What changed in this filing

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Item 1. Financial Statements

2022-10-06 compared with 2022-07-07 · 143 added, 107 removed, 423 unchanged (37% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Short-term investments

Marketable securities, current

Accounts receivable

2 unchanged sentences

Total current assets

Long-term investments

Marketable securities, non‑current

Operating lease right-of-use assets

13 unchanged sentences

Stockholdersʼ equity:

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

authorized as of May 31, 2022 and November 30, 2021;

no shares issued and outstanding

as of May 31, 2022 and November 30, 2021

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

as of May 31, 2022 and November 30, 2021;

45,040,068 and 44,664,371 shares issued and outstanding

as of May 31, 2022 and November 30, 2021, respectively

Preferred stock, $ 0.001 par value— 10,000,000 shares authorized as of August 31, 2022 and November 30, 2021;

no shares issued and outstanding as of August 31, 2022 and November 30, 2021

Common stock, $ 0.001 par value— 500,000,000 shares authorized as of August 31, 2022 and November 30, 2021;

47,147,781 and 44,664,371 shares issued and outstanding as of August 31, 2022 and November 30, 2021, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Collaboration revenue

6 unchanged sentences

Loss before income taxes

Provision for income taxes

Provision for (benefit from) income taxes

Net loss per share, basic and diluted

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Other comprehensive loss, net of tax:

Unrealized loss on available-for-sale investments

Unrealized loss on available-for-sale securities

Total comprehensive loss

12 unchanged sentences

Stock-based compensation

Unrealized loss on available-for-sale investments

Unrealized loss on available-for-sale securities

Balance as of February 28, 2021

Issuance of common stock in connection with equity

offering, net of offering costs of $ 643

Issuance of common stock in connection with equity offering, net of offering costs of $ 643

Exercise of stock options

1 unchanged sentence

Stock-based compensation

Unrealized loss on available-for-sale investments

Unrealized loss on available-for-sale securities

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 loss on available-for-sale securities

Balance as of August 31, 2021

comprehensive

6 unchanged sentences

Stock-based compensation

Unrealized loss on available-for-sale investments

Unrealized loss on available-for-sale securities

Balance as of February 28, 2022

3 unchanged sentences

Stock-based compensation

Unrealized loss on available-for-sale investments

Unrealized loss on available-for-sale securities

Balance as of May 31, 2022

Issuance of pre-funded warrants, net of issuance costs of $ 234

Issuance of common stock in “at the market” financing, net of issuance costs of $ 672

Exercise of stock options

Vesting of restricted stock units

Vesting of early-exercised stock options

Issuance under employee stock purchase plan

Stock-based compensation

Unrealized loss on available-for-sale securities

Balance as of August 31, 2022

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

2 unchanged sentences

(in thousands)

Six Months Ended May 31,

Nine Months Ended August 31,

Cash flows from operating activities

2 unchanged sentences

Stock-based compensation

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

Net amortization (accretion) of premium (discount) on marketable securities

Loss on disposal of property and equipment

10 unchanged sentences

Cash flows from investing activities

Purchases of investments

Sales of investments

Maturities of investments

Purchases of marketable securities

Sales of marketable securities

Maturities of marketable securities

Purchases of property and equipment

Net cash (used in) provided by investing activities

Net cash used in investing activities

Cash flows from financing activities

Proceeds from issuance of common stock, net of underwriting discounts and commissions and offering costs

Proceeds from issuances of pre-funded warrants, net of issuance costs

Proceeds from issuances of common stock in equity financing, net of issuance costs

Proceeds from exercise of stock options

8 unchanged sentences

Vesting of early exercised stock options

As of May 31,

Issuance costs related to pre-funded warrants included in accrued expenses and other liabilities

Deferred issuance costs recognized related to equity financing

As of August 31,

Reconciliation of cash, cash equivalents and restricted cash:

26 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 May 31, 2022, the Company had 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.

In June 2022, the Company issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement for net proceeds of approximately $ 19.3 million, after deducting offering commissions and expenses paid by the Company (the June 2022 ATM Offering).

As of the closing of the June 2022 ATM Offering, the Company had $ 130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

In June 2022, the Company issued and sold 2,000,000 shares of common stock under the Equity Distribution Agreement at a price of $ 10.0001 per share of common stock for net proceeds of approximately $ 19.3 million, after deducting offering commissions and expenses paid by the Company.

As of August 31, 2022, the Company had $ 130.0 million of common stock remaining available for sale under the Equity Distribution Agreement.

Registered Direct Offerings

In July 2022, the Company entered into separate securities purchase agreements with certain purchasers to issue and sell pre‑funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock in registered direct offerings (RDOs) at a price of $ 13.939 per pre-funded warrant.

Net proceeds from the RDOs were approximately $ 94.8 million, after deducting offering expenses of $ 0.2 million.

Refer to Note 7 for more information regarding the pre-funded warrants issued in the RDOs.

Liquidity and Management Plans

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

As of May 31, 2022, the Company had an accumulated deficit of $ 308.8 million and will require substantial additional capital for research and development activities.

As of August 31, 2022, the Company had an accumulated deficit of $ 354.5 million 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 May 31, 2022, the Company had cash, cash equivalents and investments of $ 348.8 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.

As of August 31, 2022, the Company had cash, cash equivalents and marketable securities of $ 413.6 million.

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

Future capital requirements will depend on many factors, including the timing and extent of spending on research and development and payments the Company may receive under its collaboration agreements with Sanofi S.A.

8 unchanged sentences

GAAP) and applicable rules and regulations of the 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 six months ended May 31, 2022.

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

7 unchanged sentences

Principles of Consolidation

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

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, including DeCART Therapeutics Inc, which was legally dissolved in July 2022.

All intercompany balances and transactions have been eliminated in consolidation.

7 unchanged sentences

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and investments.

The Company’s investments consist of debt securities issued by highly rated corporate entities, the U.S.

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities.

The Company’s marketable securities consist of debt securities issued by highly rated corporate entities, the U.S.

federal government or state and local governments.

2 unchanged sentences

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

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

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

Other Risks and Uncertainties

1 unchanged sentence

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.

Moreover, the current COVID-19 pandemic, which is impacting worldwide economic activity, poses the risk that the Company or its employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

The extent to which the COVID-19 pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

Moreover, the Company is subject to risks and uncertainties as a result of the current COVID-19 pandemic and increasing financial market volatility and uncertainty.

The COVID-19 pandemic, including the resurgence of cases relating to the spread of new variants, is impacting worldwide economic activity and poses the risk that the Company or its employees, contractors, suppliers and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

The extent to which the COVID-19 pandemic and increasing financial market volatility and uncertainty will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

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 six months ended May 31, 2022;

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

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

55 unchanged sentences

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 May 31, 2021 and for the three and six months ended May 31, 2021 as presented in its May 31, 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 and six months ended May 31, 2021 presented herein differ from the Company’s condensed consolidated financial statements included in its May 31, 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 .

As a result, the Company has retrospectively changed its previously issued condensed consolidated financial statements as of August 31, 2021 and for the three and nine months ended August 31, 2021 as presented in its August 31, 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 and nine months ended August 31, 2021 presented herein differ from the Company’s condensed consolidated financial statements included in its August 31, 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, 2020 (in thousands):

6 unchanged sentences

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 six months ended May 31, 2021 (in thousands):

The following table summarizes the effect of the adoption of Topic 842 on the condensed consolidated statement of cash flows for the nine months ended August 31, 2021 (in thousands):

As Previously Reported

11 unchanged sentences

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.

In August 2019 and September 2022, the Company entered into a first amendment and a second amendment, respectively, to the collaboration agreement with Gilead to clarify certain language of the Gilead Agreement.

These amendments had no impact on revenue recognition.

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

In addition, from the signing of the Gilead Agreement to May 31, 2022, the Company has received payments of $ 30.5 million for research milestones and additional payments.

Additionally, the Company recognized a research milestone in May 2022 and anticipates a payment of $ 1.5 million in the third fiscal quarter of 2022.

As of May 31, 2022, the Company is eligible to receive up to approximately $ 2.3 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

In addition, from the signing of the Gilead Agreement to August 31, 2022, the Company has received payments of $ 32.0 million for research milestones and additional payments.

Additionally, the Company recognized a research milestone in August 2022 and anticipates a payment of $ 2.5 million in the fourth fiscal quarter of 2022.

As of August 31, 2022, the Company is eligible to receive up to approximately $ 2.3 billion in total additional payments based on certain additional fees, payments and the successful completion of certain preclinical, clinical, development and sales milestones.

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.

1 unchanged sentence

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

Upon the achievement of research milestones and additional fees related to target reservations, $ 32.0 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.

Upon the achievement of research milestones and additional fees related to target reservations, $ 34.5 million in variable consideration, which includes $ 2.5 million added during the three months ended August 31, 2022, 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 .

For the three and six months ended May 31, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 6.1 million and $ 12.3 million, respectively, of which $ 5.3 million and $ 8.6 million, respectively, was included in deferred revenue as of November 30, 2021, and $ 0.6 million and $ 3.1 million, respectively, was related to activities satisfied in previous periods.

For the three and six months ended May 31, 2021, the Company recognized collaboration revenue related to the Gilead Agreement of $ 3.7 million and $ 6.5 million, respectively, of which $ 2.9 million and $ 5.6 million, respectively, was included in deferred revenue as of November 30, 2020, and $ 0.6 million and $ 0.6 million, respectively, was related to activities satisfied in previous periods.

As of May 31, 2022, deferred revenue related to the Gilead Agreement was $ 34.8 million, of which $ 17.0 million was current and includes $ 1.5 million in contract assets representing the unbilled amount related to the research milestone recognized in May 2022.

For the three and nine months ended August 31, 2022, the Company recognized collaboration revenue related to the Gilead Agreement of $ 7.2 million and $ 19.5 million, respectively, of which $ 5.6 million and $ 14.3 million, respectively, was included in deferred revenue as of November 30, 2021, and $ 0.6 million and $ 4.1 million, respectively, was related to activities satisfied in previous periods.

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, was included in deferred revenue as of November 30, 2020, and $ 1.2 million and $ 1.9 million, respectively, was related to activities satisfied in previous periods.

As of August 31, 2022, deferred revenue related to the Gilead Agreement was $ 29.1 million, of which $ 15.9 million was current and includes $ 2.5 million in contract assets representing the unbilled amount related to the research milestone recognized in August 2022.

As of November 30, 2021, deferred revenue related to the Gilead Agreement was $ 41.1 million, of which $ 19.9 million was current.

4 unchanged sentences

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

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

In December 2021, the Company and Sanofi entered into a second amendment to extend the substitution deadline on certain 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, subject to certain conditions and limitations.

In July 2022, the Company entered into a third amendment to further extend the substitution deadline on certain targets.

The extensions of the substitution deadline had no impact on revenue recognition.

Also in July 2022, Sanofi elected to replace certain drug targets, and the substitution extended the research term of those targets by one year to 5.25 years and increased overall forecasted costs, which had an immaterial impact on revenue recognition.

In August 2022, the Company entered into a fourth amendment to modify the research plan for a certain target, which had no impact on revenue recognition.

Upon signing the Sanofi Agreement, Sanofi paid the Company an upfront payment of $ 55.0 million.

Subsequently, in January 2021, Sanofi paid the Company an additional $ 22.0 million to exercise its option to expand the number of targets beyond the initial targets included in the collaboration.

In addition, from the signing of the Sanofi Agreement to May 31, 2022, the Company has received payments of $ 3.0 million for research milestones.

As of May 31, 2022, the Company is eligible to receive up to approximately $ 2.5 billion in total additional payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones, as well as 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.

In addition, from the signing of the Sanofi Agreement to August 31, 2022, the Company has received payments of $ 3.0 million for research milestones.

As of August 31, 2022, the Company is eligible to receive up to approximately $ 2.5 billion in total additional payments based on certain additional fees, payments and the successful completion of certain research development, regulatory and sales milestones, as well as 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.

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

1 unchanged sentence

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 in the First Sanofi Amendment, using the cost-based input method.

For the three and six months ended May 31, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 5.3 million and $ 8.7 million, respectively, of which $ 5.3 million and $ 8.2 million, respectively, was included in deferred revenue as of November 30, 2021 and zero and $ 0.5 million, respectively, was related to activities satisfied in previous periods.

For the three and six months ended May 31, 2021, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 3.3 million and $ 5.6 million, respectively, all of which was included in deferred revenue as of November 30, 2020.

As of May 31, 2022 and November 30, 2021, deferred revenue related to the Sanofi Agreement was $ 52.4 million, of which $ 24.3 million was current, and $ 59.2 million, of which $ 21.3 million was current, respectively.

Revenue is recognized using the cost-based input method over the research term of 4.25 years, the revised research period that was agreed to in January 2021 in the First Sanofi Amendment for certain targets, and 5.25 years, the revised research period due to the target substitutions in July 2022, for certain other targets.

For the three and nine months ended August 31, 2022, the Company recognized collaboration revenue related to the Sanofi Agreement of $ 3.6 million and $ 12.4 million, respectively, of which $ 3.6 million and $ 11.8 million, respectively, was included in deferred revenue as of November 30, 2021 and zero and $ 0.4 million, respectively, was related to activities satisfied in previous periods.

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.

As of August 31, 2022 and November 30, 2021, deferred revenue related to the Sanofi Agreement was $ 48.8 million, of which $ 20.5 million was current, and $ 59.2 million, of which $ 21.3 million was current, respectively.

Condensed Consolidated Balance Sheet Components

9 unchanged sentences

Total property and equipment, net

Depreciation and amortization expense was $ 1.3 million and $ 0.6 million for the three months ended May 31, 2022 and 2021, respectively, and $ 2.3 million and $ 1.3 million for the six months ended May 31, 2022 and 2021, respectively.

Depreciation and amortization expense was $ 1.5 million and $ 0.7 million for the three months ended August 31, 2022 and 2021, respectively, and $ 3.7 million and $ 2.0 million for the nine months ended August 31, 2022 and 2021, respectively.

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

16 unchanged sentences

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 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 May 31, 2022 and November 30, 2021 (in thousands):

The following tables present the Company’s investments, which consist of cash equivalents and available-for-sale marketable securities, that are measured at fair value on a recurring basis as of August 31, 2022 and November 30, 2021 (in thousands):

August 31, 2022

Money market funds

5 unchanged sentences

Municipal securities

Long-term investments:

Long-term marketable securities:

treasury securities

2 unchanged sentences

Included in Cash and cash equivalents

Included in Short-term investments

Included in Long-term investments

Included in Short-term marketable securities

Included in Long-term marketable securities

November 30, 2021

5 unchanged sentences

Municipal securities

Long-term investments:

Long-term marketable securities:

treasury securities

3 unchanged sentences

Included in Cash and cash equivalents

Included in Short-term investments

Included in Long-term investments

The accrued interest receivable related to the Company’s investments was $ 0.7 million and $ 0.9 million as of May 31, 2022 and November 30, 2021, respectively, and was included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

Included in Short-term marketable securities

Included in Long-term marketable securities

The accrued interest receivable related to the Company’s marketable securities was $ 1.1 million and $ 0.9 million as of August 31, 2022 and November 30, 2021, respectively, 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.

treasury securities, which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

The Company classifies its investments in corporate debt securities, U.S.

government agency securities, corporate commercial paper, and municipal securities as Level 2 assets within the fair value hierarchy.

The fair values of these investments are estimated by taking into consideration valuations obtained from third-party pricing services.

The Company classifies its marketable securities in corporate debt securities, U.S.

government agency securities, corporate commercial paper, foreign government securities and municipal securities as Level 2 assets within the fair value hierarchy.

The fair values of these marketable securities are estimated by taking into consideration valuations obtained from third-party pricing services.

The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value.

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.

There were no transfers of financial instruments between valuation levels during the three and six months ended May 31, 2022 and 2021.

As of May 31, 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 May 31, 2022 and November 30, 2021, no allowance for credit losses for the Company’s investments was recorded.

During the three and six months ended May 31, 2022 and 2021, the Company did no t recognize any impairment losses related to investments.

There were no transfers of financial instruments between valuation levels during the three and nine months ended August 31, 2022 and 2021.

As of August 31, 2022 and November 30, 2021, the unrealized losses for available-for-sale securities were non-credit related, and the Company does no t intend to sell the securities that were in an unrealized loss position, nor will it be required to sell those securities before recovery of their amortized cost basis, which may be maturity.

As of August 31, 2022 and November 30, 2021, no allowance for credit losses for the Company’s marketable securities was recorded.

During the three and nine months ended August 31, 2022 and 2021, the Company did no t recognize any impairment losses related to marketable securities.

Commitments and Contingencies

4 unchanged sentences

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

As of May 31, 2022, the Company was not a party to any material legal proceedings.

As of August 31, 2022, the Company was not a party to any material legal proceedings.

Indemnifications

10 unchanged sentences

The Company leases office and laboratory facilities within the same building in San Francisco, California under several lease agreements.

The term of these lease agreements expire on April 30, 2025 .

The terms of these lease agreements expire on April 30, 2025 .

In July 2021, the Company entered into a lease agreement for the lease of approximately 19,320 square feet of office space in San Francisco, California, for a research and development laboratory and related uses.

1 unchanged sentence

In March 2022, the Company entered into a lease agreement for the lease of approximately 46,434 square feet of office space in The Woodlands, Texas, for a research and development laboratory and related uses.

The lease is expected to commence on or about August 1, 2022 , and will expire on March 1, 2035 , unless terminated earlier.

The Company obtained access to the premise on August 1, 2022, and the lease is expected to commence in fiscal year 2023 when the underlying assets become available for use and will expire on March 1, 2035 , unless terminated earlier.

The minimum rent payable by the Company under the lease will be approximately $ 205,000 per month, beginning on March 1, 2023, which amount will increase by 3 % per year over the term of the lease;

1 unchanged sentence

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.

Operating lease expenses, excluding additional rent charges for utilities, maintenance and real estate taxes, were $ 1.5 million and $ 0.9 million for the three months ended May 31, 2022 and 2021, respectively, and $ 2.8 million and $ 1.7 million for the six months ended May 31, 2022 and 2021, respectively.

Operating lease expenses, excluding additional rent charges for utilities, maintenance and real estate taxes, were $ 1.5 million and $ 0.9 million for the three months ended August 31, 2022 and 2021, respectively, and $ 4.4 million and $ 2.6 million for the nine months ended August 31, 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):

Six Months Ended May 31,

Nine Months Ended August 31,

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

2 unchanged sentences

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 May 31, 2022 were as follows (in thousands):

The undiscounted future non-cancellable lease payments under the Company’s lease agreements as of August 31, 2022 were as follows (in thousands):

Year ending November 30,

7 unchanged sentences

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 May 31, 2022 and November 30, 2021.

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 August 31, 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 May 31, 2022, no dividends have been declared.

Common stock reserved for future issuance, on an as-if converted basis, as of May 31, 2022 and November 30, 2021, consists of the following:

Issuance of options under stock option plan

As of August 31, 2022, no dividends have been declared.

In July 2022, the Company issued pre-funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock in RDOs at a price of $ 13.939 per pre-funded warrant.

The pre-funded warrants were immediately exercisable, have an exercise price of $ 0.001 and may be exercised at any time after the date of issuance.

A holder of pre-funded warrants may not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 9.99 % of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise.

A holder of the pre-funded warrants may increase or decrease this percentage not in excess of 19.99 % by providing at least 61 days’ prior notice to the Company.

As of August 31, 2022 , all of the pre-funded warrants remained available for exercise.

The pre-funded warrants were classified as a component of permanent equity in the Company's condensed consolidated balance sheet as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the holders to receive a fixed number of shares of common stock upon exercise.

All of the shares underlying the pre-funded warrants have been included in the weighted-average number of shares of common stock used to calculate net loss per share attributable to common stockholders because the shares may be issued for little or no consideration, are fully vested and are exercisable after the original issuance date of the pre-funded warrants.

Common stock reserved for future issuance, on an as-if converted basis, as of August 31, 2022 and November 30, 2021, consists of the following:

Options under stock option plan issued and outstanding

Shares available for future stock option grants

1 unchanged sentence

Restricted stock units issued and outstanding

Pre-funded warrants issued and outstanding

Total common stock reserved for future issuance

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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.

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, restricted stock awards, 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:

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Options forfeited

Balances as of May 31, 2022

Options vested and expected to vest as of May 31, 2022 (2)

Options exercisable as of May 31, 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 May 31, 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.

Balances as of August 31, 2022

Options vested and expected to vest as of August 31, 2022 (2)

Options exercisable as of August 31, 2022

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 a 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 May 31, 2022, a total of 33,300 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 $ 0.2 million as of May 31, 2022 is recorded in share-based compensation liability.

As of August 31, 2022, a total of 27,424 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 $ 0.2 million as of August 31, 2022 is recorded in share-based compensation liability.

RSU activity under the Stock Plans is set forth below:

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RSUs forfeited

Balances as of May 31, 2022

Balances as of August 31, 2022

Employee Stock Purchase Plan

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 six months ended May 31, 2022, the Company issued 71,207 shares pursuant to the ESPP at a weighted-average price of $ 14.94 per share.

During the nine months ended August 31, 2022, the Company issued 136,304 shares pursuant to the ESPP at a weighted-average price of $ 14.34 per share.

Stock-Based Compensation

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Three Months Ended,

Six Months Ended,

Nine Months Ended,

Research and development

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Total stock-based compensation

As of May 31, 2022, the total compensation cost related to stock-based awards not yet recognized was $ 68.2 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.8 years.

As of August 31, 2022, the total compensation cost related to stock-based awards not yet recognized was $ 85.9 million, which is expected to be amortized on a straight-line basis over the weighted-average remaining vesting period of approximately 2.9 years.

Defined Contribution Plan

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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 $ 0.2 million and $ 0.2 million during the three months ended May 31, 2022 and 2021, respectively, and $ 0.7 million and $ 0.4 million during the six months ended May 31, 2022 and 2021, respectively.

For the three month and six months ended May 31, 2022, the Company did no t record any current income tax expense or provision and for the three month and six months ended May 31, 2021, the Company recorded a current income tax expense of $ 0.1 million and $ 0.2 million, respectively.

The Company has made contributions to the 401(k) Plan and recorded contribution expense of $ 0.1 million and $ 0.1 million during the three months ended August 31, 2022 and 2021, respectively, and $ 0.8 million and $ 0.5 million during the nine months ended August 31, 2022 and 2021, respectively.

For the three and nine months ended August 31, 2022, the Company did no t record any current income tax expense or provision and for the three and nine months ended August 31, 2021, the Company recorded a current income tax benefit of $ 0.1 million and an expense of $ 0.1 million, respectively.

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 May 31, 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.

The Company has generated losses since inception and has established a valuation allowance to offset deferred tax assets as of August 31, 2022 and 2021 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.

In August 2022, the U.S.

Inflation Reduction Act (the Act) was enacted into law.

The Act includes various tax provisions, including an excise tax on stock repurchases, expanded tax credits for clean energy incentives and a corporate alternative minimum tax that generally applies to U.S.

corporations with adjusted financial statement income in excess of $1.0 billion.

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

In January 2019, the California Franchise Tax Board (the 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

Weighted-average number of shares outstanding, basic and diluted ( 1)

Net loss per share, basic and diluted

The shares underlying the pre-funded warrants to purchase an aggregate of 6,814,920 shares of the Company’s common stock have been included in the calculation of the weighted-average number of shares outstanding, basic and diluted, for the three and nine months ended August 31, 2022.

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:

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

Expenses related to the healthcare plan premiums were $ 0.9 million and $ 0.6 million for the three months ended May 31, 2022 and 2021, respectively, and $ 1.9 million and $ 1.1 million for the six months ended May 31, 2022 and 2021, respectively.

As of May 31, 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

Refer to Note 1 for more information regarding the June 2022 ATM Offering.

Expenses related to the healthcare plan premiums were $ 1.0 million and $ 0.7 million for the three months ended August 31, 2022 and 2021, respectively, and $ 2.9 million and $ 1.8 million for the nine months ended August 31, 2022 and 2021, respectively.

As of August 31, 2022 and November 30, 2021, the amount recorded in accrued liabilities and accounts payable in connection with this healthcare plan provider was not material.

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