What changed in this filing

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Item 1. Financial Statements

2022-04-08 compared with 2021-10-14 · 215 added, 324 removed, 362 unchanged (60% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable

Contract assets

3 unchanged sentences

Long-term investments

Operating lease right-of-use assets

Property and equipment, net

3 unchanged sentences

Accounts payable

Accrued and other current liabilities

Accrued expenses and other current liabilities

Operating lease liabilities, current

Deferred revenue, current

Total current liabilities

Operating lease liabilities, net of current portion

Deferred revenue, net of current portion

Other long-term liabilities

Total liabilities

2 unchanged sentences

Preferred stock, $ 0.001 par value— 10,000,000 shares

authorized as of August 31, 2021 and

November 30, 2020;

0 shares issued and outstanding

as of August 31, 2021 and November 30, 2020

Common stock, $ 0.001 par value— 500,000,000 shares

authorized as of August 31, 2021 and

November 30, 2020;

44,556,604 and 38,864,872 shares

issued and outstanding as of August 31, 2021 and

November 30, 2020, respectively

authorized as of February 28, 2022 and November 30, 2021;

no shares issued and outstanding

as of February 28, 2022 and November 30, 2021

Common stock, $ 0.001 par value— 500,000,000 shares authorized

as of February 28, 2022 and November 30, 2021;

44,853,448 and 44,664,371 shares issued and outstanding

as of February 28, 2022 and November 30, 2021, respectively

Additional paid-in capital

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended August 31,

Nine Months Ended August 31,

Three Months Ended

Collaboration revenue

6 unchanged sentences

Loss before income taxes

Provision (benefit) for income taxes

Net loss per share attributable to common

stockholders, basic and diluted

Weighted-average number of shares outstanding,

basic and diluted

Provision for income taxes

Net loss per share, basic and diluted

Weighted-average number of shares outstanding, basic and diluted

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

2 unchanged sentences

(in thousands)

Three Months Ended August 31,

Nine Months Ended August 31,

Other comprehensive income (loss):

Unrealized gain (loss) on

available-for-sale investments

Three Months Ended

Other comprehensive loss, net of tax:

Unrealized loss on available-for-sale investments

Total comprehensive loss

1 unchanged sentence

NURIX THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

Redeemable convertible

preferred stock

comprehensive

3 unchanged sentences

Exercise of stock options

Repurchase of unvested early

exercised stock options

Vesting of early-exercised

stock options

Repurchase of unvested early exercised stock options

Vesting of early-exercised stock options

Issuance under employee stock purchase plan

Stock-based compensation

Unrealized gain (loss) on

available-for-sale

Net income (loss)

Unrealized loss on available-for-sale investments

Balance as of February 28, 2021

Issuance of Series D redeemable

convertible preferred stock at

$ 12.75 per share, net of

issuance costs of $ 336

Exercise of stock options

Vesting of early-exercised

stock options

Stock-based compensation

Unrealized gain (loss) on

available-for-sale

Net income (loss)

Balance as of May 31, 2020

Conversion of redeemable

convertible preferred stock

into common stock

Issuance of common stock upon

initial public offering, net of

offering costs of $ 20,308

Exercise of stock options

Repurchase of unvested early

exercised stock options

Vesting of early-exercised

stock options

Stock-based compensation

Unrealized gain (loss) on

available-for-sale

Net income (loss)

Balance as of August 31, 2020

Redeemable convertible

preferred stock

comprehensive

3 unchanged sentences

Exercise of stock options

Repurchase of unvested early

exercised stock options

Vesting of early-exercised

stock options

Issuance under employee

stock purchase plan

Vesting of early-exercised stock options

Issuance under employee stock purchase plan

Stock-based compensation

Unrealized gain (loss) on

available-for-sale

Net income (loss)

Unrealized loss on available-for-sale investments

Balance as of February 28, 2022

Issuance of common stock in

connection with equity

offering, net of offering

costs of $ 643

Exercise of stock options

Vesting of early-exercised

stock options

Stock-based compensation

Unrealized gain (loss) on

available-for-sale

Net income (loss)

Balance as of May 31, 2021

Exercise of stock options

Vesting of early-exercised

stock options

Issuance under employee

stock purchase plan

Stock-based compensation

Unrealized gain (loss) on

available-for-sale

Net income (loss)

Balance as of August 31, 2021

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

2 unchanged sentences

(in thousands)

Nine Months Ended August 31,

Three Months Ended February 28,

Cash flows from operating activities

Adjustments to reconcile net loss to net cash (used in)

provided by operating activities:

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization

1 unchanged sentence

Net amortization (accretion) of premium (discount) on investments

Loss on disposal of property and equipment

Amortization of operating lease right-of-use assets

Changes in operating assets and liabilities:

4 unchanged sentences

Deferred revenue

Accrued and other liabilities

Operating lease liabilities

Accrued expenses and other liabilities

Net cash (used in) provided by operating activities

1 unchanged sentence

Purchases of investments

Sales of investments

Maturities of investments

Purchases of property and equipment

Net cash used in investing activities

Net cash (used in) provided by investing activities

Cash flows from financing activities

Proceeds from issuance of common stock, net of offering costs

Proceeds from issuance of redeemable convertible preferred stock,

net of offering costs

Proceeds from exercise of stock options

Repurchase of unvested early exercised stock options

Proceeds from issuance under employee stock purchase plan

Repurchase of unvested early exercised stock options

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

1 unchanged sentence

Supplemental disclosures of non-cash investing and financing activities:

Additions to property and equipment included in accounts payable

and accrued liabilities

Additions to property and equipment included in accounts payable and accrued expenses and other liabilities

Vesting of early exercised stock options

Offering costs included in accounts payable and accrued liabilities

Conversion of redeemable convertible preferred stock into common stock

upon closing of initial public offering

As of August 31,

Reconciliation of cash, cash equivalents and restricted cash as shown

in the statements of cash flows:

Deferred offering costs included in accounts payable and accrued liabilities

As of February 28,

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents

7 unchanged sentences

(the Company) previously known as Nurix, Inc., was incorporated in the state of Delaware on August 27, 2009 and is headquartered in San Francisco, California.

The Company is a biopharmaceutical company focused on the discovery, development and commercialization of small molecule therapies designed to modulate cellular protein levels as a novel treatment approach for cancer and other challenging diseases.

The Company is a clinical stage biopharmaceutical company focused on the discovery, development and commercialization of small molecule and cell therapies based on the modulation of cellular protein levels as a novel treatment approach for cancer and other challenging diseases.

Leveraging the Company’s expertise in E3 ligases together with its proprietary DNA-encoded libraries, the Company has built DELigase, an integrated discovery platform to identify and advance novel drug candidates targeting E3 ligases, a broad class of enzymes that can modulate proteins within the cell.

The Company’s drug discovery approach is to either harness or inhibit the natural function of E3 ligases within the ubiquitin-proteasome system to selectively decrease or increase cellular protein levels to treat disease.

The Company wholly owns a subsidiary, DeCART Therapeutics Inc.

(DeCART), which was incorporated in the state of Delaware on June 22, 2020 and which holds a license to three of the Company’s compounds, including NX-0255, for drug-enhanced isolation of T cells exclusively with respect to three CAR-T therapy targets.

Initial Public Offering

4 unchanged sentences

Immediately prior to the closing of the IPO, all outstanding shares of the Company’s redeemable convertible preferred stock automatically converted into 22,245,251 shares of common stock.

Net proceeds from the IPO, including the exercise of the underwriters’ option to purchase additional shares, were $ 218.1 million, after deducting underwriting discounts and commissions of $ 16.7 million and expenses of $ 3.6 million.

Net proceeds from the IPO were $ 218.1 million, after deducting underwriting discounts and commissions of $ 16.7 million and expenses of $ 3.6 million.

Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding.

1 unchanged sentence

Follow-on Offering

In March 2021, the Company completed a follow-on offering and issued 5,175,000 shares of common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $ 31.00 per share for net proceeds of approximately $ 150.2 million, after deducting underwriting discounts and commissions of $ 9.6 million and expenses of $ 0.6 million.

In March 2021, the Company completed a follow-on offering and issued 5,175,000 shares of common stock (including the exercise by the underwriters of their option to purchase an additional 675,000 shares of common stock) at a price to the public of $ 31.00 per share for net proceeds of $ 150.2 million, after deducting underwriting discounts and commissions of $ 9.6 million and expenses of $ 0.6 million.

Equity Distribution Agreement

In August 2021, the Company filed a shelf registration statement on Form S-3 with the SEC.

In August 2021, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (SEC).

This shelf registration statement, which includes a base prospectus, allows the Company at any time to offer and sell registered common stock, preferred stock, debt securities, warrants, subscriptions rights and or units or any combination of securities described in the prospectus in one or more offerings.

3 unchanged sentences

The Company agreed to pay Piper Sandler a commission of 3 % of the gross sales price of any shares sold pursuant to the Equity Distribution Agreement.

As of August 31, 2021, the Company has not sold any shares of common stock pursuant to the Equity Distribution Agreement and $150.0 million in shares remained available under the Equity Distribution Agreement.

As of February 28, 2022, the Company has not sold any shares of common stock pursuant to the Equity Distribution Agreement and $150.0 million in shares remained available under the Equity Distribution Agreement.

Liquidity and Management Plans

The Company’s operations have historically been financed through the issuance of common and redeemable convertible preferred stock and proceeds received under the Company’s collaboration and license agreements.

Since inception, the Company has generally incurred significant losses and negative net cash flows from operations.

During the nine months ended August 31, 2021, the Company incurred a net loss of $ 79.5 million and had negative net cash flows from operating activities of $ 53.5 million.

The Company had an accumulated deficit of $ 183.2 million as of August 31, 2021 and will require substantial additional capital for research and development activities.

The Company anticipates incurring additional losses until such time, if ever, that it can generate

significant sales of its drug candidates currently in development.

As of August 31, 2021 , the Company had cash, cash equivalents and investments of $ 465.4 million .

During the three months ended February 28, 2022, the Company incurred a net loss of $ 42.5 million and had negative net cash flows from operating activities of $ 42.6 million.

The Company had an accumulated deficit of $ 263.4 million as of February 28, 2022 and will require substantial additional capital for research and development activities.

The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales of its drug candidates currently in development.

As of February 28, 2022, the Company had cash, cash equivalents and investments of $ 385.7 million.

Management believes that its cash, cash equivalents and investments are sufficient to continue operating activities for at least 12 months following the issuance date of these condensed consolidated financial statements.

8 unchanged sentences

generally accepted accounting principles (U.S.

GAAP) and applicable rules and regulations of the Securities and Exchange Commission (SEC) regarding interim financial reporting.

The Company’s condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of and for the three and nine months ended August 31, 2021.

GAAP) and applicable rules and regulations of the SEC regarding interim financial reporting.

The condensed consolidated balance sheet as of November 30, 2021 was derived from the audited annual financial statements as of that date.

5 unchanged sentences

Principles of Consolidation

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

and its wholly owned subsidiaries, including DeCART.

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, including DeCART Therapeutics Inc.

All intercompany balances and transactions have been eliminated in consolidation.

Reverse Stock Split

On July 17, 2020, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse split of shares of the Company’s common stock and redeemable convertible preferred stock, each on a 1-for-3 basis (reverse stock split).

The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the reverse stock split.

All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the condensed consolidated financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.

Use of Estimates

3 unchanged sentences

The Company bases its estimates on historical experience and on other relevant assumptions that are reasonable under the circumstances.

Actual results could differ materially from those estimates.

Actual results could materially differ from those estimates.

Refer to Note 3 for more information regarding the estimates related to revenue recognition.

Concentration of Credit Risk

3 unchanged sentences

The Company’s exposure to any individual corporate entity is limited by policy.

Deposits may, at times, exceed federally insured limits, but minimal credit risk exists.

Deposits may, at times, exceed federally insured limits.

The Company invests its cash equivalents in highly rated money market funds.

The Company has not experienced any credit losses on its deposits of cash and cash equivalents.

During the periods presented, the Company has not experienced any losses on its deposits of cash, cash equivalents or investments.

Other Risks and Uncertainties

The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations:

The Company is subject to a number of risks similar to other clinical stage biopharmaceutical companies, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations:

risks related to the successful discovery and development of its drug candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain drug substance and finished drug product from the Company’s third-party contract manufacturers necessary for the Company’s drug candidates, including due to the impact of the current coronavirus (COVID-19) pandemic, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights and regulatory clearance and market acceptance for any of the Company’s products candidates for which the Company receives marketing approval.

3 unchanged sentences

The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s financial statements is highly uncertain and subject to change.

Management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s condensed consolidated financial statements as of and for the three and nine months ended August 31, 2021;

however, actual results could differ from those estimates and there may be changes to management’s estimates in future periods.

1 unchanged sentence

Disruption from these manufacturers or suppliers would have a negative impact on the Company’s business, financial position and results of operations.

The Company determines if an arrangement contains a lease at inception.

Lease right-of-use (ROU) assets, current lease liabilities and long-term lease liabilities are recognized at the lease commencement date based on the present value of the future minimum lease payments over the lease term at the commencement date.

ROU assets also include any initial direct costs incurred and any lease payments made on or before the lease commencement date, less lease incentives received.

The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate.

The incremental borrowing rate, the ROU asset and the lease liability are reevaluated upon a lease modification.

The Company determines its incremental borrowing rate based on the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term, in an amount equal to the lease payments in a similar economic environment.

Lease terms may include options to extend or terminate the lease when the Company is reasonably certain that the option will be exercised.

Lease expense for operating leases is recognized on a straight-line basis over the lease term.

The Company does not have any finance leases.

The Company elected to apply each of the practical expedients described in Topic 842 which allow companies (i) not to reassess prior conclusions on whether any expired or existing contracts are or contain a lease, lease classification, and initial direct costs, (ii) combine lease and non-lease components for all underlying assets groups, and (iii) not recognize ROU assets or lease liabilities for short-term leases.

A short-term lease is a lease that, at the commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

Revenue Recognition

18 unchanged sentences

The Company uses the most likely amount method for research, development and regulatory milestone payments.

Under the most likely amount method, an entity considers the single most likely amount in a range of possible

consideration amounts.

Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts.

If it is probable that a significant revenue reversal would not occur, the associated milestone amount is included in the transaction price.

9 unchanged sentences

Deferred revenue, which is a contract liability, represents amounts received by the Company for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met.

The current portion of deferred revenue represents the amount to be recognized within one year from the consolidated balance sheet date based on the estimated performance period of the underlying performance obligation.

The current portion of deferred revenue represents the amount to be recognized within one year from the condensed consolidated balance sheet date based on the estimated performance period of the underlying performance obligation.

The noncurrent portion of deferred revenue represents amounts to be recognized after one year through the end of the performance period of the performance obligation.

Contracts may be amended to account for changes in contract specifications and requirements.

Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations.

When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations as adjusted for specific facts and circumstances of the contract, the modification is considered to be a separate contract and revenue is recognized prospectively.

If a contract modification is not accounted for as a separate contract, the Company accounts for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification.

The Company accounts for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification.

In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

Recent Accounting Pronouncements

As of August 31, 2021, the Company is an “emerging growth company” (EGC), as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the JOBS Act).

Under the JOBS Act, EGCs can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an EGC or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.

As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of the public company effective dates.

Recently Adopted Accounting Pronouncements

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurements (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which modifies the disclosure requirements on fair value measurements by removing the requirement to disclose amounts of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation process for Level 3 fair value measurements, among other modifications to fair value measurement disclosure requirements.

The Company adopted ASU 2018-13 as of December 1, 2020 .

The adoption did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No.

2019‑12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify accounting for income taxes and eliminate certain exceptions from Topic 740 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.

ASU 2019-12 also requires the amount of tax that is based on income to be accounted for under Topic 740 as an income-based tax, with any incremental amount accounted for as a non-income-based tax recognized entirely in the period incurred.

The Company adopted ASU 2019-12 as of December 1, 2021 using the modified retrospective method, and recognized an immaterial non-income-based tax within operating expenses in the current period.

The adoption had no other impact on the Company’s condensed consolidated financial statements.

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) (ASU 2016-02) , which for operating leases requires the lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of lease payments, in its balance

For EGCs, ASU 2016-02 is effective for annual periods beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022.

For public business entities, ASU 2016-02 is effective for annual periods beginning after December 15, 20 18 and interim periods within those fiscal years.

As of November 30, 2021, t he Company will no longer be considered an EGC and will be required to adopt ASU 2016-02 at the beginning of the fiscal year that EGC status is lost .

As such, the Company will ad opt ASU 2016-02 effective December 1, 2020 using the alternative modified transition method, which applies ASU 2016-02 as of the effective date and therefore, the Company will not be required to apply the standard to the comparative periods presented in the Company's consolidated financial statements.

The Company is in the process of evaluating the impact of this new guidance on its financial statements ;

however, the Company expects to recognize a right-of-use asset and a lease liability on the Company’s consolidated balance sheet, which will materially increase the Company’s assets and liabilities.

The Company does not expect the adoption to have a material impact on the consolidated statement of operations.

The Company plans to elect the “package of practical expedients , ” which permits the Company to not reassess its prior conclusions about lease identification, lease classification and initial direct costs.

The Company also plans to elect the hindsight practical expedient to determine the lease term and the practical expedient to not separate lease and non-lease components .

In June 2016, the FASB issued ASU No.

2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13), which requires that financial assets measured at amortized cost be presented at the net amount expected to be collected.

The measurement of expected credit losses is based on historical experience, current conditions, and reasonable and supportable forecasts that affect collectability.

ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt investments and instead focuses on determining whether any impairment is a result of a credit loss or other factors.

An entity will recognize an allowance for credit losses on available-for-sale debt investments rather than an other-than-temporary impairment that reduces the cost basis of the investment.

For EGCs, ASU 2016-13 is effective for annual periods beginning after December 15, 2022 and interim periods within those fiscal years.

For public business entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2019 and interim periods within those fiscal years.

As of November 30, 2021, the Company will no longer be considered an EGC and will be required to adopt ASU 2016-13 at the beginning of the fiscal year that EGC status is lost.

As such, the Company will adopt ASU 2016-13 effective December 1, 2020.

The Company does not expect the adoption to have a material impact on its financial statements.

In November 2018, the FASB issued ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18).

ASU 2018-18 clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer.

For EGCs, ASU 2018-18 is effective for annual periods beginning after December 15, 2020, and interim periods within annual periods beginning after December 15, 2021.

For public business entities, ASU 2018-18 is effective for annual periods beginning after December 15, 2019 and interim periods within those fiscal years.

As of November 30, 2021, the Company will no longer be considered an EGC and will be required to adopt ASU 2018-18 at the beginning of the fiscal year that EGC status is lost.

As such, the Company will adopt ASU 2018-18 effective December 1, 2020.

ASU 2018-18 requires retrospective adoption to the date the Company adopted Topic 606 by recognizing a cumulative-effect adjustment to the opening balance of retained earnings of the earliest annual period presented.

Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606.

The Company does not expect the adoption to have a material impact on its financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify accounting for income taxes.

It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application.

For EGCs, ASU 2019-12 is effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022.

For public business entities, ASU 2019-12 is effective for annual periods beginning after December 15, 2020 and interim periods within those fiscal years.

Early adoption is permitted.

The Company is in the process of evaluating the impact of this new guidance on its financial statements.

2016-02, Leases (Topic 842) (ASU 2016-02), which requires the lessee to recognize a ROU asset and a lease liability for operating leases, initially measured at the present value of lease payments, in its consolidated balance sheet.

On November 30, 2021, the Company adopted ASU 2016-02 using the alternative modified transition method effective as of December 1, 2020.

As a result, the Company has retrospectively changed its previously issued condensed consolidated financial statements as of February 28, 2021 and for the three months ended February 28, 2021 as presented in its February 28, 2021 Quarterly Report on Form 10-Q to reflect the adoption of Topic 842 on December 1, 2020 .

The condensed consolidated financial statements for the three months ended February 28, 2021 presented herein differ from the Company’s condensed consolidated financial statements included in its February 28, 2021 Quarterly Report on Form 10-Q, as those financial statements were prepared using the former accounting standard referred to as ASC Topic 840, Leases .

The following table summarizes the effect of the adoption of Topic 842 on the condensed consolidated balance sheet as of December 1, 202 0 (in thousands):

As Previously Reported

Impact of Topic 842 Adoption

Operating lease right-of-use assets

Operating lease liabilities, current

Operating lease liabilities, net of current portion

Accrued and other current liabilities

Other long-term liabilities

The following table summarizes the effect of the adoption of Topic 842 on the condensed consolidated statement of cash flows for the three months ended February 28, 2021 (in thousands):

As Previously Reported

Impact of Topic 842 Adoption

Cash flows from operating activities

Adjustments to reconcile net loss to net cash provided by operating activities:

Amortization of operating lease right-of-use assets

Changes in operating assets and liabilities:

Operating lease liabilities

Accrued expenses and other liabilities

Collaboration Agreements

In June 2019, the Company entered into a global strategic collaboration agreement with Gilead, which was amended in August 2019 (the Gilead Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with cancer and other challenging diseases using the Company’s DELigase platform to identify novel agents that utilize E3 ligases to induce degradation of five specified drug targets.

Under the Gilead Agreement, Gilead has the option to license drug candidates directed to up to five targets resulting from the collaboration and is responsible for the clinical development and commercialization of drug candidate s resulting from the collaboration.

The Company retains the option to co-develop and co-promote, under a profit share structure, up to two drug candidate s in the United States, provided that the Company may only exercise such option once per licensed product and Gilead retains the right to veto the Company’s option selection for any one drug candidate of its choice.

The collaboration excludes the Company’s current internal protein degradation programs for which the Company retain s all rights, and also excludes the Company’s future internal programs, provided that the Company has distinguished future programs as excluded from the scope of the collaboration.

The Company retains the option to co-develop and co-promote, under a profit share structure, up to two drug candidates in the United States, provided that the Company may only exercise such option once per licensed product and Gilead retains the right to veto the Company’s option selection for any one drug candidate of its choice.

The collaboration excludes the Company’s current internal protein degradation programs for which the Company retains all rights, and also excludes the Company’s future internal programs, provided that the Company has distinguished future programs as excluded from the scope of the collaboration.

Over time, Gilead may elect to replace the initial drug targets with other drug targets.

8 unchanged sentences

Upon signing the Gilead Agreement, Gilead paid the Company an upfront payment of $ 45.0 million plus $ 3.0 million in additional fees.

Since the signing of the Gilead Agreement, the Company has received payments of $ 13.5 million for research milestones and additional payments, including $ 2.5 million, which was received in the third quarter of 2021.

Additionally, in August 2021, the Company recognized a research milestone, resulting in a $ 5.0 million additional due payment, which will be received in the fourth quarter of 2021.

As of August 31, 2021, the Company is eligible to receive up to approximately $ 2.3 billion in total additional payments, including up to $ 683.5 million upon the achievement of specified development milestones, up to $ 1.5 billion upon the achievement of specified sales milestones, subject to reduction for any product for which the Company exercises its option to co-develop and co-promote, and up to $ 136.8 million in certain additional fees related to target licensing, reservation and selection and research term extensions.

In addition, from the signing of the Gilead Agreement to February 28, 2022, the Company has received payments of $ 24.5 million for research milestones and additional payments.

Additionally, the Company recognized a research milestone in February 2022 and received a payment of $ 6.0 million in the second fiscal quarter of 2022.

The Company is eligible to receive up to approximately $ 2.3 billion in total additional payments, including up to $ 671.5 million upon the achievement of specified development milestones, up to $ 1.5 billion upon the achievement of specified sales milestones, subject to reduction for any product for which the Company exercises its option to co-develop and co-promote, and up to $ 139.8 million in certain additional fees related to target licensing, reservation and selection and research term extensions.

In addition, the Company is eligible to receive tiered royalties from mid-single digit to low tens percentages on annual net sales from any commercial products directed to the optioned collaboration targets, subject to certain reductions and excluding sales in the United States of any products for which the Company exercises its option to co-develop and co-promote, for which the Company and Gilead share profits and losses evenly.

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In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Certain milestones and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of August 31, 2021 .

Certain milestones and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of February 28, 2022.

The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company determined that the transaction price at the inception of the Gilead Agreement consists of the upfront payment of $ 45.0 million and $ 3.0 million in additional fees.

Subsequently, u pon the achievement of research milestone s and target reservation s, $ 18.5 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased .

Upon the achievement of research milestones and additional fees related to target reservations, $ 30.5 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased.

The transaction price is recognized as collaboration revenue using the cost-based input method over the estimated contract term of five years .

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Additionally, the Company considered the impact of Gilead terminating the agreement prior to the completion of the research services during the initial five-year research term and determined that there were significant economic costs to Gilead for doing so, and as such, did not adjust the contract term.

Using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligation to Gilead, the Company recognizes revenue based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation.

The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

These actual costs consist primarily of internal employee and third-party contract costs related to the Gilead Agreement.

For the three and nine months ended August 31, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.1 million and $ 12.5 million, respectively, of which $ 4.0 million and $ 9.6 million, respectively, were included in deferred revenue as of November 30, 2020, and $ 1.2 million and $ 1.9 million, respectively, were related to activities satisfied in previous periods.

For the three and nine months ended August 31, 2020, the Company recognized revenue related to the Gilead Agreement of $ 2.1 million and $ 6.9 million, respectively.

As of August 31, 2021, $ 39.1 million was recorded as deferred revenue, of which $ 15.4 million was current, on the condensed consolidated balance sheet related to the Gilead Agreement.

As of August 31, 2021, the Company recognized contract assets of $ 5.0 million on the consolidated balance sheet related to the Gilead Agreement.

The contract assets represent unbilled revenue related to the research milestones recognized in August 2021.

The Company invoiced Gilead in September 2021 and expects to receive the payment in the fourth quarter of 2021.

Costs consist primarily of internal full-time employee (FTE) and third-party contract costs related to the Gilead Agreement.

The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation is recorded in the period in which changes are identified and amounts can be reasonably estimated.

Total estimated costs are primarily driven by the number of estimated FTEs, which requires significant management judgment.

For the three months ended February 28, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.2 million, of which $ 3.3 million was included in deferred revenue as of November 30, 2021, and $ 2.5 million was related to activities satisfied in previous periods.

For the three months ended February 28, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $ 2.7 million, all of which was included in deferred revenue as of November 30, 2020, and $ 0.5 million was related to activities satisfied in previous periods.

Deferred revenue related to the Gilead Agreement was $ 40.9 million, of which $ 19.8 million was current, as of February 28, 2022, and $ 41.1 million, of which $ 19.9 million was current, as of November 30, 2021.

Additionally, as of both February 28, 2022 and November 30, 2021, $ 6.0 million was recorded in accounts receivable representing the billed amount related to the research milestones recognized in February 2022 and November 2021.

In December 2019, the Company entered into a strategic collaboration with Genzyme Corporation, a subsidiary of Sanofi, which became effective in January 2020 (as subsequently expanded and amended, the Sanofi Agreement), to discover, develop and commercialize a pipeline of targeted protein degradation drugs for patients with challenging diseases in multiple therapeutic areas using the Company’s DELigase platform to identify small molecules designed to induce degradation of three specified initial drug targets.

In January 2021, as part of the existing collaboration agreement, Sanofi paid the Company $ 22.0 million to exercise its option to expand the number of targets in the collaboration agreement from three to a total of five targets.

The Company and Sanofi also entered into a first amendment to the collaboration agreement in January 2021 to modify the research term on all targets (the First Sanofi Amendment) .

In January 2021, the Company and Sanofi entered into a first amendment to the collaboration agreement to modify the research term on all targets (the First Sanofi Amendment) .

Over time and subject to certain limitations, Sanofi may elect to replace the drug targets with other reserved targets.

Under the Sanofi Agreement, Sanofi has exclusive rights and is responsible for the clinical development, commercialization and manufacture of drug candidates resulting from the collaboration while the Company retains the option to co-develop, co-promote and co-commercialize up to two targets, one of which must be selected from a list of targets designated at the execution of the Sanofi Agreement and one of which must be selected from targets identified by Sanofi as part of their recent expansion.

In December 2021, the Company and Sanofi entered into a second amendment to the collaboration agreement to extend the substitution deadline on certain targets.

The Company’s right to exercise its option to co-develop, co-promote and co-commercialize a given target is dependent on its ability to demonstrate, within a given timeframe, that it has sufficient cash resources and personnel to commercialize the product.

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The Company is eligible to receive additional payments if Sanofi exercises an option to extend the license term with respect to a particular target.

Since the signing of the Sanofi Agreement, the Company has received a payment of $ 1.0 million for research milestones, all of which was received in the third quarter of 2021.

As of August 31, 2021, the Company is eligible to receive up to approximately $ 2.5 billion in total payments, including payments of up to $ 499.0 million upon the achievement of specified development milestones, up to $ 625.0 million upon the achievement of specified regulatory milestones and up to $ 1.3 billion upon the achievement of certain sales milestones, as well as up to $ 141.1 million in certain additional fees related to target licensing and reservation.

From the signing of the Sanofi Agreement to February 28, 2022, the Company has received a payment of $ 1.0 million for a research milestone.

Additionally, the Company recognized another research milestone in February 2022 and anticipates a payment of $ 2.0 million in the second fiscal quarter of 2022.

The Company is eligible to receive up to approximately $ 2.5 billion in total additional payments, including payments of up to $ 497.0 million upon the achievement of specified development milestones, up to $ 625.0 million upon the achievement of specified regulatory milestones and up to $ 1.3 billion upon the achievement of certain sales milestones, as well as up to $ 131.8 million in certain additional fees related to target licensing and reservation.

In addition, the Company is eligible to receive tiered royalties ranging from mid-single digit to low teen percentages on annual net sales of any commercial products that may result from the collaboration, subject to certain reductions and excluding sales in the United States of any products for which the Company exercises its option to co-develop and co-promote, for which the parties share profits and losses evenly.

Subject to earlier expiration in certain circumstances, the Sanofi Agreement expires on a licensed product-by-licensed product or profit-shared licensed product-by-profit-shared licensed product basis and country-by-country basis upon on the later of the expiration of (i) the last-to-expire patent with a valid claim covering the applicable licensed product in the applicable country, (ii) the expiration of any regulatory exclusivity for the applicable licensed product in the applicable country or (iii) ten years after the first commercial sale of the applicable licensed product in the applicable country covered by the Sanofi Agreement.

The Company identified the following promises in the Sanofi Agreement:

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In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract.

Certain milestone and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of August 31, 2021.

Milestone and additional fees were considered variable consideration, which were not included in the transaction price based on the most likely amount method as of February 28, 2022.

The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

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The practical alternative can be applied as the research activities for the two additional targets are similar to the research activities for the initial three targets.

Consequently, for the purpose of applying the practical alternative to estimating the standalone selling price of the material right, an expected consideration of $ 77.0 million was used for revenue recognition allocation, which represents the $ 55.0 million paid upfront for the three initial drug targets, and the $ 22.0 million for the additional consideration related to two additional targets that was included as part of applying the practical alternative, which was subsequently exercised by Sanofi.

Consequently, for the purpose of applying the practical alternative to estimating the standalone selling price of the material right, an expected consideration of $ 77.0 million was used for revenue recognition allocation, which represents the $ 55.0 million paid upfront for the three initial drug targets, and the $ 22.0 million for the additional consideration related to two additional targets, which was included as part of applying the practical alternative, which was subsequently exercised by Sanofi.

Subsequently, upon the achievement of research milestones, $ 3.0 million in variable consideration was added to the transaction price, and a cumulative effect was recorded as revenue in the period the transaction price increased.

Revenue is recognized over the research term of 4.25 years, the revised research period that was agreed to in January 2021, using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligations to Sanofi, based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligations.

The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

These actual costs consist primarily of internal employee and third party contract costs related to the Sanofi Agreement.

Revenue is recognized over the research term of 4.25 years, the revised research period that was agreed to in January 2021 in the First Sanofi Amendment, using the cost-based input method.

Using the cost-based input method, which the Company determined most faithfully depicts the transfer of its performance obligation to Sanofi, the Company recognizes revenue based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation under the contract.

Costs consist primarily of internal FTE and third-party contract costs related to the Sanofi Agreement.

Total estimated costs are primarily driven by the number of estimated FTEs, which requires significant management judgment.

The Company accounted for the First Sanofi Amendment as if it were part of the existing contract with Sanofi as the remaining goods and services to be provided after the contract modification are not distinct from the goods and services already provided and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification.

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The effect of the revised research period on the Company’s measure of progress toward complete satisfaction of the performance obligation was recognized as an adjustment to revenue at the date of the contract modification on a cumulative catch-up basis.

For the three and nine months ended August 31, 2021, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 4.2 million and $ 9.8 million, respectively, of which $ 4.0 million and $ 9.6 million, respectively, was included in deferred revenue as of November 30, 2020.

For the three and nine months ended August 31, 2020, the Company recognized revenue related to the Sanofi Agreement of $ 2.0 million and $ 4.2 million, respectively.

As of August 31, 2021, $ 62.5 million was recorded as deferred revenue, of which $ 19.9 million was current, on the condensed consolidated balance sheet related to the Sanofi Agreement.

For the three months ended February 28, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 3.4 million, of which $ 2.9 million was included in deferred revenue as of November 30, 2021 and $ 0.4 million was related to activities satisfied in previous periods.

For the three months ended February 28, 2021, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 2.3 million, all of which was included in deferred revenue as of November 30, 2020.

Deferred revenue related to the Sanofi Agreement was $ 57.7 million, of which $ 23.4 million was current, as of February 28, 2022, and $ 59.2 million, of which $ 21.3 million was current, as of November 30, 2021.

Additionally, as of February 28, 2022, $ 2.0 million was recorded as contract assets representing the unbilled amount related to the research milestone recognized in February 2022.

Condensed Consolidated Balance Sheet Components

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Total property and equipment, net

Depreciation and amortization expense was $ 0.7 million and $ 0.6 million for the three months ended August 31, 2021 and 2020, respectively, and $ 2.0 million and $ 1.5 million for the nine months ended August 31, 2021 and 2020, respectively.

Depreciation and amortization expense was $ 1.0 million and $ 0.6 million for the three months ended February 28, 2022 and 2021, respectively.

All long-lived assets are maintained in the United States.

Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

Accrued compensation

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Accrued taxes

Total accrued expenses and other current liabilities

Fair Value Measurements

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The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and considers factors specific to the asset or liability.

The following tables presents the Company’s financial assets, which consist of cash equivalents and investments classified as available-for-sale investments, that are measured at fair value on a recurring basis as of August 31, 2021 and November 30, 2020 (in thousands):

August 31, 2021

The following tables present the Company’s investments, which consist of cash equivalents and investments classified as available-for-sale investments, that are measured at fair value on a recurring basis as of February 28, 2022 and November 30, 2021 (in thousands):

February 28, 2022

Money market funds

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Long-term investments:

treasury securities

Corporate debt securities

12 unchanged sentences

Long-term investments:

treasury securities

Corporate debt securities

4 unchanged sentences

Included in Long-term investments

The accrued interest receivable related to the Company’s investments was $ 0.9 million as of each of February 28, 2022 and November 30, 2021, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

The Company classifies its money market funds and U.S.

5 unchanged sentences

These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

As of August 31, 2021 and November 30, 2020, none of the Company’s available-for-sale investments that were in an unrealized loss position had been in an unrealized loss position for more than 12 months.

During the three and nine months ended August 31, 2021 and 2020, the Company did no t recognize any other-than-temporary impairment losses.

The Company’s short-term investments have maturities of less than one year from the respective condensed consolidated balance sheet dates.

The Company’s long-term investments have maturities of between one and two years from the respective condensed consolidated balance sheet dates.

There were no transfers of financial instruments between valuation levels during the three months ended February 28, 2022 and 2021.

As of February 28, 2022 and November 30, 2021, the unrealized losses for available-for-sale investments were non-credit related, and the Company does no t intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized cost basis, which may be maturity.

As of February 28, 2022 and November 30, 2021, no allowance for credit losses for the Company’s investments was recorded.

During the three months ended February 28, 2022 and 2021, the Company did no t recognize any impairment losses related to investments.

Commitments and Contingencies

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Legal fees and other costs associated with such actions are expensed as incurred.

As of August 31, 2021, the Company had no outstanding, pending or threatened litigation.

As of February 28, 2022, the Company was not a party to any material legal proceedings.

Indemnifications

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In October 2015, the Company entered into a second lease agreement for additional space in the same building as its existing office and laboratory facilities.

In November 2017, the Company entered into a second amendment to its original lease agreement that combined the Company’s two leases into a single lease agreement and extended the term of the lease agreement through April 30, 2025 .

In March 2021, the Company entered into a third amendment to its original lease agreement to add additional office space in the same building.

In November 2017, the Company entered into an amendment to its original lease agreement that combined the Company’s two leases into a single lease agreement and extended the term of the lease agreement through April 30, 2025 .

The Company has an option to renew this lease for an additional two years which has not been included in the lease term used to calculate the ROU asset and lease liability as it is not reasonably certain that the Company will exercise this option.

The Company is required to pay base rent plus the tenant’s proportionate share of operating expenses as defined in the lease agreement.

Under the terms of the lease agreement, the Company paid the landlord security deposits totaling $ 91 thousand and issued a letter of credit to the landlord in the amount of $70 thousand, which is collateralized by a restricted deposit of $ 70 thousand.

Under the terms of the lease agreement, the Company paid the landlord security deposits totaling $ 91,000 and issued a letter of credit to the landlord in the amount of $70,000, which is collateralized by a restricted deposit of $ 70,000 .

In June 2020, the Company entered into a new lease agreement for additional space in the same building as the Company’s existing office for a 14 -month term ending on July 31, 2021 .

In July 2021, the Company entered into a lease agreement for the lease of approximately 19,320 square feet of office space located at 455 Mission Bay Boulevard South, San Francisco, California, for a research and development laboratory and related uses.

The commencement date of the lease is expected to be on or about December 1, 2021 and the lease will expire on June 30, 2024 , unless terminated earlier.

The minimum rent payable by the Company under the lease will be approximately $ 0.1 million per month, beginning on December 1, 2021, which amount will increase by 3 % per year over the term, for total minimum rent payments of $ 3.8 million over the lease term.

The lease commenced on December 1, 2021 and will expire on June 30, 2024 , unless terminated earlier.

The minimum rent payable by the Company under the lease will be approximately $ 0.1 million per month and increase by 3 % per year for total minimum rent payments of $ 3.8 million over the lease term.

The Company will also be responsible for the payment of additional rent to cover the Company’s share of the annual operating and tax expenses and utilities costs for the building.

Under the terms of the lease agreement, the Company paid the landlord security deposits totaling $ 0.1 million and issued a letter of credit to the landlord in the amount of $0.1 million, which is collateralized by a restricted deposit of $ 0.1 million.

Rent expense was $ 0.9 million and $ 0.8 million for the three months ended August 31, 2021 and 2020, respectively, and $ 2.6 million and $ 2.2 million for the nine months ended August 31, 2021 and 2020, respectively.

Future minimum lease payments under the Company’s lease agreements as of August 31, 2021 were as follows (in thousands):

Under the terms of the lease agreement, the Company issued a letter of credit to the landlord in the amount of $ 0.1 million, which is collateralized by a restricted deposit of $ 0.1 million.

Operating lease expenses were $ 1.4 million and $ 0.8 million for the three months ended February 28, 2022 and 2021, respectively.

Short-term lease expense was not material for all periods presented.

Other information related to leases were as follows (in thousands):

Three Months Ended February 28,

Cash paid for amounts included in the measurement of lease liabilities:

Cash flows from operating leases

Supplemental disclosures of non-cash investing and financing activities:

Right-of-use assets recognized in exchange for lease obligations

The undiscounted future non-cancellable lease payments under the Company’s lease agreements as of February 28, 2022 were as follows (in thousands):

Year ending November 30,

Operating Leases

2022 (remaining 9 months)

Total minimum lease payments

The Company’s Certificate of Incorporation, as amended, authorizes the Company to issue up to 500,000,000 shares of $ 0.001 par value common stock.

Total undiscounted lease payments

imputed interest

Total lease liabilities

Operating lease current liabilities

Operating lease long-term liabilities

Total lease liabilities

The Company’s Restated Certificate of Incorporation authorizes the Company to issue up to 500,000,000 shares of common stock, $ 0.001 par value per share, as of February 28, 2022 and November 30, 2021.

Holders of common stock are entitled to dividends when and if declared by the Company’s board of directors, subject to the prior rights of the holders of shares of preferred stock.

The holder of each share of common stock is entitled to one vote.

As of August 31, 2021, no dividends have been declared.

Common stock reserved for future issuance, on an as-if converted basis, as of August 31, 2021 and November 30, 2020, consists of the following and has been adjusted for the 1-for-3 reverse stock split:

As of February 28, 2022, no dividends have been declared.

Common stock reserved for future issuance, on an as-if converted basis, as of February 28, 2022 and November 30, 2021, consists of the following:

Issuance of options under stock option plan

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Shares available for issuance under employee stock purchase plan

Restricted stock units issued and outstanding

Total common stock reserved for future issuance

Stock-Based Compensation

2020 Equity Incentive Plan

In July 2020, the Company’s board of directors approved, and the Company adopted the 2020 Equity Incentive Plan (the 2020 Plan).

The 2020 Plan became effective on July 22, 2020.

The 2020 Plan provides for the granting of stock options, stock appreciation rights (SARs), restricted stock awards (RSAs), restricted stock units (RSUs), performance awards and stock bonus awards to employees, directors, consultants, independent contractors and advisors of the Company.

Under the 2020 Plan, the Company generally grants stock-based awards with service-based vesting conditions only.

Options granted typically vest over a four-year period but may be granted with different vesting terms.

In the case of an incentive stock option granted to an employee who at the time of grant owns stock representing more than 10 % of the total combined voting power of all classes of stock, the exercise price shall be no less than 110 % of the fair value per share on the date of grant, and the award shall expire five years from the date of grant.

In the case of all other stock options, the per share exercise price shall be no less than 100 % of the fair value per share on the date of grant.

Following the effectiveness of the 2020 Plan, the Company ceased making grants under the 2012 Equity Incentive Plan (the 2012 Plan).

However, the 2012 Plan continues to govern the terms and conditions of the outstanding awards granted under it.

Shares of common stock subject to awards granted under the 2012 Plan that cease to be subject to such awards by forfeiture or otherwise after the termination of the 2012 Plan will be available for issuance under the 2020 Plan.

As of August 31, 2021, there were 2,955,477 shares of common stock reserved for future issuance pursuant to the 2020 Plan.

2012 Equity Incentive Plan

In April 2012, the Company’s board of directors approved, and the Company adopted the 2012 Plan.

The 2012 Plan provides for the granting of stock options, SARs, RSAs, and RSUs to employees, directors, consultants and advisors of the Company.

Options granted under the 2012 Plan generally vest over four years .

Options granted under the 2012 Plan may, but need not, be exercisable immediately, with any shares issued on exercise being subject to the Company’s right of repurchase.

As of August 31, 2021, there were no shares of common stock reserved for issuance pursuant to the 2012 Plan.

Activity under the 2020 Plan and 2012 Plan is set forth below and has been adjusted for the 1-for-3 reverse stock split (in thousands, except share and per share data):

Equity Incentive Plans

The Company’s 2020 Equity Incentive Plan (the 2020 Plan) serves as the successor to the Company’s 2012 Equity Incentive Plan (together with the 2020 Plan, the Stock Plans) and provides for the granting of stock options, stock appreciation rights (SARs), restricted stock awards (RSAs), restricted stock units (RSUs), performance awards and stock bonus awards to employees, directors, consultants, independent contractors and advisors of the Company.

Option activity under the Stock Plans is set forth below:

(in thousands)

Balances as of November 30, 2021

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Options forfeited

Balances as of August 31, 2021

Options vested and expected to vest as of August 31, 2021 (2)

Options exercisable as of August 31, 2021

The aggregate intrinsic values were calculated as the pre-tax difference between the exercise price of stock options and the quoted market price of the Company’s common stock on August 31, 2021 for all in-the-money stock options.

Balances as of February 28, 2022

Options vested and expected to vest as of February 28, 2022 (2)

Options exercisable as of February 28, 2022

The aggregate intrinsic values were calculated as the pre-tax difference between the exercise price of stock options and the quoted market price of the Company’s common stock on February 28, 2022 for all in-the-money stock options.

Certain stock options granted by the Company prior to the date of IPO are exercisable at the date of grant, with unvested shares subject to repurchase by the Company in the event of voluntary or involuntary termination of employment of the stockholder.

Such exercises are recorded as a liability in the condensed consolidated balance sheets and reclassified into equity as the options vest.

As of August 31, 2021, a total of 76,175 shares of common stock were subject to repurchase by the Company at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of $ 0.4 million as of August 31, 2021 is recorded in share-based compensation liability.

As of February 28, 2022, a total of 41,522 shares of common stock were subject to repurchase by the Company at the lower of (i) the fair market value of such shares on the date of repurchase, or (ii) the original exercise price of such shares.

The corresponding exercise value of $ 0.3 million as of February 28, 2022 is recorded in share-based compensation liability.

RSU activity under the Stock Plans is set forth below:

Number of RSUs

Weighted-average grant date fair value

Balances as of November 30, 2021

RSUs forfeited

Balances as of February 28, 2022

Employee Stock Purchase Plan

In July 2020, the Company’s board of directors adopted the 2020 Employee Stock Purchase Plan (the 2020 ESPP) that became effective upon the date of the IPO in order to enable eligible employees to purchase shares of common stock with accumulated payroll deductions.

The 2020 ESPP is intended to qualify under Section 423 of the Internal Revenue Code, as amended.

Under the 2020 ESPP, eligible employees are offered the option to purchase shares of common stock at a discount over a series of offering periods.

Each offering period may consist of one or more purchase periods.

The purchase price for shares of common stock purchased under the 2020 ESPP will be 85 % of the lesser of the fair market value of the Company’s common stock on (i) the first trading day of the applicable offering period or (ii) the last trading day of each purchase period in the applicable offering period.

As of August 31, 2021, there were 1,015,184 shares of common stock reserved for issuance pursuant to the 2020 ESPP.

The first offering period commenced as of July 23, 2020, the date on which the Company’s registration statement on Form S-1 relating to its IPO of common stock became effective and ended on February 15, 2021.

The first purchase period was the same as the first offering period and the first purchase date was the last trading day of the purchase period, which was February 12, 2021.

Under the Company’s 2020 Employee Stock Purchase Plan (the ESPP), eligible employees are entitled to purchase shares of common stock with accumulated payroll deductions.

During the three months ended February 28, 2022, the Company issued 71,207 shares pursuant to the ESPP at a weighted-average price of $ 14.94 per share.

Stock-Based Compensation

The following table sets forth stock-based compensation expense related to stock options and the 2020 ESPP that is included in the Company’s condensed consolidated statements of operations (in thousands):

Three Months Ended August 31,

Nine Months Ended August 31,

Stock-based compensation expense related to the Stock Plans and the ESPP that is included in the Company’s condensed consolidated statements of operations is as follows (in thousands):

Three Months Ended,

Research and development

1 unchanged sentence

Total stock-based compensation

As of August 31, 2021, the total compensation cost related to stock-based awards not yet recognized was $ 54.9 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 3.2 years.

As of February 28, 2022, the total compensation cost related to stock-based awards not yet recognized was $ 75.2 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 3.0 years.

Defined Contribution Plan

The Company sponsors a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code (the 401(k) Plan), which provides for the Company to make discretionary matching or discretionary annual contributions to the 401(k) Plan, for its employees.

The Company sponsors a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the 401(k) Plan), which provides for the Company to make discretionary matching or discretionary annual contributions to the 401(k) Plan, for its employees.

Substantially all of the Company’s employees are eligible to participate.

Employees may contribute a percentage of their annual compensation to the plan, subject to statutory limitations.

The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.1 million during both the three months ended August 31, 2021 and 2020 and $ 0.5 million and $ 0.3 million during the nine months ended August 31, 2021 and 2020, respectively.

Income tax was a benefit of $ 0.1 million and an expense of $ 0.1 million for the three and nine months ended August 31, 2021, respectively.

Income tax benefit was $ 0 and $ 20.6 million for the three and nine months ended August 31, 2020, respectively.

The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.5 million and $ 0.2 million during the three months ended February 28, 2022 and 2021, respectively.

For the three months ended February 28, 2022, the Company did no t record any current income tax expense or provision and for the three months ended February 28, 2021, the Company recorded a current income tax expense of $ 71,000 .

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

Realization of the deferred tax assets is dependent upon future taxable income, the amount, if any, and timing of which are uncertain.

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of August 31, 2021 and November 30, 2020 due to the uncertainty of realizing future tax benefits from its net operating loss (NOL) carryforwards and other deferred tax assets.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, allows NOLs incurred in taxable years 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The fiscal 2020 tax benefit was primarily due to the carryback of NOLs to prior taxable years as allowed under the CARES Act.

In fiscal 2020, the Company filed refund claims of $ 19.6 million to carryback NOLs generated in fiscal years ended November 30, 2018 and 2019.

These refund claims were approved by Congressional Joint Committee on Taxation during the three months ended August 31, 2021.

As of August 31, 2021, the Company has received the full amount of these refund claims.

In February 2018, the Internal Revenue Service (IRS) commenced an examination of the Company’s U.S.

income tax returns for the tax years ending in 2016, 2017, 2018 and 2019.

As of the August 31, 2021, the examination procedures are substantially complete and the Company expects the IRS exam to be formally closed in 2021.

Additionally, in January 2019, the California Franchise Tax Board (FTB) initiated an examination of the Company’s California tax return for the years ending in 2015, 2016, 2017, and 2018.

During the three months ended August 31, 2021, the FTB issued a proposed audit assessment related to revenue sourcing that would result in additional income tax expense and interest for a cash liability of approximately $ 0.6 million.

The Company does not agree with the FTB position and intends to challenge the assessment.

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of February 28, 2022 and November 30, 2021 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

In January 2019, the California Franchise Tax Board (FTB) commenced an examination of the Company’s California income tax returns for the tax years ending in 2015, 2016, 2017 and 2018.

During the year ended November 30, 2021, the FTB issued proposed audit assessments related to revenue sourcing and R&D credits.

The Company does not agree with the FTB assessments and intends to challenge the assessments.

Pursuant to a measurement analysis, the Company has not recorded an unrecognized tax benefit related to the FTB’s sourcing position.

The Company maintains an unrecognized tax benefit related to its California R&D credits for all years.

Net Loss Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders, which excludes shares which are legally outstanding but subject to repurchase by the Company (in thousands, except share and per share data):

Three Months Ended August 31,

Nine Months Ended August 31,

Weighted-average number of shares

outstanding, basic and diluted

Net loss per share attributable to

common stockholders, basic and diluted

Q3 2020 Revision of Net Loss per Share

During the fourth quarter of 2020, the Company identified an error in the computation and disclosure of the basic and diluted weighted-average number of shares outstanding and the basic and diluted net loss per share for the three and nine months ended August 31, 2020 included in its Quarterly Report on Form 10-Q for the period ended August 31, 2020.

The error primarily resulted from the inclusion of the absolute number of shares converted from redeemable convertible preferred stock into common stock rather than the weighted-average number of shares converted from redeemable convertible preferred stock into common stock as a result of the closing of the IPO.

The Company evaluated the materiality of the error in accordance with SEC Staff Accounting Bulletin No.

99, Materiality and ASC 250, Accounting for Changes and Error Corrections , and concluded the error was not material to the previously issued condensed consolidated financial statements.

However, the Company has revised its previously reported basic and diluted weighted-average number of shares outstanding and basic and diluted net loss per share, which decreased the weighted-average number of shares outstanding from 31,383,936 to 16,937,934 and increased the basic and diluted net loss per share from $ 0.59 to $ 1.09 for the three months ended August 31, 2020.

It also decreased the weighted-average number of shares outstanding from 27,688,972 to 8,052,905 and increased the basic and diluted net loss per share from $ 0.84 to $ 2.90 for the nine months ended August 31, 2020.

The following potentially dilutive securities were excluded from the computation of the diluted net income (loss) per share of common stock for the periods presented because their effect would have been anti-dilutive:

Three and Nine Months Ended August 31,

Three Months Ended

Weighted-average number of shares outstanding, basic and diluted

Net loss per share, basic and diluted

The following potentially dilutive securities were excluded from the computation of the diluted net loss per share of common stock for the periods presented because their effect would have been anti-dilutive:

Options to purchase common stock

Options early exercised subject to vesting

Shares expected to be purchased under

employee stock purchase plan

Shares expected to be purchased under employee stock purchase plan

Restricted stock

1 unchanged sentence

The Company’s Chief Financial Officer is a trustee for the Company’s healthcare plan provider.

Expenses related to the healthcare plan premiums were $ 0.7 million and $ 0.4 million for the three months ended August 31, 2021 and 2020, respectively, and $ 1.8 million and $ 1.2 million for the nine months ended August 31, 2021 and 2020, respectively.

As of August 31, 2021 and November 30, 2020, $ 0 was recorded in accrued liabilities and accounts payable in connection with this healthcare plan provider.

Expenses related to the healthcare plan premiums were $ 0.9 million and $ 0.5 million for the three months ended February 28, 2022 and 2021, respectively.

As of February 28, 2022 and November 30, 2021, the amount recorded in accrued liabilities and accounts payable in connection with this healthcare plan provider was not material.

Subsequent Events

On March 1, 2022, the Company entered into a lease agreement (the 8800 Technology Forest Pl Lease) with 8800 Technology Forest Pl, LLC, effective as of March 1, 2022, for the lease of approximately 46,434 square feet of office space located at 8800 Technology Forest Place, The Woodlands, Texas, for a research and development laboratory and related uses.

The commencement date of the 8800 Technology Forest Pl Lease is expected to be on or about August 1, 2022 , and the lease will expire on March 1, 2035 , unless terminated earlier.

The minimum rent payable by the Company under the 8800 Technology Forest Pl Lease will be approximately $ 205,084 per month, beginning on March 1, 2023, which amount will increase by 3 % per year over the term of the lease;

provided that, for the period between March 1, 2023 and February 29, 2024, the minimum rent payable by the Company under the lease will be approximately $ 153,813 per month.

The Company will also be responsible for the payment of additional rent to cover the Company’s share of the annual operating and tax expenses and utilities costs for the building.

Refer to Note 6 for more information regarding leases.

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