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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-40499

 

Cyteir Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

45-5429901

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

128 Spring St, Building A, Suite 510

Lexington, MA

02421

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 857-285-4140

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

CYT

 

Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 2, 2022, the registrant had 35,409,028 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Condensed Consolidated Balance Sheets

3

 

Condensed Consolidated Statements of Operations

4

 

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

5

 

Condensed Consolidated Statements of Cash Flows

6

 

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

25

Item 6.

Exhibits

26

Signatures

27

 

 

 

i


 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” and similar expressions are intended to identify forward-looking statements. For example, all statements we make relating to our clinical trial plans and milestones, including initiating a potentially registrational trial in 2023 for CYT-0851, our plan to complete IND-enabling studies with CYT-1853 in the first half of 2022, our plan to file an IND application with the United States Food and Drug Administration for CYT-1853 by the end of 2022, our expectation of reaching the drug candidate nomination phase for our drug discovery projects in 2023 and our plans to nominate additional targets from our DNA damage repair platform, are forward looking statements.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in the section titled “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission on March 16, 2022, which could cause actual results to differ materially. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in or implied by any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or reflect interim developments, except as required by law. Some of the key factors that could cause actual results to differ include that:

• We have a limited operating history and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.

• We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

• We will need substantial additional funding. If we are unable to raise capital when needed, we will be forced to delay, reduce, or eliminate our research and product development programs or future commercialization efforts.

• We have never successfully completed any clinical trials, and we may be unable to do so for any drug candidates we develop.

• Our clinical trials may fail to demonstrate adequately the safety and efficacy of any of our drug candidates, which would delay or prevent further clinical development of those candidates, or prevent marketing approval from FDA or similar regulatory authorities.

• We intend to develop CYT-0851, and potentially future drug candidates, for use in combination with other therapies, which exposes us to additional risks.

• If we are unable to successfully develop and commercialize companion diagnostic tests for our drug candidates, or experience significant delays in doing so, we may not realize the full commercial potential of our drug candidates.

• Synthetic lethality represents an emerging class of precision medicine targets, and negative perceptions of the efficacy, safety or tolerability of this class of targets, including any that we develop, could adversely affect our ability to conduct our business, advance our drug candidates or obtain regulatory approvals.

 

 

1


 

• If we are unable to adequately protect and enforce our intellectual property or obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and products may be impaired.

• The continuing outbreak of COVID-19 in the United States and other countries may adversely affect our business and the market price of our common stock.

• Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

 

 

2


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

CYTEIR THERAPEUTICS, INC.

Condensed consolidated balance sheets

 

(in thousands, except share and per share amounts)
(unaudited)

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

177,383

 

 

$

189,723

 

Prepaid expenses and other current assets

 

 

3,602

 

 

 

3,354

 

Total current assets

 

$

180,985

 

 

$

193,077

 

Property and equipment, net

 

 

2,098

 

 

 

2,055

 

Other assets

 

 

2,875

 

 

 

256

 

Total assets

 

$

185,958

 

 

$

195,388

 

Liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

3,509

 

 

$

1,785

 

Accrued expenses and other current liabilities

 

 

5,645

 

 

 

5,726

 

Total current liabilities

 

$

9,154

 

 

$

7,511

 

Deferred rent, net of current portion

 

 

 

 

 

384

 

Other long term liabilities

 

 

2,301

 

 

 

201

 

Total liabilities

 

$

11,455

 

 

$

8,096

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

Preferred stock, $0.001 par value: 40,000,000 shares authorized
   as of March 31, 2022 and December 31, 2021;
no shares issued and
   outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value: 280,000,000 shares
   authorized as of March 31, 2022 and December 31, 2021;
   
35,409,028 and 35,389,453 shares issued as of March 31, 2022
   and December 31, 2021, respectively;
35,272,014 and
   
35,219,834 shares outstanding as of March 31, 2022 and
   December 31, 2021, respectively

 

 

35

 

 

 

35

 

Additional paid-in capital

 

 

280,623

 

 

 

279,310

 

Accumulated deficit

 

 

(106,155

)

 

 

(92,053

)

Total stockholders’ equity (deficit)

 

 

174,503

 

 

 

187,292

 

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

 

$

185,958

 

 

$

195,388

 

 

See accompanying notes to condensed consolidated financial statements.

 

3


 

CYTEIR THERAPEUTICS, INC.

Condensed consolidated statements of operations

 

 

 

Three Months Ended
March 31,

 

(in thousands, except share and per share amounts)
(unaudited)

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

10,088

 

 

$

5,613

 

General and administrative

 

 

4,043

 

 

 

1,724

 

Total operating expenses

 

 

14,131

 

 

 

7,337

 

Loss from operations

 

 

(14,131

)

 

 

(7,337

)

Other income (expense):

 

 

 

 

 

 

Other income (expense)

 

 

29

 

 

 

25

 

Total other income (expense)

 

 

29

 

 

 

25

 

Net loss

 

$

(14,102

)

 

$

(7,312

)

Net loss per share—basic and diluted

 

$

(0.40

)

 

$

(3.40

)

Weighted-average common stock outstanding—basic and diluted

 

 

35,241,251

 

 

 

2,152,613

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

 

CYTEIR THERAPEUTICS, INC.

Condensed consolidated statements of redeemable convertible preferred stock and stockholders’ equity (deficit)

 

 

 

 

Redeemable convertible preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A

 

 

Series B

 

 

Series C

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share amounts)
(unaudited)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Additional
paid-in
capital

 

 

Accumulated
deficit

 

 

Total
stockholders’
equity (deficit)

 

Balance At December 31, 2020

 

 

5,817,996

 

 

$

5,696

 

 

 

55,200,000

 

 

$

51,715

 

 

 

 

 

$

 

 

 

 

2,044,529

 

 

$

2

 

 

$

1,894

 

 

$

(49,927

)

 

$

(48,031

)

Exercise of common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49,244

 

 

 

 

 

 

154

 

 

 

 

 

 

154

 

Issuance of Series C redeemable convertible preferred
   stock, net of issuance costs of $
345

 

 

 

 

 

 

 

 

 

 

 

 

 

 

21,784,885

 

 

 

79,655

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

172,666

 

 

 

 

 

 

197

 

 

 

 

 

 

197

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

488

 

 

 

 

 

 

488

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,312

)

 

 

(7,312

)

Balance At March 31, 2021

 

 

5,817,996

 

 

$

5,696

 

 

 

55,200,000

 

 

$

51,715

 

 

 

21,784,885

 

 

$

79,655

 

 

 

 

2,266,439

 

 

$

2

 

 

$

2,733

 

 

$

(57,239

)

 

$

(54,504

)

 

 

 

Redeemable convertible preferred stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A

 

 

Series B

 

 

Series C

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share amounts)
(unaudited)

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Additional
paid-in
capital

 

 

Accumulated
deficit

 

 

Total
stockholders’
equity (deficit)

 

Balance At December 31, 2021

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

35,219,834

 

 

$

35

 

 

$

279,310

 

 

$

(92,053

)

 

$

187,292

 

Exercise of common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,575

 

 

 

 

 

 

19

 

 

 

 

 

 

19

 

Vesting of early exercised options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32,605

 

 

 

 

 

 

39

 

 

 

 

 

 

39

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,255

 

 

 

 

 

 

1,255

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,102

)

 

 

(14,102

)

Balance At March 31, 2022

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

35,272,014

 

 

$

35

 

 

$

280,623

 

 

$

(106,155

)

 

$

174,503

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

 

CYTEIR THERAPEUTICS, INC.

Condensed consolidated statements of cash flows

 

 

 

Three Months Ended
March 31,

 

(in thousands)
(unaudited)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(14,102

)

 

$

(7,312

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

159

 

 

 

103

 

Stock-based compensation

 

 

1,255

 

 

 

488

 

Non-cash lease expense

 

 

154

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(322

)

 

 

3

 

Other assets

 

 

 

 

 

61

 

Accounts payable

 

 

1,713

 

 

 

331

 

Accrued expenses and other current liabilities

 

 

(1,025

)

 

 

11

 

Deferred rent

 

 

 

 

 

(59

)

Net cash used in operating activities

 

$

(12,168

)

 

$

(6,374

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(191

)

 

 

(178

)

Net cash used in investing activities

 

$

(191

)

 

$

(178

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of preferred stock, net of issuance costs

 

 

 

 

 

79,655

 

Proceeds from exercise of stock options

 

 

19

 

 

 

154

 

Net cash provided by financing activities

 

$

19

 

 

$

79,809

 

Net (decrease) increase in cash, cash equivalents, and restricted cash

 

 

(12,340

)

 

 

73,257

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

189,979

 

 

 

11,194

 

Cash, cash equivalents and restricted cash at end of period

 

$

177,639

 

 

$

84,451

 

Supplemental disclosure of cash flows

 

 

 

 

 

 

Deferred financing costs in accounts payable

 

$

 

 

$

716

 

Property and equipment purchases in accounts payable

 

$

11

 

 

$

70

 

 

 

 

 

 

 

 

Supplemental disclosure of noncash financing activities

 

 

 

 

 

 

Vesting of early exercised options

 

$

39

 

 

$

197

 

 

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the dates shown below:

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Cash and cash equivalents

 

$

177,383

 

 

$

84,195

 

Restricted cash (included in other assets)

 

 

256

 

 

 

256

 

Total cash, cash equivalents, and restricted cash

 

$

177,639

 

 

$

84,451

 

 

See accompanying notes to condensed consolidated financial statements.

 

6

 


 

CYTEIR THERAPEUTICS, INC.

Notes to condensed consolidated financial statements – (unaudited)

1. Nature of the business

Cyteir Therapeutics, Inc., (the “Company”) is a clinical-stage biotechnology company focused on developing and commercializing the next-generation of precision oncology medicines that inhibit DNA damage repair and cause cancer cell death in specific subsets of cancer patients through a therapeutic strategy known as synthetic lethality. The Company’s lead program, CYT-0851, was designed to exploit a novel synthetic lethality between overexpression of a family of DNA damaging enzymes called cytidine deaminases, or CD, and functional inhibition of homologous recombination, or HR, a DNA repair pathway critical for the survival of some cancers. The Company is using its expertise in DNA Damage Response biology and a disciplined approach to select targets for other novel, differentiated programs with the aim of building a patient-centric portfolio of effective cancer therapies.

The Company was formed as a Delaware corporation on June 4, 2012, pursuant to the General Corporation Law of the State of Delaware. The Company has a principal office in Lexington, Massachusetts.

Liquidity

The Company has incurred net operating losses since inception and has funded its operations primarily with proceeds from the sale of redeemable convertible preferred stock and the issuance of common stock in the IPO. As of March 31, 2022, the Company had cash and cash equivalents of $177.4 million and an accumulated deficit of $106.2 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts.

The Company expects that its cash and cash equivalents as of March 31, 2022 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date these condensed consolidated financial statements are available to be issued.

The Company will need additional funding to support its planned operating activities. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects.

COVID-19 considerations

The development of the Company’s product candidates could be disrupted and materially adversely affected in by a pandemic, epidemic or outbreak of an infectious disease, such as the ongoing COVID-19 pandemic. The ongoing COVID-19 pandemic and the measures taken by the governments of countries affected by it could disrupt the supply chain and the manufacture or shipment of both drug substance and finished drug product for the Company’s product candidates for preclinical testing or clinical trials, cause diversion of healthcare resources away from the conduct of preclinical and clinical trial matters to focus on pandemic concerns, limit travel in a manner that interrupts key trial activities, such as trial site initiations and monitoring, delay regulatory filings with regulatory agencies in affected areas or adversely affect the Company’s ability to obtain regulatory approvals. These disruptions could also affect other facets of the Company’s business, including, but not limited to, the Company’s ability to recruit employees from outside of the United States, the ability of the Company’s CROs to conduct clinical trials and preclinical studies in countries outside of the United States, the Company’s ability to import materials from outside of the United States, including raw materials required to manufacture its drug candidates, the Company’s ability to export materials to its CROs and other third-parties located outside of the United States, the Company’s ability to identify suitable clinical sites or open those sites for enrollment due to competing business needs, the Company’s ability to enroll patients due to their fear of coming into medical facilities and their perceived risk of becoming infected at such facilities, and the Company’s ability to monitor the clinical data generated at its clinical sites, required for completion of clinical trials.

The COVID-19 pandemic and mitigation measures also may have an adverse impact on global economic conditions, which could adversely impact the Company’s business, financial condition or results of operations. Additionally, the COVID-19 pandemic has resulted in significant financial market volatility and uncertainty. A continuation or worsening of the levels of market disruption and volatility as a result of the COVID-19 pandemic could have an adverse effect on the Company’s ability to access capital and on the market price of its common stock. The Company cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if the Company or any of the third parties on whom it relies on or with whom it conducts business, were to experience shutdowns or other business disruptions, the

7

 


 

Company’s ability to conduct business in the manner and on the timelines presently planned could be materially and adversely impacted.

2. Summary of significant accounting policies

The Company's significant accounting policies are disclosed in the audited consolidated financial statements for the years ended December 31, 2021 and 2020 ("audited financial statements"), which are included in the Company's Annual Report on Form 10-K that was filed with the SEC on March 16, 2022. Since the date of the financial statements, there have been no changes to the Company's significant accounting policies, except as noted below.

Interim Financial Information

The accompanying condensed consolidated balance sheet at March 31, 2022, and the condensed consolidated statements of operations, statements of redeemable convertible preferred stock and changes in stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021 and condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited. The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position at March 31, 2022 and the results of its operations for the three months ended March 31, 2022 and 2021 and its cash flows for the three months ended March 31, 2022 and 2021. The financial data and other information disclosed in these notes related to the three months ended March 31, 2022 and 2021 are also unaudited. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the full year or for any other subsequent interim period.

Leases

Prior to January 1, 2022, the Company accounted for leases in accordance with Accounting Standards Codification (“ASC”) 840, Leases. At lease inception, the Company determined if an arrangement was an operating or capital lease. For operating leases, the Company recognized rent expense, inclusive of rent escalations and lease incentives, on a straight-line basis over the lease term.

Effective January 1, 2022, the Company adopted ASC 842, Leases (“ASC 842”), and elected to apply the modified retrospective transition approach using the effective date as the initial date of application. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. At the lease commencement date, when control of the underlying asset is transferred from the lessor to the Company, the Company classifies a lease as either an operating or finance lease and recognizes a right-of-use (“ROU”) asset and a current and non-current lease liability, as applicable, on the consolidated balance sheet if the lease has a term greater than one year. As permitted under ASC 842, the Company has made an accounting policy election, for all classes of underlying assets, to not recognize ROU assets and lease liabilities for leases having a term of twelve months or less. When it determines the appropriate classification and accounting for a lease arrangement, the Company typically only considers the committed lease term. Options to extend a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will either renew or not cancel, respectively.

At the lease commencement date, the operating lease liability and corresponding ROU asset are recorded at the present value of future lease payments over the expected remaining lease term using the discount rate implicit in the lease, if it is readily determinable, or the Company’s incremental borrowing rate. The Company’s incremental borrowing rate reflects the fixed rate at which the Company could borrow the amount of lease payments in the same currency on a collateralized basis, for a similar term in a similar economic environment. Lease cost for operating leases is recognized on a straight-line basis over the lease term as an operating expense. In addition, certain adjustments to the ROU asset may be required for items such as lease prepayments, incentives received, or initial direct costs.

The Company enters into contracts that contain both lease and non-lease components. Non-lease components include costs that do not provide a right-to-use a leased asset but instead provide a service, such as maintenance costs. After its adoption of ASC 842, the Company has elected to combine the lease and non-lease components together as a single lease component for all existing classes of underlying assets. Variable costs associated with the lease, such as maintenance and utilities, are not included in the measurement of right-to-use assets and lease liabilities but rather are expensed when the events determining the amount of variable consideration to be paid have occurred.

Upon its adoption of ASC 842 on January 1, 2022, the Company recorded a lease liability and its corresponding ROU asset based on the present value of lease payments over the remaining lease term. The adoption of ASC 842 resulted in the recognition of an operating lease liability of $3.2 million and ROU assets of $2.8 million, with the offset attributed to the net derecognition of prepaid rent and the unamortized deferred rent liability, inclusive of tenant improvement allowances

8

 


 

on the Company’s balance sheet as of January 1, 2022. The adoption of ASC 842 did not have a material impact on the Company’s statements of operations and comprehensive loss or statements of cash flows.
 

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued Accounting Standards Update No. 2019-12 (ASU 2019-12) Simplifying the Accounting for Income Tax. The standard contains several provisions that reduce financial statement complexity including removing the exception to the incremental approach for intra-period tax expense allocation when a company has a loss from continuing operations and income from other items not included in continuing operations. The new guidance is effective for the year beginning January 1, 2022 with optional adoption prior to the effective date. The Company adopted ASU 2019-12 on January 1, 2022. There was no material impact to the Company’s consolidated financial statements as a result of adopting this new standard.

 

9

 


 

3. Fair value measurement

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

 

 

 

 

 

 

March 31, 2022

 

Assets:

 

Total

 

 

Quoted prices in
active markets for
identical assets
(level 1)

 

 

Significant
other observable
inputs
(level 2)

 

 

Significant
other observable
inputs
(level 3)

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

171,501

 

 

$

171,501

 

 

$

 

 

$

 

Total assets

 

$

171,501

 

 

$

171,501

 

 

$

 

 

 

$

 

 

 

 

 

 

 

 

December 31, 2021

 

Assets

 

Total

 

 

Quoted prices in
active markets for
identical assets
(level 1)

 

 

Significant
other observable inputs
(level 2)

 

 

Significant
other observable inputs
(level 3)

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

189,488

 

 

$

189,488

 

 

$

 

 

$

 

Total assets

 

$

189,488

 

 

$

189,488

 

 

$

 

 

$

 

 

During the three months ended March 31, 2022 and the year ended December 31, 2021, there were no transfers between levels. The fair values of the Company’s cash equivalents, consisting of its standard checking accounts and money market funds, are based on quoted market prices in active markets without any valuation adjustment.

The Company uses the carrying amounts of its restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities to approximate their fair value due to the short-term nature of these amounts.

4. Prepaid expenses and other current assets

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

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Prepaid research and development expenses

 

$

2,620

 

 

$

1,549

 

Prepaid insurance

 

 

649

 

 

 

1,397

 

Payroll tax credit

 

 

51

 

 

 

38

 

Prepaid other

 

 

282

 

 

 

370

 

     Total

 

$

3,602

 

 

$

3,354

 

 

5. Property and equipment, net

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

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Laboratory and computer equipment

 

$

1,736

 

 

$

1,541

 

Leasehold improvements

 

 

1,675

 

 

 

1,668

 

Total property and equipment

 

 

3,411

 

 

 

3,209

 

Less: accumulated depreciation and amortization

 

 

(1,313

)

 

 

(1,154

)

     Property and equipment, net

 

$

2,098

 

 

$

2,055

 

 

For the three months ended March 31, 2022 and 2021, depreciation and amortization expense related to property and equipment was $0.2 million and $0.1 million, respectively.

10

 


 

6. Accrued expenses and other current liabilities

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

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Accrued research and development expenses

 

$

3,668

 

 

$

3,448

 

Accrued bonuses

 

 

551

 

 

 

1,660

 

Accrued other

 

 

539

 

 

 

618

 

Operating lease liabilities

 

 

887

 

 

 

 

     Total accrued expenses and other current liabilities

 

$

5,645

 

 

$

5,726

 

 

7. Common stock

The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock as set forth in our Form 10-K for the fiscal year ended December 31, 2021.

The holders of the common stock are entitled to one vote for each share of common stock held submitted to a vote of stockholders (and written actions in lieu of meetings), and there are not any cumulative voting rights. Holders of common stock are entitled to received proportionately any dividends as may be declared by our board of directors subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.

As of March 31, 2022 and December 31, 2021, the Company has reserved the following shares of common stock for the potential exercise of stock options:

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Options to purchase common stock

 

 

3,421,653

 

 

 

2,778,963

 

Remaining shares reserved for future issuance

 

 

5,892,879

 

 

 

5,670,560

 

     Total

 

 

9,314,532

 

 

 

8,449,523

 

 

8. Stock-based compensation

2012 Stock Incentive Plan

The Company adopted the 2012 Stock Incentive Plan (the “2012 Plan”) in February 2016 pursuant to which the Company can issue incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock awards. Recipients of stock options or stock appreciate rights shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to the estimated fair market value of such stock on the date of grant. The exercise price may be less than fair market value if the stock award is granted pursuant to an assumption or substitution for another stock award in the event of a merger or sale of the Company. The maximum term of options granted under the 2012 Plan is ten years, and stock options typically vest over a four-year period. The Board may assign vesting terms to the stock option grants as deemed appropriate. The Company also has the right of refusal to purchase any proposed disposition of shares issued under the 2012 Plan. The 2012 Plan allows for early exercise of all stock option grants if authorized by the Board at the time of grant. The shares of common stock issued from the early exercise of stock options are restricted and vest over time. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. At the discretion of the Board, unvested shares held by employees may accelerate vesting in the event of a change of control of the Company unless assumed or substituted by the acquirer or surviving entity. The 2012 Plan has been subsequently amended and provides for the issuance of up to 6,941,421 shares of common stock as of March 31, 2022, of which 2,732,632 shares of common stock remained available for future grant under the 2012 Plan upon the effectiveness of the 2021 Equity Incentive Plan (the “2021 Plan”) and were made available for future issuance under the 2021 Plan. On June 11, 2021, the Company’s board of directors adopted, and in June 2021 the Company’s stockholders approved, the 2021 Plan, which became effective immediately prior to the effectiveness of the registration statement for the initial public offering.

2021 Equity Incentive Plan

In June 2021 the Company’s board of directors adopted, and in June 2021 the Company’s stockholders approved, the 2021 Plan, which became effective immediately prior to the effectiveness of the registration statement for the initial public offering. The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation

11

 


 

rights, restricted stock awards, restricted stock units and other stock-based awards. Upon effectiveness of the 2021 Plan, the number of shares of common stock reserved for issuance under the 2021 Plan was 5,932,632, which represents 3,200,000 shares along with 2,732,632 shares of common stock reserved for issuance under the 2012 Plan that remained available for grant under the 2012 Plan immediately prior to the effectiveness of the 2021 Plan. Shares of our common stock subject to outstanding awards granted under the 2012 Plan that expire unexercised or are terminated, surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right will become available for issuance under the 2021 Plan. Upon adoption of the 2021 Plan, the Company ceased the grant of additional awards under the 2012 Plan. The 2021 Plan includes an "evergreen" provision, which provides for an annual increase to be added on January 1st of each year beginning in 2022 and continuing through and including 2031 by the lesser of (i) 5% of the number of shares of Stock outstanding as of such date and (ii) an amount determined by the board of directors. On January 1, 2022, the number of shares of Common Stock reserved and available for issuance under the 2021 Plan increased by 884,585 shares.

At March 31, 2022, 5,892,879 shares of common stock remained available for future grant under the 2021 Plan.

2021 Employee Stock Purchase Plan

In June 2021, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effectiveness of the registration statement for the initial public offering. The ESPP is administered by the Company’s board of directors or by a committee appointed by the board of directors. The ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of 300,000 shares of common stock. The number of shares of common stock reserved for issuance under the ESPP will automatically increase on January 1st of each year beginning in 2022 and continuing through and including 2031 by the least of (i) 1% of the number of shares of Stock outstanding as of such date, (ii) 600,000 shares of Stock and (iii) the number of shares of Stock determined by the Board on or prior to such date for such year, up to a maximum of 6,300,000 shares in the aggregate.

Early exercise of unvested stock options

Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in long-term liabilities on the condensed consolidated balance sheets. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. As of March 31, 2022 and December 31, 2021, there were 137,015 and 169,919 unvested shares related to early exercises of stock options, respectively.

Stock option valuation

The assumptions that the Company used in the Black Scholes option-pricing model to determine the grant date fair value of stock options granted were as follows:

 

 

 

March 31,
2022

Risk-free interest rate range

 

1.89%

Dividend yield

 

0.0%

Expected life of options (years)

 

6.0

Volatility rate range

 

92.8%

 

The following table summarizes the Company’s stock option activity during the three months ended March 31, 2022:

 

 

 

Number of
shares

 

 

Weighted average
exercise price

 

 

Weighted average
remaining
contractual
term (in years)