OLMA US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following Management’s discussion and analysis (“MD&A”) of our financial condition and results of operations should be read in conjunction with the financial statements and notes thereto included as part of this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates and beliefs and involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those discussed in the section titled “Risk Factors” included under Part I, Item 1A and elsewhere in this Annual Report. See “Special Note Regarding Forward-Looking Statements” in this Annual Report.

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of next generation targeted therapies for women’s cancers. Our team has spent the past decade characterizing the structure and function of the ER, a key driver of breast cancer in approximately 75% of patients, in order to develop more potent, oral therapies that completely inactivate this signaling pathway. Our wholly owned lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a CERAN and a SERD, which we believe will drive deeper, more durable responses than existing therapies. OP-1250, both as a monotherapy and in combination with inhibitors of CDK4/6 demonstrated robust tumor shrinkage in several xenograft models, including a breast cancer brain metastasis model. In August 2020, we initiated an ongoing Phase 1/2 dose escalation and expansion trial evaluating OP-1250 for the treatment of recurrent, locally advanced or metastatic ER+, HER2- breast cancer, and expect to report initial data from this trial in the second half of 2021. We own worldwide development and commercialization rights to OP-1250. As summarized in the figure below, our plan is to develop OP-1250 in a number of ER+ breast cancer indications, both as a monotherapy and in combination with approved targeted therapies that have shown improved outcomes with other endocrine therapies. We believe OP-1250’s oral formulation and dual mechanism of action directly address the limitations of current endocrine therapies, such as fulvestrant and tamoxifen, and position OP-1250 as a potential endocrine therapy of choice for the treatment of ER+ breast cancers. Our goal is to transform the standard of care for women living with cancers by developing more effective therapies that apply our deep understanding and collective expertise in endocrine-driven cancers, nuclear receptor activities and mechanisms of acquired resistance.

Since our inception, we have devoted substantially all of our resources to organizing and staffing our company, research and development activities, business planning, raising capital, establishing and maintaining our intellectual property portfolio, conducting nonclinical studies and clinical trials and providing general and administrative support for these operations.

We do not have any product candidates approved for commercial sale, and we have not generated any revenue from product sales. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development and eventual commercialization of one or more of our product candidates which we expect, if it ever occurs, will take a number of years. We also do not own or operate, and currently have no plans to establish, any manufacturing facilities. We rely, and expect to continue to rely, on third parties for the manufacture of our product candidates for nonclinical and clinical testing, as well as for commercial manufacturing if any of our product candidates obtain marketing approval. We believe that this strategy allows us to maintain a more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.

Through December 31, 2020, we had received aggregate gross proceeds of $391.3 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes since inception. As of December 31, 2020, we had cash and cash equivalents of $338.5 million. In January 2020, we received proceeds of $3.0 million from the issuance of convertible promissory notes, or the 2020 Notes. From March 2020 through June 2020, we issued 10,801,277 shares of our Series B convertible preferred stock at a price of $4.712 per share for cash proceeds of $50.9 million, and 638,270 shares of our Series B convertible

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preferred stock upon conversion of the 2020 Notes (including accrued interest). In September 2020, we issued 7,904,135 shares of our Series C convertible preferred stock at a price of $11.063 per share for cash proceeds of $87.4 million. In November 2020, we completed the initial public offering of our common stock, in which we issued an aggregate of 12,650,000 shares of common stock, including 1,650,000 shares of common stock issued pursuant to the over-allotment option granted to the underwriters, at a price of $19.00 per share, for gross cash proceeds of $240.4 million, before underwriting discounts and commissions. We received approximately $220.6 million in net proceeds, after deducting underwriting discounts, commissions and offering expenses. Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operating expenses and capital expenditure requirements through the end of 2022.

We have incurred significant operating losses since the commencement of our operations. Our net losses were $22.1 million, $4.3 million, and $2.2 million for the years ended December 31, 2020, 2019 and 2018, respectively, and we expect to incur significant and increasing losses for the foreseeable future as we continue to advance our product candidate, and as we transition to operating as a public company. Our net losses may fluctuate significantly from period to period, depending on the timing of expenditures on our research and development activities. As of December 31, 2020, we had an accumulated deficit of $33.1 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and other current liabilities.

We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:

● acquire or in-license other product candidates and technologies;

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● expand our operations in the United States and to other geographies; and

We also expect to increase the size of our administrative function to support the growth of our business. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.

We will require substantial additional funding to develop our product candidates and support our continuing operations. Until such time that we can generate significant revenue from product sales or other sources, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic and otherwise. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, including requiring us to have to delay, reduce or eliminate our product development or future commercialization efforts. Insufficient liquidity may also require us to relinquish rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts. We cannot provide assurance that we will ever be profitable or generate positive cash flow from operating activities.

The COVID-19 pandemic continues to rapidly evolve. As a result of the COVID-19 pandemic, we experienced some delays in setting up our current Phase 1/2 clinical trial and in clinical site initiation, including delays in recruiting clinical site investigators and clinical site staff, which we may experience again in the future. The extent of the impact of the COVID-19 pandemic on our business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration of the outbreak and its impact on our development activities, planned clinical trial enrollment, future trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. To the extent possible, we are conducting business as usual, with necessary or advisable modifications to employee travel and with many of our employees working remotely. We continue to actively monitor the rapidly evolving situation related to the COVID-19 pandemic and may take further actions that alter our operations, including those that may be required by federal, state or local authorities, or that we determine are in the best interests of our employees and other third parties with whom we do business. During 2020, although we modified our operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, our business, operations and development timelines were not material adversely affected. However, the extent to which the COVID-19 pandemic may affect our business, operations and development timelines and plans in the future, including the resulting impact on our expenditures and capital needs, remains uncertain.

Components of our results of operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products for the foreseeable future.

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Operating expenses

Research and development

Research and development expenses account for a significant portion of our operating expenses and consist primarily of external and internal expenses incurred in connection with the discovery and development of our product candidates. To date, our research and development expenses have related primarily to discovery efforts and nonclinical and clinical development of our product candidate OP-1250. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

External expenses include:

● costs of funding research performed by third parties;

● facility costs including rent, depreciation and maintenance expenses.

Internal expenses include employee and personnel-related costs and expenses, including salaries, benefits and stock-based compensation expense for employees and personnel engaged in research and development functions.

We expense research and development expenses in the periods in which they are incurred. Costs for certain activities, such as manufacturing and nonclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or nonclinical program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or nonclinical programs.

Research and development expenses to advance the development of our lead product candidate and nonclinical program were $13.7 million, $3.9 million and $1.7 million for the years ended December 31, 2020, 2019 and 2018, respectively.

We expect our research and development expenses to increase substantially in absolute dollars for the foreseeable future as we advance OP-1250 or any other future product candidates we may develop into and through nonclinical studies and clinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-

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consuming. The actual probability of success for OP-1250 or any other future product candidates we may develop may be affected by a variety of factors including but not limited to: the safety and efficacy of our product candidates, early clinical data, investment in our clinical program, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our OP-1250 or any other future product candidates we may develop. Clinical and nonclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future nonclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast whether OP-1250 or any other future product candidates we may develop may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements. We are also unable to predict when, if ever, we will generate revenue from our product candidates to offset these expenses. Our expenditures on current and future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost to completion. The duration, costs and timing of nonclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:

● the timing and progress of nonclinical and clinical development activities;

● the number and scope of nonclinical and clinical programs we decide to pursue;

● receipt of regulatory approvals from applicable regulatory authorities;

● our ability to establish licensing or collaboration arrangements;

● the performance of our future collaborators, if any;

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● obtaining and retaining key research and development personnel.

Any changes in the outcome of any of these factors could significantly impact the costs, timing and viability associated with the development of our product candidates.

General and administrative

General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and stock-based compensation expense, for personnel in executive, finance, accounting, business development, legal, human resource and administrative functions. General and administrative expenses also include costs not otherwise included in research and development expenses, including corporate facility costs, depreciation and other expenses, which include direct or allocated expenses for rent and maintenance of facilities and insurance, and professional fees for legal, patent and consulting services.

We expect that our general and administrative expenses will increase substantially in the foreseeable future as we increase our headcount to support the continued research and development of our programs and the growth of our business. We also anticipate incurring additional expenses associated with operating as a public company, including increased expenses related to ongoing financial statement audit and interim-period quarterly reviews, internal control over financial reporting compliance and audit, legal, other regulatory and compliance, director and officer insurance, investor and public relations and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Total other income (expense), net

Interest income, interest expense and other income

Interest income primarily consists of interest income on our cash and cash equivalents. Interest expense primarily consists of interest on our convertible promissory notes, and in the year ended December 31, 2020, a non-cash interest charge related to a beneficial conversion feature on a convertible note issued in January 2020. Other income consists of miscellaneous income not related to operating activities.

Loss on extinguishment of convertible notes

Loss on extinguishment of convertible promissory notes consists of the loss recognized from the extinguishment of the unpaid principal and accrued interest on convertible promissory notes issued in 2017. These notes were extinguished in July 2018 and noteholders were issued Series A-1 convertible preferred stock and common stock concurrent with the extinguishment of the notes.

Loss on remeasurement of convertible notes

Loss on remeasurement of convertible promissory notes consists of the loss recognized from the remeasurement of convertible promissory notes issued in 2018. In July 2018, these notes were remeasured to their final fair value, and then settled with the issuance of Series A-1 convertible preferred stock and common stock provided to noteholders.

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Results of operations

Comparison of the years ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

​

​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31, ​ ​

​ ​ (in thousands)

Operating expenses: ​ ​

Other (expense) income: ​

Interest expense (653) ​ — (653)

Total other (expense) income, net (593) ​ 7 (600)

​

Research and development expenses

Research and development expenses for the year ended December 31, 2020 were $13.7 million, compared to $3.9 million for the year ended December 31, 2019. The increase of $9.8 million was primarily due to increased spending in (i) advancing our lead product candidate OP-1250 clinical study and the associated contract manufacturing costs, (ii) other nonclinical research and discovery program costs, and (iii) personnel-related costs due to increased headcount, and an increase in the non-cash stock-based compensation of $2.0 million recognized during the year ended December 31, 2020.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2020 were $7.8 million compared to $0.4 million for the year ended December 31, 2019. The increase of $7.4 million was primarily due to increased salary expense associated with the expanded executive team, fees paid to outside consultants in connection with our initial public offering and operating as a public company, and an increase in the non-cash stock-based compensation of $1.1 million recognized during the year ended December 31, 2020.

Other (expense) income, net

Other (expense) income, net for the year ended December 31, 2020 was $(0.6) million, which primarily consisted of a non-cash interest charge incurred in connection with convertible notes issued in January 2020.

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Comparison of the years ended December 31, 2019 and 2018

The following table summarizes our results of operations for the years ended December 31, 2019 and 2018:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Years Ended December 31, ​ ​ ​

​ ​ (in thousands)

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

General and administrative ​ 403 ​ 386 ​ 17

Other (expense) income: ​ ​ ​

Interest income ​ 7 ​ 4 ​ 3

Interest expense ​ — ​ (28) ​ 28

Loss on convertible notes ​ ​ — ​ ​ (94) ​ ​ 94

Total other income (expense), net ​ 7 ​ (118) ​ 125

Net loss and comprehensive loss ​ $ (4,316) ​ $ (2,197) ​ $ (2,119)

​

Research and development expenses

Research and development expenses for the year ended December 31, 2019 were $3.9 million, compared to $1.7 million for the year ended December 31, 2018. The increase of $2.2 million was primarily due to the nonclinical research of OP-1250 and included a $0.7 million increase in lab services costs and $1.5 million increase in third-party research and development fees.

General and administrative expenses

General and administrative expenses remained relatively unchanged year over year and were $0.4 million for the years ended December 31, 2019 and 2018, respectively.

Other income (expense), net

Other income (expense), net for the year ended December 31, 2019 was less than $0.1 million, compared to $(0.1) million during the year ended December 31, 2018. The change was primarily due to the $0.1 million loss on extinguishment and remeasurement of the convertible promissory notes in 2018.

Liquidity and capital resources

Sources of liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net losses were $22.1 million, $4.3 million, and $2.2 million for the years ended December 31, 2020, 2019, and 2018, respectively. As of December 31, 2020, we had $338.5 million in cash and cash equivalents and an accumulated deficit of $33.1 million. We had no debt outstanding as of December 31, 2020. Through December 31, 2020, we had received aggregate gross proceeds of $391.3 million from sales of our common stock, convertible preferred stock and issuance of convertible promissory notes since inception. In January 2020, we received proceeds of $3.0 million from the issuance of convertible promissory notes, or the 2020 Notes. From March 2020 through June 2020, we issued 10,801,277 shares of our Series B convertible preferred stock at a price of $4.712 per share for cash proceeds of $50.9 million, and 638,270 shares of our Series B convertible preferred stock upon conversion of the 2020 Notes (including accrued interest). In September 2020, we issued 7,904,135 shares of our Series C convertible preferred stock at a price of $11.063 per share for gross proceeds of $87.4 million. In November 2020, we completed the initial public offering of our common stock, in which we issued an aggregate of 12,650,000 shares

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of common stock, including 1,650,000 shares of common stock issued pursuant to the over-allotment option granted to the underwriters, at a price of $19.00 per share, for gross proceeds of $240.4 million, before underwriting discounts and commissions. We received approximately $220.6 million in net proceeds, after deducting underwriting discounts, commissions and offering expenses.

We expect to incur significant expenses and operating losses for the foreseeable future as we advance the nonclinical and clinical development of OP-1250. We expect that our research and development and general and administrative costs will increase in connection with conducting additional nonclinical studies and clinical trials for our current and future research programs and product candidates, contracting with CMOs to support nonclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

Our primary uses of cash are to fund our research and development activities, including with respect to OP-1250 and other nonclinical programs, business planning, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital and providing general and administrative support for these operations.

We currently have no financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years.

Future funding requirements

To date, we have not generated any revenue from product sales. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if at all, that will occur. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for our product candidates, we expect to incur significant commercialization expenses related to program sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators. Furthermore, we have incurred and expect to continue to incur additional costs associated with operating as a public company. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our development efforts.

We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through the end of 2022 at which point we would need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Our future capital requirements will depend on many factors, including:

● the scope, prioritization and number of our research and development programs;

● the costs, timing and outcome of regulatory review of our product candidate;

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Identifying potential product candidates and conducting nonclinical studies and clinical trials is a time- consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidate, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of a product candidate that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a shareholder. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

Cash flows

The following table shows a summary of our cash flows for each of the periods presented:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Net cash used in operating activities ​ $ (19,866) ​ $ (3,081) ​ $ (2,176)

Net cash used in investing activities ​ (56) ​ — ​ —

Net cash provided by financing activities ​ 358,403 ​ — ​ 5,254

​

Operating activities

Net cash used in operating activities during the year ended December 31, 2020 consisted primarily of our net loss of $22.1 million, partially offset by non-cash charges of $3.8 million and a net change of $1.5 million in net operating assets and liabilities. The net loss consisted primarily of $13.7 million in research and development expenses and $7.8 million in general and administrative expenses. The non-cash charges consisted primarily of stock-based compensation of $3.1 million and non-cash interest expense of $0.6 million related to our 2020 Convertible Notes. The change in operating assets and liabilities was primarily due to an increase of $3.6 million in prepaid expenses and other current assets related to advanced payments for corporate insurance and research and development activities, an increase of $0.5 million in other assets, and a decrease of $0.2 million

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in accounts payable, partially offset by an increase of $2.8 million in invoices and accrued liabilities, primarily as a result of timing of invoice payment.

Net cash used in operating activities during the year ended December 31, 2019 consisted primarily of our net loss of $4.3 million, partially offset by an increase in accounts payable of $1.2 million. The net loss primarily consisted of $3.9 million in research and development expenses and $0.4 million in general and administrative expenses. The increase in accounts payable and other current liabilities was due to the timing of the posting of the invoices and the overall increase in research and development expenses in the year ended 2019.

Net cash used in operating activities during the year ended December 31, 2018 consisted primarily of our net loss of $2.2 million. The net loss consisted of $1.7 million of research and development expenses, $0.4 million of general and administrative expenses and $(0.1) million of other (expenses) income, net.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2020 consisted of nominal purchases of equipment. There were no cash flows from investing activities during the years ended December 31, 2019 and 2018.

Financing activities

Net cash provided by financing activities during the year ended December 31, 2020 consisted primarily of $220.6 million, $85.8 million, and $50.6 million in net proceeds from our initial public offering, sale and issuance of our Series C and B convertible preferred stock, and $3.0 million in proceeds from the sale and issuance of our convertible promissory notes, respectively. These cash inflows were partially offset by cash outflows of $2.3 million for the repurchase of Series A convertible preferred stock.

There were no cash flows from financing activities during the year ended December 31, 2019.

Net cash provided by financing activities during the year ended December 31, 2018 consisted primarily of $4.9 million in proceeds from the sale and issuance of our Series A-1 convertible preferred stock and $0.3 million in proceeds from the sale and issuance of our convertible promissory notes, net of issuance costs.

Contractual obligations and commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2020:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Payments due by period

​ Less than 1 1 to 3 3 to 5 More than ​

(in thousands) ​ year ​ years ​ years ​ 5 years ​ Total

​

We conduct our research and development programs internally and through third parties that include, among others, arrangements with vendors, consultants, CMOs, and CROs. We have contractual arrangements in the normal course of business with these parties, however, our contracts with them are cancelable generally on reasonable notice within one year and our obligations under these contracts are primarily based on services performed. We included certain contracts that have significant cancellation penalties and are material, which make the continuation of these arrangements reasonable.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

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Critical accounting policies and significant judgements and estimates

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, expenses and the disclosure of our contingent liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our financial statements elsewhere in this Annual Report, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our audited financial statements.

Stock-Based Compensation

All stock-based compensation cost, including grants of stock options and restricted stock awards issued under our equity incentive plans and employee stock purchase plan, is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. We recognize stock-based compensation in accordance with ASC 718, Compensation—Stock Compensation, or ASC 718. ASC 718 requires the recognition of compensation expense, using a fair-value-based method, for costs related to all share-based payments including stock options. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant. Our determination of the fair value of stock options with time-based vesting on the date of grant utilizes the Black-Scholes option-pricing model. We estimate the expected contractual lives using historical data,volatility using stock prices of peer companies, risk-free rates using the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term, and dividend yield using our expectations and historical data. We use the simplified method to calculate the expected term of employee stock option grants. Under the simplified method, the expected term is estimated to be the mid-point between the vesting date and the contractual term of the option. For awards with graded vesting, in which specified tranches of the options vest on different dates, we use a single weighted-average expected life to value the entire award, which is equal to the average of the weighted-average vesting period of the award and the contractual term of the award. The fair value of each stock option grant is calculated based upon our common stock valuation on the date of the grant which we had to estimate prior to becoming a public company. Equity instruments issued to nonemployees are recorded at their fair value on the grant date and without subsequent remeasurement. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest, including awards with graded vesting. As part of the requirements of ASC 718, we have elected to account for forfeitures of stock option grants as they occur.

Historically, for all periods prior to our initial public offering, the fair value of our common stock was estimated on each grant date by our board of directors. In order to determine the fair value, our board of directors considered, among other things, contemporaneous valuations of our common stock and preferred stock prepared by management with the assistance of unrelated third-party valuation firms in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid.

Prior to our initial public offering, given the absence of a public trading market of our shares of capital stock, our board of directors exercised reasonable judgment and considered a number of objective and subjective factors to determine the best estimate of the fair value of our shares of common stock and preferred stock, which significant changes to the key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date.

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In determining the fair value of our common stock through December 31, 2018, we estimated the equity value of our business using income and market approaches including recent sales of our convertible preferred stock in arms’-length transactions (the back-solve method). Once an equity value was determined, we utilized the Option-pricing method, or OPM, to allocate the overall value of equity to the various share classes. In accordance with the Practice Aid, the OPM was the most appropriate method for determining the fair value of our common stock based on our stage of development and other relevant factors.

In determining the fair value of our common stock beginning May 2020, we estimated the equity value of our business using the Hybrid Method, which utilizes the Probability-Weighted Expected Return Method, or PWERM, a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for us assuming various outcomes.

We performed contemporaneous valuations, with the assistance of a third-party valuation specialist, as of December 31, 2018, May 31, 2020, July 31, 2020 and August 31, 2020, which resulted in valuations of our common stock of $0.725, $2.064, $4.406 and $4.824 per share, respectively. We had initially used an OPM in assessing the fair value of our common stock as of May 31, 2020. For financial reporting purposes in connection with our initial public offering, we retrospectively assessed the fair value of our common stock in connection with our June 2020 stock option grants and restricted stock awards using the Hybrid Method.

Following the closing of our IPO, the fair value of our common stock is determined based on the closing price of our common stock as reported by Nasdaq Global Select Market on the date of grant.

Accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing purchase orders and open contracts, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the services when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by CROs and CMOs among others, in connection with research and development activities for which we have not yet been invoiced.

We contract with CROs and CMOs to conduct clinical and manufacturing and other research and development services on our behalf. We base our expenses related to CROs and CMOs on our estimates of the services received and efforts expended pursuant to quotes and contracts with them. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our CROs or CMOs will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Although we do not expect our estimates to be materially different from amounts actually incurred, our 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 us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.

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Internal Control over Financial Reporting

During August 2020, in connection with the preparation of our financial statements as of and for the years ended December 31, 2019 and 2018, we identified material weaknesses in our control over financial reporting. The first material weakness identified in our internal control over financial reporting arose because we did not have an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. This material weakness contributed to an additional material weakness in that we did not design and therefore did not have formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including controls over the preparation and review of account reconciliations and journal entries. As of December 31, 2020, we remediated the material weaknesses by hiring additional key finance and accounting personnel, creatingformal financial policies and procedures, including month-end close process, and establishing more robust processes supporting internal controls over financial reporting. While we believe that these material weaknesses have now been remediated, we cannot assure you that these measures will be sufficient to prevent future material weaknesses or significant deficiencies in our internal control over financial reporting from occurring. See “Risk Factors-If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.”

Emerging growth company status

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition provided in the JOBS act. As a result, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies and our financial statements may not be comparable to other public companies that comply with new or revised accounting pronouncements as of public company effective dates. We may choose to early adopt any new or revised accounting standards whenever such early adoption is permitted for private companies. The JOBS Act also exempts us from having to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b).

We will cease to be an “emerging growth company” on the date that is the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more, (ii) December 31, 2025, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (iv) the last day of the fiscal year in which we are deemed to be a large accelerated filer under the rules of the SEC, which generally is when we have more than $700.0 million in market value of our stock held by non-affiliates as of the last day of the second fiscal quarter and we have been a public company for at least 12 months and have filed one annual report.

Further, even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exceptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our shares of common stock less attractive because we may rely on these exemptions. If some investors find our shares of common stock less attractive as a result, there may be a less active trading market for shares of our common stock and our share price may be more volatile.

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Recently issued accounting pronouncements

See Note 2 to our financial statements contained in this Annual Report for a description of recent accounting pronouncements applicable to our financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest rate risk

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. As of December 31, 2020 and 2019, we had cash and cash equivalents of $338.5 million and $0.1 million, respectively. We generally hold our cash in interest-bearing bank accounts and money market funds. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. An immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash and cash equivalents.

Financial institution risk

Substantially all of our cash is held with a single financial institution. Due to its size, this financial institution represents a minimal credit risk. Cash amounts held at financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000.

Foreign currency exchange risk

Our expenses are generally denominated in U.S. dollars. To date, we have not had any significant foreign currency transactions, and we do not have a formal hedging program with respect to foreign currency. A 10.0% increase or decrease in current exchange rates would not have a material effect on our financial results.

Effects of inflation

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation has had a material effect on our results of operations during the periods presented.

​

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Item 8. Financial Statements and Supplementary Data.

Olema Pharmaceuticals, Inc.

Index to financial statements

​ Page

Report of Independent Registered Public Accounting Firm 137

Balance Sheets 138

Statements of Operations and Comprehensive Loss 139

Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) 140

Statements of Cash Flows 141

Notes to Financial Statements 142

​

​

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​

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Olema Pharmaceuticals, Inc.

​

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Olema Pharmaceuticals, Inc. (the Company) as of December 31, 2020 and 2019, the related statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

​

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

​

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

​

/s/ Ernst & Young LLP

We have served as the Company‘s auditor since 2020.

Redwood City, California

March 17, 2021

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Olema Pharmaceuticals, Inc.

Balance Sheets

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Assets ​ ​ ​ ​ ​ ​

Current assets: ​ ​ ​ ​ ​ ​

Prepaid expenses and other current assets ​ 3,588 ​ 35

Property and equipment, net ​ 75 ​ 26

Other assets ​ 510 ​ 3

​ ​ ​ ​ ​ ​ ​

Current liabilities: ​ ​ ​ ​ ​ ​

Accounts payable ​ $ 719 ​ $ 935

Other current liabilities ​ ​ 3,866 ​ 443

Total current liabilities ​ ​ 4,585 ​ 1,378

Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ ​

Stockholders’ equity (deficit): ​ ​ ​ ​ ​ ​

Total stockholders’ equity (deficit) ​ ​ 338,137 ​ (10,594)

​

See accompanying notes to the financial statements.

​

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Olema Pharmaceuticals, Inc.

Statements of operations and comprehensive loss

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

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​

Other (expense) income: ​ ​ ​ ​

Interest income ​ 60 ​ 7 ​ 4

Interest expense ​ (653) ​ — ​ (28)

Loss on convertible notes ​ — ​ — ​ (94)

Total other (expense) income, net ​ (593) ​ 7 ​ (118)

Net loss and comprehensive loss ​ $ (22,121) ​ $ (4,316) ​ $ (2,197)

​

See accompanying notes to the financial statements.

​

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Olema Pharmaceuticals, Inc.

Statements of convertible preferred stock and stockholders’ equity (deficit)

(Amounts in thousands, except share amounts)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Convertible ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Total

​ ​ Preferred Stock ​ Common Stock ​ Paid-in ​ Accumulated ​ Stockholders'

​ Shares Amount Shares Amount Capital Deficit Equity (Deficit)

Stock-based compensation expense — ​ — — ​ — ​ 1 ​ — ​ 1

Net loss and comprehensive loss — ​ — — ​ — ​ — ​ (2,197) ​ (2,197)

Net loss and comprehensive loss — ​ — — ​ — ​ — ​ (4,316) ​ (4,316)

Exercise of stock options ​ — ​ ​ — ​ 246,046 ​ ​ — ​ ​ 151 ​ ​ — ​ ​ 151

Vesting of restricted stock awards ​ — ​ ​ — ​ 53,801 ​ ​ — ​ ​ — ​ ​ — ​ ​ —

Stock-based compensation expense ​ — ​ ​ — ​ — ​ ​ — ​ ​ 3,078 ​ ​ — ​ ​ 3,078

ESPP expense ​ — ​ ​ — ​ — ​ ​ — ​ ​ 30 ​ ​ — ​ ​ 30

​

See accompanying notes to the financial statements.

​

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Olema Pharmaceuticals, Inc.

Statements of cash flows

(Amounts in thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Cash flows from operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​

Depreciation and amortization expense ​ 11 ​ 9 ​ 8

Non-cash interest expense ​ 641 ​ — ​ 28

Stock-based compensation expense ​ 3,108 ​ — ​ 1

Loss on convertible notes ​ — ​ — ​ 94

Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​

Prepaid expenses, other current assets ​ (3,553) ​ 58 ​ (78)

Other assets ​ ​ (507) ​ ​ — ​ ​ —

Net cash used in operating activities ​ (19,866) ​ (3,081) ​ (2,176)

Cash flows from investing activities: ​ ​ ​ ​ ​ ​

Purchase of equipment ​ (56) ​ — ​ —

Net cash used in investing activities ​ (56) ​ — ​ —

Cash flows from financing activities: ​ ​ ​ ​ ​ ​

Proceeds from the issuance of convertible notes ​ 3,000 ​ — ​ 323

Exercise of stock options ​ 641 ​ — ​ —

Proceeds from the settlement of non-recourse notes ​ 88 ​ — ​ —

Net cash provided by financing activities ​ 358,403 ​ — ​ 5,254

Net increase (decrease) in cash and cash equivalents ​ 338,481 ​ (3,081) ​ 3,078

Cash and cash equivalents at beginning of period ​ 68 ​ 3,149 ​ 71

Cash and cash equivalents at end of period $ 338,549 ​ $ 68 ​ $ 3,149

Offering costs included in other current liabilities ​ $ 70 ​ $ — ​ $ —

​

See accompanying notes to the financial statements.

​

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Olema Pharmaceuticals, Inc.

Notes to financial statements

1. Nature of the Business and Basis of Presentation

Olema Pharmaceuticals Inc. (“Olema” or the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of next generation targeted therapies for women’s cancers. The Company is initially focused on developing therapies for the treatment of breast cancer. The Company’s wholly owned, lead product candidate, OP-1250, is a novel oral therapy with combined activity as both a complete estrogen receptor (“ER”) antagonist and a selective ER degrader. The Company is currently evaluating OP-1250 in a Phase 1/2 dose escalation and expansion trial for the treatment of recurrent, locally advanced or metastatic estrogen receptor-positive, human epidermal growth factor receptor 2-negative breast cancer.

The Company is located in San Francisco, California and was incorporated in Delaware on August 7, 2006 under the legal name of CombiThera, Inc. and on March 25, 2009 was renamed to Olema Pharmaceuticals, Inc. All of the Company’s tangible assets are held in the United States (“U.S.”) and the Company operates in one business segment and therefore has only one reportable segment.

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, successful discovery and development of its product candidates, development by competitors of new technological innovations, dependence on key personnel, the ability to attract and retain qualified employees, protection of proprietary technology, compliance with governmental regulations, the impact of COVID-19, the ability to secure additional capital to fund operations and commercial success of its product candidates. OP-1250 and any future product candidates the Company may develop will require extensive nonclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. 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.

Reverse Stock Split

On November 13, 2020, the Company filed an amended and restated certificate of incorporation to affect a 1-for-2.788 reverse split of shares of the Company’s issued and outstanding common stock and convertible preferred stock (the "Reverse Stock Split"). The par value of the common stock and preferred stock was not adjusted as a result of the Reverse Stock Split. As part of the reverse stock split, the Company did not adjust the number of authorized shares of common stock or convertible preferred stock. All references to common stock and convertible preferred stock, options to purchase common stock, early exercised options, restricted stock awards, share data, per share data and related information contained in these financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Initial Public Offering

In November 2020, the Company completed its initial public offering (“IPO”) of its common stock. In connection with its IPO, the Company issued and sold 12,650,000 shares of its common stock, at a price to the public of $19.00 per share. As a result of the IPO, the Company received $220.6 million in net proceeds, after deducting underwriting discounts and commissions and offering costs of $19.8 million.

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Upon the closing of the IPO, 23,765,075 shares of outstanding convertible preferred stock were automatically converted into 23,765,075 shares of common stock with the related carrying value of $148.3 million reclassified to common stock and additional paid-in capital. In connection with the IPO, the Company amended and restated its amended and restated certificate of incorporation to change the authorized capital stock to 490,000,000 shares designated as common stock and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share.

Liquidity

Through December 31, 2020, the Company had received aggregate gross proceeds of $391.3 million from sales of its common stock, convertible preferred stock and issuance of convertible promissory notes since inception. The Company had $338.5 million of cash and cash equivalents at December 31, 2020, which management believes is sufficient to fund its operating expenses and capital expenditure requirements through the end of 2022.

Impact of COVID-19

The extent of the impact of the COVID-19 pandemic on the Company’s business, operations and development timelines and plans remains uncertain, and will depend on certain developments, including the duration of the outbreak and its impact on the Company’s development activities, planned clinical trial enrollment, future trial sites, CROs, third-party manufacturers, and other third parties with whom the Company does business, as well as its impact on regulatory authorities and the Company’s key scientific and management personnel. During 2020, although the Company modified its operations and practices due to the COVID-19 pandemic and to comply with federal, state and local requirements, its business, operations and development timelines were not material adversely affected. However, the extent to which the COVID-19 pandemic may affect the Company’s business, operations and development timelines and plans in the future, including the resulting impact on its expenditures and capital needs, remains uncertain.

2. Summary of Significant Accounting Policies

Use of Estimates

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Such estimates include the determination of useful lives for equipment, accruals of research and development expenses, accrual of research contract costs, and preferred and common stock and stock option valuations. On an ongoing basis, the Company evaluates its estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents are defined as short-term, highly liquid investments with original maturities of 90 days or less at the date of purchase. Cash deposits are all in reputable financial institutions in the United States and as of December 31, 2020 and 2019, cash and cash equivalents consisted of cash on deposit with U.S. banks denominated in U.S. dollars. Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. The Company invests its excess cash with large financial institutions. At times, the Company’s cash balances with individual banking institutions will exceed the limits insured by the Federal Deposit Insurance Corporation (“FDIC”); however, the Company has not experienced any losses on such deposits.

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The Company’s future results of operations involve a number of other risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s current and potential future product candidates, uncertainty of market acceptance of the Company’s product candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals or sole-source suppliers.

The Company’s product candidates require approvals from the U.S. Food and Drug Administration and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any product candidates will receive the necessary approvals. If the Company were denied approval, approval was delayed or the Company was unable to maintain approval for any product candidate, it could have a materially adverse impact on the Company.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three levels of inputs that may be used to measure fair value are defined below:

● Level 1 — Quoted prices in active markets for identical assets or liabilities.

The carrying values of the Company’s accounts payable and other current liabilities approximate their fair values due to the short-term nature of these assets and liabilities.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop product candidates, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees and external costs including fees paid to consultants and clinical research organizations (“CROs”), in connection with nonclinical studies and clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation and analysis. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed.

Costs incurred in obtaining technology licenses are charged immediately to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future uses.

Research Contract Costs and Accruals

The Company has from time to time entered into various research and development and other agreements with commercial firms, researchers, universities and others for provisions of goods and services. These agreements

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are generally cancelable, and the related costs are recorded as research and development expenses as incurred.

The Company records accruals for estimated ongoing research and development costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation, and insignificant for all periods presented. Depreciation is computed using the straight-line method over the estimated useful lives. The useful lives of equipment are as follows:

​

​ ​ ​

​ Estimated Useful Lives

Lab equipment 5 – 7 years

Computer equipment 5 years

​

When assets are sold or retired, the cost and related accumulated depreciation are removed from the balance sheets, with any resulting gain or loss recorded in operating expenses in the statements of operations and comprehensive loss. Costs of repairs and maintenance are expensed as incurred.

Income Taxes

Income taxes are computed using the asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements. In estimating future tax consequences, the Company considers all expected future events other than enactment of changes in tax laws or rates. A valuation allowance is recorded, if necessary, to reduce net deferred tax assets to their realizable values if management does not believe it is more likely than not that the net deferred tax assets will be realized. As of December 31, 2020 and 2019, the Company has recorded full valuation allowance against its net deferred tax assets.

The Company had no unrecognized tax benefits for the years ended December 31, 2020 and 2019, respectively. With few exceptions, the Company is no longer subject to U.S. Federal, state, and local tax examinations by tax authorities for years before 2017, although carry-forward attributes that were generated prior to 2020 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period (see Note 9, “Income Taxes”).

The Company’s policy is to recognize interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 2020 and 2019, the Company had no accrued interest or penalties related to uncertain tax positions.

Common Stock Valuation

Due to the absence of an active market for the Company’s common stock prior to its IPO, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants

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Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. In determining the fair value of options granted prior to the IPO, the Company estimated fair value of its common stock as of each measurement date. Significant changes to the key assumptions underlying the factors used could have resulted in different fair values of common stock at each valuation date.

Follow the Company’s initial public offering, the fair market value of its common stock is determined based on the closing price of its common stock as reported by the Nasdaq Global Select Market on the date of grant.

Comprehensive Loss

There was no difference between net loss and comprehensive loss for each of the periods presented in the accompanying financial statements.

Stock-Based Compensation

All stock-based compensation cost, including grants of stock options and restricted stock awards issued under the Company’s equity incentive plans and employee stock purchase plan (“ESPP”), is measured at the grant date based on the estimated fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, which is generally the vesting period. The Company recognizes stock compensation in accordance with ASC 718, Compensation — Stock Compensation (“ASC 718”). The Company’s determination of the fair value of stock options with time-based vesting on the date of grant utilizes the Black-Scholes option-pricing model. The Company estimates the expected contractual lives using historical data, volatility using stock prices of peer companies, risk-free rates using the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term, and dividend yield using the Company’s expectations and historical data. The Company uses the simplified method to calculate the expected term of employee stock option grants. Under the simplified method, the expected term is estimated to be the mid-point between the vesting date and the contractual term of the option. For awards with graded vesting, in which specified tranches of the options vest on different dates, the Company uses a single weighted average expected life to value the entire award, which is equal to the average of the weighted average vesting period of the award and the contractual term of the award. Equity instruments issued to nonemployees are recorded at their fair value on the grant date and without subsequent remeasurement. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest, including awards with graded vesting. As part of the requirements of ASC 718, the Company has elected to account for forfeitures of stock option grants as they occur.

Net Loss Per Common Share

The Company follows the two-class method when computing net loss per common share as the Company has issued shares that meet the definition of participating securities. The two-class method determines net loss per common share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Basic net loss per common share is computed by dividing the net loss per common share by the weighted average number of common shares outstanding for the period without consideration of common stock equivalents. Diluted net loss per common share is computed by adjusting net loss to reallocate undistributed earnings based on the potential impact of dilutive securities, and by dividing the diluted net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, contingently issuable common stock related to the ESPP, and convertible preferred stock are considered potential dilutive common shares.

The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends but do not contractually require the holders of such shares to participate in losses of the Company.

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Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such securities. In periods in which the Company reported a net loss, diluted net loss per common share is the same as basic net loss per common share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for the years ended December 31, 2020, 2019 and 2018.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB under its ASC or other standard setting bodies.

The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”). Under the JOBS Act, companies have extended transition periods available for complying with new or revised accounting standards. The Company has elected to use this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies. Where allowable, the Company has early adopted certain standards as described below.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2019-12, “Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and clarifies and amends existing guidance to improve consistent application. The standard will be effective for the Company beginning in the first quarter of fiscal year beginning after December 15, 2021, with early adoption permitted. The amendments that are related to changes in ownership of foreign equity method investments or foreign subsidiaries are to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments that are related to franchise taxes that are partially based on income are to be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments under this ASU are to be applied on a prospective basis. The Company has early adopted the guidance effective January 1, 2020. The adoption of this new standard did not have a material impact on the Company’s financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosure requirements for fair value measurements. The Company adopted this standard on January 1, 2020. The adoption of ASU 2018-13 had no impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. In July 2018, the FASB issued ASU No. 2018-11, Leases: Targeted Improvements, or ASU No. 2018-11. In issuing ASU No. 2018-11, the FASB is permitting another transition method for ASU 2016-02, which allows the transition to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. For non-public entities, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2021, including interim periods within those fiscal years, and early adoption is permitted. The Company expects to adopt this new guidance under ASU 2016-02 effective

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January 1, 2022 and is in the process of completing its review of its existing lease agreements under Topic 842. The Company anticipates recording a right-of-use asset and lease liability to account for its facility leases and will record a cumulative-effect adjustment in the period of adoption.

In August 2020, the FASB issued ASU 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40). The new standard reduces the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. The standard also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity. For non-public entities, ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2023, including interim periods within those fiscal years, and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company does not expect the adoption of ASU 2020-06 to have a material impact on its financial position, results of operations, or cash flows.

3. Prepaid Expenses and Other Current Assets

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

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Prepaid insurance ​ $ 1,663 ​ $ —

Prepaid clinical trial costs ​ 1,148 ​ —

Prepaid research contracts ​ ​ 432 ​ ​ —

Prepaid rent ​ ​ 196 ​ ​ —

​

​

​

​

4. Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31,

Accrued employee bonuses ​ $ 1,222 ​ $ —

Accrued R&D related costs ​ ​ 609 ​ ​ —

Early exercise of unvested options ​ ​ 578 ​ ​ —

Accrued professional fees ​ ​ 577 ​ ​ ​

Accrued payroll taxes ​ ​ 444 ​ ​ —

Accrued franchise tax ​ ​ 198 ​ ​ —

​

​

5. Convertible Notes

2020 Convertible Notes

On January 3, 2020 (“issuance date”), the Company issued convertible promissory notes (the “2020 Notes”) in the aggregate principal amount of $3.0 million. The 2020 Notes bore interest at a rate of 1.21% per annum,

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were unsecured and were due and payable, including accrued interest, on May 2, 2020 (“maturity date”). The Company was not permitted to prepay the outstanding principal and interest without the consent of the note holders. In the event of a default, all unpaid principal and accrued interest would become immediately due.

On the issuance date the Company determined that the conversion option associated with the 2020 Notes met the definition of a beneficial conversion feature (“BCF”) as the fair value of the underlying instrument at the time of issuance exceeded the contractual conversion price. The BCF was recognized at its aggregate intrinsic value of $1.1 million as a debt discount with a corresponding credit to additional paid-in capital in the Company’s balance sheet. The debt discount was amortized over the term of the 2020 Notes through the recognition of interest expense via the effective interest method.

On March 17, 2020 (the “settlement date”), the Company issued and sold 2,545,277 shares of Series B convertible preferred stock at $4.712 per share for gross proceeds of approximately $12.0 million (see Note 7, “Convertible Preferred Stock”). On the settlement date, the principal and accrued interest then outstanding under the 2020 Notes of $3.0 million were converted into 638,270 shares of Series B convertible preferred stock (“March 2020 conversion”).

On the settlement date, the unamortized debt discount on the 2020 Notes was $0.4 million and the intrinsic value of the BCF was $2.6 million representing an increase of $1.5 million from the issuance date of the 2020 Notes. The March 2020 conversion was accounted for as a debt extinguishment. However, as the note holders were previous investors of the Company, the increase in the intrinsic value of the BCF was deemed to be a capital contribution and therefore not income attributable to common stockholders, and accordingly, the Company recorded the $1.5 million gain on extinguishment of the debt within additional paid-in capital.

6. Convertible Preferred Stock

Upon the closing of the Company’s IPO, each then outstanding share of convertible preferred stock was converted into one share of common stock.

As of December 31, 2019, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 4,640,126 shares of Series A convertible preferred stock at par value of $0.0001 per share. In September 2020, the Company purchased and retired 181,503 shares of Series A convertible preferred stock from investors at a price of $11.063 per share, or approximately $2.0 million.

In September 2020, the Company purchased and retired 25,319 shares of Series A-1 convertible preferred stock at a price of $11.063 per share or approximately $0.3 million.

Series B Convertible Preferred Stock

On March 13, 2020, the Company filed its fourth amended and restated certificate of incorporation, which authorized the Company to sell and issue up to 26,627,219 shares of Series B convertible preferred stock with a par value of $0.0001 per share. On March 17, 2020, the Company issued and sold 2,545,277 shares of Series B convertible preferred stock at $4.712 per share for gross proceeds of approximately $12.0 million. At the same time, the Company issued an additional 638,270 shares of Series B convertible preferred stock in conjunction with its conversion of the 2020 Notes (see Note 6, “Convertible Notes” “2020 Convertible Notes”), for a total of 3,183,547 shares of Series B convertible preferred stock issued on March 17, 2020. On March 20, 2020, the Company issued and sold 3,183,550 shares of Series B convertible preferred stock at $4.712 per share for gross proceeds of approximately $15.0 million. On May 28, 2020, the Company filed an amendment to its fourth amended and restated certificate of incorporation, which authorized the Company to sell and issue up to 32,781,066 shares of Series B convertible preferred stock. On June 1, 2020, the Company issued and sold 5,072,450 shares of Series B convertible preferred stock at $4.712 per share for gross proceeds of approximately $23.9 million (collectively, “Series B convertible preferred stock issuances”). In total, 11,439,547 shares of Series B convertible preferred stock were issued for gross cash proceeds of approximately $50.9 million.

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The Company incurred issuance costs in connection with the sale and issuance of the Series B convertible preferred stock of $0.3 million.

On September 3, 2020, the Company filed a second amendment to its fourth amended and restated certificate of incorporation. The amendment had the impact of reducing the authorized number of shares of Series B convertible preferred stock to 31,893,492. Upon the closing of the IPO, all outstanding shares of convertible preferred stock were automatically converted into shares of the Company’s common stock.

Series C Convertible Preferred Stock

On September 29, 2020, the Company filed its fifth amended and restated certificate of incorporation, which authorized the sale of 22,100,000 shares of Series C convertible preferred stock. On September 30, 2020, the Company issued and sold 7,904,135 shares of Series C convertible preferred stock at $11.063 per share for gross proceeds of approximately $87.4 million. The Company incurred issuance costs in connection with the sale and issuance of the Series C convertible preferred stock of $1.7 million.

The Series A convertible preferred stock, Series A-1 convertible preferred stock, Series B convertible preferred stock and Series C convertible preferred stock are collectively referred to as “convertible preferred stock”. On November 23, 2020, the Company filed the seventh amended and restated certificate of incorporation in connection with the closing of the IPO, which authorizes the Company to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share. As of December 31, 2020, the Company did not have any preferred stock issued and outstanding.

As of December 31, 2019, convertible preferred stock consisted of the following (in thousands, except share amounts):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ Convertible ​ ​ ​ ​ ​ ​ ​ Common

​ ​ Convertible ​ Preferred ​ ​ ​ ​ ​ ​ ​ Stock

​ ​ Preferred ​ stock Issued ​ ​ ​ ​ ​ ​ ​ Issuable

​ ​ stock ​ and ​ Carrying ​ Liquidation ​ Upon

​ Authorized Outstanding Value Preference Conversion​

​

​

7. Common Stock

As of each of the balance sheet dates below, the Company had reserved shares of common stock for issuance in connection with the following:

​

​ ​ ​ ​ ​ ​ ​

​ ​ December 31, ​ December 31,

Conversion of outstanding shares of convertible preferred stock ​ — ​ 4,628,215

Options outstanding under the 2020 Equity Incentive Plan ​ ​ 2,144,891 ​ ​ —

Shares available for future grant under the 2014 Stock Plan ​ ​ — ​ ​ 394,548

Available for the 2020 Employee Stock Purchase Plan ​ ​ 430,416 ​ ​ —

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8. Stock-Based Compensation

In 2014, the Company’s Board of Directors and stockholders approved and adopted the 2014 Stock Plan (the “2014 Plan”). The 2014 Plan was intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2014 Plan permitted the grant of options and restricted stock awards (including restricted stock purchase rights and restricted stock bonus awards). The maximum aggregate number of shares that may be subject to awards and sold under the 2014 Plan as of December 31, 2019 was 717,360 shares. In March 2020, the Company’s Board of Directors and stockholders increased the number of shares under the 2014 Plan to 2,331,420 shares. In September 2020, the Company’s Board of Directors and stockholders approved additional increases under the 2014 Plan to allow for 4,124,820 shares and subsequently 4,842,180 shares. The shares may be authorized but unissued, or reacquired common stock. The exercise price for each option shall be established in the discretion of the Board; provided, however, that (i) the exercise price per share for an option shall be no less than the fair market value of a share of common stock on the effective date of the grant of the option and (ii) no incentive stock option granted to a ten percent stockholder shall have an exercise price per share less than 110% of the fair market value of a share of common stock on the effective date of the grant of the option. Specific vesting for stock options is service related and determined in each award agreement, where stock options are fully vested at the grant date or follow a graded vesting schedule. Options granted under the Plan generally expire ten years after the date of grant. During the year ended December 31, 2020, the Company granted to certain directors, employees, and consultants options to purchase 2,555,252 shares of common stock pursuant to the 2014 Plan at exercise prices ranging from $0.390 per share to $4.824 per share. The 2014 Plan was terminated on the date the 2020 Equity Incentive Plan (the “2020 Plan”), which is described below, became effective, and no additional awards will be made pursuant to the 2014 Plan. However, any outstanding awards granted under the 2014 Plan will remain outstanding, subject to the terms of the 2014 Plan and award agreements, until such outstanding options are exercised or until any awards terminate or expire by their terms. At December 31, 2020 and 2019, 0 shares and 394,548 shares, respectively, were available for future grants, under the 2014 Plan.

In 2020, the Company’s Board of Directors and stockholders approved and adopted the 2020 Plan. The 2020 Plan is intended to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The maximum number of shares of common stock that may be issued under the 2020 Plan will not exceed 6,494,510 shares of the Company’s common stock, which is the sum of (i) 2,152,080 new shares, plus (ii) an additional number of shares not to exceed 4,342,430 shares, consisting of any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the Company’s 2014 Plan that, on or after the 2020 Plan becomes effective, terminate or expire prior to exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2020 Plan automatically increases on January 1 of each year for a period of ten years, beginning on January 1, 2021 and continuing through January 1, 2030, in an amount equal to the lesser of (1) 5% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year, or (2) a lesser number of shares determined by the Company’s board of directors no later than December 31 of the immediately preceding year. The maximum number of shares of the common stock that may be issued on the exercise of incentive stock options under the 2020 Plan is 19,483,530 shares. The 2020 Plan permits the grant of options restricted stock awards, stock appreciation rights, restricted stock unit awards, performance awards, and other awards.

The exercise price for each option and stock appreciation right shall be established in the discretion of the Board, provided that the exercise price of a stock option generally will not be less than 100% of the fair market value of the Company’s common stock on the date of grant. Specific vesting for stock options and stock appreciation rights is service related and determined in each award agreement, where stock options and stock

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appreciation rights are fully vested at the grant date or follow a graded vesting schedule. Stock options and stock appreciation rights granted under the Plan generally expire ten years after the date of grant.

During the year ended December 31, 2020, the Company granted to certain directors, employees, and consultants options to purchase 2,144,891 shares of common stock pursuant to the 2020 Plan at an exercise price of $19.000 per share. At December 31, 2020 and 2019, 7,189 shares and 0 shares, respectively, were available for future grants, under the 2020 Plan.

Stock Option Valuation

The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company lacks company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. For options with service- based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is 0% since the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

The assumptions that the Company used to determine the estimated grant-date fair value of stock options granted to employees and directors under the 2020 Plan were as follows, presented as a weighted average:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Weighted average risk-free interest rate ​ 0.44% ​ * ​ *

Expected term (in years) ​ ​ 5.95 ​ ​ * ​ ​ *

Expected volatility ​ ​ 77.13% ​ ​ * ​ ​ *

Expected dividend yield — ​ ​ * ​ ​ *

*There were no stock options granted during the period.

Stock Option Activity

The following table summarizes the stock option activity under the 2014 Plan and the 2020 Plan:

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​

​ ​ ​ ​ Weighted ​ Average ​ ​ ​

​ ​ ​ ​ Average ​ Remaining ​ ​ ​

​ ​ Number of ​ Exercise ​ Contractual ​ Aggregate

​ ​ Shares ​ ​ Price ​ Term ​ Intrinsic Value

​ ​ ​ ​ ​ ​ (in years) ​ (in thousands)

Forfeited ​ — ​ ​ — ​ — ​ ​ —

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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The weighted-average grant-date fair value per share of options granted during the year ended December 31, 2020, 2019, and 2018 was $7.26, $0, and $0, respectively. For the years ended December 2020, 2019, and 2018, there were 426,739, 2,941, and 8,878 shares vested, respectively. The weighted-average grant date fair value per share of options vested during the year ended December 31, 2020 was $3.87. The total fair value of options vested during the year ended December 31, 2020, 2019, and 2018 was $1.7 million, $1,000, and $1,000, respectively. The aggregate intrinsic value of options exercised was $0.1 million, $0, and $0 for the years ended December 2020, 2019, and 2018, respectively.

As of December 31, 2020, the total unrecognized compensation expense related to unvested options was $31.3 million, which the Company expects to recognize over an estimated weighted average period of 3.2 years.

Early Exercise of Stock Options

In September 2020, one employee and one non-employee paid $0.6 million to early exercise 135,525 options with exercise prices ranging from $4.406 per share to $4.824 per share. As of December 31, 2020, 9,319 of such shares had vested with the remaining shares vesting over their respective terms. The terms of the 2014 Plan permit certain option holders to exercise options before their options are vested, subject to certain limitations. The early exercised options are subject to the same vesting provisions in the original stock option awards. Shares issued as a result of early exercise that have not vested are subject to repurchase by the Company upon termination of the purchaser’s employment, at the price paid by the purchaser. Such shares are not deemed to be outstanding for accounting purposes until they vest and are therefore excluded from shares outstanding and from basic and diluted net loss per share until the repurchase right lapses and the shares are no longer subject to the repurchase feature. A liability is recognized related to the cash proceeds of the unvested options and is reclassified into common stock and additional paid-in capital as the shares vest and the repurchase right lapses. Accordingly, the Company has recorded the unvested portion of the exercise proceeds of $0.6 million in other current liabilities as of December 31, 2020.

Restricted Stock Awards

In June 2020, the Company granted to certain employees 789,095 shares of restricted common stock (the “RSAs”) under the 2014 Plan as consideration for services with a deemed value of $2.40 per share, or $1.9 million. The following table summarizes the restricted stock activity under the Plan during the year ended December 31, 2020:

​

​ ​ ​ ​ ​ ​ ​

​ ​ ​ Number of Shares ​ Grant Date Fair Value

Unvested restricted stock as of December 31, 2019 ​ — $ —

Forfeited ​ ​ — ​ ​ —

​

The total grant date fair value of the RSAs vested during the year ended December 31, 2020, was $0.1 million. As of December 31, 2020, the total unrecognized compensation expense related to unvested RSAs was $1.6 million, which the Company expects to recognize over an estimated weighted average period of 3.5 years.

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Stock-Based Compensation Expense

Stock-based compensation expense related to awards granted under the 2014 Plan and the 2020 Plan was classified in the statements of operations and comprehensive loss as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Research and development expenses $ 1,970 $ — $ 1

General and administrative 1,108 ​ ​ — ​ ​ —

2020 Employee Stock Purchase Plan

In 2020, the Company’s board of directors and stockholders approved and adopted the 2020 Employee Stock Purchase Plan (the “ESPP”). The ESPP became effective immediately prior to the date of the underwriting agreement related to the IPO. The ESPP permits eligible employees who elect to participate in an offering under the ESPP to have up to 15% of their eligible earnings withheld, subject to certain limitations, to purchase shares of common stock pursuant to the ESPP. The price of the common stock purchased under the ESPP is equal to the lesser of (i) 85% of the fair market value of a share of the Company’s common stock on the first day of an offering; or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase. Each offering period is not to exceed 27 months and will include one or more purchase periods (each a “Purchase Period”) as approved by the Company’s board of directors in the offering. The current offering period will consist of two (2) six month purchase periods (each a “Purchase Period”) during which payroll deductions of the participants are accumulated under the ESPP. The last business day of each Purchase Period is referred to as the “Purchase Date.” The first Purchase Period commenced on November 18, 2020 with a purchase date of May 15, 2021. The second Purchase Period will commence on May 16, 2021 and have a purchase date of November 15, 2021. A total of 430,416 shares of common stock were initially reserved for issuance pursuant to the ESPP.

The ESPP is a compensatory plan as defined by the authoritative guidance for stock-based compensation. The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock offered under the ESPP. Stock-based compensation expense related to the ESPP was $30 thousand for the year ended December 31, 2020.

9. Income Taxes

The reconciliation of the Federal statutory income tax provision to the Company’s effective income tax provision is as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ ​ December 31,

Federal statutory income tax ​ $ 4,760 ​ $ 906

State income taxes, net of federal tax benefit ​ (1) ​ 300

Other permanent items ​ (135) ​ (3)

Other deferred items ​ ​ 13 ​ ​ —

Provision for income taxes ​ $ — ​ $ —

​

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Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred income tax assets and liabilities at December 31, 2020 and 2019 were comprised of the following (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ As of December 31,

Deferred tax assets: ​ ​

Net operating loss carryforwards ​ $ 6,168 ​ $ 2,706

Equity compensation ​ 500 ​ 6

Other ​ ​ 578 ​ ​ —

Total deferred tax assets ​ $ 7,246 ​ $ 2,712

Deferred tax liabilities: ​ ​

Fixed assets ​ $ (15) ​ $ (4)

Total deferred tax liabilities ​ ​ (15) ​ ​ (4)

Valuation allowance ​ ​ (7,231) ​ ​ (2,708)

Net deferred tax assets ​ $ — ​ $ —

​

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical operating results and the uncertainty of the economic conditions, the Company has recorded a valuation allowance of $7.2 million and $2.7 million at December 31, 2020 and 2019, respectively. The change in the valuation allowance for the year end December 31, 2020 was an increase of $4.5 million.

At December 31, 2020 and 2019, the Company had Federal net operating losses (NOLs) of approximately $26.1 million and $9.7 million, and state NOLs of $9.8 million and $9.7 million, respectively. As a result of the Tax Act, as modified by the CARES Act, for U.S. income tax purposes, NOLs generated in tax years beginning before January 1, 2018 can still be carried forward for up to 20 years, but net operating losses generated for tax years beginning after December 31, 2017 carryforward indefinitely and can be used to offset taxable income, but the deductibility of such Federal NOLs may be limited to 80% of current year taxable income for tax years beginning on or after December 31, 2020. Of the total Federal net operating loss of $26.1 million, $3.3 million will begin to expire in 2032 and $22.8 million will not expire. The state NOL carryover of $9.8 million will begin to expire in 2032.

Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an ownership change analysis pursuant to IRC Section 382. If ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of remaining tax attribute carryforwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company’s deferred tax assets associated with such tax attributes could be significantly reduced upon realization of an ownership change within the meaning of IRC Section 382 that has occurred or may occur in the future. Any adjustment to the Company’s tax attributes as a result of an ownership change will result in a corresponding decrease to the valuation allowance recorded against the Company’s deferred tax assets.

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The Company’s valuation allowance increased during the years ended December 31, 2020 and 2019 due primarily to the generation of net operating losses, as follows (in thousands):

​

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended

​ December 31,

Valuation allowance at beginning of year ​ $ 2,708 ​ $ 1,505

Increase recorded to provision for income taxes ​ 4,523 ​ 1,203

Valuation allowance at end of year ​ $ 7,231 ​ $ 2,708

​

The Company has not incurred any material interest or penalties as of the current reporting date with respect to income tax matters. The Company does not expect that there will be unrecognized tax benefits within 12 months of the reporting date. The Company is subject to U.S. Federal income tax as well as income tax in California. The Company’s Federal returns for tax years 2017 through 2019 remain open to examination; the Company’s state returns remain subject to examination for tax years 2017 through 2019. Carryforward attributes that were generated in years where the statute of limitations is closed may still be adjusted upon examination by the Internal Revenue Service or other respective tax authority.

The unrecognized tax benefit amounts are not reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance.

10. Net Loss Per Common Share

Net Loss Per Common Share

Basic and diluted net loss per common share was calculated as follows (in thousands, except share and per share amounts):

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​

Denominator: ​ ​ ​

​

The Company’s potentially dilutive securities, which include unvested restricted common stock, stock options, common stock contingently issuable under the ESPP, and convertible preferred stock, have been excluded from the computation of diluted net loss per common share as the effect would be to reduce the net loss per common share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per common share 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

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net loss per common share for the periods indicated because including them would have had an anti-dilutive effect:

​

​ ​ ​ ​ ​ ​ ​

​ ​ Years Ended December 31,

Unvested restricted common stock 735,294 — —