10-Q 1 amti-10q_20210331.htm AMT-Q1-2021.03.31 amti-10q_20210331.htm

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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, 2021

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: 001-39306

 

APPLIED MOLECULAR TRANSPORT INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-4481426

(State or other jurisdiction of

incorporation or organization)

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

1 Tower Place, Suite 850

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: 650-392-0420

 

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 $0.0001 per share

 

AMTI

 

The 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, a 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 5, 2021, the registrant had 38,278,344 shares of common stock, $0.0001 par value per share, outstanding.

 


Table of Contents

 

Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations and Comprehensive Loss

2

 

Condensed Statements of Stockholders’ Equity

3

 

Condensed Statements of Convertible Preferred Stock and Stockholders’ Deficit

4

 

Condensed Statements of Cash Flows

5

 

Notes to Unaudited Condensed Financial Statements

6

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

76

Item 3.

Defaults Upon Senior Securities

76

Item 4.

Mine Safety Disclosures

76

Item 5.

Other Information

76

Item 6.

Exhibits

77

Signatures

78

 

 

 


Table of Contents

 

 

Forward-Looking Statements

This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information regarding our expectations on the timing of clinical study initiation and results and the timing and success of future development of our products, our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities, reliance on third parties, financing needs, and impact of the Affordable Care Act and other legislation, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons. Actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

 

 

 


Table of Contents

 

 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial Statements (Unaudited)

Applied Molecular Transport Inc.

Condensed Balance Sheets

(unaudited)

 

(in thousands, except share and per share amounts)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,202

 

 

$

5,843

 

Short-term investments

 

 

82,063

 

 

 

124,026

 

Prepaid expenses

 

 

2,648

 

 

 

1,311

 

Deferred offering costs

 

 

659

 

 

 

 

Other current assets

 

 

393

 

 

 

321

 

Total current assets

 

 

111,965

 

 

 

131,501

 

Property and equipment, net

 

 

6,999

 

 

 

8,447

 

Operating lease right-of-use assets, net

 

 

5,450

 

 

 

 

Finance lease right-of-use assets, net

 

 

796

 

 

 

 

Restricted cash

 

 

1,025

 

 

 

108

 

Other assets

 

 

169

 

 

 

127

 

Total assets

 

$

126,404

 

 

$

140,183

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,208

 

 

$

3,174

 

Accrued expenses

 

 

4,094

 

 

 

4,173

 

Operating lease liabilities, current

 

 

2,377

 

 

 

 

Finance lease liabilities, current

 

 

235

 

 

 

 

Deferred rent, current

 

 

 

 

 

83

 

Capital lease obligations, current

 

 

 

 

 

232

 

Total current liabilities

 

 

8,914

 

 

 

7,662

 

Operating lease liabilities

 

 

3,589

 

 

 

 

Finance lease liabilities

 

 

344

 

 

 

 

Deferred rent

 

 

 

 

 

444

 

Capital lease obligations

 

 

 

 

 

404

 

Total liabilities

 

 

12,847

 

 

 

8,510

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 450,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 35,250,650 and 35,121,360 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

273,348

 

 

 

271,000

 

Accumulated other comprehensive income

 

 

25

 

 

 

27

 

Accumulated deficit

 

 

(159,820

)

 

 

(139,358

)

Total stockholders’ equity

 

 

113,557

 

 

 

131,673

 

Total liabilities and stockholders’ equity

 

$

126,404

 

 

$

140,183

 

 

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

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Applied Molecular Transport Inc.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

14,881

 

 

$

12,954

 

General and administrative

 

 

5,599

 

 

 

2,489

 

Total operating expenses

 

 

20,480

 

 

 

15,443

 

Loss from operations

 

 

(20,480

)

 

 

(15,443

)

Interest income, net

 

 

40

 

 

 

83

 

Other (expense) income, net

 

 

(22

)

 

 

49

 

Net loss

 

$

(20,462

)

 

$

(15,311

)

Net loss per share, basic and diluted

 

$

(0.58

)

 

$

(2.06

)

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

 

 

35,217,773

 

 

 

7,417,440

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(20,462

)

 

$

(15,311

)

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

Unrealized (loss) gain on investments

 

 

(2

)

 

 

6

 

Total comprehensive loss

 

$

(20,464

)

 

$

(15,305

)

 

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

 

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Applied Molecular Transport Inc.

Condensed Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

As of December 31, 2020

 

 

35,121,360

 

 

$

4

 

 

$

271,000

 

 

$

27

 

 

$

(139,358

)

 

$

131,673

 

Exercise of common stock options

 

 

129,290

 

 

 

 

 

 

397

 

 

 

 

 

 

 

 

 

397

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,951

 

 

 

 

 

 

 

 

 

1,951

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,462

)

 

 

(20,462

)

As of March 31, 2021

 

 

35,250,650

 

 

$

4

 

 

$

273,348

 

 

$

25

 

 

$

(159,820

)

 

$

113,557

 

 

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

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Applied Molecular Transport Inc.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Deficit

(unaudited)

(in thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred Stock

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Series A

 

 

Series B

 

 

Series C

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Deficit

 

As of December 31, 2019

 

 

5,157,213

 

 

$

32,826

 

 

 

3,992,919

 

 

$

30,921

 

 

 

4,816,160

 

 

$

41,868

 

 

 

7,360,738

 

 

$

1

 

 

$

1,078

 

 

$

13

 

 

$

(72,794

)

 

$

(71,702

)

Exercise of common stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

73,594

 

 

 

 

 

 

58

 

 

 

 

 

 

 

 

 

58

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

557

 

 

 

 

 

 

 

 

 

557

 

Unrealized gain on investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(15,311

)

 

 

(15,311

)

As of March 31, 2020

 

 

5,157,213

 

 

$

32,826

 

 

 

3,992,919

 

 

$

30,921

 

 

 

4,816,160

 

 

$

41,868

 

 

 

7,434,332

 

 

$

1

 

 

$

1,693

 

 

$

19

 

 

$

(88,105

)

 

$

(86,392

)

 

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

 

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Applied Molecular Transport Inc.

Condensed Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Three Months Ended

March 31,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(20,462

)

 

$

(15,311

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,951

 

 

 

557

 

Depreciation and amortization

 

 

784

 

 

 

211

 

Non-cash operating lease expense

 

 

597

 

 

 

 

Net accretion of discounts on investments

 

 

(39

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

(1,337

)

 

 

(2,321

)

Other current assets

 

 

(114

)

 

 

(563

)

Other assets

 

 

 

 

 

504

 

Accounts payable

 

 

(1,331

)

 

 

2,575

 

Accrued expenses

 

 

(389

)

 

 

629

 

Operating lease liabilities

 

 

(608

)

 

 

 

Deferred rent

 

 

 

 

 

6

 

Capital lease obligations

 

 

 

 

 

2

 

Net cash used in operating activities

 

 

(20,948

)

 

 

(13,711

)

Investing activities

 

 

 

 

 

 

 

 

Proceeds from sales and maturities of investments

 

 

42,000

 

 

 

18,126

 

Purchases of property and equipment

 

 

(79

)

 

 

(1,203

)

Purchases of investments

 

 

 

 

 

(8,315

)

Net cash provided by investing activities

 

 

41,921

 

 

 

8,608

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

397

 

 

 

58

 

Principal payments on finance lease liabilities

 

 

(57

)

 

 

 

Payments of issuance costs for follow-on offering

 

 

(37

)

 

 

 

Payments of issuance costs for initial public offering

 

 

 

 

 

(1,695

)

Principal payments on capital lease obligations

 

 

 

 

 

(20

)

Net cash provided by (used in) financing activities

 

 

303

 

 

 

(1,657

)

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

 

 

21,276

 

 

 

(6,760

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

5,951

 

 

 

12,835

 

Cash, cash equivalents and restricted cash, end of period

 

$

27,227

 

 

$

6,075

 

Supplemental cash flow data:

 

 

 

 

 

 

 

 

Cash paid for interest on capital lease obligations

 

$

9

 

 

$

1

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Property and equipment included in accounts payable and accrued expenses

 

$

54

 

 

$

660

 

Issuance costs included in accounts payable and accrued expenses

 

$

622

 

 

$

641

 

 

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

 

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Applied Molecular Transport Inc.

Notes to the Condensed Financial Statements

(unaudited)

1. Business and Principal Activities

Description of Business

Applied Molecular Transport Inc. (the Company) is a clinical-stage biopharmaceutical company leveraging its proprietary technology platform to design and develop a pipeline of novel oral biologic product candidates to treat autoimmune, inflammatory, metabolic, and other diseases. The Company is building a portfolio of oral product candidates based on its technology platform including its most advanced product candidate, AMT-101, a gastrointestinal (GI)-selective oral fusion of interleukin-10 (IL-10) and our proprietary carrier molecule that has completed a Phase 1b clinical trial in patients with ulcerative colitis (UC). The Company has initiated multiple Phase 2 clinical trials of AMT-101 in UC and related inflammatory indications. The Company’s second product candidate, AMT-126, is a GI-selective oral fusion of interleukin-22 (IL-22) and the Company’s proprietary carrier molecule currently in development for diseases related to intestinal epithelium (IE) barrier function defects driven by activation of the innate immune system. The Company’s technology platform enables it to design and develop various oral biologic therapeutic modalities, such as peptides, proteins, full-length antibodies, antibody fragments, and ribonucleic acid (RNA) therapeutics, with potentially significant advantages over existing marketed and development-stage drugs.

Since the date of incorporation in Delaware on November 21, 2016, the Company has devoted substantially all of its resources to research and development activities, including research activities such as drug discovery, preclinical studies, and clinical trials as well as development activities such as the manufacturing of clinical and research material, establishing and maintaining an intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.

Initial Public Offering

On June 4, 2020, the Company’s registration statement on Form S-1 (File No. 333-238464) relating to its initial public offering (IPO) of common stock became effective. The IPO closed on June 9, 2020 at which time the Company issued an aggregate of 12,650,000 shares of its common stock at a price of $14.00 per share which included 1,650,000 shares of common stock issued in connection with the full exercise by the underwriters of their option to purchase additional shares of common stock. In addition, immediately prior to the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 13,966,292 shares of common stock. The aggregate offering price for shares sold in the IPO was $177.1 million. After deducting underwriting discounts and commissions of $12.4 million and offering costs paid or payable by the Company of $4.1 million (including offering costs of $0.2 million paid in 2019), the net proceeds from the offering were approximately $160.6 million.

Follow-On Offering

On April 6, 2021, the Company completed a follow-on offering. See Note 10.

Liquidity and Capital Resources

Management believes that its existing cash, cash equivalents, and investments as of March 31, 2021 will be sufficient to allow the Company to fund its current operating plan through at least 12 months after the date of issuance of these condensed financial statements.

The Company has incurred significant losses and negative cash flows from operations since its inception. As of March 31, 2021, the Company had an accumulated deficit of $159.8 million and does not expect positive cash flows from operations in the foreseeable future. The Company expects to incur significant and increasing losses until regulatory approval is granted and successful commercialization is achieved for any of its product candidates. Regulatory approval is not guaranteed and may never be obtained. The Company has historically financed its operations primarily through private placements of its convertible preferred stock and sale of common stock upon the completion of both its IPO which was completed in June 2020 and its follow-on offering which was completed in April 2021. The Company may seek to raise capital through debt financings, private or public equity financings, license agreements, collaborative agreements or other arrangements with other companies, or other sources of financing. There can be no assurance that such financing will be available or will be at terms acceptable to the Company.

Risks and Uncertainties

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The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, such as the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise. Beginning the week of March 16th, 2020, certain workforce of the Company began working from home. Disruptions caused by the COVID-19 pandemic, including the effects of the stay-at-home orders and work-from-home policies, may impact productivity, may result in increased operational expenses, certain adjustments to the operations of the Company’s clinical trials, the suspension of enrollment of new patients at the Company’s clinical trial sites, delays in activating new clinical trial sites, and delays in certain supply chain activities and collecting and analyzing data from patients in the Company’s clinical trial, and may further disrupt the business and delay the development programs and regulatory timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on the Company’s ability to conduct business in the ordinary course. As a result, research and development expenses and general and administrative expenses may increase significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trials and other related business activities and as the Company implements mitigation strategies to offset the impact of the pandemic on development programs and regulatory timelines. The Company is carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on our financial condition and results of operations.

 

2. Summary of Significant Accounting Policies

Condensed Financial Statements (Unaudited)

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the U.S. Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The condensed balance sheet as of December 31, 2020, is derived from the Company’s audited financial statements. The results of operations during the three months ended March 31, 2021, are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or for any other future annual or interim period.

The accompanying interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2020, which are included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 19, 2021.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances. Assets and liabilities reported in the Company’s condensed balance sheet and expenses and income reported are affected by estimates and assumptions, which are used for, but are not limited to, estimating research and development expenses and determining the fair value of assets and liabilities, including common stock valuation, income tax uncertainties, and measurement of stock-based compensation expense. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic. Actual results could differ from such estimates or assumptions.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and investments. The Company invests in U.S. Treasury securities. The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash, cash equivalents, and investments to the extent recorded in the condensed balance sheet. The Company has not experienced any losses on its deposits of cash, cash equivalents, and investments. The Company is subject to a number of risks similar to other early-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical studies or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product

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candidates, protection of its proprietary technology, and the need to secure and maintain adequate manufacturing arrangements with third parties. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

Operating Segment

The Company operates and manages its business as one reportable and operating segment, which is the business of designing and developing a pipeline of novel oral biologic product candidates to treat autoimmune, inflammatory, metabolic, and other diseases. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance.

Cash and Cash Equivalents

Cash and cash equivalents are held in accounts at financial institutions. Such deposits have and will continue to exceed federally insured limits in the foreseeable future. The Company considers all highly liquid investments purchased with original maturities of 90 days or less from the purchase date to be cash equivalents. Cash equivalents consist of amounts invested in money market funds exclusively composed of U.S. government obligations.

Restricted Cash

The Company has cash in two collateral accounts related to letters of credit issued on behalf of the Company for the security deposits on the leased and subleased properties in South San Francisco. As of March 31, 2021, the collateralized cash in connection with the letter of credit was classified as restricted cash on the condensed balance sheet based on the terms of the agreements. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed statements of cash flows (in thousands):

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

26,202

 

 

$

5,967

 

Restricted cash

 

 

1,025

 

 

 

108

 

Total cash, cash equivalents and restricted cash

 

$

27,227

 

 

$

6,075

 

 

Investments

The Company’s investments have been classified and accounted for as available-for-sale securities. Fixed income securities consist of U.S. Treasury securities. The specific identification method is used to determine the cost basis of fixed income securities sold. These securities are recorded on the condensed balance sheets at fair value. Unrealized gains and losses on these securities are included as a separate component of accumulated other comprehensive income or loss. The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in other income or expense, net. The Company classifies its investments as short or long term primarily based on the remaining contractual maturity of the securities.

Property and Equipment, Net

Property and equipment are presented at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method. Depreciation begins at the time the asset is placed in service. Maintenance and repairs are charged to expense as incurred and costs of major replacement or improvement are capitalized. The Company’s estimated useful lives of its property and equipment are as follows:  

 

Laboratory and manufacturing equipment

 

5 years

Computer and office equipment

 

3 years

Leasehold improvements

 

Shorter of remaining lease

term or estimated useful life

 

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Impairment of Long-Lived Assets

The Company evaluates the carrying amount of its long-lived assets whenever events or changes in circumstances indicate that the assets may not be recoverable. An impairment loss is recognized when the remaining book value of an asset is not recoverable. There was no impairment on long-lived assets during the three months ended March 31, 2021 and March 31, 2020.

Leases

In February 2016, the Financial Accounting Standards Board (FASB) issued a new standard that requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements. The Company adopted the new standard on January 1, 2021 using the modified retrospective approach. The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the condensed statements of operations and comprehensive loss.

At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease, the Company (i) identifies lease and non-lease components, (ii) determines the consideration in the contract, (iii) determines whether the lease is an operating or finance lease; and (iv) recognizes lease ROU assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses the incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

Most leases include options to renew and, or terminate the lease, which can impact the lease term. The exercise of these options is at the Company’s discretion. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company has operating leases for its corporate offices, laboratory and warehouse facilities, and a contract research organization (CRO) embedded lease arrangement. Fixed lease payments on operating leases are recognized over the expected term of the lease on a straight-line basis. Variable lease expenses that are not considered fixed are recognized as incurred. Fixed and variable lease expense on operating leases is recognized within operating expenses within our condensed statements of operations and comprehensive loss.

The Company has finance leases for lab equipment. Fixed payments on finance leases are recognized using the effective interest method. Finance lease ROU asset amortization and interest expense are recorded within operating expenses and interest income, net, respectively, within our condensed statements of operations and comprehensive loss.

The Company has elected the short-term lease exemption and, therefore, does not recognize an ROU asset or corresponding liability for lease arrangements with an original term of 12 months or less.

Research and Development Expenses

Research and development expenses are expensed as incurred. Research and development expenses include personnel costs related to research and development activities, materials costs, external clinical drug product manufacturing and clinical trial costs, outside services costs, repair, maintenance and depreciation costs for research and development equipment, as well as facility costs for laboratory space used for research and development activities.

Accrued Research and Development Expenses

The Company records accruals for estimated costs of research, preclinical studies, clinical trials, manufacturing and development, within accrued expenses which are significant components of research and development expenses. A substantial portion of the Company’s ongoing research and development activities is conducted by third-party service providers, CROs and contract development and manufacturing organizations (CDMOs). The Company’s contracts with the CROs and CDMOs generally include fees such as clinical trial fees, initiation fees, reservation fees, costs related to animal studies and safety tests, verification run costs, materials and reagents expenses, taxes, etc. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts. The Company accrues the costs incurred under agreements with these third parties based on estimates

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of actual work completed in accordance with the respective agreements. The Company determines the estimated costs through discussions with internal personnel and external service providers as to the progress, stage of completion or actual timeline (start-date and end-date) of the services and the agreed-upon fees to be paid for such services.

If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impact research and development expenses. Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to the Company’s prior estimates of research and development expenses.

Stock-Based Compensation Expense

The Company maintains both an equity incentive plan and an employee stock purchase plan (ESPP) as long-term incentives for its employees, consultants, and directors. The equity incentive plan allows for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock grants, and restricted stock units. The ESPP has an offering period of two years comprised of four purchase periods. The ESPP allows employees to purchase shares of the Company’s common stock each purchase period based on a percentage of their compensation subject to certain limits. As of March 31, 2021, no stock appreciation rights, restricted stock grants, restricted stock units or performance-based awards were issued.

The Company accounts for stock-based compensation expense by measuring and recognizing compensation expense for all share-based payments made to employees and non-employees based on estimated grant-date fair values. The grant-date fair values for options are recorded as stock-based compensation expense on a straight-line basis over each recipient’s requisite service period, which is generally the vesting period. The grant-date fair values for the ESPP are recorded as stock-based compensation expense on a straight-line basis over the applicable purchase period. The Company recognizes actual forfeitures by reducing the stock-based compensation expense in the same period as that forfeitures occur.

The Company estimates the fair value of stock options granted to employees and non-employees using the Black-Scholes model. The Company estimates the fair value of ESPP for each purchase period at the beginning of the offering period using the Black-Scholes model. The Black-Scholes model requires the input of assumptions, including expected volatility, expected dividend yield, expected term and the risk-free rate of return. The fair value of ESPP also factors in a discount which is typically 15% of the purchase price as well as a call output and a put output of the Black-Scholes model.

Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurement establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

The Company determined the fair value of financial assets and liabilities using the fair value hierarchy that describes three levels of inputs that may be used to measure fair value, as follows:

Level 1—Quoted prices in active markets for identical assets and liabilities;

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, 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; and

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.

As of March 31, 2021 and December 31, 2020, fair value measurements consisted mainly of cash equivalents and investments. The carrying amounts of these instruments approximate their fair value.

Comprehensive Loss

Comprehensive loss includes net loss and other comprehensive (loss) income for the period. Other comprehensive (loss) income represents unrealized (loss) or gain on investments.

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Deferred Offering Costs

Deferred offering costs, consisting of legal, accounting and filing fees, are capitalized and subsequently offset against offering proceeds. During the three months ended March 31, 2021, $0.7 million of deferred offering costs were incurred in connection with the Company’s follow-on offering which is described in Note 10.

Emerging Growth Company Status

The Company is an emerging growth company (EGC) as defined in the Jumpstart Our Business Startups Act of 2012 (JOBS Act) and may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts EGCs from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. The Company has elected to use the extended transition period for complying with new or revised accounting standards.

Commitments and Contingencies

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

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s financial position or results of operations upon adoption.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) that requires lessees to recognize leases on the balance sheet and disclose key information about leasing arrangements.

The Company adopted the new standard on January 1, 2021 using the modified retrospective approach. The Company has elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the condensed financial statements and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit on the date of adoption. The Company has elected to combine lease components (for example fixed rent payments) with non-lease components (for example, common-area maintenance costs) on our facility, lab equipment and CRO embedded lease asset classes. The Company also elected the “package of practical expedients”, which permits the Company not to reassess under the new standard the Company’s prior conclusions about lease identification, lease classification and initial direct costs. Lastly, the Company elected a practical expedient to use hindsight in determining the lease term for all its leases.

Results for reporting period beginning after January 1, 2021 are presented under the new standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. Upon adoption of the new lease standard, on January 1, 2021, the Company capitalized operating lease ROU assets of $6.0 million, with opening adjustments of $0.5 million related to deferred rent existing at transition, and $6.5 million of operating lease liabilities, within our condensed balance sheets upon adoption. There was no impact to the finance lease ROU asset and the finance lease liabilities upon adoption. Also, for both operating and finance leases, there was no impact to the accumulated deficit upon the adoption of the new standard on January 1, 2021.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements. The guidance contains improvements to the Codification by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to condensed financial statements is codified in the Disclosure Section of the Codification. The guidance also contains Codifications that are varied in nature and may affect the application of the guidance in cases in which the original guidance may have been unclear. The Company adopted the new standard on January 1, 2021. The adoption did not have a material impact on the Company’s condensed financial statements.

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3. Fair Value Measurements

As of March 31, 2021, the Company held $82.1 million of investment securities, comprised of U.S. Treasury securities.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

Financial instruments classified within Level 2 of the fair value hierarchy are valued based on other observable inputs. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, or historical pricing trends of a security relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

The carrying amounts of cash equivalents and investments approximate their fair value based upon quoted market prices. Certain of the Company’s financial instruments are recorded at amounts that approximate their fair value, rather than at fair value on a recurring basis, due to their liquid or short-term nature, such as cash, accounts payable and accrued expenses.

The unrealized losses on short-term investments as of March 31, 2021 were insignificant. The Company does not believe that these unrealized losses are credit related but are rather a reflection of current market yields and/or current marketplace bid/ask spreads. The Company has not recognized an allowance for credit losses as of March 31, 2021.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

 

 

 

March 31, 2021

 

 

 

Fair Value

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Hierarchy

Level

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds invested in U.S. government obligations(1)

 

Level 1

 

$

25,213

 

 

$

 

 

$

 

 

$

25,213

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

Level 2

 

 

82,038

 

 

 

25

 

 

 

 

 

 

82,063

 

Total

 

 

 

$

107,251

 

 

$

25

 

 

$

 

 

$

107,276

 

(1)

Included in cash and cash equivalents on the condensed balance sheet

 

 

 

 

 

December 31, 2020

 

 

 

Fair Value

 

 

 

 

 

Gross

 

 

Gross

 

 

 

 

 

 

 

Hierarchy

Level

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds invested in U.S. government obligations(1)

 

Level 1

 

$

4,844

 

 

$

 

 

$

 

 

$

4,844

 

Short-term and long-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

Level 2

 

 

123,998

 

 

 

28

 

 

 

 

 

 

124,026

 

Total

 

 

 

$

128,842

 

 

$

28

 

 

$

 

 

$

128,870

 

(1)

Included in cash and cash equivalents on the condensed balance sheet

 

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4. Balance Sheet Components

Property and Equipment, Net

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

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Laboratory and manufacturing equipment

 

$

8,176

 

 

$

8,022

 

Leasehold improvements

 

 

2,598

 

 

 

2,550

 

Computer and office equipment

 

 

201

 

 

 

201

 

Construction in progress

 

 

92

 

 

 

162

 

Capital leases

 

 

 

 

 

959

 

Total property and equipment, gross

 

 

11,067

 

 

 

11,894

 

Accumulated depreciation

 

 

(4,068

)

 

 

(3,447

)

Total property and equipment, net

 

$

6,999

 

 

$

8,447

 

 

Depreciation was $0.7 million and $0.2 million during the three months ended March 31, 2021 and 2020, respectively.

Capital leases consisted of laboratory and manufacturing equipment subject to capital leases. Depreciation on capital lease assets was insignificant during three months ended March 31, 2020. The accumulated depreciation on capital lease assets was $0.1 million as of December 31, 2020.

Right-of-Use Assets, Net

Right-of-use assets, net consisted of the following as of March 31, 2021 (in thousands):

 

 

 

Operating Leases

 

 

Finance Leases

 

 

Total

 

Right-of-use assets

 

$

6,013

 

 

$

959

 

 

$

6,972

 

Accumulated amortization

 

 

(563

)

 

 

(163

)

 

 

(726

)

Right-of-use assets, net

 

$

5,450

 

 

$

796

 

 

$

6,246

 

 

Lease expense from operating lease right-of-use assets during the three months ended March 31, 2021 was $0.6 million. Amortization expense from finance lease right-of-use assets during the three months ended March 31, 2021 was insignificant.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Research and development expenses

 

$

2,213

 

 

$

1,303

 

Compensation expenses

 

 

1,037

 

 

 

2,389

 

Professional services

 

 

687

 

 

 

241

 

Other

 

 

109

 

 

 

115

 

Property and equipment

 

 

48

 

 

 

125

 

Total accrued expenses

 

$

4,094

 

 

$

4,173

 

 

Accrued research and development expenses were primarily related to clinical trials, preclinical studies, contract manufacturing and materials.

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5. Leases

Operating Leases

In December 2016, the Company entered into an operating lease agreement for its principal office in South San Francisco, California. The lease term expires in August 2024. Under the lease agreement, the Company has two three-year renewal options through August 2030.

In October 2019, the Company entered into a sublease, as a lessee, for office and laboratory space located in South San Francisco, California. The sublease term expires in May 2022. Under the lease agreement, the Company has a five-year renewal option through May 2027.

In September 2020, the Company entered into a lease agreement for warehouse space in South San Francisco, California. The lease term expires in September 2021. Under the lease agreement, the Company has two six-month renewal options through September 2022.

In February 2021, the Company entered into a lease agreement for laboratory, manufacturing, warehouse and office space in South San Francisco, California. The lease term is estimated to commence in October 2021. The initial lease term is eight years from the commencement date and includes optional two five-year extensions. As of March 31, 2021, the Company does not yet have control of the underlying asset.

Finance Leases

During 2019, the Company entered into three finance lease agreements for certain laboratory equipment. Two of the leases commenced during 2019 and the third lease commenced during 2020. 

The following table summarizes total lease expense during the three months ended March 31, 2021 (in thousands):

 

 

Condensed Statements of Operations and Comprehensive Loss Classification

Three Months Ended

March 31, 2021

 

Operating lease expense

Operating expenses

$

597

 

Finance lease expense:

 

 

 

 

   Amortization of right-of-use assets

Operating expenses

 

48

 

   Interest on lease liabilities

Interest income, net

 

9

 

Variable lease expense

Operating expenses

 

204

 

Short-term lease expense

Operating expenses

 

8

 

Total lease expense

 

$

866

 

 

Rent expense was $0.5 million during the three months ended March 31, 2020.

 

The following table summarizes supplemental cash flow information during the three months ended March 31, 2021 (in thousands):

 

 

Three Months Ended

March 31, 2021

 

Cash paid for amounts included in measurement of liabilities:

 

 

 

   Operating cash flows from operating leases

$

608

 

   Operating cash flows from finance leases

 

9

 

   Financing cash flows from finance leases

 

57

 

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The following table summarizes maturities of lease liabilities and the reconciliation of lease liabilities as of March 31, 2021 (in thousands):

 

 

 

Operating Leases

 

 

Finance Leases

 

 

Total

 

2021 (remaining nine months)

 

$

1,861

 

 

$

197

 

 

$

2,058

 

2022

 

 

1,864

 

 

 

255

 

 

 

2,119

 

2023

 

 

1,457

 

 

 

171

 

 

 

1,628

 

2024

 

 

1,000

 

 

 

 

 

 

1,000

 

Total undiscounted lease liabilities

 

 

6,182

 

 

 

623

 

 

 

6,805

 

Less: Interest

 

 

(216

)

 

 

(44

)

 

 

(260

)

Total discounted lease liabilities

 

 

5,966

 

 

 

579

 

 

 

6,545

 

Less: Lease liabilities, current

 

 

(2,377

)

 

 

(235

)

 

 

(2,612

)

Lease liabilities, non-current

 

$

3,589

 

 

$

344

 

 

$

3,933

 

 

The following table summarizes lease terms and discount rates as of March 31, 2021:

 

 

 

Operating Leases

 

 

Finance Leases

 

Weighted-average remaining lease term (years)

 

 

2.9

 

 

 

2.3

 

Weighted-average discount rate

 

 

2.31

%

 

 

5.95

%

 

6. Commitments and Contingencies

Contingencies

From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company was not subject to any material legal proceedings during the three months ended March 31, 2021 and 2020, and no material legal proceedings are currently pending or threatened.

Indemnification

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its officers and directors. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments that the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company is not currently aware of any indemnification claims. The Company also maintains director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. Accordingly, the Company has not recorded any liabilities for these indemnification rights and agreements as of March 31, 2021 and December 31, 2020.

COVID-19

The full extent of the impact of the COVID-19 pandemic on financial markets, economies worldwide and our business is highly uncertain. As of March 31, 2021, the Company was not aware of any contingencies and no estimates were recorded on its condensed financial statements as a result of COVID-19.

7. Common Stock

As of March 31, 2021 and December 31, 2020, the Company was authorized to issue 450,000,000 shares of $0.0001 par value common stock. Common stockholders are entitled to dividends if and when declared by the Board of Directors of the Company (Board of Directors). The holder of each share of common stock is entitled to one vote. As of March 31, 2021, no dividends were declared.

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Common stock reserved for future issuance, on an as converted basis, consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Stock options, issued and outstanding

 

 

4,341,535

 

 

 

3,506,599

 

Stock options, authorized for future issuance

 

 

4,161,088

 

 

 

3,369,246