Notes To The Condensed Consolidated Financial Statements | F-6 |
F-1
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(unaudited)
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 40,638 | $ | 76,899 | ||||
Restricted cash | 305 | 305 | ||||||
Short-term investments | 4,987 | - | ||||||
Accounts receivable | 17 | 29 | ||||||
Prepaid expenses and other current assets | 5,328 | 2,500 | ||||||
Total current assets | 51,275 | 79,733 | ||||||
Property and equipment, net | 1,054 | 1,193 | ||||||
Operating lease right-of-use asset | 2,686 | - | ||||||
Prepaid expenses and other long-term assets | - | 11 | ||||||
Total assets | $ | 55,015 | $ | 80,937 | ||||
Liabilities, redeemable convertible preferred stock and stockholders' deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 4,309 | $ | 2,345 | ||||
Accrued expenses and other current liabilities | 5,044 | 5,477 | ||||||
Deferred revenue | 109 | 96 | ||||||
Deferred rent, short term | 9 | 123 | ||||||
Operating lease liability | 625 | - | ||||||
Note payable, short term | 625 | - | ||||||
Total current liabilities | 10,721 | 8,041 | ||||||
Note payable, long term | 14,213 | 4,784 | ||||||
Operating lease liability, net of current portion | 2,832 | - | ||||||
Corporate bond, net of bond discount | 1,735 | 1,638 | ||||||
Deferred rent, long term | - | 712 | ||||||
Total liabilities | 29,501 | 15,175 | ||||||
Commitments and contingencies | ||||||||
Redeemable convertible preferred stock, $0.0001 par value - authorized 41,785,202 shares: | ||||||||
Series A-1: designated, 4,000,000 shares; issued and outstanding shares, 4,000,000 at June 30, 2022 and December 31, 2021 (liquidation value of $4,000 at June 30, 2022 and December 31, 2021) | - | - | ||||||
Series A-2: designated 4,427,072 shares; issued and outstanding shares, 4,427,072 at June 30, 2022 and December 31, 2021 (liquidation value of $8,832 at June 30, 2022 and December 31, 2021) | 7,128 | 7,128 | ||||||
Series B: designated 7,341,485 shares; issued and outstanding shares, 7,341,485 at June 30, 2022 and December 31, 2021 (liquidation value of $42,360 at June 30, 2022 and December 31, 2021) | 41,854 | 41,854 | ||||||
Series C: designated 8,016,645 shares; issued and outstanding shares, 8,016,645 at June 30, 2022 and December 31, 2021 (liquidation value of $68,200 at June 30, 2022 and December 31, 2021) | 67,904 | 67,904 | ||||||
Series D: designated 18,000,000 shares; issued and outstanding shares, 13,843,858 at June 30, 2022 and December 31, 2021 (liquidation value of $183,668 and $174,990 at June 30, 2022 and December 31, 2021, respectively) | 183,668 | 174,990 | ||||||
Stockholders' deficit: | ||||||||
Common stock, $0.0001 par value: 55,000,000 shares authorized at June 30, 2022 and December 31, 2021; 1,482,520 and 1,454,239 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | - | - | ||||||
Additional paid-in capital | - | - | ||||||
Accumulated deficit | (275,033 | ) | (226,114 | ) | ||||
Accumulated other comprehensive loss | (7 | ) | - | |||||
Total stockholders' deficit | (275,040 | ) | (226,114 | ) | ||||
Total liabilities, redeemable convertible preferred stock and stockholders' deficit | $ | 55,015 | $ | 80,937 | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-2
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues | $ | 64 | $ | 105 | $ | 130 | $ | 222 | ||||||||
Cost of revenues | 97 | 98 | 193 | 160 | ||||||||||||
Gross profit (loss) | (33 | ) | 7 | (63 | ) | 62 | ||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 7,358 | 4,039 | 13,662 | 7,983 | ||||||||||||
Selling, general and administrative | 14,948 | 10,526 | 30,339 | 15,383 | ||||||||||||
Total operating expenses | 22,306 | 14,565 | 44,001 | 23,366 | ||||||||||||
Operating loss | (22,339 | ) | (14,558 | ) | (44,064 | ) | (23,304 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Other income | 40 | 4 | 49 | 5 | ||||||||||||
Interest expense | (194 | ) | (39 | ) | (370 | ) | (120 | ) | ||||||||
Extinguishment of debt | - | (181 | ) | - | (181 | ) | ||||||||||
Total other income (expense) | (154 | ) | (216 | ) | (321 | ) | (296 | ) | ||||||||
Loss before income taxes | (22,493 | ) | (14,774 | ) | (44,385 | ) | (23,600 | ) | ||||||||
Income tax expense | - | - | - | 1 | ||||||||||||
Net loss | $ | (22,493 | ) | $ | (14,774 | ) | $ | (44,385 | ) | $ | (23,601 | ) | ||||
Unrealized loss on short-term investments | $ | (1 | ) | $ | - | $ | (7 | ) | $ | - | ||||||
Comprehensive loss | $ | (22,494 | ) | $ | (14,774 | ) | $ | (44,392 | ) | $ | (23,601 | ) | ||||
Net loss | $ | (22,493 | ) | $ | (14,774 | ) | $ | (44,385 | ) | $ | (23,601 | ) | ||||
Dividends on Series D convertible preferred stock | (2,908 | ) | (1,115 | ) | (5,785 | ) | (1,115 | ) | ||||||||
Redemption value of Series D convertible preferred stock | (1,455 | ) | (55,877 | ) | (2,893 | ) | (55,877 | ) | ||||||||
Net loss attributable to common stockholders | $ | (26,856 | ) | $ | (71,766 | ) | $ | (53,063 | ) | $ | (80,593 | ) | ||||
Net loss per share: | ||||||||||||||||
Basic and diluted | $ | (18.25 | ) | $ | (61.98 | ) | $ | (36.18 | ) | $ | (69.60 | ) | ||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic and diluted | 1,471,296 | 1,157,870 | 1,466,462 | 1,157,869 | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-3
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit
(In thousands, except unit amounts)
(unaudited)
Six Months Ended June 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A-1 | Series A-2 | Series B | Series C | Series D | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock | Common Stock |
Additional Paid-in | Accumulated |
Accumulated other comprehensive | Total Stockholders' | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Value | Shares | Value | Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | (loss) income | Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | 4,000,000 | $ | - | 4,427,072 | $ | 7,128 | 7,341,485 | $ | 41,854 | 8,016,645 | $ | 67,904 | 13,843,858 | $ | 174,990 | 1,454,239 | $ | - | $ | - | $ | (226,114 | ) | $ | - | $ | (226,114 | ) | ||||||||||||||||||||||||||||||||||||
Stock-based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 2,070 | - | - | 2,070 | ||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | - | - | - | - | - | - | - | - | - | - | 15,000 | - | 64 | - | - | 64 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock divdend | - | - | - | - | - | - | - | - | - | 2,877 | - | - | (2,134 | ) | (743 | ) | - | (2,877 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Redemption value | - | - | - | - | - | - | - | - | - | 1,438 | - | - | - | (1,438 | ) | - | (1,438 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (6 | ) | (6 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (21,892 | ) | - | (21,892 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2022 | 4,000,000 | $ | - | 4,427,072 | $ | 7,128 | 7,341,485 | $ | 41,854 | 8,016,645 | $ | 67,904 | 13,843,858 | $ | 179,305 | 1,469,239 | $ | - | $ | - | $ | (250,187 | ) | $ | (6 | ) | $ | (250,193 | ) | |||||||||||||||||||||||||||||||||||
Stock-based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 1,969 | - | - | 1,969 | ||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | - | - | - | - | - | - | - | - | - | - | 13,281 | - | 41 | - | - | 41 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock divdend | - | - | - | - | - | - | - | - | - | 2,908 | - | - | (2,010 | ) | (898 | ) | - | (2,908 | ) | |||||||||||||||||||||||||||||||||||||||||||||
Redemption value | - | - | - | - | - | - | - | - | - | 1,455 | - | - | - | (1,455 | ) | - | (1,455 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | - | - | - | - | - | - | - | - | - | - | - | - | - | - | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (22,493 | ) | - | (22,493 | ) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 4,000,000 | $ | - | 4,427,072 | $ | 7,128 | 7,341,485 | $ | 41,854 | 8,016,645 | $ | 67,904 | 13,843,858 | $ | 183,668 | 1,482,520 | $ | - | $ | - | $ | (275,033 | ) | $ | (7 | ) | $ | (275,040 | ) | |||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A-1 | Series A-2 | Series B | Series C | Series D | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock |
Redeemable Convertible Preferred Stock | Common Stock |
Additional Paid-in | Accumulated | Total Stockholders' | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Value | Shares | Value | Shares | Value | Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 4,000,000 | $ | - | 4,427,072 | $ | 7,128 | 7,341,485 | $ | 41,854 | 8,016,645 | $ | 67,904 | - | $ | - | 1,157,868 | $ | - | $ | 9,905 | $ | (114,807 | ) | $ | (104,902 | ) | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 842 | - | 842 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (8,827 | ) | (8,827 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | 4,000,000 | $ | - | 4,427,072 | $ | 7,128 | 7,341,485 | $ | 41,854 | 8,016,645 | $ | 67,904 | - | $ | - | 1,157,868 | $ | - | $ | 10,747 | $ | (123,634 | ) | $ | (112,887 | ) | ||||||||||||||||||||||||||||||||||
Stock-based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 958 | - | 958 | |||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | - | - | - | - | - | - | - | - | - | - | 5 | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock warrants | - | - | - | - | - | - | - | - | - | - | - | - | 268 | - | 268 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of convertible preferred stock, net of issuance costs | - | - | - | - | - | - | - | - | 13,053,508 | 109,681 | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Stock divdend | - | - | - | - | - | - | - | - | - | 1,115 | - | - | (1,115 | ) | - | (1,115 | ) | |||||||||||||||||||||||||||||||||||||||||||
Redemption value | - | - | - | - | - | - | - | - | - | 55,877 | - | - | (10,858 | ) | (45,019 | ) | (55,877 | ) | ||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (14,774 | ) | (14,774 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 4,000,000 | $ | - | 4,427,072 | $ | 7,128 | 7,341,485 | $ | 41,854 | 8,016,645 | $ | 67,904 | 13,053,508 | $ | 166,673 | 1,157,873 | $ | - | $ | - | $ | (183,427 | ) | $ | (183,427 | ) | ||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-4
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)
Six Months Ended June 30, | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (44,385 | ) | $ | (23,601 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation and amortization | 154 | 138 | ||||||
Reduction in the carrying amount of right-of-use assets | 239 | - | ||||||
Stock-based compensation expense | 4,039 | 1,800 | ||||||
Loss on extinguishment of debt | - | 181 | ||||||
Amortization of premium on short-term investments | (20 | ) | - | |||||
Non cash interest expense | 152 | 53 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 12 | (19 | ) | |||||
Prepaid expenses and other current assets | (2,828 | ) | (1,171 | ) | ||||
Prepaid expenses and other long-term assets | 11 | (116 | ) | |||||
Accounts payable | 1,961 | 1,328 | ||||||
Accrued expenses and other current liabilities | (433 | ) | 343 | |||||
Deferred rent | (14 | ) | (42 | ) | ||||
Operating lease liabilities | (280 | ) | - | |||||
Deferred revenue | 13 | (123 | ) | |||||
Net cash used in operating activities | (41,379 | ) | (21,229 | ) | ||||
Cash flows from investing activities: | ||||||||
Acquisition of property and equipment | (13 | ) | (46 | ) | ||||
Capitalized software development costs | - | (57 | ) | |||||
Purchases of short-term investments | (14,974 | ) | - | |||||
Proceeds from maturities of short-term investments | 10,000 | - | ||||||
Net cash used in investing activities | (4,987 | ) | (103 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options | 105 | - | ||||||
Proceeds from note payable | 10,000 | 5,000 | ||||||
Proceeds from issuance of preferred stock, net issuance costs | - | 109,681 | ||||||
Payment of debt issuance costs | - | (74 | ) | |||||
Payment of premium on note payable | - | (26 | ) | |||||
Repayment of principal on note payable | - | (2,000 | ) | |||||
Net cash provided by financing activities | 10,105 | 112,581 | ||||||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (36,261 | ) | 91,249 | |||||
Cash, cash equivalents, and restricted cash at beginning of period | 77,204 | 18,833 | ||||||
Cash, cash equivalents, and restricted cash at end of period | $ | 40,943 | $ | 110,082 | ||||
Supplementary Information: | ||||||||
Cash paid for income taxes | $ | - | $ | - | ||||
Cash paid for interest | 181 | 39 | ||||||
Noncash investing and financing activities: | ||||||||
Purchase of property and equipment included in accounts payable and accrued expenses | 10 | 7 | ||||||
Common stock warrants issued related to note payable | - | 268 | ||||||
Redemption value of Series D preferred stock | 2,893 | 55,877 | ||||||
Dividends accrued for Series D preferred stock | 5,785 | 1,115 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
F-5
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
1. Nature of the Business and Basis of Presentation
Organization
Akili Interactive Labs, Inc. (collectively referred to with its wholly-owned, controlled subsidiary, Akili Securities Corporation as "Akili" or the "the Company") was incorporated under the laws of the State of Delaware on December 1, 2011. The Company operates as one business segment and is developing a digital medicine platform for the treatment and assessment of cognitive dysfunction across several neurology and psychiatry indications, including attention-deficit hyperactivity disorder ("ADHD"), major depressive disorder, autism spectrum disorder, multiple sclerosis, and various neuroinflammatory diseases. In June 2020, the U.S. Food and Drug Administration ("FDA") granted clearance for EndeavorRx as a prescription treatment for children with ADHD. The Company is headquartered in Boston, Massachusetts.
Business Combination Agreement and Plan of Merger
On January 26, 2022, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Social Capital Suvretta Holdings Corp. I, ("SCS") to affect a business combination between SCS and the Company with the Company surviving the merger as a wholly owned subsidiary of SCS. At the effective time of the Merger, each share of Akili Redeemable Convertible Preferred Stock and each share of Akili Common Stock will be converted into the right to receive such number of shares of SCS Class A Common Stock. The estimated combined enterprise value will be approximately $777 million. The consummation of the proposed transaction was completed on August 19, 2022, see Note 13 for further details.
Going Concern
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance- reporting capabilities.
Most of the Company's product candidates are still in development. There can be no assurance that the Company's research and development will be successfully completed; that adequate protection for the Company's intellectual property will be obtained; that any products developed will obtain necessary government regulatory approval; or that any approved products will be commercially viable. Even if the Company's product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.
The Company's condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative operating cash flows for the six months ended June 30, 2022 and had an accumulated deficit of $275,033. On August 19, 2022, the Company and SCS completed a merger resulting in the reverse recapitalization of the Company and the Company received aggregate gross proceeds of $2,283 held in trust by SCS (following satisfaction of redemptions by public stockholders), and $162,000 in aggregate gross proceeds from PIPE investors. The Company received $133,293 in net proceeds after the reduction of $30,990 in transaction related expenses and other costs paid at Closing. Management believes the Company's sources of liquidity will be sufficient to fund the Company's planned operations and existing obligations within one year after the date that the consolidated financial statements are issued.
The future viability of the Company is dependent on its ability to generate cash from operating activities or to raise additional capital to finance its operations. The Company's failure to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies.
F-6
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
COVID-19 Related Significant Risks and Uncertainties
There continue to be uncertainties regarding the pandemic of the novel coronavirus, or COVID-19, and the Company is closely monitoring the impact of COVID-19 on all aspects of its business, including how it will impact its customers, employees, suppliers, vendors, and business partners. The Company is unable to predict the specific impact that COVID-19 may have on its financial position and operations moving forward due to the numerous uncertainties. Any estimates made herein may change as new events occur and additional information is obtained, and actual results could differ materially from any estimates made herein under different assumptions or conditions. The Company will continue to assess the evolving impact of COVID-19.
In response to the COVID-19 pandemic, Congress passed the Coronavirus Aid, Relief and Economic Security Act of 2020, or the CARES Act, which was signed into law on March 27, 2020. The CARES Act provides for deferred payment of the employer portion of social security taxes through the end of 2020, with a portion of the deferred amount due by December 31, 2022. As of June 30, 2022 and December 31, 2021, the Company has deferred payments of $187 of social security taxes, which is included in accrued expenses and other current liabilities within the condensed consolidated balance sheet.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company, after elimination of all intercompany accounts and transactions. As permitted for interim reporting, certain footnotes or other financial information that are normally required by U.S. GAAP may be condensed or omitted, unless otherwise required by U.S. GAAP or Securities and Exchange Commission ("SEC") rules and regulations. These condensed consolidated financial statements were prepared on the same basis as and should be read in conjunction with the Company's annual consolidated financial statements included elsewhere in the proxy/registration statement. In the opinion of management, all adjustments of a normal recurring nature, considered necessary for fair presentation, have been included in these condensed consolidated financial statements. The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period or future year. The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited annual consolidated financial statements but does not include all information required by U.S. GAAP for annual consolidated financial statements.
2. Summary of Significant Accounting Policies
The Company's significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, included elsewhere in this Report. Since the date of those consolidated financial statements, there have been no changes to the Company's significant accounting policies except as noted below.
Investments: The Company considers all investments with original maturities of more than three months but less than one year to be short-term investments. All investments in marketable securities are classified as available for sale. Available-for-sale securities are reported at fair value, with temporary unrealized gains and losses excluded from earnings and reported as a separate component of stockholders' equity, while other-than-temporary gains or losses are included in earnings. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (expense) within the condensed consolidated statements of operations and comprehensive loss.
F-7
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
Revenue from Contracts with Customers: The following table presents the Company's revenue by type:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Product revenue | $ | 64 | $ | 37 | $ | 130 | $ | 66 | ||||||||
Collaboration revenue | $ | - | $ | 68 | - | 156 | ||||||||||
Total | $ | 64 | $ | 105 | $ | 130 | $ | 222 | ||||||||
As of June 30, 2022, the Company has a contract liability related to product revenue, which consists of amounts that have been paid but have not been recognized as revenue. All amounts are expected to be recognized as revenue within 12 months of the balance sheet date and are classified as current deferred revenue. The Company recognized $51 of product revenue, in the six months ended June 30, 2022, that was previously included in the December 31, 2021 deferred revenue balance.
Contract Liabilities | Product | |||
Balance at December 31, 2021 | $ | 96 | ||
Revenue recognized | (130 | ) | ||
Revenue deferred | 143 | |||
Balance at June 30, 2022 | $ | 109 | ||
Advertising: The Company expenses advertising costs as incurred. Advertising expenses were $1,845 and $5,937 during the three and six months ended June 30, 2022. Advertising expenses were $2,847 and $2,867 during the three and six months ended June 30 2021.
Leases: The Company determines whether a contract is, or contains, a lease at inception. The Company classifies each of its leases as operating or financing considering factors such as the length of the lease term, the present value of the lease payments, the nature of the asset being leased, and the potential for ownership of the asset to transfer during the lease term. Leases with terms greater than one-year are recognized on the consolidated balance sheets as right-of-use assets and lease liabilities and are measured at the present value of the fixed payments due over the expected lease term less the present value of any incentives, rebates or abatements we expect to receive from the lessor. Options to extend a lease are included in the expected lease term if exercise of the option is deemed reasonably certain. Costs determined to be variable and not based on an index or rate are not included in the measurement of the lease liability and are expensed as incurred. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilized the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis an amount equal to the lease payments over a similar term and in a similar economic environment. To estimate our incremental borrowing rate, a credit rating applicable to the Company is estimated using a synthetic credit rating analysis since it does not currently have a rating agency-based credit rating. The Company records expense to recognize fixed lease payments on a straight-line basis over the expected lease term. The Company has elected the practical expedient not to separate lease and non-lease components for real estate leases.
Recently adopted accounting pronouncements:
In February 2016, the FASB issued ASU No. 2016-02 ("ASU 2016-02"),Leases (Topic 842) as amended by ASU 2019-10 and ASU 2020-05, which supersedes the guidance in former ASC Topic 840, Leases. 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 are not impacted by the new guidance.
The Company adopted this guidance, effective January 1, 2022, using the modified retrospective method as of the date of adoption such that prior periods will not be restated. The Company elected a package of practical expedients, under which an entity need not reassess whether any expired or existing contracts are or contain
F-8
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
leases, the lease classification for any expired or existing leases, or initial direct costs for any existing leases. Additional disclosures related to accounting for leases under this new standard are included in Note 5. The adoption incrementally increased the Company's assets and liabilities by the right-of-use asset and lease liabilities. As the leases do not provide an implicit rate, the Company's incremental borrowing rate was determined based on the information available at the date of adoption to measure its lease liability. The adoption did not have a material impact on the Company's condensed consolidated statement of operations and comprehensive loss and did not require a cumulative adjustment to accumulated deficit on its condensed consolidated statement of stockholders' equity as of June 30, 2022.
Recently issued accounting pronouncements: In June 2016, the FASB issued ASU No. 2016-13,Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"), as amended by ASU 2019-10. ASU 2016-13 will change how companies account for credit losses for most financial assets and certain other instruments. For trade receivables, loans and held-to-maturity debt securities, companies will be required to recognize an allowance for credit losses rather than reducing the carrying value of the asset. ASU 2016-13 is effective for the Company for the annual reporting period beginning January 1, 2023. The Company is currently evaluating the potential impact this standard may have on its consolidated financial statements and results of operations.
In December 2019, the FASB issued ASU No. 2019-12,Income Taxes-Simplifying the Accounting for Income Taxes. ASU 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This standard is effective for annual reporting periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. The Company is currently evaluating the potential impact that ASU 2019-12 will have on its consolidated financial statements and related disclosures; however, it does not expect the impact to be material.
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Deferred issuance costs | $ | 2,999 | $ | 572 | ||||
Prepaid clinical trials | 879 | 872 | ||||||
Other current assets | 1,450 | 1,056 | ||||||
Prepaid expenses and other current assets | $ | 5,328 | $ | 2,500 | ||||
4. Property and Equipment
Property and equipment, net consisted of the following:
June 30, | December 31, | |||||||
2022 | 2021 | |||||||
Furniture and fixtures | $ | 184 | $ | 184 | ||||
Computer equipment and software | 459 | 443 | ||||||
Office equipment | 60 | 60 | ||||||
Leasehold improvements | 975 | 975 | ||||||
Capitalized internal-use software costs | 427 | 427 | ||||||
Total property and equipment | 2,105 | 2,089 | ||||||
Less: accumulated depreciation and amortization | (1,051 | ) | (896 | ) | ||||
Property and equipment, net | $ | 1,054 | $ | 1,193 | ||||
Depreciation and amortization expense was $76 and $154 for the three and six months ended June 30, 2022. Depreciation and amortization expense was $68 and $138 for the three and six months ended June 30, 2021.
F-9
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
5. Leases
As of June 30, 2022, the Company leases office space under non-cancelable operating leases in two cities. The office space in Boston, Massachusetts consists of approximately 7,200 square feet that will expire in October 2022 and is classified as a short-term lease. The office space in Larkspur, California consists of approximately 43,600 square feet that will expire in November 2026. The Company posted a customary letter of credit in the amount of approximately $250 as a security deposit, which is included in restricted cash within the condensed consolidated balance sheets. This lease does not include any restrictions or covenants that had to be accounted for under the lease guidance.
During the three and six months ended June 30, 2022, the Company recognized $262 and $524 of rent expense. During the three and six months ended June 30, 2021, the Company recognized $299 and $585 of rent expense. Of the $524 recognized during the six months ended June 30, 2022, $150 was related to short term leases.
Net cash paid under the Larkspur lease for the amounts included in the measurement of the operating lease liability on the condensed consolidated balance sheet and operating activities in our condensed consolidated statement of cash flow was $415 for the period ending June 30, 2022. The remaining lease term and incremental borrowing rate for the Larkspur lease as of June 30, 2022 was 4.4 years and 7.6%, respectively.
Future minimum lease payments for the Massachusetts lease are $109 for the year ending December 31, 2022.
Future lease payments for our California noncancelable operating lease as of June 30, 2022 and a reconciliation to the carrying amount of the operating lease liability presented in the condensed consolidated balance sheet as of June 30, 2022 is as follows:
Years Ending December 31, | Amounts | |||
2022 (remaining 6 months) | $ | 429 | ||
2023 | 878 | |||
2024 | 914 | |||
2025 | 950 | |||
2026 | 905 | |||
Total undiscounted payments due under operating leases | 4,076 | |||
Less imputed interest | (619 | ) | ||
Total | $ | 3,457 | ||
Current operating lease liability | $ | 625 | ||
Non-current operating lease liability | 2,832 | |||
Total | $ | 3,457 | ||
For comparable purposes, aggregate future minimum non-cancellable commitments under leases as of December 31, 2021, are as follows:
Years Ending December 31, | Amounts | |||
2022 (remaining 6 months) | $ | 538 | ||
2023 | 878 | |||
2024 | 914 | |||
2025 | 950 | |||
2026 | 905 | |||
Total | $ | 4,185 | ||
F-10
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
6. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
June 30, 2022 |
December 31, 2021 | |||||||
Accrued bonus | $ | 1,801 | $ | 2,516 | ||||
Accrued royalties | 106 | 106 | ||||||
Accrued wages and benefits | 669 | 421 | ||||||
Accrued clinical study expenses | 418 | 363 | ||||||
Accrued consulting service expenses | 1,489 | 766 | ||||||
Other accrued expenses | 561 | 1,305 | ||||||
Total | $ | 5,044 | $ | 5,477 | ||||
7. Corporate Bond
The Company recognized amortization expense of $49 and $97 related to the discount on the corporate bond as a component of interest expense in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022. The Company recognized amortization expense of $44 and $87 for the three and six months ended June 30, 2021.
The carrying amount of the corporate bond is as follows:
June 30, 2022 |
December 31, 2021 | |||||||
Corporate bond | 5,000 | $ | 5,000 | |||||
Unamortized discount on corporate bond | (3,265 | ) | (3,362 | ) | ||||
Corporate bond, net of discount | $ | 1,735 | $ | 1,638 | ||||
8. Note Payable
Amended and restated Loan and Security Agreement
On June 28, 2022, the Company drew an additional $10,000 from Tranche 1 of the Amended and Restated Loan and Security Agreement with Silicon Valley Bank. The Company is required to make interest-only payments through May 2023 before beginning to repay the $15,000 in outstanding principal in 24 equal monthly payments on the first day of each month beginning June 1, 2023, plus interest. In relation to this additional draw of $10,000, the Company incurred $500 of debt issuance costs in the form of a final payment fee.
At June 30, 2022, the Company had outstanding principal of $15,000. The Company recognized interest expense related to debt issuance costs of $81 for the six months ended June 30, 2022. The interest rate in effect as of June 30, 2022 was 8.5%. At June 30, 2022, the carrying amount of the note payable is as follows:
Note payable, long term | $ | 14,375 | ||
Final Payment | 750 | |||
Unamortized debt issuance costs | (912 | ) | ||
Note payable, long term (net of debt issuance costs) | $ | 14,213 | ||
F-11
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
Future minimum principal payments due under the Amended and Restated Loan and Security Agreement, excluding the Final Payment, are as follows:
Years Ending December 31, | ||||
Remainder of 2022 | - | |||
2023 | 4,375 | |||
2024 | 7,500 | |||
2025 | 3,125 | |||
Total | $ | 15,000 | ||
9. Redeemable Convertible Preferred Stock
The Company has 41,785,202 shares of $.0001 par value redeemable convertible preferred stock authorized, of which 4,000,000 shares are designated as Series A-1 redeemable convertible preferred stock ("Series A-1"), 4,427,072 shares are designated as Series A-2 redeemable convertible preferred stock ("Series A-2"), 7,341,485 shares are designated as Series B redeemable convertible preferred stock ("Series B"), and 8,016,645 shares are designated as Series C redeemable convertible preferred stock ("Series C"), and 18,000,000 shares are designated as Series D redeemable convertible preferred stock ("Series D").
The amount of accumulated, but undeclared stock dividends on Series D Shares at June 30, 2022 is $5,785 and the cumulative redemption value adjustment recorded since issuance amounted to $61,542.
10. Common Stock
The holders of the common stock are entitled to one vote for each share of common stock. Subject to the payment in full of all preferential dividends to which the holders of the preferred stock are entitled, the holders of common stock shall be entitled to receive dividends out of funds legally available. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment or provision for payment of all debts and liabilities of the Company and all preferential amounts to which the holders of preferred stock are entitled with respect to the distribution of assets in liquidation, the holders of common stock shall be entitled to share ratably in the remaining assets of the Company available for distribution.
2011 Stock Incentive Plan: In 2011, the Company's Board of Directors approved the 2011 Stock Incentive Plan, ("2011 Plan"), which provides for the grant of incentive stock options, nonqualified stock options, and restricted stock to employees, directors, and nonemployees of the Company up to an aggregate of 11,737,602 shares of the Company's common stock. 1,878,907 shares remain available for issuance under the 2011 Plan as of June 30, 2022.
Options generally vest based on the grantee's continued service with the Company during a specified period following a grant as determined by the Board of Directors and expire ten years from the grant date. In general, awards typically vest in four years, but vesting conditions can vary based on the discretion of the Company's Board of Directors. Stock-based compensation expense is classified in the condensed consolidated statements of operations and comprehensive loss as follows:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Research and development | $ | 841 | $ | 265 | $ | 1,450 | $ | 512 | ||||||||
Selling, general and administrative | 1,128 | 693 | 2,589 | 1,288 | ||||||||||||
Total | $ | 1,969 | $ | 958 | $ | 4,039 | $ | 1,800 | ||||||||
F-12
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
A summary of the Company's stock option activity and related information is as follows:
Number of Options |
Weighted- Average Exercise Price Per Share |
Weighted- Average Remaining Contractual Term (Years) |
Aggregate Intrinsic Value | |||||||||||||
Balance, December 31, 2021 | 7,529,063 | $ | 3.89 | 7.28 | $ | 4,020 | ||||||||||
Granted | 1,334,379 | $ | 11.58 | |||||||||||||
Cancelled | (458,986 | ) | $ | 4.55 | ||||||||||||
Exercised | (28,281 | ) | $ | 3.73 | ||||||||||||
Balance, June 30, 2022 | 8,376,175 | $ | 5.08 | 7.13 | $ | 54,482 | ||||||||||
Exercisable, June 30, 2022 | 5,110,692 | $ | 3.77 | 5.99 | $ | 39,901 | ||||||||||
Options vested and expected to vest, June 30, 2022 | 8,376,175 | $ | 5.08 | 7.13 | $ | 54,482 |
The fair value of all option activity was estimated at the date of grant using Black-Scholes with the following weighted-average assumptions for the six months ended June 30, 2022:
Fair value of common stock | $ | 11.58 | ||
Expected volatility | 96.21 | % | ||
Expected term (in years) | 6.03 | |||
Risk-free interest rate | 1.73 | % | ||
Expected dividend yield | 0.00 | % |
There was no option activity for the six months ended June 30, 2021.
The weighted average grant-date fair value of stock options granted to employees during the six months ended June 30, 2022 was $8.97 per share. There were no options granted during the six months ended June 30, 2021.
During the six months ended June 30, 2022, the aggregate intrinsic value of stock option awards exercised was $222. There were no stock option awards exercised during the six months ended June 30, 2021. Aggregate intrinsic value represents the difference between the exercise price and the fair value of the underlying common stock on the date of exercise.
As of June 30, 2022 there was $17,069 of unrecognized compensation cost related to unvested stock option grants to employees under the Plan, which is expected to be recognized over a weighted-average period of 3.0 years.
F-13
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
11. Fair Value of Financial Assets and Liabilities
The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values:
Fair Value Measurements as of June 30, 2022 | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 16,550 | $ | - | $ | - | $ | 16,550 | ||||||||
Short-term investments: | ||||||||||||||||
United States Treasuries | 4,987 | - | - | 4,987 | ||||||||||||
Total assets | $ | 21,537 | $ | - | $ | - | $ | 21,537 | ||||||||
Fair Value Measurements as of December 31, 2021 | ||||||||||||||||
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Assets | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 61,510 | $ | - | $ | - | $ | 61,510 | ||||||||
The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of financial instruments between levels during the six months ended June 30, 2022 and 2021. The Company recorded unrealized losses on short-term investments of $7 in other comprehensive loss for the six months ended June 30, 2022.
As of June 30, 2022 and December 31, 2021, the Company's cash equivalents consisted of money market funds with original maturities of less than 90 days from the date of purchase. As of June 30, 2022, the Company's short-term investments consisted of United States treasuries with original maturities of more than three months but less than one year. As of June 30, 2022 and December 31, 2021, the Company did not have any liabilities that are measured at fair value on a recurring basis.
12. Net Loss Per Share
The following table summarizes the computation of basic and diluted net loss per share attributable to common stockholders of the Company:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator: | ||||||||||||||||
Net loss | $ | (22,493 | ) | $ | (14,774 | ) | $ | (44,385 | ) | $ | (23,601 | ) | ||||
Dividends on Series D convertible preferred stock | (2,908 | ) | (1,115 | ) | (5,785 | ) | (1,115 | ) | ||||||||
Redemption value of Series D convertible preferred stock | (1,455 | ) | (55,877 | ) | (2,893 | ) | (55,877 | ) | ||||||||
Net loss attributable to common stockholders - basic and diluted | $ | (26,856 | ) | $ | (71,766 | ) | $ | (53,063 | ) | $ | (80,593 | ) | ||||
Denominator: | ||||||||||||||||
Weighted-average common stock outstanding | 1,471,296 | 1,157,870 | 1,466,462 | 1,157,869 | ||||||||||||
Net loss per share attributable to common stockholders - basic and diluted | $ | (18.25 | ) | $ | (61.98 | ) | $ | (36.18 | ) | $ | (69.60 | ) | ||||
For periods in which the Company reports a net loss attributable to common stockholders, potentially dilutive securities have been excluded from the computation of diluted net loss per share as their effects would be anti- dilutive. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.
F-14
AKILI INTERACTIVE LABS, INC. AND SUBSIDIARY
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (dollars in thousands, except share and per share amounts)
The Company excluded the following potential common shares, presented based on amounts outstanding at period end, from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:
As of June 30, | ||||||||
2022 | 2021 | |||||||
Series A-1 convertible preferred stock (as converted to common stock) | 4,000,000 | 4,000,000 | ||||||
Series A-2 convertible preferred stock (as converted to common stock) | 4,427,072 | 4,427,072 | ||||||
Series B convertible preferred stock (as converted to common stock) | 7,341,485 | 7,341,485 | ||||||
Series C convertible preferred stock (as converted to common stock) | 8,016,645 | 8,016,645 | ||||||
Series D convertible preferred stock (as converted to common stock) | 21,795,525 | 19,778,730 | ||||||
Warrants to purchase common stock | 226,196 | 226,196 | ||||||
Stock options to purchase common stock | 8,376,175 | 5,912,116 | ||||||
Total | 54,183,098 | 49,702,244 | ||||||
13. Subsequent Events
The Company has evaluated subsequent events through August 23, 2022, which is the date these condensed consolidated financial statements were available to be issued and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements except for the transaction described below.
On August 19, 2022, (the "Closing Date"), Social Capital Suvretta Holdings Corp. I, ("SCS") consummated the previously announced merger pursuant to the Merger Agreement, dated January 26, 2022, by and among SCS, Akili Interactive Labs, Inc. (now Akili, Inc.) and Karibu Merger Sub, Inc., pursuant to which Karibu Merger Sub, Inc. merged with and into Akili Interactive Labs, Inc., with Akili Interactive Labs, Inc. becoming a wholly owned subsidiary of Akili, Inc. (the "Business Combination"). Upon the closing of the Business Combination, SCS changed its name to Akili, Inc. In connection with the Business Combination, SCS completed the sale and issuance of 16,200,000 shares of Akili, Inc. common stock in a fully committed common stock private placement at a purchase price of $10.00 per share ("PIPE Shares") for an aggregate purchase price of $162,000 ("PIPE Investment"). Gross proceeds from the Merger totaled approximately $164,283 which included funds held in SCS's trust account (after giving effect to redemptions). Transaction costs and other costs paid at Closing totaled approximately $30,990.
F-15
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Social Capital Suvretta Holdings Corp. I published this content on 23 August 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 August 2022 20:57:02 UTC.