Item 1. Financial Statements
The accompanying notes are an integral part of these unaudited condensed financial statements.
The accompanying notes are an integral part of these unaudited condensed financial statements.
The accompanying notes are an integral part of these unaudited condensed financial statements.
The accompanying notes are an integral part of these unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Description of the Business
Bolt Biotherapeutics, Inc. (the “Company”) is a clinical-stage biotechnology company pioneering a new class of immuno-oncology agents that combine the targeting precision of antibodies with the power of both the innate and adaptive immune systems.
Initial Public Offering and Related Transactions
On February 9, 2021, the Company completed its initial public offering (“IPO”) pursuant to a registration statement on Form S-1 (File No. 333-252136) that was declared effective by the Securities and Exchange Commission (the “SEC”) on February 4, 2021, and sold an aggregate of 13,225,000 shares of its common stock, including the full exercise of the underwriters’ option to purchase 1,725,000 shares, at a price per share of $20.00. Proceeds from the IPO, net of underwriting discounts, commissions and offering costs, were approximately $242.0 million.
In addition, each of the following occurred on February 4, 2021, in connection with the completion of the Company’s IPO:
|
•
|
the conversion of all outstanding shares of convertible preferred stock into 20,843,334 shares of the Company’s common stock; and
|
|
•
|
the amendment and restatement of the Company’s certificate of incorporation, authorizing 200,000,000 shares of common stock and 10,000,000 shares of undesignated preferred stock.
|
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and pursuant to applicable rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments and certain immaterial reclassifications, which are normal in nature, that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows. The balance sheet as of December 31, 2020 was derived from the audited financial statements as of that date. These interim financial results are not necessarily indicative of results to be expected for the full year or any other period. These unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Reverse Stock Split
On January 26, 2021, the Company amended and restated its amended and restated certificate of incorporation to effect a 1-for-7 reverse stock split of the Company’s outstanding common stock and convertible preferred stock. The par value and authorized shares of the common stock were not adjusted as a result of the reverse stock split. All issued and outstanding common stock, options to purchase common stock, early exercised options and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the reverse stock split for all periods presented.
Other Risks and Uncertainties
The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, changes in any of the following areas that the Company believes could have a material adverse effect on its future financial position or results of operations: risks related to the successful discovery and development of its product candidates, ability to raise additional capital, development of new technological innovations by its competitors and delay or inability to obtain chemical or biological intermediates from such suppliers required for the synthesis of the Company’s product candidates, including due to the impact of the current COVID-19 pandemic, protection of intellectual property rights, litigation or claims against the Company based on intellectual property rights, regulatory clearance and market acceptance of the Company’s products.
6
The current COVID-19 pandemic, which is impacting worldwide economic activity, poses the 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The extent to which the COVID-19 pandemic may directly or indirectly impact the Company’s financial statements is highly uncertain and subject to change. Management considered the potential impact of the COVID-19 pandemic on its estimates and assumptions and there was not a material impact to the Company’s condensed financial statements as of and for the three and six months ended June 30, 2021; however, actual results could differ from those estimates and there may be changes to management’s estimates in future periods.
The Company relies on single source manufacturers and suppliers for the supply of its product candidates. Disruption from these manufacturers or suppliers would have a negative impact on the Company’s business, financial position and results of operations.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, the valuation of common stock, stock-based compensation, convertible preferred stock purchase right liabilities and accrued liabilities. 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 materially from those estimates.
Deferred Offering Costs
The Company capitalized certain legal, accounting and other third-party fees that were directly related to the Company’s IPO. After the completion of the IPO in February 2021, the total deferred offering costs of $4.0 million were offset against the proceeds from the IPO and reclassified to additional paid-in capital in the accompanying the balance sheets. At December 31, 2020, deferred offering costs totaling $2.4 million were included as non-current assets in the accompanying balance sheet.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash, cash equivalents and marketable securities. At June 30, 2021 and December 31, 2020, most of the Company’s funds are invested with a registered investment manager and custodied at one financial institution, with working capital kept at a separate financial institution, and account balances may at times exceed federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial strength of the depository institutions where the funds are held.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of June 30, 2021 and December 31, 2020, cash and cash equivalents consisted primarily of bank deposits and money market funds, which were unrestricted as to withdrawal or use.
Marketable Securities
The Company classifies its marketable securities as available-for-sale and records such assets at estimated fair value in the balance sheets, with unrealized gains and losses that are determined to be temporary, if any, reported as a component of other comprehensive income (loss) within the statements of operations and comprehensive loss and as a separate component of stockholders’ equity. The Company classifies marketable securities with remaining maturities greater than three months but less than one year as short-term investments, and those with remaining maturities greater than one year are classified as long-term investments. Investments are regularly reviewed for other-than-temporary declines in fair value. The review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of investments in an unrealized loss position, the severity and duration of the unrealized losses and whether it is more likely than not that the Company will be required to sell the investments before the recovery of their amortized cost basis. A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the establishment of a new cost basis for the security. The Company invests its
7
excess cash balances primarily in corporate debt securities with strong credit ratings. Realized gains and losses are calculated on the specific identification method and recorded as interest income and were immaterial for all periods presented.
Restricted Cash
As of June 30, 2021 and December 31, 2020, the Company had $1.6 million of long-term restricted cash deposited with a financial institution. The restricted cash is held in separate bank accounts to support letter of credit agreements related to the Company’s facility leases that expire in 2025 and 2031 (see Note 7).
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. Cash and cash equivalents, restricted cash, marketable debt securities, accounts payable, accrued expenses and other current liabilities are reported at their respective fair values in our condensed balance sheets. The carrying amount of the remaining financial instruments approximate fair value due to their short-term nature. Refer to Note 3 for the methodologies and assumptions used in valuing financial instruments.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common stock and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, convertible preferred stock, stock options, common stock subject to repurchase related to unvested restricted stock awards and early exercise of stock options are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities as the convertible preferred stock is considered a participating security because it participates in dividends with common stock. The Company also considers the shares issued upon the early exercise of stock options subject to repurchase to be participating securities because holders of such shares have non-forfeitable dividend rights in the event a dividend is paid on common stock. The holders of all series of convertible preferred stock and the holders of early exercised shares subject to repurchase do not have a contractual obligation to share in the Company’s losses. As such, the net loss was attributed entirely to common stockholders. Because the Company has reported a net loss for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods presented as potentially dilutive securities were anti-dilutive.
Recent Accounting Standards
From time to time, new accounting standards are issued by the Financial Accounting Standards Board (the “FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. There have been no new accounting pronouncements issued nor adopted during the three and six months ended June 30, 2021 that are of significance to the Company’s financial position or results of operations.
3. Fair Value Measurements and Fair Value of Financial Instruments
The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
8
During the three and six months ended June 30, 2021, financial assets measured on a recurring basis consist of cash invested in money market accounts, short-term investments, and long-term investments. The fair value of short-term and long-term investments is based upon market prices quoted on the last day of the fiscal period or other observable market inputs. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, bids and/or offers. Financial liabilities measured at fair value on a recurring basis include the convertible preferred stock purchase rights liabilities described below.
There were no transfers within the hierarchy during the three and six months ended June 30, 2021 and 2020.
Marketable securities, all of which are classified as available-for-sale securities, consisted of the following at June 30, 2021 and December 31, 2020 (in thousands):
|
|
June 30, 2021
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Asset-backed securities
|
|
$
|
38,644
|
|
|
$
|
3
|
|
|
$
|
(6
|
)
|
|
$
|
38,641
|
|
U.S. treasury securities
|
|
|
29,993
|
|
|
|
—
|
|
|
|
(12
|
)
|
|
|
29,981
|
|
Other government agency securities
|
|
|
5,098
|
|
|
|
—
|
|
|
|
(5
|
)
|
|
|
5,093
|
|
Commercial paper
|
|
|
90,819
|
|
|
|
—
|
|
|
|
—
|
|
|
|
90,819
|
|
Corporate debt securities
|
|
|
88,092
|
|
|
|
16
|
|
|
|
(18
|
)
|
|
|
88,090
|
|
Total
|
|
$
|
252,646
|
|
|
$
|
19
|
|
|
$
|
(41
|
)
|
|
$
|
252,624
|
|
|
|
December 31, 2020
|
|
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Estimated
|
|
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Fair Value
|
|
Asset-backed securities
|
|
$
|
2,639
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,639
|
|
U.S. treasury securities
|
|
|
1,300
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,300
|
|
Commercial paper
|
|
|
6,795
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,795
|
|
Corporate debt securities
|
|
|
6,562
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
6,562
|
|
Total
|
|
$
|
17,296
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
17,296
|
|
At June 30, 2021 and December 31, 2020, the fair values of the Company’s assets and liabilities, which are measured at fair value on a recurring basis, were determined using the following inputs (in thousands):
|
|
June 30, 2021
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Money market funds
|
|
$
|
54,700
|
|
|
$
|
54,700
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Asset-backed securities
|
|
|
38,641
|
|
|
|
—
|
|
|
|
38,641
|
|
|
|
—
|
|
U.S. treasury securities
|
|
|
29,981
|
|
|
|
—
|
|
|
|
29,981
|
|
|
|
—
|
|
Other government agency securities
|
|
|
5,093
|
|
|
|
—
|
|
|
|
5,093
|
|
|
|
—
|
|
Commercial paper
|
|
|
90,819
|
|
|
|
—
|
|
|
|
90,819
|
|
|
|
—
|
|
Corporate debt securities
|
|
|
88,090
|
|
|
|
—
|
|
|
|
88,090
|
|
|
|
—
|
|
Total
|
|
$
|
307,324
|
|
|
$
|
54,700
|
|
|
$
|
252,624
|
|
|
$
|
—
|
|
9
|
|
December 31, 2020
|
|
|
|
Total
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Money market funds
|
|
$
|
3,921
|
|
|
$
|
3,921
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Asset-backed securities
|
|
|
2,640
|
|
|
|
—
|
|
|
|
2,640
|
|
|
|
—
|
|
U.S. treasury securities
|
|
|
1,300
|
|
|
|
1,300
|
|
|
|
—
|
|
|
|
—
|
|
Commercial paper
|
|
|
6,795
|
|
|
|
—
|
|
|
|
6,795
|
|
|
|
—
|
|
Corporate debt securities
|
|
|
6,561
|
|
|
|
—
|
|
|
|
6,561
|
|
|
|
—
|
|
Total
|
|
$
|
21,217
|
|
|
$
|
5,221
|
|
|
$
|
15,996
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock purchase rights liability
|
|
$
|
25,224
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25,224
|
|
Level 3 liabilities that are measured at fair value on a recurring basis consist of the convertible preferred stock purchase right liabilities. The following table provides a summary of changes in the estimated fair value of the financial instruments using significant Level 3 inputs (in thousands):
|
|
Series C
Convertible
Preferred
Stock
Purchase Right
Liability
|
|
Balance at December 31, 2020
|
|
$
|
25,224
|
|
Change in fair value
|
|
|
6,084
|
|
Reclassification to equity
|
|
|
(31,308
|
)
|
Balance at June 30, 2021
|
|
$
|
—
|
|
The fair value of the convertible preferred stock purchase right liabilities is estimated using an income-based approach incorporating probability considerations for different scenarios. The main assumptions include the probability and timing of the tranche closing, and the estimated value of the Company’s equity at that time. In January 2021, the Company issued the additional shares of Series C-2 convertible preferred stock and accordingly, this contractual obligation was settled, and the preferred stock purchase right liability was remeasured to its fair value and reclassified to permanent equity. The fair value of the convertible preferred stock purchase right liability immediately prior to settlement was increased to $31.3 million as a result of the estimated probability of the occurrence of the second closing of Series C convertible preferred stock increasing to 80%, timing related to the occurrence of the second closing decreasing to 0.06 years and the increase in the future expected value of the Series C preferred shares to $16.25 per share.
4. License and Equity Agreement
License and Equity Agreement with Related Party
In May 2015 and June 2018, the Company entered into license agreements (the “Stanford Agreement”), as amended, with The Board of Trustees of the Leland Stanford Junior University (“Stanford”). The Stanford Agreement provides the Company exclusive licenses to certain inventions. As consideration, the Company issued Stanford shares of its common stock and a limited right to purchase equity in future financing. Dr. Edgar G. Engleman, a founder and member of the board of directors of the Company, who is a professor at Stanford, was issued shares of common stock as part of the Company’s Series A financing in September 2016. Additionally, the Company is required by the Stanford Agreement to make milestone payments up to an aggregate of $0.4 million for the first licensed product that meets certain patent issuance, clinical and regulatory milestones, and an additional milestone payment of $0.2 million for each additional regulatory approval. The Company also agreed in the Stanford Agreement to pay Stanford tiered royalties on the Company’s and its sublicensees’ net sales of licensed products, if any, at low single-digit percentage rates, subject to certain reductions. Dr. Engleman is entitled to receive a share of any royalties that the Company pays to Stanford under the Stanford Agreement with respect to the covered intellectual property. No royalty payments have been made to date.
10
5. Balance Sheet Components
Property and Equipment, net
Property and equipment, net, consist of the following (in thousands):
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Laboratory equipment
|
|
$
|
6,028
|
|
|
$
|
5,253
|
|
Leasehold Improvements
|
|
|
67
|
|
|
|
—
|
|
Office equipment
|
|
|
214
|
|
|
|
69
|
|
Total property and equipment
|
|
|
6,309
|
|
|
|
5,322
|
|
Less accumulated depreciation and amortization
|
|
|
(1,758
|
)
|
|
|
(1,239
|
)
|
Total
|
|
$
|
4,551
|
|
|
$
|
4,083
|
|
Depreciation expense related to property and equipment was $0.2 million and $0.5 million for the three and six months ended June 30, 2021, respectively, and $0.1 million and $0.2 million for the same periods in 2020, respectively.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following (in thousands):
|
|
June 30,
2021
|
|
|
December 31,
2020
|
|
Accrued research and development
|
|
$
|
7,054
|
|
|
$
|
3,199
|
|
Accrued compensation
|
|
|
2,414
|
|
|
|
2,885
|
|
Accrued other
|
|
|
1,515
|
|
|
|
579
|
|
Total
|
|
$
|
10,983
|
|
|
$
|
6,663
|
|
6. Collaborations
Joint Development and License Agreement with Toray Industries, Inc.
In March 2019, the Company entered into a Joint Development and License Agreement (the “Toray Development Agreement”) with Toray Industries, Inc. (“Toray”) to jointly develop and commercialize a Boltbody immune-stimulating antibody conjugate (“ISAC”) containing Toray’s proprietary antibody to treat cancer. The Company determined that the Toray Development Agreement is a contract with a customer and should be accounted for under ASC 606. In conjunction with the Toray Development Agreement, the Company entered into a Series T Convertible Preferred Stock Purchase Agreement (the “Series T Agreement”) for the issuance of 717,514 shares of Series T convertible preferred stock to Toray. These contracts have been evaluated together and the consideration in excess of the fair value of the Series T convertible preferred stock of $1.5 million has been allocated to the Toray Development agreement and included in the total consideration for collaboration revenue. In February 2021, in connection with the Company’s IPO, all outstanding shares of Series T convertible preferred stock were converted into shares of the Company’s common stock.
In the Toray Development Agreement, the Company has identified one bundled performance obligation which includes the license rights, research and development services and services associated with participation on a joint steering committee. Collaboration revenue is recognized over time proportionate to the costs that the Company has incurred to perform the services using an input method as a measure of progress towards satisfying the performance obligation, which is based on project hours. Amounts are billed based on estimated variable consideration in the quarter ahead of performance and are trued up on the subsequent quarter’s invoice following the work performed. The cumulative effect of revisions to estimated hours to complete the Company’s performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. Deferred revenue allocated to the unsatisfied performance obligation is recorded as a contract liability on the balance sheet and will be recognized over time as the services are performed, which is expected to take place through the first half of 2022. As of June 30, 2021 and December 31, 2020, contract liabilities totaling $1.5 million at each period-end were recorded in deferred revenue in current liabilities on the balance sheet. The Toray Development Agreement includes optional additional items which will be accounted for as contract modifications when development advances past certain milestones and the parties both exercise their opt-in rights.
Oncology Research and Development Collaboration with Genmab A/S
In May 2021, the Company entered into a License and Collaboration Agreement (the “Genmab Agreement”) with Genmab A/S (“Genmab”). Together, the companies will evaluate Genmab antibodies and bispecific antibody engineering technologies in combination with Bolt’s ISAC technology platform, with the goal of discovering and developing next-generation bispecific ISACs for
11
the treatment of cancer. Under this research collaboration, the companies will evaluate multiple bispecific ISAC concepts to identify up to three clinical candidates for development. Genmab will fund the research, along with the preclinical and clinical development of these candidates through initial clinical proof of concept. Under the Genmab Agreement, Bolt received an upfront payment of $10.0 million and is eligible to receive total potential milestone payments of up to $285.0 million per therapeutic candidate exclusively developed and commercialized by Genmab, along with tiered royalties at rates from a mid-single digit to mid-teens percentage, subject to certain customary reductions. The Company determined that the Genmab Agreement is a contract with a customer and should be accounted for under ASC 606. In conjunction with the Genmab Agreement, the Company entered into a Stock Purchase Agreement (the “SPA”) for the issuance of 821,045 shares of the Company’s common stock to Genmab for a total purchase price of $15.0 million. These contracts have been evaluated together and the consideration in excess of the fair value of the common stock of $1.4 million has been allocated to the Genmab Agreement and included in the total consideration for collaboration revenue.
In the Genmab Agreement, the Company has identified one bundled performance obligation that includes the license rights, research and development services and services associated with participation on a joint research committee. The transaction price includes the $10.0 million upfront payment, the $1.4 million allocated from the Genmab SPA, and $6.1 million of estimated variable consideration related to reimbursements for research and development services at the agreed upon full-time employee rate and third-party costs. Collaboration revenue is recognized over time proportionate to the costs that the Company has incurred to perform the services using an input method as a measure of progress towards satisfying the performance obligation, which is based on project hours. Amounts are billed based on estimated variable consideration in the quarter ahead of performance and are trued up on the subsequent quarter’s invoice following the work performed. The cumulative effect of revisions to estimated hours to complete the Company’s performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. Deferred revenue allocated to the unsatisfied performance obligation is recorded as a contract liability on the balance sheet and will be recognized over time as the services are performed. As of June 30, 2021, contract liabilities totaling $11.4 million was recorded in deferred revenue in current and non-current liabilities on the balance sheet. There was no revenue earned during the three and six months ended June 30, 2021, as no services had been performed under the Genmab Agreement during these periods. The Genmab Agreement includes optional additional items which will be accounted for as contract modifications after initial clinical proof of concept of the therapeutic candidates and the parties exercise their respective program opt in rights.
7. Commitments and Contingencies
Leases
The Company has operating leases for its corporate office, laboratory and vivarium space in Redwood City, California. On August 7, 2020, the Company executed a non-cancellable lease agreement for 71,646 square feet of space (the “Chesapeake Master Lease”), which consists of 45,690 square feet of additional office, laboratory and vivarium space and includes an extension of 25,956 square feet under an existing lease. The Chesapeake Master Lease has an initial term of ten years from the Commencement Date, with an option to extend the lease for an additional eight-year term. The Chesapeake Master Lease contains rent escalation, and the Company is also responsible for certain operating expenses and taxes throughout the lease term. In addition, the Company is entitled to up to $4.8 million of tenant improvement allowance, which paid directly by the landlord to various vendors. Upon execution of the non-cancellable lease agreement, the Company took control of 10,000 square feet of space, which is subleased as further described below. The remaining 35,690 square feet of additional office, laboratory and vivarium space commenced in June 2021 and the extension of the 25,956 square feet under an existing lease is expected to commence in 2025. As of June 30, 2021, the operating lease right-of-use assets and operating lease liabilities for the 45,690 square feet of additional space were $18.5 million and $19.2 million, respectively.
In connection with the execution of the Chesapeake Master Lease, the Company entered into two operating lease agreements to sublease portions of the premises to two unrelated third parties. The first sublease agreement, to sublease 10,000 square feet, commenced in August 2020 and will expire on July 31, 2022. The second sublease agreement, to sublease 10,500 square feet, commenced in June 2021 and will expire on July 31, 2023. Rent for both subleases are subject to scheduled annual increases and the subtenants are responsible for certain operating expenses and taxes throughout the term under the sublease agreements. The subtenants have no option to extend the sublease term. Sublease income under the two sublease agreements for the three and six months ended June 30, 2021, was approximately $0.2 million and $0.3 million, respectively.
At June 30, 2021 and December 31, 2020, finance right-of-use leases are used to finance capital equipment such as printers or ozone generators and it is immaterial.
The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of June 30, 2021 were 8.4 years and 10.8%, respectively, for the operating leases. The weighted-average remaining lease term and discount rate related to the Company’s lease liabilities as of December 31, 2020 were 6.3 years and 9.5%, respectively, for the operating leases. The Company lease discount rates are based on estimates of its incremental borrowing rate, as the discount rates implicit in the Company’s leases cannot be readily determined. As the Company does not have any outstanding debt, the Company estimates the incremental borrowing
12
rate based on its estimated credit rating and available market information.
The components of lease expense were as follows (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Total operating lease cost
|
|
$
|
902
|
|
|
$
|
603
|
|
|
$
|
1,669
|
|
|
$
|
1,196
|
|
Supplemental cash flow information related to leases was as follows (in thousands):
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
Operating cash flows from operating leases
|
|
$
|
666
|
|
|
$
|
3,133
|
|
The following is a schedule by year for future maturities of the Company’s operating lease liabilities and sublease income to be received as of June 30, 2021 (in thousands):
|
|
Operating Leases
|
|
|
Sublease Income
|
|
2021
|
|
$
|
2,446
|
|
|
$
|
646
|
|
2022
|
|
|
4,994
|
|
|
|
1,048
|
|
2023
|
|
|
4,612
|
|
|
|
403
|
|
2024
|
|
|
4,772
|
|
|
|
—
|
|
2025
|
|
|
4,227
|
|
|
|
—
|
|
Thereafter
|
|
|
19,709
|
|
|
|
—
|
|
Total minimum lease payments/sublease income
|
|
|
40,760
|
|
|
|
2,097
|
|
Less imputed interest
|
|
|
(15,277
|
)
|
|
|
—
|
|
Total
|
|
$
|
25,483
|
|
|
$
|
2,097
|
|
Supply Agreement
The Company has entered into a supply agreement with a contract manufacturer pursuant to which the Company may be required to pay milestone payments upon the achievement of specified regulatory milestones. The agreement is cancelable by the Company upon delivering the appropriate prior written notice. At June 30, 2021, potential future milestone payments under this agreement were up to $2.0 million.
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, the Company did not have any material indemnification claims that were probable or reasonably possible and consequently had not recorded related liabilities.
Legal Proceedings
The Company is subject to claims and assessments from time to time in the ordinary course of business but is not aware of any such matters, individually or in the aggregate, that will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
8. Convertible Preferred Stock
Issuance of Series C-1 and Series C-2 Convertible Preferred Stock
In June 2020, the Company entered into a preferred stock purchase agreement (the “Series C Agreement”) with existing and new investors to raise up to $93.5 million in two separate tranches. The first tranche closed in June 2020 and the Company raised $41.3 million, net of issuance costs of $0.2 million, and issued 5,162,173 shares of Series C-1 convertible preferred stock at $8.05 per share. In addition, the investors agreed to buy and the Company agreed to sell up to 5,611,065 shares of Series C-2 convertible
13
preferred stock at a price per share of $9.2575, for potential additional gross proceeds of $51.9 million, upon the achievement of certain milestones as defined in the agreement.
The commitment made by the investors to invest in the second tranche of the Series C Agreement was considered a separate freestanding financial instrument and was recorded as a Convertible Preferred Stock Purchase Right Liability in the amount of $13.5 million upon the issuance of the first tranche of the Series C-1 convertible preferred stock in June 2020. The commitment was accounted for at fair value during the period it was outstanding with changes in fair value recorded as other income (expense) in the statement of operations and comprehensive loss. During the three months ended March 31, 2021, changes in fair value of this liability totaling $6.1 million have been recorded in other income (expense) in the statement of operations and comprehensive loss. In January 2021, the Company issued the additional 5,611,059 shares of Series C-2 convertible preferred stock for net proceeds of $51.9 million and accordingly, this contractual obligation was settled and the preferred stock purchase right liability was remeasured to its fair value and reclassified to permanent equity. In February 2021, all outstanding shares of convertible preferred stock were converted into the Company’s common stock in connection with the IPO.
9. COMMON STOCK
Common Stock Warrants
In July 2018, the Company issued 249,218 warrants to purchase common stock to the Series B investors in the first tranche. The warrants were deemed to be freestanding instruments indexed to the Company’s common stock and met the requirements for equity classification. The warrants had an expiration date of July 26, 2028 and were exercisable at the option of the warrant holder for $0.07 per share. In February 2021, all outstanding warrants were exercised to purchase 82,603 shares of the Company’s common stock in connection with the IPO.
10. STOCK-BASED COMPENSATION
Approval of 2021 Equity Incentive Plan and 2021 Employee Stock Purchase Plan
In January 2021, the Company’s board of directors adopted the 2021 Equity Incentive Plan (the “2021 Plan”) and the Company’s stockholders approved the 2021 Plan. The 2021 Plan authorized issuance of up to 8,075,000 shares of common stock and it became effective upon the execution of the underwriting agreement for the Company’s IPO.
In addition, in January 2021, the Company’s board of directors and stockholders adopted the 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP authorized issuance of up to 840,000 shares of common stock and it became effective upon the execution of the underwriting agreement for the Company’s IPO. The 2021 ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation. Employees purchase shares of common stock at a price per share equal to 85% of the lower of the fair market value at the start or end of the six-month purchase periods within the two-year offering period. During the three and six months ended June 30, 2021, 29,685 shares had been issued under the 2021 ESPP.
Performance and Service Based Stock Options
In September 2020, the compensation committee of the Company’s board of directors granted 526,018 options to employees that would commence vesting upon the closing of the Series C-2 financing and generally vest monthly over 48 months (the “Performance Awards”). The Company recognizes expense based on the fair value of the Performance Awards over the estimated service period (under the graded vesting method) to the extent the achievement of the related performance criteria is estimated to be probable. The Company determined that the financing milestone was achieved during January 2021. Accordingly, the Company recognized stock-based compensation expense related to the Performance Awards of approximately $0.1 million and $0.6 million for the three and six months ended June 30, 2021, respectively. The weighted-average grant date fair value of the Performance Awards was $3.24 per share.
14
Stock-Based Compensation Expense
The following table summarizes the components of stock-based compensation expense recognized in the Company’s statement of operations and comprehensive loss (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
1,077
|
|
|
$
|
98
|
|
|
$
|
2,097
|
|
|
$
|
198
|
|
General and administrative
|
|
|
946
|
|
|
|
125
|
|
|
|
2,035
|
|
|
|
250
|
|
Total
|
|
$
|
2,023
|
|
|
$
|
223
|
|
|
$
|
4,132
|
|
|
$
|
448
|
|
Early Exercise Liability
Some of the options granted under the 2015 Plan may be exercised prior to the time that the options have vested, provided that such shares remain subject to repurchase until such time as they have vested. The right to repurchase these shares lapses over the vesting periods, which are generally four years. As of June 30, 2021 and December 31, 2020, there were 10,904 and 47,180, respectively, unvested shares representing an early exercise liability of approximately $28,000 and $0.1 million, respectively. The unvested shares purchased by the employees are not deemed, for accounting purposes, to be outstanding.
11. Net Loss Per Share
The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders, which excludes shares which are legally outstanding, but subject to repurchase by the Company (in thousands, except share and per share amounts):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(23,585
|
)
|
|
$
|
(11,059
|
)
|
|
$
|
(48,039
|
)
|
|
$
|
(19,692
|
)
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
36,617,390
|
|
|
|
1,937,510
|
|
|
|
29,104,021
|
|
|
|
1,935,575
|
|
Weighted average common stock outstanding subject to repurchase related to unvested early exercised stock options and restricted stock awards
|
|
|
(22,279
|
)
|
|
|
(20,213
|
)
|
|
|
(33,553
|
)
|
|
|
(24,401
|
)
|
Weighted average warrants to purchase common stock
|
|
|
—
|
|
|
|
172,023
|
|
|
|
17,798
|
|
|
|
172,023
|
|
Weighted average common shares outstanding - basic and
diluted
|
|
|
36,595,112
|
|
|
|
2,089,320
|
|
|
|
29,088,267
|
|
|
|
2,083,197
|
|
Net loss per share attributable to common stockholders, basic
and diluted
|
|
$
|
(0.64
|
)
|
|
$
|
(5.29
|
)
|
|
$
|
(1.65
|
)
|
|
$
|
(9.45
|
)
|
15
Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common stock equivalent shares):
|
|
Three and Six Months Ended
|
|
|
|
2021
|
|
|
2020
|
|
Convertible preferred stock
|
|
|
—
|
|
|
|
15,232,275
|
|
Common stock options issued and outstanding
|
|
|
5,091,714
|
|
|
|
1,992,801
|
|
Common stock outstanding subject to repurchase related to
unvested early exercised stock options and restricted
stock awards
|
|
|
10,904
|
|
|
|
16,132
|
|
Total
|
|
|
5,102,618
|
|
|
|
17,241,208
|
|
The ESPP did not exist in 2020, and the potentially dilutive shares to be issued under the ESPP as of June 30, 2021 were not included in the calculation of dilutive net loss per share because they would be anti-dilutive and were immaterial.
16