Quince Therapeutics, Inc. 10-Q

Item 1. Financial Statements. Cortexyme, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share amounts) March 31, 2021 December 31, 2020 (1) ASSETS Current assets: Cash and cash equivalents $ 85,315 $ 66,841 Short term investments 61,720 66,979 Prepaid expenses and other current assets 2,850 4,042 Total current assets 149,885 137,862 Property and equipment, net 378 427 Operating lease right-of-use assets, net 500 674 Long term investments 23,720 50,464 Other assets 39 39 Total assets $ 174,522 $ 189,466 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 2,845 $ 3,555 Accrued expenses and other current liabilities 15,022 13,441 Total current liabilities 17,867 16,996 Long-term operating lease liability 171 208 Total liabilities 18,038 17,204 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.001 par value, 10,000,000 authorized, no shares issued and outstanding as of March 31, 2021 and December 31, 2020 — — Common stock, $ 0.001 par value, 100,000,000 shares authorized, 29,575,944 and 29,543,222 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively 29 29 Additional paid in capital 326,006 318,574 Accumulated other comprehensive income 189 313 Accumulated deficit ( 169,740 ) ( 146,654 ) Total stockholders’ equity 156,484 172,262 Total liabilities and stockholders’ equity $ 174,522 $ 189,466 (1) The balance sheet as of December 31, 2020 is derived from the audited financial statements as of that date See accompanying notes. 1 Cortexyme, Inc. Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share amounts) Three Months Ended March 31, 2021 2020 Operating expenses: Research and development $ 16,824 $ 14,380 General and administrative 6,489 3,478 Total operating expenses 23,313 17,858 Loss from operations ( 23,313 ) ( 17,858 ) Interest income 227 682 Net loss ( 23,086 ) ( 17,176 ) Other comprehensive loss: Unrealized loss on available for sales securities ( 124 ) ( 97 ) Total comprehensive loss ( 23,210 ) ( 17,273 ) Net loss per share - basic and diluted ( 0.78 ) ( 0.61 ) Weighted average shares of common stock outstanding - basic and diluted 29,554,921 28,261,719 See accompanying notes. 2 Cortexyme, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share and per share amounts) Common Stock Additional Paid in Accumulated Other Comprehensive Accumulated Total Stockholders' Shares Amount Capital Income / (Loss) Deficit Equity Balance January 1, 2021 29,543,222 $ 29 $ 318,574 $ 313 $ ( 146,654 ) $ 172,262 Exercise of stock options 32,722 — 441 — — 441 Stock based compensation — — 6,991 — — 6,991 Other comprehensive loss — — — ( 124 ) — ( 124 ) Net loss — — — — $ ( 23,086 ) ( 23,086 ) Balance March 31, 2021 29,575,944 $ 29 $ 326,006 $ 189 $ ( 169,740 ) $ 156,484 Balance January 1, 2020 26,869,413 $ 27 $ 185,196 $ 60 $ ( 69,805 ) $ 115,478 Issuance of common stock in connection with private placement, net of issuance costs of $ 7,310 2,500,000 2 117,688 — — 117,690 Exercise of stock options 35,127 — 191 — — 191 Stock based compensation — — 1,955 — — 1,955 Other comprehensive loss — — — ( 97 ) — ( 97 ) Net loss — — — — $ ( 17,176 ) ( 17,176 ) Balance March 31, 2020 29,404,540 $ 29 $ 305,030 $ ( 37 ) $ ( 86,981 ) $ 218,041 See accompanying notes. 3 Cortexyme, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) For the Three Months Ended March 31, 2021 2020 Cash flows from operating activities Net Loss $ ( 23,086 ) $ ( 17,176 ) Adjustments to reconcile net loss to net cash used in operating activities: Non-cash rent expense 92 92 Stock based compensation 6,991 1,955 Depreciation and amortization 86 83 Amortization of premium on available for sale investments 202 56 Changes in operating assets and liabilities: Prepaid expenses and other current assets 1,192 49 Accounts payable ( 710 ) 1,879 Accrued expenses and other current liabilities 1,623 2,283 Net cash used in operating activities ( 13,610 ) ( 10,779 ) Cash flow from investing activities: Purchase of investments ( 11,980 ) ( 95,543 ) Proceeds from maturities of investments 43,660 22,867 Purchase of property and equipment ( 37 ) ( 5 ) Net cash provided by / (used in) investing activities 31,643 ( 72,681 ) Cash flows from financing activities: Payments of finance leases — ( 29 ) Proceeds from issuance of common stock upon exercise of stock options 441 191 Proceeds from private placement offering, net of issuance costs — 117,690 Net cash provided by financing activities 441 117,852 Net increase in cash and cash equivalents 18,474 34,392 Cash and cash equivalents at beginning of period 66,841 51,214 Cash and cash equivalents at end of period $ 85,315 $ 85,606 See accompanying notes. 4 Cortexyme, Inc. Notes to Unaudited Condensed Consolidated Financial Statements Note 1. Organization Description of Business Cortexyme, Inc. (the “Company”) was incorporated in the State of Delaware in June 2012 and is headquartered in South San Francisco, California. The Company is a clinical stage biopharmaceutical company focused on developing therapeutics based on data supporting a new theory of the cause of Alzheimer’s disease and other degenerative disorders. Cortexyme is targeting a specific, infectious pathogen tied to neurodegeneration and chronic inflammation in humans and animal models. Private Investment in Public Equity (“PIPE”) In February 2020, the Company completed a private investment in public equity transaction (“PIPE Financing”). The Company entered into Stock Purchase Agreements (the “Purchase Agreements”) with certain accredited investors, including an entity affiliated with a member of the Company’s Board of Directors, pursuant to which the Company sold and issued shares of common stock for aggregate gross proceeds of $ 125.0 million. Costs related to the offering were $ 7.3 million. Pursuant to the Purchase Agreements, the Company sold 2,500,000 common shares at $ 50.00 per common share. In connection with the PIPE Financing, the Company filed a registration statement on Form S-1 (File No. 333-237594), with the SEC registering for resale the shares of common stock issued in the PIPE Financing. The registration statement was declared effective by the SEC on April 13, 2020. Liquidity and Capital Resources 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 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. Management expects to incur additional losses in the future to fund its operations and conduct product research and development and may need to raise additional capital to fully implement its business plan. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidate. Note 2. 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 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 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, 5 202 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 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 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. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from the Company’s estimates. Significant Accounting Policies 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. Cash equivalents, which consist of amounts invested in money market funds, are stated at fair value. There are no unrealized gains or losses on the money market funds for the periods presented. 6 Fair Value Measurements 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 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; Level 3 - Inputs that are unobservable. 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. 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. Recent Accounting Pronouncements Not Yet Adopted The following are new accounting pronouncements that the Company is evaluating for future impacts on its financial statements: Financial Instruments—Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which amends the principles around the recognition of credit losses by mandating entities incorporate an estimate of current expected credit losses when determining the value of certain assets. The guidance also amends reporting around allowances for credit losses on available-for-sale marketable securities. 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. All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable. Note 3. Fair Value Measurements 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 March 31, 2021 and December 31, 2020 are presented in the following tables (in thousands): Fair Value Measurements at March 31, 2021 Total Level 1 Level 2 Level 3 Money market funds $ 38,246 $ 38,246 $ — $ — Certificates of Deposit 17,888 — 17,888 — Repurchase Agreements 22,500 — 22,500 — Corporate notes 59,377 — 59,377 — Government and agency notes 4,686 — 4,686 — Municipal notes 3,489 — 3,489 — Total $ 146,186 $ 38,246 $ 107,940 $ — 7 Fair Value Measurements at December 31, 2020 Total Level 1 Level 2 Level 3 Money market funds $ 15,661 $ 15,661 $ — $ — Certificates of Deposit 30,765 — 30,765 — Repurchase Agreements 15,000 — 15,000 — Corporate notes 75,426 — 75,426 — Government and agency notes 8,296 — 8,296 — Municipal notes 3,446 — 3,446 — Total $ 148,594 $ 15,661 $ 132,933 $ — The following table summarizes the available-for-sale securities (in thousands): Fair Value Measurements at March 31, 2021 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Money market funds $ 38,246 $ — $ — $ 38,246 Certificates of Deposit 17,793 95 — 17,888 Repurchase Agreements 22,500 — — 22,500 Corporate notes 59,300 97 ( 20 ) 59,377 Government and agency notes 4,671 16 ( 1 ) 4,686 Municipal notes 3,488 2 ( 1 ) 3,489 Total cash equivalents and investments $ 145,998 $ 210 $ ( 22 ) $ 146,186 Classified as: Cash equivalents (maturities within 90 days) $ 60,746 Short-term investments (maturities within one year) 61,720 Long-term investments (maturities beyond 1 year) 23,720 Total cash equivalents and investments $ 146,186 Fair Value Measurements at December 31, 2020 Amortized Cost Unrealized Gains Unrealized Losses Fair Value Money market funds $ 15,661 $ — $ — $ 15,661 Certificates of Deposit 30,603 162 — 30,765 Repurchase Agreements 15,000 — — 15,000 Corporate notes 75,298 183 ( 55 ) 75,426 Government and agency notes 8,274 22 — 8,296 Municipal notes 3,445 1 — 3,446 Total cash equivalents and investments $ 148,281 $ 368 $ ( 55 ) $ 148,594 Classified as: Cash equivalents (maturities within 90 days) $ 31,151 Short-term investments (maturities within one year) 66,979 Long-term investments (maturities beyond 1 year) 50,464 Total cash equivalents and investments $ 148,594 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. 8 The investments are classified as available-for-sale securities. 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. Note 4: 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 Cash and cash equivalents: Cash $ 24,569 $ 35,690 Money market funds 38,246 15,661 Repurchase agreements 22,500 15,000 Certificates of deposit — 490 Total cash and cash equivalents $ 85,315 $ 66,841 Short-term investments: Certificates of deposit $ 14,240 $ 23,387 Municipal notes 2,157 2,365 Corporate notes 41,053 34,991 Government and agency notes 4,270 6,236 Total short-term investments $ 61,720 $ 66,979 Long-term investments Corporate notes $ 18,324 $ 40,435 Certificates of deposit 3,648 6,888 Municipal notes 1,333 1,081 Government and agency notes 415 2,060 Total long-term investments $ 23,720 $ 50,464 Note 5. Balance Sheet Components Prepaid expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): March 31, December 31, 2021 2020 Prepaid expenses $ 346 $ 274 Prepaid insurance 317 964 Prepaid research and development expenses 1,630 2,110 Other current assets 557 694 Total prepaid expenses and other current assets $ 2,850 $ 4,042 9 Property and Equipment, Net Property and equipment, net consist of the following (in thousands): March 31 December 31 2021 2020 Computer equipment $ 52 $ 33 Lab equipment 423 405 Finance lease right of use assets 557 557 Leasehold improvement 21 21 Office furniture 26 26 Less: accumulated amortization and depreciation ( 701 ) ( 615 ) Property and equipment, net $ 378 $ 427 Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consist of the following (in thousands): March 31, December 31, 2021 2020 Personnel expenses $ 1,463 $ 2,415 Professional fees 106 141 Research and development expenses 13,233 10,603 Other 220 282 Total accrued expenses and other current liabilities $ 15,022 $ 13,441 Note 6. Leases Real Estate Operating Leases 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. The Company issued 114,437 shares of its Series B redeemable convertible preferred stock with a fair value of $ 1.1 million in exchange for the leased facility. No other payments are due under the lease. The common area maintenance and other operating costs are included in the base rent. 100 % of the issued shares were initially subject to a repurchase option. Pursuant to the terms of the lease, each month beginning on the one-month anniversary of the commencement date of the lease, 1/36 th of the total shares are released from the repurchase option until all shares are released over the lease period of three years . The scheduled release of shares ceased immediately upon the IPO which was a terminating event. The Company completed its IPO on May 13, 2019 and as a result, pursuant to the terms of the lease agreement, all previously unvested shares were fully vested and as part of the IPO process, all outstanding shares of the Company’s redeemable convertible preferred stock including the Series B redeemable convertible preferred stock issued in connection with the lease agreement were converted into shares of the Company’s common stock on a 1 -for-1 basis and the operating lease liability was extinguished. In May 2019, the Company entered into an 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 paid a one-time fee of approximately $ 63,000 for the additional space and the lease agreement will terminate in July 2021 . No other payments are due under the lease agreement and no renewal option is available. As the entire lease is prepaid, there is no associated lease liability. In May 2020, 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 . 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. The lease agreement is for three years which commenced August 1, 2020. 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 March 31, 2021 condensed consolidated balance 10 sheet. 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 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 The Company uses certain vendor supplied equipment in connection with its on-going clinical trial. The Company has analyzed the vendor agreement and determined that it contains an embedded operating lease. The Company recognizes monthly the leases costs in our research and development expenses. The right of use asset and lease liability are recognized at the lease commencement date based on the present value of lease payments over the lease term. The Company’s lease does not provide an implicit rate. The Company used an adjusted historical incremental borrowing rate, based on the information available at the approximate lease commencement date, to determine the present value of lease payments. The remaining lease expense of $ 67,000 will be recognized over the remaining lease term of approximately 17 months. Clinical Equipment Financing Lease The Company uses certain vendor supplied equipment in connection with its on-going clinical trial. 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 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): March 31, 2021 December 31, 2020 Operating lease right of use asset, net $ 500 $ 674 Short-term operating lease liability 197 238 Long-term operating lease liability 171 208 $ 368 $ 446 Finance lease right of use asset 557 557 Finance lease accumulated amortization ( 394 ) ( 337 ) Total finance lease right of use asset, net $ 163 $ 220 Weighted average remaining lease term Operating leases 1.4 years 1.6 years Finance leases 0.7 years 0.9 years Weighted average discount rate Operating leases 2.10 % 2.10 % Finance leases — % — % Year ended December 31, Operating Lease 2021 (excluding the three months ended March 31, 2021) 165 2022 141 2023 70 Total lease payments 376 Less: imputed interest ( 8 ) Total remaining lease liability 368 11 Note 7. Stock-Based Compensation 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. The remaining shares available for issuance under the 2014 Plan were added to the shares reserved for issuance under the 2019 Plan. The 2019 Plan provides for the grant of stock options (including incentive stock options and non-qualified stock options), stock appreciation rights, restricted stock, RSUs, performance units, and performance shares to the Company’s employees, directors, and consultants. 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 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; and (iii) such other amount as the Company’s Board of Directors may determine . The 2019 Plan may be amended, suspended or terminated by the Company’s Board of Directors at any time, provided such action does not impair the existing rights of any participant, subject to stockholder approval of any amendment to the 2019 Plan as required by applicable law or listing requirements. Unless sooner terminated by the Company’s Board of Directors, the 2019 Plan will automatically terminate on April 23, 2029. 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: Number of Options and Unvested Shares Weighted Average Exercise Price Weighted average remaining contractual life (years) Aggregate intrinsic value (In thousands) Balance at December 31, 2020 4,790,327 $ 25.47 8.69 $ 49,723 Options granted 126,000 39.27 Options exercised ( 32,722 ) 13.48 Options cancelled / forfeited ( 27,084 ) 28.90 Balance at March 31, 2021 4,856,521 $ 25.89 8.48 $ 73,413 Options vested and expected to vest as of March 31, 2021 4,856,521 25.89 8.48 73,413 Options exercisable as of March 31, 2021 1,713,563 $ 12.43 7.56 $ 45,006 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 Weighted Average Exercise Price Weighted average remaining contractual life (years) Balance at December 31, 2020 675,000 $ 29.60 9.94 Balance at March 31, 2021 675,000 29.60 9.69 Outstanding 675,000 $ 29.60 9.69 Vested — — — 12 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): March 31, 2021 2020 General and administrative expense $ 3,478 $ 1,038 Research and development expense 3,513 917 Total stock-based compensation $ 6,991 $ 1,955 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 effectiveness 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. employees. In addition, the 2019 ESPP authorizes grants of purchase rights that do not comply with Section 423 of the Code under a separate non-423 component for non-U.S. employees and certain non-U.S. service providers. 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: (i) 536,589 shares; (ii) 1 % of the shares of common stock outstanding on the last day of the prior fiscal year; or (iii) such lesser number of shares determined by the Company’s Board of Directors. 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. Note 8. Related Party Transactions 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. 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 . 13 Note 9. Income Taxes The Company has a history of losses and expects to record a loss in 2021. The Company accounts for income taxes under ASC Topic 740 – Income Taxes. Under this standard, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations. No provision for income taxes has been recorded due to the available net operating loss carry forwards. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future deferred tax assets. On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") into law. 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 . Note 10. 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: March 31, 2021 2020 Stock options issued and outstanding 4,856,521 3,271,050 Performance stock options 675,000 — Total 5,531,521 3,271,050 14