What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-12 · 135 added, 205 removed, 282 unchanged (55% of the section changed)

1 unchanged sentence

Cortexyme, Inc.

Condensed Balance Sheets

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

September 30, 2020

March 31, 2021

December 31, 2020 (1)

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Preferred stock, $ 0.001 par value, 10,000,000 authorized, no shares issued and

outstanding as of September 30, 2020 and December 31, 2019

outstanding as of March 31, 2021 and December 31, 2020

Common stock, $ 0.001 par value, 100,000,000 shares authorized,

29,494,249 and 26,869,413 issued and outstanding as of September 30, 2020 and

29,575,944 and 29,543,222 issued and outstanding as of March 31, 2021 and

December 31, 2020, respectively

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The balance sheet as of December 31, 2020 is derived from the audited financial statements as of that date

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

See accompanying notes.

Cortexyme, Inc.

Condensed Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses:

4 unchanged sentences

Interest income

Other comprehensive income / (loss):

Unrealized gain / (loss) on available for sales securities

Other comprehensive loss:

Unrealized loss on available for sales securities

Total comprehensive loss

Net loss per share - basic and diluted

Weighted average shares of common stock outstanding -

basic and diluted

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

Weighted average shares of common stock outstanding - basic and diluted

See accompanying notes.

Cortexyme, Inc.

Condensed Statements of Stockholders’ Equity

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share amounts)

For the three months ended September 30, 2020 and 2019

Accumulated Other

Comprehensive

Shareholders'

Total Stockholders'

Income / (Loss)

Balance June 30, 2020

Balance January 1, 2021

Exercise of stock options

1 unchanged sentence

Other comprehensive loss

Balance September 30, 2020

Balance June 30, 2019

Stock based compensation

Other comprehensive income

Balance September 30, 2019

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

Cortexyme, Inc.

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity

(In thousands, except share and per share amounts)

For the nine months ended September 30, 2020 and 2019

Series A Redeemable

Convertible Preferred

Series B Redeemable

Convertible Preferred

Comprehensive

Shareholders'

Income / (Loss)

Balance March 31, 2021

Balance January 1, 2020

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Stock based compensation

Other comprehensive income

Balance September 30, 2020

Balance January 1, 2019

Exercise of stock options

Stock based compensation

Vesting of Series B redeemable convertible

preferred stock in lieu of rent

Conversion of redeemable convertible

preferred stock to common stock

Initial public offering of common stock,

net of issuance costs of $8,427

Exercise of stock warrant

Other comprehensive income

Balance September 30, 2019

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

Other comprehensive loss

Balance March 31, 2020

See accompanying notes.

Cortexyme, Inc.

Condensed Statements of Cash Flows

For the Nine Months Ended September 30,

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31,

Cash flows from operating activities

3 unchanged sentences

Depreciation and amortization

Amortization of premium (discount) on available for sale investments

Amortization of premium on available for sale investments

Changes in operating assets and liabilities:

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Purchase of property and equipment

Net cash used in investing activities

Net cash provided by / (used in) investing activities

Cash flows from financing activities:

1 unchanged sentence

Proceeds from issuance of common stock upon exercise of stock options

Proceeds from initial public offering, net of stock offering costs

Proceeds from private placement offering, net of issuance costs

Net cash provided by financing activities

Net change in cash and cash equivalents

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental disclosures of non-cash information:

Right-of-use assets obtained in exchange for new operating lease liabilities

Right-of-use assets obtained in exchange for new finance lease liabilities

Conversion of Series A redeemable convertible preferred stock to common stock on

initial public offering

Conversion of Series B redeemable convertible preferred stock to common stock on

initial public offering

Acceleration of vesting of Series B redeemable convertible preferred stock on initial

public offering

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

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

See accompanying notes.

Cortexyme, Inc.

Notes to Unaudited Condensed Financial Statements

Notes to Unaudited Condensed Consolidated Financial Statements

Description of Business

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Cortexyme is targeting a specific, infectious pathogen tied to neurodegeneration and chronic inflammation in humans and animal models.

Initial Public Offering

On May 8, 2019, the Company’s registration statement on Form S-1 (File No.

333-230853) for its initial public offering of common stock (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”).

On May 13, 2019, the Company closed its IPO with the sale of 5,073,800 shares of common stock, which included 661,800 shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $17.00 per share, resulting in net proceeds of $77.8 million, after deducting underwriting discounts and commissions and estimated offering expenses paid by the Company.

In addition, in connection with the closing of the IPO, all of the Company’s outstanding shares of redeemable convertible preferred stock were automatically converted into 18,161,027 shares of common stock, and there are no shares of redeemable convertible preferred stock outstanding.

Private Investment in Public Equity (“PIPE”)

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The Company has incurred losses and negative cash flows from operations since inception and expects to continue to generate operating losses for the foreseeable future.

As of September 30, 2020, the Company had an accumulated deficit of $126.1 million.

Since inception through September 30, 2020, the Company has funded operations primarily with the net proceeds from the issuance of convertible promissory notes, from the issuance of redeemable convertible preferred stock, from the net proceeds from the IPO and from the net proceeds from the PIPE Financing.

As of September 30, 2020, the Company had cash, cash equivalents, and short-term investments of $137.8 million, which it believes will be sufficient to fund its planned operations for a period of at least 12 months from the date of the issuance of the accompanying unaudited financial statements.

As of March 31, 2021, the Company had an accumulated deficit of $ 169.7 million.

Since inception through March 31, 2021, the Company has funded operations primarily with the net proceeds from the issuance of convertible promissory notes, from the issuance of redeemable convertible preferred stock, from the net proceeds from the Company’s initial public offering (the “IPO”) and from the net proceeds from the PIPE Financing.

As of March 31,2021, the Company had cash, cash equivalents, and short-term investments of $ 147.0 million, which it believes will be sufficient to fund its planned operations for a period of at least 12 months from the date of the issuance of the accompanying unaudited consolidated financial statements.

The Company also has long-term investments of $ 23.7 million.

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Summary of Significant Accounting Policies

Basis of Consolidation

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

and its wholly owned subsidiary.

All intercompany balances and transactions have been eliminated.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions of the SEC on Form 10-Q and Article 10 of Regulation S-X of the SEC.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions of the SEC on Form 10-Q and Article 10 of Regulation S-X of the SEC.

Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements.

In management’s opinion, all adjustments (consisting only of normal recur ring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.

The condensed balance sheet as of September 30, 2020, the condensed statements of operations and comprehensive loss for the three and nine months ended September 30, 2020 and 2019, the condensed statements of redeemable convertible preferred stock and stockholders’ equity for the three and nine months ended September 30, 2020 and 2019, the condensed statements of cash flows for the nine months ended September 30, 2020 and 2019, and the financial data and other financial information disclosed in the notes to the condensed financial statements are unaudited.

These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Form 10-K filed with the SEC on March 16, 2020.

The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or for any other future annual or interim period.

In the management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.

The condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, the condensed consolidated statements of stockholders’ equity as of March 31, 2021 and 2020, the condensed consolidated statements of cash flows for the three months ended March 31,

202 1 and 20 20 , and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited .

These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 20 20 included in the Company’s Form 10-K filed with the SEC on Ma rch 1, 20 21 .

The results of operations for the three months ended March 31 , 20 2 1 are not necessarily indicative of the results to be expected for the year ending December 31, 20 2 1 , or for any other future annual or interim period.

Risks and Uncertainties

The pandemic caused by an outbreak of a new strain of coronavirus, COVID-19, has resulted, and is likely to continue to result, in significant national and global economic disruption and may adversely affect our business.

The Company is actively monitoring the impact of COVID-19 and the possible effects on its financial condition, liquidity, operations, clinical trials, suppliers, industry and workforce.

However, the full extent, consequences, and duration of the COVID-19 pandemic and the resulting impact on the Company cannot currently be predicted.

The Company will continue to evaluate the impact that these events could have on the Company’s operations, financial position, and the results of operations and cash flows during fiscal year 2020 and beyond.

The Company’s future results of operations involve a number of risks and uncertainties.

Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s potential drug candidates, uncertainty of market acceptance of the Company’s drug candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals.

The Company’s drug candidate will require approvals from the U.S.

Food and Drug Administration (FDA) and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions.

There can be no assurance that any drug candidate will receive the necessary approvals.

If the Company was denied approval, approval was delayed or the Company was unable to maintain approval for any drug candidate, it could have a materially adverse impact on the Company.

In connection with the COVID-19 pandemic, governments have implemented significant measures, including closures, quarantines, travel restrictions and other social distancing directives, intended to control the spread of the virus.

Companies have also taken precautions, such as requiring employees to work remotely, imposing travel restrictions, and temporarily closing businesses.

To the extent that these restrictions remain in place, additional prevention and mitigation measures are implemented in the future or there is uncertainty about the effectiveness of these or any other measures to contain or treat COVID-19, there is likely to be a continuing, adverse impact on global economic conditions and consumer confidence and spending, which could materially and adversely affect the Company’s research and development, as well as operational activities.

At this time, the Company continues to manage and mitigate potential disruptions to its research and future manufacturing and supply chain considerations.

The Company has not experienced significant hinderances to its operations or material negative financial impacts as compared to prior periods.

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.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosure of contingent assets and liabilities.

The most significant estimates used in the Company’s financial statements relate to the determination of the fair value of common stock prior to the initial public offering, stock-based awards and other issuances, accruals for research and development costs, useful lives of long-lived assets, stock-based compensation and related assumptions, the incremental borrowing rate for leases and income tax uncertainties, including a valuation allowance for deferred tax assets;

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosure of contingent assets and liabilities.

The most significant estimates used in the Company’s consolidated financial statements relate to the determination of the fair value of common stock prior to the initial public offering, stock-based awards and other issuances, accruals for research and development costs, useful lives of long-lived assets, stock-based compensation and related assumptions, the incremental borrowing rate for leases and income tax uncertainties, including a valuation allowance for deferred tax assets;

and contingencies.

2 unchanged sentences

Significant Accounting Policies

There have been no significant changes to the accounting policies during the nine months ended September 30, 2020, as compared to the significant accounting policies described in our Annual Report on Form 10-K.

Cash, Cash Equivalents, and Restricted Cash

There have been no significant changes to the accounting policies during the three months ended March 31, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash and cash equivalents.

2 unchanged sentences

Fair Value Measurements

The fair value of our financial instruments reflects the amounts that we estimate we would receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price).

We disclose and recognize the fair value of our assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates that it would receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price).

The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements).

The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;

Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

Level 2 - Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly, including inputs in markets that are not considered to be active;

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Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period.

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update, or ASU, No.

2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements.

The Company adopted the standard effective January 1, 2019.

The Company determines if an arrangement includes a lease at inception.

Right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date.

The right-of-use asset includes any lease payments made and excludes lease incentives.

Incremental borrowing rate is used in determining the present value of future payments.

The Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The lease terms may include options to extend or terminate the lease.

Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term.

The Company has elected not to recognize a right-of-use asset and lease liability for short-term leases.

A short-term lease is a lease with an expected lease term of 12 months or less and which does not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

The Company also elected the package of practical expedients under the transition guidance that will retain the historical lease classification and initial direct costs for any leases that exist prior to adoption of the new guidance and the practical expedient to not separate lease and non-lease components.

See Note 6 for further disclosure.

Finance lease right of use assets are recorded on the balance sheet in Property and equipment, net.

The current portion of the operating lease liability is recorded in accrued expenses and other current liabilities.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

The Company has elected to not use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies.

Recent Accounting Pronouncements Adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.

The new guidance changes disclosure requirements related to fair value measurements as part of the disclosure framework project.

The disclosure framework project aims to improve the effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly communicate the most important

information to users of the financial statements.

The Company adopted this effective January 1, 2020.

The adoption of this pronouncement did not have a material impact on its financial statements or disclosures.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40)”:

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”), which clarifies the accounting for implementation costs in cloud computing arrangements.

The Company adopted the standard prospectively on January 1, 2020.

The adoption of this pronouncement did not have a material impact on its financial statements.

Recent Accounting Pronouncements Not Yet Adopted

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The guidance also amends reporting around allowances for credit losses on available-for-sale marketable securities.

For Smaller Reporting Companies as defined by the SEC, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842):

Effective Dates, which established that a one-time determination of the effective date for ASU 2016-13 would be based on the Company’s SEC reporting status as of November 15, 2019.

The Company was a “smaller reporting company” as defined by Item 10 of Regulation S-K, and therefore, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The Company is evaluating the impact of the guidance on its financial statements.

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Fair Value Measurements

The Company measures and reports its cash equivalents, restricted cash, and investments at fair value.

The Company measures and reports its cash equivalents and investments at fair value.

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1.

Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs.

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of September 30, 2020 and December 31, 2019 are presented in the following tables (in thousands):

Fair Value Measurements at September 30, 2020

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2021 and December 31, 2020 are presented in the following tables (in thousands):

Fair Value Measurements at March 31, 2021

Money market funds

Certificates of Deposit

Municipal notes

Repurchase Agreements

Corporate notes

Government and agency notes

Municipal notes

Fair Value Measurements at December 31, 2020

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Corporate notes

Government notes

Commercial paper

Government and agency notes

Municipal notes

The following table summarizes the available-for-sale securities (in thousands):

Fair Value Measurements at September 30, 2020

Fair Value Measurements at March 31, 2021

Money market funds

Certificates of Deposit

Municipal notes

Repurchase Agreements

Corporate notes

Government and agency notes

Municipal notes

Total cash equivalents and investments

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Cash equivalents (maturities within 90 days)

Short-term investments (maturities within

Long-term investments (maturities beyond

Short-term investments (maturities within one year)

Long-term investments (maturities beyond 1 year)

Total cash equivalents and investments

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Corporate notes

Government notes

Commercial paper

Government and agency notes

Municipal notes

Total cash equivalents and investments

1 unchanged sentence

Cash equivalents (maturities within 90 days)

Short-term investments (maturities within

Long-term investments (maturities beyond

Short-term investments (maturities within one year)

Long-term investments (maturities beyond 1 year)

Total cash equivalents and investments

As of September 30, 2020, the weighted average remaining contractual maturities of available-for-sale securities was approximately 11 months.

There have been no significant realized losses on available-for-sale securities for the period presented.

Based on the Company’s review of its available-for-sale securities, the Company has a limited number of available-for-sale securities in insignificant loss positions as of September 30, 2020, none of which have been in a loss position for more than one year.

T he Company believes it had no other-than-temporary impairments on these securities as of September 30, 2020, because the Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before the recovery of their amortized cost basis.

As of March 31, 2021, the remaining contractual maturities of available-for-sale securities was approximately 10 months.

There have been no significant realized gains or losses on available-for-sale securities for the period presented.

Based on the Company’s review of its available-for-sale securities, the Company has a limited number of available-for-sale securities in insignificant loss positions as of March 31, 2021, none of which have been in a loss position for more than a year.

T he Company believes it had no other-than-temporary impairments on these securities as of March 31, 2021, because the Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before the recovery of their amortized cost basis.

The investments are classified as available-for-sale securities.

At September 30, 2020 and December 31, 2019, the balance in the Company’s accumulated other comprehensive income was comprised solely of activity related to the Company’s available-for-sale securities.

There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities for the three or nine months ended September 30, 2020 and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the quarter.

At March 31, 2021 and December 31, 2020, the balance in the Company’s accumulated other comprehensive income was comprised primarily of activity related to the Company’s available-for-sale securities.

There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities for the three months ended March 31, 2021 and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the quarter.

There were no transfers between Levels 1, 2 or 3 for the period presented.

Cash, C ash E quivalents and I nvestments

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that sum to the total of the same amounts shown in the condensed statements of cash flows (in thousands):

Nine Months Ended September 30,

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

Restricted cash as of September 30, 2019 relates to a compensating balance to secure a credit card facility.

There was no restricted cash as of September 30, 2020.

The following tables categorize the fair values of cash, cash equivalents, and short-term investments measured at fair value on a recurring basis on our balance sheet (in thousands):

September 30, 2020

Cash, cash equivalents and investments

The following tables categorize the fair values of cash, cash equivalents, short-term investments and long-term investments measured at fair value on a recurring basis on our balance sheets (in thousands):

March 31, 2021

December 31, 2020

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Certificates of deposit

Corporate notes

Total cash and cash equivalents

Short-term investments:

Commercial paper

Certificates of deposit

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Prepaid expenses and other current assets consist of the following (in thousands):

September 30,

Prepaid expenses

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Total prepaid expenses and other current assets

Property and Equipment

Property and Equipment, Net

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

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Accrued expenses and other current liabilities consist of the following (in thousands):

September 30,

Personnel expenses

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Real Estate Operating Leases

In June 2018, the Company entered into a three-year lease agreement with no renewal options with a related party, one of the investors in the Series B redeemable convertible preferred stock.

In June 2018, the Company entered into a three-year lease agreement with no renewal options with an investor in the Series B redeemable convertible preferred stock.

The lease began on July 16, 2018 and provides 3,185 square feet of office and laboratory space in South San Francisco, California.

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The Company recorded an operating lease asset and liability of $ 172,000 .

The Company expects to renew the lease for the South San Francisco facility prior to its expiration in July 2021.

In May 2020, the Company entered into a lease agreement to rent space in San Diego, California for our clinical operations team.

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Total payments under the lease will be $ 337,000 .

The Company paid a security deposit of $29,000 and is included in Other Assets on our September 30, 2020 balance sheets.

The Company paid a security deposit of $ 29,000 and is included in Other Assets on our March 31, 2021 condensed consolidated balance

At the commencement of the lease, the Company recorded an operating lease asset of $ 326,000 , which consists of an operating lease liability of $ 317,000 and cash rent prepayment of $ 9,000 .

The Company recognizes lease expense on a straight-line basis over the term of its operating lease.

As of September 3 0 , 2020, future rent expense of $ 760 ,000 will be recognized over the remaining term s of 10 to 34 months on a straight-line basis over the respective lease period.

As of March 31, 2021, total future rent expense from all real estate operating leases of $ 470,000 will be recognized over the remaining terms ranging from 4 to 28 months on a straight-line basis over the respective lease period.

Clinical Equipment Operating Lease

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The Company has analyzed the vendor agreements and determined that they contain embedded finance leases.

The Company recognizes the depreciation expense in research and development expenses in the statement of operations and recognizes expense on a straight-line basis starting when the equipment is placed into service until the end of the contract term ranging from 20 to 34 months.

Amortization expense of the financing lease right of use asset for the nine months ended September 30, 2020 and 2019 was $173,000 and $53,000, respectively.

The Company recognizes the depreciation expense in research and development expenses in the condensed consolidated statements of operations and comprehensive loss and recognizes expense on a straight-line basis starting when the equipment is placed into service until the end of the contract term ranging from 20 to 34 months .

Depreciation expense of the financing lease right of use asset for the three months ended March 31, 2021 and 2020 was $ 57,000 and $ 60,000 , respectively.

Supplemental balance sheet information related to leases as follows (in thousands except lease terms and discount rates):

September 30, 2020

March 31, 2021

December 31, 2020

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Operating Lease

2020 (excluding the nine months ended September 30, 2020)

2021 (excluding the three months ended March 31, 2021)

Total lease payments

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Stock-Based Compensation

On December 4, 2014, the Company’s stockholders approved the 2014 Stock Plan (“2014 Plan”) and amended the 2014 Plan on April 25, 2019.

On December 4, 2014, the Company’s stockholders approved the 2014 Stock Plan (“2014 Plan”), and most recently amended the 2014 Plan on April 25, 2019.

The 2014 Plan was amended, restated and re-named the 2019 Equity Incentive Plan (the “2019 Plan”), which became effective as of May 7, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO.

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The maximum aggregate number of shares that may be issued under the 2019 Plan is 7,388,053 shares of the Company’s common stock.

In addition, the number of shares available for issuance under the 2019 Plan will be increased annually on the first day of each of its fiscal years beginning with fiscal 2020, by an amount equal to the least of (i) 2,146,354 shares of common stock;

In addition, the number of shares available for issuance under the 2019 Plan will be annually increased on the first day of each fiscal years beginning with fiscal 2020, by an amount equal to the least of (i) 2,146,354 shares of common stock;

(ii) 4 % of the outstanding shares of its common stock as of the last day of its immediately preceding fiscal year;

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Unless sooner terminated by the Company’s Board of Directors, the 2019 Plan will automatically terminate on April 23, 2029.

As of September 30, 2020, the Company had 2,014,728 shares available for future issuance under the 2019 Plan.

For the three and nine months ended September 30, 2020, the Company recognized $4,158,000 and $9,511,000 of stock-based compensation expense, respectively, related to options granted to employees and non-employees.

The compensation expense is allocated on a departmental basis, based on the classification of the option holder.

No income tax benefits have been recognized in the statements of operations for stock-based compensation arrangements.

As of March 31, 2021, the Company had 1,352,165 shares available for future issuance under the 2019 Plan.

Stock Options

Activity for service-based stock options under the 2019 Plan is as follows:

Exercise Price

(In thousands)

Balance at December 31, 2020

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Options exercised

Options cancelled

Balance at September 30, 2020

Options vested and expected to vest as of

September 30, 2020

Options exercisable as of September 30, 2020

Future stock-based compensation for unvested employee and non-employee options granted and outstanding as of September 30, 2020 is $54.0 million with a weighted average remaining expense life of 1.7 years.

The weighted average grant date fair value of options granted during the nine months ended September 30, 2020 was $37.03 per share.

The following table summarizes employee and non-employee stock-based compensation expense for the three and nine months ended September 30, 2020 and 2019 and the allocation within the statements of operations and comprehensive loss (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Options cancelled / forfeited

Balance at March 31, 2021

Options vested and expected to vest as of March 31, 2021

Options exercisable as of March 31, 2021

For the three months ended March 31, 2021 and 2020, the Company recognized stock-based compensation expense of $ 6,077,000 and $ 1,955,000 , respectively, related to options granted to employees and non-employees.

The compensation expense is allocated on a departmental basis, based on the classification of the option holder.

No income tax benefits have been recognized in the statement of operations for stock-based compensation arrangements.

As of March 31, 2021, total unamortized employee stock-based compensation was $ 70.1 million, which is expected to be recognized over the remaining estimated vesting period of 1.62 years.

Performance Stock Options (“PSOs”)

The following table summarizes activity under the Company’s PSOs from the 2019 Plan and related information:

Shares Subject to Outstanding PSOs

Exercise Price

Weighted average remaining contractual life (years)

Balance at December 31, 2020

Balance at March 31, 2021

For the three months ended March 31, 2021 and 2020, the Company recognized stock-based compensation expense of $ 914,000 and $ 0 , respectively, related to these PSOs.

As of March 31, 2021, total unamortized stock-based compensation related to PSOs was $ 8.9 million, which is expected to be recognized over the remaining estimated vesting period of 2.51 years.

Stock-Based Compensation Expense

The following table summarizes employee and non-employee stock-based compensation expense for the three months ended March 31, 2021 and 2020 and the allocation within the condensed consolidated statements of operations and comprehensive loss (in thousands):

General and administrative expense

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Employee Stock Purchase Plan

On April 24, 2019, the Company’s Board of Directors adopted its 2019 Employee Stock Purchase Plan (“2019 ESPP”), which was subsequently approved by the Company’s stockholders and became effective on May 7, 2019, the day immediately prior to the

effectivene ss of the registration statement filed in connection with the IPO.

The 2019 ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code (the “Code”) for U.S.

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service providers.

The Company has reserved 536,989 shares of common stock for issua nce under the 2019 ESPP.

The Company has reserved 832,421 shares of common stock for issuance under the 2019 ESPP.

In addition, the number of shares reserved for issuance under the 2019 ESPP will be increased automatically on the first day of each fiscal year for a period of up to ten years , starting with the 2020 fiscal year, by a number equal to the least of:

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or (iii) such lesser number of shares determined by the Company’s Board of Directors.

The 2019 ESPP is expected to be implemen ted through a series of offerings under which participants are granted purchase rights to purchase shares of the Company’s common stock on specified dates during such offerings.

The 2019 ESPP is expected to be implemented through a series of offerings under which participants are granted purchase rights to purchase shares of the Company’s common stock on specified dates during such offerings.

The Company has not yet approved an offering under the 2019 ESPP.

Related Party Transactions

In June 2014, the Company entered into a research grant and license agreement (the Agreement) with a stockholder of the Company.

The Agreement requires the Company to pay royalties to the stockholder in the amount of 3% of gross revenues not to exceed $1.05 million.

This agreement was amended in April 2019 and the royalty payment provision was removed.

As described in Note 6, the Company entered into a three-year lease agreement with a Series B redeemable preferred stock investor.

The lease began on July 16, 2018 and provides 3,185 square feet of office space in South San Francisco, California.

The Company issued 114,437 restricted shares of its Series B redeemable convertible preferred stock in exchange for the use of the leased facility.

In May 2019, the Company entered into an amendment to the lease agreement to rent additional space in the same building for a one-time payment of approximately $63,000 on the same terms as the July 2018 agreement except rent.

As described in Note 1, the Company completed its IPO in May 2019.

As a result of the IPO, in addition to the 229,453 shares of Series B redeemable convertible preferred stock held by the investor, an additional 82,649 shares of the Company’s Series B redeemable convertible preferred stock under issued pursuant the lease agreement fully vested and were converted into common stock of the Company on a one-to-one basis.

As described in Note 1, o n February 10, 2020, the Company issued and sold shares of common stock at a purchase price of $50.00 per share in a private placement.

As described in Note 1, on February 10, 2020 , the Company issued and sold shares of common stock at a purchase price of $ 50.00 per share in a private placement.

In the private placement, the Company issued and sold 30,000 shares of common stock for an aggregate purchase price of $ 1,500,000 to an entity affiliated with David A.

Lamond, a member of the Company’s Board of Directors.

As described in Note 6, the Company entered into a second amendment to the lease agreement to rent additional space in the same facility under the same terms as its existing facility lease except the terms of payment.

Under the terms of the amendment, the Company will pay rent monthly for the additional space and the lease agreement will terminate in July 2021.

The Company recorded an operating lease asset and liability of $172,000.

In the first quarter of 2021, the Company entered into two agreements with LifeSci Advisors, LLC for non-capital advisory consulting services.

The Company’s Chief Operating Officer and Chief Financial Officer, Christopher Lowe, has an investment in a sister entity to LifeSci Advisors, LLC whose business is unrelated to the services being offered by LifeSci Advisors, LLC to the Company.

For the quarter ended March 31, 2021, the Company has not incurred a material expense related to these agreements .

The Company has a history of losses and expects to record a loss in 2021.

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On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") into law.

The Company has reviewed the aspects of this law as it relates to income taxes and have concluded that at this time, the CARES Act will have no material impact to the Company’s 2020 provision for income taxes.

On December 21, 2020, President Trump also signed into law the Consolidated Appropriations Act, 2021 ("CAA Act") which includes further COVID-19 economic relief and extension of certain expiring tax provisions.

The Company has reviewed the aspects of these laws as it relates to the income taxes and has concluded that at this time, the CARES Act and CAA Act will have no material impact to the Company's 2021 provision for income taxes.

The Company will continue to evaluate changes and revisions of the CARES Act and CAA Act and their impact on the Company’s financial position, results of operations and cash flows .

Net Loss Per Share

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the period presented due to their anti-dilutive effect:

September 30,

Options issued and outstanding

Stock options issued and outstanding

Performance stock options

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