10-Q
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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission File
No. 001-35890
 
 
Tempest Therapeutics, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
Delaware
 
45-1472564
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
Identification No.)
 
7000 Shoreline Court, Suite 275
South San Francisco, California
 
94080
(Address of Principal Executive Offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (415)
798-8589
 
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
 
 
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, $0.001 par value
  TPST   The Nasdaq Capital Market
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.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated filer
     Smaller reporting company  
       
Emerging growth company           
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 Act).    Yes  ☐    No  
The number of shares of Registrant’s Common Stock, $0.001 par value per share, outstanding as of August 10, 2021 was 6,703,242
 
 
 

Table of Contents
INDEX TO
FORM 10-Q
 
 
  
 
  
Page
 
  
  
 
5
 
Item 1.
  
  
 
5
 
  
  
 
5
 
  
  
 
6
 
  
  
 
7
 
  
  
 
9
 
  
  
 
10
 
Item 2.
  
  
 
22
 
Item 3.
  
  
 
28
 
Item 4.
  
  
 
28
 
  
  
 
29
 
Item 1.
  
  
 
29
 
Item 1A.
  
  
 
29
 
Item 2.
  
  
 
62
 
Item 3.
  
  
 
62
 
Item 4.
  
  
 
62
 
Item 5.
  
  
 
62
 
Item 6.
  
  
 
63
 
  
  
 
64
 
 
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless the context suggests otherwise, references in this Quarterly Report on
Form 10-Q
to “Tempest,” “the Company,” “we,” “us,” and “our” refer to Tempest Therapeutics, Inc. and, where appropriate, its subsidiaries.
This Quarterly Report on Form
10-Q
contains forward-looking statements (including within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended (the Securities Act)) about us and our industry that involve substantial risks and uncertainties. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of our management, as well as assumptions made by, and information currently available to, our management. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions, and include words such as “may,” “will,” “should,” “would,” “could”, “expect,” “anticipate,” “plan,” “likely,” “believe,” “estimate,” “intend,” and other similar expressions. Statements that are not historical facts are forward-looking statements. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Actual results could differ materially from those contained in any forward-looking statement as a result of various factors, including, without limitation: our strategies, prospects, plans, expectations or objectives for future operations; the progress, scope or timing of the development of our product candidates; the benefits that may be derived from any future products or the commercial or market opportunity with respect to any of our future products; our ability to protect our intellectual property rights; our anticipated operations, financial position, ability to raise capital to fund operations, revenues, costs or expenses; statements regarding future economic conditions or performance; statements of belief and any statement of assumptions underlying any of the foregoing. These risks and uncertainties include, but are not limited to, the risks included in this Quarterly Report on
Form 10-Q
under Part II, Item 1A, “Risk Factors.” Other sections of this Quarterly Report on Form
10-Q,
as well as our other disclosures and filings, include additional factors that could harm our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time, and it is not possible for our management to predict all risk factors nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in, or implied by, any forward-looking statements.
Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this document. You should read this document with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this report, whether as a result of new information, future events or otherwise.
Forward-looking statements contained in this Quarterly Report on Form
10-Q
include, but are not limited to, statements about:
 
 
 
our expected future growth and our ability to manage such growth;
 
 
 
our ability to develop, obtain regulatory approval for and commercialize TPST-1495 and TPST-1120 and our future product candidates;
 
 
 
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
 
 
 
the development, regulatory approval, efficacy and commercialization of competing products;
 
 
 
our ability to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates.
 
 
 
our ability to retain regulatory approval for our product candidates or future product candidates in the United States and in any foreign countries in which we make seek to do business;
 
 
 
our ability to retain and hire our board of directors, senior management, or operational personnel;
 
 
 
our ability integrate TempestTx, Inc. and Millendo Therapeutics, Inc. (now the Company) successfully and realize the anticipated benefits of the merger of the two entities, which close in July 2021;
 
 
 
our expectations regarding the period during which we will qualify as a smaller reporting company under the federal securities laws;
 
3
 
 
our ability to develop and maintain our corporate infrastructure, including our ability to remediate our existing material weakness and to design and maintain an effective system of internal controls;
 
 
 
our financial performance and capital requirements; and
 
 
 
our expectations regarding our ability to obtain, maintain and enforce intellectual property protection for our products and technology, as well as our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of others.
You should read this Quarterly Report on Form
10-Q
as well as the documents that we reference in, and have filed as exhibits to, this report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
 
4
PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
TEMPEST THERAPEUTICS, INC.
Consolidated Balance Sheets
(in thousands except share and per share amounts)
 
    
(Unaudited)
June 30,
2021
   
December 31,
2020
 
Assets
                
Current assets:
                
Cash and cash equivalents
   $ 68,413     $ 18,820  
Restricted cash
     45           
Prepaid expenses and other current assets
     2,036       1,005  
    
 
 
   
 
 
 
Total current assets
     70,494       19,825  
Property and equipment — net
     1,218       1,110  
Operating lease
right-of-use
assets
     3,673       1,877  
Other noncurrent assets
     112       51  
    
 
 
   
 
 
 
Total assets
   $ 75,497     $ 22,863  
    
 
 
   
 
 
 
     
Liabilities and stockholders’ equity (deficit)
                
Current liabilities:
                
Accounts payable
   $ 6,695     $ 1,071  
Accrued expenses
     948       665  
Current operating lease liabilities
     1,484       712  
Accrued compensation
     540       695  
Interest payable
     89           
Early option exercise liability
     38       79  
    
 
 
   
 
 
 
Total current liabilities
     9,794       3,222  
Loan payable (net of issuance costs of $85)
     14,915           
Operating lease liabilities
     2,674       1,727  
    
 
 
   
 
 
 
Total liabilities
     27,383       4,949  
    
 
 
   
 
 
 
Commitments and contingencies (Note 8)
                
     
Convertible preferred stock, $0.001
par value; 5,000,000 and 
135,936,731 shares authorized at June 30, 2021 and December 31,
2020, respectively; 
nil and 114,686,731 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively; liquidation preference of $0 and $100,186,732 at June 30, 2021 and December 31, 2020, respectively
              86,707  
    
 
 
   
 
 
 
     
Stockholders’ equity (deficit):
                
     
Common stock, $0.001
par value; 100,000,000 and 
196,000,000 shares authorized at June 30, 2021 and December 31,
2020, respectively; 
6,637,081 and 527,265 shares issued and outstanding, 8,767 and 29,041 subject to repurchase at June 30, 2021 and December 31, 2020, respectively
     7       15  
Additional
paid-in
capital
     132,281       2,953  
Accumulated deficit
     (84,174     (71,761
    
 
 
   
 
 
 
Total stockholders’ equity (deficit)
     48,114       (68,793
    
 
 
   
 
 
 
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
   $ 75,497     $ 22,863  
    
 
 
   
 
 
 
See accompanying Notes to unaudited Interim Consolidated Financial Statements
 
5

Table of Contents 
TEMPEST THERAPEUTICS, INC.
Consolidated Statements of Operations
(Unaudited)
(in thousands except share and per share amounts)
 
    
Three Months Ended
June 30,
   
Six Months Ended
June 30,
 
    
2021
   
2020
   
2021
   
2020
 
Operating expenses:
                                
Research and development
   $ 4,229     $ 4,094     $ 7,821     $ 7,121  
General and administrative
     2,556       1,144       4,091       2,420  
    
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
     6,785       5,238       11,912       9,541  
Other income (expense):
                                
Interest expense
   $ (276   $        $ (507   $     
Interest income and other income (expense), net
     3       9       6       84  
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss
   $ (7,058   $ (5,229   $ (12,413   $ (9,457
    
 
 
   
 
 
   
 
 
   
 
 
 
Net loss per share of common stock, basic and diluted
   $ (7.63   $ (11.42   $ (17.30   $ (21.28
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted-average shares of common stock outstanding, basic and diluted
     925,432       457,998       717,618       444,466  
    
 
 
   
 
 
   
 
 
   
 
 
 
See accompanying Notes to unaudited Interim Consolidated Financial Statements
 
6

Table of Contents
TEMPEST THERAPEUTICS, INC.
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands except share amounts)
 
Three Months Ended June 30, 2021
 
                 
   
Series A
Convertible
   
Series B
Convertible
   
Series B1
Convertible
               
Additional
Paid-In
Capital
   
Deficit
Accumulated
   
Total
Stockholders’
Equity (Deficit)
 
   
Preferred Stock
   
Prefer110red Stock
   
Preferred Stock
   
Common Stock
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
 
BALANCE—March 31, 2021
    17,000,000     $ 16,982       25,186,738     $ 12,235       72,499,993     $ 57,490       514,508     $ 1     $ 3,164     $ (77,116   $ (73,951
Exercise of stock options
    —         —         —         —         —         —         6,285       —         29       —         29  
Vesting of early exercised stock options
    —         —         —         —         —         —         8,314       —         39       —         39  
Conversion of preferred stock to common stock
    (17,000,000     (16,982     (25,186,738     (12,235     (72,499,993     (57,490     3,692,912       4       86,703       —         86,707  
Issuance of common stock for cash
    —         —         —         —         —         —         1,136,849       1       30,009               30,010  
Share-based compensation
    —         —         —         —         —         —         —         —         411       —         411  
Reverse recapitalization transaction costs
    —         —         —         —         —         —         —         —         (6,074     —         (6,074
Record pre-merger Millendo
stockholders’ equity and
elimination of Millendo 
historical accumulated
deficit
    —         —         —         —         —         —         1,269,446       1       18,000       —         18,001  
Net loss
    —         —         —         —         —         —         —         —         —         (7,058     (7,058
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE—June 30, 2021
           $                 $                 $          6,628,314     $ 7     $ 132,281     $ (84,174   $ 48,114  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Three Months Ended June 30, 2020
 
                 
   
Series A
Convertible
   
Series B
Convertible
   
Series B1
Convertible
               
Additional
Paid-In
Capital
   
Deficit
Accumulated
   
Total
Stockholders’
Equity (Deficit)
 
   
Preferred Stock
   
Preferred Stock
   
Preferred Stock
   
Common Stock
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
 
BALANCE—March 31, 2020
    17,000,000     $ 16,982       25,186,738     $ 12,235       72,499,993     $ 57,490       440,292     $        $ 2,315     $ (56,781   $ (54,466
Vesting of early exercised stock options
    —         —         —         —         —         —         36,675                103       —         103  
Share-based compensation
    —         —         —         —         —         —         —         —         227       —         227  
Net loss
    —         —         —         —         —         —         —         —         —         (5,229     (5,229
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE—June 30, 2020
    17,000,000     $ 16,982       25,186,738     $ 12,235       72,499,993     $ 57,490       476,967     $        $ 2,645     $ (62,010   $ (59,365
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
S
ee accompanying Notes to unaudited Interim Consolidated Financial Statements.
 
7

TEMPEST THERAPEUTICS, INC.
Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(Unaudited)
(in thousands except share amounts)
 
Six Months Ended June 30, 2021
 
                 
   
Series A
Convertible
   
Series B
Convertible
   
Series B1
Convertible
               
Additional
Paid-In
Capital
   
Deficit
Accumulated
   
Total
Stockholders’
Equity (Deficit)
 
   
Preferred Stock
   
Preferred Stock
   
Preferred Stock
   
Common Stock
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
 
BALANCE—December 31, 2020
    17,000,000     $ 16,982       25,186,738     $ 12,235       72,499,993     $ 57,490       498,224     $ 1     $ 2,967     $ (71,761   $ (68,793
Exercise of stock options
    —         —         —         —         —         —         10,654       —         49       —         49  
Vesting of early exercised stock options
    —         —         —         —         —         —         20,229       —         96       —         96  
Conversion of preferred stock to common stock
    (17,000,000     (16,982     (25,186,738     (12,235     (72,499,993     (57,490     3,692,912       4       86,703       —         86,707  
Issuance of common stock for cash
    —         —         —         —         —         —         1,136,849       1       30,009       —         30,010  
Share-based compensation
    —         —         —         —         —         —         —         —         531       —         531  
Reverse recapitalization transaction costs
    —         —         —         —         —         —         —         —         (6,074     —         (6,074
Record pre-merger Millendo
stockholders’ equity and
elimination of Millendo
historical accumulated
deficit
    —         —         —         —         —         —         1,269,446       1       18,000       —         18,001  
Net loss
    —         —         —         —         —         —         —         —         —         (12,413     (12,413
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE—June 30, 2021
           $                 $                 $          6,628,314     $ 7     $ 132,281     $ (84,174   $ 48,114  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Six Months Ended June 30, 2020
 
                 
   
Series A
Convertible
   
Series B
Convertible
   
Series B1
Convertible
               
Additional
Paid-In
Capital
   
Deficit
Accumulated
   
Total
Stockholders’
Equity (Deficit)
 
   
Preferred Stock
   
Preferred Stock
   
Preferred Stock
   
Common Stock
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
 
BALANCE—December 31, 2019
    17,000,000     $ 16,982       25,186,738     $ 12,235       28,749,997     $ 22,755       410,429     $ —       $ 2,188     $ (52,553   $ (50,365
Exercise of options—net of
    —         —         —         —         —         —         6,132       —         27       —         27  
Issuance of preferred stock for cash—net of issuance costs of $265
    —         —         —         —         43,749,996       34,735       —         —         —         —         —    
Vesting of early exercised stock options
    —         —         —         —         —         —         60,406       —         200       —         200  
Share-based compensation
    —         —         —         —         —         —         —         —         230       —         230  
Net loss
    —         —         —         —         —         —         —         —         —         (9,457     (9,457
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
BALANCE—June 30, 2020
    17,000,000     $ 16,982       25,186,738     $ 12,235       72,499,993     $ 57,490       476,967     $ —       $ 2,645     $ (62,010   $ (59,365
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
See accompanying Notes to unaudited Interim Consolidated Financial Statements.
 
8

TEMPEST THERAPEUTICS, INC.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
 
    
Six Months Ended
June 30,
 
    
2021
   
2020
 
Operating activities:
                
Net loss
   $ (12,413   $ (9,457
Adjustments to reconcile net loss to net cash used in operating activities:
                
Depreciation expense
     165       174  
Stock-based compensation expense
     531       230  
Noncash lease expense
     274       264  
Noncash related party interest income
     (4     (3
Noncash interest and other expense
     290       —    
Changes in operating assets and liabilities:
                
Prepaid expenses and other current assets
     987       (176
Accounts payable
     5,445       (891
Accrued expenses and other liabilities
     (1,197     (625
Interest payable
     89       —    
Operating lease liabilities
     (350     363  
    
 
 
   
 
 
 
Cash used in operating activities
     (6,183     (10,121
    
 
 
   
 
 
 
Investing activities:
                
Purchase of property and equipment
     (84     (37
Repayment of note receivable
              44  
    
 
 
   
 
 
 
Cash (used in) provided by investing activities
     (84     7  
    
 
 
   
 
 
 
Financing activities:
                
Proceeds from issuance of preferred stock
              35,000  
Payment of preferred stock issuance costs
              (469
Proceeds from the issuance of common stock
     30,010           
Borrowings on loan payable
     15,000       —    
Payment of loan issuance costs
     (93        
Cash acquired in connection with the reverse recapitalization
     17,045       —    
Payment of reverse recapitalization transaction costs
     (6,074     —    
Proceeds from option exercises
     17       27  
    
 
 
   
 
 
 
Cash provided by financing activities
     55,905       34,558  
    
 
 
   
 
 
 
Net increase in cash and cash equivalents
     49,638       24,444  
Cash and cash equivalents and restricted cash at beginning of period
     18,820       3,244  
    
 
 
   
 
 
 
Cash and cash equivalents and restricted cash at end of period
   $ 68,458     $ 27,688  
    
 
 
   
 
 
 
Supplemental disclosure of cashflow information:
                
Cash paid for interest
   $ 383     $ —    
    
 
 
   
 
 
 
Supplemental schedule of
non-cash
investing and financing activities:
                
Vesting of early exercise stock options
   $ 95     $ 200  
    
 
 
   
 
 
 
S
ee accompanying Notes to unaudited Interim Consolidated Financial Statements
 
9

TEMPEST THERAPEUTICS, INC.
Notes to Unaudited Interim Consolidated Financial Statements
 
1.
ORGANIZATION AND DESCRIPTION OF THE BUSINESS
Description of Business
—Tempest
Therapeutics, Inc. (“Tempest,” or the “Company”) is a clinical-stage oncology company focused on developing novel, orally available therapies for the treatment of solid tumors. Tempest has three programs currently in development, TPST-1495, TPST-1120 and a TREX-1 antagonist. TPST-1495 is a dual antagonist of the EP2 and EP4 prostaglandin E2 receptors, and to the Company’s knowledge, is the only such dual antagonist in clinical development. TPST-1495 is currently in a Phase 1 trial in solid tumors. Tempest’s second clinical program, TPST-1120, is a selective antagonist of peroxisome proliferator-activated receptor alpha (“PPARα”) and is also in a Phase 1 trial in solid tumors. Similar to TPST-1495, Tempest believes TPST-1120 is the only PPARα antagonist in clinical development. The Company also has a third program in preclinical studies that could be the first to target TREX-1, a cellular enzyme that regulates the innate immune response in tumors. Tempest is headquartered in South San
Francisco, California.
Merger with Millendo
—On March 29, 2021, TempestTx, Inc. (“Private Tempest”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Millendo Therapeutics, Inc. (“Millendo”).
Concurrent with the execution and delivery of the Merger Agreement, Private Tempest entered into funding agreements with certain investors named therein, pursuant to which the investors agreed to purchase, in the aggregate, $30.0 million of common stock of Private Tempest, convertible into securities of Millendo.
On June 25, 2021, Private Tempest completed the merger with Millendo in accordance with the Merger Agreement. Prior to the effective time of the merger, Millendo effected a
1-for-15
reverse stock split, and right after the merger, Millendo changed its name to Tempest Therapeutics, Inc. Under the terms of the Merger Agreement, immediately prior to the effective time of the merger, each share Private Tempest’s preferred stock was converted into a share of Private Tempest’s common stock. At closing of the merger, the Company issued an aggregate of approximately
5,365,899
 
shares of its common stock to Private Tempest stockholders, based on an exchange ratio of
0.0322
shares of the Company’s common stock for each share of Private Tempest common stock outstanding immediately prior to the merger, including those shares of common stock issued upon conversion of the Private Tempest preferred stock, resulting in approximately
 
6,635,345
shares of the Company’s common stock being issued and outstanding immediately following the effective time of the merger. The Company also assumed all of the outstanding and unexercised stock options and warrants to purchase shares of Private Tempest capital stock. The assumed options continue to be governed by the terms of the 2011 and 2017 Equity Incentive Plans (as discussed more in Note 12) under which the options were originally granted, with such options hence forth representing the right to purchase a number of shares of the Company’s common stock equal to 0.0322 multiplied by the number of share of Private Tempest common stock previously represented by such options.
T
he merger was accounted for as a reverse recapitalization in accordance with U.S. generally accepted accounting principles (“GAAP”). Under this method of accounting, Private Tempest was be deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the expectation that, immediately following the merger: (i) Private Tempest stockholders would own a substantial majority of the voting rights; (ii) Private Tempest would designate a substantial majority of the initial members of the board of directors of the combined company; (iii) Private Tempest’s executive management team would become the management of the combined company; and (iv) the combined company would be named Tempest Therapeutics, Inc. Accordingly, for accounting purposes, the merger was treated as the equivalent of Tempest issuing stock to acquire the net assets of Millendo. As a result of the merger, the net assets of Millendo were recorded at their acquisition-date fair value in the financial statements of Private Tempest and the reported operating results prior to the merger will be those of Private Tempest. Historical per share figures of Private Tempest have been retroactively restated based on the exchange ratio of
 
0.0322
.
 
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
—The accompanying unaudited interim financial statements have been prepared in accordance with GAAP.
Unaudited Interim Financial Statements
—The Company has prepared the accompanying unaudited interim financial statements on the same basis as the audited financial statements, and the unaudited interim financial statements include, in the Company’s opinion, all adjustments, consisting only of normal recurring adjustments that the Company considers necessary for a fair presentation of its financial position and results of operations for these periods. The unaudited interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements.
Use of Estimates
—The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to research and development accruals, recoverability of long-lived assets,
right-of-use
assets, lease obligations, fair value of common stock
stock-based
compensation and income taxes uncertainties and valuation allowances. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from those estimates.
Risks and Uncertainties –
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations,
 
10

Table of Contents
protection of proprietary technology, dependence on key personnel, reliance on single-source vendors, availability of raw materials, patentability of the Company’s products and processes and clinical efficacy and safety of the Company’s products under development, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical studies, clinical trials and regulatory approval, prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting. The Company’s product candidates are still in development and, to date, none of the Company’s product candidates have been approved for sale and, therefore, the Company has not generated any revenue from product sales. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.
Moreover, the current
COVID-19
(“coronavirus”) pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The extent to which the
COVID-19
pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.
Cash and Cash Equivalents
—The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisitions to be cash equivalents. As of June 30, 2021 and December 31, 2020, the Company’s cash and cash equivalents consisted of bank deposits and a money market funds.
Property and Equipment
—Property and equipment is recorded at cost and depreciated over the estimated useful lives of the related assets using the straight-line method. Upon disposal of an asset, the related cost and accumulated depreciation are removed from the asset accounts and any resulting gain or loss is included in the statement of operations. Repair and maintenance costs are expensed as incurred, whereas major improvements are capitalized as additions to property and equipment. The estimated useful lives of the Company’s respective assets are as follows:
 
Computer equipment and software
   3 years
Furniture and fixtures
   7 years
Laboratory equipment
   5 years
Leasehold improvements
   Shorter of the useful life of the asset or the life of the lease
Impairment of Long-Lived Assets
—Long-lived assets are reviewed for impairment if events or circumstances indicate the carrying amount of these assets may not be recoverable. If this review indicates that these assets will not be recoverable, based on the forecasted undiscounted future operating cash flows expected to result from the use of long-lived assets and their eventual disposition, the Company’s carrying value of the long-lived assets is reduced to fair value based on a discounted future cash flow approach or quoted market values. For the six months ended June 30, 2021 and 2020, there were no events or circumstances which required an impairment test of long-lived assets.
Convertible Preferred Stock
—The Company records convertible preferred stock at fair value on the dates of issuance, net of issuance costs. The convertible preferred stock is recorded outside of stockholders’ deficit because the shares contain liquidation features that are not solely within the Company’s control. The Company has elected not to adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because it is uncertain whether or when an event would occur that would obligate the Company to pay the liquidation preferences to holders of shares of convertible preferred stock. Subsequent adjustments to the carrying values to the liquidation preferences will be made only when it becomes probable that such a liquidation event will occur.
Comprehensive Loss
—Comprehensive loss includes net loss as well as other changes in stockholders’ deficit that results from transactions and economic events other than those with stockholders. There was no other comprehensive income or loss for the six months ended June 30, 2021 and 2020.
Research and Development Expenses and Accrued Research and Development
—Research and development expenses are charged to expense as incurred. Research and development expenses include certain payroll and personnel expenses, laboratory supplies, consulting costs, external contract research and development expenses.
In-licensing
fees and other costs to acquire technologies that are utilized in research and development, and that are not expected to have alternative future use, are expensed when incurred. Advance payments for goods or services for future research and development activities are deferred and expensed as the goods are delivered or the related services are performed.
The Company estimates preclinical studies and clinical trial expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on the Company’s behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. These estimates are based on communications with the
third-party
service providers, the Company’s estimates of accrued expenses and on information available at each balance sheet date. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. The estimates are trued up to reflect the best information available at the time of the financial statement issuance. Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company’s estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.
 
11

Table of Contents 
Patent Costs –
Costs related to filing and pursuing patent applications are expensed as incurred, as recoverability of such expenditures is uncertain. These patent-related legal costs are reported as a component of general and administrative expense.
General and Administrative Expense –
General and administrative costs are expensed as incurred and include employee-related expenses including salaries, benefits, travel and stock-based compensation for the Company’s personnel in executive, finance and accounting, and other administrative functions, as well as fees paid for legal, accounting and tax services, consulting fees and facilities costs not otherwise included in research and development expense. Legal costs include general corporate legal fees and patent costs.
Fair Value Measurements
—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a
market-based
measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. The carrying amounts of the Company’s financial instruments approximate fair value due to their
short-term
maturities.
Stock
-Based
Compensation Expense
—The Company accounts for
stock-based
compensation by measuring and recognizing compensation expense for all
share-based
payments made to employees, directors and
non-employees
based on estimated
grant-date
fair values. The Company uses the
straight-line
method to allocate compensation cost to reporting periods over each optionee’s requisite service period, which is generally the vesting period.
The Company estimates the fair value of stock options to employees, directors and
non-employees
using the
Black-Scholes
option-valuation
model. The
Black-Scholes
model requires the input of subjective assumptions, including expected volatility, expected dividend yield, expected term,
risk-free
rate of return, and the estimated fair value of the underlying common stock on the date of grant. Due to the lack of company-specific historical and implied volatility data, the Company has based its estimate of expected volatility on the historical volatility of a group of similar companies that are publicly traded. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The group of representative companies have characteristics similar to the Company, including stage of product development and focus on the life science industry. The Company uses the simplified method to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting tranche for awards with graded vesting. The
mid-point
between the vesting date and the maximum contractual expiration date is used as the expected term under this method. For awards with multiple vesting-tranches, the times from grant until the
mid-points
for each of the tranches may be averaged to provide an overall expected term. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The Company uses an assumed dividend yield of zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.
The Company accounts for forfeitures as they occur. The fair value of restricted stock awards granted to employees are valued as of the grant date using the estimated fair value of the Company’s common stock.
Net Loss per Share Attributable to Common Stockholders
—The Company follows the
two-class
method when computing net loss per share as the Company has issued shares that meet the definition of participating securities. The
two-class
method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The
two-class
method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net loss attributable to common stockholders is computed by adjusting net loss attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding stock options, convertible preferred stock and warrants to purchase shares of convertible preferred stock are considered potential dilutive common shares.
Income Taxes
—The Company accounts for income taxes using the asset and liability method. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
In evaluating the ability to recover its deferred income tax assets, the Company considers all available positive and negative evidence, including its operating results, ongoing tax planning and forecasts of future taxable income on a
jurisdiction-by-jurisdiction
basis. In the event the Company determines that it would be able to realize its deferred income tax assets in the future in excess of their net recorded amount, it would make an adjustment to the valuation allowance that would reduce the provision for income taxes. Conversely, in the event that all or part of the net deferred tax assets are determined not to be realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period when such determination is made. As of June 30, 2021 and December 31, 2020, the Company has recorded a full valuation allowance on its deferred tax assets.
 
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Tax benefits related to uncertain tax positions are recognized when it is more likely than not that a tax position will be sustained during an audit. Interest and penalties related to unrecognized tax benefits are included within the provision for income tax.
Recently Issued Accounting Pronouncements
—From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by the Company as of the specified effective date.
In August 2020, the FASB issued ASU
2020-06
, Debt-Debt With Conversions and Other Options (Subtopic
470-20)
and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic
815-40)
. The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. Under the new ASU, convertible instruments will now more frequently accounted for as a single unit of account. That is, a conversion feature and the host instrument in which it is embedded now generally will be treated as a single unit of acc
o
unt unless the conversion feature requires bifurcation under Topic 815. The ASU is effective for fiscal years beginning after December 15, 2021 for public business entities, and for fiscal years beginning after December 15, 2023 for all other entities. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its financial statements and related disclosures.
 
3.
MILLENDO MERGER
As described in Note 1,
 Private Tempest merged with the Company on June 
25
,
2021
. The merger was accounted for as a reverse recapitalization with Private Tempest as the accounting acquirer. The primary
pre-combination
assets of Millendo were cash, cash equivalents and restricted cash. Under reverse recapitalization accounting, the assets and liabilities of Millendo were recorded at their fair value which approximated book value due to the short-term nature of the instruments.
No
goodwill or intangible assets were recognized. Consequently, the consolidated financial statements of Tempest reflect the operations of Millendo for accounting purposes together with a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization of the equity of the accounting acquirer.
As part of the reverse recapitalization, the Company obtained approximately $17.0 million of cash, cash equivalents and restricted cash. The Company also obtained prepaids and other assets of approximately $1.4 million and assumed payables and accruals of approximately $0.5 million. The Company also acquired operating lease
right-of-use
asset of $2.1 million and the related operating lease liability of $2.1 million.
All of the development programs and associated collaboration arrangements were terminated prior to the merger and were deemed to have no value at the transaction date and the Company is winding down the legacy Millendo operations.
In addition, the Company incurred approximately $0.2 million in share-based compensation expense as a result of the acceleration of vesting of stock options at the time of merger. This amount was recorded in general and administrative expense in the accompanying consolidated statements of operations for the three months and six months period ended June 30, 2021. The Company also incurred transaction costs of approximately $6.1 million and this amount is recorded in additional
paid-in
capital in the accompanying consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the three months and six months period ended June 30, 2021.
 
4.
FAIR VALUE MEASUREMENTS
The following tables present the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands):
 
    
June 30, 2021
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Cash and cash equivalents
   $ 68,413      $         $         $ 68,413  
Short-term restricted cash
     45                            45  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total assets
   $ 68,458      $         $         $ 68,458  
   
    
December 31, 2020
 
    
Level 1
    
Level 2
    
Level 3
    
Total
 
Cash and cash equivalents
   $ 18,820      $         $         $ 18,820  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total assets
   $ 18,820      $         $         $ 18,820  
 
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5.
TRANSACTIONS WITH RELATED PARTIES (AMOUNTS IN THOUSANDS)
Inception Sciences Service Agreements
Inception Sciences, Inc. (Inception Sciences US) and Inception Sciences Canada, Inc. (Inception Sciences Canada) are subsidiaries of Versant Ventures, affiliates of which, together, are a holder of more than 5% of our capital stock. The Company has service agreements with Inception Sciences US, and Inception Sciences Canada whereby research and support services are provided to the Company. On June 30, 2020, the Company terminated these Inception Sciences service agreements. Total expenses under the service agreements consist of charges for services, equipment usage, lab supplies and other out of pocket expenses as incurred.
 
For the six months ended June 30, 2021 and 2020, the Company incurred nil
 and $1,315, respectively, in expenses under the Inception Sciences service agreements.
Related Party Notes Receivable
On November 19, 2017, the Company loaned three employees a total of
$353
pursuant to promissory notes in order for such employees to early exercise certain stock options which had a total exercise cost of
$652.
Two employees paid
$298
which represents
50%
of the exercise cost and the other
 50% totaling $298
was recorded as notes receivable. The other employee did not pay any portion of the exercise cost and
$55
was recorded as note receivable. The three notes receivable accrue interest at
 2% per year and will mature on November 29, 2022.
The notes receivable vest over time until maturity in conjunction with the vesting of the early-exercised stock options.
In February 2020, one of the employees left the Company in May 2019 and repaid her note balance of
$44, of which $43
was the vested portion of the note receivable and
$1
was accrued interest. On June 25, 2021, prior to the closing of the Merger Agreement, one of the employees’ note receivable plus accrued interest totaling
$278 was forgiven by the Company.
This amount was recognized as compensation included in general and administrative expense in the accompanying consolidated statements of operations for the three and six months period ended June 30, 2021. As of June 30, 2021 and December 31, 2020, the balance of the vested notes receivable and accrued interest was
$38 and $260, respectively.
 
6.
BALANCE SHEET ITEMS (AMOUNTS IN THOUSANDS)
Prepaid expenses and other current asset consist of the following as of June 30, 2021 and December 31, 2020:
 
    
June 30,
2021
    
December 31,
2020
 
Prepaid expenses
   $ 439      $ 245  
Research tax credit
     304            
Prepaid research and development costs
     569        441  
Notes and interest receivable
     38        260  
Other current assets
     686        59  
    
 
 
    
 
 
 
     $  2,036      $  1,005  
    
 
 
    
 
 
 
Property and equipment, net, consists of the following as of June 30, 2021 and December 31, 2020:
 
    
June 30,
202
1
    
December 31,
2020
 
Computer equipment and software
   $ 96      $ 85  
Furniture and fixtures
     142        135  
Lab equipment
     667        600  
Leasehold improvements
     934        746  
    
 
 
    
 
 
 
     
Property and equipment
     1,839        1,566  
     
Less accumulated depreciation
     (621      (456
    
 
 
    
 
 
 
     
Property and equipment—net
   $  1,218      $  1,110  
    
 
 
    
 
 
 
Depreciation expense for the three months and six months period ended June 30, 2021 were $86 and $165, respectively. Depreciation expense for the three months and six months period ended June 30, 2020 were $80 and $174, respectively.
 
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Accrued liabilities as of June 30, 2021 and December 31, 2020 consist of the following:
 
    
June 30,
2021
    
December 31,
2020
 
Accrued other liabilities
   $ 838      $ 441  
Accrued clinical trial liability
     110        224  
    
 
 
    
 
 
 
     
     $  948      $  665  
    
 
 
    
 
 
 
 
7.
EARLY OPTION EXERCISE LIABILITY (AMOUNTS IN THOUSANDS)
The recorded amount of the early option exercise liability relates to restricted stock awards and stock options granted to certain employees and contractors that were early-exercised before they became vested. The early option exercise liability decreases as the restricted stock awards and stock options vest over time or if the Company decides to repurchase them, and the amount of decrease is recorded in common stock and additional
paid-in
capital. As of June 30, 2021 and December 31, 2020, the early option exercise liability was $38 and $79, respectively, which represents unvested shares of 8,767 and 29,041. The unvested shares purchased by the employees are not deemed, for accounting purposes, to be issued and outstanding.
 
8.
COMMITMENTS AND CONTINGENCIES (AMOUNTS IN THOUSANDS)
Facilities Lease Agreements
—In February 2019, the Company entered into a
5-year
office lease agreement for a 9,780 square feet facility in South San Francisco, California (“SSF Lease”). The remaining lease term of the SSF Lease is two years and eight months
as of June 30, 2021. The Company has no other leases as of June 30,2021 and December 31, 2020.
As a result of the merger with Millendo, the Company assumed Millendo’s noncancelable operating leases for office space which have remaining lease terms of approximately 3.0 years. In February 2019 and October 2018, Millendo entered into two noncancellable operating leases for office space in Ann Arbor, Michigan (“Ann Arbor Leases”) of which one that Millendo took possession of in April 2019 and the other that Millendo took possession of in July 2019, respectively. One of its leases in Ann Arbor, Michigan expires in June 2024 and the other expires in March 2024. There were no other leases assumed by the Company as of June 30,2021.
As of June 30, 2021 and December 31, 2020, the balance of the operating lease right of use assets on the SSF Lease were $1,603 and $1,877, respectively, and the related operating lease liability were $2,088 and $2,439, respectively, as shown in the accompanying consolidated balance sheets.
As of June 30, 2021, the balance of the operating lease right of use assets on the Ann Arbor Leases was $2,070 and the related operating lease liability was $2,070 as shown in the accompanying consolidated balance sheet.
Rent expense for the SSF Lease
w
as
 
$
322
and $
330
for the six months ended June 30, 2021 and 2020, respectively.
 
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As of June 30, 2021, future minimum annual lease payments under the Company’s operating lease liabilities for the SSF Lease and Ann Arbor Leases were as follows:
 
Year Ending
  
Total
Commitment
 
2021 (excluding the six months ended June 30, 2021)
   $ 786  
2022
     1,603  
2023
     1,647  
2024
     443  
2025
     —    
    
 
 
 
Total minimum lease payments
     4,479  
Less: imputed interest
     (321
    
 
 
 
Present value of operating lease obligations
     4,158  
Less: current portion
     (1,484
    
 
 
 
Noncurrent operating lease obligations
   $ 2,674  
    
 
 
 
Guarantees and Indemnifications
—In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of June 30, 2021 and December 31, 2020, the Company does not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.
Legal
Proceedings
Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated.
As a result of the merger with Millendo, the Company is party to various litigation matters given Millendo’s role as successor to OvaScience, Inc. (“OvaScience”). OvaScience merged with Millendo in 2018. Prior to the merger with Millendo, OvaScience was sued in three matters that are disclosed below.
On November 9, 2016, a purported shareholder derivative action was filed in Massachusetts State court (Cima v. Dipp) against certain former officers and directors of OvaScience and OvaScience alleging breach of fiduciary duties, unjust enrichment, abuse of control, gross mismanagement and waste of corporate assets for purported actions related to OvaScience’s January 2015 follow-on public offering. No material proceedings have occurred since the case was filed; in April 2021, the Company filed a unilateral request to continue a stay of the case, which the court has not yet ruled on.
On March 24, 2017, a purported shareholder class action lawsuit was filed in Massachusetts Federal court (Dahhan v. OvaScience, Inc.) OvaScience and certain former officers of OvaScience alleging violations of Sections 10(b) and 20(a) of the Exchange Act (the “Dahhan Action”). Defendants have answered and the case is currently in discovery.
On July 27, 2017, a purported shareholder derivative complaint was filed in Massachusetts Federal court (Chiu v. Dipp) against OvaScience and certain former officers and directors of OvaScience alleging breach of fiduciary duties, unjust enrichment and violations of Section 14(a) of the Exchange Act. related to OvaScience’s January 2015 follow-on public offering and other public statements concerning OvaScience’s AUGMENT treatment. Following the Court’s dismissal of an amended complaint, the parties agreed that plaintiffs could file a second amended complaint and that the case would be stayed pending the resolution of the Dahhan Action. In May 2018, the court entered an order staying this case pending the resolution of the Dahhan Action.
With respect to each of the three OvaSciences matters described above, the Company is unable to estimate potential losses, if any. However, the Company believes the matters are without merit, and that in light of applicable insurance, any material exposure to the Company is remote.
On April 23, 2021 a complaint was filed against the Company and each of its directors in New York Federal court (Nakkhumpun v. Millendo Therapeutics, Inc.) alleging violations of the Securities Exchange Act of 1934 and breach of fiduciary duty of candor, for allegedly disseminating a materially incomplete and misleading registration statement with the SEC in connection with the proposed merger. Following the filing of this complaint, ten additional complaints containing substantially the same claims were filed in Federal courts in New York, the Eastern District of New York, and Michigan. After the Company filed a Form 8-K on June 11, 2021 containing additional disclosures, each of these cases was voluntarily dismissed without prejudice.
 
9.
LOAN PAYABLE (AMOUNTS IN THOUSANDS)
On January 15, 2021,
 the Company entered into a loan agreement with a lender to borrow a term loan amount of $
35,000
to be funded in three tranches. Tranche A of $
15,000
was wired to the Company on January 15, 2021. Tranche B of $
10,000
will be available through March 31, 2022 contingent upon achievement of each of the following: i)
receipt of at least $50,000 in Series C equity capital, ii) initiation of the Phase 1 combination study of TPST-1495 or monotherapy expansion study, and iii) initiation of Phase 2 trial of TPST-1120 or the 1L Triplet Collaboration study.
And Tranche C of $
10,000
is available at lender’s option. The term loan matures on
August 1, 2025
and has an annual floating interest rate of
7.15
% which is an Index Rate plus
7
%.
Index Rate is the greater of
(i)
30-day
US LIBOR or (ii)
0.15
%. Monthly principal payments of $
500
will begin on
March 1, 2023
. Related to this borrowing, the Company paid $
96
of debt issuance costs and the amount would be amortized as additional interest expense over the life of the loan. As of June 30, 2021, the balance of the loan payable (net of debt issuance costs) was $
14,915
.
The carrying value of the loan approximates fair value.
For the three months and six months period ended June 30, 2021, total interest expense were $276 and $507, respectively.
 
10.
CONVERTIBLE PREFERRED STOCK
As of June 30, 2021, the Company was authorized to issue up to 
5,000,000
 
shares of preferred stock at a par value of $0.001 as a result of Private Tempest completing the merger with Millendo on June 25, 2021. As of December 31, 2020, Private Tempest was authorized to issue up to 135,936,731 shares of preferred stock at par value of
$0.001.
In October 2011, Private Tempest received a commitment from its venture investor for a Series A Preferred Stock financing totaling
$10 million to be taken down in two tranches of $5 
million each. Upon execution of the stock purchase agreement, Private Tempest received the first tranche of $5 million, which included
$2,399 in cash proceeds and the conversion of notes payable and accrued interest totaling $2,601 for issuing 5,000,000
shares of its Series A Preferred Stock. In June 2012, Private Tempest received cash proceeds of 
$5 million related to the second tranche of the Series A Preferred Stock financing from the issuance of 5,000,000 shares of Series A Preferred Stock.
In August 2015,
Private Tempest
 issued an additional 2,000,000 shares of Series A Preferred Stock to its venture investor for cash proceeds of $2 million. In September 2016,
Private Tempest
 issued an additional 5,000,000 shares of Series A Preferred Stock to its venture investor for cash proceeds of $5 million.
 
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In February 2018,
Private Tempest 
issued 25,186,738 shares of Series B Preferred Stock for $1.00 per share in connection with the closing of the Series B Preferred Stock Purchase Agreement.
Private
 
Tempest’s convertible notes of $8.0 million and accrued interest were converted as part of the Series B offering.
In February 2019,
Private Tempest
 issued 28,749,997 shares of
Series B-1
preferred stock for $0.80 per share for total cash proceeds of $23 million. In January 2020,
Private Tempest
 issued 43,749,996 shares of
Series B-1
preferred stock for $0.80 per share for total cash proceeds of $35 million.
On June 25, 2021, Private Tempest completed the mer
g
er with Millendo in accordance with the Merger Agreement. Under the terms of the Merger Agreement, immediately prior to the effective time of the merger, each share Private Tempest’s preferred stock was converted into a share of Private Tempest’s common stock. At closing of the merger, the Company issued an aggregate of approximately 5,365,899 shares of its common stock to Private Tempest stockholders, based on an exchange ratio of 0.0322 shares of the Company’s common stock for each share of Private Tempest common stock outstanding immediately prior to the merger, including those shares of common stock issued upon conversion of the Private Tempest preferred stock.
The authorized, issued and outstanding shares of the convertible preferred stock and liquidation preferences at December 31, 2020 were as follows (in thousands except share and per share amounts):
 
December 31, 2020
                                    
Series
  
Shares
Authorized
    
Shares Issued
and
Outstanding
    
Per Share
Liquidation
Preference
    
Aggregate
Liquidation
Amount
    
Proceeds
Net of
Issuance Cost
    
Net
Carrying
Value
 
Series A
     17,000,000        17,000,000      $  1.00      $ 17,000      $  16,982      $  16,982  
Series B
     25,186,738        25,186,738        1.00        25,187        24,943        12,235  
Series
B-1
     93,749,993        72,499,993        0.80        58,000        57,489        57,489  
    
 
 
    
 
 
             
 
 
    
 
 
    
 
 
 
       135,936,731        114,686,731               $  100,187      $ 99,414      $ 86,706  
    
 
 
    
 
 
             
 
 
    
 
 
    
 
 
 
The significant rights, preferences, and privileges of the convertible preferred stock as of December 31, 2020 were as follows:
Dividends
—The holders of the Company’s convertible preferred stock are entitled to receive noncumulative dividends of 8% per share (as adjusted for stock splits, combinations, and reorganizations) per annum on each outstanding share of Series convertible preferred stock. Such dividends shall be payable only when and if declared by the Board of Directors. As of June 30, 2021 and December 31, 2020, the Company’s Board of Directors had not declared any dividends. Dividends on convertible preferred stock shall be payable in preference to and prior to any payments of any dividends on common stock. No dividends have been declared to date.
Voting Rights
—The holders of preferred stock are entitled to one vote for each share of common stock into which such preferred stock could then be converted; and with respect to such vote, such holder shall have full voting rights and powers equal to the voting rights and powers of the holders of common stock.
Liquidation
—The holders of preferred stock are entitled to receive liquidation preferences at an amount per share of preferred stock equal to the original price plus all declared and unpaid dividends on the preferred stock. Liquidation payments to the holders of preferred stock have priority and are made in preference to any payments to the holders of common stock. After full payment of the liquidation preference to the holders of the preferred stock, the remaining assets, if any, will be distributed ratably to the holders of the common stock and preferred stock on an
as-if-converted
to common stock basis.
Redemption and Balance Sheet Classification
— The convertible preferred stock is recorded within mezzanine equity because while it is not mandatorily redeemable, it will become redeemable at the option of the stockholders upon the occurrence of certain deemed liquidation events that are considered not solely within the Company’s control.
 
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Table of Contents
11.
COMMON STOCK
Upon completion of the merger on June 25, 2021, the Company issued an aggregate of approximately 5,365,899 shares of its common stock to Private Tempest stockholders, based on an exchange ratio of 0.0322 shares of the Company’s common stock for each share of Private Tempest common stock outstanding immediately prior to the merger, including those shares of common stock issued upon conversion of the Private Tempest preferred stock (3,692,912 common shares) and those shares of common stock issued with its
pre-merger
financing of $30.0 million (1,136,849 common shares).
As of June 30, 2021, the Company was authorized to issue 100,000,000 shares of common stock at a par value of $0.001. Of the 1
00
,000,000 common stock shares authorized, 6,637,081 are legally issued and outstanding at June 30, 2021, with 8,767 shares subject to repurchase due to remaining vesting requirements. Common stockholders are entitled to dividends as declared by the Board of Directors, subject to rights of holders of all classes of stock outstanding having priority rights as to dividends. There have been no dividends declared to date. The holders of each share of common stock are entitled to one vote. Except for effecting or validating certain specific actions intended to protect the preferred stockholders, the holders of common stock vote together with preferred stockholders and have the right to elect one member of the Company’s Board of Directors.
 
12.
STOCK COMPENSATION
In 2011 Private Tempest adopted the 2011 Equity Incentive Plan, and in 2017, Private Tempest adopted the 2017 Equity Incentive Plan, together “the Plans”. Upon adoption of the 2017 Equity Incentive Plan, the 2011 Equity Incentive Plan was terminated. Both the Plans provide for the granting of stock awards to employees, directors and consultants of the Company. Awards issuable under the Plans include incentive stock options (“ISO”), nonqualified stock options (“NSO”), stock appreciation rights (“SAR”), restricted stock awards, restricted stock unit awards and other stock awards. As a result of the merger, the Plans of Private Tempest were assumed by the Company.
Options to purchase the Company’s common stock may be granted at a price not less than the fair market value in the case of both NSOs and ISOs, except for an employee or
non-employee
with options who owns more than 10 percent of the voting power of all classes of stock of the Company, in which case the exercise price shall be no less than 110 percent of the fair market value per share on the grant date. Stock options granted under the Plans generally vest over four years and expire no later than ten (10) years from the date of grant. Vested options can be exercised at any time.
The grant date fair market value of the shares of common stock underlying stock options has historically been determined by the Company’s Board of Directors. Because there has been no public market for the Company’s common stock, the Board of Directors exercises reasonable judgment and considers a number of objective and subjective factors to determine the best estimate of the fair market value, which include valuations performed by an independent
third-party,
important developments in the Company’s operations, sales of convertible preferred stock, actual operating results, financial performance, the conditions in the life sciences industry, the economy in general, the stock price performance and volatility of comparable public companies, and the lack of liquidity of the Company’s common stock.
 
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Table of Contents 
Stock option activity under the Plans is set forth below:
 
                  
Weighted-
 
    
Shares
           
Average
 
    
Available
    
Total Options
    
Exercise
 
    
for Grant
    
Outstanding
    
Price
 
       
Balance—January 1, 2021
     489,797        452,165      $ 5.35  
       
Assumed in reverse recapitalization
     —          178,732        178.64  
Granted
     (186,482      186,482        20.99  
Exercised
     —          (10,654      4.60  
Cancelled and forfeited
     5,667        (6,316      18.36  
    
 
 
    
 
 
          
       
Balance—June 30, 2021
     308,982        800,409        47.70  
    
 
 
    
 
 
          
The following table summarizes information about stock options outstanding at June 30, 2021:
 
           
Weighted
               
           
Average
    
Weighted
        
           
Remaining
    
Average
    
Aggregate
 
           
Contractual
    
Exercise
    
Intrinsic
 
    
Shares
    
Life (In Years)
    
Price
    
Value
 
Options outstanding
     800,409        8.46      $  47.70      $  2,594,131  
Vested and expected to vest
     799,823        8.46      $ 47.63      $ 2,593,281  
Exercisable
     366,374        7.64      $ 89.59      $ 1,133,181  
Employee Stock Options
—During the six months ended June 30, 2021, the Company granted employees stock options to purchase 184,872 shares of common stock with a weighted-average grant date fair value of $12.70 per share. As of June 30, 2021, there was total unrecognized compensation costs related to unvested employee stock options of $3,047. These costs are expected to be recognized over a
weighted-average
period of approximately 1.6 years.
The Company estimated the fair value of stock options using the
Black-Scholes
option pricing valuation model. The fair value of employee stock options is being amortized on the
straight-line
basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following assumptions for the six months ended June 30, 2021:
 
Expected term (in years)
     6.0 – 6.1  
Expected volatility
     67%  
Risk-free interest rate
     1.0% – 1.1%  
Dividends
     0%  
Expected Term
—The expected term of options granted represents the period of time that the options are expected to be outstanding. Due to the lack of historical exercise history, the expected term of the Company’s employee stock options has been determined utilizing the simplified method for awards that qualify as
plain-vanilla
options.
Expected Volatility
—The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available.
Risk
-Free
Interest Rate
—The
risk-free
interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.
Dividends
—The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used.
Non
-Employee
Stock Options
— During the six months ended June 30, 2021, the Company granted
non-employees
stock options to purchase 1,610 shares of common stock with a weighted-average grant date fair value of $7.46 per share. As of June 30, 2021, there was total unrecognized compensation costs related to unvested
non-employee
stock options of $25. These costs are expected to be recognized over a
weighted-average
period of approximately 1.3 years.
 
19

The Company estimated the fair value of stock options using the
Black-Scholes
option pricing valuation model. The fair value of
non-employee
stock options is being amortized on the
straight-line
basis over the requisite service period of the awards. The fair value of
non-employee
stock options was estimated using the following assumptions for the six months ended June 30, 2021:
 
Expected term (in years)
     10  
Expected volatility
     66
Risk-free interest rate
     1.50
Dividends
     0
Expected Term
—The expected term of options granted represents the period of time that the options are expected to be outstanding. The Company has valued its
non-employee
stock options using the contractual term as the expected term.
Expected Volatility
—The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company’s common stock becomes available.
Risk
-Free
Interest Rate
—The
risk-free
interest rate assumption is based on the U.S. Treasury instruments whose term was consistent with the expected term of the Company’s stock options.
Dividends
—The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used.
Stock
-Based
Compensation Expense
—The following table summarizes the components of
stock-based
compensation expense recognized in the Company’s statement of operations for the three and six months ended June 30, 2021 and 2020:
 
    
Three months ended June 30,
    
Six months ended June 30,
 
    
2021
    
2020
    
2021
    
2020
 
Research and development
   $ 45      $  176      $  122      $  231  
General and administrative
     366        51        409        (1
    
 
 
    
 
 
    
 
 
    
 
 
 
     $  411      $ 227      $ 531      $ 230  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
13.
RETIREMENT PLAN
The Company participates in a qualified 401(k) Plan sponsored by its professional service organization. The retirement plan is a defined contribution plan covering eligible employees. Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service. There was no contribution from the Company for the six months ended June 30, 2021 and 2020.
 
14.
NET LOSS PER SHARE
The following table sets forth the computation of the Company’s basis in diluted net loss per share for the three months and six months ended June 30, 2021 and 2020 (in thousands except share and per share amounts):
 
    
Three months ended
June 30,
 
Numerator:
  
 
2021
 
  
 
2020
 
Net loss
   $ (7,058    $ (5,229
Denominator:
                 
Weighted-average common shares outstanding
     937,300        519,112  
Less: Weighted-average unvested restricted shares and shares subject to repurchase
     (11,868      (61,114
    
 
 
    
 
 
 
Weighted-average shares used to computing basic and diluted net loss per share
     925,432        457,998  
    
 
 
    
 
 
 
Net loss per share attributable to common stockholders—basic and diluted
  
$
(7.63
  
$
(11.42
    
 
 
    
 
 
 
 
20

    
Six months ended June 30,
 
    
2021
    
2020
 
Numerator:
                 
Net loss
   $  (12,413    $ (9,457
Denominator:
                 
Weighted-average common shares outstanding
     733,679        517,825  
Less: Weighted-average unvested restricted shares and shares subject to repurchase
     (16,061      (73,359
    
 
 
    
 
 
 
Weighted-average shares used to computing basic and diluted net loss per share
     717,618        444,466  
    
 
 
    
 
 
 
Net loss per share attributable to common stockholders—basic and diluted
  
$
(17.30
  
$
(21.28
    
 
 
    
 
 
 
As of June 30, 2021 and 2020, the Company’s potentially dilutive securities included unvested stock warrants and stock options, which have been excluded from the computation of diluted net loss per share attributable to common stockholders as the effect would be anti-dilutive. Based on the amounts outstanding as of June 30, 2021 and 2020, the Company excluded the following potential common shares from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect:
 
    
June 30,

2021
    
June 30,

2020
 
Options to purchase common stock
     795,428        386,689  
Redeemable convertible preferred stock
               3,692,909  
Unvested restricted common stock
               393  
Common stock warrants
     7,178            
    
 
 
    
 
 
 
       802,606        4,079,991  
    
 
 
    
 
 
 
 
15.
SUBSEQUENT EVENTS
Subsequent events were evaluated through the filing date of this Quarterly Report on Form
10-Q.
On July 23, 2021, the Company entered into a sales agreement (the “Sales Agreement”) with Jefferies LLC (the “Agent”), pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $100,000,000 of its common stock through the Agent.
The common stock sold in the offering will be issued pursuant to a prospectus supplement filed with the Securities and Exchange Commission (the “SEC”) on July 23, 2021, and the accompanying base prospectus dated July 23, 2021, forming part of the Company’s registration statement on
Form S-3 (Registration No. 333-257990), which
was declared effective on July 23, 2021.
Sales of the common stock, if any, made pursuant to the Sales Agreement may be sold in negotiated transactions or transactions that are deemed to be an “at the market offering”, as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through the Nasdaq Capital Market, on or through any other existing trading market for the common stock or by any other method permitted by law, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at negotiated prices, or as otherwise agreed between the Company and the Agent. The Agent will be entitled to compensation equal to 3.0% of the gross proceeds from the sale of all shares of common stock sold through it as Agent under the Sales Agreement.
 
21

Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited Interim Financial Statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This discussion and other parts of this report contains forward-looking statements that involve risks and uncertainties, such as its plans, objectives, expectations, intentions, and beliefs, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled “Risk Factors,” under Part II, Item 1A of this report and those discussed in our other disclosures and filings.
Overview
We
are a clinical-stage oncology company focused on leveraging a deep scientific understanding of cancer biology and medicinal chemistry to develop and advance novel, orally available therapies for the treatment of solid tumors. Our philosophy is to build a company based upon not only creative science and thoughtful management, but also upon the efficient translation of those ideas into therapies that will improve patient’s lives. To this end, we currently are advancing three programs, TPST-1495, TPST-1120 and a TREX-1 antagonist. TPST-1495 is a dual antagonist of the EP2 and EP4 prostaglandin E2 receptors, and, to our knowledge, is the only such dual antagonist in clinical development. TPST-1495 is currently in a Phase 1 trial in solid tumors. Our second clinical program, TPST-1120, is a selective antagonist of peroxisome proliferator-activated receptor alpha, or PPARα, and is also in a Phase 1 trial in solid tumors. Similar to TPST-1495, we believe TPST-1120 is the only PPARα antagonist in clinical development. We also have a third program in preclinical studies that could be the first to target TREX-1, a cellular enzyme that regulates the innate immune response in
 tumors.
We have no products approved for commercial sale and have not generated any revenue from product sales. From inception to June 30, 2021, we have raised $145 million, through sales of common stock, convertible preferred stock and issuance of debt.
We have never been profitable and has incurred operating losses in each period since inception. Our net losses were $12.4 million and $9.5 million for the six months period ended June 30, 2021 and 2020, respectively. As of June 30, 2021, we had an accumulated deficit of $84.0 million. Substantially all of its operating losses resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with its operations.
We expect to incur significant expenses and increasing operating losses for at least the next several years as it initiates and continues the clinical development of, and seeks regulatory approval for, its product candidates and adds personnel necessary to advance our pipeline of clinical-stage product candidates. In addition, operating as a publicly traded company will involve the hiring of additional financial and other personnel, upgrading its financial information and other systems, and incurring substantial costs associated with operating as a public company. We expect that its operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval.
As of June 30, 2021, we had cash and cash equivalents of $68.5 million. Our ability to fund continued development will require additional capital, and we intend to raise such capital through the issuance of additional debt or equity including in connection with potential merger opportunities, or through business development activities. Our ability to continue as a going concern is dependent upon its ability to successfully accomplish these plans and secure sources of financing and ultimately attain profitable operations. If we are unable to obtain adequate capital, it could be forced to cease operations.
Recent Developments
Oxford Loan and Security Agreement
On January 15, 2021, we entered into a loan and security agreement with Oxford Finance LLC (“Oxford”) to borrow a term loan amount of $35.0 million to be funded in three tranches. Tranche A of $15.0 million was funded to us on January 15, 2021. Tranche B of $10.0 million will be available through March 31, 2022 contingent upon achievement of each of the following: i) receipt of at least $50.0 million in Series C equity capital, ii) initiation of the Phase 1 combination study of TPST-1495 or monotherapy expansion study, and iii) initiation of Phase 2 trial of TPST-1120 or the 1L Triplet Collaboration study. Tranche C of $10.0 million is available at Oxford’s option. The term loan matures on August 1, 2025 and has an annual floating interest rate of 7.15% which is an Index Rate plus 7.15% which is an index rate plus 7%. The index rate is the greater of (i)
30-day
US LIBOR or (ii) 0.15%.
Merger Agreement
On March 29, 2021, TempestTx, Inc. (“Private Tempest”) and Millendo Therapeutics, Inc. (“Millendo”) entered into an Agreement and Plan of Merger (the Merger Agreement). Concurrent with the execution and delivery of the Merger Agreement, Private Tempest entered into funding agreements with certain investors named therein, pursuant to which the investors agreed to purchase, in the aggregate, $30.0 million of common stock of Private Tempest, convertible into securities of Millendo.
On June 25, 2021, Private Tempest closed the merger with Millendo. Pursuant to the Merger Agreement, Mars Merger Corp. (“Merger Sub”), a direct, wholly owned subsidiary of Millendo merged with and into Private Tempest, with Private Tempest surviving as a wholly owned subsidiary of Millendo. Following the closing of the merger, Millendo changed its corporate name to Tempest Therapeutics, Inc.
Financial Operations Overview
Research and Development Expense
Research and development expenses represent costs incurred to conduct research and development, such as the development of our product candidates. We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following:
 
   
salaries, benefits and stock-based compensation;
 
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Table of Contents
   
licensing costs;
 
   
allocated occupancy;
 
   
materials and supplies;
 
   
contracted research and manufacturing;
 
   
consulting arrangements; and
 
   
other expenses incurred to advance our research and development activities.
The largest component of our operating expenses has historically been the investment in research and development activities. We expect research and development expenses will increase in the future as we advance our product candidates into and through clinical trials and pursues regulatory approvals, which will require a significant investment in costs of clinical trials, regulatory support and contract manufacturing and inventory
build-up.
In addition, we continue to evaluate opportunities to acquire or
in-license
other product candidates and technologies, which may result in higher research and development expenses due to license fee and/or milestone payments, as well as added clinical development costs.
The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in timely developing and achieving regulatory approval for its product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinical data, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of our development projects or when and to what extent we will generate revenue from the commercialization and sale of any of its product candidates.
General and Administrative Expenses
General and administrative expenses consist of employee-related expenses, including salaries, benefits, travel and noncash stock-based compensation, for our personnel in executive, finance and accounting, and other administrative functions, as well as fees paid for legal, accounting and tax services, consulting fees and occupancy costs not otherwise included in research and development expense. Legal costs include general corporate legal fees and patent costs. We expect to incur additional expenses as a result of becoming a public company following completion of the merger, including expenses related to compliance with the rules and regulations of the SEC and Nasdaq, additional insurance, investor relations and other administrative expenses and professional services.
Other Income (Expense), Net
Other income (expense), net consists primarily of interest expense, interest income, and various income or expense items of a
non-recurring
nature.
Results of Operations
Comparison of the three months ended June 30, 2021 and 2020
The following table summarizes our operating results for the periods indicated:
 
    
Three Months Ended
June 30,
 
    
2021
    
2020
 
    
(in thousands)
 
Expenses:
                 
Research and development
   $ 4,229      $ 4,094  
General and administrative
     2,556        1,144