What changed in this filing

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Item 1. Financial Statements

2022-05-10 compared with 2021-11-12 · 205 added, 303 removed, 152 unchanged (77% of the section changed)

1 unchanged sentence

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Balance Sheets

Consolidated Balance Sheets

(In thousands, except share and par value data)

SEPTEMBER 30,

As of March 31, 2022

As of December 31, 2021

Current assets:

4 unchanged sentences

Property and equipment, net

Right-of-use assets

Other non-current assets

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

Liabilities and stockholders’ equity

Current liabilities:

1 unchanged sentence

Accrued expenses

Operating lease liabilities, current portion

Total current liabilities

Deferred rent

Performance award (Note 7)

Operating lease liabilities, less current portion

Other long-term liabilities

Performance award

Total liabilities

Commitments and contingencies (Note 9)

Series A convertible preferred stock, $ 0.0001 par value;

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 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 September 30, 2021 and December 31, 2020, respectively;

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

Commitments and contingencies

Stockholders’ equity:

Common stock, $ 0.0001 par value;

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

200,000,000 shares authorized at March 31, 2022 and December 31, 2021;

24,458,550 shares issued and outstanding at March 31, 2022;

and 24,457,838 and 24,455,390 shares issued and outstanding at December 31, 2021, respectively

Additional paid-in capital

1 unchanged sentence

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.

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

THREE MONTHS ENDED SEPTEMBER 30,

NINE MONTHS ENDED SEPTEMBER 30,

Three Months Ended March 31,

Operating expenses:

3 unchanged sentences

Loss from operations

Unrealized gain (loss) on short-term investments

Other (loss) income

Unrealized gain on short-term investments

Comprehensive loss

1 unchanged sentence

Weighted-average shares used in computing net loss per share, basic and diluted

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

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

RENEO PHARMACEUTICALS, INC.

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

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

(In thousands, except share data)

Three Months Ended March 31, 2022

Preferred Stock

1 unchanged sentence

Stockholders'

EQUITY (DEFICIT)

Balances, December 31, 2021

Issuance of series B convertible preferred stock, net of issuance costs of $ 29

Stock based compensation

Stock option exercise

Stock option exercise and common shares vested

Other comprehensive income

Balances, March 31, 2022

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

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

Three Months Ended March 31, 2021

Preferred Stock

1 unchanged sentence

Stockholders'

EQUITY (DEFICIT)

Balances, December 31, 2020

Issuance of series B convertible preferred stock, net of issuance costs of $ 29

Stock based compensation

Stock option exercise

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

Balances, March 31, 2021

Stock based compensation

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

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.

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

RENEO PHARMACEUTICALS, INC.

Condensed Consolidated Statements of Cash Flows

Consolidated Statements of Cash Flows

(In thousands)

NINE MONTHS ENDED

SEPTEMBER 30,

Three Months Ended

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Stock-based compensation

Depreciation and amortization

Amortization/accretion on short-term investments

Changes in the fair value of performance award (Note 7)

Stock-based compensation

Changes in the fair value of performance award

Non-cash lease expense

Changes in operating assets and liabilities:

Accounts payable, accrued expenses and other

Accounts payable and accrued expenses

Prepaid expenses and other assets

Deferred rent

Operating lease liabilities

Other current and long-term liabilities

Net cash used in operating activities

3 unchanged sentences

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

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

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

Proceeds from issuance of common stock pursuant to equity award plans

Costs paid in connection with initial public offering

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental cash flow information:

Vesting of unvested exercised options

Noncash operating activities:

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

Noncash investing and financing activities:

Property and equipment in accounts payable

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

Unpaid Series B convertible preferred stock issuance costs

Accrued deferred initial public offering costs

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

RENEO PHARMACEUTICALS, INC.

Notes to Condensed Consolidated Financial Statements

Notes to Consolidated Financial Statements

Organization and Business

Reneo Pharmaceuticals, Inc.

(Reneo or the Company) was incorporated in the state of Delaware on September 22, 2014 (Inception).

The Company is a clinical-stage pharmaceutical company focused on the development of therapies for patients with rare genetic mitochondrial diseases.

(Reneo or the Company) commenced operations on September 22, 2014 as a clinical-stage pharmaceutical company focused on the development of therapies for patients with rare genetic mitochondrial diseases.

In December 2017, the Company in-licensed REN001, a novel oral peroxisome proliferator-activated receptor (PPAR) agonist.

3 unchanged sentences

The reverse stock split resulted in an adjustment to the Series A and Series B convertible preferred stock conversion prices to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion.

The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

The accompanying consolidated financial statements and notes to the consolidated financial statements give retroactive effect to the reverse stock split for all periods presented.

Initial Public Offering

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Following the IPO, there were no shares of preferred stock outstanding.

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

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.

Management must first evaluate whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for a period of 12 months from the date the condensed consolidated financial statements are issued.

If management concludes that substantial doubt is raised, management is also required to consider whether its plans alleviate that doubt.

Since inception in 2014, the Company has incurred significant losses and negative cash flows from operations.

As of March 31, 2022, the Company had cash, cash equivalents and short-term investments of $ 138.7 million and an accumulated deficit of $ 97.8 million.

Due to the Company’s continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future and may never become profitable.

As a result, the Company will need to raise capital through public or private equity or debt financings, government or other third-party funding, collaborations, strategic alliances and licensing arrangements or a combination of these.

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.

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.

The Company may not be able to secure additional financing in a timely manner or on favorable terms, if at all.

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 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 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.

Accordingly, they do not include all of the information and footnotes required by U.S.

GAAP for annual financial statements.

The condensed consolidated balance sheet at December 31, 2020 has been derived from the audited financial statements at December 31, 2020, but does not include all of the information and footnotes required by U.S.

GAAP for complete financial statements.

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 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.

333-254534) as filed with the Securities and Exchange Commission (SEC) pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the Securities Act), on April 9, 2021.

The condensed consolidated financial statements include the accounts of Reneo Pharmaceuticals, Inc.

and its wholly owned subsidiary, Reneo Pharma Ltd located in the United Kingdom (UK).

All intercompany balances and transactions among the consolidated entities have been eliminated in consolidation.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure in the Company’s condensed consolidated financial statements and accompanying notes.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

Risks and Uncertainties

Any product candidates developed by the Company will require approvals from the U.S.

Food and Drug Administration (FDA) or foreign regulatory agencies prior to commercial sales.

There can be no assurance that the Company’s current product candidates will meet desired efficacy and safety requirements to obtain the necessary approvals.

If approval is denied or delayed, it may have a material adverse impact on the Company’s business and its financial statements.

The Company is subject to a number of risks similar to other clinical-stage pharmaceutical companies including, but not limited to, dependency on the clinical and commercial success of the Company’s product candidate, REN001, ability to obtain regulatory approval of REN001, the need for substantial additional financing to achieve its goals, uncertainty of

broad adoption of its approved products, if any, by physicians, consumers and third-party payors, significant competition and untested manufacturing capabilities, and dependence on key individuals and sole source suppliers.

The Company’s business has been and could continue to be adversely affected by the evolving COVID-19 pandemic.

For example, the COVID-19 pandemic has resulted in and could result in delays to the Company’s clinical trials for numerous reasons, including additional delays or difficulties in enrolling patients, diversion of healthcare resources away from the conduct of clinical trials, interruption or delays in the operations of the FDA or other regulatory authorities, and delays in clinical sites receiving the supplies and materials to conduct the Company’s clinical trials.

At this time, the extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted.

Segment Reporting

The Company operates and manages its business as one operating segment, which is the business of developing novel therapies for rare genetic mitochondrial diseases.

The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance.

Cash and Cash Equivalents

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

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.

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

Short-term Investments

The Company accounts for short-term investments in accordance with ASC Topic 320, Investments – Debt and Equity Securities .

Management determines the appropriate classification of its investments at the time of purchase and reevaluates such determinations at each balance sheet date.

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 (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.

The Company recognizes an impairment charge when a decline in the fair value of its investments in debt securities below the amortized cost basis of such securities is judged to be other-than-temporarily impaired.

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 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.

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment.

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

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

Convertible Preferred Stock

The Company records convertible preferred stock at fair value on the dates of issuance, net of issuance costs.

Prior to the IPO, upon the occurrence of certain potential events that would have been outside the Company’s control, including a “deemed liquidation event” such as a merger, acquisition and sale of all or substantially all of the Company’s assets, holders of the convertible preferred stock could cause redemption for cash.

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.

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

Research and Development Costs and Accruals

All research and development costs are expensed as incurred.

Research and development costs consist primarily of costs associated with manufacturing drug substance and drug product, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services), license fees, salaries and employee benefits.

The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites and others.

Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones.

Payments made in advance of or after the performance are reflected in the condensed consolidated balance sheets as prepaid expenses or accrued liabilities, respectively.

Up-front costs, such as costs associated with setting up clinical trial sites for participation in the trials, are expensed immediately once the set-up has occurred as research and development expenses.

The Company accrues the costs incurred under agreements with these third parties based on estimates of actual work completed in accordance with the respective agreements.

If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impact research and development expenses.

The Company expenses amounts paid to acquire licenses associated with products under development when the ultimate recoverability of the amounts paid is uncertain, and the technology has no alternative future use when acquired.

Acquisitions of technology licenses are charged to expense or capitalized based upon management’s assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use.

The Company has determined that technological feasibility for its product candidate would be reached when the requisite regulatory approvals are obtained to make the product available for sale.

Contingent milestone payments are recognized when the related contingency is resolved, and the amounts are paid or become payable.

These amounts are expensed to research and development if there is no alternative future use associated with the license or capitalized as an intangible asset if alternative future use of the license exists.

Costs related to filing and pursuing patent applications are expensed as incurred, as the recoverability of such expenditures is uncertain.

These costs are included in general and administrative expenses.

Stock-Based Compensation

Compensation expense related to stock options granted to employees and non-employees is measured at the grant date based on the estimated fair value of the award and is recognized on a straight-line basis over the requisite service period.

Forfeitures are recognized as a reduction of stock-based compensation expense as they occur.

The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model.

Foreign Currency Transactions

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 statements of operations and comprehensive loss.

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

Comprehensive Income or Loss

Comprehensive income or loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources.

Net Loss Per Share

The Company computes basic loss per share by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents.

Diluted net loss per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive.

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 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:

September 30, 2021

September 30, 2020

Convertible preferred stock (as converted)

Common stock options

The Company has prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission.

Certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in

the United States of America (GAAP) have been condensed or omitted, although the Company believes that the disclosures made are adequate to make the information not misleading.

The Company recommends that the unaudited consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s latest Annual Report on Form 10-K.

In the opinion of management, all adjustments, including normal recurring adjustments, considered necessary for a fair statement of the financial statements, have been included in the accompanying unaudited financial statements.

Interim results are not necessarily indicative of results that may be expected for any other interim period or for an entire year.

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries as of March 31, 2021;

all intercompany transactions and balances have been eliminated.

Summary of Significant Accounting Policies

The significant accounting policies used in the preparation of these consolidated financial statements for the three months ended March 31,2022 are consistent with those discussed in Note 2 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

New Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2019-12, Simplifying the Accounting for Income Taxes .

The standard simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

The new guidance will be effective for the Company as of January 1, 2022.

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02, Leases (ASC 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheets for those leases classified as operating leases under previous GAAP.

ASU 2016-02 requires a lessee to recognize a liability for lease payments (lease liability) and a right-of-use (ROU)assets (representing its right to use the underlying asset for the lease term) on the balance sheet.

In July 2018, the FASB issued ASU 2018-11, Leases (ASC 842):

Targeted Improvements , which provides entities an optional transition method to apply the new guidance as of the adoption date, rather than as of the earliest period presented.

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 GAAP.

The Company early adopted this standard on January 1, 2022, using the optional transitional method and elected the package of practical expedients in transition for leases that commenced prior to January 1, 2022.

As a result of implementing ASC 842, the Company recognized operating lease ROU assets of $ 1.5 million and lease liabilities of $ 1.7 million on January 1, 2022, with no impact on its beginning retained earnings, consolidated statements of operations and comprehensive loss, or cash flows.

See Note 6, Leases, for further details.

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes .

The standard simplifies the accounting for income taxes, eliminates certain exceptions within Accounting Standards Codification (ASC) 740, Income Taxes , and clarifies certain aspects of the current guidance to promote consistency among reporting entities.

The new guidance was effective for the Company as of January 1, 2022.

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 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 .

The Company adopted this standard on January 1, 2022.

Adoption of this standard had no material impact on the Company’s consolidated financial position, results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

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

The standard amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income.

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This new guidance is effective for the Company as of January 1, 2023.

The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its condensed consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheets for those leases classified as operating leases under previous GAAP.

ASU 2016-02 requires a lessee to recognize a liability for lease payments (the lease liability) and a right-of-use asset (representing its right to use the underlying asset for the lease term) on the balance sheet.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements , which provides entities an optional transition method to apply the new guidance as of the adoption date, rather than as of the earliest period presented.

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.

The Company is currently evaluating the impact of this ASU and does not expect that adoption of this standard will have a material impact on its consolidated financial statements and related disclosures.

Net Loss Per Share

Diluted net loss per share assumes the conversion, exercise or issuance of all potential common stock equivalents, unless the effect of inclusion would be anti-dilutive.

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.

As of March 31, 2022, no shares of convertible preferred stock were outstanding.

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 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 and restricted stock units were also excluded from the diluted net loss per share calculation for the three months ended March 31, 2022 and 2021 because such shares are anti-dilutive.

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

As of March 31,

Convertible preferred stock (as converted)

Common stock options outstanding

Unvested restricted stock units

Fair Value Measurements

ASC Topic 820, Fair Value Measurement , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).

ASC 820, Fair Value Measurement , establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs).

Observable inputs are inputs that market participants would use in pricing an asset or liability based on market data obtained from sources independent of the Company.

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ASC 820 identifies fair value as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

As a basis for considering market

participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:

Level 1 – Observable inputs such as quoted prices in active markets for identical assets or liabilities.

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The Company’s financial assets are subject to fair value measurements on a recurring basis.

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

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 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):

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

Commercial paper is valued using Level 2 significant other observable inputs.

The Company considers all highly liquid investments purchased with a remaining maturity of three months or less to be cash equivalents.

The fair value of the Company’s investments in certain money market funds is their face value and such instruments are classified as Level 1 and are included in cash and cash equivalents on the consolidated balance sheets.

In November 2020, in connection with the CEO’s employment agreement he is entitled to receive a special performance award 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 8.

The Company estimated the fair value of the Performance Award using a Monte Carlo simulation, which incorporates the stock price at the date of the valuation and 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 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 three months ended March 31, 2022.

The recurring fair value measurement of the Company’s assets and liabilities measured at fair value at March 31, 2022 consisted of the following (in thousands):

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Money market investments

Short-term Investments:

Commercial paper

Performance award

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

The following table summarizes changes in fair value measurements of the Performance Award during the three months ended March 31, 2022 (in thousands):

Balance as of January 1, 2022

Expense recorded upon consummation of the IPO

Change in fair value

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):

Balance as of March 31, 2022

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

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Observable Inputs

Cash and cash equivalents:

Money market investments

Property and Equipment, Net

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

September 30, 2021

December 31, 2020

Computer, software and office equipment

Leasehold improvements

Total property and equipment, gross

accumulated depreciation and amortization

Total property and equipment, net

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.

Short-term Investments:

Commercial paper

Performance award

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

September 30, 2021

December 31, 2020

Accrued contract manufacturing expenses

Accrued clinical expenses

As of March 31, 2022

As of December 31, 2021

Accrued clinical and regulatory

Accrued contract manufacturing cost

Accrued compensation

Other accrued expenses

Total other accrued expenses

Convertible Preferred Stock and Stockholders’ Equity (Deficit)

Accrued research and development-other

Total accrued expenses

The Company’s headquarters are located in Irvine, California, where it leases office space.

The Company leases additional office space located in San Diego, California, and in Kent, United Kingdom.

The lease terms for the Irvine, San Diego, and Kent offices extend through November 30, 2026, July 31, 2023, and December 20, 2022, respectively.

The Company adopted ASU 2016-02 on January 1, 2022, which requires it to recognize a liability for lease payments and a ROU asset on the balance sheet.

The Company elected the package of practical expedients permitted within the standard, which allows an entity to forego reassessing (i) whether a contract contains a lease, (ii) classification of leases, and (iii) whether capitalized costs associated with a lease meet the definition of initial direct costs.

Also, the Company elected the expedient allowing an entity to use hindsight to determine the lease term and impairment of ROU assets and the expedient to allow the Company to not have to separate lease and non-lease components.

At March 31, 2022, the weighted average incremental borrowing rate and the weighted average remaining lease term for the operating leases held by the Company were 5 % and 4.1 years, respectively.

During the three months

ended March 31, 2022, operating lease expenses recognized and cash paid for amounts included for the measurement of lease liabilities were immaterial.

The Company has elected to net the amortization of the ROU assets and the reduction of the lease liabilities principal in other current and long-term liabilities in the consolidated statements of cash flows.

Maturities of lease liabilities by fiscal year for our operating leases are as follows:

As of March 31, 2022

2022 (remaining nine months)

Total lease payments

Imputed interest

Present value of lease liabilities

Convertible Preferred Stock and Stockholders’ Equity

Series A Convertible Preferred Stock

In December 2017, January 2018, and May 2019, the Company issued a total of 24,302,472 shares of Series A convertible preferred stock to certain investors at $ 2.16 per share.

As of March 31, 2022, there were no shares of Series A convertible preferred stock outstanding.

In connection with the IPO (Note 1) in April 2021, all outstanding shares of Series A convertible preferred stock were converted into 5,430,957 shares of common stock.

Series B Convertible Preferred Stock

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).

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.

In March 2021, the Company completed the Series B Tranche Right at $ 2.0215 per share.

A total of 23,440,514 shares of Series B convertible preferred stock were issued for aggregate net proceeds of approximately $ 47.4 million.

As of March 31, 2022, there were no shares of Series B convertible preferred stock outstanding.

In March 2021, the Company completed milestone closing of it’s the Series B convertible preferred stock financing and sold a total of 23,440,514 shares of Series B convertible preferred stock, at $ 2.0215 per share for aggregate net proceeds of approximately $ 47.4 million.

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.

Stock-Based Compensation

In March 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (2021 Plan), which is the successor to the 2014 Equity Incentive Plan (2014 Plan).

As of the effectiveness of the 2021 Plan, awards granted under the 2014 Plan that are forfeited or otherwise become available under the 2014 Plan will be included and available for issuance under the 2021 Plan.

Under the 2021 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and other awards to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s affiliates.

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

The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance.

The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination.

The shares purchased by the 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, 2022, there were no shares subject to stock options that have been early exercised.

Shares Reserved for Future Issuance

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

As of March 31, 2022, the Company had reserved shares of its common stock for future issuance as follows:

Common stock options outstanding

Unvested restricted stock units

Available for future grants under the 2021 Equity Incentive Plan

Available for future grants under the 2021 Employee Stock Purchase Plan

Available for future grants outside of the 2021 Plan as inducement award

Total shares of common stock reserved

Stock-Based Compensation

In 2014, the Company adopted the 2014 Equity Incentive Plan (the 2014 Plan).

The 2014 Plan provides for the issuance of incentive stock options to employees of the Company and non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights and other stock awards to directors, employees and consultants of the Company.

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

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

The shares of common stock issued pursuant to the early exercise of unvested stock options are restricted and continue to vest over the requisite service period after issuance.

The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination.

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 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 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.

The 2021 Plan became effective immediately prior to the execution of the underwriting agreement in connection with the IPO.

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 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 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 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 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

Stock Options

A summary of the Company’s stock option activity and related information during the three months ended March 31, 2022 is as follows:

Average Exercise

Weighted-Average

Contractual Term

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Outstanding at December 31, 2021

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.

Forfeited/Expired

Outstanding at March 31, 2022

Vested at March 31, 2022

Exercisable at March 31, 2022

Options exercisable at March 31, 2022 include vested options and options eligible for early exercise.

All outstanding options as of March 31, 2022 are expected to vest.

Unrecognized stock-based expense at March 31, 2022 was $ 10.4 million, which is expected to be recognized over a weighted-average vesting term of 2.9 years.

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:

Nine Months Ended

September 30,

Three Months Ended March 31,

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 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.

For periods prior to the IPO, the fair value of the shares of common stock underlying the stock options has been determined by the Company’s board of directors, with input from management.

Historically, since there has been no public market for the Company’s common stock, the Company’s board of directors determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant.

Risk-free interest rate.

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Expected volatility.

The expected volatility assumption is based on the volatilities of a peer group of similar companies whose share prices are publicly available.

Since the Company recently completed its IPO and does not have sufficient trading history for its common stock the expected volatility assumption is based on volatilities of a peer group of similar companies whose share prices are publicly available.

The peer group was developed based on companies in the biotechnology industry.

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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 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

Nine Months Ended

September 30,

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 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 (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.

Fair value of common stock.

For periods prior to the IPO, since there had been no public market for the Company’s common stock, the Company’s board of directors, with input from management, determined the fair value of the Company’s common stock on each grant date by considering a number of objective and subjective factors, including the most recent independent third-party valuations of the Company’s common stock, sales of the Company’s convertible preferred stock to unrelated third-parties, operating and financial performance of the Company, the lack of liquidity of capital stock and general and industry-specific economic outlook, and the Company’s board of directors’ assessment of additional objective and subjective factors that it believed were relevant.

Performance-Based Restricted Stock Units (PSUs)

The following table summarizes PSU activity as of March 31, 2022, under the 2021 Plan:

Average Grant Date

Outstanding at December 31, 2021

Outstanding at March 31, 2022

The PSUs vest based on the Company achieving certain regulatory milestones and are subject to the employee’s continued employment with the Company through the achievement date.

The fair value of the awards was based on the value of the Company’s common stock at the date of the award and expense recognition is based on the probability of achieving the performance metric.

The Company concluded that achievement of the performance conditions was not probable as of March 31, 2022, and therefore no compensation expense was recognized for the three months ended March 31, 2022 in connection with the PSUs.

Compensation cost is adjusted in future periods for subsequent changes in the expected outcome of the performance related conditions.

Market-Based Awards

Restricted Stock Units

In December 2021, the Company granted 100,000 market-based restricted stock units (MRSUs) to its chief executive officer (CEO) pursuant to the 2021 Plan.

The MRSUs vest based on the Company’s closing stock price trading above $ 20 per share for 30 consecutive trading days subject to the employee’s continued employment with the Company through the date of achievement.

The share price of the Company’s common stock on the date of issuance of the MRSUs was $ 6.69 per share.

The fair value was $ 0.4 million based on Monte Carlo simulation model on the grant date.

Compensation expense is recognized over the derived service period of 3 years .

based compensation expense in connection with the MRSUs was immaterial for the three months ended March 31, 2022.

As of March 31, 2022, there was $ 0.4 million of unrecognized compensation expense related to this MRSU.

Performance Award

In November 2020, in connection with the CEO’s employment agreement he 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 subject to ASC 718, Compensation – Stock Compensation and includes both market and performance conditions.

Since the IPO, neither of the events have yet been satisfied.

The Company estimated the fair value of the Performance Award at each reporting period using the Monte Carlo simulation (Note 4), which is recognized as compensation cost over the derived service period.

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.

During the three-months ended March 31, 2022, the Company reversed $ 0.4 million in compensation expenses as a direct result of decreased value of the Performance Award caused by a decline in the Company’s common stock price.

As of March 31, 2021, prior to the IPO, the Performance Award was not probable of being achieved;

therefore, no stock-based compensation expense was recognized during the three months ended March 31, 2021.

2021 Employee Stock Purchase Plan (ESPP)

In March 2021, the Company’s board of directors adopted the ESPP, which became effective immediately prior to the execution of the underwriting agreement in connection with the Company’s IPO.

As of March 31, 2022, 8,624 shares have been issued under the ESPP.

In September 2021, the Company’s board of directors adopted the Company’s 2021 UK Sharesave Sub-plan (SAYE).

An allocation of 25,875 shares of common stock from the ESPP reserve pool was approved and reserved for issuance under the SAYE.

No shares have been issued under the SAYE through March 31, 2022.

The stock-based compensation expense related to the ESPP and SAYE for the three months ended March 31, 2022, was immaterial.

The following table summarizes stock compensation expense, including expense associated with award modifications for unvested options, reflected in the unaudited consolidated statements of operations and comprehensive loss (in thousands):

Three Months Ended March 31,

Research and development

General and administrative

License Agreement

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.

The vTv License Agreement was accounted for as an asset acquisition and the upfront cash payment of $ 3.0 million and the fair value of common stock of $ 0.7 million issued to vTv Therapeutics was recorded in research and development expenses, as there was no alternative use for the asset.

To date, the Company has paid a $ 3.0 million upfront payment and a total of $ 2.0 million in milestone payments and issued an aggregate of 576,443 shares of our common stock to vTv Therapeutics.

Upon the achievement of certain pre-specified development and regulatory milestones, the Company is also required to pay vTv Therapeutics milestone payments totaling up to $ 64.5 million.

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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.

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 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

Operating Leases

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 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 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 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.

There were no milestone payments achieved or recorded for the three months ended March 31, 2022 and 2021.

Subsequent Events

On May 2, 2022, the Company entered into a sales agreement with SVB Securities LLC (ATM facility), under which the Company may offer and sell, from time to time at its sole discretion, up to $ 20.0 million in shares of its common stock.

The Company has no t yet sold any shares of its common stock under the ATM facility.

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