What changed in this filing

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Item 1. Financial Statements

2021-11-12 compared with 2021-08-12 · 145 added, 46 removed, 263 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

Current assets:

Cash and cash equivalents

Marketable securities

Prepaid expenses and other current assets

16 unchanged sentences

487,149,741 shares authorized;

35,636,695 and 32,595,301 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

35,789,759 and 32,595,301 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Non-voting common stock, $ 0.0001 par value;

12,850,259 shares authorized;

11,402,037 and 11,110,371 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

11,402,037 and 11,110,371 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated other comprehensive income (loss)

Accumulated deficit

3 unchanged sentences

PRELUDE THERAPEUTICS INCORPORATED

STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except share and per share data)

8 unchanged sentences

Weighted average common shares outstanding, basic

Comprehensive loss

Unrealized gain (loss) on marketable securities, net of tax

Comprehensive loss

See accompanying notes to unaudited interim financial statements.

1 unchanged sentence

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

Stockholders’ equity

Stockholders’ equity (deficit)

Voting common stock

Non-voting common

Accumulated Other

(in thousands, except shares)

paid-in capital

Comprehensive

Income (Loss)

Balance at January 1, 2021

7 unchanged sentences

Balance at June 30,2021

Exercise of stock options

Unrealized gain (loss) on

marketable securities

Stock-based compensation

Balance at September 30,2021

See accompanying notes to unaudited interim financial statements.

PRELUDE THERAPEUTICS INCORPORATED

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

Convertible preferred stock

Stockholders’ deficit

Stockholders’ equity (deficit)

Voting common stock

Non-voting common stock

(in thousands, except shares)

4 unchanged sentences

Stock-based compensation

expense, including issuance of RSAs

expense, including

issuance of RSAs

Balance at March 31, 2020

2 unchanged sentences

Balance at June 30, 2020

Exercise of stock options

Sale of Series C convertible

preferred stock, net of

offering 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,

net of offering costs of

Stock-based compensation

expense, including issuance

of restricted stock awards

Balance at September 30, 2020

See accompanying notes to unaudited interim financial statements.

1 unchanged sentence

STATEMENTS OF CASH FLOWS

Six months ended June 30,

Nine months ended September 30,

(in thousands)

4 unchanged sentences

Stock-based compensation

Amortization of premium and discount on marketable securities, net

Changes in operating assets and liabilities:

5 unchanged sentences

Cash flows used in investing activities:

Purchases of marketable securities

Purchases of property and equipment

1 unchanged sentence

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 common stock, net of offering costs

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

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

2 unchanged sentences

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

1 unchanged sentence

Supplemental disclosures:

Operating lease right-of-use assets obtained in exchange for operating lease liabilities

Property and equipment in accounts payable

Unrealized gain (loss) on marketable securities

Offering costs in accounts payable

13 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 $ 155.6 million at June 30, 2021.

Since its inception, the Company has incurred operating losses and has an accumulated deficit of $ 186.3 million at September 30, 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 June 30, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements into mid-2023.

The Company believes that its cash, cash equivalents, and marketable securities as of September 30, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements into the second half of 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.

3 unchanged sentences

On March 10, 2020, the World Health Organization characterized the novel COVID-19 virus as a global pandemic.

There is significant uncertainty as to the likely effects of this disease which may, among other things, materially impact the Company’s planned clinical trials.

There is significant uncertainty as to the likely effects of this disease and emerging variants which may, among other things, materially impact the Company’s planned clinical trials.

This pandemic or outbreak could result in difficulty securing clinical trial site locations, CROs, and/or trial monitors and other critical vendors and consultants supporting the trial.

10 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 six month periods ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

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

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.

6 unchanged sentences

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 June 30, 2021 and December 31, 2020.

Accordingly, a full valuation allowance has been recorded against the Company’s net deferred tax assets as of September 30, 2021 and December 31, 2020.

Marketable Securities

The Company’s marketable securities consist of investments in corporate debt securities and commercial paper that are classified as available-for-sale.

The securities are carried at fair value with the unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss), a component of stockholders’ equity (deficit).

Realized gains and losses and declines in value determined to be other than temporary are included in the Company's statements of operations.

The Company classifies marketable securities that are available for use in current operations as current assets on the balance sheets.

Net Loss Per Share

6 unchanged sentences

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:

Series A convertible preferred stock

Series B convertible preferred stock

September 30,

Unvested restricted stock awards

1 unchanged sentence

Stock options

Employee stock purchase plan

Amounts in the above table reflect the common stock equivalents.

26 unchanged sentences

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 six months ended June 30, 2021.

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 nine months ended September 30, 2021.

Accounting guidance not yet adopted

In June 2016, the FASB issued ASU No.

2016-13, “ Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments ” which has subsequently been amended by ASU No.

2019-04, ASU No.

2019-05, ASU No.

2019-10, ASU No.

2019-11, and ASU No.

2020-03 (“ASU 2016-03”).

This guidance replaces the incurred loss impairment methodology under current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 and must be adopted using a modified retrospective approach, with certain exceptions.

The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

Marketable Securities

The following is a summary of the Company’s marketable securities as of September 30, 2021.

The Company did not have any marketable securities as of December 31, 2020.

(in thousands)

Amortized Cost

Gross unrealized gain

Gross unrealized loss

Marketable securities

Corporate debt securities

Commercial paper

The Company’s marketable securities generally have contractual maturity dates of between four and 21 months.

Fair Value of Financial Instruments

12 unchanged sentences

Quoted prices

June 30, 2021:

September 30, 2021:

Cash equivalents (Money Market Funds)

Marketable securities

Corporate debt securities

Commercial paper

December 31, 2020:

3 unchanged sentences

(in thousands)

September 30,

Compensation and related benefits

10 unchanged sentences

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 June 30, 2021 .

The Company leases office and laboratory space in Wilmington, Delaware under a noncancelable lease (the “Lease”), which expires in December 2022, which was amended during the third quarter of 2021 to include additional office and laboratory space to accommodate the Company’s growth.

The Company has an option to renew the Lease 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 September 30, 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 %.

In June 2021, the Company signed a 12 -month noncancelable lease, which commenced on July 1, 2021 and will expire on June 30, 2022 and has remaining lease payments of approximately $ 0.2 million in both 2021 and 2022.

Rent expense for the three months ended June 30, 2021 and 2020 was $ 0.3 million and $ 0.2 million, respectively.

Rent expense for the six months ended June 30, 2021 and 2020 was $ 0.7 million and $ 0.5 million, respectively.

Future minimum annual lease payments under the Company’s noncancelable lease at June 30, 2021 is as follows:

In June 2021, the Company entered into a 12 -month noncancelable lease, which commenced on July 1, 2021 and will expir e on June 30, 2022 and has remaining lease payments of approximately $ 0.1 million and $ 0.2 million in 2021 and 2022, respectively.

The Company adopted the short-term lease election as afforded by ASC 842 and did no t recognize a right-of-use asset and operating lease liability related to this short-term lease.

Rent expense for the three months ended September 30, 2021 and 2020 was $ 0.5 million and $ 0.3 million, respectively.

Rent expense for the nine months ended September 30, 2021 and 2020 was $ 1.2 million and $ 0.8 million, respectively .

Future minimum annual lease payments under the L ease at September 30, 2021 is as follows:

(in thousands)

9 unchanged sentences

The Company provides a safe harbor match with a maximum amount of 3 % of the participant’s compensation.

During the three and six months ended June 30, 2021, the Company made matching contributions of $ 0.1 million and $ 0.3 million, respectively.

During the three and nine months ended September 30, 2021, the Company made matching contributions of $ 0.1 million and $ 0.4 million, respectively .

Research Collaboration Agreement

In September 2021, the Company entered into a research collaboration agreement estimated to last for approximately one year (the “Darwin Health Agreement”) with Darwin Health, Inc.

(“DarwinHealth”).

Under the terms of the Darwin Health Agreement, DarwinHealth will utilize their drug discovery technologies and certified methodologies in precision oncology to advance and accelerate clinical development for certain of the Company’s programs across a broad range of tumor subtypes.

The Company will pay DarwinHealth a total of $ 3.0 million in three equal installments over the one-year term (the “Research Term”) to fund the research and, if the Company adopts any of DarwinHealth’s development ideas, the Company will be responsible for the development, manufacturing, and commercialization of any such products.

In addition to research funding, DarwinHealth is eligible to receive future research, development and regulatory milestones of up to $ 3.0 million for each product candidate and is also eligible to receive tiered royalties in the low single digits on net sales of each product developed using DarwinHealth’s development technologies or methods.

However, within eighteen-months following the Research Term, the Company, in its sole discretion, may notify DarwinHealth that it will not utilize its development ideas and will be entitled to receive a refund of $ 0.5 million.

Other Research and Development Arrangements

4 unchanged sentences

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”) and as of June 30, 2021, 6,282,783 shares were available for future grants.

New awards can only be granted under the 2020 Equity Incentive Plan (the “Plan”) and as of September 30, 2021, 4,782,468 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.

1 unchanged sentence

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 adopted the 2020 Employee Stock Purchase Plan (the “ESPP”), which, as of June 30, 2021, had 957,056 shares of common stock reserved for future issuance.

No shares have been issued from the ESPP as of June 30, 2021.

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,

Nine Months Ended

September 30,

(in thousands)

5 unchanged sentences

Outstanding at January 1, 2021

Outstanding at June 30, 2021

Exercisable at June 30, 2021

At June 30, 2021, the aggregate intrinsic value of outstanding options and exercisable options was $ 131.1 million and $ 33.2 million, respectively.

The following table summarizes information about stock options outstanding at June 30, 2021 under the Plan:

Outstanding at September 30, 2021

Exercisable at September 30, 2021

At September 30, 2021, the aggregate intrinsic value of outstanding options and exercisable options was $ 139.3 million and $ 52.8 million, respectively.

The following table summarizes information about stock options outstanding at September 30, 2021 under the Plan:

Options Outstanding

6 unchanged sentences

$15.94 - $88.98

The weighted-average grant date fair value of options granted was $ 38.31 and $ 2.88 per share for the six months ended June 30, 2021 and 2020, respectively.

The aggregate intrinsic value of options exercised was $ 18.3 million for the six months ended June 30, 2021.

The Company recorded stock-based compensation expense of $ 4.2 million and $ 0.6 million for the three months ended June 30, 2021 and 2020, respectively, related to stock options.

The Company recorded stock-based compensation expense of $ 7.7 million and $ 0.7 million for the six months ended June 30, 2021 and 2020, respectively, related to stock options.

As of June 30, 2021, the total unrecognized compensation expense related to unvested stock option awards was $ 55.6 million, which the Company expects to recognize over a weighted-average period of 3.05 years.

The weighted-average grant date fair value of options granted was $ 24.88 and $ 8.44 per share for the nine months ended September 30, 2021 and 2020, respectively.

The aggregate intrinsic value of options exercised was $ 22.8 million for the nine months ended September 30, 2021.

The Company recorded stock-based compensation expense of $ 6.7 million and $ 1.2 million for the three months ended September 30, 2021 and 2020, respectively, related to stock options.

The Company recorded stock-based compensation

expense of $ 14.4 million and $ 1.9 million for the nine months ended September 30, 2021 and 2020 , respectively, related to stock options.

As of September 30, 2021 , the total unrecognized compensation expense related to unvested stock option awards was $ 83.1 million, which the Company expects to recognize over a weighted-average period of 3.22 years .

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

Six months ended

Nine months ended

September 30,

Expected volatility

11 unchanged sentences

Unvested balance at January 1, 2021

Unvested balance at June 30, 2021

The Company recorded stock-based compensation expense of $ 0.2 million and $ 0.2 million for the three months ended June 30, 2021 and 2020, respectively, related to RSAs.

The Company recorded stock-based compensation expense of $ 0.4 million and $ 0.3 million for the six months ended June 30, 2021 and 2020, respectively, related to RSAs.

As of June 30, 2021, the total unrecognized expense related to all RSAs was $ 1.8 million, which the Company expects to recognize over a weighted-average period of 2.26 years.

During the six months ended June 30, 2021, the Company granted 25,000 restricted stock units (“RSU”) to an employee that vest over a four-year period with 25 % of awards vesting after one year and then quarterly thereafter.

Unvested balance at September 30, 2021

The Company recorded stock-based compensation expense of $ 0.3 million and $ 0.3 million for the three months ended September 30, 2021 and 2020, respectively, related to RSAs.

The Company recorded stock-based compensation expense of $ 0.7 million and $ 0.6 million for the nine months ended September 30, 2021 and 2020, respectively, related to RSAs.

As of September 30, 2021, the total unrecognized expense related to all RSAs was $ 1.6 million, which the Company expects to recognize over a weighted-average period of 2.05 years.

During the nine months ended September 30, 2021, the Company granted 25,000 restricted stock units (“RSU”) to an employee that vest over a four-year period with 25 % of awards vesting after one year and then quarterly thereafter.

Any unvested units will be forfeited upon termination of services.

At June 30, 2021 the total unrecognized expense related to the RSUs was $ 0.8 million, which the Company expects to recognize over 3.95 years.

The Company recorded stock-based compensation expense of $ 0.1 million for the three and nine months ended September 30, 2021, respectively, related to RSUs.

At September 30, 2021 the total unrecognized expense related to the RSUs was $ 0.8 million, which the Company expects to recognize over 3.70 years.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the “ESPP”), which, as of September 30, 2021, had 957,056 shares of common stock reserved for future issuance.

The number of shares of the Company’s common stock that may be issued pursuant to rights granted under the ESPP shall automatically increase on January 1st of each year and continuing for ten years beginning in 2021, in an amount equal to one percent of the total number of shares of all classes 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 in any particular year.

No shares have been issued from the ESPP as of September 30, 2021.

Under the ESPP, eligible employees can purchase the Company’s common stock through accumulated payroll deductions at such times as are established by the compensation committee.

Eligible employees may purchase the Company’s common stock at 85 % of the lower of the fair market value of the Company’s common stock on the first day of the offering period or on the last day of the offering period.

Eligible employees may contribute up to 15 % of their eligible compensation.

Under the ESPP, a participant may not accrue rights to purchase more than $ 25,000 worth of the Company’s common stock for each calendar year in which such right is outstanding.

The ESPP is considered compensatory under the FASB stock compensation rules.

Accordingly, share-based compensation expense is determined based on the option’s grant-date fair value as estimated by applying the Black Scholes option-pricing model and is recognized over the withholding period.

The Company recognized share-based compensation expense of $ 0.1 million for the three and nine months ended September 30, 2021, respectively, related to the ESPP.

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