Restatement and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Restatement and Summary of Significant Accounting Policies

2. Restatement and Summary of Significant Accounting Policies

Restatement

The Company has restated its previously reported unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2022 to correct an error related to revenue that was incorrectly recognized. For the three and six months ended June 30, 2022, correcting this error increased the Company’s net loss by $0.1 million and $4.8 million, respectively.

As discussed in Note 9, the Company entered into the LianBio License Agreement and received an upfront payment of $12.0 million and is eligible to receive up to $135.0 million in future payments based upon the achievement of specified development, regulatory and commercialization milestones. In the three months ended March 31, 2022, the Company achieved a development

milestone of $5.0 million for dosing the first patient in its global Phase 3 clinical trial. At the time the milestone was achieved, the Company recognized the entire $5.0 million as revenue in the three months ended March 31, 2022.

In connection with the third quarter 2022 financial statement close process, the Company determined that the $5.0 million development milestone should have been allocated to the performance obligations previously identified in the LianBio License Agreement and the allocated amounts should have been recognized under the revenue recognition model previously developed for each performance obligation.

The error in the recognition of the milestone amount was a result of the Company misapplying the provisions of ASC Topic 606, Revenue from Contracts with Customers, in accounting for the achievement of the milestone.

As a result of the restatement, the Company has made adjustments to present the corrected amount of collaboration revenue as a reduction to revenue previously recognized in the accompanying condensed consolidated statements of operations and comprehensive loss and as an increase in deferred revenue in the accompanying June 30, 2022 condensed consolidated balance sheet.

Set forth below are the adjustments to the Company’s previously issued unaudited statements of operations and comprehensive loss and unaudited balance sheet for the periods affected by the restatement. The restatement adjustments did not affect the net cash used in operating activities in the Company’s statements of cash flows.


(in thousands, except per share data)	Three Months Ended June 30, 2022								Six Months Ended June 30, 2022
Statement of Operations and Comprehensive Loss	As Reported			Adjustment		As Restated			As Reported			Adjustment			As Restated
Collaboration revenue	$	407		$	118	$	525		$	5,774		$	(4,781	)	$	993
Loss from operations	$	(14,518	)	$	118	$	(14,400	)	$	(21,544	)	$	(4,781	)	$	(26,325	)
Net loss	$	(14,484	)	$	118	$	(14,366	)	$	(21,496	)	$	(4,781	)	$	(26,277	)
Net loss per share attributable to common stockholders—basic and diluted	$	(0.43	)	$	0.01	$	(0.42	)	$	(0.91	)	$	(0.21	)	$	(1.12	)

									As of June 30, 2022
Balance Sheet									As Reported			Adjustment			As Restated
Deferred revenue									$	1,811		$	735		$	2,546
Deferred revenue, net of current portion									$	9,130		$	4,046		$	13,176
Total liabilities									$	19,005		$	4,781		$	23,786
Accumulated deficit									$	(214,893	)	$	(4,781	)	$	(219,674	)
Stockholders' equity									$	111,030		$	(4,781	)	$	106,249

									Six Months Ended June 30, 2022
Statement of Cash Flows									As Reported			Adjustment			As Restated
Net loss									$	(21,496	)	$	(4,781	)	$	(26,277	)
Deferred revenue									$	(774	)	$	4,781		$	4,007

Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2022. Since the date of those financial statements, there have been no changes to its significant accounting policies except as noted below.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of expenses during the reporting period. On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgments of revenue recognition, operating lease right-of-use assets, operating lease liabilities, accrued expenses, valuation of share-based awards and deferred income taxes. Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.

Restricted Cash

The Company had restricted cash of approximately $1.4 million and $0.3 million as of June 30, 2022 and December 31, 2021, respectively, which are held in certificates of deposit and collateral accounts at the Company’s financial institution to secure the Company’s letters of credit for its facility leases, as discussed in Note 8.

Concentrations of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains all its cash and cash equivalents at a single accredited financial institution, in amounts that exceed federally insured limits.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign exchange hedging arrangements.

Net Loss per Share

The Company has reported losses since inception and has computed basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. The weighted-average common shares outstanding as of June 30, 2022 included pre-funded warrants to purchase up to an aggregate of 5,000,000 shares of common stock that were issued in connection with the April 2022 Financing (as defined below), as discussed in Note 6. The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including options to purchase common stock and restricted stock units, outstanding during the period determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same.

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):


	Six Months Ended June 30,
	2022		2021
Stock options		4,017,726		1,764,499
Restricted stock units		42,353		—
Total		4,060,079		1,764,499

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.