What changed in this filing

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Item 1. Financial Statements

2021-08-11 compared with 2021-05-20 · 116 added, 114 removed, 325 unchanged (41% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Short-term investments

Prepaid expenses and other current assets

2 unchanged sentences

Other non-current assets

Liabilities, convertible preferred stock and stockholders’ deficit

Liabilities, convertible preferred stock and stockholders’ equity (deficit)

Current liabilities:

3 unchanged sentences

Deferred rent

Performance Award (Note 7)

Total liabilities

1 unchanged sentence

Series A convertible preferred stock, $ 0.0001 par value;

24,302,472 shares authorized

at March 31, 2021 and December 31, 2020;

24,302,472 shares issued and

outstanding at March 31, 2021 and December 31, 2020, liquidation preference of

$ 49,127 at March 31, 2021 and December 31, 2020

zero and 24,302,472 shares authorized at June 30, 2021 and December 31, 2020, respectively;

zero and 24,302,472 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively;

liquidation preference of $ 0 and $ 49,127 at June 30, 2021 and December 31, 2020, respectively

Series B convertible preferred stock, $ 0.0001 par value;

46,881,028 shares authorized

at March 31, 2021 and December 31, 2020;

46,881,028 and 23,440,514 shares

issued and outstanding at March 31, 2021 and December 31, 2020, respectively;

liquidation preference of $ 94,770 and $ 47,385 as of March 31, 2021 and

December 31, 2020, respectively

Stockholders’ deficit:

zero and 46,881,028 shares authorized at June 30, 2021 and December 31, 2020, respectively;

zero and 23,440,514 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively;

liquidation preference of $ 0 and $ 47,385 as of June 30, 2021 and December 31, 2020, respectively

Stockholders’ equity (deficit):

Preferred stock, $ 0.0001 par value, 10,000,000 and zero shares authorized at June 30, 2021 and December 31, 2020, respectively;

zero shares issued and outstanding as of June 30, 2021 and December 31, 2020

Common stock, $ 0.0001 par value;

105,000,000 shares authorized at March 31, 2021

and December 31, 2020, 2,148,193 and 2,123,733 shares issued and outstanding at

March 31, 2021, respectively, and 2,053,070 shares issued and outstanding at

December 31, 2020

200,000,000 and 105,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively;

24,305,822 and 24,288,699 shares issued and outstanding at June 30, 2021, respectively and 2,053,070 shares issued and outstanding at December 31, 2020

Additional paid-in capital

Accumulated deficit

Total stockholders’ deficit

Total liabilities, convertible preferred stock and stockholders’ deficit

Accumulated other comprehensive income

Total stockholders’ equity (deficit)

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

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

2 unchanged sentences

(In thousands, except share and per share data)

THREE MONTHS ENDED MARCH 31,

THREE MONTHS ENDED JUNE 30,

SIX MONTHS ENDED JUNE 30,

Operating expenses:

3 unchanged sentences

Loss from operations

Unrealized gain on short-term investments

Unrealized gain (loss) on short-term investments

Comprehensive loss

3 unchanged sentences

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Deficit

Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders’ Equity (Deficit )

(In thousands, except share data)

2 unchanged sentences

STOCKHOLDERS'

EQUITY (DEFICIT)

Balances, December 31, 2020

3 unchanged sentences

Balances, March, 31, 2021

Conversion of convertible preferred stock into common stock upon initial public offering

( 24,302,472 )

( 46,881,028 )

Issuance of common stock in public offering, net of offering costs

Vesting of early exercised options

Stock-based compensation

Change in unrealized holding gains and losses on short-term investments

Balances, June 30, 2021

PREFERRED STOCK

1 unchanged sentence

STOCKHOLDERS'

EQUITY (DEFICIT)

Balances, December 31, 2019

3 unchanged sentences

Balances, March, 31, 2020

Stock based compensation

Change in unrealized holding gains and losses on short-term investments

Balances, June 30, 2020

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

2 unchanged sentences

(In thousands)

THREE MONTHS ENDED

SIX MONTHS ENDED

Cash flows from operating activities

2 unchanged sentences

Amortization/accretion on short-term investments

Changes in the fair value of Performance Award (Note 7)

Stock-based compensation

5 unchanged sentences

Cash flows from investing activities

Purchase of property and equipment

Purchases of property and equipment

Purchase of available-for-sale short-term investments

Proceeds from maturities of available-for-sale short-term investments

2 unchanged sentences

Proceeds from issuance of Series B convertible preferred stock, net of issuance costs

Proceeds from initial public offering, net of offering costs

Proceeds from exercise of stock options

Costs paid in connection with initial public offering

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

2 unchanged sentences

Property and equipment in accounts payable

Unpaid Series B convertible preferred stock issuance costs

Costs incurred in connection with initial public offering included in accrued expenses

19 unchanged sentences

The Company has incurred significant losses and negative cash flows from operations.

From Inception through March 31, 2021, the Company has raised $ 146.7 million primarily from private financings to support its drug development efforts.

As of March 31, 2021, the Company had cash and cash equivalents of $ 91.2 million and an accumulated deficit of $ 52.2 million.

The Company had a net loss of $ 7.2 million and used cash of $ 8.6 million for operating activities for the three months ended March 31, 2021.

From Inception through June 30, 2021, the Company has raised net cash proceeds of approximately $ 230.6 million primarily through equity financings, including the net proceeds from the IPO, to support its drug development efforts.

As of June 30, 2021, the Company had cash, cash equivalents and short-term investments of $ 167.3 million and an accumulated deficit of $ 61.4 million.

The Company had a net loss of $ 16.4 million and used cash of $ 18.3 million for operating activities for the six months ended June 30, 2021.

In accordance with Accounting Standards Codification (ASC) Topic 205-40, Presentation of Financial Statements - Going Concern , management is required to perform a two-step analysis over the Company’s ability to continue as a going concern.

4 unchanged sentences

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

If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs.

Any of these actions could materially harm the Company’s business, results of

operations, and future prospects.

suspend or curtail planned programs.

Any of these actions could materially harm the Company’s business, results of operations, and future prospects.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and disruptions to, and volatility in, financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic.

1 unchanged sentence

In addition, successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to support the Company’s cost structure.

As of March 31, 2021, the Company had $ 91.2 million in cash and cash equivalents.

Management believes that the Company’s cash and cash equivalents as of March 31, 2021 and net proceeds of approximately $ 84.8 million from the Company’s IPO in April 2021 will be sufficient to fund operations for at least one year from date on which this Quarterly Report on Form 10-Q is issued.

As of June 30, 2021, the Company had $ 167.3 million in cash, cash equivalents and short-term investments, which management believes will be sufficient to fund operations for at least one year from date on which this Quarterly Report on Form 10-Q is issued.

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

The accompanying unaudited condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

GAAP) for interim financial information.

4 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial position and results of operations of the Company have been included.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2020, which are included in the Company’s prospectus, dated April 8, 2021, that forms a part of the Company’s Registration Statement on Form S-1 (File.

22 unchanged sentences

The Company considers all highly liquid investments with original maturities of three months or less, when purchased, to be cash equivalents.

As of March 31, 2021 and December 31, 2020, the Company had cash balances deposited at a major financial institution.

As of June 30, 2021 and December 31, 2020, the Company had cash balances deposited at a major financial institution.

Cash balances are subject to minimal credit risk as the balances are with high credit quality financial institutions.

Cash and cash equivalents include cash in readily available checking and money market accounts.

Cash equivalents, which consist of money market accounts and commercial paper, are stated at fair value.

Short-term Investments

2 unchanged sentences

The Company’s investments are classified as available-for-sale securities.

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income in stockholders’ deficit.

Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in accumulated other comprehensive income (loss) in stockholders’ equity (deficit).

Realized gains and losses on sales of investments are included in interest income and are derived using the specific identification method for determining the cost of securities.

1 unchanged sentence

Factors considered in making such a determination include the duration and severity of the impairment, the reason for the decline in value, the potential recovery period and if the entity has the intent to sell the security, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis.

The Company did no t recognize any other-than-temporary impairment charges on its short-term investments during the three months ended March 31, 2021 and 2020.

The Company did no t recognize any other-than-temporary impairment charges on its short-term investments during the three and six months ended June 30, 2021 and 2020.

Money market account balances are included as cash and cash equivalents on the condensed consolidated balance sheets, which are also disclosed in Note 3, Fair Value Measurements.

3 unchanged sentences

If the carrying value exceeds the estimated future undiscounted cash flows, an impairment loss is recognized based on the amount that the carrying value exceeds the fair value of the asset or asset group.

The Company did no t recognize impairment losses during the three months ended March 31, 2021 and 2020.

The Company did no t recognize impairment losses during the six months ended June 30, 2021 and 2020.

Convertible Preferred Stock

2 unchanged sentences

Therefore, convertible preferred stock was classified as temporary equity (mezzanine) on the condensed consolidated balance sheets as events triggering the liquidation preferences are not solely within the Company’s control.

The carrying values of the convertible preferred stock will be adjusted to their liquidation preferences if and when it becomes probable that such a liquidation event will occur.

All convertible preferred stock was converted to common stock in connection with the IPO in April 2021.

Research and Development Costs and Accruals

20 unchanged sentences

The functional currency of Reneo Pharma Ltd is the U.S.

All foreign exchange transactional and remeasurement gains and losses are recognized in the condensed consolidated statement of operations and comprehensive loss.

For the three months ended March 31, 2021 and 2020, total foreign currency gains and losses were not material.

All foreign exchange transactional and remeasurement gains and losses are recognized in the condensed consolidated statements of operations and comprehensive loss.

For the six months ended June 30, 2021 and 2020, total foreign currency gains and losses were not material.

Comprehensive Income or Loss

4 unchanged sentences

For purposes of this calculation, common stock equivalents include the Company’s stock options and convertible preferred stock, which are convertible into shares of the Company’s common stock.

No shares related to the convertible preferred stock were included in the diluted net loss per share calculation for the three months ended March 31, 2021 and 2020 because the inclusion of such shares would have had an anti-dilutive effect.

The shares to be issued upon exercise of all outstanding stock options were also excluded from the diluted net loss per share calculation for the three months ended March 31, 2021 and 2020 because such shares are anti-dilutive.

No shares related to the convertible preferred stock were included in the diluted net loss per share calculation for the three or six months ended June 30, 2021 and 2020 because the inclusion of such shares would have had an anti-dilutive effect.

The shares to be issued upon exercise of all outstanding stock options were also excluded from the diluted net loss per share calculation for the three and six months ended June 30, 2021 and 2020 because such shares are anti-dilutive.

Historical outstanding anti-dilutive securities not included in the diluted net loss per share calculation include the following:

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

Convertible preferred stock (as converted)

33 unchanged sentences

The Company classifies its money market funds as Level 1 using the quoted prices in active markets.

No assets or liabilities were transferred into or out of their classifications during the three months ended March 31, 2021 and 2020.

The recurring fair value measurement of the Company’s assets measured at fair value at March 31, 2021 consisted of the following (in thousands):

In November 2020, the Company hired a new chief executive officer under which the chief executive officer is entitled to receive a special performance bonus in the amount of $ 7.5 million (Performance Award), payable in cash, common stock or a combination of cash and common stock, at the election of the Company, based on achievement of certain conditions as described in more detail in Note 7.

The Company estimated the fair value of the Performance Award using a Monte Carlo simulation, which utilizes level 3 inputs such as volatility, probabilities of success, and other inputs that are not observable in active markets.

The Performance Award is required to be measured at fair value on a recurring basis each reporting period, with changes in the fair value recognized in general and administrative expense in the condensed consolidated statements of operations and comprehensive loss over the derived service period of the award.

No assets or liabilities were transferred into or out of their classifications during the six months ended June 30, 2021 and 2020.

The recurring fair value measurement of the Company’s assets measured at fair value at June 30, 2021 consisted of the following (in thousands):

Quoted Prices in

3 unchanged sentences

Observable Inputs

Cash equivalents

Cash and cash equivalents:

Money market investments

Commercial paper

Performance Award

The following table summarizes changes in fair value measurements of the Performance Award during the six months ended June 30, 2021 (in thousands):

Balance as of January 1, 2021

Expense recorded upon consummation of the IPO

Change in fair value

Balance as of June 30, 2021

The recurring fair value measurement of the Company’s assets measured at fair value at December 31, 2020 consisted of the following (in thousands):

4 unchanged sentences

Observable Inputs

Cash equivalents

Money market investments

1 unchanged sentence

Property and equipment, net, consisted of the following (in thousands):

MARCH 31, 2021

JUNE 30, 2021

DECEMBER 31, 2020

4 unchanged sentences

Total property and equipment, net

Depreciation and amortization expense related to property and equipment was $ 10,000 and $ 9,000 for the three months ended March 31, 2021 and 2020, respectively.

Depreciation and amortization expense related to property and equipment was $ 10,000 and $ 9,000 for the three months ended June 30, 2021 and 2020, respectively, and $ 20,000 and $ 18,000 for the six months ended June 30, 2021 and 2020, respectively.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

MARCH 31, 2021

JUNE 30, 2021

DECEMBER 31, 2020

4 unchanged sentences

Total other accrued expenses

Convertible Preferred Stock and Stockholders’ Deficit

Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Series A Convertible Preferred Stock

3 unchanged sentences

In December 2020, the Company and certain investors entered into a Series B preferred stock purchase agreement, whereby the Company issued 23,440,514 shares of Series B convertible preferred stock at $ 2.0215 per share for total gross proceeds of approximately $ 47.4 million before deducting offering costs of $ 0.3 million, which constituted the closing of the first tranche of the Series B convertible preferred stock.

In connection with the closing of the first tranche of Series B convertible preferred stock in December 2020, the Company issued rights to the purchasers for the purchase

of an additional 23,440,514 shares of Series B convertible preferred stock under the same terms and conditions upon the board of directors’ determination of either (i) that the cash balance of the Company is below $ 10 million, or (ii) approving the Company’s initial public offering of shares of its common stock pursuant to a registration statement under the Securities Act (Series B Tranche Right).

In connection with the closing of the first tranche of Series B convertible preferred stock in December 2020, the Company issued rights to the purchasers for the purchase of an additional 23,440,514 shares of Series B convertible preferred stock under the same terms and conditions upon the board of directors’ determination of either (i) that the cash balance of the Company is below $ 10 million, or (ii) approving the Company’s initial public offering of shares of its common stock pursuant to a registration statement under the Securities Act (Series B Tranche Right).

The Company evaluated the Series B Tranche Right and concluded that it was not a free-standing instrument that met the definition of a derivative that required separate accounting.

2 unchanged sentences

In connection with the IPO in April 2021, all outstanding shares of Series B convertible preferred stock were converted into 10,476,672 shares of common stock.

The following are key features of the convertible preferred stock:

Voting Rights

Each holder of shares of the Series A and Series B convertible preferred stock is entitled to the number of votes equal to the number of shares of common stock into which such shares of Series A and Series B convertible preferred stock could then be converted.

The holders of Series A and Series B convertible preferred stock are entitled to a non-cumulative dividend of 8 % of the original issue price when, as and if declared by the board of directors, only out of funds that are legally available.

Liquidation Preferences

Holders of the Series A and Series B convertible preferred stock are entitled to receive liquidation preferences equal to the greater of (a) original issue price plus all declared and unpaid dividends or (b) such amount per share as would have been payable had all shares of such series of preferred stock been converted into common stock immediately prior to such liquidation, dissolution, winding up or deemed liquidation event.

Only after payment of the full liquidation preference of Series A and Series B convertible preferred stock, the remaining assets of the Company legally available for distribution shall be distributed ratably to the holders of the common stock.

Conversion Rights

At the option of the holder, shares of Series A and Series B convertible preferred shares can be converted into fully paid and non-assessable shares of the Company’s common stock.

The initial conversion ratio is one -for-one, subject to customary anti-dilution provisions.

Upon either (a) the closing of the sale of shares of common stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act resulting in at least $ 75,000,000 of gross proceeds to the Company (Qualified Initial Public Offering) or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of a majority of the outstanding shares of Series A and Series B convertible preferred stock at the time of such vote or consent, voting together as a single class on an as-converted basis, all outstanding shares of Series A and Series B convertible preferred stock shall automatically be converted into shares of common stock, at the applicable ratio at the time of conversion.

The Series A and Series B convertible preferred stock are not redeemable.

However, the Series A and Series B convertible preferred stock include terms such that there are deemed liquidation events that can trigger redemption of the

convertible preferred stock that are outside the control of the Company.

Accordingly, the Series A and Series B convertible preferred stock are classified outside of permanent equity on the condensed consolidated balance sheets.

Shares Reserved for Future Issuance

As of March 31, 2021, the Company had reserved shares of its common stock for future issuance as follows:

Series A convertible preferred stock outstanding

Series B convertible preferred stock outstanding

As of June 30, 2021, the Company had reserved shares of its common stock for future issuance as follows:

Common stock options outstanding

Available for future grants under the 2021 Equity Incentive Plan

Available for future grants under the 2021 Employee Stock Purchase Plan

Total shares of common stock reserved

3 unchanged sentences

In March 2021, the Company’s board of directors increased the option pool by 234,158 shares of common stock.

As of March 31, 2021, As of March 31, 2021, the 2014 Plan has a total reserve of 3,231,242 shares.

As of March 31, 2021, there were 117,602 shares available for future grant under the 2014 Plan.

The options granted under the 2014 Plan will expire no more than ten years from the date of grant.

The exercise price of each option is determined by the Company’s board of directors, although generally options have an exercise price equal to the estimated fair market value of the Company’s stock on the date of the option grant.

In the case of incentive stock options, the exercise price is required to be no less than 100 % of the estimated fair market value of the Company’s common stock at the time the option is granted.

For holders of more than 10 % of the Company’s total combined voting power of all classes of stock, incentive stock options may not be granted at less than 110 % of the fair market value of the Company’s common stock at the date of grant and for a term not to exceed five years .

Most option grants generally vest 25 % on the first anniversary of the original vesting commencement date, with the balance vesting monthly over the remaining three years .

Under the 2014 Plan, certain employees may be granted the ability to early exercise their options.

2 unchanged sentences

The shares purchased by the employees and non-employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding until those shares vest.

As of March 31, 2021, stock options to purchase 24,460 shares of common stock have been early exercised and were subject to vesting.

As of June 30, 2021, stock options to purchase 17,123 shares of common stock have been early exercised and were subject to vesting.

Cash received in exchange for early exercises of stock options has been recorded as a liability for the early exercise of stock options and will be transferred into common stock and additional paid-in capital as the shares vest.

As of March 31, 2021, such liability for early exercises of stock options was immaterial.

As of June 30, 2021, such liability for early exercises of stock options was immaterial.

In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (the 2021 Plan) and the Company’s stockholders approved the 2021 Plan in April 2021.

2 unchanged sentences

A total of 2,187,524 new shares of common stock were approved to be initially reserved for issuance under the 2021 Plan.

In addition, the number of shares of common stock reserved for issuance under the 2021 Plan includes the shares reserved and available for issuance pursuant to the grant of new awards under the 2014 Plan as of the effectiveness of the 2021 Plan and will include any shares subject to stock awards granted under the 2014 Plan that, after the date the 2021 Plan became effective, are forfeited or otherwise become available under the 2014 Plan.

number of shares of common stock reserved for issuance under the 2021 Plan will also automatically increase on January 1 of each calendar year, beginning on January 1, 2022 and continuing through and including January 1, 2031, by 5 % of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year;

In addition, the number of shares of common stock reserved for issuance under the 2021 Plan includes 117,639 shares (as adjusted for reverse stock split) reserved and available for issuance pursuant to the grant of new awards under the 2014 Plan as of the effectiveness of the 2021 Plan and will include any shares subject to stock awards granted under the 2014 Plan that, after the date the 2021 Plan became effective, are forfeited or otherwise become available under the 2014 Plan.

The number of shares of common stock reserved for issuance under the 2021 Plan will also automatically increase on January 1 of each calendar year, beginning on January 1, 2022 and continuing through and including January 1, 2031, by 5 % of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year;

provided, however, that the Company’s board of directors may act prior to January 1 st of a given year to provide that the increase for such year will be a lesser number of shares of common stock.

As of June 30, 2021, there were 2,221,163 shares available for future grant under the 2021 Plan.

In March 2021, the Company’s board of directors adopted the Company’s 2021 Employee Stock Purchase Plan (ESPP) and the Company’s stockholders approved the ESPP in April 2021.

1 unchanged sentence

A total of 243,058 shares of common stock were approved to be initially reserved for issuance under the ESPP.

A summary of the Company’s stock option activity and related information during the three months ended March 31, 2021 is as follows:

No shares have been issued under the ESPP through June 30, 2021.

A summary of the Company’s stock option activity and related information during the six months ended June 30, 2021 is as follows:

Weighted- Average

3 unchanged sentences

Outstanding at December 31, 2020

Forfeited/cancelled

Outstanding at March 31, 2021

Vested at March 31, 2021

Exercisable at March 31, 2021

Intrinsic value as of March 31, 2021 was based on the estimated common stock fair value of $ 6.36 per share.

Options exercisable at March 31, 2021 include vested options and options eligible for early exercise.

All outstanding options as of March 31, 2021 are expected to vest.

Outstanding at June 30, 2021

Vested at June 30, 2021

Exercisable at June 30, 2021

Options exercisable at June 30, 2021 include vested options and options eligible for early exercise.

All outstanding options as of June 30, 2021 are expected to vest.

The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants were as follows:

Three Months Ended

Six Months Ended

Risk-free interest rate

2 unchanged sentences

Expected dividend yield

The weighted average grant date fair value of options granted during the three months ended March 2021 and 2020 was $ 3.15 and $ 2.40 , respectively.

The weighted average grant date fair value of options granted during the three months ended June 30, 2021 and 2020 was $ 10.89 and $ 2.65 , and $ 3.42 and $ 2.51 during the six months ended June 30, 2021 and 2020, respectively.

Fair value of common stock.

13 unchanged sentences

The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Unrecognized compensation expense at March 31, 2021 for both employee and non-employee stock-based compensation expense was $ 7.2 million, which is expected to be recognized over a weighted-average vesting term of 3.3 years.

Unrecognized compensation expense at June 30, 2021 for both employee and non-employee stock-based compensation expense was $ 7.3 million, which is expected to be recognized over a weighted-average vesting term of 2.9 years.

Non-cash stock-based compensation expense recorded in the condensed consolidated statements of operations and comprehensive loss is as follows (in thousands):

Three Months Ended

Six Months Ended

General and administrative

Research and development

In November 2020, the Company hired a new chief executive officer under which the chief executive officer is entitled to receive a special performance bonus in the amount of $ 7.5 million, payable in cash, common stock or a combination of cash and common stock, in the event that (i) the Company’s market value exceeds $ 750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $ 750 million.

The Company has determined that the bonus award is subject to ASC Topic 718 , Compensation – Stock Compensation and includes both market and performance conditions.

Because the performance conditions are not considered to be probable until the completion of the Company’s IPO or change in control, no expense was recorded on the award for the three months ended March 31, 2021.

In November 2020, the Company hired a new chief executive officer under which the chief executive officer is entitled to receive a Performance Award in the amount of $ 7.5 million, payable in cash, common stock or a combination of cash and common stock, at the election of the Company, in the event that (i) the Company’s market value exceeds $ 750 million utilizing the volume-weighted average of the closing sale price of its common stock on the Nasdaq Stock Market or other principal exchange for each of the 30 trading days immediately prior to the measurement date, or (ii) the fair market value of the net proceeds available for distribution to the Company’s stockholders in connection with a change in control as defined in the Company’s severance benefit plan, as determined in good faith by its board of directors, exceeds $ 750 million.

The Company has determined that the Performance Award is a liability classified award subject to ASC Topic 718 , Compensation – Stock Compensation and includes both market and performance conditions.

In April 2021, the performance condition was achieved in connection with the IPO.

Accordingly, the Company expects to start recognizing compensation expense related to the award granted to the chief executive officer beginning in April 2021.

The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 3), which is recognized as compensation cost over the derived service period.

During the three and six months ended June 30, 2021, the Company recorded $ 0.4 million in stock based compensation related to the Performance Award.

License Agreement

certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans.

In December 2017, the Company entered into a License Agreement with vTv Therapeutics LLC (vTv Therapeutics) (the vTv License Agreement), under which the Company obtained an exclusive, worldwide, sublicensable license under certain vTv Therapeutics intellectual property to develop, manufacture and commercialize PPARδ agonists and products containing such PPARδ agonists, including REN001, for any therapeutic, prophylactic or diagnostic application in humans.

Under the terms of the vTv License Agreement, the Company paid vTv Therapeutics an initial upfront license fee payment of $ 3.0 million and issued to vTv Therapeutics 309,576 shares of its common stock.

3 unchanged sentences

In addition, the Company is obligated to make royalty payments to vTv Therapeutics at mid-single digit to low teen percentage royalty rates, based on tiers of annual net sales of licensed products, subject to certain customary reductions.

In accordance with the terms of the vTv License Agreement, the Company issued a total of an additional 266,867 shares of its common stock to vTv Therapeutics in 2018 and 2019.

The Company accounted for the additional shares of common stock issued to vTv Therapeutics when the shares were obligated to be issued to vTv Therapeutics.

The Company is no longer obligated to issue any further shares of common stock under the vTv License Agreement.

For the three months ended March 31, 2021 and 2020, the Company did no t record any research and development expenses in connection with the vTv License Agreement.

The Company accrues for the contingent payments under the vTv License Agreement when the amounts are probable or when the contingency is resolved and amounts are due and payable .

For the three and six months ended June 30, 2021 and 2020, the Company did no t record any research and development expenses in connection with the vTv License Agreement.

In July 2021, a milestone under the vTv License Agreement was achieved, and the Company became obligated to make a payment of $ 2.0 million to vTv Therapeutics.

Commitments and Contingencies

Operating Leases

In June 2018, the Company leased certain office space for its U.S.

headquarters under a non-cancelable operating lease with terms through July 2023, with an option to extend the terms for the entire premises for a period of five years .

The rent expense in the United States for the three months ended March 31, 2021 and 2020 totaled $ 46,000 for both periods.

United States

In June 2018, the Company leased certain office space in San Diego, California under a non-cancelable operating lease with terms through July 2023, with an option to extend the terms for the entire premises for a period of five years .

In June 2021, the Company leased 5,137 square feet of office space for its U.S.

headquarters in Irvine, California under a non-cancelable operating lease with terms through November 2026.

The lease provides for a 3 % annual rent increase, five months of abated rent and a tenant improvement allowance of $ 6.50 per square foot.

The total minimum lease payments over the life of the lease is $ 1.6 million.

The rent expense in the United States for the three months ended June 30, 2021 and 2020 totaled $ 70,000 and 46,000 , respectively, and for the six months ended June 30, 2021 and 2020 totaled $ 116,000 and $ 92,000 , respectively.

United Kingdom

In December 2018, the Company leased certain office space for its UK subsidiary under a non-cancelable operating lease with lease terms through November 2021.

The rent expense in the UK for the three months ended March 31, 2021 and 2020 totaled $ 7,000 for both periods.

The rent expense in the UK for the three months ended June 30, 2021 and 2020 totaled $ 7,000 and $ 6,000 , respectively, and for the six months ended June 30, 2021 and 2020 totaled $ 14,000 and $ 12,000 , respectively.

Legal Proceedings

4 unchanged sentences

Matching contributions to the 401(k) plan are made for certain eligible employees to meet non- discrimination provisions of the plan.

During the three months ended March 31, 2021 and December 31, 2020, the expense recorded by the Company was immaterial.

During the three and six months ended June 30, 2021 and 2020, the expense recorded by the Company was immaterial.

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