ACUMEN PHARMACEUTICALS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year endedDecember 31, 2020 and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our final prospectus datedJune 30, 2021 and filed with theSecurities and Exchange Commission (the "SEC"), onJuly 2, 2021 , pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended (the "Securities Act"). This discussion, particularly information with respect to our future results of operations or financial condition, business strategy, plans and objectives of management for future operations and the potential impact that the ongoing COVID-19 pandemic may have on our business, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Statements" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. Overview We are a clinical-stage biopharmaceutical company developing a novel disease-modifying approach to target what we believe to be a key underlying cause of Alzheimer's disease (AD). Alzheimer's disease is a progressive neurodegenerative disease of the brain that leads to loss of memory and cognitive functions and ultimately results in death. Our scientific founders pioneered research on soluble amyloid-beta oligomers ("AßOs"), globular assemblies of the amyloid-beta ("Aß") peptide that are distinct from other forms of Aß and amyloid. We are currently focused on advancing a targeted immunotherapy drug candidate, ACU193, through clinical proof of mechanism in early AD patients. We initiated our Phase 1 clinical trial of ACU193 in the second quarter of 2021. We were incorporated in 1996 and were party to an exclusive license and research collaboration with Merck in 2003. Although we acquired the exclusive rights to ACU193 from Merck in 2011 following Merck's strategic decision to focus its AD development efforts on a different product candidate, we did not recommence meaningful operations until we completed our first institutional fundraising in 2018. Since 2018, we have devoted substantially all of our efforts to organizing and staffing our company, business planning, raising capital, conducting discovery, research and development activities, and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through the sale of our convertible preferred stock and common stock, the issuance of notes, grant revenue and during our collaboration with Merck, certain payments received under our collaboration agreement. From inception throughJune 30, 2021 , we raised an aggregate of$99.4 million of gross proceeds through the issuance of convertible preferred stock, as well as sales of common stock and issuance of notes that were converted to preferred stock, with the vast majority of this capital being raised since our Series A-1 convertible preferred stock, or Series A-1, financing in 2018. In 2020, we conducted a Series B convertible preferred stock, or Series B, financing, with the funding to occur in two tranches. We closed the first tranche of the Series B financing inNovember 2020 , selling 11,862,043 shares of Series B at$3.80 per share for gross proceeds of$45.1 million . OnJune 9, 2021 , our board of directors and the holders of more than 67% of the outstanding shares of Series B preferred stock elected to waive the achievement of the milestone event. OnJune 17, 2021 , we closed the second tranche of our Series B preferred stock financing, pursuant to which certain of our investors funded an additional$30.0 million . We have incurred net losses and negative cash flows from operations since our inception. Our net loss was$88.4 million and$7.3 million for the six months endedJune 30, 2021 and the year endedDecember 31, 2020 , respectively. As ofJune 30, 2021 , we had an accumulated deficit of$115.3 million . Our net losses and cash flows from operations may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of nonclinical studies, clinical trials and our expenditures on other research and development activities. We expect our expenses and operating losses will increase substantially for the foreseeable future as we advance ACU193 into clinical trials, seek to expand our product candidate portfolio through developing additional product candidates, grow our clinical, regulatory and quality capabilities, and incur additional costs associated with operating as a public 19
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Table of Contents company. It is likely that we will seek third-party collaborators for the future commercialization of ACU193 or any other product candidate that is approved for marketing. However, we may seek to commercialize our products at our own expense, which would require us to incur significant additional expenses for marketing, sales, manufacturing and distribution. We will not generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for our product candidates. In addition, if we obtain regulatory approval for our product candidates and do not enter into a third-party commercialization partnership, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings and debt financings or other sources, such as potential collaboration agreements, strategic alliances and licensing arrangements. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on acceptable terms, or at all. Our failure to raise capital or enter into such agreements as, and when needed, could have a material adverse effect on our business, results of operations and financial condition. As ofJune 30, 2021 , we had cash and cash equivalents of$68.8 million . InJuly 2021 , we raised an additional$168.6 million in net proceeds from our IPO. Based on our current operating plan, we expect that the net proceeds from our IPO, together with our existing cash and cash equivalents as ofJune 30, 2021 , will be sufficient to enable us to fund our operating expenses and capital expenditure requirements at least through 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See "-Liquidity and Capital Resources." COVID-19 Business Update InMarch 2020 , theWorld Health Organization declared COVID-19 a global pandemic andthe United States declared a national emergency with respect to COVID-19. In response to the COVID-19 pandemic, a number of governmental orders and other public health guidance measures have been implemented across much ofthe United States , including in the locations of our office, clinical trial sites and third parties on whom we rely. We implemented a work-from-home policy allowing employees and consultantswho can work from home to do so. Business travel has been limited, and online video and teleconference technology is used to meet virtually rather than in person. We have taken measures to secure our research and development activities, while work in laboratories by our partners has been organized to reduce risk of COVID-19 transmission. Although to date, our business has not been materially impacted by COVID-19, it is possible that our clinical development timelines could be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations. Components of Results of Operations Grants and Other Revenue To date, we have not generated any revenues from the commercial sale of any products, and we do not expect to generate revenues from the commercial sale of any products for the foreseeable future, if ever. For the years endedDecember 31, 2019 and 2020, we derived revenue from a grant awarded by theNational Institutes of Health inSeptember 2017 and renewed annually in 2018 through 2020. The grant provides us with funding to support the completion of preclinical chemistry, manufacturing and control studies, toxicology and pharmacokinetic studies, submit an IND dossier to the FDA, and then conduct first in human clinical safety trials for ACU193. We recognize revenue from this grant when the related costs are incurred and the right to payment is realized. As ofDecember 31, 2020 , we had been awarded a total of$3.9 million under this grant, all of which has been recognized as revenue prior to or during the years endedDecember 31, 2019 and 2020. 20
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Table of Contents
Operating Expenses
Our operating expenses consist of (i) research and development expenses and
(ii) general and administrative expenses.
Research and Development Expenses
Research and development costs primarily consist of direct costs associated with
consultants and materials, biologic storage, third party, contract research
organization costs and contract development and manufacturing expenses, salaries
and other personnel-related expenses. Research and development costs are
expensed as incurred. More specifically, these costs include:
• costs of funding research performed by third parties that conduct
research and development and nonclinical and clinical activities on
our behalf;
• costs of manufacturing drug supply and drug product;
• costs of conducting nonclinical studies and clinical trials of our
product candidates;
• consulting and professional fees related to research and development
activities, including equity-based compensation to
non-employees;
• costs related to compliance with clinical regulatory requirements; and
• employee-related expenses, including salaries, benefits and
stock-based compensation expense for our research and development
personnel.
Costs for certain activities are recognized based on an evaluation of the
progress to completion of specific tasks using data such as information provided
to us by our vendors and analyzing the progress of our nonclinical and clinical
studies or other services performed. Significant judgment and estimates are made
in determining the accrued expense balances at the end of any reporting period.
Advance payments that we make for goods or services to be received in the future
for use in 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, or until it is no longer expected that the goods
will be delivered or the services rendered.
As we currently only have one product candidate, ACU193, in development, we do
not separately track expenses by program. Further, as we have historically
relied exclusively on consultants for research and development activities, we
did not have any material internal research and development costs for the year
ended
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Table of Contents approval for, any of our current or future product candidates. This is due to the numerous risks and uncertainties associated with product development and commercialization, including the following:
• our ability to add and retain key research and development personnel;
• our ability to successfully develop, obtain regulatory approval for,
and then successfully commercialize our product candidates;
• our successful enrollment in and completion of clinical trials,
including our ability to generate positive data from any such trials;
• the size and cost of any future clinical trials for existing or future
product candidates in our pipeline;
• the costs associated with the development of any additional programs
we identify
in-house
or acquire through collaborations and other arrangements and the
success of such collaborations;
• the terms and timing of any additional collaborations, license or
other arrangement, including the timing of any payments thereunder;
• our ability to establish and maintain agreements and operate with
third-party manufacturers for clinical supply for our clinical trials
and commercial manufacturing, if any of our product candidates are
approved;
• costs related to manufacturing of our product candidates or to account
for any future changes in our manufacturing plans;
• our ability to obtain and maintain patents, trade secret and other
intellectual property protection and regulatory exclusivity for our
product candidates, both in the United States and internationally;
• our ability to obtain and maintain third-party insurance coverage and
adequate reimbursement for our product candidates, if and when
approved;
• the acceptance of our product candidates, if approved, by patients,
the medical community and third-party payors;
• effectively competing with other products if our product candidates
are approved;
• the impact of any business interruptions to our operations, including
the timing and enrollment of patients in our planned clinical trials,
or to those of our manufacturers, suppliers, or other vendors
resulting from the
COVID-19
pandemic or similar public health crisis; and
• our ability to maintain a continued acceptable safety profile for our
therapies following approval.
A change in the outcome of any of these variables with respect to the
development of our product candidates could significantly change the costs and
timing associated with the development of that product candidate. We may never
succeed in obtaining regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of management and business
consultants and other related costs, including stock-based compensation. General
and administrative expenses also include board of directors' expenses and
professional fees for legal, patent, consulting, accounting, auditing, tax
services and insurance costs.
We expect that our general and administrative expenses will increase as our
organization and headcount needed in the future grows to support continued
research and development activities and potential commercialization of our
product candidates. These increases will likely include increased costs related
to the hiring of additional personnel and fees to outside consultants, attorneys
and accountants, among other expenses. Additionally, we expect to incur
increased expenses associated with being a public company, including costs of
additional personnel, accounting, audit, legal, regulatory
and tax-related services
associated with maintaining compliance with exchange listing and SEC
requirements, director and officer insurance costs, and investor and public
relations costs.
Other Income (Expense)
Other income (expense) primarily includes changes in fair value of the
Series A-1 warrant
liability and the Series B tranche rights, other income and interest income,
net.
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Table of Contents The Series A-1 warrant was issued inOctober 2018 in connection with the Series A-1 preferred financing. The warrant liability met the definition of a freestanding financial instrument, as it was legally detachable and separately exercisable from the initial closing of the Series A-1 convertible preferred stock. The warrant liability was initially recorded at fair value as a liability on our balance sheet and was subsequently re-measured at fair value at the end of each reporting period and upon its exercise onJune 22, 2021 . The changes in the fair value were recognized as a component of other income (expense). Included in the terms of the Series B stock purchase agreement inNovember 2020 were tranche rights granted to the holders of the Series B convertible preferred stock. The tranche rights provide the Series B holders with the right to purchase additional shares of Series B at$3.80 per share in an additional tranche after the achievement of a certain milestone event. OnJune 17, 2021 we closed the second tranche of our Series B preferred stock financing upon the election of a majority of the Series B investors, pursuant to which certain of our investors funded an additional$30.0 million . The tranche rights met the definition of a freestanding financial instrument as the tranche rights were legally detachable and separately exercisable from the Series B convertible preferred stock. The tranche rights were initially recorded at fair value as a liability on our balance sheet. The tranche rights were subsequently re-measured at fair value at the end of each reporting period and at settlement. Changes in the fair value were recognized as a component of other income (expense). Results of Operations Comparison of the Three Months EndedJune 30, 2021 and 2020 The following table summarizes our results of operations for the three months endedJune 30, 2021 and 2020 (in thousands): Three Months Ended June 30, 2021 2020 Change Grant and other revenue $ -$ 151 $ (151 ) Costs and operating expenses Research and development 2,254 1,927 327 General and administrative 1,187 259 928 Total operating expenses 3,441 2,186 1,255 Loss from operations (3,441 ) (2,035 ) (1,406 ) Other income (expense) Interest income 4 - 4 Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability (57,940 ) - (57,940 ) Other income 19 - 19 Total other income (expense) (57,917 ) - (57,917 ) Net loss$ (61,358 ) $ (2,035 ) $ (59,323 ) Grant and Other Revenue Revenue related to ourNIH grant was nil and$0.2 million for the three months endedJune 30, 2021 and 2020, respectively. Revenue under theNIH grant is recognized when the related costs were incurred and the right to payment was realized. Research and Development Expenses Research and development expenses were$2.3 million and$1.9 million for the three months endedJune 30, 2021 and 2020, respectively. The$0.3 million increase was primarily due to increases in costs for contract research organizations and personnel of$0.9 million and$0.5 million , respectively, net of decreases in costs for consulting and drug safety testing of$0.6 million and$0.5 million , respectively. General and Administrative Expenses General and administrative expenses were$1.2 million and$0.3 million for the three months endedJune 30, 2021 and 2020, respectively. The$0.9 million increase was primarily due to increased accounting expenses incurred of$0.4 million in anticipation of becoming a public company and increased personnel expenses of$0.4 million due to employees hired during the first three months of 2021. The remainder of the increase relates to increases for marketing and public relations costs and rent expense. 23
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Table of Contents Other Income (Expense) Increases in the fair value of the Series B tranche liability and the Series A-1 warrant liability of$54.6 million and$3.3 million , respectively, were primarily responsible for total other expense for the three months endedJune 30, 2021 . Other income (expense) was nil for the three months endedJune 30, 2020 . Comparison of the Six Months EndedJune 30, 2021 and 2020 The following table summarizes our results of operations for the six months endedJune 30, 2021 and 2020 (in thousands): Six Months Ended June 30, 2021 2020 Change Grant and other revenue $ -$ 377 $ (377 ) Costs and operating expenses Research and development 4,832 3,977 855 General and administrative 2,402 481 1,921 Total operating expenses 7,234 4,458 2,776 Loss from operations (7,234 ) (4,081 ) (3,153 ) Other income (expense) Interest income 8 1 7 Change in fair value of preferred stock tranche rights liability and preferred stock warrant liability (81,157 ) - (81,157 ) Other income 28 - 28 Total other income (expense) (81,121 ) 1 (81,122 ) Net loss$ (88,355 ) $ (4,080 ) $ (84,275 ) Grant and Other Revenue Revenue related to ourNIH grant was nil and$0.4 million for the three months endedJune 30, 2021 and 2020, respectively. Revenue under theNIH grant is recognized when the related costs were incurred and the right to payment was realized. Research and Development Expenses Research and development expenses were$4.8 million and$4.0 million for the six months endedJune 30, 2021 and 2020, respectively. The$0.8 million increase was primarily due to increases in costs for contract research organizations and personnel of$1.7 million and$1.0 million , respectively, net of decreases in costs for drug safety testing and consulting of$1.1 million and$0.5 million , respectively, and a$0.2 million decrease for materials. General and Administrative Expenses General and administrative expenses were$2.4 million and$0.5 million for the six months endedJune 30, 2021 and 2020, respectively. The$1.9 million increase was primarily due to increased accounting expenses incurred of$0.9 million in anticipation of becoming a public company, increased personnel expenses of$0.9 million due to employees hired during the first three months of 2021 and increased marketing and public relations expenses of$0.1 million . Other Income (Expense) Increases in the fair value of the Series B tranche liability and the Series A-1 warrant liability of$76.2 million and$5.0 million , respectively, were primarily responsible for total other expense for the six months endedJune 30, 2021 . Other income (expense) was de minimis for the six months endedJune 30, 2020 . 24
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Table of Contents Liquidity and Capital Resources Sources of Liquidity Since our inception up until the time of our IPO inJuly 2021 , we have funded our operations primarily through the sale of our convertible preferred stock and common stock, the issuance of notes, grant revenue and, during our collaboration with Merck, certain payments received under our collaboration agreement. We do not have any products approved for sale and have not generated any revenue from product sales. From inception throughJune 30, 2021 , we have raised an aggregate of$99.4 million of gross proceeds through the issuance of convertible preferred stock, as well as sales of common stock and issuance of notes that were converted to preferred stock, with the vast majority of this capital being raised since our Series A-1 financing in 2018. In 2020, we conducted a Series B financing, with the funding to occur in two tranches. We closed the first tranche of the Series B financing inNovember 2020 for gross proceeds of$45.1 million and the second tranche closed onJune 17, 2021 for gross proceeds of$30.0 million following the election of our board of directors and a majority of the Series B investors to waive the requirement for a certain milestone event for ACU193 to be achieved prior to funding the second tranche onJune 9, 2021 . As ofJune 30, 2021 , our cash and cash equivalents totaled$68.8 million . OnJuly 6, 2021 , we issued 9,999,999 shares of common stock in our IPO, and onJuly 8, 2021 , we issued an additional 1,499,999 shares of common stock that were purchased by the underwriters pursuant to the underwriters' option to purchase additional shares at the public offering price less underwriting discounts and commissions. The price to the public for each share was$16.00 . The aggregate net proceeds from our IPO, after underwriting discounts and commissions and other offering expenses of$15.4 million , were$168.6 million . Cash Flows The following table summarizes our sources and uses of cash (in thousands): Six Months EndedJune 30, 2021 2020
Net cash used in operating activities
(6 ) -
Net cash provided by financing activities 31,675 -
Net change in cash and cash equivalents
Operating Activities Net cash used in operating activities was$6.6 million and$3.3 million for the six months endedJune 30, 2021 and 2020, respectively. Net cash used in operating activities during the six months endedJune 30, 2021 was primarily due to our net loss of$88.4 million , which includes$81.2 million of expense related to the change in the fair values of the Series B tranche liability and the Series A-1 warrant liability, plus$1.1 million of cash used for prepaid expenses associated with research and development activities; partially offset by cash provided of$0.7 million for both accounts payable and accrued expenses and other current liabilities. Net cash used in operating activities during the six months endedJune 30, 2020 was primarily due to our net loss of$4.1 million , partially offset by$0.7 million of cash provided by changes in our operating assets and liabilities. Investing Activities Our cash used in investing activities for the six months endedJune 30, 2021 was de minimis and was associated with computer hardware acquired. 25
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Table of Contents Financing Activities Net cash provided by financing activities was$31.7 million and nil for the six months endedJune 30, 2021 and 2020, respectively. Net cash provided by financing activities during the six months endedJune 30, 2021 was primarily due to the closing of the second tranche of our Series B convertible preferred stock for gross proceeds of$30.0 million , plus a total of$1.9 million received from the exercise of a Series A-1 preferred warrant, as well as exercises of common stock warrants, partially offset by$0.2 million of costs that were paid in connection with our IPO. Funding Requirements We expect our expenses to increase in connection with our ongoing activities, particularly as we continue our research and development, conduct clinical trials, and seek marketing approval for our current and any of our future product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company following ourJuly 2021 IPO. It is likely that we will seek third-party collaborators for the future commercialization of ACU193 or any other product candidate that is approved for marketing. However, we may seek to commercialize our products at our own expense, which would require us to incur significant additional expenses for marketing, sales, manufacturing and distribution., which costs we may seek to offset through entry into collaboration agreements with third parties. As a result, we expect that we will need to obtain substantial additional funding in connection with our future operations. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts. Based on our current operating plan, we expect that the net proceeds from our IPO, together with our existing cash and cash equivalents as ofJune 30, 2021 , will be sufficient to enable us to fund our operating expenses and capital expenditure requirements at least through 2024. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including: • the scope, progress, results and costs of discovery, nonclinical development, laboratory testing and clinical trials for other potential product candidates we may develop, if any; • the costs, timing and outcome of regulatory review of our product candidates; • our ability to establish and maintain collaborations on favorable terms, if at all; • the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time; • the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; • the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; • the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; • our headcount growth and associated costs as we expand our business operations and our research and development activities; and • the costs of operating as a public company.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Any debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. 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.
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Table of Contents Off-Balance Sheet Arrangements During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined underSEC rules. Contractual Obligations As ofJune 30, 2021 , we have an operating lease obligation associated with a lease for our executive office space that totals less than$1,000 for the remainder of the lease term. This amount is due in equal monthly installments over the remaining lease term, which expires onAugust 31, 2021 . We have been subleasing space inIndiana sinceMarch 1, 2020 under a lease that expired onDecember 31, 2020 . We executed a new sublease for this space that was effectiveFebruary 1, 2021 . The term of the sublease is for 31 months, expiring onAugust 30, 2023 . We pay monthly rent of$12,719 and we are also allowing others to sublease a portion of the space from us for less than a one-year period. As ofJune 30, 2021 , the remaining aggregate minimum rent obligation over the remaining term was approximately$331,000 . As ofJune 30, 2021 , future minimum lease payments under lease agreements (including short-term leases) associated with our operations were as follows (in thousands):
Year ended
153
Year ended December 31, 2023 102
Total $ 332
We enter into contracts in the normal course of business with contract research
organizations ("CROs") and contract manufacturing organizations ("CMOs") for
clinical trials, nonclinical research studies and testing, manufacturing and
other services and products for operating purposes. These contracts do not
contain any minimum purchase commitments and are generally cancelable by us upon
prior notice of 30 days. Payments due upon cancelation consist only of payments
for services provided and expenses incurred up to the date of cancelation.
Critical Accounting Estimates and Policies
This management's discussion and analysis of our financial condition and results
of operations is 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 these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, and expenses
and the disclosure of contingent assets and liabilities in our financial
statements. In accordance with U.S. GAAP, we evaluate our estimates and
judgments on an ongoing basis, including those related to accrued expenses, the
preferred stock tranche and warrant liabilities and stock-based compensation. We
base our estimates on historical experience, known trends and events, and
various other factors that are believed to be 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. Actual results may differ from these estimates under different
assumptions or conditions.
We define our critical accounting policies as those accounting principles that
require us to make subjective estimates and judgments about matters that are
uncertain and are likely to have a material impact on our financial condition
and results of operations, as well as the specific manner in which we apply
those principles. While our significant accounting policies are more fully
described in Note 2 to our unaudited condensed financial statements located in
"Part I - Financial Information, Item 1. Financial Statements" in this Quarterly
Report on Form
10-Q.
There have been no significant changes to our critical accounting policies from
those described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations," included in our final prospectus dated June 30,
2021 , and filed with the SEC on July 2, 2021 pursuant to Rule 424(b)(4).
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Table of Contents Recent Accounting Pronouncements See Note 2 to our unaudited condensed financial statements located in "Part I - Financial Information, Item 1. Financial Statements" in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements. Emerging Growth Company and Smaller Reporting Company Status InApril 2012 , the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies. In addition, as an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include: • an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended; • reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; • exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and • an exemption from compliance with the requirements of thePublic Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor's report on financial statements. We may take advantage of these provisions until we no longer qualify as an emerging growth company. We will cease to qualify as an emerging growth company on the date that is the earliest of: (i)December 31, 2025 , (ii) the last day of the fiscal year in which we have more than$1.07 billion in total annual gross revenues, (iii) the date on which we are deemed to be a "large accelerated filer" under the rules of theSEC , which means the market value of our common stock that is held by non-affiliates exceeds$700 million as of the priorJune 30th , or (iv) the date on which we have issued more than$1.0 billion of non-convertible debt over the prior three-year period. We may choose to take advantage of some but not all of these reduced reporting burdens. We have taken advantage of certain reduced reporting requirements in this Quarterly Report on Form 10-Q and our other filings with theSEC . Accordingly, the information contained herein may be different than you might obtain from other public companies in which you hold equity interests. We are also a "smaller reporting company," meaning that the market value of our shares held by non-affiliates is less than$700 million and our annual revenue was less than$100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than$250 million or (ii) our annual revenue was less than$100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than$700 million . If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. 28
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