SEC Filing | Pardes Biosciences, Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _____________________ TO _____________________

Commission File Number 001-40067

PARDES BIOSCIENCES, INC.

(Exact name of Registrant as specified in its Charter)


Delaware		85-2696306
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2173 Salk Avenue, Suite 250 PMB#052 Carlsbad, CA		92008
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (415) 649-8758

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.0001 per share	PRDS	The Nasdaq Stock Market, LLC

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Registrant’s common stock outstanding as of November 1, 2022 was 62,320,924.

Table of Contents



		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations and Comprehensive Loss	2
	Condensed Statements of Stockholders’ Equity (Deficit)	3
	Condensed Statements of Cash Flows	4
	Notes to Unaudited Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	19

PART II	OTHER INFORMATION	20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
SIGNATURES		64

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions, or strategies regarding the future, including those relating to the success, cost and timing of our product development activities and clinical trials, the potential attributes and benefits of our product candidates, our ability to obtain and maintain regulatory approval for our product candidates and our ability to obtain funding for our operations. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

Forward-looking statements relating to us in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•

the impact of the COVID-19 pandemic on our operations, financial results and liquidity and capital resources, including due to the pandemic’s impact on our research and development activities, clinical trials and employees;

•

the ability of our clinical trials to demonstrate acceptable safety and efficacy of our product candidates, including PBI-0451, our lead product candidate, and other positive results;

•

the timing, progress and results of clinical trials for PBI-0451 and completion of studies or trials and related preparatory work;

•

the period during which the results of the clinical trials will become available;

•

the initiation, timing, progress, results and costs of our research and development programs and our current and future preclinical studies, nonclinical studies and clinical trials;

•

our ability to initiate, recruit and enroll patients in and conduct our clinical trials at the pace that we project;

•

the timing, scope and likelihood of regulatory filings;

•

our ability to obtain emergency use authorization or marketing approval of PBI-0451 and any future product candidates on expected timelines and to meet existing or future regulatory standards or comply with post-authorization or post-approval requirements;

•

our expectations regarding the potential market size, government stockpiling and the size of the patient populations for our product candidates, if approved for commercial use;

•

the performance of third parties in connection with the development of our product candidates, including third-party suppliers and manufacturers;

•

our intellectual property position and expectations regarding our ability to obtain and maintain intellectual property protection;

•

our ability to identify additional products, product candidates or technologies with significant commercial potential that are consistent with our commercial objectives;

•

our expected future growth;

•

our estimates regarding expenses, future financial performance and capital requirements;

•

the impact of government laws and regulations in the United States and foreign countries;

•

our competitive position and expectations regarding developments and projections relating to our competitors and any competing therapies that are or become available;

•

developments and expectations regarding our industry; and

•

other risks and uncertainties indicated in this Quarterly Report, including those under “Risk Factors” herein and other filings that have been made or will be made with the Securities and Exchange Commission (SEC).

The forward-looking statements in this Quarterly Report on Form 10-Q are based on current expectations and beliefs concerning future developments and their potential effects. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements.

In addition, statements that we “believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe that such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

The risks and uncertainties include, but are not limited to, those factors described under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 29, 2022. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Some of these risks and uncertainties may in the future be amplified by the COVID-19 pandemic (including declines in severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) infections), and there may be additional risks that we currently consider immaterial or which are unknown. It is not possible to predict or identify all such risks. We do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

iii

SUMMARY OF RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. Set forth below is a summary list of the principal risk factors as of the date of filing of this Quarterly Report on Form 10-Q:

•

We are heavily dependent on the success of PBI-0451, our lead product candidate. If we are required to discontinue development of PBI-0451 or if PBI-0451 does not receive emergency use authorization (if available) or regulatory approval, or fails to be successfully commercialized or achieve significant market acceptance, we would be substantially delayed in our ability to achieve profitability, if ever.

•

We have a limited operating history and no history of successfully developing or commercializing any approved therapeutic products, which may make it difficult to evaluate the success of our business to date and to assess the prospects for our future viability and ability to generate revenue and become profitable in the future.

•

We will require additional capital to finance our operations, which may not be available to us on acceptable terms, or at all. As a result, we may not complete the development, manufacturing and commercialization of PBI-0451 or any other product candidates.

•

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than us. If our competitors develop and market products faster or that are more effective, safer, better tolerated, or less expensive than the product candidates we develop, our ability to obtain any future funding for our development and manufacturing efforts or to ultimately commercialize a therapy for COVID-19 will be negatively impacted.

•

The regulatory pathways for our product candidates targeting coronaviruses, including SARS-CoV-2, the virus that causes COVID-19, are continually evolving, which may result in unexpected or unforeseen challenges and longer timelines than seen for earlier COVID-19 vaccines and therapeutics.

•

COVID-19 continues to cause morbidity and mortality globally; however, the number of infections and the morbidity associated with those infections fluctuates significantly. As a result, we may find enrollment of patients for clinical trials to be a challenge and/or may find that the severity of disease declines over time such that it becomes challenging to enroll the number of patients required to demonstrate statistically significant improvements in endpoints. If enrollment is delayed or takes longer than expected, this could delay or prevent the collection of data sufficient to meet our endpoints and seek authorization or marketing approval.

•

PBI-0451 and any other product candidates we may develop must undergo rigorous clinical trials and regulatory approvals, and results from early nonclinical studies or earlier-stage clinical trials may not be indicative of results in future clinical trials.

•

Our subsequent clinical trials may reveal significant adverse events not seen in our earlier clinical trials or preclinical or nonclinical studies and may result in a safety profile that could inhibit regulatory approval or market acceptance of any of our product candidates.

•

We may expend resources in anticipation of clinical trials and potential commercialization of PBI-0451, which we may not be able to recover if PBI-0451 is not authorized or approved for the treatment of COVID-19 or we are not successful at commercializing PBI-0451.

•

If available, we may attempt to secure expedited approvals of our product candidates in the United States and other countries. If we are unable to obtain such expedited approvals, or those pathways are no longer available to us at the time we would be seeking approvals, we will be required to conduct additional nonclinical studies or clinical trials beyond those contemplated for expedited approval, which could delay our ability to generate revenue and increase the expense of obtaining and delay in the receipt of necessary marketing approvals. Even if we receive an expedited approval from the FDA or other regulators, if our confirmatory clinical trials do not verify clinical benefit, or if we do not comply with rigorous post-marketing requirements, the FDA or other regulators may seek to withdraw the initial approval.

•

We must attract and retain highly skilled employees to succeed. If we are not able to attract and retain key clinical, scientific, technical and management personnel, our business may materially suffer.

•

Our success depends upon our ability to obtain and maintain intellectual property protection for our products and technologies. Proprietary rights and technology are difficult and costly to protect, and we may not be able to ensure their protection.

•

We contract with third parties for the manufacture of our product candidates for nonclinical and clinical testing and expect to continue to do so for subsequent clinical trials and for commercialization. Significant portions of our clinical manufacturing are currently conducted by third-party manufacturers outside of the United States, including China. This reliance on third parties increases the risk that we will not have sufficient quantities of our product candidates or products, if approved, or that such supply will not be available to us at an acceptable cost and in accordance with anticipated timelines, which could delay, prevent or impair our development or commercialization efforts.

•

We may seek to establish collaborations and if we are not able to establish them on commercially reasonable terms, we may have to alter our development and commercialization plans.

•

The price of our common stock may be volatile.

PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial Statements (Unaudited).

PARDES BIOSCIENCES, INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and par value data)


	September 30,			December 31,
	2022			2021
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	209,055		$	268,678
Prepaid expenses and other current assets		4,986			6,581
Total current assets		214,041			275,259
Total assets	$	214,041		$	275,259
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,569		$	2,385
Accrued expenses		10,459			6,580
Total current liabilities		12,028			8,965
Total liabilities		12,028			8,965
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock: $0.0001 par value; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding at September 30, 2022 and December 31, 2021		—			—
Common stock: $0.0001 par value at September 30, 2022 and December 31, 2021; 250,000,000 shares authorized at September 30, 2022 and December 31, 2021; 62,320,924 and 62,378,996 shares issued at September 30, 2022 and December 31, 2021, respectively; and 59,113,864 and 56,765,533 shares outstanding at September 30, 2022 and December 31, 2021, respectively		6			6
Additional paid-in capital		325,943			317,812
Accumulated deficit		(123,936	)		(51,524	)
Total stockholders' equity		202,013			266,294
Total liabilities and stockholders' equity	$	214,041		$	275,259

The accompanying notes are an integral part of these condensed financial statements.

PARDES BIOSCIENCES, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(UNAUDITED)

(in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating expenses:
Research and development	$	17,375		$	8,081		$	50,918		$	17,792
General and administrative		6,919			3,434			22,736			6,389
Total operating expenses		24,294			11,515			73,654			24,181
Other income:
Interest and other income, net		959			3			1,242			10
Net loss and comprehensive loss	$	(23,335	)	$	(11,512	)	$	(72,412	)	$	(24,171	)
Net loss per share, basic and diluted	$	(0.40	)	$	(3.76	)	$	(1.25	)	$	(11.73	)
Weighted-average number of common shares used in computing net loss per share, basic and diluted		58,381,918			3,064,829			57,720,591			2,059,855

The accompanying notes are an integral part of these condensed financial statements.

PARDES BIOSCIENCES, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(UNAUDITED)

(in thousands, except share amounts)


	For the Nine Months Ended September 30, 2022
	Convertible Preferred Stock				Common Stock				Additional					Total Stockholders'
	Number of Shares		Amount		Number of Shares		$0.0001 Par Value		Paid-In Capital		Accumulated Deficit			Equity (Deficit)
Balance at December 31, 2021		—	$	—		56,765,533	$	6	$	317,812	$	(51,524	)	$	266,294
Vesting of restricted stock awards into common stock		—		—		610,765		—		—		—			—
Stock-based compensation expense		—		—		—		—		1,527		—			1,527
Net loss		—		—		—		—		—		(21,440	)		(21,440	)
Balance at March 31, 2022		—		—		57,376,298		6		319,339		(72,964	)		246,381
Vesting of restricted stock awards into common stock		—		—		604,820		—		—		—			—
Stock-based compensation expense		—		—		—		—		3,888		—			3,888
Net loss		—		—		—		—		—		(27,637	)		(27,637	)
Balance at June 30, 2022		—		—		57,981,118		6		323,227		(100,601	)		222,632
Vesting of restricted stock awards into common stock		—		—		1,132,746		—		—		—			—
Stock-based compensation expense		—		—		—		—		2,716		—			2,716
Net loss		—		—		—		—		—		(23,335	)		(23,335	)
Balance at September 30, 2022		—	$	—		59,113,864	$	6	$	325,943	$	(123,936	)	$	202,013


	For the Nine Months Ended September 30, 2021
	Convertible Preferred Stock				Common Stock				Additional					Total Stockholders'
	Number of Shares		Amount		Number of Shares		$0.0001 Par Value		Paid-In Capital		Accumulated Deficit			Equity (Deficit)
Balance at December 31, 2020		—	$	—		—	$	—	$	—	$	(13,006	)	$	(13,006	)
Issuance of Series A convertible preferred stock for cash, net of issuance costs of $176		13,756,122		44,324		—		—		—		—			—
Conversion of 2020 SAFE agreements into shares of convertible preferred stock		5,845,071		14,808		—		—		—		—			—
Vesting of restricted stock awards into common stock		—		—		1,534,646		—		—		—			—
Stock-based compensation expense		—		—		—		—		76		—			76
Net loss		—		—		—		—		—		(4,523	)		(4,523	)
Balance at March 31, 2021		19,601,193		59,132		1,534,646		—		76		(17,529	)		(17,453	)
Vesting of restricted stock awards into common stock		—		—		1,185,397		—		—		—			—
Exercise of common stock options		—		—		1,408		—		4		—			4
Stock-based compensation expense		—		—		—		—		230		—			230
Net loss		—		—		—		—		—		(8,136	)		(8,136	)
Balance at June 30, 2021		19,601,193		59,132		2,721,451		—		310		(25,665	)		(25,355	)
Vesting of restricted stock awards into common stock		—		—		630,120		—		—		—			—
Stock-based compensation expense		—		—		—		—		344		—			344
Net loss		—		—		—		—		—		(11,512	)		(11,512	)
Balance at September 30, 2021		19,601,193	$	59,132		3,351,571	$	—	$	654	$	(37,177	)	$	(36,523	)

The accompanying notes are an integral part of these condensed financial statements.

PARDES BIOSCIENCES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)


	Nine Months Ended September 30,
	2022			2021
Operating activities:
Net loss	$	(72,412	)	$	(24,171	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		8,131			650
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,594			(482	)
Accounts payable		(581	)		1,119
Accrued expenses		4,042			2,747
Net cash used in operating activities		(59,226	)		(20,137	)
Financing activities:
Proceeds from issuance of convertible preferred stock		—			44,500
Cash paid for deferred offering costs		(397	)		(1,218	)
Payment of issuance costs for convertible preferred stock		—			(176	)
Proceeds from exercise of common stock options		—			4
Net cash (used) provided by financing activities		(397	)		43,110
(Decrease) increase in cash and cash equivalents		(59,623	)		22,973
Cash and cash equivalents at beginning of period		268,678			3,410
Cash and cash equivalents at end of period	$	209,055		$	26,383
Non-cash financing activities:
Conversion of 2020 SAFE agreements into shares of convertible preferred stock	$	—		$	14,808
Deferred offering costs included in accounts payable and accrued expenses		—			302

The accompanying notes are an integral part of these condensed financial statements.

PARDES BIOSCIENCES, INC.

Notes to Unaudited Condensed Financial Statements

Note 1. Description of Business

Description of Business

Unless the context otherwise requires, references in these notes to “Pardes,” “the Company,” “we,” “us,” “our” and any related terms are intended to mean Pardes Biosciences, Inc.

Pardes Biosciences, Inc. is a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing novel oral-antiviral therapeutics to improve the lives of patients suffering from life-threatening disease, starting with our lead product candidate, PBI-0451, which is in clinical development and intended to treat and prevent COVID-19 in adult and pediatric patients. COVID-19 is caused by infection with the severe acute respiratory syndrome coronavirus (SARS-CoV-2). PBI-0451 inhibits the main coronaviral cysteine protease, a viral protein essential for replication of all known coronaviruses, including SARS-CoV-2.

References in these notes to the unaudited condensed financial statements to “Pardes Biosciences, Inc.,” refer to Pardes Biosciences Sub, Inc., a Delaware corporation incorporated in February 2020 and formerly known as Pardes Biosciences, Inc. (Old Pardes), for the periods prior to its business combination transaction that took place on December 23, 2021 and Pardes Biosciences, Inc., a Delaware corporation incorporated in August 2020 and formerly known as FS Development Corp. II (FSDC II) and its subsidiary for the periods following the Business Combination.

Business Combination

On December 23, 2021 (Closing Date), Old Pardes and FSDC II completed the transactions contemplated by the Agreement and Plan of Merger, dated as of June 29, 2021, as amended on November 7, 2021 (Merger Agreement), by and among Old Pardes, Shareholder Representative Services LLC, a Colorado limited liability company solely in its capacity as the representative, agent and attorney-in-fact of the Company Securityholders (as defined in the Merger Agreement), FSDC II and Orchard Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of FSDC II (Merger Sub). FSDC II was formed in August 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses.

On the day prior to the Closing Date, Old Pardes changed its name to “Pardes Biosciences Sub, Inc.” Pursuant to the Merger Agreement, on the Closing Date, (i) FSDC II changed its name to “Pardes Biosciences, Inc.” (together with its consolidated subsidiary, New Pardes) and (ii) Old Pardes merged with and into Merger Sub (Merger), with Old Pardes as the surviving company in the Merger and, after giving effect to such Merger, Old Pardes becoming a wholly-owned subsidiary of New Pardes. On January 31, 2022, Old Pardes merged with and into New Pardes.

In connection with the transactions contemplated under the Merger Agreement and described above (collectively, the Business Combination) certain investors purchased an aggregate of $75.0 million of our common stock in a private placement of public equity (PIPE Investment). Together with FSDC II’s cash resources and funding of the PIPE Investment, we received net proceeds of approximately $257.5 million.

For additional information on the Business Combination, please refer to Note 4, Business Combination, to the consolidated financial statements included in Part II, Item 8 of our Form 10-K for the fiscal year ended December 31, 2021.

Through September 30, 2022, we have funded our operations primarily with proceeds from the issuance of Simple Agreements for Future Equity (SAFEs), convertible preferred stock financing, the Business Combination and the PIPE Investment. We believe that our $209.1 million of cash and cash equivalents as of September 30, 2022, will enable us to fund our current planned operations for at least 12 months from the issuance date of these unaudited condensed financial statements, though we may raise additional capital through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements, government funding and grants. Management’s expectations with respect to our ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. Our operating plan may change as a result of many factors currently unknown to management and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by us or at all and we may need to seek additional funds sooner than anticipated. If adequate funds are not available to us on a timely basis, on acceptable terms or at all, management may be required to delay, limit, reduce, or terminate certain of its research, product development or future commercialization efforts, obtain funds through arrangements with collaborators on terms unfavorable to us, or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of our stockholders.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the Securities and Exchange Commission (SEC) on March 29, 2022, from which we derived our balance sheet as of December 31, 2021. The accompanying unaudited condensed financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, since they are interim statements, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring adjustments, that are, in the opinion of our management, necessary to a fair statement of the results for the interim periods presented. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022 or for any other future annual or interim period.

As a result of the Business Combination, the shares and corresponding capital amounts and loss per share amounts related to Old Pardes’ outstanding redeemable convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect the conversion ratio of 1.4078 (Conversion Ratio) established in the Merger Agreement. For additional information on the Business Combination and the Conversion Ratio, please read Note 4, Business Combination, to the audited consolidated financial statements included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Use of Estimates

The preparation of the unaudited condensed financial statements in accordance with GAAP requires our management to make estimates and assumptions that affect the amounts reported on our unaudited condensed financial statements and accompanying notes. The amounts reported could differ under different estimates and assumptions. On an ongoing basis, we evaluate our estimates and judgments, which are based on historical and anticipated results and trends and on various other assumptions that management believes to be reasonable under the circumstances. Though the impact of the COVID-19 pandemic on our business and operating results presents additional uncertainty, we continue to use the best information available to form our critical accounting estimates. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

Impact of COVID-19

In December 2019, a novel strain of coronavirus, which causes the disease known as COVID-19, was reported to have surfaced. Since then, COVID-19 has spread globally. In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic and the U.S. government-imposed travel restrictions on travel between the U.S., Europe and certain other countries. The outbreak and government measures taken in response thereto have had a significant impact, both direct and indirect, on businesses and commerce, as certain worker shortages have occurred, supply chains have been disrupted and facilities and production have been suspended. The future progression of the pandemic and its effects on our business and operations are uncertain.

We are monitoring the potential impact of COVID-19 on our business and our unaudited condensed financial statements. The effects of the public health directives and our work-from-home policies may negatively impact productivity, disrupt our business and delay clinical programs and timelines and future clinical trials, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct business in the ordinary course. The ultimate extent of the impact of the COVID-19 pandemic on our business, financial condition, prospects, operations and product development timelines and plans remains highly uncertain and will depend on future developments, and the duration and intensity of those developments, including as a result of new information that may emerge concerning COVID-19, actions taken to contain the pandemic, the duration and spread of outbreaks and the continued emergence of variants, the availability of emergency use authorizations, the availability of effective alternative treatments, the ability to design and initiate clinical trials with approvable endpoints that are financially feasible, the pandemic’s impact on patient enrollment, trial sites, contract research organizations (CROs), contract manufacturing organizations (CMOs) and other third parties with which we do business, as well as its impact on regulatory authorities and our key scientific and management personnel. These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, results of operations and financial condition, including our ability to obtain financing.

To date, we have not incurred impairment losses in the carrying values of our assets as a result of the COVID-19 pandemic and are not aware of any specific related event or circumstance that would require us to revise our estimates reflected in the unaudited condensed financial statements.

Significant Accounting Policies

The accounting policies we follow are set forth in our audited consolidated financial statements for the fiscal year ended December 31, 2021. For further information, please refer to the audited consolidated financial statements and footnotes thereto included in Part II, Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There have been no material changes to these accounting policies.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares and common stock equivalents outstanding for the period determined using the treasury-stock method. Common stock equivalents are only included in the calculation of diluted earnings per common share when net income is reported and their effect is dilutive. For the periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to our net loss position. Basic and diluted net loss attributable to common stockholders per share is presented in conformity with the two-class method required for participating securities as shares of unvested restricted stock are considered participating securities. Our participating securities do not have a contractual obligation to share in our losses. As such, the net loss was attributed entirely to common stockholders for all periods presented.

As a result of the Business Combination, we have retroactively restated the weighted-average number of common shares and common stock equivalent outstanding prior to December 23, 2021 to give effect to the Conversion Ratio.

The following outstanding shares of potentially dilutive securities were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented because including them would be anti-dilutive (in common stock equivalent shares):


	September 30, 2022		September 30, 2021
Conversion of outstanding convertible preferred stock		—		19,601,193
Outstanding stock options		9,810,627		2,259,425
Restricted common stock subject to repurchase or forfeiture		3,207,060		6,411,522
Total		13,017,687		28,272,140

New Accounting Pronouncements Adopted and Not Yet Adopted

The Company has not adopted any significant accounting policies since December 31, 2021. Upon evaluation of recently issued accounting pronouncements, the Company does not believe any will have a material impact on its unaudited condensed financial statements or related financial statement disclosures.

Note 3.