What changed in this filing

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Item 1. Financial Statements

2021-08-12 compared with 2021-05-13 · 597 added, 431 removed, 64 unchanged (94% of the section changed)

Item 1 – Financial Statements

MILLENDO THERAPEUTICS, INC.

TEMPEST THERAPEUTICS, INC.

Consolidated Balance Sheets

(in thousands except share and per share amounts)

2021 December 31,

Current assets:

Cash and cash equivalents

$ 26,802 $ 38,174

Short-term restricted cash 45 484

Marketable securities 439 —

Restricted cash

Prepaid expenses and other current assets

Refundable tax credit 300 314

Total current assets

29,394 40,901

Operating lease right-of-use assets 2,014 2,157

Other assets 299 351

Total assets $ 31,707 $ 43,409

Liabilities and stockholders’ equity

Property and equipment — net

Operating lease right-of-use

Other noncurrent assets

Liabilities and stockholders’ equity (deficit)

Current liabilities:

Current portion of debt $ 235 $ 239

Accounts payable

Accrued expenses

Operating lease liabilities — current 742 737

Current operating lease liabilities

Accrued compensation

Interest payable

Early option exercise liability

Total current liabilities

Debt, net of current portion — 61

Loan payable (net of issuance costs of $ 85 )

Operating lease liabilities

1 unchanged sentence

Commitments and contingencies (Note 8)

Stockholders’ equity:

Preferred stock, $ 0.001 par value:

5,000,000 shares authorized;

no shares issued and outstanding

Convertible preferred stock, $ 0.001 par value;

5,000,000 and

135,936,731 shares authorized at June 30, 2021 and December 31, 2020, respectively;

nil and 114,686,731 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively;

liquidation preference of $ 0 and $ 100,186,732 at June 30, 2021 and December 31, 2020, respectively

Stockholders’ equity (deficit):

Common stock, $ 0.001 par value;

100,000,000 shares authorized;

19,043,034 and 18,999,701 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital 278,113 277,647

100,000,000 and

196,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively;

6,637,081 and 527,265 shares issued and outstanding, 8,767 and 29,041 subject to repurchase at June 30, 2021 and December 31, 2020, respectively

Additional paid-in

Accumulated deficit

Accumulated other comprehensive income 277 452

Total stockholders’ equity attributable to Millendo Therapeutics, Inc.

24,960 33,058

Equity attributable to noncontrolling interests 668 668

Total stockholders’ equity 25,628 33,726

Total liabilities and stockholders’ equity $ 31,707 $ 43,409

Total stockholders’ equity (deficit)

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

See accompanying Notes to unaudited Interim Consolidated Financial Statements

MILLENDO THERAPEUTICS, INC.

Consolidated Statements of Operations and Comprehensive Loss

TEMPEST THERAPEUTICS, INC.

Consolidated Statements of Operations

(in thousands except share and per share amounts)

Three Months Ended

Six Months Ended

Operating expenses:

Research and development

$ 2,152 $ 7,540

General and administrative

Loss from operations

Other expenses (income):

Interest expense (income), net $ 1 $ ( 162 )

Other (gain) / loss ( 174 ) 25

Net loss $ ( 8,389 ) $ ( 11,998 )

Other income (expense):

Interest expense

Interest income and other income (expense), net

Net loss per share of common stock, basic and diluted

Weighted-average shares of common stock outstanding, basic and diluted

Other comprehensive income (loss):

Foreign currency translation adjustment $ ( 175 ) $ ( 42 )

Comprehensive loss $ ( 8,564 ) $ ( 12,040 )

See accompanying Notes to unaudited Interim Consolidated Financial Statements

MILLENDO THERAPEUTICS, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

TEMPEST THERAPEUTICS, INC.

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

(in thousands except share amounts)

Three Months Ended March 31, 2021

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Three Months Ended June 30, 2021

Stockholders’

Equity (Deficit)

attributable to Millendo

Therapeutics, Inc.

Attributable to

Noncontrolling

Interests Total

Stockholders’

Shares Amount

Balance at January 1, 2021 18,999,701 $ 19 $ 277,647 $ ( 245,060 ) $ 452 $ 33,058 $ 668 $ 33,726

Preferred Stock

Prefer110red Stock

Preferred Stock

BALANCE—March 31, 2021

Exercise of stock options

Stock-based compensation expense — — 380 — — 380 — 380

Foreign currency translation adjustment — — — — ( 175 ) ( 175 ) — ( 175 )

Net loss — — — ( 8,389 ) — ( 8,389 ) — ( 8,389 )

Balance at March 31, 2021 19,043,034 $ 19 $ 278,113 $ ( 253,449 ) $ 277 $ 24,960 $ 668 $ 25,628

Three Months Ended March 31, 2020

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Vesting of early exercised stock options

Conversion of preferred stock to common stock

Issuance of common stock for cash

Share-based compensation

Reverse recapitalization transaction costs

Record pre-merger Millendo

stockholders’ equity and

elimination of Millendo

historical accumulated

BALANCE—June 30, 2021

Three Months Ended June 30, 2020

Stockholders’

Equity (Deficit)

attributable to Millendo

Therapeutics, Inc.

Attributable to

Noncontrolling

Interests Total

Preferred Stock

BALANCE—March 31, 2020

Vesting of early exercised stock options

Share-based compensation

BALANCE—June 30, 2020

ee accompanying Notes to unaudited Interim Consolidated Financial Statements.

TEMPEST THERAPEUTICS, INC.

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

(in thousands except share amounts)

Six Months Ended June 30, 2021

Stockholders’

Shares Amount

Balance at January 1, 2020 18,266,545 $ 18 $ 267,018 $ ( 208,654 ) $ 165 $ 58,547 $ 1,324 $ 59,871

Issuance of common stock, net of issuance costs 719,400 1 5,649 — — 5,650 — 5,650

Exercise/forfeiture of BSPCE warrants 12,307 — 593 — — 593 ( 515 ) 78

Stock-based compensation expense — — 1,080 — — 1,080 — 1,080

Foreign currency translation adjustment — — — — ( 42 ) ( 42 ) — ( 42 )

Net loss — — — ( 11,998 ) — ( 11,998 ) — ( 11,998 )

Balance at March 31, 2020 18,998,252 $ 19 $ 274,340 $ ( 220,652 ) $ 123 $ 53,830 $ 809 $ 54,639

Equity (Deficit)

Preferred Stock

BALANCE—December 31, 2020

Exercise of stock options

Vesting of early exercised stock options

Conversion of preferred stock to common stock

Issuance of common stock for cash

Share-based compensation

Reverse recapitalization transaction costs

Record pre-merger Millendo

stockholders’ equity and

elimination of Millendo

historical accumulated

BALANCE—June 30, 2021

Six Months Ended June 30, 2020

Stockholders’

Equity (Deficit)

Preferred Stock

BALANCE—December 31, 2019

Exercise of options—net of

Issuance of preferred stock for cash—net of issuance costs of $ 265

Vesting of early exercised stock options

Share-based compensation

BALANCE—June 30, 2020

See accompanying Notes to unaudited Interim Consolidated Financial Statements.

MILLENDO THERAPEUTICS, INC.

TEMPEST THERAPEUTICS, INC.

Consolidated Statements of Cash Flows

(in thousands)

Three Months Ended

Six Months Ended

Operating activities:

Net loss $ ( 8,389 ) $ ( 11,998 )

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

Depreciation expense

Stock-based compensation expense

Foreign currency remeasurement gain ( 174 ) —

Amortization of right-of-use asset 143 243

Loss on disposal of equipment 9 —

Noncash lease expense

Noncash related party interest income

Noncash interest and other expense

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Other assets — ( 1 )

Accounts payable

Accrued expenses and other liabilities

Interest payable

Operating lease liabilities

1 unchanged sentence

Investing activities:

Proceeds (purchases) from property and equipment 8 ( 26 )

Cash provided by (used) in investing activities 8 ( 26 )

Purchase of property and equipment

Repayment of note receivable

Cash (used in) provided by investing activities

Financing activities:

Repayment of debt ( 54 ) —

Proceeds from the issuance of common stock, net of issuance costs — 5,521

Proceeds from option and BSPCE warrant exercises 86 78

Repayment of principal on finance lease ( 10 ) ( 10 )

Proceeds from issuance of preferred stock

Payment of preferred stock issuance costs

Proceeds from the issuance of common stock

Borrowings on loan payable

Payment of loan issuance costs

Cash acquired in connection with the reverse recapitalization

Payment of reverse recapitalization transaction costs

Proceeds from option exercises

Cash provided by financing activities

Effect of foreign currency exchange rate changes on cash ( 6 ) ( 37 )

Net decrease in cash, cash equivalents and restricted cash ( 11,811 ) ( 4,635 )

Cash, cash equivalents and restricted cash at beginning of period 38,658 63,512

Cash, cash equivalents and restricted cash at end of period $ 26,847 $ 58,877

Supplemental schedule of non-cash investing and financing activities:

Financing costs in accounts payable and accrued expenses $ — $ 68

See accompanying Notes to unaudited Interim Consolidated Financial Statements

MILLENDO THERAPEUTICS, INC.

Net increase in cash and cash equivalents

Cash and cash equivalents and restricted cash at beginning of period

Cash and cash equivalents and restricted cash at end of period

Supplemental disclosure of cashflow information:

Cash paid for interest

Supplemental schedule of non-cash

investing and financing activities:

Vesting of early exercise stock options

ee accompanying Notes to unaudited Interim Consolidated Financial Statements

TEMPEST THERAPEUTICS, INC.

Notes to Unaudited Interim Consolidated Financial Statements

Organization and Description of Business

ORGANIZATION AND DESCRIPTION OF THE BUSINESS

Description of Business

Millendo Therapeutics, Inc.

(the “Company”), a Delaware corporation, together with its subsidiaries, is a biopharmaceutical company that was previously primarily focused on developing novel treatments for orphan endocrine diseases where current therapies do not exist or are insufficient.

The Company had been developing livoletide (AZP-531), as a potential treatment for Prader-Willi syndrome, (“PWS”), a rare and complex genetic endocrine disease characterized by hyperphagia, or insatiable hunger.

The Company discontinued the development of livoletide as a potential treatment for PWS in April 2020 based upon results from its Phase 2b trial.

All costs, including estimated closeout costs associated with the livoletide program were recognized during 2020.

The Company does not expect to incur future material expenses related to this program.

In an effort to streamline costs after discontinuing the PWS program, the Company eliminated employee positions representing approximately 30 % of its prior headcount, which were completed in the second quarter of 2020.

The Company recorded one-time costs of $ 1.1 million in the form of termination benefits related to this plan in the second quarter of 2020.

The Company had also been developing nevanimibe (ATR-101) as a potential treatment for patients with classic congenital adrenal hyperplasia, (“CAH”), a rare, monogenic adrenal disease that requires lifelong treatment with exogenous cortisol, often at high doses.

The Company elected to cease investing in the development of nevanimibe as a potential treatment for CAH in June 2020 based on an interim review of data from its Phase 2b trial.

All costs, including estimated closeout costs associated with the nevanimibe program for the treatment of CAH were recognized during 2020.

The Company does not expect to incur future material expenses related to its nevanimibe program for the treatment of CAH.

The Company had also been developing a selective neurokinin 3-receptor (NK3R) antagonist (MLE-301) as a potential treatment of vasomotor symptoms (“VMS”), commonly known as hot flashes and night sweats, in menopausal women.

In January 2021, the Company discontinued further investment in MLE-301 for the treatment of VMS based on an analysis of the pharmacokinetic and pharmacodynamic data from the single ascending dose portion of the Phase 1 study.

All costs, including estimated closeout costs associated with the MLE-301 program were recognized during the first quarter of 2021 and the Company does not expect to incur future material expenses related to this program.

In January 2021, as a result of its decision to discontinue its investment in MLE-301, the Company's Board of Directors (the “Board”) also approved a corporate restructuring plan (the “Plan”) furthering the Company's ongoing efforts to align its resources with its current strategy and operations.

In connection with the Plan, the Company plans to reduce its workforce by up to 85 %, and the majority of the reduction in personnel was completed by April 15, 2021.

The Company initiated this reduction in force in January 2021 and has provided or will provide severance payments and continuation of group health insurance coverage for a specified period to the affected employees.

The Company has also entered into retention arrangements with employees who are expected to remain with the Company.

The Company estimates that it will incur costs of approximately $ 5.5 million for termination benefits and retention arrangements related to the Plan, of which approximately $ 4.2 million has been recorded in the first quarter of 2021.

Substantially all termination benefits will be cash expenditures.

In 2020, the Company undertook a strategic review process, which was intended to result in an actionable plan that leverages its assets, capital and capabilities to maximize stockholder value.

Following an extensive process of evaluating strategic alternatives, including identifying and reviewing potential candidates for a strategic acquisition or other transaction, on March 29, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Tempest Therapeutics, Inc.

(“Tempest”) under which the privately held Tempest will merge with a wholly owned subsidiary of Millendo (the “Merger”).

The Merger is subject to certain closing conditions, including, among other things, approval by the Company's stockholders.

If the Merger is completed, the business of Tempest will continue as the business of the combined company.

The Company has incurred net losses since inception and it expects to generate losses from operations for the foreseeable future primarily due to the ongoing review of corporate strategic alternatives that include, but are not limited to, the potential sale or merger of the Company or its assets.

As of March 31, 2021, the Company had cash, cash equivalents, marketable securities and restricted cash of $ 27.3 million and an accumulated deficit of $ 253.4 million.

In April 2019, the Company entered into an “at-the-market” (“ATM”) equity distribution agreement with Citigroup Global Markets Inc.

acting as sole agent with an aggregate offering value of up to $ 50.0 million, which allows the Company to sell its common stock through the facilities of the Nasdaq Capital Market.

Subject to the terms of the ATM equity distribution agreement, the Company is able to determine, at its sole discretion, the timing and number of shares to be sold under this ATM facility.

In March 2020, the Company amended and restated the equity distribution agreement to include SVB Leerink LLC as an additional sales agent for the ATM.

In March 2020, the Company sold 719,400 shares of its common stock under its ATM equity distribution agreement for net proceeds of approximately $ 5.5 million.

The Company does not expect to sell additional shares of common stock under the equity distribution agreement.

Given its limited expected financing options, the Company is currently exploring an expanded range of strategic alternatives that include, but are not limited to, the potential sale or merger of the Company or its assets.

In the event that the Company does not complete the Merger with Tempest, the Company (i) may elect to pursue a dissolution and liquidation of the Company, (ii) may pursue another strategic transaction or (iii) may resume research and development activities.

The Company believes its cash, cash equivalents and restricted cash at March 31, 2021 are sufficient to fund its current operations for at least 12 months following the issuance of these financial statements.

Basis of Presentation and Summary of Significant Accounting Policies

Basis of presentation and consolidation principles

The accompanying unaudited Interim Consolidated Financial Statements include the accounts of Millendo Therapeutics, Inc.

and its subsidiaries, and all intercompany amounts have been eliminated.

The unaudited Interim Consolidated Financial Statements have been prepared in conformity with U.S.

—Tempest Therapeutics, Inc.

(“Tempest,” or the “Company”) is a clinical-stage oncology company focused on developing novel, orally available therapies for the treatment of solid tumors.

Tempest has three programs currently in development, TPST-1495, TPST-1120 and a TREX-1 antagonist.

TPST-1495 is a dual antagonist of the EP2 and EP4 prostaglandin E2 receptors, and to the Company’s knowledge, is the only such dual antagonist in clinical development.

TPST-1495 is currently in a Phase 1 trial in solid tumors.

Tempest’s second clinical program, TPST-1120, is a selective antagonist of peroxisome proliferator-activated receptor alpha (“PPARα”) and is also in a Phase 1 trial in solid tumors.

Similar to TPST-1495, Tempest believes TPST-1120 is the only PPARα antagonist in clinical development.

The Company also has a third program in preclinical studies that could be the first to target TREX-1, a cellular enzyme that regulates the innate immune response in tumors.

Tempest is headquartered in South San

Francisco, California.

Merger with Millendo

—On March 29, 2021, TempestTx, Inc.

(“Private Tempest”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Millendo Therapeutics, Inc.

(“Millendo”).

Concurrent with the execution and delivery of the Merger Agreement, Private Tempest entered into funding agreements with certain investors named therein, pursuant to which the investors agreed to purchase, in the aggregate, $ 30.0 million of common stock of Private Tempest, convertible into securities of Millendo.

On June 25, 2021, Private Tempest completed the merger with Millendo in accordance with the Merger Agreement.

Prior to the effective time of the merger, Millendo effected a 1-for-15

reverse stock split, and right after the merger, Millendo changed its name to Tempest Therapeutics, Inc.

Under the terms of the Merger Agreement, immediately prior to the effective time of the merger, each share Private Tempest’s preferred stock was converted into a share of Private Tempest’s common stock.

At closing of the merger, the Company issued an aggregate of approximately

shares of its common stock to Private Tempest stockholders, based on an exchange ratio of

0.0322 shares of the Company’s common stock for each share of Private Tempest common stock outstanding immediately prior to the merger, including those shares of common stock issued upon conversion of the Private Tempest preferred stock, resulting in approximately

shares of the Company’s common stock being issued and outstanding immediately following the effective time of the merger.

The Company also assumed all of the outstanding and unexercised stock options and warrants to purchase shares of Private Tempest capital stock.

The assumed options continue to be governed by the terms of the 2011 and 2017 Equity Incentive Plans (as discussed more in Note 12) under which the options were originally granted, with such options hence forth representing the right to purchase a number of shares of the Company’s common stock equal to 0.0322 multiplied by the number of share of Private Tempest common stock previously represented by such options.

he merger was accounted for as a reverse recapitalization in accordance with U.S.

generally accepted accounting principles (“GAAP”).

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

The unaudited Interim Consolidated Financial Statements include the accounts of the Company’s subsidiaries in which the Company holds a controlling financial interest as of the financial statement date.

Unaudited Interim Consolidated Financial Statements

The Company has prepared the accompanying unaudited Interim Consolidated Financial Statements based on Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods.

These unaudited Interim Consolidated Financial Statements include, in the Company’s opinion, all adjustments, consisting only of normal recurring adjustments that the Company considers necessary for a fair presentation of its consolidated financial position and results of operations for these periods.

The Company’s historical results are not necessarily indicative of the results to be expected in the future and the Company’s operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

The accompanying unaudited Interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 29, 2021.

Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies except as noted below:

Under this method of accounting, Private Tempest was be deemed to be the accounting acquirer for financial reporting purposes.

This determination was primarily based on the expectation that, immediately following the merger:

(i) Private Tempest stockholders would own a substantial majority of the voting rights;

(ii) Private Tempest would designate a substantial majority of the initial members of the board of directors of the combined company;

(iii) Private Tempest’s executive management team would become the management of the combined company;

and (iv) the combined company would be named Tempest Therapeutics, Inc.

Accordingly, for accounting purposes, the merger was treated as the equivalent of Tempest issuing stock to acquire the net assets of Millendo.

As a result of the merger, the net assets of Millendo were recorded at their acquisition-date fair value in the financial statements of Private Tempest and the reported operating results prior to the merger will be those of Private Tempest.

Historical per share figures of Private Tempest have been retroactively restated based on the exchange ratio of

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

—The accompanying unaudited interim financial statements have been prepared in accordance with GAAP.

Unaudited Interim Financial Statements

—The Company has prepared the accompanying unaudited interim financial statements on the same basis as the audited financial statements, and the unaudited interim financial statements include, in the Company’s opinion, all adjustments, consisting only of normal recurring adjustments that the Company considers necessary for a fair presentation of its financial position and results of operations for these periods.

The unaudited interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements.

Use of Estimates

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

Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the Consolidated Financial Statements, actual results may materially vary from these estimates.

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

Significant Risks and Uncertainties

With the global impacts of the ongoing COVID-19 pandemic continuing in the first quarter of 2021, the Company is maintaining business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business.

The Company anticipates that the COVID-19 pandemic will continue to have an impact on business activities .

The extent to which the COVID-19 pandemic impacts the Company’s business, its strategic planning and the value of and market for its

common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the U.S., Europe and other countries, and the effectiveness of actions taken globally to contain and treat the disease.

The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

Restricted Cash and Marketable Securities

Restricted cash relates to amounts used to secure the Company’s credit card facility balances held on deposit with major financial institutions and to collateralize a letter of credit in the name of the Company’s landlord pursuant to a certain operating lease agreement as of December 31, 2020.

In the first quarter of 2021, the letter of credit in the amount of $ 0.4 million expired and remained invested in a certificate of deposit.

This amount is reflected in marketable securities on the Company's consolidated balance sheet as the original maturity of the certificate of deposit was greater than three months when acquired.

Net loss per share

Basic loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period.

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

In computing the basic and diluted net loss per share, the weighted-average number of shares of common stock remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

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 (amounts shown as common stock equivalents):

Stock options

3,520,358 3,340,732

Common stock warrants 17,125 17,125

BSA and BSPCE warrants 48,265 58,415

3,585,748 3,416,272

Recent accounting pronouncements

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) .

ASU 2020-01 states any equity security transitioning from the alternative method of accounting under Topic 321 to the equity method, or vice versa, due to an observable transaction will be remeasured immediately before the transition.

In addition, the ASU clarifies the accounting for certain non-derivative forward contracts or purchased call options to acquire equity securities stating such instruments will be measured using the fair value principles of Topic 321 before settlement or exercise.

The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied on a prospective basis.

The Company adopted ASU 2020-01 on January 1, 2021, which did not have a material effect on the consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes .

ASU 2019-12 simplifies the accounting for income taxes by removing exceptions within the general principles of Topic 740 regarding the calculation of deferred tax liabilities, the incremental approach for intra-period tax allocation, and calculating income taxes in an interim period.

In addition, the ASU adds clarifications to the accounting for franchise tax (or similar tax), which is partially based on income, evaluating tax basis of goodwill recognized from a business combination, and reflecting the effect of any enacted changes in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

The ASU is effective for fiscal years beginning after December 15, 2020, and will be applied either retrospectively or prospectively based upon the applicable amendments.

The Company adopted ASU 2019-01 on January 1, 2021, which did not have a material effect on the consolidated financial statements.

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 .

ASU 2018-13 resulted in certain modifications to fair value

measurement disclosures, primarily related to level 3 fair value measurements.

This standard was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, and early adoption was permitted.

The adoption of this ASU did not have a material impact on the consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments , which replaces the incurred loss impairment methodology in current 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.

Additionally, ASU 2016-13 requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected through the use of an allowance of expected credit losses.

In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326) Targeted Transition Relief , which amends ASU 2016-13 by providing entities with an option to irrevocably elect the fair value option to be applied on an instrument-by-instrument basis for eligible financial instruments that are within the scope of Topic 326.

The fair value option election does not apply to held-to-maturity debt 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) , which finalized effective date delays for private companies, not-for-profit organizations, and certain smaller reporting companies applying the credit losses, leases, and hedging standards.

Also, in November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments - Credit Losses , which provides clarity about certain aspects of the amendments in ASU 2016-13.

ASU 2016-13, as amended, is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and requires a modified retrospective approach.

The Company is in the process of evaluating the impact of this new guidance on its consolidated financial statements and related disclosures.

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

On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to research and development accruals, recoverability of long-lived assets, right-of-use

assets, lease obligations, fair value of common stock stock-based

compensation and income taxes uncertainties and valuation allowances.

Management bases its estimates on historical experience and on various other assumptions that are believed 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 may differ from those estimates.

Risks and Uncertainties –

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations,

protection of proprietary technology, dependence on key personnel, reliance on single-source vendors, availability of raw materials, patentability of the Company’s products and processes and clinical efficacy and safety of the Company’s products under development, compliance with government regulations and the need to obtain additional financing to fund operations.

Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials and regulatory approval, prior to commercialization.

These efforts will require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and, therefore, the Company has not generated any revenue from product sales.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable.

Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales.

The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies.

In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

Moreover, the current COVID-19

(“coronavirus”) pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities.

The extent to which the COVID-19

pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

Cash and Cash Equivalents

—The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisitions to be cash equivalents.

As of June 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents consisted of bank deposits and a money market funds.

Property and Equipment

—Property and equipment is recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method.

Upon disposal of an asset, the related cost and accumulated depreciation are removed from the asset accounts and any resulting gain or loss is included in the statement of operations.

Repair and maintenance costs are expensed as incurred, whereas major improvements are capitalized as additions to property and equipment.

The estimated useful lives of the Company’s respective assets are as follows:

Computer equipment and software

Furniture and fixtures

Laboratory equipment

Leasehold improvements

Shorter of the useful life of the asset or the life of the lease

Impairment of Long-Lived Assets

—Long-lived assets are reviewed for impairment if events or circumstances indicate the carrying amount of these assets may not be recoverable.

If this review indicates that these assets will not be recoverable, based on the forecasted undiscounted future operating cash flows expected to result from the use of long-lived assets and their eventual disposition, the Company’s carrying value of the long-lived assets is reduced to fair value based on a discounted future cash flow approach or quoted market values.

For the six months ended June 30, 2021 and 2020, there were no events or circumstances which required an impairment test of long-lived assets.

Convertible Preferred Stock

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

The convertible preferred stock is recorded outside of stockholders’ deficit because the shares contain liquidation features that are not solely within the Company’s control.

The Company has elected not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because it is uncertain whether or when an event would occur that would obligate the Company to pay the liquidation preferences to holders of shares of convertible preferred stock.

Subsequent adjustments to the carrying values to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur.

Comprehensive Loss

—Comprehensive loss includes net loss as well as other changes in stockholders’ deficit that results from transactions and economic events other than those with stockholders.

There was no other comprehensive income or loss for the six months ended June 30, 2021 and 2020.

Research and Development Expenses and Accrued Research and Development

—Research and development expenses are charged to expense as incurred.

Research and development expenses include certain payroll and personnel expenses, laboratory supplies, consulting costs, external contract research and development expenses.

fees and other costs to acquire technologies that are utilized in research and development, and that are not expected to have alternative future use, are expensed when incurred.

Advance payments for goods or services for future research and development activities are deferred and expensed as the goods are delivered or the related services are performed.

The Company estimates preclinical studies and clinical trial expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on the Company’s behalf.

In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period.

These estimates are based on communications with the third-party

service providers, the Company’s estimates of accrued expenses and on information available at each balance sheet date.

If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly.

The estimates are trued up to reflect the best information available at the time of the financial statement issuance.

Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company’s estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.

Patent Costs –

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

These patent-related legal costs are reported as a component of general and administrative expense.

General and Administrative Expense –

General and administrative costs are expensed as incurred and include employee-related expenses including salaries, benefits, travel and stock-based compensation for the Company’s personnel in executive, finance and accounting, and other administrative functions, as well as fees paid for legal, accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expense.

Legal costs include general corporate legal fees and patent costs.

Fair Value Measurements

—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

As such, fair value is a market-based

measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

The carrying amounts of the Company’s financial instruments approximate fair value due to their short-term

Compensation Expense

—The Company accounts for stock-based

compensation by measuring and recognizing compensation expense for all share-based

payments made to employees, directors and non-employees

based on estimated grant-date

The Company uses the straight-line

method to allocate compensation cost to reporting periods over each optionee’s requisite service period, which is generally the vesting period.

The Company estimates the fair value of stock options to employees, directors and non-employees

using the Black-Scholes

option-valuation

The Black-Scholes

model requires the input of subjective assumptions, including expected volatility, expected dividend yield, expected term, risk-free

rate of return, and the estimated fair value of the underlying common stock on the date of grant.

Due to the lack of company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded.

The historical volatility is calculated based on a period of time commensurate with the expected term assumption.

The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the life science industry.

The Company uses the simplified method to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting tranche for awards with graded vesting.

The mid-point

between the vesting date and the maximum contractual expiration date is used as the expected term under this method.

For awards with multiple vesting-tranches, the times from grant until the mid-points

for each of the tranches may be averaged to provide an overall expected term.

The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options.

The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

The Company accounts for forfeitures as they occur.

The fair value of restricted stock awards granted to employees are valued as of the grant date using the estimated fair value of the Company’s common stock.

Net Loss per Share Attributable to Common Stockholders

—The Company follows the two-class

method when computing net loss per share as the Company has issued shares that meet the definition of participating securities.

The two-class

method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings.

The two-class

method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.

Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.

Diluted net loss attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares.

For purpose of this calculation, outstanding stock options, convertible preferred stock and warrants to purchase shares of convertible preferred stock are considered potential dilutive common shares.

—The Company accounts for income taxes using the asset and liability method.

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of

assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction

In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes.

Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period when such determination is made.

As of June 30, 2021 and December 31, 2020, the Company has recorded a full valuation allowance on its deferred tax assets.

Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit.

Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.

Recently Issued Accounting Pronouncements

—From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified effective date.

In August 2020, the FASB issued ASU 2020-06

, Debt-Debt With Conversions and Other Options (Subtopic 470-20)

and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40)

The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

Under the new ASU, convertible instruments will now more frequently accounted for as a single unit of account.

That is, a conversion feature and the host instrument in which it is embedded now generally will be treated as a single unit of acc o

unt unless the conversion feature requires bifurcation under Topic 815.

The ASU is effective for fiscal years beginning after December 15, 2021 for public business entities, and for fiscal years beginning after December 15, 2023 for all other entities.

Early adoption is permitted.

The Company is in the process of evaluating the impact of this new guidance on its financial statements and related disclosures.

MILLENDO MERGER

As described in Note 1,

Private Tempest merged with the Company on June

The merger was accounted for as a reverse recapitalization with Private Tempest as the accounting acquirer.

pre-combination

assets of Millendo were cash, cash equivalents and restricted cash.

Under reverse recapitalization accounting, the assets and liabilities of Millendo were recorded at their fair value which approximated book value due to the short-term nature of the instruments.

No goodwill or intangible assets were recognized.

Consequently, the consolidated financial statements of Tempest reflect the operations of Millendo for accounting purposes together with a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization of the equity of the accounting acquirer.

As part of the reverse recapitalization, the Company obtained approximately $ 17.0 million of cash, cash equivalents and restricted cash.

The Company also obtained prepaids and other assets of approximately $ 1.4 million and assumed payables and accruals of approximately $ 0.5 million.

The Company also acquired operating lease right-of-use

asset of $ 2.1 million and the related operating lease liability of $ 2.1 million.

All of the development programs and associated collaboration arrangements were terminated prior to the merger and were deemed to have no value at the transaction date and the Company is winding down the legacy Millendo operations.

In addition, the Company incurred approximately $ 0.2 million in share-based compensation expense as a result of the acceleration of vesting of stock options at the time of merger.

This amount was recorded in general and administrative expense in the accompanying consolidated statements of operations for the three months and six months period ended June 30, 2021.

The Company also incurred transaction costs of approximately $ 6.1 million and this amount is recorded in additional paid-in

capital in the accompanying consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the three months and six months period ended June 30, 2021.

FAIR VALUE MEASUREMENTS

The following tables present the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands):

March 31, 2021

(Level 2) (Level 3)

Money market funds (included in cash and cash equivalents) $ 24,637 $ — $ —

Certificate of deposit $ 439 $ — $ —

December 31, 2020

(Level 1) (Level 2) (Level 3)

Money market funds (included in cash and cash equivalents) $ 33,636 $ — $ —

Accrued Expenses

Accrued expenses consist of the following (amounts in thousands):

June 30, 2021

Cash and cash equivalents

Short-term restricted cash

December 31, 2020

Compensation and related benefits $ 781 $ 1,978

Professional fees 1,009 719

Preclinical and clinical costs 131 1,002

Insurance premiums 775 1,476

Other 113 350

Total $ 2,809 $ 5,525

Bpifrance Reimbursable Advance

In December, 2017, in connection with its acquisition of Alizé Pharma SAS (“Alizé”), the Company assumed € 0.7 million of debt that Alizé had outstanding with Bpifrance Financing (“Bpifrance”).

The original advance amount of € 0.8 million (“the

Bpifrance Advance”) was provided to Alizé as an innovation aid that required Alizé to carry out certain activities related to its livoletide clinical development program and incur a certain level of program expenditures.

No interest is charged or accrued under the advance.

The Company is required to make quarterly principal payments, which began in December 2016 and continue through September 2021.

The quarterly principal payments escalate over the repayment period beginning with € 17,500 per quarter and increasing to € 50,000 through maturity.

In addition to the quarterly payments, beginning January 1, 2016, Bpifrance may require the Company to pay, by no later than March 31 of each year, a reimbursement annuity equal to 20 % of the proceeds generated by the Company from license, assignment or use of livoletide.

Under no circumstance, however, would the Company be required to reimburse to Bpifrance principal amounts greater than the original advance it received.

The Company is permitted to repay the Bpifrance Advance at any time, at which point it would be released from all commitments and obligations under the Bpifrance Advance agreement.

The Bpifrance Advance agreement does not contain any ongoing financial covenants.

During the three months ended March 31, 2021, the Company made $ 54,000 in principal payments.

During the three months ended March 31, 2020, the Company made no principal payments under the Bpifrance Advance agreement due to the fact that in April 2020, Bpifrance provided a six month deferral of principal payments to support businesses as a result of the COVID-19 pandemic.

At March 31, 2021, the balance outstanding was $ 0.2 million (or € 0.2 million).

Commitments and Contingencies

Operating Leases

The Company has noncancelable operating leases for office space which have remaining lease terms of approximately 3.2 years.

The Company was a party to a sublease agreement for office and laboratory space located in Waltham, Massachusetts.

The sublease commenced on January 15, 2019 and expired on November 30, 2020.

The total minimum sublease rentals received under the Waltham, Massachusetts agreement was $ 0.6 million.

In February 2019 and October 2018, the Company entered into two additional noncancellable operating leases for office space in Ann Arbor, Michigan for the Company’s headquarters;

one that the Company took possession of in April 2019, and the other that the Company took possession of in July 2019, respectively.

Cash and cash equivalents

TRANSACTIONS WITH RELATED PARTIES (AMOUNTS IN THOUSANDS)

Inception Sciences Service Agreements

Inception Sciences, Inc.

(Inception Sciences US) and Inception Sciences Canada, Inc.

(Inception Sciences Canada) are subsidiaries of Versant Ventures, affiliates of which, together, are a holder of more than 5 % of our capital stock.

The Company has service agreements with Inception Sciences US, and Inception Sciences Canada whereby research and support services are provided to the Company.

On June 30, 2020, the Company terminated these Inception Sciences service agreements.

Total expenses under the service agreements consist of charges for services, equipment usage, lab supplies and other out of pocket expenses as incurred.

For the six months ended June 30, 2021 and 2020, the Company incurred nil

and $ 1,315 , respectively, in expenses under the Inception Sciences service agreements.

Related Party Notes Receivable

— On November 19, 2017, the Company loaned three employees a total of

$ 353 pursuant to promissory notes in order for such employees to early exercise certain stock options which had a total exercise cost of

Two employees paid

$ 298 which represents

50 % of the exercise cost and the other

50 % totaling $ 298 was recorded as notes receivable.

The other employee did not pay any portion of the exercise cost and

$ 55 was recorded as note receivable.

The three notes receivable accrue interest at

2 % per year and will mature on November 29, 2022 .

The notes receivable vest over time until maturity in conjunction with the vesting of the early-exercised stock options.

In February 2020, one of the employees left the Company in May 2019 and repaid her note balance of

$ 44 , of which $ 43 was the vested portion of the note receivable and

$ 1 was accrued interest.

On June 25, 2021, prior to the closing of the Merger Agreement, one of the employees’ note receivable plus accrued interest totaling

$ 278 was forgiven by the Company.

This amount was recognized as compensation included in general and administrative expense in the accompanying consolidated statements of operations for the three and six months period ended June 30, 2021.

As of June 30, 2021 and December 31, 2020, the balance of the vested notes receivable and accrued interest was

$ 38 and $ 260 , respectively.

BALANCE SHEET ITEMS (AMOUNTS IN THOUSANDS)

Prepaid expenses and other current asset consist of the following as of June 30, 2021 and December 31, 2020:

Prepaid expenses

Research tax credit

Prepaid research and development costs

Notes and interest receivable

Other current assets

Property and equipment, net, consists of the following as of June 30, 2021 and December 31, 2020:

Computer equipment and software

Furniture and fixtures

Lab equipment

Leasehold improvements

Property and equipment

Less accumulated depreciation

Property and equipment—net

Depreciation expense for the three months and six months period ended June 30, 2021 were $ 86 and $ 165 , respectively.

Depreciation expense for the three months and six months period ended June 30, 2020 were $ 80 and $ 174 , respectively.

Accrued liabilities as of June 30, 2021 and December 31, 2020 consist of the following:

Accrued other liabilities

Accrued clinical trial liability

EARLY OPTION EXERCISE LIABILITY (AMOUNTS IN THOUSANDS)

The recorded amount of the early option exercise liability relates to restricted stock awards and stock options granted to certain employees and contractors that were early-exercised before they became vested.

The early option exercise liability decreases as the restricted stock awards and stock options vest over time or if the Company decides to repurchase them, and the amount of decrease is recorded in common stock and additional paid-in

As of June 30, 2021 and December 31, 2020, the early option exercise liability was $ 38 and $ 79 , respectively, which represents unvested shares of 8,767 and 29,041 .

The unvested shares purchased by the employees are not deemed, for accounting purposes, to be issued and outstanding.

COMMITMENTS AND CONTINGENCIES (AMOUNTS IN THOUSANDS)

Facilities Lease Agreements

—In February 2019, the Company entered into a 5 -year

office lease agreement for a 9,780 square feet facility in South San Francisco, California (“SSF Lease”).

The remaining lease term of the SSF Lease is two years and eight months as of June 30, 2021.

The Company has no other leases as of June 30,2021 and December 31, 2020.

As a result of the merger with Millendo, the Company assumed Millendo’s noncancelable operating leases for office space which have remaining lease terms of approximately 3.0 years.

In February 2019 and October 2018, Millendo entered into two noncancellable operating leases for office space in Ann Arbor, Michigan (“Ann Arbor Leases”) of which one that Millendo took possession of in April 2019 and the other that Millendo took possession of in July 2019, respectively.

One of its leases in Ann Arbor, Michigan expires in June 2024 and the other expires in March 2024 .

In April 2019, the Company entered into a lease agreement for office space in Lexington, Massachusetts.

This lease was scheduled to expire on September 30, 2020;

however, in June 2020 the Company exercised its right to terminate the lease early such that the lease terminated on August 11, 2020.

Lease agreements generally do not require material variable lease payments, residual value guarantees or restrictive covenants.

In January 2020, the Company terminated its office lease agreement in Lyon, France.

As of March 31, 2021, the operating lease ROU asset and the operating lease liabilities were $ 2.0 million and $ 2.2 million, respectively.

The weighted average discount rate used to account for the Company's operating leases under ASC 842 is the Company’s estimated incremental borrowing rate of 7.0 %.

The Company has options to extend certain of its leases for another five to ten years .

These options to extend were not recognized as part of the Company’s measurement of the ROU assets and operating lease liabilities for the three months ended March 31, 2021.

The weighted average remaining term of the Company’s noncancellable operating leases is 3.13 years.

Rent expense related to the Company's operating leases was approximately $ 0.2 million and $ 0.2 million for the three months ended March 31, 2021 and 2020, respectively.

The Company recognizes rent expense on a straight-lined basis over the lease period and has accrued for rent expense incurred but not yet paid.

Cash paid for amounts included in the measurement of the lease liabilities was approximately $ 0.2 million and $ 0.5 million during the three months ended March 31, 2021 and 2020, respectively.

The Company received approximately $ 87,000 in sublease payments related to its Waltham, Massachusetts lease during the three months ended March 31, 2020.

Future minimum rental payments under the Company’s noncancellable operating leases at March 31, 2021 is as follows (amounts in thousands):

2021 (excluding the three months ended March 31, 2021) $ 573

Total $ 2,464

Present Value Adjustment ( 240 )

Lease liability at March 31, 2021 $ 2,224

There were no other leases assumed by the Company as of June 30,2021.

As of June 30, 2021 and December 31, 2020, the balance of the operating lease right of use assets on the SSF Lease were $ 1,603 and $ 1,877 , respectively, and the related operating lease liability were $ 2,088 and $ 2,439 , respectively, as shown in the accompanying consolidated balance sheets.

As of June 30, 2021, the balance of the operating lease right of use assets on the Ann Arbor Leases was $ 2,070 and the related operating lease liability was $ 2,070 as shown in the accompanying consolidated balance sheet.

Rent expense for the SSF Lease w

330 for the six months ended June 30, 2021 and 2020, respectively.

As of June 30, 2021, future minimum annual lease payments under the Company’s operating lease liabilities for the SSF Lease and Ann Arbor Leases were as follows:

2021 (excluding the six months ended June 30, 2021)

Total minimum lease payments

imputed interest

Present value of operating lease obligations

current portion

Noncurrent operating lease obligations

Guarantees and Indemnifications

—In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification.

The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future.

To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations.

As of June 30, 2021 and December 31, 2020, the Company does not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.

On November 9, 2016, a purported shareholder derivative action was filed in the Business Litigation Session of the Suffolk County Superior Court in the Commonwealth of Massachusetts (Cima v.

16-3443-BLS1 (Mass.

Ct.)) against certain former officers and directors of the Company and one current director of the Company and the Company as a nominal defendant alleging breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets for purported actions related to the Company’s January 2015 follow-on public offering.

On February 22, 2017, the court approved the parties’ joint stipulation to stay all proceedings in the action until further notice.

Following a status conference in December 2017, the stay was lifted.

On January 25, 2018, at the parties’ request, the court entered a second order staying all proceedings in the action until further order of the court.

On March 2, 2020, the parties submitted a status report requesting that the court continue the stay.

On March 5, 2020, the court entered an order continuing the stay and requiring that the parties file a further status report on or before June 30, 2020.

On June 30, 2020, the parties filed a further status report requesting that the court continue the stay.

The court continued the stay until at least January 7, 2021.

On January 7, 2021, the parties filed a further status report requesting that the court continue the stay until at least April 30, 2021.

The court continued the stay until April 30, 2021.

On April 30, 2021, the defendants filed a status report requesting that the court continue the stay.

The court has not acted yet on the April 30, 2021 status report.

The Company believes that the complaint is without merit and intends to defend against the litigation.

There can be no assurance, however, that the Company will be successful.

At present, the Company is unable to estimate potential losses, if any, related to the lawsuit.

On March 24, 2017, a purported shareholder class action lawsuit was filed in the U.S.

District Court for the District of Massachusetts (Dahhan v.

OvaScience, Inc., No.

1:17-cv-10511-IT (D.

Mass.)) against the Company and certain former officers of the Company alleging violations of Sections 10(b) and 20(a) of the Exchange Act (the “Dahhan Action”).

On July 5, 2017, the court entered an order approving the appointment of Freedman Family Investments LLC as lead plaintiff, the firm of Robins Geller Rudman & Dowd LLP as lead counsel and the Law Office of Alan L.

Kovacs as local counsel.

Plaintiff filed an amended complaint on August 25, 2017.

The Company filed a motion to dismiss the amended complaint, which the court denied on July 31, 2018.

On August 14, 2018, the Company answered the amended complaint.

On December 9, 2019, the court granted leave for the lead plaintiff to file a second amended complaint under seal and permitted the defendants to file a motion to strike the second amended complaint.

On December 30, 2019, the court granted the parties’ joint motion to stay all proceedings in the case pending mediation.

On March 3, 2020, the parties conducted a mediation session.

The mediation was unsuccessful.

The Company filed a motion to strike the second amended complaint on May 1, 2020.

On August 17, 2020, the court granted the parties’ joint motion to again stay all proceedings in the case pending mediation.

The parties agreed to participate in a second mediation session on November 10, 2020.

The mediation was unsuccessful.

The Company believes that the amended complaint and the second amended complaint are without merit.

On October 16, 2020, the court granted the parties’ joint request to extend the stay until November 16, 2020.

On November 16, 2020, the parties filed a joint status report seeking to extend the stay for an additional thirty days.

On November 17, 2020, the court ordered the parties to file a supplemental joint status report clarifying whether they sought a continuance of the stay of all proceedings or instead, a partial lifting of the stay.

On November 19, 2020, the parties filed a joint status report seeking to continue a partial stay of the case while the parties engaged in additional settlement discussions, and a partial lifting of the stay to the extent required for the court to rule on the Company’s pending motion to strike and motions to dismiss filed by other defendants.

Those motions

remain pending.

The Company believes that the amended complaint and the second amended complaint are without merit.

A resolution of this lawsuit adverse to the Company or the other defendants could have a material effect on the Company’s consolidated financial position and results of operations.

At present, the Company is unable to estimate potential losses, if any, related to the lawsuit.

On July 27, 2017, a purported shareholder derivative complaint was filed in the U.S.

District Court for the District of Massachusetts (Chiu v.

1:17-cv-11382-IT (D.

Mass.)) against OvaScience as a nominal defendant, certain former officers and directors of the Company and one current director of the Company alleging breach of fiduciary duties, unjust enrichment and violations of Section 14(a) of the Exchange Act alleging that compensation awarded to the director defendants was excessive and seeking redress for purported actions related to the Company’s January 2015 follow-on public offering and other public statements concerning the Company’s former products.

On September 26, 2017, the plaintiff filed an amended complaint which eliminated all claims regarding allegedly excessive director pay and additionally alleged claims of abuse of control and waste of corporate assets.

On October 27, 2017, the defendants filed a motion to dismiss the amended complaint.

The court heard oral argument on the motion to dismiss on April 5, 2018.

On April 13, 2018, the court granted the defendants’ motion to dismiss the amended complaint for failure to state a claim for relief under Section 14(a).

The court also dismissed the plaintiffs’ pendent state law claims without prejudice, based on lack of subject matter jurisdiction.

On April 25, 2018, the plaintiffs moved for leave to amend the complaint and to stay this case pending the outcome of the Dahhan Action.

The Company does not believe that the proposed amended complaint cures the defects in the current complaint, but informed plaintiffs’ counsel that, in the interest of judicial economy, the defendants would not oppose the proposed amendment if the court would consider staying the case pending the resolution of the Dahhan Action.

On April 27, 2018, the court granted the plaintiffs’ motion for leave to amend the complaint and for a stay.

On April 30, 2018, the plaintiffs filed their second amended complaint.

On May 23, 2018, the court entered an order staying this case pending the resolution of the Dahhan Action.

The Company believes that the second amended complaint is without merit and intends to defend against the litigation.

There can be no assurance, however, that the Company will be successful.

At present, the Company is unable to estimate potential losses, if any, related to the lawsuit.

On April 23, 2021 a complaint was filed against the Company and each of its directors in the United States District Court for the Southern District of New York.

The lawsuit, captioned Nakkhumpun v.

Millendo Therapeutics, Inc., alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder, as well as breach of fiduciary duty of candor, against the defendants for allegedly disseminating a materially incomplete and misleading registration statement with the SEC in connection with the proposed Merger.

The plaintiff seeks to enjoin the defendants from proceeding with a shareholder vote on the proposed Merger until the Company discloses the material information.

The plaintiff also seeks damages and an award of costs, expert fees and attorneys’ fees.

On April 27, 2021, a second complaint was filed against the Company and each of its directors in the United States District Court for the Southern District of New York.

The lawsuit, captioned Klaus v.

Millendo Therapeutics Inc., alleges violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 and Rule 14a-9 promulgated thereunder against the defendants for allegedly disseminating a materially incomplete and misleading registration statement with the SEC in connection with the proposed Merger.

The plaintiff seeks to enjoin the defendants from proceeding with or consummating the proposed merger, or, in the event the proposed Merger is consummated, the plaintiff seeks to rescind it or recover damages.

The plaintiff also seeks an award of costs, expert fees and attorneys’ fees.

Finally, the plaintiff seeks to direct the Company to disseminate a registration statement that does not contain any alleged misstatements of material fact.

On April 29, 2021, a third complaint was filed against the Company and each of its directors in the United States District Court for the Eastern District of New York.

The lawsuit, captioned Campbell v.

Millendo Therapeutics Inc., alleges the same violations and demands the same relief as in Klaus v.

Millendo Therapeutics Inc.

On April 30, 2021, a complaint was filed against the Company and each of its directors in the United States District Court for the Southern District of New York.

The lawsuit, captioned Schmidt v.

Millendo Therapeutics, Inc., alleges the same violations as Campbell v.

Millendo Therapeutics, Inc.

It also demands the same relief.

On May 4, 2021, a complaint was filed against the Company and each of its directors in the United States District Court for the Southern District of New York.

The lawsuit, captioned Colthurst v.

Millendo Therapeutics, Inc., alleges the same violations as Campbell v.

Millendo Therapeutics, Inc., Klaus v.

Millendo Therapeutics, Inc., and Schmidt v.

Millendo Therapeutics, Inc.

It also demands the same relief.

On May 7, 2021, a complaint was filed against the Company and each of its directors in the United States District Court for the Eastern District of Michigan.

The lawsuit, captioned Wilhelm v.

Millendo Therapeutics, Inc., alleges the same violations as

Millendo Therapeutics, Inc., Campbell v.

Millendo Therapeutics, Inc., Klaus v.

Millendo Therapeutics, Inc., and Schmidt v.

Millendo Therapeutics, Inc.

It also demands the same relief.

On May 10, 2021, a complaint was filed against the Company and each of its directors in the United States District Court for the District of Delaware.

The lawsuit, captioned Carlisle v.

Millendo Therapeutics, Inc., alleges the same violations as Wilhelm v.

Millendo Therapeutics, Inc., Colthurst v.

Millendo Therapeutics, Inc., Campbell v.

Millendo Therapeutics, Inc., Klaus v.

Millendo Therapeutics, Inc., and Schmidt v.

Millendo Therapeutics, Inc.

It also demands the same relief.

On May 11, 2021, a complaint was filed against the Company and each of its directors in the United States District Court for the Eastern District of Pennsylvania.

The lawsuit, captioned Cech v.

Millendo Therapeutics, Inc., alleges the same violations as Carlisle v.

Millendo Therapeutics, Inc., Wilhelm v.

Millendo Therapeutics, Inc., Colthurst v.

Millendo Therapeutics, Inc., Campbell v.

Millendo Therapeutics, Inc., Klaus v.

Millendo Therapeutics, Inc., and Schmidt v.

Millendo Therapeutics, Inc.

It also demands the same relief.

In addition to the matters described above, the Company may be a party to litigation and subject to claims incident to the ordinary course of business from time to time.

Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, and diversion of management resources.

Stock-Based Compensation

On June 11, 2019, the Company held its 2019 Annual Meeting of Stockholders (the “Annual Meeting”).

At the Annual Meeting, the Company’s stockholders approved the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) and the Company’s 2019 Employee Stock Purchase Plan (the “2019 ESPP,” and together with the 2019 Plan, the “Equity Plans”).

The 2019 Plan is the successor to the Private Millendo 2012 Stock Plan and the OvaScience 2012 Stock Incentive Plan (each, as amended, the “Prior Plans”) and allows the Company to grant stock options, restricted stock unit awards and other awards at levels determined appropriate by the Company’s Board of Directors (the “Board”) or the Compensation Committee of the Board.

No additional awards will be granted under either of the Prior Plans.

The 2019 ESPP enables employees to purchase shares of the Company’s common stock through offerings of rights to purchase the Company’s common stock to all eligible employees.

The Equity Plans were adopted by the Board on April 29, 2019, subject to approval by the Company’s stockholders, and became effective with such stockholder approval on June 11, 2019.

Outstanding awards under the Prior Plans continue to be subject to the terms and conditions of the Prior Plans.

The aggregate number of shares of the Company’s common stock initially reserved for issuance under the 2019 Plan was 2,919,872 shares, which is the sum of (i) 534,320 shares, (ii) the number of unallocated shares remaining available for grant under the Prior Plans as of the effective date of the 2019 Plan, and (iii) the Prior Plans’ Returning Shares (as defined below), as such shares become available from time to time.

The number of shares of the Company's common stock reserved for issuance under the 2019 Plan will automatically increase on January 1 of each year, for a period of ten years , from January 1, 2020 continuing through January 1, 2029, by 4 % of the total number of shares of the Company's common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board.

Pursuant to the terms of the 2019 Plan, an additional 4 % of the total number of shares of the Company's common stock outstanding on December 31, 2020 were added to the number of available shares effective January 1, 2021.

The term “Prior Plan’s Returning Shares” refers to the following shares of the Company's common stock subject to any outstanding stock award granted under either of the Prior Plans:

shares of common stock subject to awards that (i) expire or terminate for any reason prior to exercise or settlement;

(ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company;

(iii) are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award.

The foregoing includes shares subject to outstanding awards under the OvaScience 2011 Stock Incentive Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right.

The following shares of the Company’s common stock under the 2019 Plan (collectively, the “2019 Plan Returning Shares”) will also become available again for issuance under the 2019 Plan:

(i) any shares subject to a stock award that are not issued because such stock award expires or otherwise terminates without all of the shares covered by such stock award having been issued, (ii) any shares subject to a stock award that are not issued because such stock award is settled in cash;

(iii) any shares issued pursuant to a stock award that are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares;

and (iv) any shares reacquired by the Company in satisfaction of tax withholding obligations on a stock award or as consideration for the exercise or purchase price of a stock award.

The aggregate number of shares of the Company’s common stock that may be issued under the 2019 ESPP is 133,580 shares, plus the number of shares of the Company’s common stock that are automatically added on January 1st of each year, for a period of up to ten years , from January 1, 2020 continuing through January 1, 2029, by the lesser of (i) 1 % of the total number of shares of the Company's capital stock outstanding on December 31 of the preceding calendar year, or (ii) 133,580 shares of the Company's common stock, unless a lesser number of shares is determined by the Board.

Pursuant to the terms of the 2019 Employee Stock Purchase Plan, an additional 133,580 shares were added to the number of available shares effective January 1, 2021.

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

The Company recorded stock-based compensation expense in the following expense categories of its accompanying consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, respectively (amounts in thousands):

Three Months Ended

Research and development

$ ( 258 ) $ 300

General and administrative 638 780

As a result of the merger with Millendo, the Company is party to various litigation matters given Millendo’s role as successor to OvaScience, Inc.

(“OvaScience”).

OvaScience merged with Millendo in 2018.

Prior to the merger with Millendo, OvaScience was sued in three matters that are disclosed below.

On November 9, 2016, a purported shareholder derivative action was filed in Massachusetts State court (Cima v.

Dipp) against certain former officers and directors of OvaScience and OvaScience alleging breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets for purported actions related to OvaScience’s January 2015 follow-on public offering.

No material proceedings have occurred since the case was filed;

in April 2021, the Company filed a unilateral request to continue a stay of the case, which the court has not yet ruled on.

On March 24, 2017, a purported shareholder class action lawsuit was filed in Massachusetts Federal court (Dahhan v.

OvaScience, Inc.) OvaScience and certain former officers of OvaScience alleging violations of Sections 10(b) and 20(a) of the Exchange Act (the “Dahhan Action”).

Defendants have answered and the case is currently in discovery.

On July 27, 2017, a purported shareholder derivative complaint was filed in Massachusetts Federal court (Chiu v.

Dipp) against OvaScience and certain former officers and directors of OvaScience alleging breach of fiduciary duties, unjust enrichment and violations of Section 14(a) of the Exchange Act.

related to OvaScience’s January 2015 follow-on public offering and other public statements concerning OvaScience’s AUGMENT treatment.

Following the Court’s dismissal of an amended complaint, the parties agreed that plaintiffs could file a second amended complaint and that the case would be stayed pending the resolution of the Dahhan Action.

In May 2018, the court entered an order staying this case pending the resolution of the Dahhan Action.

With respect to each of the three OvaSciences matters described above, the Company is unable to estimate potential losses, if any.

However, the Company believes the matters are without merit, and that in light of applicable insurance, any material exposure to the Company is remote.

On April 23, 2021 a complaint was filed against the Company and each of its directors in New York Federal court (Nakkhumpun v.

Millendo Therapeutics, Inc.) alleging violations of the Securities Exchange Act of 1934 and breach of fiduciary duty of candor, for allegedly disseminating a materially incomplete and misleading registration statement with the SEC in connection with the proposed merger.

Following the filing of this complaint, ten additional complaints containing substantially the same claims were filed in Federal courts in New York, the Eastern District of New York, and Michigan.

After the Company filed a Form 8-K on June 11, 2021 containing additional disclosures, each of these cases was voluntarily dismissed without prejudice.

LOAN PAYABLE (AMOUNTS IN THOUSANDS)

On January 15, 2021,

the Company entered into a loan agreement with a lender to borrow a term loan amount of $

35,000 to be funded in three tranches.

Tranche A of $

15,000 was wired to the Company on January 15, 2021.

Tranche B of $

10,000 will be available through March 31, 2022 contingent upon achievement of each of the following:

receipt of at least $ 50,000 in Series C equity capital, ii) initiation of the Phase 1 combination study of TPST-1495 or monotherapy expansion study, and iii) initiation of Phase 2 trial of TPST-1120 or the 1L Triplet Collaboration study.

And Tranche C of $

10,000 is available at lender’s option.

The term loan matures on

August 1, 2025 and has an annual floating interest rate of

7.15 % which is an Index Rate plus

Index Rate is the greater of (i)

US LIBOR or (ii)

Monthly principal payments of $

500 will begin on

March 1, 2023 .

Related to this borrowing, the Company paid $

96 of debt issuance costs and the amount would be amortized as additional interest expense over the life of the loan.

As of June 30, 2021, the balance of the loan payable (net of debt issuance costs) was $

The carrying value of the loan approximates fair value.

For the three months and six months period ended June 30, 2021, total interest expense were $ 276 and $ 507 , respectively.

CONVERTIBLE PREFERRED STOCK

As of June 30, 2021, the Company was authorized to issue up to

shares of preferred stock at a par value of $ 0.001 as a result of Private Tempest completing the merger with Millendo on June 25, 2021.

As of December 31, 2020, Private Tempest was authorized to issue up to 135,936,731 shares of preferred stock at par value of

In October 2011, Private Tempest received a commitment from its venture investor for a Series A Preferred Stock financing totaling

$ 10 million to be taken down in two tranches of $ 5

million each.

Upon execution of the stock purchase agreement, Private Tempest received the first tranche of $5 million, which included

$ 2,399 in cash proceeds and the conversion of notes payable and accrued interest totaling $ 2,601 for issuing 5,000,000 shares of its Series A Preferred Stock.

In June 2012, Private Tempest received cash proceeds of

$ 5 million related to the second tranche of the Series A Preferred Stock financing from the issuance of 5,000,000 shares of Series A Preferred Stock.

In August 2015, Private Tempest

issued an additional 2,000,000 shares of Series A Preferred Stock to its venture investor for cash proceeds of $ 2 million.

In September 2016, Private Tempest

issued an additional 5,000,000 shares of Series A Preferred Stock to its venture investor for cash proceeds of $ 5 million.

In February 2018, Private Tempest

issued 25,186,738 shares of Series B Preferred Stock for $ 1.00 per share in connection with the closing of the Series B Preferred Stock Purchase Agreement.

Tempest’s convertible notes of $ 8.0 million and accrued interest were converted as part of the Series B offering.

In February 2019, Private Tempest

issued 28,749,997 shares of Series B-1

preferred stock for $ 0.80 per share for total cash proceeds of $ 23 million.

In January 2020, Private Tempest

issued 43,749,996 shares of Series B-1

preferred stock for $ 0.80 per share for total cash proceeds of $ 35 million.

On June 25, 2021, Private Tempest completed the mer g

er with Millendo in accordance with the Merger Agreement.

At closing of the merger, the Company issued an aggregate of approximately 5,365,899 shares of its common stock to Private Tempest stockholders, based on an exchange ratio of 0.0322 shares of the Company’s common stock for each share of Private Tempest common stock outstanding immediately prior to the merger, including those shares of common stock issued upon conversion of the Private Tempest preferred stock.

The authorized, issued and outstanding shares of the convertible preferred stock and liquidation preferences at December 31, 2020 were as follows (in thousands except share and per share amounts):

December 31, 2020

Shares Issued

Issuance Cost

The significant rights, preferences, and privileges of the convertible preferred stock as of December 31, 2020 were as follows:

—The holders of the Company’s convertible preferred stock are entitled to receive noncumulative dividends of 8 % per share (as adjusted for stock splits, combinations, and reorganizations) per annum on each outstanding share of Series convertible preferred stock.

Such dividends shall be payable only when and if declared by the Board of Directors.

As of June 30, 2021 and December 31, 2020, the Company’s Board of Directors had not declared any dividends.

Dividends on convertible preferred stock shall be payable in preference to and prior to any payments of any dividends on common stock.

No dividends have been declared to date.

Voting Rights

—The holders of preferred stock are entitled to one vote for each share of common stock into which such preferred stock could then be converted;

and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock.

—The holders of preferred stock are entitled to receive liquidation preferences at an amount per share of preferred stock equal to the original price plus all declared and unpaid dividends on the preferred stock.

Liquidation payments to the holders of preferred stock have priority and are made in preference to any payments to the holders of common stock.

After full payment of the liquidation preference to the holders of the preferred stock, the remaining assets, if any, will be distributed ratably to the holders of the common stock and preferred stock on an as-if-converted

to common stock basis.

Redemption and Balance Sheet Classification

— The convertible preferred stock is recorded within mezzanine equity because while it is not mandatorily redeemable, it will become redeemable at the option of the stockholders upon the occurrence of certain deemed liquidation events that are considered not solely within the Company’s control.

Upon completion of the merger on June 25, 2021, the Company issued an aggregate of approximately 5,365,899 shares of its common stock to Private Tempest stockholders, based on an exchange ratio of 0.0322 shares of the Company’s common stock for each share of Private Tempest common stock outstanding immediately prior to the merger, including those shares of common stock issued upon conversion of the Private Tempest preferred stock ( 3,692,912 common shares) and those shares of common stock issued with its pre-merger

financing of $ 30.0 million ( 1,136,849 common shares).

As of June 30, 2021, the Company was authorized to issue 100,000,000 shares of common stock at a par value of $ 0.001 .

,000,000 common stock shares authorized, 6,637,081 are legally issued and outstanding at June 30, 2021, with 8,767 shares subject to repurchase due to remaining vesting requirements.

Common stockholders are entitled to dividends as declared by the Board of Directors, subject to rights of holders of all classes of stock outstanding having priority rights as to dividends.

There have been no dividends declared to date.

The holders of each share of common stock are entitled to one vote.

Except for effecting or validating certain specific actions intended to protect the preferred stockholders, the holders of common stock vote together with preferred stockholders and have the right to elect one member of the Company’s Board of Directors.

STOCK COMPENSATION

In 2011 Private Tempest adopted the 2011 Equity Incentive Plan, and in 2017, Private Tempest adopted the 2017 Equity Incentive Plan, together “the Plans”.

Upon adoption of the 2017 Equity Incentive Plan, the 2011 Equity Incentive Plan was terminated.

Both the Plans provide for the granting of stock awards to employees, directors and consultants of the Company.

Awards issuable under the Plans include incentive stock options (“ISO”), nonqualified stock options (“NSO”), stock appreciation rights (“SAR”), restricted stock awards, restricted stock unit awards and other stock awards.

As a result of the merger, the Plans of Private Tempest were assumed by the Company.

Options to purchase the Company’s common stock may be granted at a price not less than the fair market value in the case of both NSOs and ISOs, except for an employee or non-employee

with options who owns more than 10 percent of the voting power of all classes of stock of the Company, in which case the exercise price shall be no less than 110 percent of the fair market value per share on the grant date.

Stock options granted under the Plans generally vest over four years and expire no later than ten ( 10 ) years from the date of grant.

Vested options can be exercised at any time.

The grant date fair market value of the shares of common stock underlying stock options has historically been determined by the Company’s Board of Directors.

Because there has been no public market for the Company’s common stock, the Board of Directors exercises reasonable judgment and considers a number of objective and subjective factors to determine the best estimate of the fair market value, which include valuations performed by an independent third-party,

important developments in the Company’s operations, sales of convertible preferred stock, actual operating results, financial performance, the conditions in the life sciences industry, the economy in general, the stock price performance and volatility of comparable public companies, and the lack of liquidity of the Company’s common stock.

Stock option activity under the Plans is set forth below:

Total Options

Balance—January 1, 2021

Assumed in reverse recapitalization

Cancelled and forfeited

Balance—June 30, 2021

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

Life (In Years)

Options outstanding

Vested and expected to vest

Employee Stock Options

—During the six months ended June 30, 2021, the Company granted employees stock options to purchase 184,872 shares of common stock with a weighted-average grant date fair value of $ 12.70 per share.

As of June 30, 2021, there was total unrecognized compensation costs related to unvested employee stock options of $ 3,047 .

These costs are expected to be recognized over a weighted-average

period of approximately 1.6 years.

The Company estimated the fair value of stock options using the Black-Scholes

option pricing valuation model.

The fair value of employee stock options is being amortized on the straight-line

basis over the requisite service period of the awards.

The fair value of employee stock options was estimated using the following assumptions for the six months ended June 30, 2021:

Expected term (in years)

Expected volatility

Risk-free interest rate

1.0 % – 1.1 %

Expected Term

—The expected term of options granted represents the period of time that the options are expected to be outstanding.

Due to the lack of historical exercise history, the expected term of the Company’s employee stock options has been determined utilizing the simplified method for awards that qualify as plain-vanilla

Expected Volatility

—The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for the Company’s common stock.

The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available.

Interest Rate

—The risk-free

interest rate assumption is based on the U.S.

Treasury instruments whose term was consistent with the expected term of the Company’s stock options.

—The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future.

Consequently, an expected dividend yield of zero was used.

Stock Options

Options issued may have a contractual life of up to 10 years and may be exercisable in cash or as otherwise determined by the Board.

Vesting generally occurs over a period of not greater than four years .

In May 2020, the Company granted 840,450 stock options to its employees in connection with the PWS and CAH program changes that occurred during the second quarter of 2020 (see Note 1).

The vesting is as follows:

1) 50 percent of the shares subject to this option grant will vest on the earlier of (i) December 31, 2020 or (ii) the Board's approval of the achievement of certain performance criteria;

and 2) one twelfth (1/12th) of the remaining shares subject to this option grant will vest in equal monthly installments thereafter.

Stock-based compensation expense is negative for research and development employees and decreased for general and administrative employees for the three months ended March 31, 2021 as compared to the prior period due to forfeitures as a result of the reduction in force initiated in the first quarter of 2021.

The following table summarizes the activity related to stock option grants to employees and nonemployees for the three months ended March 31, 2021:

exercise price

per share Weighted-average

Outstanding at January 1, 2021 3,749,102 $ 11.60 7.9

Granted 534,000 2.07

Exercised ( 43,333 ) 2.00

Forfeited ( 719,411 ) 6.69

Outstanding at March 31, 2021 3,520,358 $ 11.28 6.7

Vested and exercisable at March 31, 2021 2,035,439 $ 15.49 4.9

Vested and expected to vest at March 31, 2021 3,520,358 $ 11.28 6.7

As of March 31, 2021, the unrecognized compensation cost related to 1,484,919 unvested stock options expected to vest was $ 5.2 million.

This unrecognized compensation will be recognized over an estimated weighted-average amortization period of 2.2 years.

There were 43,333 stock options exercised during the three months ended March 31, 2021.

There were no options exercised during the three months ended March 31, 2020.

The aggregate intrinsic value of options exercised during the three months ended March 31, 2021 was $ 29,000 .

The aggregate intrinsic value of both options outstanding and options exercisable

as of March 31, 2021 was $ 10,000 .

The options granted during the three months ended March 31, 2021 had an estimated weighted-average grant date fair value of $ 1.36 .

The grant date fair value of each option grant was estimated during the three months ended March 31, 2021 and 2020 using the following assumptions within the Black-Scholes option-pricing model:

Three Months Ended

March 31, 2021 Three Months Ended

March 31, 2020

— During the six months ended June 30, 2021, the Company granted non-employees

stock options to purchase 1,610 shares of common stock with a weighted-average grant date fair value of $ 7.46 per share.

As of June 30, 2021, there was total unrecognized compensation costs related to unvested non-employee

stock options of $ 25 .

These costs are expected to be recognized over a weighted-average

period of approximately 1.3 years.

The Company estimated the fair value of stock options using the Black-Scholes

option pricing valuation model.

The fair value of non-employee

stock options is being amortized on the straight-line

basis over the requisite service period of the awards.

The fair value of non-employee

stock options was estimated using the following assumptions for the six months ended June 30, 2021:

Expected term (in years)

1 unchanged sentence

Risk-free interest rate

Expected dividend yield 0 % 0 %

At the time of the Alizé acquisition, Alizé had 6,219 nonemployee (BSA) warrants and 5,360 employee (BSPCE) warrants outstanding, which have weighted-average exercise prices of € 80.06 and € 83.40 , respectively.

As of March 31, 2021, all BSA and BSPCE warrants were vested.

During the three months ended March 31, 2021, no shares were exercised.

As of March 31, 2021, there were an aggregate of 48,265 shares of common stock issuable upon the exercise of the BSA and BSPCE warrants with a weighted-average exercise price of $ 7.50 per share.

These instruments are included in the equity attributable to noncontrolling interests.

Expected Term

—The expected term of options granted represents the period of time that the options are expected to be outstanding.

The Company has valued its non-employee

stock options using the contractual term as the expected term.

Expected Volatility

The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available.

Interest Rate

—The risk-free

interest rate assumption is based on the U.S.

Treasury instruments whose term was consistent with the expected term of the Company’s stock options.

—The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future.

Consequently, an expected dividend yield of zero was used.

Compensation Expense

—The following table summarizes the components of stock-based

compensation expense recognized in the Company’s statement of operations for the three and six months ended June 30, 2021 and 2020:

Three months ended June 30,

Six months ended June 30,

Research and development

General and administrative

RETIREMENT PLAN

The Company participates in a qualified 401(k) Plan sponsored by its professional service organization.

The retirement plan is a defined contribution plan covering eligible employees.

Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service.

There was no contribution from the Company for the six months ended June 30, 2021 and 2020.

NET LOSS PER SHARE

The following table sets forth the computation of the Company’s basis in diluted net loss per share for the three months and six months ended June 30, 2021 and 2020 (in thousands except share and per share amounts):

Three months ended

Weighted-average common shares outstanding

Weighted-average unvested restricted shares and shares subject to repurchase

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

Net loss per share attributable to common stockholders—basic and diluted

Six months ended June 30,

Weighted-average common shares outstanding

Weighted-average unvested restricted shares and shares subject to repurchase

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

Net loss per share attributable to common stockholders—basic and diluted

As of June 30, 2021 and 2020, the Company’s potentially dilutive securities included unvested stock warrants and stock options, which have been excluded from the computation of diluted net loss per share attributable to common stockholders as the effect would be anti-dilutive.

Based on the amounts outstanding as of June 30, 2021 and 2020, the Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:

Options to purchase common stock

Redeemable convertible preferred stock

Unvested restricted common stock

Common stock warrants

SUBSEQUENT EVENTS

Subsequent events were evaluated through the filing date of this Quarterly Report on Form 10-Q.

On July 23, 2021, the Company entered into a sales agreement (the “Sales Agreement”) with Jefferies LLC (the “Agent”), pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $ 100,000,000 of its common stock through the Agent.

The common stock sold in the offering will be issued pursuant to a prospectus supplement filed with the Securities and Exchange Commission (the “SEC”) on July 23, 2021, and the accompanying base prospectus dated July 23, 2021, forming part of the Company’s registration statement on Form S-3 (Registration No.

333-257990), which

was declared effective on July 23, 2021.

Sales of the common stock, if any, made pursuant to the Sales Agreement may be sold in negotiated transactions or transactions that are deemed to be an “at the market offering”, as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through the Nasdaq Capital Market, on or through any other existing trading market for the common stock or by any other method permitted by law, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices, or as otherwise agreed between the Company and the Agent.

The Agent will be entitled to compensation equal to 3.0 % of the gross proceeds from the sale of all shares of common stock sold through it as Agent under the Sales Agreement.

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