What changed in this filing

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Item 1. Financial Statements

2021-05-11 compared with 2020-11-10 · 113 added, 158 removed, 195 unchanged (58% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

Current assets:

3 unchanged sentences

Property and equipment, net

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

Right-of-use asset

Deferred offering costs

Liabilities and stockholders’ equity

Current liabilities:

Capital lease obligation

Accounts payable

Accrued expenses and other current liabilities

Operating lease liability

Total current liabilities

Other liabilities

Operating lease liability

Total liabilities

Convertible preferred stock, $0.0001 par value:

Series A convertible preferred stock:

No shares and 13,574,008 shares

authorized at September 30, 2020 and December 31, 2019, respectively;

no shares and 11,736,119 shares issued and outstanding at

September 30, 2020 and December 31, 2019, respectively

Series B convertible preferred stock:

No shares and 18,500,000 shares

authorized at September 30, 2020 and December 31, 2019;

and 7,628,846 shares issued and outstanding at September 30, 2020

and December 31, 2019, respectively

Series C convertible preferred stock:

no shares authorized, issued or outstanding

at September 30, 2020 and December 31, 2019

Total convertible preferred stock

Stockholders’ equity (deficit):

Commitments (Note 7)

Stockholders’ equity:

Voting common stock, $0.0001 par value:

487,149,741 and 42,000,000 shares

authorized at September 30, 2020 and December 31, 2019, respectively;

32,593,010 and 3,161,653 shares issued and outstanding at September 30, 2020

and December 31, 2019, respectively

487,149,741 shares authorized;

35,388,909 and 32,595,301 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Non-voting common stock, $0.0001 par value;

12,850,259 and no shares

authorized at September 30, 2020 and December 31, 2019, respectively;

11,110,371 and no shares issued and outstanding at September 30, 2020 and

December 31, 2019, respectively

12,850,259 shares authorized;

11,402,037 and 11,110,371 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity (deficit)

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

Total stockholders’ equity

Total liabilities and stockholders’ equity

See accompanying notes to unaudited interim financial statements.

1 unchanged sentence

STATEMENTS OF OPERATIONS

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except share and per share data)

11 unchanged sentences

STATEMENTS OF CHANGES IN CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

Convertible preferred stock

Stockholders’ equity (deficit)

Stockholders’ equity

Voting common stock

2 unchanged sentences

Balance at January 1,

Sale of Series B convertible

preferred stock, net of

issuance costs of $58

Stock-based compensation

expense, including

issuance of restricted stock

Balance at March 31,

Exercise of stock options

Stock-based compensation

Balance at June 30, 2020

Exercise of stock options

Sale of Series C convertible

preferred stock, net of

issuance costs of $174

Conversion of convertible

preferred stock into

voting and non-voting

common stock upon initial

public offering

Sale of common stock in

initial public offering,

Sale of common stock,

net of offering costs of $739

Stock-based compensation

Balance at September 30, 2020

Balance at March 31, 2021

Convertible preferred stock

2 unchanged sentences

Balance at January 1, 2020

Stock-based compensation

Balance at March 31, 2019

Exercise of stock options

Sale of Series B convertible

preferred stock, net of

issuance costs of $152

Stock-based compensation

expense, including issuance

of restricted stock awards

Balance at June 30, 2019

offering costs of $152

Stock-based compensation

expense, including issuance

of restricted stock awards

Balance at September 30, 2019

expense, including issuance of RSAs

Balance at March 31, 2020

See accompanying notes to unaudited interim financial statements.

1 unchanged sentence

STATEMENTS OF CASH FLOWS

Nine months ended

September 30,

Three months ended March 31,

(in thousands)

2 unchanged sentences

Depreciation and amortization

Noncash lease expense

Stock-based compensation

3 unchanged sentences

Accrued expenses and other liabilities

Operating lease liabilities

Net cash used in operating activities

3 unchanged sentences

Cash flows provided by financing activities:

Proceeds from the issuance of common stock upon initial public offering, net of offering costs

Proceeds from the sale of Series C convertible preferred stock, net of offering costs

Proceeds from the sale of common stock, net of offering costs

Proceeds from the sale of Series B convertible preferred stock, net of offering costs

7 unchanged sentences

Property and equipment in accounts payable

Offering costs in accrued expenses and other current liabilities

Offering costs in accounts payable

Reclassification of offering costs paid in a prior period

See accompanying notes to unaudited interim financial statements.

3 unchanged sentences

Since beginning operations, the Company has devoted substantially all its efforts to research and development, conducting preclinical and clinical studies, recruiting management and technical staff, administration, and raising capital.

In September 2020, the Company closed its initial public offering (“IPO”) in which the Company issued and sold 9,573,750 shares of its common stock at a public offering price of $19.00 per share for net proceeds of $166.6 million after deducting underwriting discounts, commissions and other offering expenses paid or to be paid.

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

In connection with the closing of the IPO, the Company amended and restated its Fifth Amended and Restated Certificate of Incorporation to change the authorized capital stock to 500,000,000 shares designated as common stock (of which 12,850,259 shares are non-voting common stock) and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share.

Risks and liquidity

6 unchanged sentences

In addition, the Company is dependent upon the services of its employees, consultants and contractors.

Since its inception, the Company has incurred operating losses and has an accumulated deficit of $88.2 million at September 30, 2020.

Since its inception, the Company has incurred operating losses and has an accumulated deficit of $128.7 million at March 31, 2021.

The Company has no revenue to date and devotes its efforts to research and development.

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

The Company believes that its cash and cash equivalents as of September 30, 2020, which includes the net proceeds of approximately $166.6 million from the IPO of the Company’s common stock completed in September 2020, will be sufficient to fund its operating expenses and capital expenditure requirements into the second half of 2022.

The Company believes that its cash and cash equivalents as of March 31, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements into 2023.

To fund its operating expenses and capital expenditure requirements after that date, the Company plans to seek additional funding through public or private equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

8 unchanged sentences

At the current time, the Company is unable to quantify the potential effects of this pandemic on its future financial statements.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Summary of significant accounting policies

The summary of significant accounting policies included in the Company’s financial statements for the year ended December 31, 2020 can be found in “Note 3.

Summary of significant accounting policies” of the Company’s prospectus filed with the Securities and Exchange Commission (the “SEC”) on September 25, 2020 (the “Prospectus”).

Summary of significant accounting policies” of the Company’s Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 16, 2021.

Those policies have not materially changed, except as set forth below.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Basis of presentation

2 unchanged sentences

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and nine month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ended December 31, 2020.

The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2019 found in the Prospectus filed with the SEC on September 25, 2020.

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

The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2020 found in the Form 10-K filed with the SEC on March 16, 2021.

Any reference in these notes to applicable guidance is meant to refer to GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

On September 18, 2020, the Company’s board of directors and stockholders approved a 1.1566-to-one reverse stock split of the Company’s issued and outstanding shares of common stock and convertible preferred stock.

All share and per share amounts in the unaudited interim financial statements and notes hereto have been retrospectively adjusted for all periods presented to give effect to the reverse stock split.

The completion of the IPO, as described above, impacts the comparability of certain amounts to the corresponding prior year period, including earnings per share.

Use of estimates

The preparation of the unaudited interim financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the unaudited interim financial statements and the reported amounts of expenses during the reporting period.

The preparation of the unaudited interim financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the unaudited interim financial statements and the reported amounts of expenses during the reporting period.

Actual results could differ from those estimates.

Estimates and assumptions are periodically reviewed and the effects of the revisions are reflected in the accompanying unaudited interim financial statements in the period they are determined to be necessary.

Prior to the IPO, significant areas that required management’s estimates included the fair value of the Company’s common stock, stock-based compensation assumptions and accrued clinical trial expenses.

Subsequent to the IPO, the most significant estimate relates to accrued clinical trial expenses.

The most significant estimate relates to accrued clinical trial expenses.

Based upon the historical and anticipated future losses, management has determined that the deferred tax assets generated by net operating losses and research and development credits do not meet the more likely than not threshold for realizability.

Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of September 30, 2020 and December 31, 2019.

Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of March 31, 2021 and December 31, 2020.

Net Loss Per Share

2 unchanged sentences

Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock.

For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as the impact is anti-

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

The Company’s convertible preferred stock and unvested restricted stock entitles the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share.

1 unchanged sentence

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:

September 30,

Series A convertible preferred stock

3 unchanged sentences

Amounts in the above table reflect the common stock equivalents.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Recently Issued Accounting Pronouncements

4 unchanged sentences

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

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, Leases , which requires a lessee to record a right-of-use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.

A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available.

The standard is effective for the Company beginning January 1, 2022, with early adoption permitted.

The Company is currently evaluating the expected impact that the standard will have on its financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurements, which changes the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurement (“ASC 820”).

The goal of the ASU is to improve the effectiveness of ASC 820’s disclosure requirements.

The standard is effective for fiscal years beginning after December 15, 2019 and interim periods therein.

The adoption of this standard on January 1, 2020 did not have a material impact on the Company’s unaudited interim financial statements.

Recently Adopted Accounting Pronouncements

On January 1, 2021, the Company adopted ASC 842 issued by the FASB in February 2016, which was subsequently supplemented by clarifying guidance to improve financial reporting of leasing transactions.

The new lease accounting guidance requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for all leases with initial terms longer than 12 months and provides enhanced disclosures on key information of leasing arrangements.

The Company adopted the new standard using the modified retrospective transition method utilizing the optional transition method and elected the package of practical expedients.

Accordingly, prior periods will not be restated to reflect the adopted standard.

In accordance with the guidance in ASC 842 , components of a lease should be split into three categories:

lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.).

The Company has elected the practical expedient to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the contract consideration to the lease component only .

Upon adoption, the Company recorded a right of use asset of $2.5 million and corresponding operating lease liabilities of $2.5 million, with an offset to accrued expenses and other current liabilities of approximately $64,000 to eliminate deferred rent on the balance sheets.

Refer to Note 7 for the Company’s lease disclosures.

At lease commencement, the Company records a lease liability based on the present value of lease payments over the expected lease term including any options to extend the lease that the Company is reasonably certain to exercise.

The Company calculates the present value of lease payments using an incremental borrowing rate as the Company’s leases do not provide an implicit interest rate.

The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

At the lease commencement date, the Company records a corresponding right-of-use lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to the lessor prior to the lease commencement date.

The Company may enter into leases with an initial term of 12 months or less (“Short-Term Leases”).

For Short-Term Leases, the Company records the rent expense on a straight-line basis and does not record the leases on the consolidated balance sheet.

The Company had no Short-Term Leases as of March 31, 2021.

After lease commencement, the Company measures its leases as follows:

(i) the lease liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement and (ii) the right-of-use lease asset based on the re-measured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement.

Any lease incentives received, and any initial direct costs incurred are amortized on a straight-line basis over the expected lease term.

Rent expense is recorded on a straight-line basis over the expected lease term.

The adoption of the new lease accounting standard did not have a material impact on the Company’s results of operations or cash flows for the three months ended March 31, 2021.

Fair Value of Financial Instruments

2 unchanged sentences

Additionally, fair value is used on a nonrecurring basis to evaluate assets for impairment or as required for disclosure purposes by applicable accounting guidance on disclosures about fair value of financial instruments.

Depending on the nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value.

Depending on the

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

nature of the assets and liabilities, various valuation techniques and assumptions are used when estimating fair value.

The Company follows the provisions of ASC 820, for financial assets and liabilities measured on a recurring basis.

1 unchanged sentence

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

4 unchanged sentences

Quoted prices

September 30, 2020:

March 31, 2021:

Cash equivalents (Money Market Funds)

4 unchanged sentences

(in thousands)

September 30,

Compensation and related benefits

Research and development

Offering costs

Professional services and other

Convertible Preferred Stock and Common Stock

Preferred Stock Financings

In August 2020, the Company’s existing Convertible Preferred Stock investors as well as a new investor purchased 3,443,612 shares of Series C at a price of $14.5197 per share for net proceeds of approximately $49.8 million.

In March 2020, the Company’s Series B investors exercised their Future Tranche Right and purchased 7,628,846 shares of Series B for net proceeds of approximately $29.9 million.

Initial Public Offering

In September 2020, the Company completed its IPO in which the Company sold 9,573,750 shares of its common stock at a public offering price of $19.00 per share.

Common Stock Offering

In January 2021, the Company sold 2,875,000 shares of its common stock at a public offering price of $60.00 per share.

The Company received net proceeds of $161.4 million after deducting underwriting discounts, commissions, and other offering expenses paid by the Company.

In addition, immediately prior to the closing of the IPO on September 29, 2020, (i) all of the Company’s outstanding shares of convertible preferred stock converted into an aggregate of 30,437,423 shares of common stock (of which, 11,110,371 shares are non-voting common stock) and (ii) the Company filed an amended and restated certificate of incorporation to, among other things, increase the number of authorized shares of common stock to 500,000,000.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

The Company has two classes of common stock;

3 unchanged sentences

Any holder of non-voting common stock may elect to convert each share of non-voting common stock into one fully paid and non-assessable share of voting common stock at any time by providing written notice to the Company;

provided that as a result of such conversion, such holder, together with its affiliates and any members of a Schedule 13(d) group with such holder, would not beneficially own in excess of 9.99% of the Company’s common stock immediately prior to and following such conversion, unless otherwise as expressly provided for in the Company’s restated certificate of incorporation.

provided that as a result of such conversion, such holder, together with its affiliates and any members of a Schedule 13(d) group with such holder, would not beneficially own in excess of

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

9.99 % of the Company’s common stock immediately prior to and following such conversion, unless otherwise as expressly provided for in the Company’s restated certificate of incorporation.

However, this ownership limitation may be increased (not to exceed 19.99 %) or decreased to any other percentage designated by such holder of non-voting common stock upon 61 days’ notice to the Company.

The Company leases office and laboratory space in Wilmington, Delaware under a noncancelable lease, which expires in December 2022.

The Company has an option to renew the leases for an additional 1-year period.

This option to extend was not recognized as part of the Company’s measurement of the right-of-use asset and operating lease liability as of March 31, 2021 .

The discount rate used to account for the Company’s operating lease under ASC 842 is the Company’s estimated incremental borrowing rate of 10.0%.

Rent expense for the three months ended March 31, 2021 and 2020 was $0.3 million and $0.2 million, respectively.

Future minimum annual lease payments under the Company’s noncancelable lease at March 31, 2021 is as follows:

(in thousands)

2021 (remaining)

Total undiscounted lease payments

Less imputed interest

Current and noncurrent lease liability

Employment Agreements

The Company entered into employment agreements with key personnel providing for compensation and severance in certain circumstances, as defined in the respective employment agreements

401(k) Defined Contribution Plan

The Company sponsors a 401(k) defined‑contribution plan covering all employees.

Participants are permitted to contribute up to 100% of their eligible annual pretax compensation up to an established federal limit on aggregate participant contributions.

The Company provides a safe harbor match with a maximum amount of 4% of the participant’s compensation.

During the three months ended March 31, 2021, the Company made matching contributions of $0.2 million.

Other Research and Development Arrangements

The Company enters into agreements with contract research organizations (“CROs”) to assist in the performance of research and development activities.

Expenditures to CROs will represent a significant cost in clinical development for the Company.

Stock-Based Compensation

1 unchanged sentence

the 2016 Equity Incentive Plan, as amended, and the 2020 Equity Incentive Plan.

New awards can only be granted under the 2020 Equity Incentive Plan (the “Plan”).

The total number of shares initially authorized under the Plan was 4,680,000.

Of this amount, 4,677,407 shares were available for future grants as of September 30, 2020.

New awards can only be granted under the 2020 Equity Incentive Plan (the “Plan”) and as of March 31, 2021, 6,555,615 shares were available for future grants.

The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the Plan shall automatically increase on January 1st of each year, commencing on January 1, 2021, and continuing for ten years, in an amount equal to five percent of the total number of shares of the Company’s common stock outstanding on December 31st of the preceding calendar year, subject to the discretion of the board of directors or compensation committee to determine a lesser number of shares shall be added for such year.

The Plan provides for the granting of common stock, incentive stock options, nonqualified stock options, restricted stock awards, and/or stock appreciation rights to employees, directors, and other persons, as determined by the Company’s board of directors.

The Company’s stock options vest based on the terms in each award agreement, generally over four-year periods with 25% of options vesting after 1 year and then monthly thereafter, and have a term of ten years.

In September 2020, the Company also adopted the 2020 Employee Stock Purchase Plan (the “ESPP”), which includes 520,000 shares of common stock reserved for future issuance.

No shares have been issued from the ESPP as of September 30, 2020.

The Company’s stock options vest based on the terms in each award agreement, generally over four-

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

year periods with 25% of options vesting after 1 year and then monthly thereafter , and have a term of ten years .

In September 2020, the Company adopted the 2020 Employee Stock Purchase Plan (the “ ESPP ” ), which , as of March 31, 2021 , had 957,056 shares of common stock reserved for future issuance.

No shares have been issued from the ESPP as of March 31 , 202 1 .

The Company measures stock-based awards at their grant-date fair value and records compensation expense on a straight-line basis over the vesting period of the awards.

1 unchanged sentence

Three Months Ended

September 30,

(in thousands)

1 unchanged sentence

General and administrative

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Stock Options

2 unchanged sentences

Outstanding at January 1, 2021

Outstanding at September 30, 2020

Exercisable at September 30, 2020

At September 30, 2020, the aggregate intrinsic value of outstanding options and exercisable options was $153.7 million and $22.3 million, respectively.

The following table summarizes information about stock options outstanding at September 30, 2020 under the Plan:

Outstanding at March 31, 2021

Exercisable at March 31, 2021

At March 31, 2021, the aggregate intrinsic value of outstanding options and exercisable options was $232.3 million and $50.0 million, respectively.

The following table summarizes information about stock options outstanding at March 31, 2021 under the Plan:

Options Outstanding

6 unchanged sentences

$15.94 - $88.98

The weighted-average grant date fair value of options granted was $8.44 and $1.40 per share for the nine months ended September 30, 2020 and 2019, respectively.

The aggregate intrinsic value of options exercised was $2.9 million for the nine months ended September 30, 2020.

The Company recorded stock-based compensation expense of $1.2 million and $0.2 million for the three months ended September 30, 2020 and 2019, respectively, related to stock options.

The Company recorded stock-based compensation expense of $1.9 million and $0.3 million for the nine months ended September 30, 2020 and 2019, respectively, related to stock options.

As of September 30, 2020, the total unrecognized compensation expense related to unvested stock option awards was $39.1 million, which the Company expects to recognize over a weighted-average period of 3.74 years.

The weighted-average grant date fair value of options granted was $68.39 and $2.87 per share for the three months ended March 31, 2021 and 2020, respectively.

The aggregate intrinsic value of options exercised was $9.5 million for the three months ended March 31, 2021.

The Company recorded stock-based compensation expense of $3.7 million and $0.3 million for the three months ended March 31, 2021 and 2020, respectively, related to stock options.

As of March 31, 2021, the total unrecognized compensation expense related to unvested stock option awards was $52.5 million, which the Company expects to recognize over a weighted-average period of 3.34 years.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

The fair value of each option was estimated on the date of grant using the weighted average assumptions in the table below:

Nine months ended

September 30,

Three months ended

Expected volatility

7 unchanged sentences

RSA expense is amortized straight-line over the vesting period.

PRELUDE THERAPEUTICS INCORPORATED

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

The following table summarizes activity related to RSA stock-based payment awards:

2 unchanged sentences

Unvested balance at January 1, 2021

Unvested balance at September 30, 2020

The Company recorded stock-based compensation expense of $0.3 million and $0.1 million for the three months ended September 30, 2020 and 2019, respectively, related to RSAs.

The Company recorded stock-based compensation expense of $0.6 million and $0.3 million for the nine months ended September 30, 2020 and 2019, respectively, related to RSAs.

As of September 30, 2020, the total unrecognized expense related to all RSAs was $2.4 million, which the Company expects to recognize over a weighted-average period of 2.94 years.

Subsequent Events

On November 1, 2020, the Company entered into a Second Amended and Restated Entrepreneur Client License Agreement (the “Amendment”) with Delaware Innovation Space, Inc.

(“DISI”) to amend the Amended and Restated Entrepreneur Client License Agreement dated June 1, 2020 (the “Original Agreement”) relating to the Company’s office and laboratory space in Wilmington, Delaware.

The Amendment provides for the expansion of the premises by approximately 8,800 rentable square feet (the “Expansion Space”).

Upon inclusion of the Expansion Space, the Company will license approximately 19,800 rentable square feet of office space (the “Premises”) from DISI (the “License”).

Pursuant to the Amendment, the initial term of the License is twenty-six months commencing on November 1, 2020 and terminating on December 31, 2022 (the “Initial Term”).

The total base license fee for the Premises through the Initial Term is expected to be $3.0 million (the “License Fee”).

The Company has an option to renew the License for twelve months commencing on January 1, 2023 at a monthly renewal license fee increased by 5.0% for a total of $1.4 million payable during the renewal term.

Pursuant to the Amendment, the Company was granted a right of first offer (the “ROFO”) in connection with certain licensable additional space on the Premises that becomes vacant prior to October 31, 2021 (“Available ROFO Space”).

If the Company exercises its ROFO, the Company will pay to DISI an increased monthly license fee not to exceed $0.2 million per month at any time during the Initial Term.

As consideration for the ROFO, the Company paid DISI a one-time payment of $0.2 million.

Unvested balance at March 31, 2021

The Company recorded stock-based compensation expense of $0.2 million and $0.1 million for the three months ended March 31, 2021 and 2020, respectively, related to RSAs.

As of March 31, 2021, the total unrecognized expense related to all RSAs was $2.0 million, which the Company expects to recognize over a weighted-average period of 2.49 years.

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