0001104659-22-032475 | 10-K | XBRL Viewer

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Consolidated Statements of Stockholders' Equity (Parenthetical) $ in Millions	12 Months Ended
	Dec. 31, 2020 USD ($)
Issuance of common stock and warrants in public offering
Issuance costs	$ 1.9
ATM
Issuance costs	$ 0.5

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Preferred Stock Series X Preferred Stock	Common stock	Additional Paid-in Capital	Deficit Accumulated	Series X Preferred Stock	Total
Balance, beginning of period at Dec. 31, 2019		$ 2	$ 259,315	$ (223,597)		$ 35,720
Balance, beginning of period (in shares) at Dec. 31, 2019		2,072,266
Increase (Decrease) in Shareholders' Equity
Issuance of stock, net of issuance costs		$ 1	24,558			24,559
Issuance of stock, net of issuance costs (in shares)		881,666
Issuance of common stock for at-the-market offerings, net of issuance costs			16,268			16,268
Issuance of common stock for at-the-market offerings, net of issuance costs (in shares)		392,288
Proceeds from exercises of options		$ 1	31			32
Proceeds from exercises of options (in shares)		1,166
Stock-based compensation expense			1,390			1,390
Net loss				(37,300)		(37,300)
Balance, end of period at Dec. 31, 2020		$ 4	301,562	(260,897)		$ 40,669
Balance, end of period (in shares) at Dec. 31, 2020		3,347,386				3,347,386
Increase (Decrease) in Shareholders' Equity
Issuance of stock, net of issuance costs	$ 84,696		19,565			$ 104,261
Issuance of stock, net of issuance costs (in shares)	35,573
Issuance of preferred stock and common stock upon acquisition of Quellis	$ 156,185		8,098			164,283
Issuance of common stock upon acquisition of Quellis (in shares)	50,504	555,444
Issuance of common stock upon the conversion of preferred stock	$ (168,920)	$ 9	168,911
Issuance of common stock upon the conversion of preferred stock (in shares)	(54,622)	9,103,664			9,103,664
Fair value adjustment to acquired Quellis warrants			1,157			1,157
Accretion of preferred stock discount	$ 24,437		(24,437)
Proceeds from exercises of options			23			$ 23
Proceeds from exercises of options (in shares)		10,470				10,470
Reclassification of equity classified warrants			3,468			$ 3,468
Fractional shares eliminated pursuant to reverse stock split		(9)
Stock-based compensation expense			3,362			3,362
Net loss				(194,912)		(194,912)
Balance, end of period at Dec. 31, 2021	$ 96,398	$ 13	$ 481,709	$ (455,809)		$ 122,311
Balance, end of period (in shares) at Dec. 31, 2021	31,455	13,016,955				13,016,955

Short-Term Investments (Tables)

12 Months Ended

Dec. 31, 2021

Short-Term Investments

Schedule of short term investments

The following tables summarize the short-term investments held at December 31, 2021 and 2020 (in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
December 31, 2021
Reverse repurchase agreements	$	39,000	$	—	$	—	$	39,000
Total	$	39,000	$	—	$	—	$	39,000


			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value
December 31, 2020
Reverse repurchase agreements	$	20,000	$	—	$	—	$	20,000
Total	$	20,000	$	—	$	—	$	20,000

Stockholders' Equity - Common Stock Warrants (Details)	12 Months Ended
Stockholders' Equity - Common Stock Warrants (Details)	Dec. 31, 2021 $ / shares shares
Weighted Average
Common Stock Warrants
Weighted average life (in years)	4 years 18 days
Common stock warrants
Common Stock Warrants
Warrants Outstanding (in shares) \| shares	1,530,380
Common stock warrants \| Weighted Average
Common Stock Warrants
Exercise Price (in dollars per share) \| $ / shares	$ 41.84
Warrants Issued in 2015 \| Common stock warrants
Common Stock Warrants
Warrants Outstanding (in shares) \| shares	204
Exercise Price (in dollars per share) \| $ / shares	$ 732.72
Warrants Issued in 2018 \| Common stock warrants
Common Stock Warrants
Warrants Outstanding (in shares) \| shares	699,962
Exercise Price (in dollars per share) \| $ / shares	$ 72.00
Warrants Issued in 2019 \| Common stock warrants
Common Stock Warrants
Warrants Outstanding (in shares) \| shares	331,858
Exercise Price (in dollars per share) \| $ / shares	$ 37.50
Warrants Issued In 2021 \| Common stock warrants
Common Stock Warrants
Warrants Outstanding (in shares) \| shares	498,356
Exercise Price (in dollars per share) \| $ / shares	$ 2.10

Stock Incentive Plans (Tables)

12 Months Ended

Dec. 31, 2021

Stock Incentive Plans

Summary of stock option activity


				Weighted
				Average
		Weighted-		Remaining	Aggregate
		Average Exercise		Contractual	Intrinsic Value
	Shares	Price		Term (years)	(in thousands)
Outstanding at December 31, 2020	227,846	$	68.25	8.13	$	—
Granted	1,156,646	$	15.91
Assumed in Quellis Acquisition	55,414	$	1.73
Exercised	(10,470)	$	2.10
Cancelled or forfeited	(81,196)	$	48.13
Expired	(1,507)	$	100.85
Outstanding at December 31, 2021	1,346,733	$	22.25	9.02	$	168,181
Vested and exercisable at December 31, 2021	135,412	$	72.76	7.19	$	77,798

Schedule of assumptions made based on the Black-Scholes option pricing model


	Year Ended December 31,
	2021	2020
Weighted-average expected volatility	69.28-71.32%	75.51-82.08%
Expected term (in years)	5-6.25	5.50-6.25
Risk-free interest rate	0.42-1.36%	0.37-1.51%
Expected dividend yield	0%	0%

Summary of Significant Accounting Policies - Preferred Stock Discount (Details) - USD ($) $ in Thousands	1 Months Ended	12 Months Ended
	Feb. 28, 2021	Dec. 31, 2021
Antidilutive Common Stock Equivalents Excluded from Computation of Diluted Net Loss Per Share
Conversion of Series X Preferred Stock into common stock		$ 168,920
Series X redeemable convertible preferred stock
Antidilutive Common Stock Equivalents Excluded from Computation of Diluted Net Loss Per Share
Conversion of Series X Preferred Stock into common stock		900
Private Placement \| Series X redeemable convertible preferred stock
Antidilutive Common Stock Equivalents Excluded from Computation of Diluted Net Loss Per Share
Beneficial conversion feature	$ 19,600
Issuance costs	$ 5,700
Non cash return		$ 24,400

Acquisition of Quellis (Tables)

12 Months Ended

Dec. 31, 2021

Acquisition of Quellis

Schedule of net assets acquired


Acquired IPR&D	$	164,612
Cash and cash equivalents		8,307
Prepaid expenses and other assets		136
Accounts payable		(1,974)
Accrued liabilities		(400)
Net acquired tangible assets	$	170,681

Summary of Significant Accounting Policies - Net Loss Per Share (Details) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Antidilutive common stock equivalents excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from the calculation of diluted net loss per share (in shares)	8,119,614	1,260,236
Stock options
Antidilutive common stock equivalents excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from the calculation of diluted net loss per share (in shares)	1,346,733	227,945
Common stock warrants
Antidilutive common stock equivalents excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from the calculation of diluted net loss per share (in shares)	1,530,380	1,032,292
Series X Preferred Stock (1)
Antidilutive common stock equivalents excluded from computation of diluted net loss per share
Anti-dilutive securities excluded from the calculation of diluted net loss per share (in shares)	5,242,501

Summary of Significant Accounting Polices - Cash and Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Summary of Significant Accounting Policies
Cash and cash equivalents	$ 86,508	$ 24,930
Restricted cash	121	121
Total	$ 86,629	$ 25,051	$ 10,376

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Astria Securities Corporation and Quellis Biosciences, LLC, successor in interest to Quellis. All intercompany balances and transactions have been eliminated in consolidation. These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from such estimates.

The Company utilizes certain estimates to record expenses relating to research and development contracts. These contract estimates, which are primarily related to the length of service of each contract and the amount of service provided as of each measurement date, are determined by the Company based on input from internal project management, as well as from service providers.

Off-Balance Sheet Risk and Concentrations of Credit Risk

The Company has no off-balance sheet risk, such as foreign exchange contracts, option contracts or other foreign hedging arrangements. Financial instruments that subject the Company to credit risk primarily consist of cash, cash equivalents, short-term investments and restricted cash. The primary objectives for the Company’s investment portfolio are the preservation of capital and the maintenance of liquidity. The Company’s investment policy includes guidelines on the quality of the institutions and financial instruments and defines allowable investments that the Company believes minimizes the exposure to concentration of credit risk.

Cash and Cash Equivalents and Restricted Cash

The reconciliation of cash, cash equivalents and restricted cash reported within the applicable balance sheet that sum to the total of the same such amount shown in the statement of cash flows is as follows (in thousands):


	December 31,
	2021		2020
Cash and cash equivalents	$	86,508	$	24,930
Restricted cash (1)		121		121
Total	$	86,629	$	25,051

(1)

Included in prepaid expenses and other current assets at December 31, 2021 and other long-term assets at December 31, 2020.

Short-Term Investments

The Company classifies all corporate debt securities with a remaining maturity of greater than three months and reverse repurchase agreements with a remaining maturity of greater than one business day at the time of purchase as short-term investments. Short-term investments are recorded at fair value, with the unrealized gains and losses reported in other comprehensive loss. The amortized cost of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity. Such amortization is included in interest and investment income. Realized gains and losses, interest, dividends and declines in value judged to be other-than-temporary are included in interest and investment income.

The cost of securities sold is based on the specific identification method for purposes of recording realized gains and losses. To determine whether an other-than-temporary impairment exists, the Company considers whether it has the ability and intent to hold the investment until a market price recovery, and whether evidence indicating the recoverability of the cost of the investment outweighs evidence to the contrary.

Fair Value of Financial Instruments

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions

market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts reflected in the balance sheets for cash equivalents, restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values at December 31, 2021 and 2020, due to their short-term nature. There have been no changes to the valuation methods during the years ended December 31, 2021 and 2020. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between levels during the years ended December 31, 2021 and 2020.

The Company’s investment portfolio may include fixed income securities that do not always trade on a daily basis. As a result, the pricing services used by the Company apply other available information as applicable through processes such as benchmark yields, benchmarking of like securities, sector groupings and matrix pricing to prepare valuations. The Company validates the prices provided by its third party pricing services by obtaining market values from other pricing sources and analyzing pricing data in certain instances. The Company also invests in certain reverse repurchase agreements which are collateralized by deposits in the form of United States Government Securities and Obligations for an amount no less than 102% of their value. The Company does not record an asset or liability for the collateral as the Company is not permitted to sell or re-pledge the collateral. The collateral has at least the prevailing credit rating of United States Government Treasuries and Agencies. The Company utilizes a third party custodian to manage the exchange of funds and ensure that collateral received is maintained at 102% of the value of the reverse repurchase agreements on a daily basis.

The Company accounted for warrants to purchase its stock pursuant to Accounting Standards Codification (“ASC”) Topic 470, Debt, and ASC Topic 480, Distinguishing Liabilities from Equity, and classifies warrants for common stock and preferred stock as liabilities or equity. The warrants classified as liabilities are reported at their estimated fair value and any changes in fair value are reflected in research and development expense. The warrants classified as equity are reported at their estimated fair value with no subsequent remeasurement.

Impairment of Long-Lived Assets

The Company continually evaluates whether events or circumstances have occurred that indicate that the estimated remaining useful life of its long-lived assets may warrant revision or that the carrying value of these assets may be impaired. The Company has not recognized any significant impairment charges from inception through December 31, 2021.

Research and Development Expenses

Research and development costs are expensed as incurred. Research and development costs include salaries and personnel-related costs, stock-based compensation, consulting fees, fees paid for contract research services, the costs of laboratory equipment and facilities and other external costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred. The deferred amounts are expensed as the related goods are delivered or the services are performed.

Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”). ASC 718 requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statements of operations based on their grant date fair values. For granted stock options, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Company’s common stock consistent with the expected term of the option, risk-free interest rates and expected dividend yields of the Company’s common stock.

For awards subject to service-based vesting conditions, the Company recognizes stock-based compensation expense equal to the grant date fair value of stock options on a straight-line basis over the requisite service period.

The Company expenses restricted stock awards based on the fair value of the award on a straight-line basis over the associated service period of the award.

During the years ended December 31, 2021 and 2020, the Company recorded stock-based compensation expense for employee and non-employee stock options and restricted stock, which was allocated as follows in the statements of operations (in thousands):


	Year Ended December 31,
	2021		2020
Research and development	$	1,132	$	599
General and administrative		2,230		791
Total	$	3,362	$	1,390

No related tax benefits were recognized for the years ended December 31, 2021 and 2020.

Net Loss Per Share

Basic net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the Company’s dilutive net loss per share calculation, stock options and warrants to purchase the Company’s common stock were considered to be common stock equivalents but were excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive; therefore, basic and diluted net loss per share were the same for all periods presented.

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Year Ended December 31,
	2021	2020
Stock options	1,346,733	227,945
Common stock warrants	1,530,380	1,032,292
Series X Preferred Stock (1)	5,242,501	—
	8,119,614	1,260,236

(1)

Shown as common stock equivalents

Income Taxes

The Company provides deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more likely than not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740, Expenses—Income Taxes. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company did not have any uncertain tax positions for any periods presented.

The Company assesses the impact of various tax reform proposals and modifications to existing tax treaties in all jurisdictions where it has operations to determine the potential effect its business and any assumptions it has made about its future taxable income. The Company cannot predict whether any specific proposals will be enacted, the terms of any such proposals or what effect, if any, such proposals would have on its business if they were to be enacted. Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the currently available option to deduct research and development expenditures and requires taxpayers to amortize them over five years. The U.S. Congress is considering legislation that would defer the amortization requirement to future periods, however, the Company has no assurance that the provision will be repealed or otherwise modified.

Segment Information

Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker, the Company’s chief executive officer, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business in one operating segment. The Company operates in one geographic segment.

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Leases

The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) lease assets, current portion of lease obligations, and long-term lease obligations on the Company’s balance sheets. The Company does not currently hold any financing leases.

ROU lease assets represent the Company’s right to use an underlying asset for the lease term and lease obligations represent the Company’s obligation to make lease payments arising from the lease. Operating ROU lease assets and obligations are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s facility leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s ROU lease assets also include any lease payments made and excludes lease incentives. If the Company’s facility lease includes options to terminate the lease which would affect the lease period when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments under facility leases are recognized on a straight-line basis over the lease term.

Acquired In-Process Research and Development

The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire in-process research and development (“IPR&D”) with no alternative future use is charged to expense at the acquisition date. Refer to Note 3, “Acquisition of Quellis” for a more detailed description of the accounting policy utilized for the recent asset acquisition.

Preferred Stock Discount

As discussed above, in February 2021, the Company issued Series X Preferred Stock in a private placement transaction. It was determined that this transaction resulted in recognition of a beneficial conversion feature, which was valued based on the difference between the price of the shares of common stock on the date of commitment and the conversion price on the closing date, resulting in a total value of $19.6 million. Additionally, the Company incurred total issuance costs of $5.7 million related to the private placement. Both of these features were recorded as a discount on Series X Preferred Stock recognized at the close of the transaction. These features are analogous to preferred dividends and are recorded as a non-cash return to holders of Series X Preferred Stock through additional paid in capital. The discount related to the beneficial conversion feature is recognized through the earliest possible date of conversion, which occurred upon the shareholder approval of the conversion in June 2021. The issuance costs are recognized as a dividend at the time of conversion to common shares. As of December 31, 2021, $24.4 million of the above amounts were accounted for as a non-cash dividend related to shares of Series X Preferred Stock, and $0.9 million remained to be recognized upon future conversion.

Recent Accounting Pronouncements -Adopted

In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740). This standard includes amendments within the scope of Topic 740 to reduce complexity and improve areas of U.S. GAAP. This amendment was effective for annual reporting periods beginning after December 15, 2020. Adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements - Not Yet Adopted

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 its financial position or results of operations upon adoption.

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326). This standard requires a financial asset to be presented at amortized cost basis at the net amount expected to be collected. It also requires that credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. In November 2019, the FASB issued an amendment making this ASU effective for annual reporting periods beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements as well as the timing of when this standard will be adopted.

Accrued Expenses (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Accrued Expenses
Accrued compensation	$ 1,958	$ 1,719
Accrued contracted costs	760	1,726
Accrued other	295
Accrued professional fees	268	356
Accrued severance		396
Total	$ 3,281	$ 4,197

Consolidated Statements Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Consolidated Statements Comprehensive Loss
Net loss	$ (194,912)	$ (37,300)
Other comprehensive income:
Gain on short-term investments	0	0
Total other comprehensive income:	0	0
Comprehensive loss	$ (194,912)	$ (37,300)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

Organization and Operations - Liquidity (Details) - USD ($) $ / shares in Units, $ in Thousands		12 Months Ended
	Jun. 30, 2021	Dec. 31, 2021	Dec. 31, 2020
Common Stock
Accumulated deficit		$ 455,809	$ 260,897
Cash, Cash Equivalents, and Short-term Investments		125,500
Jefferies
Common Stock
Remaining available under sales agreement		$ 25,000
Jefferies \| ATM
Common Stock
Maximum aggregate value of common shares which can be issued under the agreement	$ 25,000
Percentage of commission paid to underwriter based on proceeds from common stock	3.00%
Issuance of common stock for at-the-market offerings, net of issuance costs (in shares)		0
Common stock
Common Stock
Issuance of common stock for at-the-market offerings, net of issuance costs (in shares)			392,288
Common stock \| ATM
Common Stock
Issuance of common stock for at-the-market offerings, net of issuance costs (in shares)			392,288
Share price (in dollars per share)			$ 42.76
Proceeds from public offering, net of issuance costs			$ 16,300

Stock Incentive Plans - Stock-Based Compensation Expense (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Assumptions used to calculate fair value of stock options
Expected dividend yield	0.00%	0.00%
Stock options \| Minimum
Assumptions used to calculate fair value of stock options
Weighted-average expected volatility	69.28%	75.51%
Expected term (in years)	5 years	5 years 6 months
Risk-free interest rate	0.42%	0.37%
Stock options \| Maximum
Assumptions used to calculate fair value of stock options
Weighted-average expected volatility	71.32%	82.08%
Expected term (in years)	6 years 3 months	6 years 3 months
Risk-free interest rate	1.36%	1.51%

Accrued Expenses (Tables)

12 Months Ended

Dec. 31, 2021

Accrued Expenses

Schedule of accrued expenses

Accrued expenses consisted of the following (in thousands):


	December 31,		December 31,
	2021		2020
Accrued compensation	$	1,958	$	1,719
Accrued contracted costs		760		1,726
Accrued other		295		—
Accrued professional fees		268		356
Accrued severance		—		396
Total	$	3,281	$	4,197

Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Schedule of reconciliation of cash, cash equivalents and restricted cash


	December 31,
	2021		2020
Cash and cash equivalents	$	86,508	$	24,930
Restricted cash (1)		121		121
Total	$	86,629	$	25,051

(1)

Included in prepaid expenses and other current assets at December 31, 2021 and other long-term assets at December 31, 2020.

Schedule of stock-based compensation expense


	Year Ended December 31,
	2021		2020
Research and development	$	1,132	$	599
General and administrative		2,230		791
Total	$	3,362	$	1,390

Schedule of anti-dilutive common stock equivalents excluded from calculation of diluted net loss per share


	Year Ended December 31,
	2021	2020
Stock options	1,346,733	227,945
Common stock warrants	1,530,380	1,032,292
Series X Preferred Stock (1)	5,242,501	—
	8,119,614	1,260,236

Financial Instruments - Warrant liability (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Jun. 02, 2021	Jan. 28, 2021
Derivative warrant liability was valued based on significant inputs not observable in the market, which represents a Level 3
Beginning balance	$ 0
Issuance of warrant	4,332
(Decrease) increase in the fair value of the warrants	(864)
Reclassification of warrant liability to additional paid-in capital	(3,468)
Ending balance	$ 0
Common stock
Financial Instruments
Number of shares which may be purchased with warrants		467,500
Exercise price of warrants (in dollars per share)		$ 2.10
Quellis Biosciences, Inc \| Series X redeemable convertible preferred stock
Financial Instruments
Number of shares which may be purchased with warrants			2,805
Exercise price of warrants (in dollars per share)			$ 341.70
Quellis Biosciences, Inc \| Common stock
Financial Instruments
Number of shares which may be purchased with warrants			30,856
Exercise price of warrants (in dollars per share)			$ 2.10

Summary of Significant Accounting Policies - Stock-Based Compensation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Stock-Based Compensation
Stock-based compensation expense	$ 3,362	$ 1,390
Tax benefits recognized from stock-based compensation expense	0	0
Research and development
Stock-Based Compensation
Stock-based compensation expense	1,132	599
General and administrative
Stock-Based Compensation
Stock-based compensation expense	$ 2,230	$ 791

Defined Contribution Benefit Plan

12 Months Ended

Dec. 31, 2021

Defined Contribution Benefit Plan

Defined Contribution Benefit Plan

11. Defined Contribution Benefit Plan

The Company sponsors a 401(k) retirement plan, in which substantially all of its employees are eligible to participate. Participants may contribute a percentage of their annual compensation to this plan, subject to statutory limitations. The Company did not provide any contributions to this plan during the years ended December 31, 2021 or 2020.

Subsequent Events (Details) - USD ($) $ in Millions	Jan. 28, 2022	Dec. 31, 2021	Nov. 30, 2019
Sublease
Operating lease liability		$ 0.4	$ 1.7
Subsequent Event
Sublease
Operating lease liability	$ 1.8

Organization and Operations

12 Months Ended

Dec. 31, 2021

Organization and Operations

Organization and Operations

Astria Therapeutics, Inc.

Notes to Consolidated Financial Statements

1. Organization and Operations

The Company

Astria Therapeutics, Inc. (the “Company”), formerly known as Catabasis Pharmaceuticals, Inc., is a biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics. Its mission is to bring hope with life-changing therapies to patients and families that are affected by rare and niche allergic and immunological diseases. On October 26, 2020, the Company announced that the Phase 3 PolarisDMD trial of the Company’s previous lead product candidate, edasalonexent, for the treatment of Duchenne Muscular Dystrophy (“DMD”) did not meet its primary and secondary endpoints. Based on these results, the Company announced that it was stopping activities related to the development of edasalonexent, including the Company’s ongoing open-label extension trial. On January 28, 2021, the Company acquired Quellis Biosciences, Inc. (“Quellis”). The Company’s lead product candidate, which was acquired in the Quellis acquisition, is STAR-0215 (formerly known as QLS-215), a monoclonal antibody inhibitor of plasma kallikrein in preclinical development for the treatment of hereditary angioedema, or HAE, a rare, debilitating and potentially life-threatening disease. The Company was incorporated in the State of Delaware on June 26, 2008.

Reverse Stock Split

On August 19, 2021, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of one-for-six (1:6) pursuant to a Certificate of Amendment to its Certificate of Incorporation filed with the Secretary of State of the State of Delaware. Pursuant to the reverse stock split, every six shares of the Company’s issued and outstanding shares of common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share of the common stock. Amounts of common stock resulting from the reverse stock split were rounded down to the nearest whole share and any resulting fractional shares were cancelled for cash. The number of authorized shares of the Company’s common stock remained unchanged. The reverse stock split affected all issued and outstanding shares of the Company’s common stock, and the respective numbers of shares of common stock underlying the Company’s outstanding Series X Preferred Stock, outstanding stock options, outstanding warrants and the Company’s equity incentive plans were proportionately adjusted. All share and per share amounts of the common stock included in the accompanying consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split for all periods presented, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.

Agreement and Plan of Merger

On January 28, 2021, the Company acquired Quellis (the “Quellis Acquisition”). Under the terms of that certain agreement and plan of merger, dated January 28, 2021 (the “Merger Agreement”), the Company issued to the stockholders of Quellis 555,444 shares of the Company’s common stock, par value $0.001 per share, and 50,504 shares of newly designated Series X redeemable convertible preferred stock (“Series X Preferred Stock”) (as described below). The Series X Preferred Stock had a conversion value on the closing date of $122.7 million. In addition, the Company assumed options granted under the Quellis stock option plan, which became options to purchase 55,414 shares of the Company’s common stock, a warrant to purchase 2,805 shares of Series X Preferred Stock at an exercise price of $341.70 per share, and a warrant to purchase 30,856 shares of the Company’s common stock at an exercise price of $2.10 per share, which warrants are exercisable until December 14, 2030. Upon stockholder approval of the Conversion Proposal (as defined below) on June 2, 2021, the warrant to purchase Series X Preferred Stock was converted into the right to purchase 467,500 shares of the Company’s common stock, at a per share exercise price of $2.10 per share.

Stock Purchase Agreement and Series X Preferred Stock

Concurrent with the Quellis Acquisition, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with certain institutional and accredited investors. Pursuant to the Purchase Agreement, the Company sold an aggregate of 35,573 shares of Series X Preferred Stock for gross proceeds of approximately $110.0 million, and net proceeds of $104.3 million (the “February 2021 Financing”). Each share of Series X Preferred Stock is convertible into

166.67 shares of common stock. In accounting for the Purchase Agreement, the Company recorded a beneficial conversion feature of $19.6 million and issuance costs of $5.7 million. The combined total was treated as a discount to the value of Series X Preferred Stock, See Note 2 – “Summary of Significant Accounting Policies” for further discussion.

As a result of the Quellis Acquisition and the February 2021 Financing, the Company issued the following Series X Preferred Stock or warrants to purchase Series X Preferred Stock:


		Series X
		Preferred
		Stock at
		Transaction
		Date
Shares issued in merger		50,504
Shares issued in February 2021 Financing		35,573
Warrants assumed in merger		2,805
Total		88,882

At its 2021 Annual Meeting of Stockholders on June 2, 2021, the Company’s stockholders approved the conversion of the Company’s Series X Preferred Stock into shares of the Company’s common stock in accordance with Nasdaq Listing Rule 5635(a) (the “Conversion Proposal”). Following stockholder approval of the Conversion Proposal, each share of Series X Preferred Stock then outstanding automatically converted into 166.67 shares of the Company’s common stock, subject to certain beneficial ownership limitations, including that a holder of Series X Preferred Stock is prohibited from converting shares of Series X Preferred Stock into shares of the Company’s common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (as of December 31, 2021, these percentages are set at 4.99% to 9.99% and can be adjusted by the holder to a number between 4.99% and 19.99%) of the total number of shares of the Company’s common stock issued and outstanding immediately after giving effect to such conversion. As of December 31, 2021, 54,622 shares of Series X Preferred Stock were converted into 9,103,664 shares of common stock and 31,455 shares of Series X Preferred Stock remained outstanding. Each share of Series X Preferred Stock is convertible into 166.67 shares of common stock. At December 31, 2021, the number of shares of common stock issuable upon conversion of the remaining outstanding shares of Series X Preferred Stock is 5,242,501. Outstanding shares of Series X Preferred Stock are subject to conversion at the option of the holder.

Prior to stockholder approval of the Conversion Proposal, the terms of the Series X Preferred Stock included a cash redemption feature. This cash redemption feature resulted in substantial doubt about the Company’s ability to continue as a going concern as disclosed in the Company’s annual report on Form 10-K for the year ended December 31, 2020 (the “2020 Annual Report on Form 10-K”). Upon stockholder approval of the Conversion Proposal, the cash redemption feature was eliminated and, consequently, there is no longer substantial doubt about the Company’s ability to continue as a going concern for at least twelve months subsequent to the issuance of these financial statements.

Holders of Series X Preferred Stock are entitled to receive dividends, subject to certain beneficial ownership limitations, on shares of Series X Preferred Stock equal, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the Company’s common stock. Except as otherwise required by law, the Series X Preferred Stock does not have voting rights. However, as long as any shares of Series X Preferred Stock are outstanding, the Company may not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series X Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series X Preferred Stock or alter or amend the Certificate of Designation that authorized the Series X Preferred Stock, amend or repeal any provision of, or add any provision to, the Company’s Certificate of Incorporation or bylaws, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series X Preferred Stock, (ii) issue further shares of Series X Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series X Preferred Stock, or (iii) enter into any agreement with respect to any of the foregoing.

January 2020 Financing

On January 30, 2020, the Company entered into an underwriting agreement with Oppenheimer & Co. Inc. relating to an underwritten public offering (the “January 2020 Financing”) of 881,666 shares of common stock at a price to the public of $30.00 per share, including 115,000 shares issued upon the exercise in full by Oppenheimer & Co. Inc. of its overallotment option. This resulted in gross proceeds of $26.5 million, and net proceeds of $24.6 million.

Liquidity

The Company has entered into various sales agreements with Cowen and Company LLC (“Cowen”), pursuant to which the Company could issue and sell shares of common stock under at-the-market offering programs. On May 20, 2021, the Company terminated its sales agreement with Cowen. On June 30, 2021, the Company entered into an Open Market Sale Agreement^SM with Jefferies LLC (“Jefferies”), pursuant to which the Company can issue and sell shares of common stock of up to $25.0 million under at-the-market offering programs (collectively, with the Cowen at-the-market offering program, the “ATM Programs”). The Company pays the sales agent commissions of 3% of the gross proceeds from any common stock sold through the ATM Programs. As of December 31, 2021, the Company has not sold any shares of common stock pursuant to the Jefferies agreement and, as a result, $25.0 million of common stock remains available for sale under the Jefferies agreement.

During the year ended December 31, 2020, the Company sold an aggregate of 392,288 shares of common stock pursuant to the ATM Programs, at an average price of $42.76 per share, for net proceeds of $16.3 million after deducting sales commissions and offering expenses. There was no activity from the ATM Programs during the year ended December 31, 2021.

As of December 31, 2021, the Company had an accumulated deficit of $455.8 million and had available cash, cash equivalents and short-term investments $125.5 million. The Company has been primarily involved with research and development activities and has incurred operating losses and negative cash flows from operations since its inception. The Company has not generated any product revenues and has financed its operations primarily through public offerings and private placements of its equity securities. There can be no assurance that the Company will be able to obtain additional debt, equity or other financing or generate product revenue or revenues from collaborative partners, on terms acceptable to the Company, on a timely basis or at all. The failure of the Company to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the Company’s business, results of operations, and financial condition.

The Company is subject to a number of risks similar to other life science companies, including, but not limited to, successful discovery and development of its drug candidates, raising additional capital, development by its competitors of new technological innovations, protection of proprietary technology and regulatory approval and market acceptance of the Company’s products. The Company has been primarily involved with research and development activities and has incurred operating losses and negative cash flows from operations since its inception. The Company anticipates that it will continue to incur significant operating losses for the next several years as it continues to develop its product candidates.

Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2021

Financial Instruments

Schedule of assets and liabilities measured fair value on recurring basis


	As of December 31, 2021
	Quoted Prices		Significant		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	1,853	$	—	$	—	$	1,853
Reverse repurchase agreements		—		—		—		—
Short-term investments:
Reverse repurchase agreements		—		39,000		—		39,000
Total	$	1,853	$	39,000	$	—	$	40,853


	As of December 31, 2020
	Quoted Prices		Significant		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	22,999	$	—	$	—	$	22,999
Short-term investments:
Reverse repurchase agreements		—		20,000		—		20,000
Total assets	$	22,999	$	20,000	$	—	$	42,999

Summary of warrant liability was valued based on significant inputs not observable in the market, which represents a Level 3


	December 31, 2021
Balance at beginning of year	$	—
Issuance of warrants		4,332
(Decrease) increase in the fair value of the warrants		(864)
Reclassification of warrant liability to additional paid in-capital		(3,468)
Ending balance	$	—

Schedule of fair value of the warrants


	Year Ended December 31,
	2021

Weighted-average expected volatility	89.1-89.3	%
Expected term (in years)	9.54-9.88
Risk-free interest rate	1.064-1.725	%
Expected dividend yield	0	%

Stock Incentive Plans - Summary of Plans (Details) - Stock options	12 Months Ended
	Dec. 31, 2021
Stock Incentive Plans
Vesting period	4 years
Cliff period for vesting	1 year
Expiration period	10 years

Organization and Operations - Reverse Stock Split, Agreement and Plan of Merger (Details) - USD ($) $ / shares in Units, $ in Millions			12 Months Ended
	Aug. 19, 2021	Jan. 28, 2021	Dec. 31, 2021	Jun. 02, 2021	Dec. 31, 2020
Class of Stock [Line Items]
Reverse stock split ratio	0.1667
Agreement and Plan of Merger
Common stock, par value (in dollars per share)			$ 0.001		$ 0.001
Number of options assumed in Quellis Acquisition			55,414
Common stock
Agreement and Plan of Merger
Issuance of common stock upon acquisition of Quellis (in shares)			555,444
Warrants to purchase number of shares				467,500
Exercise Price (in dollars per share)				$ 2.10
Quellis Biosciences, Inc \| Series X redeemable convertible preferred stock
Agreement and Plan of Merger
Issuance of preferred stock upon acquisition of Quellis (in shares)		50,504
Conversion value on closing date		$ 122.7
Warrants to purchase number of shares		2,805
Exercise Price (in dollars per share)		$ 341.70
Quellis Biosciences, Inc \| Common stock
Agreement and Plan of Merger
Issuance of common stock upon acquisition of Quellis (in shares)		555,444
Common stock, par value (in dollars per share)		$ 0.001
Number of options assumed in Quellis Acquisition		55,414
Warrants to purchase number of shares		30,856
Exercise Price (in dollars per share)		$ 2.10

Stockholders' Equity - Preferred Stock (Details)	Dec. 31, 2021 series $ / shares shares	Dec. 31, 2020 $ / shares shares
Preferred Stock
Preferred stock, authorized (in shares)	5,000,000
Preferred stock, par value (in dollars per share) \| $ / shares	$ 0.001	$ 0.001
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Minimum number of series used to issue preferred stock \| series	1
Number of shares of common stock into which each share of Series X Preferred Stock may be converted	166.67
Series X redeemable convertible preferred stock
Preferred Stock
Preferred stock, authorized (in shares)	91,380	91,380
Preferred stock, par value (in dollars per share) \| $ / shares	$ 0.001	$ 0.001
Preferred stock, issued (in shares)	31,455	0
Preferred stock, outstanding (in shares)	31,455	0
Number of shares of common stock into which each share of Series X Preferred Stock may be converted	166.67
Number of common shares issuable upon conversion of preferred stock (in shares)	5,242,501

Accrued Expenses

12 Months Ended

Dec. 31, 2021

Accrued Expenses

Accrued Expenses

6. Accrued Expenses

Accrued expenses consisted of the following (in thousands):


	December 31,		December 31,
	2021		2020
Accrued compensation	$	1,958	$	1,719
Accrued contracted costs		760		1,726
Accrued other		295		—
Accrued professional fees		268		356
Accrued severance		—		396
Total	$	3,281	$	4,197

Stock Incentive Plans

12 Months Ended

Dec. 31, 2021

Stock Incentive Plans

Stock Incentive Plans

9. Stock Incentive Plans

Prior to the Company’s initial public offering in June 2015 (the “IPO”), the Company granted awards to eligible participants under its 2008 Equity Incentive Plan. In May 2015, the Company’s board of directors adopted and, in June 2015, the Company’s stockholders approved the 2015 Stock Incentive Plan, as amended and amended and restated since the IPO (“2015 Plan”), which became effective immediately prior to the effectiveness of the IPO. Subsequent to the IPO, option grants have been awarded to eligible participants only under the 2015 Plan.

The 2015 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock units, stock appreciation rights and other stock-based awards. The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2015 Plan.

Terms of stock option agreements, including vesting requirements, are determined by the Company’s board of directors, subject to the provisions of the applicable stock incentive plan. Options granted by the Company generally vest ratably over four years, with a one-year cliff, and options are exercisable from the date of grant for a period of ten years. For options granted through December 31, 2021, the exercise price or purchase price, as applicable, equaled the estimated fair value of the common stock as determined by the Company’s board of directors on the date of grant.

A summary of the Company’s stock option activity and related information for employees and non-employees follows:


				Weighted
				Average
		Weighted-		Remaining	Aggregate
		Average Exercise		Contractual	Intrinsic Value
	Shares	Price		Term (years)	(in thousands)
Outstanding at December 31, 2020	227,846	$	68.25	8.13	$	—
Granted	1,156,646	$	15.91
Assumed in Quellis Acquisition	55,414	$	1.73
Exercised	(10,470)	$	2.10
Cancelled or forfeited	(81,196)	$	48.13
Expired	(1,507)	$	100.85
Outstanding at December 31, 2021	1,346,733	$	22.25	9.02	$	168,181
Vested and exercisable at December 31, 2021	135,412	$	72.76	7.19	$	77,798

The total intrinsic value of options exercised in the years ended December 31, 2021 and 2020 was $45 thousand and $29 thousand, respectively. The weighted-average grant date fair value of options granted to employees and non-employees for the years ended December 31, 2021 and 2020 was $9.82 and $3.81, respectively.

At December 31, 2021, the total unrecognized compensation expense related to unvested stock option awards was $10.8 million. The Company expects to recognize that cost over a weighted-average period of approximately 2.9 years.

Stock-Based Compensation Expense

The fair value of stock options granted to employees and non-employees was estimated using the Black-Scholes option-pricing model based on the following assumptions:


	Year Ended December 31,
	2021	2020
Weighted-average expected volatility	69.28-71.32%	75.51-82.08%
Expected term (in years)	5-6.25	5.50-6.25
Risk-free interest rate	0.42-1.36%	0.37-1.51%
Expected dividend yield	0%	0%

Volatility

Due to the lack of company-specific historical and implied volatility data of its common stock, the Company does not have relevant historical data to support its expected volatility. As such, the Company has used a weighted average of expected volatility based on the volatilities of a representative group of publicly traded biopharmaceutical companies. For purposes of identifying representative companies, the Company considered characteristics such as number of product candidates in early stages of product development, area of therapeutic focus, and length of trading history. The expected volatility was determined using an average of the historical volatilities of the representative group of companies for a period equal to the expected term of the option grant. The Company intends to continue to consistently apply this process using the same representative companies until a sufficient amount of historical information regarding the volatility of the Company’s own share price becomes available or until circumstances change, such that the identified entities are no longer representative companies. In the latter case, more suitable, similar entities whose share prices are publicly available would be utilized in the calculation.

Expected Term

The Company uses the “simplified method” to estimate the expected term of stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the contractual term (ten years) and the vesting term (generally four years) of the Company’s stock options, taking into consideration multiple vesting tranches. The Company utilizes this method due to lack of historical exercise data and the plain-vanilla nature of the Company’s share-based awards.

Risk-Free Rate

The risk-free rate was based on the yield curve of United States Treasury securities with periods commensurate with the expected term of the options being valued.

Stockholders' Equity (Tables)

12 Months Ended

Dec. 31, 2021

Reserved for Future Issuance

Schedule of common stock reserved for future issuance


	December 31,	December 31,
	2021	2020
Series X Preferred Stock	5,242,501	—
Warrants for the purchase of common stock	1,530,380	1,032,291
Options outstanding to purchase common stock	1,346,733	227,846
Options available for future issuance to purchase common stock	1,633,736	322,695
Shares reserved for the employee stock purchase plan	30,904	24,825
Total	9,784,254	1,607,657

Summary of Series X preferred stock or warrants to purchase

The following table presents information about warrants that are issued and outstanding at December 31, 2021:


Year Issued	Equity Instrument	Warrants Outstanding	Exercise Price		Date of Expiration
2015	Common Stock	204	$	732.72	3/30/2022
2018	Common Stock	699,962	$	72.00	6/21/2023
2019	Common Stock	331,858	$	37.50	2/7/2024
2021	Common Stock	498,356	$	2.10	12/14/2030
Total		1,530,380
Weighted average exercise price			$	41.84
Weighted average life in years					4.05

- Definition

Tabular disclosure of an entity's stock, including par or stated value per share, number and dollar amount of share subscriptions, shares authorized, shares issued, shares outstanding, number and dollar amount of shares held in an employee trust, dividend per share, total dividends, share conversion features, par value plus additional paid in capital, the value of treasury stock and other information necessary to a fair presentation, and EPS information. Stock by class includes common, convertible, and preferred stocks which are not redeemable or redeemable solely at the option of the issuer. Includes preferred stock with redemption features that are solely within the control of the issuer and mandatorily redeemable stock if redemption is required to occur only upon liquidation or termination of the reporting entity. If more than one issue is outstanding, state the title of each issue and the corresponding dollar amount; dollar amount of any shares subscribed but unissued and the deduction of subscriptions receivable there from; number of shares authorized, issued, and outstanding.

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+ Details

Financial Instruments

12 Months Ended

Dec. 31, 2021

Financial Instruments

Financial Instruments

4. Financial Instruments

The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value, and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value. Below is a summary of assets and liabilities measured at fair value on a recurring basis (in thousands):


	As of December 31, 2021
	Quoted Prices		Significant		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	1,853	$	—	$	—	$	1,853
Reverse repurchase agreements		—		—		—		—
Short-term investments:
Reverse repurchase agreements		—		39,000		—		39,000
Total	$	1,853	$	39,000	$	—	$	40,853


	As of December 31, 2020
	Quoted Prices		Significant		Significant
	in Active		Observable		Unobservable
	Markets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash and cash equivalents:
Money market funds	$	22,999	$	—	$	—	$	22,999
Short-term investments:
Reverse repurchase agreements		—		20,000		—		20,000
Total assets	$	22,999	$	20,000	$	—	$	42,999

At December 31, 2021 and 2020, cash equivalents approximated their fair value due to their short-term nature.

In connection with the Quellis Acquisition, the Company issued a warrant to purchase 2,805 shares of Series X Preferred Stock at an exercise price of $341.70 per share. Upon stockholder approval of the Conversion Proposal, and reflecting the reverse stock split, the warrant became a warrant to purchase 467,500 shares of common stock at a purchase price of $2.10. This was originally accounted for as a liability until stockholder approval of the Conversion Proposal on June 2, 2021, at which point the warrant was reclassified to permanent equity. The warrant liability was valued based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company estimated the fair value of the warrant liability using Black-Scholes option-pricing models and assumptions that are based on the individual characteristics of the warrants on the valuation date, as well as assumptions including the fair value per share of the underlying security, the remaining contractual term of the warrant, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying security (in thousands).


	December 31, 2021
Balance at beginning of year	$	—
Issuance of warrants		4,332
(Decrease) increase in the fair value of the warrants		(864)
Reclassification of warrant liability to additional paid in-capital		(3,468)
Ending balance	$	—

The fair value of the warrants was based on the following assumptions:


	Year Ended December 31,
	2021

Weighted-average expected volatility	89.1-89.3	%
Expected term (in years)	9.54-9.88
Risk-free interest rate	1.064-1.725	%
Expected dividend yield	0	%

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Short-Term Investments

12 Months Ended

Dec. 31, 2021

Short-Term Investments

Short-Term Investments

5. Short-Term Investments

The following tables summarize the short-term investments held at December 31, 2021 and 2020 (in thousands):


			Gross		Gross
	Amortized		Unrealized		Unrealized
	Cost		Gains		Losses		Fair Value
December 31, 2021
Reverse repurchase agreements	$	39,000	$	—	$	—	$	39,000
Total	$	39,000	$	—	$	—	$	39,000


			Gross		Gross
			Unrealized		Unrealized
	Amortized Cost		Gains		Losses		Fair Value
December 31, 2020
Reverse repurchase agreements	$	20,000	$	—	$	—	$	20,000
Total	$	20,000	$	—	$	—	$	20,000

The contractual maturities of all short-term investments held at December 31, 2021 and 2020 were one year or less. There were no short-term investments in an unrealized loss position at December 31, 2021 and 2020.

Gross realized gains and losses on the sales of short-term investments are included in other income, net. Unrealized holding gains or losses for the period that have been included in accumulated other comprehensive income, as well as gains and losses reclassified out of accumulated other comprehensive income into other income, net were not material to the Company’s consolidated results of operations.

During the years ended December 31, 2021 and 2020 all proceeds included in the Company’s cash flows related to maturities of underlying securities. The gains on proceeds of maturities of short-term investments were not material to the Company’s consolidated results of operations for the years ended December 31, 2021 and 2020.

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 86,508	$ 24,930
Short-term investments	39,000	20,000
Prepaid expenses and other current assets	1,567	1,395
Total current assets	127,075	46,325
Right-of-use asset	394	966
Other assets	45	165
Total assets	127,514	47,456
Current liabilities:
Accounts payable	1,557	1,544
Accrued expenses	3,281	4,197
Current portion of operating lease liabilities	365	649
Total current liabilities	5,203	6,390
Long-term portion of operating lease liabilities		397
Total liabilities	5,203	6,787
Commitments (Note 7)
Stockholders' equity:
Preferred Stock
Common stock, $0.001 par value per share, 150,000,000 shares authorized; 13,016,955 and 3,347,386 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively	13	4
Additional paid-in capital	481,709	301,562
Accumulated other comprehensive loss
Accumulated deficit	(455,809)	(260,897)
Total stockholders' equity	122,311	40,669
Total liabilities and stockholders' equity	127,514	$ 47,456
Series X redeemable convertible preferred stock
Stockholders' equity:
Preferred Stock	$ 96,398

Stockholders' Equity - Shares Reserved for Future Issuance (Details) - shares	Dec. 31, 2021	Dec. 31, 2020
Stockholders' Equity
Number of shares reserved for future issuance	9,784,254	1,607,657
Series X Preferred Stock
Stockholders' Equity
Number of shares reserved for future issuance	5,242,501
Warrants for the purchase of common Stock
Stockholders' Equity
Number of shares reserved for future issuance	1,530,380	1,032,291
Options outstanding to purchase common Stock
Stockholders' Equity
Number of shares reserved for future issuance	1,346,733	227,846
Options available for future issuance to purchase common stock
Stockholders' Equity
Number of shares reserved for future issuance	1,633,736	322,695
Shares reserved for the employee stock purchase plan
Stockholders' Equity
Number of shares reserved for future issuance	30,904	24,825

Stock Incentive Plans - Stock option activity (Details) - USD ($) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Shares
Outstanding, beginning of period (in shares)	227,846
Granted (in shares)	1,156,646
Assumed in Quellis Acquisition (in shares)	55,414
Exercised (in shares)	(10,470)
Cancelled or forfeited (in shares)	(81,196)
Expired (in shares)	(1,507)
Outstanding, end of period (in shares)	1,346,733	227,846
Vested and exercisable (in shares)	135,412
Weighted-Average Exercise Price
Outstanding, beginning of period (in dollars per share)	$ 68.25
Granted (in dollars per share)	15.91
Assumed in Quellis Acquisition (in dollars per share)	1.73
Exercised (in dollars per share)	2.10
Cancelled or forfeited (in dollars per share)	48.13
Expired (in dollars per share)	100.85
Outstanding at end of year (in dollars per share)	22.25	$ 68.25
Vested and Exercisable (in dollars per share)	$ 72.76
Weighted Average Remaining Contractual Term (years)
Outstanding	9 years 7 days	8 years 1 month 17 days
Vested and Exercisable	7 years 2 months 8 days
Aggregate Intrinsic Value
Outstanding	$ 168,181
Vested and Exercisable	77,798
Stock options
Additional disclosures
Intrinsic value of options exercised	$ 45	$ 29
Weighted average grant date fair value of options granted (in dollars per share)	$ 9.82	$ 3.81
Unrecognized compensation expense related to unvested stock option awards	$ 10,800
Weighted-average amortization period over which cost is expected to be recognized	2 years 10 months 24 days

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2021	Dec. 31, 2020
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	5,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	150,000,000	150,000,000
Common stock, issued (in shares)	13,016,955	3,347,386
Common stock, outstanding (in shares)	13,016,955	3,347,386
Preferred shares
Preferred stock, authorized (in shares)	4,908,620	4,908,620
Series X redeemable convertible preferred stock
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, authorized (in shares)	91,380	91,380
Preferred stock, issued (in shares)	31,455	0
Preferred stock, outstanding (in shares)	31,455	0

Consolidated Statements of Operations - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Operating expenses:
Research and development	$ 15,552	$ 25,590
General and administrative	14,807	11,845
Acquired in-process research and development	164,617
Total operating expenses	194,976	37,435
Loss from operations	(194,976)	(37,435)
Other income (expense):
Interest and investment income	122	236
Other expense, net	(58)	(101)
Total other income, net	64	135
Net loss	(194,912)	(37,300)
Dividend on convertible preferred stock related to beneficial conversion feature and issuance costs	(24,437)
Net loss attributable to common shareholders	$ (219,349)	$ (37,300)
Net loss per share - basic	$ (24.58)	$ (12.20)
Net loss per share - diluted	$ (24.58)	$ (12.20)
Weighted-average common shares outstanding used in net loss per share - basic	8,925,173	3,058,578
Weighted-average common shares outstanding used in net loss per share - diluted	8,925,173	3,058,578

Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

10. Income Taxes

For the years ended December 31, 2021 and 2020, the Company did not record a provision for federal or state income taxes as it has incurred cumulative net operating losses since inception.

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows for the years ended December 31, 2021 and 2020:


	Year Ended December 31,
	2021		2020
Federal income tax (benefit) at statutory rate	21.00	%	21.00	%
Permanent differences	(0.25)		(0.41)
Federal research and development credits and adjustments	0.44		2.78
Nondeductible research costs	(17.75)		—
State income tax, net of federal benefit	0.82		6.03
Other	0.01		0.37
Change in valuation allowance	(4.27)		(29.77)
Effective income tax rate	—	%	—	%

The Company’s deferred tax assets consisted of the following (in thousands):


	Year Ended December 31,
	2021		2020
Deferred tax assets
Net operating loss carryforwards	$	75,849	$	65,373
Tax credit carryforwards		10,063		9,273
Capitalized research and development		139		482
Capitalized legal expenses		1,048		1,070
Lease liability		99		284
Other differences		1,977		1,648
Total deferred tax assets		89,175		78,130
Deferred tax liabilities
ROU asset		(107)		(262)
Valuation allowance		(89,068)		(77,868)
Net deferred tax assets	$	—	$	—

The Company recorded an increase to the valuation allowance of $11.2 million during the year ended December 31, 2021 due primarily to the federal and state net operating losses and tax credits generated. The Company recorded an increase to the valuation allowance of $11.1 million during the year ended December 31, 2020 which was also primarily due to the federal and state net operating losses and tax credits generated.

In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible. Due to the Company’s history of losses and expectation of future losses, the deferred tax assets were fully offset by a valuation allowance at December 31, 2021 and 2020.

As of December 31, 2021, the Company had approximately $279.4 million of federal and $271.8 million of state net operating loss respectively, which may be available to offset future taxable income. Federal net operating loss carryforwards of $150.6 million and state net operating loss carryforwards of $271.8 million will expire at various dates from 2028 through 2041. Federal net operating loss carryforwards of $128.8 million can be carried forward indefinitely. The Company had approximately $8.1 million of federal and $2.4 million of state tax credit carryforwards available to reduce future tax liabilities as of December 31, 2021, which will expire at varying times through the year 2041.

The Internal Revenue Code of 1986, as amended (the “Code”), provides for a limitation of the annual use of net operating losses and other tax attributes (such as research and development tax credit carryforwards) following certain ownership changes (as defined by the Code) that could limit the Company’s ability to utilize these carryforwards. At this time, the Company has not completed a study to assess whether an ownership change under Section 382 of the Code has occurred, or whether there have been multiple ownership changes since the Company’s formation, due to the costs and complexities associated with such a study. The Company may have experienced various ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, the Company’s ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for federal or state income tax purposes.

As of December 31, 2021 and 2020, the Company did not have any significant unrecognized tax benefits. The Company had not accrued interest or penalties related to uncertain tax positions.

The federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2018 through December 31, 2021. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state taxing authorities to the extent utilized in a future period.

- 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.

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-SubTopic 30
-Section 50
-Paragraph 2
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

+ Details

Acquisition of Quellis - Net assets acquired based on their estimated fair values (Details) - Quellis Biosciences, Inc $ in Thousands	Jan. 28, 2021 USD ($)
Acquisition of Quellis
Acquired IPR&D	$ 164,612
Cash and cash equivalents	8,307
Prepaid expenses and other assets	136
Accounts payable	(1,974)
Accrued liabilities	(400)
Net acquired tangible assets	$ 170,681

Subsequent Events

12 Months Ended

Dec. 31, 2021

Subsequent Events

Subsequent Events

12. Subsequent Events

Operating Lease

On January 28, 2022, the Company entered into a sublease agreement (the “Sublease”) with Grant Thornton LLP (the “Sublandlord”), for office space. The Sublease will commence on the latest to occur of (i) May 1, 2022, (ii) the receipt of the landlord’s consent to the Sublease and (iii) the date on which the Sublandlord delivers full and exclusive possession of the premises to the Company as set forth in the Sublease and will end on July 31, 2024. The Sublease will increase the future minimum payments described in Note 7 from approximately $0.4 million to approximately $1.8 million.

Organization and Operations - January 2020 Financing (Details) - USD ($) $ / shares in Units, $ in Millions		12 Months Ended
	Jan. 30, 2020	Dec. 31, 2020
Common stock
January 2020 Financing
Issuance of stock, net of issuance costs (in shares)		881,666
January 2020 Financing
January 2020 Financing
Gross proceeds from sale of stock in public offering	$ 26.5
Proceeds from public offering, net of issuance costs	$ 24.6
January 2020 Financing \| Common stock
January 2020 Financing
Issuance of stock, net of issuance costs (in shares)	881,666
Share price (in dollars per share)	$ 30.00
January 2020 Financing \| Oppenheimer & Co. Inc
January 2020 Financing
Issuance of stock, net of issuance costs (in shares)	115,000

Summary of Significant Accounting Policies - Segment Information (Details)	12 Months Ended
	Dec. 31, 2021 segment
Summary of Significant Accounting Policies
Number of operating segments	1

Financial Instruments (Details) - Recurring - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Summary of assets measured at fair value on a recurring basis
Total assets	$ 40,853	$ 42,999
Level 1
Summary of assets measured at fair value on a recurring basis
Total assets	1,853	22,999
Level 2
Summary of assets measured at fair value on a recurring basis
Total assets	39,000	20,000
Money market funds
Summary of assets measured at fair value on a recurring basis
Cash and cash equivalents	1,853	22,999
Money market funds \| Level 1
Summary of assets measured at fair value on a recurring basis
Cash and cash equivalents	1,853	22,999
Reverse repurchase agreements
Summary of assets measured at fair value on a recurring basis
Short-term investments	39,000	20,000
Reverse repurchase agreements \| Level 2
Summary of assets measured at fair value on a recurring basis
Short-term investments	$ 39,000	$ 20,000

Commitments (Details) - USD ($) $ in Thousands	12 Months Ended
Commitments (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Nov. 30, 2019
Operating leases
Operating lease liability	$ 400		$ 1,700
Right-of-use asset	394	$ 966	$ 1,700
Estimated incremental borrowing rate			7.49%
Future minimum payments	400
Rent expense	700	800
Lease payments	$ 700	$ 1,500

Summary of Significant Accounting Polices (Polices)

12 Months Ended

Dec. 31, 2021

Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

Use of Estimates

Off-Balance Sheet Risk and Concentrations of Credit Risk

Cash, Cash Equivalents and Restricted Cash

Cash and Cash Equivalents and Restricted Cash


	December 31,
	2021		2020
Cash and cash equivalents	$	86,508	$	24,930
Restricted cash (1)		121		121
Total	$	86,629	$	25,051

(1)

Included in prepaid expenses and other current assets at December 31, 2021 and other long-term assets at December 31, 2020.

Short-Term Investments

Fair Value of Financial Instruments

Impairment of Long-Lived Assets

Research and Development Expenses

Stock-Based Compensation

The Company expenses restricted stock awards based on the fair value of the award on a straight-line basis over the associated service period of the award.


	Year Ended December 31,
	2021		2020
Research and development	$	1,132	$	599
General and administrative		2,230		791
Total	$	3,362	$	1,390

No related tax benefits were recognized for the years ended December 31, 2021 and 2020.

Net Loss Per Share

The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:


	Year Ended December 31,
	2021	2020
Stock options	1,346,733	227,945
Common stock warrants	1,530,380	1,032,292
Series X Preferred Stock (1)	5,242,501	—
	8,119,614	1,260,236

(1)

Shown as common stock equivalents

Income Taxes

Segment Information

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Leases

Acquired In-Process Research and Development

Preferred Stock Discount

Recent Accounting Pronouncements

Recent Accounting Pronouncements -Adopted

Recent Accounting Pronouncements - Not Yet Adopted

Income Taxes - Reconciliation (Details)	12 Months Ended
Income Taxes - Reconciliation (Details)	Dec. 31, 2021	Dec. 31, 2020
Reconciliation of the U.S. statutory income tax rate to the Company's effective tax rate
Federal income tax (benefit) at statutory rate	21.00%	21.00%
Permanent differences	(0.25%)	(0.41%)
Federal research and development credits and adjustments	0.44%	2.78%
Nondeductible research costs	(17.75%)
State income tax, net of federal benefit	0.82%	6.03%
Other	0.01%	0.37%
Change in valuation allowance	(4.27%)	(29.77%)
Effective income tax rate	0.00%	0.00%

Organization and Operations (Tables)

12 Months Ended

Dec. 31, 2021

Organization and Operations

Schedule of common stock warrants outstanding


		Series X
		Preferred
		Stock at
		Transaction
		Date
Shares issued in merger		50,504
Shares issued in February 2021 Financing		35,573
Warrants assumed in merger		2,805
Total		88,882

Financial Instruments - Fair value of warrants (Details)	Dec. 31, 2021 item Y
Weighted-average expected volatility \| Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants and rights outstanding, measurement input	0.891
Weighted-average expected volatility \| Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants and rights outstanding, measurement input	0.893
Expected term (in years) \| Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants and rights outstanding, measurement input \| Y	9.54
Expected term (in years) \| Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants and rights outstanding, measurement input \| Y	9.88
Risk-free interest rate \| Minimum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants and rights outstanding, measurement input	0.01064
Risk-free interest rate \| Maximum
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants and rights outstanding, measurement input	0.01725
Expected dividend yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants and rights outstanding, measurement input	0

Commitments

12 Months Ended

Dec. 31, 2021

Commitments

Commitments

7. Commitments

In November 2019, the Company entered into a sublease for office space which was classified as an operating lease. At inception of the lease, the Company recognized a lease liability and right-of-use asset of approximately $1.7 million. The lease liability represents the present value of the remaining lease payments, discounted using the Company’s estimated incremental borrowing rate of 7.49%. The ROU asset represents the lease liability adjusted for any prepaid and accrued rent payments.

The lease is scheduled to expire in 2022. Future minimum payments required under the non-cancelable operating leases as of December 31, 2021 are $0.4 million.

Rent expense was $0.7 million and $0.8 million for the years ended December 31, 2021 and 2020, respectively. Lease payments were $0.7 million and $1.5 million for the years ended December 31, 2021 and 2020, respectively.

Acquisition of Quellis (Details) $ in Thousands		12 Months Ended
Acquisition of Quellis (Details) $ in Thousands	Jan. 28, 2021 USD ($) shares	Dec. 31, 2021 shares
Acquisition of Quellis
Number of shares of common stock into which each share of Series X Preferred Stock may be converted		166.67
Common stock
Acquisition of Quellis
Issuance of common stock upon acquisition of Quellis (in shares)		555,444
Quellis Biosciences, Inc
Acquisition of Quellis
Cost to acquire the assets \| $	$ 170,681
Acquisition costs \| $	$ 1,800
Quellis Biosciences, Inc \| Common stock
Acquisition of Quellis
Issuance of common stock upon acquisition of Quellis (in shares)	555,444
Series X redeemable convertible preferred stock
Acquisition of Quellis
Number of shares of common stock into which each share of Series X Preferred Stock may be converted		166.67
Series X redeemable convertible preferred stock \| Quellis Biosciences, Inc
Acquisition of Quellis
Issuance of preferred stock upon acquisition of Quellis (in shares)	50,504
Number of shares of common stock into which each share of Series X Preferred Stock may be converted	166.67
Series X redeemable convertible preferred stock \| Quellis Biosciences, Inc \| Stock Purchase Agreement
Acquisition of Quellis
Number of shares of common stock into which each share of Series X Preferred Stock may be converted		166.67

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2021

Income Taxes

Schedule of reconciliation of U.S. statutory income tax rate to effective tax rate


	Year Ended December 31,
	2021		2020
Federal income tax (benefit) at statutory rate	21.00	%	21.00	%
Permanent differences	(0.25)		(0.41)
Federal research and development credits and adjustments	0.44		2.78
Nondeductible research costs	(17.75)		—
State income tax, net of federal benefit	0.82		6.03
Other	0.01		0.37
Change in valuation allowance	(4.27)		(29.77)
Effective income tax rate	—	%	—	%

Schedule of components of deferred tax assets

The Company’s deferred tax assets consisted of the following (in thousands):


	Year Ended December 31,
	2021		2020
Deferred tax assets
Net operating loss carryforwards	$	75,849	$	65,373
Tax credit carryforwards		10,063		9,273
Capitalized research and development		139		482
Capitalized legal expenses		1,048		1,070
Lease liability		99		284
Other differences		1,977		1,648
Total deferred tax assets		89,175		78,130
Deferred tax liabilities
ROU asset		(107)		(262)
Valuation allowance		(89,068)		(77,868)
Net deferred tax assets	$	—	$	—

Summary of Significant Accounting Polices - Fair Value of Financial Instruments (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)
Fair Value of Financial Instruments
Fair value assets, transfers from Level 1 to Level 2	$ 0
Fair value assets, transfers from Level 2 to Level 1	0
Fair value liabilities, transfers from Level 1 to Level 2	0
Fair value liabilities, transfers from Level 2 to Level 1	$ 0
Reverse repurchase agreements
Fair Value of Financial Instruments
Percentage of investment amount to collateralized deposits value	102.00%
Reverse repurchase agreements \| Government Securities and Obligations \| Minimum
Fair Value of Financial Instruments
Percentage of investment amount to collateralized deposits value	102.00%

Acquisition of Quellis

12 Months Ended

Dec. 31, 2021

Acquisition of Quellis

Acquisition of Quellis

3. Acquisition of Quellis

On January 28, 2021, the Company completed the Quellis Acquisition in accordance with the terms of the Merger Agreement as discussed in Note 1, “Organization and Operations”. Under the terms of the Merger Agreement, the Company issued 555,444 shares of common stock and 50,504 shares of Series X Preferred Stock. Each share of Series X Preferred Stock is convertible into 166.67 shares of Common Stock, subject to certain conditions.

The Company concluded that the Quellis Acquisition was not the acquisition of a business, as substantially all of the fair value of the non-monetary assets acquired was concentrated in a single identifiable asset, STAR-0215.

The Company determined that the cost to acquire the Quellis assets was $170.7 million, based on the fair value of the equity consideration issued and including direct costs of the acquisition of $1.8 million. The net assets acquired in connection with the Quellis Acquisition were recorded at their estimated fair values as of January 28, 2021, which is the date the Quellis Acquisition was completed. The following table summarizes the net assets acquired based on their estimated fair values as of January 28, 2021 (in thousands):


Acquired IPR&D	$	164,612
Cash and cash equivalents		8,307
Prepaid expenses and other assets		136
Accounts payable		(1,974)
Accrued liabilities		(400)
Net acquired tangible assets	$	170,681

In the estimation of fair value of the asset purchase consideration, the Company used the carrying value of the cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities as the most reliable indicator of fair value based on the associated short-term nature of the balances. The remaining fair value was attributable to the acquired IPR&D. As STAR-0215 had not, at the time of the Quellis Acquisition, received regulatory approval in any territory, the cost attributable to the IPR&D was expensed in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2021 as the acquired IPR&D had no alternative future use, as determined by the Company in accordance with U.S. GAAP.

Organization and Operations - Stock Purchase Agreement and Series X Preferred Stock (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($) shares	Jan. 28, 2021	Dec. 31, 2020 shares
Stock Purchase Agreement and Series X Preferred Stock
Net proceeds from issuance of private placement \| $	$ 104,261
Number of shares of common stock into which each share of Series X Preferred Stock may be converted	166.67
Preferred stock, outstanding (in shares)	0		0
Minimum
Stock Purchase Agreement and Series X Preferred Stock
Common stock, percentage of beneficial ownership initially, after conversion	4.99%
Common stock, percentage of beneficial ownership thereafter, after conversion	4.99%
Maximum
Stock Purchase Agreement and Series X Preferred Stock
Common stock, percentage of beneficial ownership initially, after conversion	9.99%
Common stock, percentage of beneficial ownership thereafter, after conversion	19.99%
Series X redeemable convertible preferred stock
Stock Purchase Agreement and Series X Preferred Stock
Series X Preferred Stock at Transaction Date	88,882
Number of shares of common stock into which each share of Series X Preferred Stock may be converted	166.67
Number of Series X preferred shares converted during period	54,622
Number of common shares issued from conversion of Series X preferred shares	9,103,664
Number of common shares issuable upon conversion of preferred stock (in shares)	5,242,501
Preferred stock, outstanding (in shares)	31,455		0
Series X redeemable convertible preferred stock \| Shares issued in merger
Stock Purchase Agreement and Series X Preferred Stock
Series X redeemable convertible preferred stock, shares issued	50,504
Series X redeemable convertible preferred stock \| Shares issued in February 2021 Financing
Stock Purchase Agreement and Series X Preferred Stock
Series X redeemable convertible preferred stock, shares issued	35,573
Series X redeemable convertible preferred stock \| Warrants assumed in merger
Stock Purchase Agreement and Series X Preferred Stock
Series X Preferred Stock at Transaction Date	2,805
Series X redeemable convertible preferred stock \| Quellis Biosciences, Inc
Stock Purchase Agreement and Series X Preferred Stock
Number of shares of common stock into which each share of Series X Preferred Stock may be converted		166.67
Series X redeemable convertible preferred stock \| Quellis Biosciences, Inc \| Stock Purchase Agreement
Stock Purchase Agreement and Series X Preferred Stock
Issuance of preferred stock in a private offering of public equity, net of issuance costs (in shares)	35,573
Gross proceeds from issuance of preferred stock in a private offering \| $	$ 110,000
Net proceeds from issuance of private placement \| $	104,300
Beneficial conversion feature \| $	19,600
Issuance costs \| $	$ 5,700
Number of shares of common stock into which each share of Series X Preferred Stock may be converted	166.67

Short-Term Investments (Details) $ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($) instrument
Short-Term Investments
Number of short term investments in unrealized loss position \| instrument		0
Short-term Investments
Short-Term Investments
Amortized Cost	$ 39,000	$ 20,000
Fair Value	39,000	20,000
Reverse repurchase agreements
Short-Term Investments
Amortized Cost	39,000	20,000
Fair Value	$ 39,000	$ 20,000

Stockholders' Equity - Common Stock (Details) - $ / shares	Dec. 31, 2021	Dec. 31, 2020
Common Stock
Common stock, authorized (in shares)	150,000,000	150,000,000
Par value of common stock (in dollars per share)	$ 0.001	$ 0.001
Common stock, issued (in shares)	13,016,955	3,347,386
Common Stock, outstanding (in shares)	13,016,955	3,347,386

Income Taxes - Deferred tax assets (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Deferred tax assets
Net operating loss carryforwards	$ 75,849	$ 65,373
Tax credit carryforwards	10,063	9,273
Capitalized research and development	139	482
Capitalized legal expenses	1,048	1,070
Lease liability	99	284
Other differences	1,977	1,648
Total deferred tax assets	89,175	78,130
Deferred tax liabilities
ROU asset	(107)	(262)
Valuation allowance	(89,068)	(77,868)
Net deferred tax assets	0	0
Increase in valuation allowance	$ 11,200	$ 11,100

Income Taxes - Operating Loss Carryforwards (Details) $ in Millions	Dec. 31, 2021 USD ($)
Federal
Operating loss carryforwards
Net operating loss	$ 279.4
Tax credit carryforwards	8.1
Federal \| Tax Years 2023 through 2039
Operating loss carryforwards
Net operating loss	150.6
Federal \| No expiration
Operating loss carryforwards
Net operating loss	128.8
State
Operating loss carryforwards
Net operating loss	271.8
Tax credit carryforwards	2.4
State \| Tax Years 2023 through 2039
Operating loss carryforwards
Net operating loss	$ 271.8

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Operating activities
Net loss	$ (194,912)	$ (37,300)
Reconciliation of net loss to net cash used in operating activities:
Non-cash portion of acquired in-process research and development	164,612
Stock-based compensation expense	3,362	1,390
Net gain on warrants inherited in acquisiton of Quellis	71
Other non-cash items	21	58
Changes in assets and liabilities:
Prepaid expenses and other assets	85	1,257
Right-of-use asset-operating	(109)	176
Accounts payable	(1,965)	347
Accrued expenses	(1,316)	1,587
Net cash used in operating activities	(30,151)	(32,485)
Investing activities
Purchases of short-term investments	(78,000)	(62,777)
Sales and maturities of short-term investments	59,000	69,110
Cash acquired in acquisition of Quellis	6,466
Purchases of property and equipment	(21)	(33)
Net cash provided by investing activities	(12,555)	6,300
Financing activities
Proceeds from underwritten public offering, net of issuance costs		24,559
Proceeds from private offering of public equity, net of issuance costs	104,261
Proceeds from at-the-market offering, net of issuance costs		16,270
Proceeds from exercise of common stock options	23	31
Net cash provided by financing activities	104,284	40,860
Net increase in cash, cash equivalents and restricted cash	61,578	14,675
Cash, cash equivalents and restricted cash, beginning of period	25,051	10,376
Cash, cash equivalents and restricted cash, end of period	86,629	$ 25,051
Supplemental disclosure of non-cash transactions:
Conversion of Series X Preferred Stock into common stock	168,920
Non-cash dividend on convertible preferred stock	24,437
Reclassification of warrant liability to additional paid-in capital	$ 3,468

Stockholders' Equity

12 Months Ended

Dec. 31, 2021

Stockholders' Equity

Stockholders' Equity

8. Stockholders’ Equity

Preferred Stock

Under the Company’s amended and restated certificate of incorporation, the Company has 5,000,000 shares of preferred stock authorized for issuance, with a $0.001 par value per share. Preferred stock may be issued from time to time in one or more series, each series to have such terms as stated or expressed in the resolutions providing for the issue of such series adopted by the board of directors of the Company. Preferred stock which may be redeemed, purchased or acquired by the Company may be reissued except as otherwise provided by law. As of December 31, 2021, the Company had 31,455 shares of Series X Preferred Stock outstanding. Each share of Series X Preferred Stock is convertible into 166.67 shares of common stock and therefore the number of shares of underlying common stock issuable upon conversion of the Series X Preferred Stock is 5,242,501. Refer to Note 1 – “Organization and Operations” regarding the Company’s issuance of Series X Preferred Stock in January 2021 and February 2021.

Outstanding Warrants

The following table presents information about warrants that are issued and outstanding at December 31, 2021:


Year Issued	Equity Instrument	Warrants Outstanding	Exercise Price		Date of Expiration
2015	Common Stock	204	$	732.72	3/30/2022
2018	Common Stock	699,962	$	72.00	6/21/2023
2019	Common Stock	331,858	$	37.50	2/7/2024
2021	Common Stock	498,356	$	2.10	12/14/2030
Total		1,530,380
Weighted average exercise price			$	41.84
Weighted average life in years					4.05

Common Stock

As of December 31, 2021, the Company had 150,000,000 shares of common stock authorized for issuance, $0.001 par value per share, with 13,016,955 shares issued and outstanding. The voting, dividend and liquidation rights of holders of common stock are subject to and qualified by the rights, powers and preferences of the holders of any outstanding preferred stock.

Reserved for Future Issuance

The Company has reserved for future issuance the following shares of common stock:


	December 31,	December 31,
	2021	2020
Series X Preferred Stock	5,242,501	—
Warrants for the purchase of common stock	1,530,380	1,032,291
Options outstanding to purchase common stock	1,346,733	227,846
Options available for future issuance to purchase common stock	1,633,736	322,695
Shares reserved for the employee stock purchase plan	30,904	24,825
Total	9,784,254	1,607,657

As of December 31, 2021, the Company also had 31,455 shares of Series X Preferred Stock outstanding. Each share of Series X Preferred Stock outstanding is convertible into 166.67 shares of the Company’s common stock, subject to certain beneficial ownership limitations at the holder’s option. See Note 1 – “Organization and Operations” for additional detail.