10-Q
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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 June 30, 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: 001-40708

 

ELIEM THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-2273741

( State or other jurisdiction of

incorporation or organization)

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

23515 NE Novelty Hill Road, Suite B221 #125

Redmond, WA

98053

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (425) 276-2300

 

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

 

ELYM

 

The Nasdaq Stock Market LLC

(The Nasdaq Global 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 ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of September 10, 2021, the registrant had 26,547,901 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

1

 

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

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

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Results and Operations

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

 

 

 

 

 

 

PART II.

OTHER INFORMATION

28

 

 

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

71

Item 3.

Defaults Upon Senior Securities

71

Item 4.

Mine Safety Disclosures

71

Item 5.

Other Information

71

Item 6.

Exhibits

72

Signatures

73

 

 

 

 


 

PART I - FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (unaudited)

 

Eliem Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(unaudited)

 

Assets

 

June 30, 2021

 

 

December 31, 2020

 

Current assets:

 

 

 

 

 

 

Cash

 

$

99,482

 

 

$

20,487

 

Prepaid expenses and other current assets

 

 

5,321

 

 

 

1,511

 

Total current assets

 

$

104,803

 

 

$

21,998

 

Long-term assets

 

 

2,824

 

 

 

2,633

 

Total assets

 

$

107,627

 

 

$

24,631

 

Liabilities, Redeemable Convertible Preferred Stock, and
   Stockholders’ Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

 

1,955

 

 

 

1,086

 

Accounts payable, related party

 

 

 

 

 

207

 

Accrued expenses

 

 

3,631

 

 

 

1,219

 

Accrued expenses, related party

 

 

127

 

 

 

 

Redeemable convertible preferred stock tranche liability

 

 

 

 

 

551

 

Total current liabilities

 

$

5,713

 

 

$

3,063

 

Total liabilities

 

$

5,713

 

 

$

3,063

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.0001 par value,
   
15,345,286 and 12,909,389 shares authorized, 15,345,279 and
   
7,140,157 shares issued and outstanding with aggregate
   liquidation preference of $
147,096 and $49,891 at June 30,
   2021 and December 31, 2020, respectively

 

 

152,759

 

 

 

46,551

 

Stockholders’ deficit:

 

 

 

 

 

 

Common stock, $0.0001 par value per share, 46,000,000 and
   
40,000,000 shares authorized; 3,489,956 and 3,418,751
   shares issued and outstanding at June 30, 2021 and
   December 31, 2020, respectively

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

4,610

 

 

 

3,152

 

Accumulated deficit

 

 

(55,456

)

 

 

(28,136

)

Total stockholders’ deficit

 

$

(50,845

)

 

$

(24,983

)

Total liabilities, redeemable convertible preferred stock,
   and stockholders’ deficit

 

$

107,627

 

 

$

24,631

 

 

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

1


 

Eliem Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(unaudited)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

5,478

 

 

$

1,325

 

 

$

9,751

 

 

$

2,714

 

Research and development, related party

 

 

315

 

 

 

35

 

 

 

703

 

 

 

269

 

General and administrative

 

 

2,914

 

 

 

248

 

 

 

5,132

 

 

 

576

 

Total operating expenses

 

 

8,707

 

 

 

1,608

 

 

 

15,586

 

 

 

3,559

 

Loss from operations

 

 

(8,707

)

 

 

(1,608

)

 

 

(15,586

)

 

 

(3,559

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of redeemable convertible preferred stock tranche liability

 

 

 

 

 

 

 

 

(11,718

)

 

 

 

Foreign currency gain (loss)

 

 

(12

)

 

 

(23

)

 

 

(16

)

 

 

12

 

Total other income (expense)

 

 

(12

)

 

 

(23

)

 

 

(11,734

)

 

 

12

 

Net loss and comprehensive loss

 

$

(8,719

)

 

$

(1,631

)

 

$

(27,320

)

 

$

(3,547

)

Accretion of redeemable convertible preferred stock to redemption value and cumulative preferred stock dividends

 

 

(2,141

)

 

 

(452

)

 

 

(3,226

)

 

 

(891

)

Net loss attributable to common stockholders

 

$

(10,860

)

 

$

(2,083

)

 

$

(30,546

)

 

$

(4,438

)

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

 

$

(3.11

)

 

$

(1.12

)

 

$

(8.80

)

 

$

(2.39

)

Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted

 

 

3,488,017

 

 

 

1,859,703

 

 

 

3,472,086

 

 

 

1,857,617

 

 

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

 

 

2


 

Eliem Therapeutics, Inc.

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

(In thousands, except share and per share amounts)

(unaudited)

 

 

 

Redeemable Convertible Preferred Stock

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Additional Paid-in Capital

 

 

Accumulated Deficit

 

 

Total Stockholders' (Deficit)

 

Balance as of December 31, 2020

 

 

7,140,157

 

 

$

46,551

 

 

 

 

3,418,751

 

 

$

1

 

 

$

3,152

 

 

$

(28,136

)

 

$

(24,983

)

Series A-1 Preferred Stock Issuance (net of
   issuance costs of $
22)

 

 

4,358,972

 

 

 

33,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification of redeemable convertible
   preferred stock tranche liability upon
   settlement

 

 

 

 

 

12,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options and release of
   restricted stock awards

 

 

 

 

 

 

 

 

 

64,047

 

 

 

 

 

 

105

 

 

 

 

 

 

105

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

297

 

 

 

 

 

 

297

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,601

)

 

 

(18,601

)

Balance as of March 31, 2021

 

 

11,499,129

 

 

$

92,798

 

 

 

 

3,482,798

 

 

$

1

 

 

$

3,554

 

 

$

(46,737

)

 

$

(43,182

)

Series B Preferred Stock Issuance (net of
   issuance costs of $
39)

 

 

3,846,150

 

 

 

59,961

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options and release of
   restricted stock awards

 

 

 

 

 

 

 

 

 

7,158

 

 

 

 

 

 

6

 

 

 

 

 

 

6

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,050

 

 

 

 

 

 

1,050

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,719

)

 

 

(8,719

)

Balance as of June 30, 2021

 

 

15,345,279

 

 

$

152,759

 

 

 

 

3,489,956

 

 

$

1

 

 

$

4,610

 

 

$

(55,456

)

 

$

(50,845

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of December 31, 2019

 

 

3,999,133

 

 

$

26,174

 

 

 

 

1,852,797

 

 

$

1

 

 

$

1,905

 

 

$

(7,468

)

 

$

(5,562

)

Accretion of Series A and A-1 Preferred
   Stock

 

 

 

 

 

439

 

 

 

 

 

 

 

 

 

 

(439

)

 

 

 

 

 

(439

)

Release of restricted stock awards

 

 

 

 

 

 

 

 

 

4,170

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

134

 

 

 

 

 

 

134

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,916

)

 

 

(1,916

)

Balance as of March 31, 2020

 

 

3,999,133

 

 

$

26,613

 

 

 

 

1,856,967

 

 

$

1

 

 

$

1,600

 

 

$

(9,384

)

 

$

(7,783

)

Accretion of Series A and A-1 Preferred
   Stock

 

 

 

 

 

452

 

 

 

 

 

 

 

 

 

 

(452

)

 

 

 

 

 

(452

)

Release of restricted stock awards

 

 

 

 

 

 

 

 

 

4,174

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51

 

 

 

 

 

 

51

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,631

)

 

 

(1,631

)

Balance as of June 30, 2020

 

 

3,999,133

 

 

$

27,065

 

 

 

 

1,861,141

 

 

$

1

 

 

$

1,199

 

 

$

(11,015

)

 

$

(9,815

)

 

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

3


 

Eliem Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(27,320

)

 

$

(3,547

)

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

 

 

 

 

 

 

Stock-based compensation

 

 

1,347

 

 

 

185

 

Change in fair value of redeemable convertible preferred stock
   tranche liability

 

 

11,718

 

 

 

 

Foreign currency gain from remeasurement

 

 

(166

)

 

 

(110

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(3,810

)

 

 

(1,824

)

Long-term assets

 

 

(192

)

 

 

(735

)

Accounts payable

 

 

871

 

 

 

(381

)

Accrued liabilities

 

 

2,411

 

 

 

381

 

Accounts payable and accrued liabilities, related party

 

 

(80

)

 

 

(62

)

Net cash used in operating activities

 

 

(15,221

)

 

 

(6,093

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs

 

 

93,939

 

 

 

 

Proceeds from the exercise of stock options

 

 

111

 

 

 

 

Net cash provided by financing activities

 

 

94,050

 

 

 

 

Effect of exchange rate changes on cash

 

 

166

 

 

 

110

 

Net change in cash

 

 

78,995

 

 

 

(5,983

)

Cash at beginning of period

 

 

20,487

 

 

 

21,223

 

Cash at end of period

 

$

99,482

 

 

$

15,240

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Redeemable convertible preferred stock accretion

 

$

 

 

$

891

 

 

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

 

 

4


 

Eliem Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Description of Organization and Summary of Significant Accounting Policies

Organization

Eliem Therapeutics, Inc. (the Company) is a clinical-stage biotechnology company focused on developing novel therapies for neuronal excitability disorders to address unmet needs in chronic pain, neuropsychiatry, epilepsy and other disorders of the peripheral and central nervous systems. Headquartered in Redmond, Washington, the Company was incorporated on October 18, 2018 as a Delaware corporation.

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements of the Company and its wholly owned subsidiaries have been prepared in conformity with accounting principles generally accepted in the United States (U.S. GAAP). All intercompany transactions and balances have been eliminated in consolidation.

The accompanying condensed consolidated balance sheet as of June 30, 2021, and condensed consolidated statements of operations and comprehensive loss, condensed consolidated statements of cash flows, and condensed consolidated statements of redeemable convertible preferred stock and stockholders’ deficit for the three months and six months ended June 30, 2021 and 2020, are unaudited. The consolidated balance sheet as of December 31, 2020 was derived from the audited financial statements as of and for the year ended December 31, 2020, but does not include all disclosures required by U.S. GAAP. The unaudited interim condensed financial statements have been prepared on a basis consistent with the audited annual financial statements as of and for the year ended December 31, 2020, and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2021, the condensed results of its operations as of the three and six months ended June 30, 2021 and 2020, and its cash flows for the six months ended June 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2021 and 2020 are also unaudited. The condensed results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any other period. These interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements included in the Company's final prospectus dated August 9, 2021 and filed with the Securities and Exchange Commission, or SEC, on August 11, 2021 pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended.

Initial Public Offering

On August 12, 2021, the Company completed its initial public offering (IPO) of 7,360,000 shares of common stock, including the underwriters' full exercise of their over-allotment option at the IPO price of $12.50 per share. Gross proceeds from the IPO were $92.0 million, and the estimated net proceeds were $83.1 million, after deducting underwriting discounts of $6.4 million and $2.5 million of estimated offering costs payable by the Company. Upon completion of the IPO, all of the Company's then outstanding redeemable convertible preferred stock was automatically converted into an aggregate of 15,345,279 shares of common stock. The unaudited interim condensed consolidated financial statements as of June 30, 2021 do not give effect to the IPO, as it closed subsequent to June 30, 2021.

Liquidity

Since inception, the Company has experienced recurring losses from operations and generated negative cash flows from operations. The Company has an accumulated deficit of $55.5 million as of June 30, 2021 and expects to incur additional losses from operations in the future. The Company estimates the available cash as of June 30, 2021, along with the $83.1 million in estimated net proceeds from the IPO will be sufficient to meet its projected operating requirements for at least the next twelve months from the filing date of these unaudited condensed consolidated financial statements. Therefore, based on management's updated evaluation of the Company's ability to continue as a going concern, management has concluded the factors that previously raised substantial doubt about the Company's ability to continue as a going concern no longer exist as of the issuance date of these unaudited condensed consolidated financial statements. The Company will need to obtain substantial additional funding to develop and commercialize the Company's clinical programs as currently contemplated. The Company expects to finance future cash needs through equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, but there are no assurances that the Company will be able to raise sufficient amounts of funding in the future on acceptable terms, or at all.

5


 

These condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

Use of Estimates

The preparation of the interim condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Key management estimates include those related to the valuation of assets acquired, accrual of research and development expenses, the valuation of stock-based awards, the valuation of common stock and redeemable convertible preferred stock, and the valuation of redeemable convertible preferred stock tranche liabilities. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company’s cash is held by one financial institution in the United States (U.S.) and one financial institution in the United Kingdom (U.K.). The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. The Company’s deposits held in the U.S. and U.K. may exceed the Federal Depository Insurance Corporation and Financial Services Compensation Scheme, respectively, insured limits.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on single-source vendors and collaborators, availability of raw materials, patentability of the Company’s products and processes and clinical efficacy and safety of the Company’s products under development, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials, and regulatory approval, prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

Moreover, the current COVID-19 pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time which may delay the start-up and conduct of the Company’s clinical trials, and negatively impact manufacturing and testing activities performed by third parties. Any significant delays may impact the use and sufficiency of the Company’s existing cash reserves, and the Company may be required to raise additional capital earlier than it had previously planned. The Company may be unable to raise additional capital if and when needed, which may result in delays or suspension of its development plans. The extent to which the pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

Segments

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (the CODM). The Company’s CODM is its chief executive officer who reviews financial information together with certain operating metrics principally to make decisions about how to allocate resources and to measure the Company’s performance. Management has determined that the Company operates as a single operating and reportable segment. The Company’s CODM evaluates financial information on a consolidated basis. As the Company operates as one operating segment, all required segment financial information is found in the interim condensed consolidated financial statements.

6


 

Fair Value Measurement

Assets and liabilities recorded at fair value on a recurring basis in the balance sheet are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company measures fair value based on a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the assets or liabilities. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

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.

In determining fair value, the Company utilizes quoted market prices, or 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.

There were no transfers between Levels 1, 2 or 3 for any of the periods presented.

The Company’s fair value measurements as of December 31, 2020 was as follows (in thousands):

 

 

 

December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Balance

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock
   tranche liability

 

$

 

 

$

 

 

$

551

 

 

$

551

 

Total liabilities

 

$

 

 

$

 

 

$

551

 

 

$

551

 

 

The redeemable convertible preferred stock tranche liability was settled on March 9, 2021.

Summary of Significant Accounting Policies

Deferred Offering Costs

Costs that were directly related to the Company’s IPO were deferred for expense recognition and capitalized and recorded within prepaid and other current assets on the accompanying condensed consolidated balance sheet. These costs consist of legal fees, accounting fees, and other applicable professional services. These deferred offering costs will be reclassified to additional paid in capital upon the closing of the IPO in August 2021. As of June 30, 2021, $1.0 million of deferred offering costs were capitalized.

There have been no other significant changes in the Company’s accounting policies during the three and six months ended June 30, 2021. 

2. Certain Balance Sheet Accounts

Prepaid Expenses and Other Current Assets

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

 

 

 

June 30, 2021

 

 

December 31, 2020

 

Recoverable research and development tax credits

 

$

2,541

 

 

$

 

Prepaid research and development expenses

 

 

1,282

 

 

 

1,500

 

Deferred offering costs

 

 

1,040

 

 

 

 

Other assets

 

 

458

 

 

 

11

 

Total prepaid expenses and other current assets

 

$

5,321

 

 

$

1,511

 

 

7


 

 

Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

 

 

June 30, 2021

 

 

December 31, 2020

 

Accrued research and development expenses

 

$

2,038

 

 

$

627

 

Accrued payroll

 

 

1,018

 

 

 

592

 

Other accrued expenses

 

 

575

 

 

 

 

Total accrued expenses

 

$

3,631

 

 

$

1,219

 

 

3. Redeemable Convertible Preferred Stock

As of June 30, 2021 and December 31, 2020, the Company’s redeemable convertible preferred stock consisted of the following balance (in thousands, except share and per share amounts):

 

 

 

As of June 30, 2021

 

 

 

Issue
Price

 

 

Shares
Authorized

 

 

Shares Issued and Outstanding

 

 

Carrying
Value

 

 

Aggregate
Liquidation
Preference

 

Series A

 

$

6.00

 

 

 

2,717,084

 

 

 

2,717,082

 

 

$

17,074

 

 

$

19,216

 

Series A (Athenen Acquisition)

 

$

5.80

 

 

 

2,500,000

 

 

 

2,500,000

 

 

$

14,500

 

 

$

15,848

 

Series A-1

 

$

7.80

 

 

 

6,282,049

 

 

 

6,282,047

 

 

$

61,224

 

 

$

51,506

 

Series B

 

$

15.60

 

 

 

3,846,153

 

 

 

3,846,150

 

 

$

59,961

 

 

$

60,526

 

Ending balance

 

 

 

 

 

15,345,286

 

 

 

15,345,279

 

 

$

152,759

 

 

$

147,096

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 31, 2020

 

 

 

Issue
Price

 

 

Shares
Authorized

 

 

Shares Issued and Outstanding

 

 

Carrying
Value

 

 

Aggregate
Liquidation
Preference

 

Series A

 

$

6.00

 

 

 

2,717,084

 

 

 

2,717,082

 

 

$

17,074

 

 

$

18,569

 

Series A (Athenen Acquisition)

 

$

5.80

 

 

 

2,500,000

 

 

 

2,500,000

 

 

$

14,500

 

 

$

15,253

 

Series A-1

 

$

7.80

 

 

 

7,692,305

 

 

 

1,923,075

 

 

$

14,977

 

 

$

16,069

 

Ending balance

 

 

 

 

 

12,909,389

 

 

 

7,140,157

 

 

$

46,551

 

 

$

49,891

 

 

In March 2021, Series A-1 preferred stockholders exercised their tranche rights in connection with milestone achievements related to Phase 1 clinical trial results of ETX-155. As a result, the Company issued an additional 4,358,972 shares of Series A-1 redeemable convertible preferred shares for gross proceeds of $34.0 million. Upon exercise of the tranche rights, the Company reclassified the $12.3 million in preferred stock tranche liability to Series A-1 redeemable convertible preferred stock on the consolidated balance sheet.

 

In May 2021, the Company issued