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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________________________________
FORM 10-Q
___________________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2020
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 001-38501
___________________________________________
BLACK DIAMOND THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
________________________________________________________________________________
Delaware81-4254660
(State or other jurisdiction
of incorporation or organization)
(I.R.S. Employer
Identification No.)
139 Main Street
Cambridge, Massachusetts
(Address of principal executive offices)
02142
(Zip Code)
(617) 252-0848
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.0001BDTXThe 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 filerAccelerated filer




Non-accelerated filerSmaller 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 August 5, 2020, the registrant had 35,912,705 shares of common stock, $0.0001 par value per share, outstanding.



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These statements are not guarantees of future results or performance and involve substantial risks and uncertainties. Forward-looking statements in this Quarterly Report include, but are not limited to, statements about:
the initiation, timing, progress and results of our research and development programs, preclinical studies, any clinical trials and investigational new drug applications, or IND, and other regulatory submissions;
our ability to obtain and maintain regulatory approval for BDTX-189 or any of our other current or future product candidates that we may identify or develop;
our need to raise additional funding before we can expect to generate any revenues from product sales;
our ability to identify future product candidates for treatment of additional disease indications;
our ability to develop our current product candidates for the treatment of various cancers;
the rate and degree of market acceptance and clinical utility for any current or future product candidates we may develop;
the effects of competition with respect to BDTX-189 or any of our other current or future product candidates, as well as innovations by current and future competitors in our industry;
the implementation of our strategic plans for our business, any product candidates we may develop and our MAP platform;
our ability to successfully develop companion diagnostics for use with our current or future product candidates;
our intellectual property position, including the scope of protection we are able to establish, maintain and enforce for intellectual property rights covering our product candidates and MAP platform;
our ability to use the proceeds of our initial public offering in ways that increase the value of your investment;
our ability to obtain additional funding for our operations, when needed, including funding necessary to complete further development and commercialization of our product candidates, if approved, and to further expand our MAP platform;
the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
our financial performance and our ability to effectively manage our anticipated growth;
our estimates regarding the market opportunities for our product candidates;
our ability to remediate our existing material weaknesses and to maintain an effective system of internal controls;
the ultimate impact of the current coronavirus pandemic, or any other health epidemic, on our business, our clinical trials, our research programs, healthcare systems or the global economy as a whole; and
other risks and uncertainties, including those discussed in Part II, Item 1A, “Risk Factors” in this Quarterly Report.

2

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Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and with respect to our future financial performance, and 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 these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
All of our forward-looking statements are as of the date of this Quarterly Report only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission, or the SEC, could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report that modify or impact any of the forward-looking statements contained in this Quarterly Report will be deemed to modify or supersede such statements in this Quarterly Report.
We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.
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BLACK DIAMOND THERAPEUTICS, INC.
TABLE OF CONTENTS

Page
PART I - FINANCIAL INFORMATION
PART II - OTHER INFORMATION

We have applied for various trademarks that we use in connection with the operation of our business. This Quarterly Report may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this Quarterly Report is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks and trade names referred to in this Quarterly Report may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner of these trademarks, service marks and trade names will not assert, to the fullest extent under applicable law, its rights.
From time to time, we may use our website or our LinkedIn profile at www.linkedin.com/company/black-diamond-therapeutics to distribute material information. Our financial and other material information is routinely posted to and accessible on the Investors section of our website, available at www.blackdiamondtherapeutics.com. Investors are encouraged to review the Investors section of our website because we may post material information on that site that is not otherwise disseminated by us. Information that is contained in and can be accessed through our website or our LinkedIn page is not incorporated into, and does not form a part of, this Quarterly Report.


Table of Contents
Part I - FINANCIAL INFORMATION
Item I. Condensed Consolidated Financial Statements (Unaudited)
Black Diamond Therapeutics, Inc.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)

As of

June 30,
2020
December 31,
2019
Assets



Current assets:



Cash and cash equivalents$63,984  

$154,666  
Short-term investments140,505    
Prepaid expenses and other current assets3,756  

1,048  
Total current assets208,245  

155,714  
Equipment, net166  

164  
Restricted cash55  

55  
Deferred offering costs  

2,303  
Right-of-use asset382  —  
Long-term investments140,522    
Other non-current assets80  

59  
Total assets$349,450  

$158,295  
Liabilities, Convertible Preferred Stock and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable$45  

$1,964  
Amounts due to related party15  

  
Accrued expenses and other current liabilities6,079  

2,899  
Total current liabilities6,139  

4,863  
Derivative liabilities  

16  
Non-current operating lease liability186  —  
Total liabilities6,325  

4,879  
Commitments and contingencies (Note 11)  

  
Convertible preferred stock (Note 7)  

200,573  
Stockholders' equity (deficit):

Common stock; $0.0001 par value; 500,000,000 shares authorized at June 30, 2020 and 80,000,000 shares authorized at December 31, 2019; 35,910,705 shares issued and outstanding at June 30, 2020 and 2,236,672 shares issued and outstanding at December 31, 2019
5  

1  
Additional paid-in capital419,794  

3,812  
Accumulated other comprehensive income1,012    
Accumulated deficit(77,686) 

(50,970) 
Total stockholders' equity (deficit)343,125  

(47,157) 
Total liabilities, convertible preferred stock and stockholders' equity (deficit)$349,450  

$158,295  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Black Diamond Therapeutics, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)

Three Months Ended
June 30,
Six Months Ended
June 30,

2020201920202019
Operating expenses:
Research and development (inclusive of $223, $3,077, $2,103 and $5,017 respectively, with a related party)
$10,170  $5,646  $17,524  $8,659  
General and administrative (inclusive of $0, $170, $0 and $181 respectively, with a related party)
4,858  1,353  10,383  2,181  
Total operating expenses15,028  6,999  27,907  10,840  
Loss from operations(15,028) (6,999) (27,907) (10,840) 
Other income (expense):
Interest expense(1)   (1)   
Interest income881  9  1,625  20  
Change in fair value of derivative liabilities  (5,300)   (5,300) 
Other (expense) income(423) 3  (433) 5  
Total other income (expense), net457  (5,288) 1,191  (5,275) 
Net loss attributable to common stockholders$(14,571) $(12,287) $(26,716) $(16,115) 
Net loss per share attributable to common stockholders, basic and diluted$(0.41) $(5.99) $(0.92) $(7.86) 
Weighted average common shares outstanding, basic and diluted35,910,718  2,052,056  29,804,987  2,048,239  
Comprehensive loss:
Net loss$(14,571) $(12,287) $(26,716) $(16,115) 
Other comprehensive income:
Unrealized gains on investments1,012    1,012    
Comprehensive loss$(13,559) $(12,287) $(25,704) $(16,115) 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Black Diamond Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
Six Months Ended
June 30,
2020

2019
Cash flows from operating activities:



Net loss$(26,716) $(16,115) 
Adjustment to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense3,296  283  
Change in fair value of derivative liabilities  5,300  
Depreciation expense23  25  
Accretion of discount on investments(400)   
Noncash rent expense94    
Changes in current assets and liabilities:
Prepaid expenses and other current assets(2,708) (302) 
Other non-current assets(21) (15) 
Accounts payable(1,359) 270  
Amounts due to related party15  (1,637) 
Accrued expenses and other current liabilities2,994  313  
Non-current operating lease liability(104) —  
Net cash used in operating activities(24,886) (11,878) 
Cash flows from investing activities:
Purchases of equipment(25) (8) 
Purchases of investments(279,615)   
Net cash used in investing activities(279,640) (8) 
Cash flows from financing activities:
Proceeds from initial public offering, net of issuance costs of $1,275
213,844    
Payment of deferred offering costs  (70) 
Net cash provided by (used in) financing activities213,844  (70) 
Net decrease in cash and cash equivalents(90,682) (11,956) 
Cash, cash equivalents and restricted cash, beginning of period154,721  51,660  
Cash, cash equivalents and restricted cash, end of period$64,039  $39,704  
Cash and cash equivalents, end of period$63,984  $39,649  
Restricted cash, end of period55  55  
Cash, cash equivalents and restricted cash, end of period$64,039  $39,704  
Supplemental disclosure of non-cash investing and financing activities:
Conversion of preferred stock into common stock upon closing of initial public offering$200,573  $  
Reclassification of warrants to additional paid-in capital$16  $  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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Black Diamond Therapeutics, Inc.
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)
(in thousands, except share data)

Convertible preferred stockCommon stock

Additional
paid-in capital

Accumulated other comprehensive incomeAccumulated deficit

Total
stockholders’
equity (deficit)

Shares

AmountShares

Par Value



BALANCE - December 31, 201833,668,075  

$60,770  2,173,684  

$1  

$169  

$  $(15,712) 

$(15,542) 
Grant of restricted common stock awards—  

—  46,416  

—  

—  

—  —  

  
Stock-based compensation—  

—  —  

—  

91  

—  —  

91  
Net loss—  

—  —  

—  

—  

—  (3,828) 

(3,828) 
BALANCE - March 31, 201933,668,075  60,770  2,220,100  1  260    (19,540) (19,279) 
Grant of restricted common stock awards—  —  —  —  —  —  —    
Stock-based compensation—  —  —  —  192  —  —  192  
Net loss—  —  —  —  —  —  (12,287) (12,287) 
BALANCE - June 30, 201933,668,075  60,770  2,220,100  1  452    (31,827) (31,374) 
BALANCE - December 31, 201964,839,353  $200,573  2,236,672  $1  $3,812  $  $(50,970) $(47,157) 
Conversion of preferred stock to common stock upon closing of the initial public offering(64,839,353) (200,573) 21,499,770  3  200,570  —  —  200,573  
Issuance of common stock, net of issuance costs—  —  12,174,263  1  212,100  —  —  212,101  
Reclassification of warrants to additional paid-in capital—  —  —  —  16  —  —  16  
Stock-based compensation—  —  —  —  1,877  —  —  1,877  
Net loss—  —  —  —  —  —  (12,145) (12,145) 
BALANCE - March 31, 2020    35,910,705  5  418,375    (63,115) 355,265  
Stock-based compensation—  —  —  —  1,419  —  —  1,419  
Unrealized gains on investments—  —  —  —  —  1,012  —  1,012  
Net loss—  —  —  —  —  —  (14,571) (14,571) 
BALANCE - June 30, 2020  $  35,910,705  $5  $419,794  $1,012  $(77,686) $343,125  
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Black Diamond Therapeutics, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Amounts in thousands, except share and per share amounts)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Black Diamond Therapeutics, Inc. (the “Company”) is a precision oncology medicine company pioneering the discovery and development of small molecule, tumor-agnostic therapies. The Company was originally organized as a limited liability company in December 2014 under the name ASET Therapeutics LLC. In September 2016, the Company was converted to a corporation under the laws of the State of Delaware under the name ASET Therapeutics, Inc. The Company changed its name to Black Diamond Therapeutics, Inc. in January 2018. Since its inception, the Company has devoted substantially all of its efforts to raising capital, obtaining financing, and incurring research and development costs related to the development of its mutation, allostery, and pharmacology computational and discovery platform.
The Company is subject to risks and uncertainties common to early stage companies in the biotechnology industry. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products developed will obtain necessary government regulatory approval or that any products, if approved, will be commercially viable. The Company operates in an environment of rapid technological innovation and substantial competition from pharmaceutical and biotechnological companies. In addition, the Company is dependent upon the services of its employees, consultants and service providers including a related party Ridgeline Therapeutics GmbH (“Ridgeline”). Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
On January 21, 2020, the Company effected a 1-for-3.01581 reverse stock split of the Company’s common stock. All shares, stock options, warrants and per share information presented in the condensed consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis for all periods presented. There was no change in the par value of the Company’s common stock.
On February 3, 2020, the Company completed an initial public offering (the “IPO”) of 12,174,263 shares of its common stock, including the exercise in full by the underwriters of their option to purchase up to 1,587,947 additional shares of common stock, for aggregate gross proceeds of $231,311 and its shares started trading on The Nasdaq Global Select Market under the ticker symbol “BDTX.” The Company received $212,101 in net proceeds after deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. Upon closing of the IPO, all of the Company's outstanding shares of convertible preferred stock automatically converted into 21,499,770 shares of common stock.
The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. Historically, the Company has funded its operations primarily with proceeds from the sale of convertible preferred stock. The Company expects to continue to generate operating losses for the foreseeable future.
As of August 11, 2020, the issuance date of the condensed consolidated financial statements, the Company expects that its cash, cash equivalents and investments will be sufficient to fund its operating expenses and capital requirements into 2023.
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The Company may seek additional funding through private or public equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company's stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
The ongoing global outbreak of the novel coronavirus disease (“COVID-19”), which began in December 2019 and has spread worldwide, has resulted, and will likely continue to result, in significant governmental measures being implemented to control the spread of the virus through quarantines, travel restrictions, heightened border security and other measures. While the Company cannot predict the scope and severity, these developments and measures have resulted, and will likely continue to result, in disruptions to our business, results of operations and financial condition. The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of the Company’s business and has taken steps to minimize its impact on the business. In response to these public health directives and orders and to help minimize the risk of the virus to our employees, the Company has taken precautionary measures, including implementing work-from-home policies for certain employees. The effects of these responsive actions and precautionary measures may negatively impact productivity, disrupt our business and delay our clinical programs and timelines. However, the extent to which COVID-19 ultimately impacts the Company’s business, results of operations or financial condition will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain the pandemic or treat its impact, among others. Furthermore, for the safety of the Company’s employees and families, the Company has introduced enhanced safety measures for scientists to be present in our labs and increased the use of third party service providers for the conduct of certain experiments and studies for research programs. Certain of the Company’s third party service providers have also experienced shutdowns or other business disruptions. While states and jurisdictions have started to rollback “stay-at-home” and quarantine orders, it is difficult to predict what the lasting impact of the pandemic will be, and any prolonged material disruption to the Company’s employees or third party service providers could negatively impact the Company’s ability to conduct business in the manner and on the timelines presently planned, which could have a material adverse impact on the Company’s business, results of operations and financial condition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company and its wholly owned subsidiaries, Black Diamond Therapeutics (Canada), Inc. and Black Diamond Therapeutics Security Corporation, after elimination of all significant intercompany accounts and transactions.
Unaudited interim financial information
The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K. The results for any interim period are not necessarily indicative of results for any future period.

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Use of estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses, the valuation of common stock and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.
The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on local, regional, national and international markets. The Company has considered the impact of COVID-19 on estimates within its financial statements and there may be changes to those estimates in future periods. As of the date of issuance of these unaudited condensed consolidated financial statements, the Company has not experienced material business disruptions or incurred impairment losses in the carrying value of its assets as a result of the pandemic and is not aware of any specific related event or circumstance that would require it to update its estimates.
Deferred offering costs
As of December 31, 2019, the Company recorded deferred offering costs of $2,303. The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process preferred stock or common stock financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded as a reduction to the carrying value of convertible preferred stock or in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should a planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss. After consummation of the IPO, which closed on February 3, 2020, these costs were recorded in stockholders' equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering.
Investments
The Company determines the appropriate classification of its investments in debt securities at the time of purchase and re-evaluates such determination at each balance sheet date. The Company classifies its marketable securities as current or non-current based on each instrument’s underlying effective maturity date. Marketable securities with maturities of greater than three months as available-for-sale are classified as current and are included in investments in the condensed consolidated balance sheets. Marketable securities with maturities greater than one year are classified as non-current and are included in investments, non-current in the condensed consolidated balance sheets. The Company’s marketable securities consist of U.S. government agency securities, corporate bonds, and commercial paper. Debt securities are carried at fair value with unrealized gains and losses included in other comprehensive income (loss) as a component of stockholders’ equity (deficit) until realized. Amortization and accretion of premiums and discounts are recorded in interest income (expense). Realized gains and losses on debt securities are included in other income (expense), net.
If any adjustment to fair value reflects a decline in value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is other than temporary and, if so, marks the investment to market on the Company’s statement of operations and comprehensive income (loss).
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Comprehensive loss
Comprehensive loss is composed of net loss and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and losses on investments.
Leases
Effective January 1, 2020, the Company adopted Accounting Standards Updated (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”), using the modified retrospective method and utilized the effective date as its date of initial application, with prior periods presented in accordance with previous guidance under ASC 840, Leases (“ASC 840”). At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable.
Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. Certain adjustments to the right-of-use asset may be required for items such as incentives received. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense or any incentives received and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date. The Company has elected not to recognize leases with an original term of one year or less on the condensed consolidated balance sheet. The Company typically only includes an initial lease term in its assessment of a lease arrangement. Options to renew a lease are not included in the Company’s assessment unless there is reasonable certainty that the Company will renew.
Assumptions made by the Company at the commencement date are re-evaluated upon occurrence of certain events, including a lease modification. A lease modification results in a separate contract when the modification grants the lessee an additional right of use not included in the original lease and when lease payments increase commensurate with the standalone price for the additional right of use. When a lease modification results in a separate contract, it is accounted for in the same manner as a new lease.
The Company elected the following practical expedients, which must be elected as a package and applied consistently to all of its leases at the transition date (including those for which the entity is a lessee or a lessor): i) the Company did not reassess whether any expired or existing contracts are or contain leases; ii) the Company did not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with ASC 840 are classified as operating leases, and all existing leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases); and iii) the Company did not reassess initial direct costs for any existing leases.
For leases that existed prior to the date of initial application of ASC 842 (which were previously classified as operating leases), a lessee may elect to use either the total lease term measured at lease inception under ASC 840 or the remaining lease term as of the date of initial application of ASC 842 in determining the period for which to measure its incremental borrowing rate. In transition to ASC 842, the Company utilized the remaining lease term of its leases in determining the appropriate incremental borrowing rates.
In accordance with ASC 842, components of a lease should be split into three categories: lease components, non-lease components, and non-components. The fixed and in-substance fixed contract consideration (including any consideration related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
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Entities may elect not to separate lease and non-lease components. The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only.
Recently issued accounting pronouncements
In December 2019, the FASB issued ASU 2019-12, Income Taxes-Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for annual periods beginning after December 15, 2020 and interim periods within, with early adoption permitted. Adoption of the standard requires certain changes to be made prospectively, with some changes to be made retrospectively. The Company is currently assessing the impact of this standard on our financial condition and results of operations.
3. FAIR VALUE MEASUREMENTS
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:

Fair value measurements at June 30, 2020 using:

Level 1

Level 2Level 3Total
Assets:





Cash equivalents:
Money market funds$59,764  $  $  $59,764  
Investments:
Commercial paper  74,400    74,400  
Corporate bonds  186,608    186,608  
U.S. Government agencies  20,019    20,019  
Total$59,764  $281,027  $  $340,791  


Fair value measurements at December 31, 2019 using:

Level 1Level 2

Level 3

Total
Assets:






Money market funds$24,157  $  $  $24,157  
Total$24,157  $  $  $24,157  
Liabilities:






Derivative liabilities$  $  $16  $16  
Total$  $  $16  $16  


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When developing fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation technique used to measure fair value for the Company's Level 1 and Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets. If market prices are not available, the fair value measurement is based on models that use primarily market-based parameters including yield curves, volatilities, credit ratings and currency rates. In certain cases where market rate assumptions are not available, the Company is required to make judgments about assumptions market participants would use to estimate the fair value of a financial instrument.
There were no transfers in or out of Level 3 categories in the periods presented.
Valuation of derivative liabilities
The fair value of the derivative liabilities related to the warrants to purchase series A convertible preferred stock is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.
Upon completion of the IPO in February 2020, the warrants to purchase series A convertible preferred stock converted to warrants to purchase 10,757 shares of common stock and the fair value of the derivative liability was reclassified to additional paid-in capital. As a result, we will no longer remeasure the fair value of the warrant liability at each reporting date. Derivative liabilities consisted of the following:

June 30,
2020
Balance - December 31, 2019$16  
Reclassification to additional paid-in capital in connection with IPO(16) 
Balance - June 30, 2020$  
4. INVESTMENTS
As of June 30, 2020, investments were comprised of the following:
June 30, 2020
Amortized CostFair Value
Due within one year or less$140,093  $140,505  
Due after one year through three years139,922  140,522  
Total investments$280,015  $281,027  
The amortized cost and estimated fair value of marketable securities, by contractual maturity:
Amortized Cost

Unrealized GainsUnrealized LossesFair ValueCurrentNon-Current
Commercial paper$74,208  $192  $  $74,400  $74,400  $  
Corporate bonds185,789  819    186,608  66,105  120,503  
U.S. Government agencies20,018  1    20,019    20,019  
Total$280,015  $1,012  $  $281,027  $140,505  $140,522  
As of December 31, 2019, the Company did not hold any investments.
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5. PROPERTY AND EQUIPMENT
Equipment, net consisted of the following:

June 30,
2020

December 31,
2019
Laboratory equipment$218  $218  
Computer and office equipment83  58  
Equipment301  276  
Less: accumulated depreciation(135) (112) 
Total Equipment, net$166  $164  

Depreciation expense for the six months ended June 30, 2020 and 2019 was $23 and $25, respectively.
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consisted of the following:

June 30,
2020

December 31,
2019
Contracted research services$2,276  $434  
Payroll and related expenses1,779  1,182  
Professional and consulting fees1,736  984  
Legal fees74  299  
Current portion of operating lease liability214  —  
Total accrued expenses and other current liabilities$6,079  $2,899  

7. STOCKHOLDERS’ EQUITY
Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.
Upon closing of the IPO on February 3, 2020, all of the preferred stock converted into an aggregate of 21,499,770 shares of common stock.
On January 3, 2020, in connection with the IPO, the Company filed a restated Certificate of Incorporation, which, among other things, restated the number of shares of all classes of stock that the Company has authority to issue to 510,000,000 shares, of which (i) 500,000,000 shares shall be a class designated as common stock, par value $0.0001 per share, and (ii) 10,000,000 shares shall be a class designated as undesignated preferred stock, par value $0.0001 per share.
8. STOCK-BASED COMPENSATION
2017 Equity Incentive Plan
The Company’s 2017 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2017 Plan”), provided for the Company to grant qualified incentive options, nonqualified options, stock grants and other stock-based awards to employees and non-employees to purchase the Company’s common stock. Upon the effectiveness of the 2020 Plan (as defined below), no further issuances will be made under the 2017 Plan.
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2020 Stock Option and Incentive Plan
The 2020 Stock Option and Incentive Plan (the “2020 Plan”) was approved by our board of directors on December 5, 2019, and the Company’s stockholders on January 14, 2020 and became effective on the date immediately prior to the date on which the registration statement for the Company’s IPO was declared effective. The 2020 Plan provides for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards, cash-based awards and dividend equivalent rights to the Company’s officers, employees, directors and consultants. The number of shares initially reserved for issuance under the 2020 Plan is 6,665,891, which shall be cumulatively increased on January 1, 2021 and each January 1 thereafter by 4% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation, nomination, and corporate governance committee of the board of directors.
2020 Employee Stock Purchase Plan
The 2020 Employee Stock Purchase Plan (the “2020 ESPP”) was approved by the Company’s board of directors on December 5, 2019, and our stockholders on January 14, 2020, and became effective on the date immediately prior to the date on which the registration statement for the Company’s IPO was declared effective. A total of 326,364 shares of common stock were initially reserved for issuance under this plan, which shall be cumulatively increased on January 1, 2021 and each January 1 thereafter by 1% of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31 or such lesser number of shares determined by the Company’s board of directors or compensation, nomination and corporate governance committee of the board of directors.
Stock-based compensation expense
The Company recorded stock-based compensation expense in the following expense categories of its condensed consolidated statements of operations and comprehensive loss:
Three Months Ended
June 30,
Six Months Ended
June 30,

2020

201920202019
Research and development$655  

$166  $1,219  $246  
General and administrative764  

26  2,077  37  

$1,419  

$192  $3,296  $283  
Options
During the six months ended June 30, 2020, the Company granted options to purchase 901,651 shares of common stock. The total fair value of options vested during the six months ended June 30, 2020 was $1,110. As of June 30, 2020, there were 3,240,362 options outstanding, 39,763 options were forfeited during the period. The weighted-average grant-date fair value per share of options granted during the six months ended June 30, 2020 was $13.08.
For the six months ended June 30, 2020, total unrecognized compensation cost related to the unvested stock-options was $20,337, which is expected to be recognized over a weighted average period of 3.1 years.
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9. NET LOSS PER SHARE
Net loss per share
The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company (in thousands, except share and per share amounts):

Three Months Ended
June 30,
Six Months Ended
June 30,

2020

201920202019
Net loss attributable to common stockholders$(14,571) 

$(12,287) $(26,716) $(16,115) 
Weighted average common shares outstanding, basic and diluted35,910,718  

2,052,056  29,804,987  2,048,239  
Net loss per share, basic and diluted$(0.41) 

$(5.99) $(0.92) $(7.86) 

The Company had no unvested restricted common shares outstanding at June 30, 2020. Unvested restricted common shares at June 30, 2019 have been excluded from the computation of basic net loss per share attributable to common stockholders.
The Company’s potentially dilutive securities, which include options, unvested restricted stock, convertible preferred stock and warrants to purchase convertible preferred stock, have been excluded from the computation of diluted net loss per share attributable to common stockholders as the effect would be to reduce the net loss per share attributable to common stockholders. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
Six Months Ended
June 30,

20202019
Options to purchase common stock3,240,362  503,666  
Unvested restricted stock  164,582  
Preferred stock (as converted to common stock)  11,163,838  
Warrants to purchase shares of series A preferred stock (as converted to common stock)  10,757  

3,240,362  11,842,843  
10. LEASES
The Company has historically entered into lease arrangements for its facilities. As of June 30, 2020, the Company had one operating lease with required future minimum payments. In applying the transition guidance under ASC 842, the Company determined the classification of this lease to be an operating lease and recorded a right-of-use asset and lease liability as of the effective date. The Company’s leases generally do not include termination or purchase options.
Operating Leases
In February 2019, the Company entered into an agreement to lease approximately 2,357 square feet of office space for its principal office, which is located in Cambridge, MA. The lease expires on April 30, 2022, subject to an option to extend the lease for three additional years.
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In July 2020, the Company entered into a seven-year agreement with an option to extend for five additional years to lease two floors totaling approximately 25,578 square feet of office space in Cambridge, MA. The lease on the first floor commenced on August 1, 2020 and the Company currently expects the lease of the second floor to commence in Q4 2020 when the landlord delivers the space in accordance with the lease terms. The Company is in the process of assessing the impacts to the financial statements, but currently expect to recognize the respective lease balances on the condensed consolidated balance sheets when the lease of each floor has commenced. Under the terms of the lease, the Company is required to make up to $17,048 in total minimum payments during the term and is required to issue a $1,168 letter of credit as security for the lease.
The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating lease for the three and six months ended June 30, 2020:
Three Months Ended
June 30, 2020
Six Months Ended
June 30, 2020
Lease Cost
Operating lease cost$56  $112  
Short-term lease cost105  265  
Variable lease cost10  22  
Total lease cost$171  $399  

Other Operating Lease InformationJune 30, 2020
Cash paid for amounts included in the measurement of lease liability$111  
Weighted-average remaining lease term1.8
Weighted-average discount rate8.6 %
The variable lease costs for the three and six months ended June 30, 2020 include common area maintenance and other operating charges. As the Company’s leases do not provide an implicit rate, the Company utilized its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.
Future minimum lease payments under the Company’s operating leases as of June 30, 2020 were as follows:
As of June 30, 2020
2020 (excluding the six months ended June 30, 2020)
$112  
2021228  
202277