What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-11 · 85 added, 71 removed, 370 unchanged (30% of the section changed)

3 unchanged sentences

(In thousands, except share and par value data)

SEPTEMBER 30,

Current assets:

15 unchanged sentences

Series A convertible preferred stock, $ 0.0001 par value;

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

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

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

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

Series B convertible preferred stock, $ 0.0001 par value;

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

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

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

liquidation preference of $ 0 and $ 47,385 as of September 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

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

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

Common stock, $ 0.0001 par value;

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

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

24,417,558 and 24,407,722 shares issued and outstanding at September 30, 2021, respectively and 2,053,070 shares issued and outstanding at December 31, 2020

Additional paid-in capital

7 unchanged sentences

(In thousands, except share and per share data)

THREE MONTHS ENDED JUNE 30,

SIX MONTHS ENDED JUNE 30,

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

Operating expenses:

28 unchanged sentences

Balances, June 30, 2021

Vesting of early exercised options

Stock option exercises

Stock-based compensation

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

Balances, September 30, 2021

PREFERRED STOCK

10 unchanged sentences

Balances, June 30, 2020

Stock based compensation

Stock option exercise

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

Balances, September 30, 2020

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

2 unchanged sentences

(In thousands)

SIX MONTHS ENDED

NINE MONTHS ENDED

SEPTEMBER 30,

Cash flows from operating activities

23 unchanged sentences

Supplemental cash flow information:

Vesting of unvested exercised options

Property and equipment in accounts payable

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

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

18 unchanged sentences

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

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.

From Inception through September 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 September 30, 2021, the Company had cash, cash equivalents and short-term investments of $ 157.7 million and an accumulated deficit of $ 74.1 million.

The Company had a net loss of $ 29.2 million and used cash of $ 28.0 million for operating activities for the nine months ended September 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.

10 unchanged sentences

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 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.

As of September 30, 2021, the Company had $ 157.7 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 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.

The accompanying unaudited condensed consolidated financial statements as of September 30, 2021 and for the three and nine months ended September 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 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.

Operating results for the three and nine months ended September 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 June 30, 2021 and December 31, 2020, the Company had cash balances deposited at a major financial institution.

As of September 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.

8 unchanged sentences

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 and six months ended June 30, 2021 and 2020.

The Company did no t recognize any other-than-temporary impairment charges on its short-term investments during the three and nine months ended September 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.

2 unchanged sentences

Long-lived assets are tested for impairment when events and circumstances indicate the assets might be impaired by first comparing the estimated future undiscounted cash flows of the asset or asset group to the carrying value.

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 six months ended June 30, 2021 and 2020.

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

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

Convertible Preferred Stock

26 unchanged sentences

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.

For the nine months ended September 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 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.

No shares related to the convertible preferred stock were included in the diluted net loss per share calculation for the three or nine months ended September 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 nine months ended September 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:

June 30, 2021

June 30, 2020

September 30, 2021

September 30, 2020

Convertible preferred stock (as converted)

6 unchanged sentences

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The Company is in the process of evaluating the impact of the application of this accounting standard update on its condensed consolidated financial statements.

The Company is in the process of evaluating the impact of the application of this ASU on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments .

9 unchanged sentences

In transition, entities may also elect a package of practical expedients that must be applied in its entirety to all leases commencing before the effective date, unless the lease was modified, to not reassess (a) whether a contract is or contains a lease, (b) lease classification or (c) determination of initial direct costs, which effectively allows entities to carryforward accounting conclusions under previous U.S.

This ASU is effective for annual reporting periods beginning January 1, 2022 with early adoption permitted.

The Company plans to adopt the ASU on January 1, 2022 and is currently in the process of evaluating the impact of the application of this accounting standard update on its condensed consolidated financial statements and related disclosures.

This ASU is effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company plans to adopt the ASU on January 1, 2022 and is currently in the process of evaluating the impact of the application of this ASU and expects the recording of a right-of-use asset and lease liability on its condensed consolidated financial statements and related disclosures.

Fair Value Measurements

14 unchanged sentences

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):

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

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

Quoted Prices in

6 unchanged sentences

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):

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

Balance as of January 1, 2021

1 unchanged sentence

Change in fair value

Balance as of June 30, 2021

Balance as of September 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):

7 unchanged sentences

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

JUNE 30, 2021

September 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 June 30, 2021 and 2020, respectively, and $ 20,000 and $ 18,000 for the six months ended June 30, 2021 and 2020, respectively.

Depreciation and amortization expense related to property and equipment was $ 13,000 and $ 9,000 for the three months ended September 30, 2021 and 2020, respectively, and $ 33,000 and $ 27,000 for the nine months ended September 30, 2021 and 2020, respectively.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

JUNE 30, 2021

September 30, 2021

December 31, 2020

Accrued development expenses

Accrued contract manufacturing expenses

Accrued clinical expenses

14 unchanged sentences

Shares Reserved for Future Issuance

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

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

Common stock options outstanding

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

As of September 30, 2021, stock options to purchase 9,785 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 June 30, 2021, such liability for early exercises of stock options was immaterial.

As of September 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.

5 unchanged sentences

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.

As of September 30, 2021, there were 2,061,163 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.

The ESPP became effective immediately prior to the execution of the underwriting agreement in connection with our IPO.

The ESPP became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO.

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

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:

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

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

Weighted- Average

3 unchanged sentences

Outstanding at December 31, 2020

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.

Outstanding at September 30, 2021

Vested at September 30, 2021

Exercisable at September 30, 2021

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

All outstanding options as of September 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:

Six Months Ended

Nine Months Ended

September 30,

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 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.

The weighted average grant date fair value of options granted during the three months ended September 30, 2021 was $ 6.58 .

No options were granted during the three months ended September 30, 2020.

The weighted average grante date fair value of options granted during the nine months ended September 30, 2021 and 2020 was $ 3.59 and $ 2.48 , 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 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.

Unrecognized compensation expense at September 30, 2021 for both employee and non-employee stock-based compensation expense was $ 7.1 million, which is expected to be recognized over a weighted-average vesting term of 2.79 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

Nine Months Ended

September 30,

General and administrative

1 unchanged sentence

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.

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

In April 2021, the performance condition was achieved in connection with the IPO, but neither market condition has yet been satisfied.

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.

During the three and nine months ended September 30, 2021, the Company recorded a credit of $ 0.1 million and expense of $ 0.3 million, respectively, within general and administrative expenses related to the Performance Award.

In September 2021, the Company entered into a transition and separation agreement with an employee and accelerated unvested options as part of the agreement.

The Company accounted for the modification as an improbable-to-probable

modification under ASC 718 and recorded stock-based compensation of $ 0.3 million for the three and nine months ended September 30, 2021.

License Agreement

6 unchanged sentences

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.

For the three and nine months ended September 30, 2021 and 2020, the Company recorded $ 2.0 million and $ 0 , respectively, in 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 made a payment of $ 2.0 million to vTv Therapeutics.

Commitments and Contingencies

5 unchanged sentences

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.

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

The rent expense in the United States for the three months ended September 30, 2021 and 2020 totaled $ 117,000 and $ 46,000 , respectively, and for the nine months ended September 30, 2021 and 2020 totaled $ 233,000 and $ 138,000 , 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 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.

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 and expects to execute a one year lease extension.

The rent expense in the UK for the three months ended September 30, 2021 and 2020 totaled $ 6,000 and $ 7,000 , respectively, and for the nine months ended September 30, 2021 and 2020 totaled $ 20,000 and $ 19,000 , respectively.

Legal Proceedings

The Company is currently not a party to any legal proceedings, nor is the Company aware of any threatened or pending litigations.

The Company is currently not a party to any legal proceedings, nor is the Company aware of any threatened or pending litigation.

However, from time-to-time in the future, the Company could be involved in disputes, including litigation, relating to claims arising out of operations in the normal course of business, which may have a material adverse effect on the Company’s consolidated results of operations or financial position.

The Company maintains a defined contribution 401(k) plan available to eligible employees.

Employee contributions are voluntary and are determined on an individual basis, limited to the maximum amount allowable under federal tax regulations.

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

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