0001193125-21-034477 | S-1 | XBRL Viewer

Cover Page	9 Months Ended
Sep. 30, 2020
Cover [Abstract]
Document Type	S-1
Amendment Flag	false
Entity Registrant Name	Oncorus, Inc.
Entity Central Index Key	0001671818
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 54,019	$ 45,286	$ 20,079
Prepaid expenses and other current assets	1,577	615	827
Total current assets	55,596	45,901	20,906
Property and equipment, net	4,506	4,475	4,300
Deferred offering costs	1,507
Other assets	450	450	450
Total assets	62,059	50,826	25,656
Current liabilities:
Accounts payable	1,470	942	975
Accrued expenses	3,155	3,521	1,290
Deferred rent	500	467	423
Other current liabilities	8	8	8
Total current liabilities	5,133	4,938	2,696
Series B tranche rights (Note 5)		1,876
Deferred rent, net of current portion	1,295	1,677	2,144
Total liabilities	6,428	8,491	4,840
Commitments and contingencies (Note 9)
Redeemable convertible preferred stock:
Redeemable convertible preferred stock
Stockholders' deficit:
Common stock, $0.0001 par value, 227,000 shares authorized; 1,072 and 989 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
Additional paid-in capital			906
Accumulated deficit	(118,257)	(74,297)	(40,983)
Total stockholders' deficit	(118,257)	(74,297)	(40,077)
Total liabilities, redeemable convertible preferred stock and stockholders' deficit	62,059	50,826	25,656
Series A-1 redeemable convertible preferred stock [Member]
Redeemable convertible preferred stock:
Redeemable convertible preferred stock	68,220	63,494	$ 60,893
Series B redeemable convertible preferred stock [Member]
Redeemable convertible preferred stock:
Redeemable convertible preferred stock	$ 105,668	$ 53,138

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Dec. 31, 2018
Common Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	227,000,000	227,000,000	107,000,000
Common Stock, Shares Issued	1,072,000	989,000	881,000
Common Stock, Shares Outstanding	1,072,000	989,000	881,000
Series A-1 redeemable convertible preferred stock [Member]
Temporary Equity, Par Value	$ 0.0001	$ 0.0001	$ 0.0001
Temporary Equity, Shares Authorized	76,500,000	76,500,000	77,000,000
Temporary Equity, Shares Issued	76,500,000	76,500,000	76,500,000
Temporary Equity, Shares Outstanding	76,499,992	76,499,992	76,499,992
Temporary Equity, Liquidation Preference	$ 68,436	$ 63,739	$ 63,739
Series B redeemable convertible preferred stock [Member]
Temporary Equity, Par Value	$ 0.0001	$ 0.0001	$ 0.0001
Temporary Equity, Shares Authorized	104,225,000	104,225,000	0
Temporary Equity, Shares Issued	104,225,000	62,535,000	0
Temporary Equity, Shares Outstanding	104,225,000	62,535,000	0
Temporary Equity, Liquidation Preference	$ 94,492	$ 55,326	$ 55,326

Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Operating expenses:
Research and development	$ 6,927	$ 6,221	$ 19,560	$ 18,183	$ 24,047	$ 12,541
General and administrative	1,973	1,513	6,032	3,978	7,119	6,037
Total operating expenses	8,900	7,734	25,592	22,161	31,166	18,578
Loss from operations	(8,900)	(7,734)	(25,592)	(22,161)	(31,166)	(18,578)
Other income (expense):
Change in fair value of Series B tranche rights	(10,631)		(11,256)			363
Other expense	(2)	(3)	(22)	(7)	(47)	(59)
Interest income	2	164	138	331	509	228
Total other income (expense), net	(10,631)	161	(11,140)	324	462	532
Net loss and comprehensive loss	(19,531)	(7,573)	(36,732)	(21,837)	(30,704)	(18,046)
Accretion of discount and dividends on redeemable convertible preferred stock	(2,848)	(1,578)	(8,298)	(1,609)	(4,287)	(98)
Net loss attributable to common stockholders	$ (22,379)	$ (9,151)	$ (45,030)	$ (23,446)	$ (34,991)	$ (18,144)
Net loss per share attributable to common stockholders—basic and diluted	$ (21.73)	$ (9.67)	$ (44.58)	$ (25.48)	$ (37.42)	$ (22.88)
Weighted-average number of common shares outstanding—basic and diluted	1,030,000	946,000	1,010,000	920,000	935,000	793,000
Pro forma net loss per share, basic and diluted	$ (21.73)	$ (9.67)	$ (44.58)	$ (25.48)	$ (37.42)	$ (22.88)
Pro forma weighted average common shares outstanding	1,030,000	946,000	1,010,000	920,000	935,000	793,000
Pro Forma [Member]
Other income (expense):
Net loss attributable to common stockholders					$ (30,704)
Net loss per share attributable to common stockholders—basic and diluted					$ (3.35)
Weighted-average number of common shares outstanding—basic and diluted					9,160,000
Pro forma net loss per share, basic and diluted					$ (3.35)
Pro forma weighted average common shares outstanding					9,160,000

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Deficit - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Series A One Redeemable Convertible Preferred Stock [Member]	Series B Redeemable Convertible Preferred Stock [Member]
Balance at Dec. 31, 2017					$ 36,315
Balance (in shares) at Dec. 31, 2017					46,068,750
Balance at Dec. 31, 2017	$ (22,281)		$ 656	$ (22,937)
Balance (in shares) at Dec. 31, 2017		720,671
Issuance of Series B preferred stock					$ 24,480
Issuance of Series B preferred stock (Shares)					30,599,992
Series A-1 preferred stock accretion	(98)		(98)		$ 98
Series A-1 and Series B preferred stock dividends and accretion	(98)
Stock-based compensation expense	326		326
Conversion of Series A-1 preferred stock					(168,750)
Conversion of Series A-1 preferred stock		13,959
Vesting of restricted common stock		137,188
Exercise of options to purchase common stock	22		22
Exercise of options to purchase common stock (Shares)		9,558
Net loss	(18,046)			(18,046)
Balance at Dec. 31, 2018					$ 60,893
Balance (in shares) at Dec. 31, 2018					76,499,992	0
Balance at Dec. 31, 2018	(40,077)		906	(40,983)
Balance (in shares) at Dec. 31, 2018		881,376
Series A-1 preferred stock accretion	(31)		(31)		$ 31
Stock-based compensation expense	210		210
Vesting of restricted common stock		38,862
Exercise of options to purchase common stock	28		28
Exercise of options to purchase common stock (Shares)		17,443
Net loss	(14,264)			(14,264)
Balance at Jun. 30, 2019					$ 60,924
Balance (in shares) at Jun. 30, 2019					76,499,992
Balance at Jun. 30, 2019	(54,134)		1,113	(55,247)
Balance (in shares) at Jun. 30, 2019		937,681
Balance at Dec. 31, 2018					$ 60,893
Balance (in shares) at Dec. 31, 2018					76,499,992	0
Balance at Dec. 31, 2018	(40,077)		906	(40,983)
Balance (in shares) at Dec. 31, 2018		881,376
Series A-1 and Series B preferred stock dividends and accretion	(1,609)
Net loss	(21,837)
Balance at Sep. 30, 2019					$ 61,900	$ 46,240
Balance (in shares) at Sep. 30, 2019					76,499,992	55,486,215
Balance at Sep. 30, 2019	(63,051)			(63,051)
Balance (in shares) at Sep. 30, 2019		970,640
Balance at Dec. 31, 2018					$ 60,893
Balance (in shares) at Dec. 31, 2018					76,499,992	0
Balance at Dec. 31, 2018	(40,077)		906	(40,983)
Balance (in shares) at Dec. 31, 2018		881,376
Issuance of Series B preferred stock						$ 51,452
Issuance of Series B preferred stock (Shares)						62,535,183
Series A-1 and Series B preferred stock dividends and accretion	(4,287)		(1,677)	(2,610)	$ 2,601	$ 1,686
Series A-1 and Series B preferred stock dividends and accretion	(4,287)
Stock-based compensation expense	711		711
Vesting of restricted common stock		71,312
Exercise of options to purchase common stock	$ 60		60
Exercise of options to purchase common stock (Shares)	36,012	36,012
Net loss	$ (30,704)			(30,704)
Balance at Dec. 31, 2019					$ 63,494	$ 53,138
Balance (in shares) at Dec. 31, 2019					76,499,992	62,535,000
Balance at Dec. 31, 2019	(74,297)			(74,297)
Balance (in shares) at Dec. 31, 2019		988,700
Balance at Jun. 30, 2019					$ 60,924
Balance (in shares) at Jun. 30, 2019					76,499,992
Balance at Jun. 30, 2019	(54,134)		1,113	(55,247)
Balance (in shares) at Jun. 30, 2019		937,681
Issuance of Series B preferred stock						$ 45,638
Issuance of Series B preferred stock (Shares)						55,486,215
Series A-1 and Series B preferred stock dividends and accretion					$ 976	$ 602
Series A-1 and Series B preferred stock dividends and accretion	(1,578)		(1,347)	(231)
Stock-based compensation expense	201		201
Vesting of restricted common stock		16,225
Exercise of options to purchase common stock	33		33
Exercise of options to purchase common stock (Shares)		16,734
Net loss	(7,573)			(7,573)
Balance at Sep. 30, 2019					$ 61,900	$ 46,240
Balance (in shares) at Sep. 30, 2019					76,499,992	55,486,215
Balance at Sep. 30, 2019	(63,051)			(63,051)
Balance (in shares) at Sep. 30, 2019		970,640
Balance at Dec. 31, 2019					$ 63,494	$ 53,138
Balance (in shares) at Dec. 31, 2019					76,499,992	62,535,000
Balance at Dec. 31, 2019	(74,297)			(74,297)
Balance (in shares) at Dec. 31, 2019		988,700
Series A-1 and Series B preferred stock dividends and accretion	5,450		624	(4,826)	$ 3,140	$ 2,310
Stock-based compensation expense	619		619		0
Vesting of restricted common stock		14,026
Exercise of options to purchase common stock	5		5
Exercise of options to purchase common stock (Shares)		1,562
Net loss	(17,201)			(17,201)
Balance at Jun. 30, 2020					$ 66,634	$ 55,448
Balance (in shares) at Jun. 30, 2020					76,499,992	62,535,183
Balance at Jun. 30, 2020	(96,324)			(96,324)
Balance (in shares) at Jun. 30, 2020		1,004,288
Balance at Dec. 31, 2019					$ 63,494	$ 53,138
Balance (in shares) at Dec. 31, 2019					76,499,992	62,535,000
Balance at Dec. 31, 2019	(74,297)			(74,297)
Balance (in shares) at Dec. 31, 2019		988,700
Series A-1 and Series B preferred stock dividends and accretion	$ (8,298)
Exercise of options to purchase common stock (Shares)	64,062
Net loss	$ (36,732)
Balance at Sep. 30, 2020					$ 68,220	$ 105,668
Balance (in shares) at Sep. 30, 2020					76,499,992	104,225,000
Balance at Sep. 30, 2020	(118,257)			(118,257)
Balance (in shares) at Sep. 30, 2020		1,071,959
Balance at Jun. 30, 2020					$ 66,634	$ 55,448
Balance (in shares) at Jun. 30, 2020					76,499,992	62,535,183
Balance at Jun. 30, 2020	(96,324)			(96,324)
Balance (in shares) at Jun. 30, 2020		1,004,288
Issuance of Series B preferred stock						$ 35,826
Issuance of Series B preferred stock (Shares)						41,690,117
Series A-1 and Series B preferred stock dividends and accretion					$ 1,586	$ 1,262
Series A-1 and Series B preferred stock dividends and accretion	(2,848)		(446)	(2,402)
Settlement of Series B tranche rights						13,132
Stock-based compensation expense	340		340
Vesting of restricted common stock		5,171
Exercise of options to purchase common stock	106		$ 106
Exercise of options to purchase common stock (Shares)		62,500
Net loss	(19,531)			(19,531)
Balance at Sep. 30, 2020					$ 68,220	$ 105,668
Balance (in shares) at Sep. 30, 2020					76,499,992	104,225,000
Balance at Sep. 30, 2020	$ (118,257)			$ (118,257)
Balance (in shares) at Sep. 30, 2020		1,071,959

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Operating activities:
Net loss	$ (36,732)	$ (21,837)	$ (30,704)	$ (18,046)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	983	786	1,071	956
Stock-based compensation	959	411	711	326
Loss on disposal of fixed assets			47
Change in fair value of Series B tranche rights	11,256			(363)
Changes in:
Prepaid expenses and other current assets	(962)	(253)	212	(280)
Accounts payable and other current liabilities	103	(91)	(33)	823
Accrued expenses and other current liabilities	(885)	2,506	1,915	(197)
Deferred rent	(349)	(317)	(423)	(382)
Net cash used in operating activities	(25,627)	(18,795)	(27,204)	(17,163)
Investing Activities
Purchase of property and equipment	(1,014)	(598)	(977)	(291)
Net cash used in investing activities	(1,014)	(598)	(977)	(291)
Financing activities
Proceeds from exercise of options to purchase common stock	111	61	60	22
Proceeds from Issuance of Convertible Preferred Stock				24,480
Proceeds from issuance of Series B preferred stock and tranche liability	35,826	47,303	53,328
Payment of deferred offering costs	(563)
Net cash provided by financing activities	35,374	47,364	53,388	24,502
Increase in cash and cash equivalents	8,733	27,971	25,207	7,048
Cash and cash equivalents at beginning of period	45,286	20,079	20,079	13,031
Cash and cash equivalents at end of period	54,019	48,050	45,286	20,079
Non-cash investing and financing activities
Purchase of property and equipment in accrued expenses		114	316
Accretion of discount and dividends on preferred stock	8,298	$ 1,609	$ 4,287	$ 98
Deferred offering costs in accounts payable and accrued expenses	944
Settlement of Series B tranche rights	$ 13,132

Nature of the Business and Basis of Presentation

9 Months Ended

12 Months Ended

Sep. 30, 2020

Dec. 31, 2019

Accounting Policies [Abstract]

Nature of the Business and Basis of Presentation

1. Nature of the Business and Basis of Presentation

Organization

Oncorus, Inc. (the “Company”) is a biopharmaceutical company focused on developing next-generation viral immunotherapies to transform outcomes for cancer patients. Using its two platforms, the Company is developing a pipeline of intratumorally and intravenously administered product candidates designed to selectively attack and kill tumor cells.

The Company’s operations to date have focused on organization and staffing, business planning, raising capital, acquiring and developing the Company’s technology, establishing the Company’s intellectual property portfolio, identifying potential product candidates and undertaking preclinical studies, clinical trials and manufacturing. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company’s product candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.

On October 6, 2020, the Company completed an initial public offering (“IPO”), in which the Company issued and sold 5,800,000 shares of its common stock at a public offering price of $15.00 per share. On October 14, 2020, the Company sold an additional 757,991 shares of common stock at $15.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock. The total gross proceeds from the IPO were $98.4 million and the Company raised approximately $88.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 14,951,519 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. In connection with the closing of the IPO, the Company filed its amended and restated certificate of incorporation pursuant to which it is authorized to issue up to 100,000,000 shares designated as common stock and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share. The condensed consolidated financial statements as of September 30, 2020, including share and per share amounts, do not give effect to the IPO, as it closed subsequent to September 30, 2020.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, possible failure of preclinical studies or clinical trials, the need to obtain marketing approval for its product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the need to successfully commercialize and gain market acceptance of any of the Company’s products that are approved and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical 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 drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Basis of Presentation and Liquidity

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals and estimates that impact the financial statements) which are considered necessary to present fairly the Company’s financial position as of September 30, 2020, its results of operations for the three and nine months ended September 30, 2020 and 2019, its changes in redeemable convertible preferred stock and stockholders’ deficit for the three and nine months ended September 30, 2020 and 2019 and its cash flows for the nine months ended September 30, 2020 and 2019. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the accompanying notes for the year ended December 31, 2019 found elsewhere in this prospectus.

On September 23, 2020 and September 25, 2020, the Company’s board of directors and stockholders, respectively, approved a

one-for-12.0874

reverse split of the Company’s issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of convertible preferred stock, which became effective on September 25, 2020. Accordingly, all share and per share amounts for all periods presented in the accompanying unaudited interim condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split, including reclassification of par, additional

paid-in

capital and accumulated deficit amounts as a result of the split adjustment.

The Company’s unaudited interim condensed consolidated financial statements as of September 30, 2020 have been prepared on the basis of the Company continuing as a going concern for the next 12 months. Management believes that the Company’s existing cash and cash equivalents, together with the net proceeds from the IPO, will allow the Company to continue its operations for at least the next 12 months. In the absence of a significant source of recurring revenue, the continued viability of the Company is dependent on its ability to continue to raise additional capital to finance its operations. If the Company is unable to obtain additional funding, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

1. Nature of the Business and Liquidity

The Company’s operations to date have focused on organization and staffing, business planning, raising capital, acquiring and developing the Company’s technology, establishing the Company’s intellectual property portfolio, identifying potential product candidates and undertaking preclinical studies and manufacturing. The Company does not have any product candidates approved for sale and has not generated any revenue from product sales. The Company’s product candidates are subject to long development cycles and the Company may be unsuccessful in its efforts to develop, obtain regulatory approval for or market its product candidates.

The Company has funded its operations to date primarily through private sales of redeemable convertible preferred stock.

Going Concern

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

(Subtopic 205-40),

the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

The Company has incurred recurring negative cash flows since inception and has funded its operations primarily from the sale of redeemable convertible preferred stock. The Company had an accumulated deficit of $74.3 million as of December 31, 2019. The Company had net losses of $18.0 million and $30.7 million for the years ended December 31, 2018 and 2019, respectively. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future.

As of July 29, 2020, the issuance date of these consolidated financial statements for the year ended December 31, 2019, the Company expects its cash and cash equivalents of $45.3 million as of December 31, 2019 will not be sufficient to fund the operating expenses and capital expenditure requirements necessary to advance its research efforts and clinical trials for one year from the issuance date of these consolidated financial statements and the Company will need to obtain additional funding. Upon reaching certain clinical development milestones for the Company’s primary clinical candidate, as defined in the terms of the Series B Redeemable Convertible Preferred Stock (“Series B”) stock purchase agreement, the Company is eligible to receive funding through the additional sale of Series B (see Note 6) in the amount of $35.8 million. In addition, the Company intends to pursue a public offering of its common stock to fund future operations. There can be no assurances, however, that the current operating plan or clinical development milestone will be achieved or that additional funding will be available or on terms acceptable to the Company. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects.

Based on the Company’s recurring losses and negative cash flows from operations since inception, expectation of continuing operating losses and negative cash flows from operations for the foreseeable future, and the need to raise additional capital to finance its future operations, the Company’s management concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year after the issuance date of the consolidated financial statements for the year ended December 31, 2019.

The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Summary of Significant Accounting Policies

9 Months Ended

12 Months Ended

Sep. 30, 2020

Dec. 31, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

COVID-19

Pandemic

With the ongoing

COVID-19

global pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the

COVID-19

pandemic on its employees and its business, including its preclinical studies and its ongoing clinical trial. The Company has taken measures to secure its research and development activities, while work in its laboratories and facilities has been

re-organized

to reduce risks of

COVID-19

transmission. Given the global impact and the other risks and uncertainties associated with the pandemic, the Company’s business, financial condition and results of operations could be materially adversely affected. The Company continues to closely monitor the

COVID-19

pandemic and evolve its business continuity plans, clinical development plans and response strategy to mitigate any potential impact. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from those estimates, and any such differences may be material to the Company’s financial statements.

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements of the Company include the accounts of its wholly owned subsidiary, Oncorus Securities Corporation. All intercompany transactions have been eliminated in consolidation. The Company has one operating segment.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, the estimated fair value of the Company’s common stock and share-based awards utilized for stock-based compensation purposes, the Company’s Series B tranche rights (see Note 5), accrued expenses, and amounts of expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Classification and Measurement of Series

A-1

and Series B Redeemable Convertible Preferred Stock

Upon the closing of the IPO on October 6, 2020, all shares of preferred stock converted into common stock. Prior to the IPO, the Company classified its Series

A-1

Redeemable Convertible Preferred Stock (“Series

A-1”)

and Series B Redeemable Convertible Preferred Stock (“Series B”) outside of permanent equity because the shares of Series

A-1

and Series B contained certain redemption features that resulted in the Series

A-1

and Series B being redeemable (i) at the option of the holder or (ii) upon the occurrence of events that were not solely within the control of the Company. As a result of these redemption provisions, the Series

A-1

and Series B were recorded outside of permanent equity and were subject to subsequent measurement under the guidance provided under ASC

480-10-S99.

While the Series

A-1

and Series B were not currently redeemable, the Series

A-1

and Series B were probable of becoming redeemable, and the Company elected to recognize changes in the redemption amount over the period from the date of issuance to the earliest possible redemption date. Changes in the redemption amount were recognized as a deemed dividend and presented as a reduction to income attributable to common stockholders.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with

in-process

equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. The Company recorded deferred offering costs related to the IPO of approximately $1.5 million as of September 30, 2020. Upon the closing the IPO in October 2020, the deferred offering costs were recorded against the IPO proceeds as a reduction of additional

paid-in

capital.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company has all of its cash at one financial institution, that management believes to be of high credit quality, in amounts that exceed federally insured limits. Cash equivalents consist of money market funds that invest primarily in U.S. government-backed securities and treasuries.

The Company is dependent upon a third-party contract manufacturer and third-party contract research organizations for the performance of portions of its testing for

pre-clinical

and clinical studies. The Company believes that its relationships with these organizations are satisfactory, and that alternative suppliers of these services are available in the event of the loss of one or more of these suppliers.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1

—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2

—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly, such as quoted market prices, interest rates, and yield curves.

Level 3

—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent a valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair values requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized as Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company’s cash equivalents, classified within Level 1, are valued using net asset value per share for the money market funds.

The tranche rights granted to the Series B stockholders (the “Series B Tranche Rights”) were classified within Level 3 of the fair value hierarchy because they were valued using significant inputs not observable in the market. The valuation of the tranche rights used assumptions the Company believed would be made by a market participant. The Company assessed these estimates on an ongoing basis as additional data impacting the assumptions was obtained. Refer to Note 5 for additional information regarding the valuation of the tranche rights.

The Company believes that the carrying amounts of prepaid expenses, other current assets, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of those instruments.

Research Contract Costs and Accruals

The Company has entered into various research service arrangements under which vendors perform various services. The Company records accrued expenses for estimated costs incurred under the arrangements. When evaluating the adequacy of the accrued expenses, the Company analyzes the progress of the studies, trials or other services performed, including invoices received and contracted costs. Judgments and estimates are made in determining the accrued expense balances at the end of each reporting period.

Net Loss Per Share

Net loss per share attributable to common stockholders is calculated using the

two-class

method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s shares of common stock and participating securities. Prior to conversion in connection with the IPO, the Company’s Series

A-1

and Series B contained participating rights in any dividend paid by the Company and were therefore participating securities. Net loss attributable to common stockholders and participating securities is allocated to each share on an

as-converted

basis as if all of the earnings for the period had been distributed. However, the participating securities do not include a contractual obligation to share in the losses of the Company and are not included in the calculation of net loss per share in the periods that have a net loss. In addition, common stock equivalent shares (whether or not participating) are excluded from the computation of diluted earnings per share in periods in which they have an anti-dilutive effect on net loss per share.

Diluted net loss per share is computed using the more dilutive of (a) the

two-class

method or (b) the

if-converted

method and treasury stock method, as applicable. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share is equivalent to basic net loss per share for the periods presented herein because common stock equivalent shares from the Series

A-1,

Series B, restricted stock, stock option awards and outstanding warrants to purchase common stock (see Note 10) were anti-dilutive.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU

No. 2016-02,

Leases

(“ASU

2016-02”).

ASU

2016-02

will require lessees to recognize most leases on their balance sheet as a

right-of-use

asset and a lease liability. Leases will be classified as either operating or finance leases, and classification will be based on criteria similar to current lease accounting, but without explicit bright lines. For emerging growth companies (“EGCs”) such as the Company, ASU

2016-02,

as amended, will be effective for annual reporting periods beginning after December 15, 2021 and interim periods for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the full impact that the adoption of ASU

2016-02

is expected to have on its financial statements; however the adoption of ASU

2016-02

will require the recognition at the adoption date of both a lease liability, based on the present value of future lease payments, and a corresponding

right-to-use

asset, which amounts the Company expects to be material.

In August 2018, the FASB issued ASU

No. 2018-13,

Fair Value Measurement (Topic 820)—Disclosure Framework

(“ASU

2018-13”),

which improves the disclosure requirements for fair value measurements. For EGCs, ASU

2018-13

was effective for the Company for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted ASU

2018-13

effective as of January 1, 2020 and that adoption did not have a material impact on the consolidated financial statements.

2. Summary of Significant Accounting Policies

Basis of Presentation

These consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and ASU of the FASB.

Principles of Consolidation

The accompanying consolidated financial statements of the Company include the accounts of its wholly owned subsidiary, Oncorus Securities Corporation. All intercompany transactions have been eliminated in consolidation. The Company has one operating segment.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimates, which include, but are not limited to, the estimated fair value of the Company’s common stock and share-based awards utilized for stock-based compensation purposes, the Company’s Series

A-1

and Series B tranche rights (see Note 6), accrued expenses, and amounts of expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company has all of its cash at one financial institution that management believes to be of high credit quality, in amounts that exceed federally insured limits. Cash equivalents consist of money market funds that invest primarily in U.S. government-backed securities and treasuries.

The Company is dependent upon a third-party contract manufacturer and third-party contract research organizations for the performance of portions of its testing for

pre-clinical

Research and Development Expenses

Research and development expenses are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including compensation-related expenses for research and development personnel, including stock-based compensation expense, preclinical and clinical activities, costs of manufacturing, overhead expenses including facilities and laboratory expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation and amortization.

Upfront and annual license payments related to acquired technologies or technology licenses which have not yet reached technological feasibility and have no alternative future use are also included in research and development expense for the period in which they are incurred.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs, including stock-based compensation expense, for personnel in executive, finance and accounting, business development, operations and administrative functions. General and administrative expenses also include fees for legal, consulting, accounting and audit services as well as insurance, outside service providers, direct and allocated facility-related costs and depreciation and amortization.

Interest Income on Investments

Interest income is separately presented on the consolidated statements of operations and comprehensive loss and consists of interest on cash and cash equivalents.

Cash and Cash Equivalents

The primary objectives for the Company’s investment portfolio are the preservation of capital and maintenance of liquidity. The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At December 31, 2018 and 2019, cash and cash equivalents include bank demand deposits and money market funds that invest primarily in U.S. government-backed securities and treasuries. Cash equivalents are stated at cost, which is substantially equivalent to fair value.

Property and Equipment, Net

Property and equipment are recorded at cost. Expenditures for major renewals or betterments that extend the useful lives of property and equipment are capitalized; expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is calculated on a straight-line basis over the estimated useful lives of the related assets. Property and equipment are depreciated as follows:


ASSET TYPE		ESTIMATED USEFUL LIFE
Computer equipment and software		3-5 years
Furniture and fixtures		5 years
Laboratory equipment		5 years

Leasehold improvements		Shorter of lease term or estimated useful life

Upon retirement or sale, the cost and related accumulated depreciation and amortization of assets disposed of are removed from the accounts, and any resulting gain or loss is included in loss from operations as a component of other income (expense).

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review were to be performed to evaluate a long-lived asset for recoverability, the Company would compare forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized if estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. To date, the Company has not recorded any impairment losses on long-lived assets.

Fair Value Measurements

Level

—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level

—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

The Company’s cash equivalents, classified within Level 1, are valued using net asset value per share for the money market funds.

The Company’s Series

A-1

and Series B tranche rights are classified within Level 3 of the fair value hierarchy because they are valued using significant inputs not observable in the market. The valuation of tranche rights uses assumptions the Company believes would be made by a market participant. The Company assesses these estimates on an

on-going

basis as additional data impacting the assumptions is obtained. Refer to Note 6 for additional information regarding the valuation of the Series

A-1

and Series B tranche rights.

Research Contract Costs and Accruals

Deferred Rent

The Company has received tenant improvement consideration from its landlord as well as free rental periods, each of which are amortized on a straight-line basis over the term of the lease.

Patent Costs

The Company expenses patent costs as incurred and records such costs within general and administrative expenses.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ (deficit) equity that result from transactions and economic events other than those with stockholders. For all periods presented, net loss is the same as comprehensive loss as there are no comprehensive income items.

Classification and Measurement of Series

A-1

and Series B Redeemable Convertible Preferred Stock

The Company has classified its Series

A-1

Redeemable Convertible Preferred Stock (“Series

A-1”)

and Series B outside of permanent equity because the shares of Series

A-1

and Series B contain certain redemption features that result in the Series

A-1

and Series B being redeemable (i) at the option of the holder or (ii) upon the occurrence of events that are not solely within the control of the Company. As a result of these redemption provisions, the Series

A-1

and Series B are recorded outside of permanent equity and are subject to subsequent measurement under the guidance provided under ASC

480-10-S99.

While the Series

A-1

and Series B are not currently redeemable, the

Series A-1

and Series B are probable of becoming redeemable, and the Company has elected to recognize changes in the redemption amount over the period from the date of issuance to the earliest possible redemption date. Changes in the redemption amount are recognized as a deemed dividend and presented as a reduction to income attributable to common stockholders.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the consolidated financial statement and tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be realized and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. The potential for recovery of deferred tax assets is evaluated by analyzing carryback capacity in periods with taxable income, reversal of existing taxable temporary differences and estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a

two-step

process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed

more-likely-than-not

to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. The Company recognizes any interest and penalties related to uncertain tax positions in income tax expense.

Stock-Based Compensation

The Company measures all stock options and other stock-based awards granted based on the fair value of the award on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company has elected to recognize forfeitures as they occur. The reversal of compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service or performance condition is recognized in the period of the forfeiture. Generally, the Company issues stock options and restricted stock awards with only service-based vesting conditions and records the expense for these awards using the straight-line method over the requisite service period. In November 2018, the Company granted a performance-based option to an employee with a total fair value of $0.1 million. A portion of these options vested upon the closing of the Series B financing and stock compensation of $0.04 million was recorded in 2019 related to these vested options. The vesting condition for the remainder of these options was not considered probable and as a result, no stock-based compensation was recorded related to this portion of the award during the year ended December 31, 2019.

Prior to the adoption of ASU No. 2018-07,

Compensation—Stock Compensation

(Topic 718) on January 1, 2019, the Company measured stock-based awards granted to

non-employee

consultants based on the fair value of the award on the date on which the related service was complete. Compensation expense was recognized over the period during which services were rendered by such consultants and

non-employees

until completed. At the end of each reporting period prior to completion of the service, the fair values of these awards were remeasured using the then-current fair value of the Company’s common stock and updated assumption inputs in the Black-Scholes option-pricing model. There was no material impact to the consolidated financial statements as a result of the adoption of ASU

No. 2018-07.

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

The Company estimates the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid,

Valuation of

Privately-Held Company Equity Securities Issued as Compensation

. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold redeemable convertible preferred stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options and restricted stock at each valuation date, as applicable.

The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model. The Company is a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the biotechnology industry with characteristics similar to the Company. 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 non-employees 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 zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Net Loss Per Share

Net loss per share attributable to common stockholders is calculated using the

two-class

method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities. The Company’s Series

A-1

and Series B contain participating rights in any dividend paid by the Company and are therefore participating securities. Net loss attributable to common stockholders and participating securities is allocated to each share on an

as-converted

Diluted net loss per share is computed using the more dilutive of (a) the

two-class

method or (b) the

if-converted

method and treasury stock method, as applicable. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share is equivalent to basic net loss per share for the years presented herein because common stock equivalent shares from the Series

A-1,

Series B, restricted stock, stock option awards and outstanding warrants to purchase common stock (see Note 8) were anti-dilutive.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be delayed or abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss. During 2019, the Company incurred $1.5 million of deferred offering costs related to the Company’s proposed initial public offering (“IPO”). These offering costs were expensed at December 31, 2019 due to the expected timing of the Company’s proposed IPO.

Pro Forma Financial Information (unaudited)

Upon the closing of a qualified IPO (as defined in the Company’s Certificate of Incorporation), all of the Company’s outstanding shares of Series

A-1

and Series B will automatically convert into shares of common stock. The unaudited pro forma basic and diluted net loss per share in the accompanying consolidated statements of operations and comprehensive loss for the year ended December 31, 2019 have been computed to give effect to the automatic conversion of all outstanding shares of Series

A-1

and Series B into shares of common stock. The unaudited pro forma basic and diluted net loss per share for the year ended December 31, 2019 was computed using the weighted average number of shares of common stock outstanding, including the pro forma effect of the conversion of all outstanding shares of the Series

A-1

and Series B into shares of common stock, as if the Company’s proposed IPO had occurred on the later of January 1, 2019 or the original issuance dates of the Series

A-1

and Series B. The unaudited pro forma net loss per share does not include the shares expected to be sold or related proceeds to be received in the proposed IPO. The unaudited pro forma net loss per share also excludes the dividends and accretion of the

Series A-1

and Series B as the Series

A-1

and Series B are assumed to be converted at the beginning of the period or the date of issuance, if later.

The following table summarizes the Company’s unaudited pro forma net loss per share attributable to common stockholders (in thousands, except per share data):


	YEAR ENDED DECEMBER 31, 2019
Numerator:
Net loss attributable to common stockholders	$	(34,991	)
Accretion of discount and dividends on redeemable convertible preferred stock		4,287

Pro forma net loss attributable to common stockholders	$	(30,704	)

Denominator:
Weighted average number of common shares outstanding		935
Pro forma weighted average shares outstanding after giving effect to the conversion of redeemable convertible preferred stock		8,225

Pro forma weighted average common shares outstanding		9,160

Pro forma basic and diluted net loss per share attributable to common stockholders, basic and diluted	$	(3.35	)

In November 2018, the Company granted a performance-based stock option to an employee for which a portion of the vesting is triggered by completion of an IPO. The stock-based compensation expense related to the vesting of this performance award is not included in the pro forma amounts above as the impact would be immaterial.

Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the date the financial statements are issued for potential recognition or disclosure in the financial statements. The Company has completed an evaluation of all subsequent events after the audited balance sheet date of December 31, 2019 through the date the financial statements were issued, to ensure that these financial statements include appropriate disclosure of events both recognized in the financial statements as of December 31, 2019 and events which occurred subsequently but were not recognized in the financial statements. Refer to Note 14 for disclosure of material subsequent events.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU

No. 2016-02,

Leases

(“ASU 2016-02”). ASU 2016-02 will

require lessees to recognize most leases on their balance sheet as

a right-of-use asset

and a lease liability. Leases will be classified as either operating or finance leases, and classification will be based on criteria similar to current lease accounting, but without explicit bright lines. For emerging growth companies (“EGCs”), such as the Company, ASU

2016-02,

as amended, will be effective for annual reporting periods beginning after December 15, 2021 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the full impact that the adoption of

ASU 2016-02 is

expected to have on its financial statements; however, the adoption of ASU

2016-02

will require the recognition at the adoption date of both a lease liability, based on the present value of future lease payments, and a corresponding

right-to-use

asset, which amounts the Company expects to be material. The future lease payment obligations as of December 31, 2019 are disclosed in Note 11.

In August 2018, the FASB issued ASU

No. 2018-13,

Fair Value Measurement (Topic 820)—Disclosure Framework

(“ASU

2018-13”),

which improves the disclosure requirements for fair value measurements. For EGCs, ASU

2018-13

will be effective for the Company for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for any removed or modified disclosures. The Company is currently evaluating the impact that the adoption of ASU

2018-13

is expected to have on its financial statements.

Series A-1 and Series B Tranche Rights

9 Months Ended

12 Months Ended

Sep. 30, 2020

Dec. 31, 2019

Warrants and Rights Note Disclosure [Abstract]

Series A-1 and Series B Tranche Rights

5. Series B Tranche Rights

Included in the terms of the purchase agreement for the Series B (“Series B Purchase Agreement”) were Series B Tranche Rights granted to the purchasers of the Series B.

The Series B Tranche Rights provided the holders with the right to purchase additional shares of Series B, in a second tranche, upon either the achievement by the Company of certain clinical development milestones for the Company’s primary clinical candidate, as set forth in the Series B Purchase Agreement, or upon the election of certain holders of the Series B prior to August 5, 2021. In the second tranche, the Company had the ability to sell up to 41,690,117 shares of Series B at $0.8597 per share. The Company reached the clinical development milestones set forth in the Series B Purchase Agreement in September 2020 and the Company sold 41,690,177 shares of Series B at $0.8597 per share, resulting in total gross proceeds to the Company of $35.8 million.

At the time of issuance, the Series B Tranche Rights met the definition of a freestanding financial instrument, as the Series B Tranche Rights were both legally detachable and separately exercisable from the Series B. In addition, the Company determined at the time of issuance that the Series B Tranche Rights met the definition of a liability (or in some circumstances, an asset) because the Series B Tranche Rights (i) embodied an obligation to repurchase the Company’s equity shares and (ii) may have required the Company to settle the obligation by transferring assets. As a result, upon issuance, the respective Series B Tranche Rights were initially recorded at fair value and were subsequently

re-measured

at the end of each reporting period until settlement. Changes in the fair value were recognized as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

At December 31, 2019 and at the end of each reporting period prior to settlement in September 2020, the estimated fair value of the Series B Tranche Rights was determined using a probability weighted present value model that considered the probability of triggering the Series B Tranche Rights through achievement of the clinical development milestones specified in the Series B Purchase Agreement. The Company converted the future values to their present values using a discount rate it considered to be appropriate for probability adjusted cash flows. The estimates were based, in part, on subjective assumptions. Significant assumptions for the Series B Tranche Rights valuations at December 31, 2019 and in 2020, prior to settlement, included an 85% to 90% range of probability of achieving the clinical development milestones and discount rates ranging from 0.2% to 1.9%.

The Company remeasured the fair value of the tranche rights for a final time at the date of settlement on September 17, 2020. As the clinical development milestones triggering the tranche closing were achieved, the fair value of the tranche rights at settlement was derived based on the implied intrinsic value of the Series B on the day of the second tranche closing event. The fair value of the Series B at settlement was $1.18 per share and was based on the probability of the conversion of the Series B upon an IPO and the expected value of the shares, on a converted basis, in an IPO. The increase in the probability of the achievement of the milestone, as well as the increase in the fair value of the Series B, resulted in an increase of $10.6 million in the fair value of the Series B Tranche Rights in the three months ended September 30, 2020 that was recognized as a loss in the accompanying unaudited interim condensed consolidated statement of operations and comprehensive loss at settlement. The balance of the Series B Tranche Rights of $13.1 million was reclassified at settlement to increase the Series B carrying value on the accompanying unaudited interim condensed consolidated balance sheet.

A rollforward of the Series B Tranche Rights liability for the nine months ended September 30, 2020 is as follows (in thousands):


	SERIES B TRANCHE RIGHTS
Balance at December 31, 2019	$	1,876
Change in fair value		11,256
Reclassification of Series B Tranche Rights upon settlement		(13,132	)

Balance at September 30, 2020	$	—

6. Series

A-1

and Series B Tranche Rights

Series A-1 Tranche Rights

Included in the terms of the purchase agreement for the Series

A-1

(“Series

A-1

Purchase Agreement”) were tranche rights granted to the purchasers of the Series

A-1

(“Series A-1 Tranche Rights”).

The Series A-1 Tranche Rights provided the holders with the right to purchase additional shares of Series

A-1

and Series

A-2

Redeemable Convertible Preferred Stock (“Series

A-2”)

in two additional future tranches. The first tranche was for the purchase of additional shares of

Series A-1

and was based upon the passage of time. The second tranche was for the purchase of Series

A-2

and was based upon the Company achieving certain future clinical development milestones. These collective Series A-1 Tranche Rights met the definition of a freestanding financial instrument, as the Series A-1 Tranche Rights were both legally detachable and separately exercisable from the

Series A-1.

In addition, the Company determined the Series A-1 Tranche Rights met the definition of a liability (or in some circumstances, an asset) because the Series A-1 Tranche Rights (i) embodied an obligation to repurchase the Company’s equity shares and (ii) may have required the Company to settle the obligation by transferring assets. As a result, upon issuance, the respective Series A-1 Tranche Rights were initially recorded at fair value and subsequently

re-measured

at fair value each reporting period (and at settlement, as applicable). Changes in the fair value were recognized as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

While outstanding, the estimated fair value of the Series A-1 Tranche Rights was determined using a probability-weighted present value model that considered the probability of triggering the Series A-1 Tranche Rights through achievement of the clinical development milestones specified in the Series

A-1

Purchase Agreement. The Company converted the future values to their present values using a discount rate it considered to be appropriate for probability-adjusted cash flows. The estimates were based, in part, on subjective assumptions. Changes to these assumptions could have had a significant impact on the reported fair value of the Series A-1 Tranche Rights.

Upon the issuance of Series

A-1

in June 2017, the Company settled the first tranche of the Series A-1 Tranche Rights. The clinical development milestones set forth in the Series

A-1

Purchase Agreement that would have triggered the issuance of shares of

Series A-2

were ultimately not met. In response, on September 6, 2018, an Amended and Restated Series

A-1

Stock Purchase Agreement was adopted, which allowed for (i) the holders of the Series

A-1

to purchase 30,599,992 shares of Series

A-1

at $0.80 per share in lieu of any

Series A-2

shares, (ii) the termination of any remaining rights and obligations associated with the Series A-1 Tranche Rights and (iii) the

Series A-2

no longer being an authorized class of capital stock.

This modification to the terms of the Series A-1 Tranche Rights was treated, in effect, as a settlement of the Series A-1 Tranche Rights and subsequent issuance of Series

A-1.

As settlement pursuant to its original terms was not expected to occur, the fair value of the Series A-1 Tranche Rights was deemed to be zero, resulting in a $0.4 million gain recorded in other income (expense) in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2018.

Series B Tranche Rights

Included in the terms of the purchase agreement for the Series B (“Series B Purchase Agreement”) were tranche rights granted to the purchasers of the Series B (“Series B Tranche Rights”).

The Series B Tranche Rights provide the holders with the right to purchase additional shares of Series B, in a future tranche, upon either the achievement by the Company of certain clinical development milestones for the Company’s primary clinical candidate, as set forth in the Series B Purchase Agreement, or upon the election of certain holders of the Series B prior to August 5, 2021. In the future tranche, the Company may sell up to 41,690,117 shares of Series B at $0.8597 per share, the full amount of which would result in gross proceeds to the Company of $35.8 million.

At the time of issuance, the Series B Tranche Rights met the definition of a freestanding financial instrument, as the Series B Tranche Rights are both legally detachable and separately exercisable from the Series B. In addition, the Company determined at the time of issuance that the Series B Tranche Rights met the definition of a liability (or in some circumstances, an asset) because the Series B Tranche Rights (i) embody an obligation to repurchase the Company’s equity shares and (ii) may require the Company to settle the obligation by transferring assets. As a result, upon issuance, the respective Series B Tranche Rights were initially recorded at fair value and are subsequently

re-measured

at fair value each reporting period until settlement. Changes in the fair value are recognized as a component of other income (expense) in the consolidated statements of operations and comprehensive loss.

While outstanding, the estimated fair value of the Series B Tranche Rights is determined using a probability-weighted present value model that considers the probability of triggering the Series B Tranche Rights through achievement of the clinical development milestones specified in the Series B Purchase Agreement. The Company converts the future values to their present values using a discount rate it considers to be appropriate for probability-adjusted cash flows. The estimates are based, in part, on subjective assumptions. Changes to these assumptions could have a significant impact on the reported fair value of the Series B Tranche Rights. Significant assumptions for the Series B Tranche Rights valuations at execution and December 31, 2019 include an 85% probability of achieving the clinical development milestones at both dates and a discount rate of 1.9% and 1.6%, respectively.

A rollforward of the Series A-1 and Series B Tranche Rights liability for the years ended December 31, 2018 and 2019 is as follows (in thousands):


	SERIES A-1 TRANCHE RIGHTS			SERIES B TRANCHE RIGHTS
Balance at December 31, 2017	$	363		$	—
Change in fair value		(363	)		—

Balance at December 31, 2018		—			—
Change in fair value		—			—
Issuance of Series B tranche rights liability		—			1,876

Balance at December 31, 2019	$	—		$	1,876

Redeemable Convertible Preferred Stock

9 Months Ended

12 Months Ended

Sep. 30, 2020

Dec. 31, 2019

Temporary Equity Disclosure [Abstract]

Redeemable Convertible Preferred Stock

6. Redeemable Convertible Preferred Stock

At September 30, 2020, the Company had 180,725,292 shares of preferred stock, par value $0.0001 per share, in authorized capital, which consisted of 76,499,992 authorized, issued and outstanding shares of Series

A-1

and 104,225,300 authorized, issued and outstanding shares of Series B.

Upon the closing of the IPO on October 6, 2020, all of the outstanding shares of Series

A-1

and Series B automatically converted into an aggregate of 14,951,519 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. In connection with the closing of the IPO, the Company changed its authorized capital to include 10,000,000 shares of undesignated preferred stock with a par value of $0.0001 per share.

Issuance of Series B Redeemable Convertible Preferred Stock

In August 2019, the Company authorized and agreed to sell 92,477,021 shares of Series B in two tranches. The first tranche closed on dates between August 5, 2019 and August 27, 2019. On those dates, the Company sold a total of 55,486,215 shares of Series B at $0.8597 per share, for gross proceeds to the Company of $47.7 million. In November 2019, the Company authorized and agreed to sell 11,748,279 additional shares of its Series B to new investors on the same terms and conditions as the previous sale of Series B. The first tranche of this sale occurred on November 27, 2019, in which the Company sold 7,048,968 shares of Series B for gross proceeds of $6.1 million. The Company paid $0.4 million of issuance costs related to these sales.

In September 2020, the Company achieved the second tranche milestones related to the clinical development of its lead product candidate,

ONCR-177.

Upon achievement of the milestones, the Series B investors became obligated to purchase additional shares of Series B in a second tranche closing and the Company issued an aggregate of 41,690,117 shares of Series B at $0.8597 per share, for gross proceeds to the Company of $35.8 million. Upon closing of the second tranche, the Company considered whether there was any potential beneficial conversion feature, concluding that there was not, as the effective conversion price of the Series B was in excess of the fair value of the Company’s common stock.

The following is a description of the rights and privileges of the Series B and

A-1

prior to their conversion to common stock upon the IPO in October 2020:

Liquidation

In the event of any voluntary or involuntary liquidation, dissolution, or

winding-up

of the affairs of the Company or Deemed Liquidation Event (as defined below), each holder of a share of Series B was entitled to receive, prior and in preference to any distribution of any assets or surplus funds of the Company to the holders of Series

A-1

and common stock, an amount equal to $0.8597 per share, plus any accrued but unpaid dividends. After payment of the full liquidation preference to the holders of Series B, each holder of a share of Series

A-1

was entitled to receive, in preference to any distribution of any of the assets or surplus funds of the Company to the holders of common stock, an amount equal to an issuance price of $0.80 per share, plus any accrued but unpaid dividends. If upon such liquidation event, the assets of the Company available for distribution were insufficient to permit payment in full to the holders of the Series B, the proceeds were to be ratably distributed among the holders of Series B. If the assets of the Company available for distribution were sufficient to pay the Series B holders in full, but insufficient to permit payment in full to the holders of Series

A-1,

the remaining proceeds were to be ratably distributed among the holders of Series

A-1.

Any remaining proceeds after full payment to the holders of Series B and Series

A-1

that were available to the holders of Series B, Series

A-1

and common stock were to be shared proportionately on an

as-converted

basis. As of September 30, 2020, the aggregate liquidation value of the Series B and

A-1

shares was $94.5 million and $68.4 million, respectively.

Unless otherwise elected by 68% of the Series B holders, including certain identified Series B holders, a merger or consolidation involving the Company in which the stockholders of the Company did not own a majority of the outstanding shares of the surviving company was considered to be a Deemed Liquidation Event. A sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company was also considered a Deemed Liquidation Event.

Redemption

Upon the demand of the holders of at least 68% of the then outstanding shares of Series B, including certain identified Series B holders, but not prior to August 5, 2026, the Company had the obligation to redeem from each holder of Series B and Series

A-1

on an equal basis, in three annual installments, the then outstanding shares of Series B and

A-1

at an amount equal to the greater of (a) the Series B and

A-1

at their original issue prices of $0.8597 and $0.80 per share, respectively, plus any declared but unpaid dividends or (b) the then fair market value of the Series B and Series

A-1

on the date of receipt of the redemption request. This redemption feature resulted in the Series B and Series

A-1

being redeemable at the option of the holder (based on the passage of time). As a result, the Series B and Series

A-1

were recorded outside of permanent equity and subject to subsequent measurement under the guidance provided under ASC

480-10-S99.

While the Series B and Series

A-1

were not currently redeemable, the Series B and

Series A-1

were probable of becoming redeemable, and the Company elected to recognize changes in the redemption amount over the period from the date of issuance to the earliest possible redemption date of the Series B and

Series A-1.

Changes in the redemption amount were recognized as a deemed dividend and presented as a reduction to income attributable to common stockholders.

Conversion

Each share of Series B and Series

A-1

was convertible at the option of the holder at any time and without the payment of any additional consideration into that number of fully paid and

non-assessable

shares of common stock as was determined by dividing the original issue price of the Series B or Series

A-1

by the conversion price in effect at the time of conversion. The initial conversion prices of the Series B and Series

A-1

were equal to the original issuance prices of the Series B and Series

A-1,

respectively.

All outstanding shares of Series B and Series

A-1

were automatically convertible into common stock, based upon either: (i) the vote or written consent of holders of at least 68% of the Series B outstanding at that time, including certain identified Series B holders, or (ii) the closing of a firm commitment, underwritten initial public offering, in which the aggregate proceeds to the Company were at least $50.0 million, and having a valuation of the Company, immediately prior to the IPO, of at least $200.0 million. On October 6, 2020, all shares of Series B and Series

A-1

converted at a rate of 0.0827 shares of common stock for each share of convertible preferred stock.

Pay to Play Requirement

All Series B holders were subject to a

pay-to-play

clause according to which

non-participating

investors in the second tranche described above would be required to convert all their Series B to common stock at a conversion ratio of one share of common stock for every 10 shares of Series B.

All Series

A-1

investors were subject to a

pay-to-play

clause according to which

non-participating

investors in later tranches of Series

A-1

offering would be required to convert all their shares of Series

A-1

to common stock at the then applicable conversion ratio. As of September 6, 2018, three investors chose not to participate in the Company’s second tranche of its Series

A-1

offering and had an aggregate of 168,750 shares of Series

A-1

converted into an aggregate of 13,959 shares of the Company’s common stock.

Voting Rights

The holders of Series B were entitled to vote, together with the holders of Series

A-1

and common stock, on all matters submitted to stockholders for a vote. Each share of Series B and Series

A-1

were entitled to the number of votes equal to the number of shares of common stock into which each share of Series B and Series

A-1

were convertible at the time of such vote. At all times during which at least 2,250,000 shares of Series

A-1

remained outstanding, the holders of the outstanding shares of Series

A-1

had the exclusive right, separately from the Series B and common stock, to elect three directors of the Company. The holders of the Series B had the right, exclusively and as a separate class, to elect one director of the Company.

Dividends

Series B holders were entitled to receive dividends at an annual rate of $0.06877 per share, which accrued from day to day, whether or not such dividends were declared by the Board of Directors, and were cumulative. The dividends were payable only when and if declared by the Board of Directors. The Company could not declare, pay or set aside any dividends on any other shares of capital stock unless the Series B holders first received, or simultaneously received, a dividend in an amount at least equal to the amount of the aggregate accumulated dividends that were accrued but not previously paid, or an amount equal to a formula, which was tied to dividends paid on other classes of stock.

Holders of the Series

A-1

were entitled to dividends at an annual rate of $0.064 per share. Prior to the issuance of the Series B, Series

A-1

dividends were payable only when, as, and if declared by the Board of Directors, and the Company was under no obligation to pay any dividends. Upon the issuance of Series B, the Series

A-1

dividend terms were modified such that the Series

A-1

dividends became cumulative and began accruing from the dates of original issuance of the Series

A-1.

Dividends were first payable to the Series B holders and, thereafter, to the holders of Series

A-1

in the same manner as in the case of Series B (i.e., accrued dividends not yet paid or a payment formula tied to dividends paid on other classes of stock). That is, upon declaring a dividend to common stock, the holders of the Series B and Series

A-1

had a right to receive (i) any unpaid cumulative dividends or (ii) dividends that functioned on an

“as-if”

converted basis, with the Series B holders having a dividend preference over the holders of Series

A-1

in the order of payout.

No dividends were paid to the holders of Series B or Series

A-1

prior to the conversion of the convertible preferred stock into common stock in connection with the IPO.

7. Redeemable Convertible Preferred Stock

At December 31, 2019, the Company had 180,725,292 shares of preferred stock, par value $0.0001 per share, in authorized capital. At December 31, 2019, the preferred stock consisted of 76,499,992 authorized, issued and outstanding shares of Series

A-1

and 104,225,300 authorized and 62,535,183 issued and outstanding shares of Series B.

Issuances of Series

A-1

(and Series

A-1

Tranche Rights)

2016 Issuances

On March 31, 2016, the Company issued 4,612,500 shares of Series A Redeemable Convertible Preferred Stock (“Series A”) at a price of $1.00 per share and warrants (the “Common Stock Warrants”) to purchase 57,239 shares of common stock at an exercise price of $1.21 per share for aggregate gross proceeds of $4.6 million. Each Common Stock Warrant initially entitled the holder to purchase one share of common stock. The Company incurred issuance costs of $0.4 million directly associated with the issuance of the Series A.

On July 11, 2016, the Company and the holders of the Series A agreed to convert and exchange each share of Series A and each Common Stock Warrant into 1.25 shares of Series

A-1

and a Common Stock Warrant to purchase 1.25 shares of common stock.

In addition, on July 11, 2016, the Company issued 16,137,499 shares of Series

A-1

at a price of $0.80 per share for gross proceeds of $12.9 million. These shares of Series

A-1

included the Tranche Rights described in Note 6. For the first tranche, the Company agreed to issue 21,165,626 shares of Series

A-1

at $0.80 per share approximately one year following the initial issuance of Series

A-1.

The second tranche was for 22,086,537 shares of Series

A-2

at a price of $1.04 per share, respectively, and was dependent upon the achievement of certain clinical development milestones.

On October 27, 2016, the Company issued an additional 1,500,000 shares of Series

A-1

at a price of $0.80 per share for gross proceeds of $1.2 million. These Series

A-1

shares were issued with terms consistent with those noted above for the July 11, 2016 issuance of the Series

A-1

and also included Tranche Rights, on the same terms, for the future issuances of 1,500,000 shares of Series

A-1

for $0.80 and 1,538,462 shares of Series

A-2

for $1.04 per share.

2017 Issuances

In June 2017, the first tranche was settled, and the Company issued 22,665,626 shares of Series

A-1

at a price of $0.80 per share for gross proceeds to the Company of $18.1 million.

2018 Issuances

As previously disclosed in Note 6, the clinical development milestones set forth in the Series

A-1

Purchase Agreement that would trigger the issuance of shares of Series

A-2

were ultimately not met. In response, on September 6, 2018, an Amended and Restated Series

A-1

Stock Purchase Agreement was adopted, which allowed for (i) the holders of the Series

A-1

to purchase 30,599,992 shares of Series

A-1

at $0.80 per share in lieu of any Series

A-2

shares, (ii) the termination of any remaining rights and obligations associated with the Series A-1 Tranche Rights and (iii) the Series

A-2

no longer being an authorized class of capital stock.

Issuance of Series B Redeemable Convertible Preferred Stock

The second tranche of the Series B will occur upon either achievement by the Company of certain clinical development milestones, as set forth in the Series B Purchase Agreement, for the Company’s primary clinical candidate, or upon election of certain holders of Series B prior to August 5, 2021. For the second tranche, the Company may sell up to 41,690,117 shares of Series B at $0.8597 per share, the full amount of which would result in gross proceeds to the Company of $35.8 million.

The following is a description of the rights and privileges of the Series B and

A-1:

Liquidation

In the event of any voluntary or involuntary liquidation, dissolution, or

winding-up

of the affairs of the Company or Deemed Liquidation Event (as defined below), each holder of a share of Series B shall be entitled to receive, prior and in preference to any distribution of any assets or surplus funds of the Company to the holders of Series

A-1

shall be entitled to receive, in preference to any distribution of any of the assets or surplus funds of the Company to the holders of common stock, an amount equal to an issuance price of $0.80 per share, plus any accrued but unpaid dividends. If upon such liquidation event, the assets of the Company available for distribution are insufficient to permit payment in full to the holders of the Series B, the proceeds will be ratably distributed among the holders of Series B. If the assets of the Company available for distribution are sufficient to pay the Series B holders in full, but insufficient to permit payment in full to the holders of Series

A-1,

the remaining proceeds will be ratably distributed among the holders of

Series A-1.

Any remaining proceeds after full payment to the holders of Series B and Series A-1 are available to the holders of Series B,

Series A-1

and common stock to share proportionately on an

as-converted

basis. As of December 31, 2019, the aggregate liquidation value of the Series B

and A-1

shares was $55.3 million and $63.7 million, respectively.

Unless otherwise elected by 68% of the Series B holders, including certain identified Series B holders, a merger or consolidation involving the Company in which the stockholders of the Company do not own a majority of the outstanding shares of the surviving company is considered to be a Deemed Liquidation Event. A sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company is also considered a Deemed Liquidation Event.

Redemption

Upon the demand of the holders of at least 68% of the then outstanding shares of Series B, including certain identified Series B holders, but not prior to August 5, 2026, the Company shall redeem from each holder of Series B and Series

A-1

on an equal basis, in three annual installments, the then outstanding shares of Series B and

A-1

at an amount equal to the greater of (a) the Series B

and A-1

at their original issue prices of $0.8597 and $0.80 per share, respectively, plus any declared but unpaid dividends or (b) the then fair market value of the Series B and

Series A-1

on the date of receipt of the redemption request. This redemption feature results in the Series B and Series

A-1

being redeemable at the option of the holder (based on the passage of time). As a result, the Series B and Series

A-1

are recorded outside of permanent equity and subject to subsequent measurement under the guidance provided under ASC

480-10-S99.

While the Series B and Series

A-1

are not currently redeemable, the Series B and

Series A-1

are probable of becoming redeemable, and the Company has elected to recognize changes in the redemption amount over the period from the date of issuance to the earliest possible redemption date of the Series B and Series

A-1.

Changes in the redemption amount are recognized as a deemed dividend and presented as a reduction to income attributable to common stockholders.

Conversion

Each share of Series B and Series

A-1

are convertible at the option of the holder at any time and without the payment of any additional consideration into that number of fully paid and

non-assessable

shares of common stock as is determined by dividing the original issue price of the Series B or Series

A-1

by the conversion price in effect at the time of conversion. The initial conversion prices of the Series B and Series

A-1

are equal to the original issuance prices of the Series B and Series

A-1,

respectively.

All outstanding shares of Series B and Series

A-1

are automatically convertible into common stock, based upon either: (i) the vote or written consent of holders of at least 68% of the Series B outstanding at that time, including certain identified Series B holders, or (ii) the closing of a firm commitment, underwritten initial public offering, in which the aggregate proceeds to the Company are at least $50.0 million, and having a valuation of the Company, immediately prior to the initial public offering, of at least $200.0 million.

Pay to Play Requirement

All Series B holders are subject to a

pay-to-play

clause according to which

non-participating

investors in the second tranche described above would be required to convert all their Series B to common stock at a conversion ratio of one share of common stock for every 10 shares of Series B.

All Series

A-1

investors were subject to a

pay-to-play

clause according to which

non-participating

investors in later tranches of Series

A-1

offering would be required to convert all their shares of Series

A-1

to common stock at the then applicable conversion ratio.

As of September 6, 2018, three investors chose not to participate in the Company’s second tranche of its Series

A-1

offering and had an aggregate of 168,750 shares of

Series A-1

converted into an aggregate of 13,959 shares of the Company’s common stock.

Voting Rights

The holders of Series B are entitled to vote, together with the holders of Series A-1 and common stock, on all matters submitted to stockholders for a vote. Each share of Series B and Series

A-1

are entitled to the number of votes equal to the number of shares of common stock into which each share of Series B and Series

A-1

are convertible at the time of such vote. At all times during which at least 2,250,000 shares of

Series A-1

remain outstanding, the holders of the outstanding shares of

Series A-1

shall have the exclusive right, separately from the Series B and common stock, to elect three directors of the Company. The holders of the Series B shall have the right, exclusively and as a separate class, to elect one director of the Company.

Dividends

Series B holders are entitled to receive dividends at an annual rate of $0.06877 per share, which shall accrue from day to day, whether or not such dividends are declared by the Board of Directors, and shall be cumulative. The dividends shall be payable only when and if declared by the Board of Directors. The Company may not declare, pay or set aside any dividends on any other shares of capital stock unless the Series B holders first receive, or simultaneously receive, a dividend in an amount at least equal to the amount of the aggregate accumulated dividends that are accrued but not previously paid, or an amount equal to a formula, which is tied to dividends paid on other classes of stock.

Holders of the Series

A-1

shall be entitled to dividends at an annual rate of $0.064 per share. Prior to the issuance of the Series B, Series A-1 dividends were payable only when, as, and if declared by the Board of Directors, and the Company was under no obligation to pay any dividends. Upon the issuance of Series B, the Series A-1 dividend terms were modified such that the Series A-1 dividends became cumulative and began accruing from the dates of original issuance of the Series A-1. Dividends are first payable to the Series B holders and, thereafter, to the holders of Series

A-1

have a right to receive (i) any unpaid cumulative dividends or (ii) dividends that function on an

“as-if”

converted basis, with the Series B holders having a dividend preference over the holders of Series

A-1

in the order of payout.

Equity Incentive Plan

9 Months Ended

12 Months Ended

Sep. 30, 2020

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Equity Incentive Plan

8. Equity Incentive Plan

The Company adopted the 2016 Equity Incentive Plan, as amended, (the “2016 Plan”) on March 31, 2016. The 2016 Plan provided for the granting of stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock awards to employees, directors and

non-employees.

The Company reserved 2,736,105 shares of common stock for grants under the 2016 Plan. All option awards were granted with an exercise price equal to or greater than the market price of the Company’s stock at the date of grant. Option awards generally vest over three to four years. Certain option awards provide for accelerated vesting if there is a change in control as defined in the 2016 Plan.

On September 23, 2020, the Company adopted the 2020 Equity Incentive Plan (“the 2020 Plan”), which became effective upon the execution of the underwriting agreement related to the IPO and will serve as the successor to the 2016 Plan. The 2020 Plan authorizes the award of stock options, restricted stock awards (“RSAs”), stock appreciation rights (“SARs”), restricted stock units (“RSUs”), cash awards, performance awards and stock bonus awards. Under the 2020 Plan, 2,800,000 shares of common stock, plus any reserved shares not issued or subject to outstanding grants under the 2016 Plan on the effective date of the 2020 Plan are reserved for issuance pursuant to awards granted under the 2020 Plan. The number of shares reserved for issuance under the 2020 Plan will increase automatically on January 1 of each fiscal year, starting on January 1, 2021 and ending on and including January 1, 2030, by the number of shares equal to 5% of the aggregate number of outstanding shares of common stock as of the immediately preceding December 31, or a lesser number of shares as may be determined by the board of directors (or an authorized committee thereof).

Total stock-based compensation (including both stock option awards and restricted stock awards) was as follows:


	THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
	2020			2019			2020			2019
	(in thousands)
General and administrative		$	172		$	112		$	512		$	255
Research and development			168			89			447			156

Total stock-based compensation		$	340		$	201		$	959		$	411

Total stock-based compensation by award type was as follows:


	THREE MONTHS ENDED SEPTEMBER 30,						NINE MONTHS ENDED SEPTEMBER 30,
	2020			2019			2020			2019
	(in thousands)
Restricted stock		$	8		$	27		$	24		$	89
Stock options			332			174			935			322

Total stock-based compensation		$	340		$	201		$	959		$	411

In November 2018, the Company granted an employee an option to purchase 85,943 shares of the Company’s common stock having an exercise price per share equal to the fair value of the Company’s common stock on the date of the grant. This grant is included in the outstanding options in the summary table below. Vesting of the option is based on certain performance criteria and shall vest as follows: (i) 16.66% of the shares vested upon the first closing of the Company’s Series B stock financing, (ii) 33.33% of the shares vest in 24 equal monthly installments beginning with the first month following the initial closing of the Series B stock financing, (iii) 25% of the shares vested upon the IPO and (iv) 25% of the shares vest in 24 equal monthly installments beginning with the first month following the IPO. Upon the closing of the Series B financing in August 2019, the option vested immediately with respect to 14,323 shares, and an additional 28,647 option shares began vesting over the following 24 months. Upon the closing of the IPO in October 2020, the option vested immediately with respect to 21,485 shares and the remainder began vesting at that time.

In September 2020, the Company granted, contingent upon the Company entering into an underwriting agreement related to the IPO, certain employee options to purchase a total of 363,150 shares of the Company’s common stock having an exercise price equal to the IPO price. These options were granted on October 1, 2020, are not included in the table below and no stock compensation was recorded for these grants as of September 30, 2020.

A summary of option activity is presented below:


	SHARES			WEIGHTED AVERAGE EXERCISE PRICE			WEIGHTED- AVERAGE REMAINING CONTRACTUAL TERM (YEARS)		AGGREGATE INTRINSIC VALUE (IN THOUSANDS)
Outstanding at December 31, 2019		1,991,066			$	3.41
Granted		182,147				7.47
Exercised		(64,062	)			1.70
Canceled, expired or forfeited		—				—

Outstanding at September 30, 2020		2,109,151			$	3.81		8.4		$	23,604

Vested at September 30, 2020		791,272			$	2.70		7.8		$	9,736

The weighted average grant date fair value per share of options granted to employees, directors and

non-employee

consultants during the nine months ended September 30, 2020 and 2019 was $5.36 and $3.24, respectively. Total unrecognized compensation expense related to stock options amounted to $3.8 million at September 30, 2020 and is expected to be incurred over a weighted-average period of 3.0 years.

The total fair value of restricted shares vested during the nine months ended September 30, 2020 and 2019 was $0.02 million and $0.09 million, respectively.

At September 30, 2020, there were 19,048 shares of common stock available for grant under the 2016 Plan.

On September 23, 2020, the Company adopted the 2020 Employee Stock Purchase Plan, or the ESPP, which became effective upon the execution of the underwriting agreement related to the IPO. The Company has initially reserved 280,000 shares of common stock for sale under the ESPP. The aggregate number of shares reserved for sale under the ESPP will increase automatically on January 1st of each fiscal year starting on January 1, 2021 and ending on and including January 1, 2030, by the number of shares equal to the lesser of (a) 1% of the total number of shares of common stock outstanding on the last day of the fiscal year prior to the date of such automatic increase and (b) 560,000 shares, provided that prior to the date of any such increase, the board of directors may determine a less number of shares for such increase.

9. Equity Incentive Plan

The Company adopted the 2016 Equity Incentive Plan (the “Plan”) on March 31, 2016. The Plan, as amended, provides for the granting of stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock awards to employees, directors and

non-employees.

The Company has reserved 2,736,105 shares of common stock for grants under the Plan. All option awards are granted with an exercise price equal to or greater than the market price of the Company’s stock at the date of grant. Option awards generally vest over three to four years. Certain option awards provide for accelerated vesting if there is a change in control as defined in the Plan.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model using the range of assumptions for the years ended December 31, 2018 and 2019 as noted in the following table:


	YEARS ENDED DECEMBER 31,
	2018		2019
Expected volatility		71.4%-77.7%		77.0%-78.7%
Expected dividends		0.0%		0.0%
Expected term (in years)		6.1-10		6.1-10
Risk-free rate		2.8%-3.2%		1.4%-2.4%

Total stock-based compensation (including both stock option awards and restricted stock) was as follows:


	YEARS ENDED DECEMBER 31,
	2018		2019
	(in thousands)
General and administrative	$	207	$	361
Research and development		119		350

Total stock-based compensation	$	326	$	711

Total stock-based compensation by award type was as follows:


	YEARS ENDED DECEMBER 31,
	2018		2019
	(in thousands)
Restricted stock	$	199	$	116
Stock options		127		595

Total stock-based compensation	$	326	$	711

In November 2018, the Company granted an employee an option to purchase 85,943 shares of the Company’s common stock having an exercise price per share equal to the fair value of the Company’s common stock on the date of the grant. This grant is included in the outstanding options in the summary table below. Vesting of the option is based on certain performance criteria and shall vest as follows: (i) 16.66% of the shares vested upon the first closing of the Company’s Series B stock financing, (ii) 33.33% of the shares vest in 24 equal monthly installments beginning with the first month following the initial closing of the Series B stock financing, (iii) 25% of the shares vest on the date immediately prior to an IPO of the Company’s equity securities and (iv) 25% of the shares vest in 24 equal monthly installments beginning with the first month following the IPO. Upon the closing of the Series B financing in August 2019, the option vested immediately with respect to 14,318 shares, and an additional 28,645 option shares began vesting over the following 24 months. As of December 31, 2019, the vesting conditions of the options subject to an IPO were not considered probable, and no stock-based compensation was recorded related to this portion of the award.

A summary of option activity under the Plan is presented below:


	SHARES			WEIGHTED- AVERAGE EXERCISE PRICE		WEIGHTED- AVERAGE REMAINING CONTRACTUAL TERM (YEARS)		AGGREGATE INTRINSIC VALUE (IN THOUSANDS)
Outstanding at December 31, 2018		970,027		$	1.74
Granted		1,109,073			4.74
Exercised		(36,012	)		1.62
Canceled, expired or forfeited		(52,022	)		2.14

Outstanding at December 31, 2019		1,991,066		$	3.41		9.0	$	6,696

Vested at December 31, 2019		455,449		$	1.72		7.9	$	2,301

The weighted average grant date fair value of options granted to employees, directors

and non-employee consultants

during the years ended December 31, 2018 and 2019 was $1.21 and $3.26, respectively. Total unrecognized compensation expense related to stock options amounted to $3.7 million at December 31, 2019 and is expected to be incurred over a weighted-average period of 3.5 years.

The total fair value of restricted shares vested during the years ended December 31, 2018 and 2019 was $0.2 million and $0.1 million, respectively.

At December 31, 2019, there were 201,224 shares of common stock available for grant under the Plan.

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

10. Income Taxes

A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows:


	DECEMBER 31,
	2018			2019
Federal income tax benefit at statutory rate		21.0	%		21.0	%
State income tax, net of federal benefit		6.3			6.1
Permanent differences		0.2			(0.3	)
Research and development credit benefit		3.4			5.1
Change in valuation allowance		(30.9	)		(31.9	)

Effective income tax rate		—	%		—	%

The Company had a net loss for 2018 and 2019 and no income tax benefit has been recorded due to the full valuation allowance. The components of the Company’s deferred taxes at December 31, 2018 and 2019 are as follows (in thousands):


	DECEMBER 31,
	2018			2019
Deferred tax assets:
Net operating loss carryforwards (federal and state)	$	9,864		$	18,070
Tax credits (federal and state)		1,630			3,129
Accrued expenses and other liabilities		164			156
Capitalized research and development expenditures		835			835
Accrued landlord incentive		537			430
Stock based compensation		—			88

		13,030			22,708
Valuation allowance		(12,417	)		(22,201	)

Deferred tax liabilities:
Fixed assets		(613	)		(507	)

		(613	)		(507	)

Net deferred tax assets	$	—		$	—

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets for each period presented. The valuation allowance was $12.4 million as of December 31, 2018 and $22.2 million as of December 31, 2019. The increase in the valuation allowance of approximately $9.8 million in 2019 was primarily a result of operating losses generated with no corresponding financial statement benefit.

As of December 31, 2019, the Company had net operating loss carryforwards (“NOLs”) for federal income tax purposes of $66.4 million, of which $18.1 million will begin to expire in 2035, and approximately $48.3 million can be carried forward indefinitely. The Company also has $65.3 million of state net operating losses which expire at various dates through 2039. As of December 31, 2019, the Company also had available research and development tax credit carryforwards for federal and state income tax purposes of $2.3 million and $1.1 million, respectively, which begin to expire in 2035 and 2030, respectively. Utilization of the NOL carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the NOL carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed, and any limitation is known, no adjustments have been reflected in the deferred tax asset for NOLs.

For the year ended December 31, 2019, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.

The Company had no unrecognized tax benefits or related interest and penalties for the years ended December 31, 2018 and 2019.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from the year of formation to the present. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

The Company set up a Massachusetts securities corporation in 2019. The securities corporation is taxed on its investment income at the rate of 1.32%. The securities corporation was not material to the 2019 tax provision.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

Commitments and Contingencies

9 Months Ended

12 Months Ended

Sep. 30, 2019

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

9. Commitments and Contingencies

Leases

In May 2016, the Company entered into an operating lease agreement for its corporate headquarters in Cambridge, Massachusetts, with a seven-year term that expires in January 2024. Rental payments related to the lease commenced in January 2017.

In connection with this lease, the Company was entitled to cash incentives from the landlord to be used for the construction of leasehold improvements within the facility. The Company received $2.7 million of such incentives, which were recorded as deferred rent on the balance sheet and are being amortized to rent expense over the lease term.

The Company recognizes rent expense on a straight-line basis over the lease period and has recorded deferred rent for rent expense incurred but not yet paid. The Company recorded rent expense related to office and lab space under the lease of $0.4 million for each of the three months ended September 30, 2020 and 2019 and $1.1 million of rent expense for each of the nine months ended September 30, 2020 and 2019. The amount of variable rent expense for these periods was immaterial.

Future minimum lease payments for the Company’s operating leases as of September 30, 2020 were as follows (in thousands):


YEARS ENDING DECEMBER 31,
2020 (three months remaining)	$	370
2021		1,523
2022		1,569
2023		1,616
2024		48

	$	5,126

License and Royalty Agreements

The Company has entered into license and royalty agreements for intellectual property with certain parties. Such arrangements require ongoing payments, including payments upon the achievement of certain development, regulatory and commercial milestones, receipt of sublicense income, as well as royalties on commercial sales.

Payments under these arrangements are expensed as incurred. In connection with the first patient dosing in the Company’s clinical trial in June 2020, the Company became obligated to make certain milestone payments totaling $0.8 million.

The Company’s material license and collaboration agreements are summarized below.

Ospedale San Raffaele S.r.l. and Fondazione Telethon

In December 2015, the Company entered into a license agreement with Ospedale San Raffaele S.r.l. and Fondazione Telethon, as amended, for the use of certain patents and technology. The Company made an initial payment of $0.1 million, which amount was recorded as research and development expense. Under the terms of the license, the Company is required to pay an annual maintenance fee, up to $3.9 million in milestone payments for the first indication, up to $5.7 million in milestone payments for each subsequent indication and a low single digit tiered royalty on net sales of any covered products. The agreement terminates upon the expiration of the last remaining royalty obligation for a licensed product.

University of Pittsburgh

In March 2016, the Company entered into a license agreement, as amended, with University of Pittsburgh for the use of certain patents and technology. The Company made an initial payment of $0.1 million, which amount was recorded as research and development expense. Under the terms of the license, the Company is required to pay an annual maintenance fee and up to $2.6 million in milestone payments through first commercial product sale and a low single digit royalty on net product revenue, subject to annual minimum amounts, through the expiration of the patent claims.

Northwestern University

In December 2018, the Company entered into a license agreement with Northwestern University for the use of certain patents and technology. The Company made an initial payment of $0.1 million, which amount was recorded as research and development expense. Under the terms of the license, the Company is required to pay an annual maintenance fee and up to $4.1 million in milestone payments through the first commercial product sale and an annual low single digit royalty on net sales, subject to annual minimum amounts, through the later of ten years from the first commercial sale or the expiration of the patent claims.

WuXi Biologics Ireland Limited

In July 2019, the Company entered into a license agreement with this entity for the use of certain patents and technology. Under the terms of the license, the Company agreed to an initial license payment of $0.3 million and is required to pay milestone payments for the first product developed, as well as additional products, in addition to royalties on net product revenue. For the first product developed, the Company is required to pay up to $8.0 million in certain clinical milestone payments. For the first three products developed, the Company is also required to pay up to $27.0 million in commercial milestone payments for each product that achieves specified net sales levels along with product approvals in several countries. The Company also agreed to pay tiered royalties on net sales of licensed products ranging in the

low-single

digits. The obligation to pay royalties under the license agreement expires on a licensed

product-by-licensed

product and

country-by-country

basis upon expiry of the last valid claim of the licensed patents that cover such licensed product in such country.

Related Party License and Royalty Agreements

In connection with the prior sale of Series A redeemable convertible preferred stock, which was later converted to Series

A-1,

certain investors are entitled to receive, in the aggregate, a royalty from the Company equal to 1% of net sales of Company products discovered or developed prior to an IPO by the Company. The royalty obligation expires upon the later of twelve years from the first commercial sale or the expiration of the patent.

Also in connection with the sale of Series A redeemable convertible preferred stock, the Company entered into a patent assignment agreement with an investor under which that investor would receive $1.0 million upon regulatory approval of a product in the United States and an annual low single-digit royalty on net product revenue. The Company is not currently developing any product candidates using the patent that was assigned to the Company.

mid-single

digit royalty on net sales through the expiration of the patent claims. This agreement was terminated in May 2020.

Litigation

The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.

11. Commitments and Contingencies

Leases

The Company recognizes rent expense on a straight-line basis over the lease period and has recorded deferred rent for rent expense incurred but not yet paid. During the years ended December 31, 2018 and 2019 the Company recognized total rent expense of $1.0 million and $1.0 million, respectively, related to office and lab space under the lease. The amount of variable rent expense for these periods was immaterial.

Future minimum lease payments for the Company’s operating leases as of December 31, 2019 were as follows (in thousands):


YEARS ENDING DECEMBER 31,
2020	$	1,479
2021		1,523
2022		1,569
2023		1,616
2024		48

	$	6,235

License and Royalty Agreements

Payments under these arrangements are expensed as incurred. The Company has not paid any royalties or milestone payments under these agreements through December 31, 2019.

The Company’s material license and collaboration agreements are summarized below.

Ospedale San Raffaele S.r.l. and Fondazione Telethon

University of Pittsburgh

Northwestern University

WuXi Biologics Ireland Limited

In July 2019, the Company entered into a license agreement with an entity for the use of certain patents and technology. Under the terms of the license, the Company agreed to an initial license payment of $0.3 million and is required to pay milestone payments for the first product developed, as well as additional products, in addition to royalties on net product revenue. For the first product developed, the Company is required to pay up to $8.0 million in certain clinical milestone payments. For the first three products developed, the Company is also required to pay up to $27.0 million in commercial milestone payments for each product that achieves specified net sales levels along with product approvals in several countries. The Company also agreed to pay tiered royalties on net sales of licensed products ranging in the

low-single

digits. The obligation to pay royalties under the license agreement expires on a licensed

product-by-licensed

product and

country-by-country

basis upon expiry of the last valid claim of the licensed patents that cover such licensed product in such country.

Related Party License and Royalty Agreements

In connection with the sale of Series A preferred stock (see Note 7), certain investors are entitled to receive, in the aggregate, a royalty from the Company equal to 1% of net sales of Company products discovered or developed prior to an IPO by the Company. The royalty obligation expires upon the later of twelve years from the first commercial sale or the expiration of the patent.

Also in connection with the sale of Series A, the Company entered into a patent assignment agreement with an investor under which that investor would receive $1.0 million upon regulatory approval of a product in the United States and an annual low single-digit royalty on net product revenue. The Company is not currently developing any product candidates using the patent that was assigned to the Company.

In September 2016, the Company entered into a sublicense agreement with an entity affiliated with a stockholder of the Company for the use of certain patents and technology. Under the terms of the license, the Company is required to pay up to $7.6 million in milestone payments through first commercial product sale and an annual mid-single digit royalty on net sales through the expiration of the patent claims. The Company is not currently using the technology underlying these patents.

Litigation

Subsequent Events

9 Months Ended

12 Months Ended

Sep. 30, 2020

Dec. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

11. Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through the date on which these financial statements were issued. Subsequent to the issuance of the financial statements, the following events occurred and required disclosure in, or revision to, the financial statements:

On October 6, 2020, the Company completed the IPO, in which the Company issued and sold 5,800,000 shares of its common stock at a public offering price of $15.00 per share. On October 14, 2020, the Company sold an additional 757,991 shares of common stock at $15.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock. The total gross proceeds of the IPO were $98.4 million and the Company raised approximately $88.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company. Upon the closing of the IPO, all of the outstanding shares of Series

A-1

and Series B convertible preferred stock converted into an aggregate of 14,951,519 shares of common stock at the applicable conversion ratio then in effect and the Company changed its authorized capital stock to 100,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share.

On December 29, 2020, the Company entered into a lease agreement for approximately 33,518 square feet, or the Pod 4 Portion, and approximately 54,666 square feet, or the Pod 5 Portion, of a manufacturing facility located in Andover, Massachusetts. The lease contains a free rent period for each of the Pod 4 Portion and the Pod 5 Portion. The term of the lease will continue for 15 years from the date the monthly rent for the Pod 5 Portion commences, or approximately December 31, 2036, unless earlier terminated in accordance with the terms of the lease. The Company has two options to extend the term of the lease for the entire premises for a period of 10 years each, with rent during the extended term being based on the then-prevailing market rental rate.

Under the lease, the monthly rent payments for the Pod 4 Portion are expected to commence on October 1, 2021, reflecting an approximately nine-month rent-free period following the execution of the lease. The Company has a right to occupy the Pod 4 Portion prior to the Pod 4 rent commencement date, subject to the completion of tenant improvements, and would be responsible for proportional base rent payments, utilities, and the Company’s proportionate share of operating costs and taxes attributable to the Pod 4 Portion, provided that such payments of base rent for the occupancy of the Pod 4 Portion would commence no earlier than July 1, 2021 in any event. Beginning on the Pod 4 rent commencement date, the Company will be obligated to make monthly base rent payments, which will initially be approximately $0.1 million and will increase to approximately $0.2 million during the initial term of the lease. The monthly rent payments for the Pod 5 Portion are expected to commence on January 1, 2022, reflecting an approximately one-year rent-free period following the execution of the lease. Beginning on the Pod 5 rent commencement date, the Company will be obligated to make monthly base rent payments, which will initially be approximately $0.2 million and will increase to approximately $0.3 million during the initial term of the lease. The total lease commitment is expected to be approximately $72.0 million over the

15-year

term. The Company also agreed to provide the landlord with a $2.9 million letter of credit as support for its obligations under the lease.

14. Subsequent Events

The Company has completed an evaluation of all subsequent events after the audited balance sheet date of December 31, 2019 through July 29, 2020, the date the financial statements were issued except for Note 14(b) as to which the date is September 28, 2020. Subsequent to the issuance of the financial statements, the following events occurred and required disclosure in, or revision to, the financial statements:

(a) Second Tranche of Series B Preferred Stock Financing (unaudited)

In September 2020, the Company achieved certain milestones related to the clinical development of its lead product candidate, ONCR-177. One of those milestones was that the three patients in the first cohort and first patient in the second cohort of the Company’s Phase 1 trial experienced no dose limiting toxicities within the first 28 days following their initial doses of ONCR-177. Upon achievement of the milestones, the Series B investors became obligated to purchase additional shares of Series B in a second and final tranche closing (see Note 6 for additional information). On September 17 and 23, 2020, the Company issued an aggregate of 41,690,117 shares of Series B at $0.8597 per share, for gross proceeds to the Company of $35.8 million, at the second tranche closing.

(b) Reverse Stock Split

On September 23, 2020, the Company’s board of directors and stockholders approved a one-for-12.0874 reverse split of the Company’s issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of convertible preferred stock, which became effective on September 25, 2020. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split, including reclassification of par, additional paid-in capital and accumulated deficit amounts as a result of the split adjustment.

A-1

(d) Other (unaudited)

On September 23, 2020, the Company adopted the 2020 Equity Incentive Plan, or the 2020 Plan, which will become effective upon the execution of the underwriting agreement related to the IPO and will serve as the successor to the Plan. The 2020 Plan authorizes the award of stock options, restricted stock awards, or RSAs, stock appreciation rights, or SARs, restricted stock units, or RSUs, cash awards, performance awards and stock bonus awards. Under the 2020 Plan, 2,800,000 shares of common stock, plus any reserved shares not issued or subject to outstanding grants under the Plan on the effective date of the 2020 Plan are reserved for issuance pursuant to awards granted under the 2020 Plan. The number of shares reserved for issuance under the 2020 Plan will increase automatically on January 1 of each of 2021 through 2030 by the number of shares equal to the lesser of 5% of the aggregate number of outstanding shares of common stock as of the immediately preceding December 31, or a number as may be determined by the board of directors.

On September 23, 2020, the Company adopted the 2020 Employee Stock Purchase Plan, or the ESPP, which will become effective upon the execution of the underwriting agreement related to the IPO. The Company has initially reserved 280,000 shares of common stock for sale under the ESPP. The aggregate number of shares reserved for sale under the ESPP will increase automatically on January 1st of each of the first ten calendar years after the first offering date by the number of shares equal to the lesser of 1% of the total outstanding shares of common stock as of the immediately preceding December 31 (rounded to the nearest whole share) or a fixed number, or a number of shares as may be determined by the board of directors in any particular year.

15-year

term. The Company also agreed to provide the landlord with a $2.9 million letter of credit as support for its obligations under the lease.

Summary of Significant Accounting Policies (Policies)

9 Months Ended

12 Months Ended

Sep. 30, 2020

Dec. 31, 2019

Accounting Policies [Abstract]

COVID-19 Pandemic

COVID-19

Pandemic

With the ongoing

COVID-19

global pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the

COVID-19

re-organized

to reduce risks of

COVID-19

Basis of Presentation

Principles of Consolidation

Use of Estimates

A-1

Classification and Measurement of Series A-1 and Series B Redeemable Convertible Preferred Stock

Classification and Measurement of Series

A-1

and Series B Redeemable Convertible Preferred Stock

Upon the closing of the IPO on October 6, 2020, all shares of preferred stock converted into common stock. Prior to the IPO, the Company classified its Series

A-1

Redeemable Convertible Preferred Stock (“Series

A-1”)

and Series B Redeemable Convertible Preferred Stock (“Series B”) outside of permanent equity because the shares of Series

A-1

and Series B contained certain redemption features that resulted in the Series

A-1

and Series B were recorded outside of permanent equity and were subject to subsequent measurement under the guidance provided under ASC

480-10-S99.

While the Series

A-1

and Series B were not currently redeemable, the Series

A-1

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with

in-process

paid-in

capital.

Deferred Rent

The Company has received tenant improvement consideration from its landlord as well as free rental periods, each of which are amortized on a straight-line basis over the term of the lease.

Concentration of Credit Risk and of Significant Suppliers

The Company is dependent upon a third-party contract manufacturer and third-party contract research organizations for the performance of portions of its testing for

pre-clinical

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company has all of its cash at one financial institution that management believes to be of high credit quality, in amounts that exceed federally insured limits. Cash equivalents consist of money market funds that invest primarily in U.S. government-backed securities and treasuries.

The Company is dependent upon a third-party contract manufacturer and third-party contract research organizations for the performance of portions of its testing for

pre-clinical

Fair Value Measurements

Level 1

—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2

Level 3

—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

The Company’s cash equivalents, classified within Level 1, are valued using net asset value per share for the money market funds.

Research and Development Expense

Research and Development Expenses

General and Administrative Expenses

Interest Income on Investments

Interest income is separately presented on the consolidated statements of operations and comprehensive loss and consists of interest on cash and cash equivalents.

Cash and Cash Equivalents

Property and Equipment, Net


ASSET TYPE		ESTIMATED USEFUL LIFE
Computer equipment and software		3-5 years
Furniture and fixtures		5 years
Laboratory equipment		5 years

Leasehold improvements		Shorter of lease term or estimated useful life

Impairment of Long-Lived Assets

Fair Value Measurements

Level

—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level

—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

The Company’s cash equivalents, classified within Level 1, are valued using net asset value per share for the money market funds.

The Company’s Series

A-1

on-going

basis as additional data impacting the assumptions is obtained. Refer to Note 6 for additional information regarding the valuation of the Series

A-1

and Series B tranche rights.

Research Contract Costs and Accruals

Deferred Rent

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with

in-process

paid-in

capital.

Deferred Rent

The Company has received tenant improvement consideration from its landlord as well as free rental periods, each of which are amortized on a straight-line basis over the term of the lease.

Patent Costs

The Company expenses patent costs as incurred and records such costs within general and administrative expenses.

Comprehensive Loss

Classification and Measurement of Series

A-1

and Series B Redeemable Convertible Preferred Stock

The Company has classified its Series

A-1

Redeemable Convertible Preferred Stock (“Series

A-1”)

and Series B outside of permanent equity because the shares of Series

A-1

and Series B contain certain redemption features that result in the Series

A-1

and Series B are recorded outside of permanent equity and are subject to subsequent measurement under the guidance provided under ASC

480-10-S99.

While the Series

A-1

and Series B are not currently redeemable, the

Series A-1

Income Taxes

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a

two-step

more-likely-than-not

Stock-Based Compensation

Prior to the adoption of ASU No. 2018-07,

Compensation—Stock Compensation

(Topic 718) on January 1, 2019, the Company measured stock-based awards granted to

non-employee

non-employees

No. 2018-07.

Valuation of

Privately-Held Company Equity Securities Issued as Compensation

Net Loss Per Share

Net loss per share attributable to common stockholders is calculated using the

two-class

A-1

as-converted

basis as if all of the earnings for the period had been distributed. However, the participating securities do not include a contractual obligation to share in the losses of the Compa