounts payable, partially offset by a decrease in deferred offering costs and accrued expenses and other current liabilities.

During the three months ended March 31, 2020, we used cash in operating activities of $9.9 million, reflecting a net loss of $9.8 million, and a net decrease in accounts payable and accrued expenses and other current liabilities.

During the six months ended June 30, 2020, we used cash in operating activities of $16.9 million, reflecting a net loss of $16.5 million, and a net decrease in accounts payable and accrued expenses and other current liabilities.

Investing activities

During the three months ended March 31, 2021 and 2020, we did not generate any cash inflows or outflows from investing activities.

During the six months ended June 30, 2021 and 2020, we did not generate any cash inflows or outflows from investing activities.

Financing activities

During the three months ended March 31, 2021, net cash provided by financing activities was $195.5 million, consisting primarily of $196.3 million of net proceeds received from the Business Combination, partially offset by principal payments made on our term loan.

During the three months ended March 31, 2020, net cash provided by financing activities was $20.1 million, consisting primarily of the net proceeds received from the issuance of our Series B preferred stock.

During the six months ended June 30, 2021, net cash provided by financing activities was $193.9 million, consisting primarily of $195.9 million of net proceeds received in connection with the Business Combination, partially offset by principal payments made on our term loan.

During the six months ended June 30, 2020, net cash provided by financing activities was $20.1 million, consisting primarily of the net proceeds received from the issuance of our Series B preferred stock.

Funding requirements

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Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

As of March 31, 2021, we had cash and cash equivalents of $185.0 million.

As of June 30, 2021, we had cash and cash equivalents of $167.5 million.

We believe that our cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2023.

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Until such time as we can generate substantial product revenue, if ever, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights as a common stockholder.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders.

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The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses.

We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We base our estimates on historical experience, known trends and events and various other factors

that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We evaluate our estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 4 to the unaudited condensed consolidated financial statements appearing elsewhere in this Form 10-Q, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements.

While our significant accounting policies are described in more detail in Note 4 to the unaudited condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our condensed consolidated financial statements.

Accrued research and development expenses

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Our common stock valuations were prepared using an option pricing method, or OPM, or a hybrid method, both of which used market approaches to estimate enterprise value.

The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise

prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes.

Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger.

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Off-balance sheet arrangements

As of March 31, 2021, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

As of June 30, 2021, we did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Recently issued accounting pronouncements

Refer to Note 4, Summary of Significant Accounting Policies, to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for information regarding recently issued accounting pronouncements.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The forward-looking statements in this Quarterly Report on Form 10-Q do not constitute guarantees of future

Investors are cautioned that statements in this Quarterly Report on Form 10-Q which are not strictly historical statements, including, without limitation, express or implied statements or guidance regarding current or future financial performance and position, potential impairment of future earnings, management’s strategy, plans and objectives for future operations or acquisitions, product development and sales, product candidate research, development and regulatory approval, SG&A expenditures, intellectual property, development and manufacturing plans, availability of materials and product and adequacy of capital resources, our financing plans, and the projected impact of, and response to, the COVID-19 coronavirus pandemic and the related downturn of the U.S.

and global economies constitute forward-looking statements.

These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates, and management’s beliefs and assumptions.

We undertake no obligation to publicly update or revise the statements in light of future developments.

In addition, other written and oral statements that constitute forward-looking statements may be made by us or on our behalf.

Words such as “expect,” “seek,” “anticipate,” “intend,” “plan,” “believe,” “could,” “estimate,” “may,” “target,” “project,” or variations of such words and similar expressions are intended to identify forward-looking statements.

Such forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated.

Information on potential risk factors that could affect our financial results are included under the sections titled “Risk Factors” in our Form 8-K/A as filed with the SEC on March 29, 2021, and Form 10-K filed with the SEC on March 29, 2021, or in future filings made by us from time to time with the Securities and Exchange Commission.

Emerging growth company and smaller reporting company status

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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 2. Management’s Discussion and Analysis