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Redeemable Convertible Preferred Stock | 9 Months Ended
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Sep. 30, 2021
Temporary Equity Disclosure [Abstract] |
Redeemable Convertible Preferred Stock | . Redeemable Convertible Preferred Stock As of December 31, 2020, the Company’s redeemable convertible preferred stock consisted of the following balance (in thousands, except share and per share amounts):
|  | As of December 31, 2020 |
|  | Issue Price |  |  | Shares Authorized |  |  | Shares Issued and Outstanding |  |  | Carrying Value |  |  | Aggregate Liquidation Preference |
Series A |  | $ | 6.00 |  |  |  | 2,717,084 |  |  |  | 2,717,082 |  |  | $ | 17,074 |  |  | $ | 18,569 |
Series A (Athenen Acquisition) |  | $ | 5.80 |  |  |  | 2,500,000 |  |  |  | 2,500,000 |  |  | $ | 14,500 |  |  | $ | 15,253 |
Series A-1 |  | $ | 7.80 |  |  |  | 7,692,305 |  |  |  | 1,923,075 |  |  | $ | 14,977 |  |  | $ | 16,069 |
Ending balance |  |  |  |  |  | 12,909,389 |  |  |  | 7,140,157 |  |  | $ | 46,551 |  |  | $ | 49,891 |
In March 2021, Series A-1 preferred stockholders exercised their tranche rights in connection with milestone achievements related to Phase 1 clinical trial results of ETX-155. As a result, the Company issued an additional 4,358,972 shares of Series A-1 redeemable convertible preferred shares for gross proceeds of $34.0 million. Upon exercise of the tranche rights, the Company reclassified the $12.3 million in preferred stock tranche liability to Series A-1 redeemable convertible preferred stock on the consolidated balance sheet. In May 2021, the Company issued 3,846,150 shares of Series B redeemable convertible preferred stock for gross proceeds of $60.0 million. Upon completion of the IPO on August 12, 2021, all of the Company’s then outstanding redeemable convertible preferred stock was converted into an aggregate of 15,345,279 shares of common stock. As of September 30, 2021, the Company had no redeemable convertible preferred stock outstanding. Prior to conversion, the holders of the Series A, Series A-1, and Series B redeemable convertible preferred stock had various rights, preferences, privileges, and restrictions, with respect to voting, dividends, liquidation, and conversion. Liquidation In the event of any liquidation event, either voluntarily or involuntary, the holders of the Series B redeemable convertible preferred stock were entitled to receive, out of the assets of the Company before any payment shall be made or any assets distributed to the holders of Series A and A-1 redeemable convertible preferred stock, the Series B redeemable convertible preferred stock liquidation preference of $15.60, adjusted for any stock splits, combinations, and reorganizations, plus all unpaid cumulative dividends on each such share. If upon the liquidation event, the assets distributed among the holders of the Series B redeemable convertible preferred stock were insufficient to permit the payment to such holders of the full liquidation preference for their shares, then the holders of shares of the Series B redeemable convertible preferred stock shared ratably in any distribution of the assets available for distribution in proportion to their respective amounts, which otherwise would have been payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid the full preferential amount. After the payment to the holders of the Series B redeemable convertible preferred stock of the full preferential amount, the holders of the Series A and Series A-1 redeemable convertible preferred stock were entitled to receive, out of the assets of the Company, the applicable liquidation preference specified for each series of redeemable convertible preferred stock before any payment was made or any assets distributed to the holders of common stock. Liquidation preference was $6.00 for Series A and $7.80 for Series A-1, each adjusted for any stock splits, combinations, and reorganizations, plus all unpaid cumulative dividends on each such share. If upon the liquidation event, the assets distributed among the holders of the Series A and A-1 redeemable convertible preferred stock were insufficient to permit the payment to such holders of the full liquidation preference for their shares, then the holders of shares of the redeemable convertible preferred stock shared ratably in any distribution of the assets available for distribution in proportion to their respective amounts, which otherwise would have been payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid the full preferential amount. After the payment to the holders of the redeemable convertible preferred stock of the full preferential amount specified above, any remaining assets of the Company would have been distributed pro rata among all holders of the preferred and common stock. A liquidation event required approval by the holders of at least a majority of the outstanding shares of redeemable convertible preferred stock and at least 70% of the then outstanding shares of Series B redeemable convertible preferred stock. Optional Conversion Each share of redeemable convertible preferred stock was convertible into common stock at the stockholder’s option. The converted shares would have been determined by dividing the original issue price for each series by the applicable conversion price for such series in effect at the date of conversion. The conversion price for each share of redeemable convertible preferred stock was initially equal to the original issuance price applicable to such share, with the exception of the Series A redeemable convertible preferred stock issued related to the Athenen Acquisition, which were convertible at any time after the date of issuance into common stock at the original issue price of the original Series A of $6.00. The conversion ratio was subject to appropriate adjustments for anti-dilution provisions, including stock splits, stock dividends, subdivisions, combinations, recapitalization events or similar events. Specific to the Series B convertible redeemable preferred stock, the conversion ratio was subject to specific anti-dilution provisions adjustments if there was common stock issued for consideration below the Series B issue price. Automatic Conversion Each share of redeemable convertible preferred stock was convertible into common stock at initial conversion rates described under the Optional Conversion heading above, subject to adjustments based on certain antidilution provisions, including stock splits, stock dividends, subdivision, combinations, recapitalization or similar events, as provided by the Company’s certificate of incorporation. Further, all shares of redeemable convertible preferred stock automatically would have converted into common stock upon the vote or written consent of the holders of a majority of the shares of redeemable convertible preferred stock or upon the closing of a firm-commitment underwritten public offering of the Company’s common stock at a stock price of at least $17.16 per share and with gross aggregate proceeds to the Company of at least $80.0 million. Upon completion of the IPO, the Company's redeemable convertible preferred stock was converted into 15,345,279 shares of common stock. Dividends The holders of shares of Series A, Series A-1, and Series B redeemable convertible preferred stock were entitled to receive cumulative dividends of 8% per annum of the original issuance price on each share of redeemable convertible preferred stock. The dividends were payable in cash, out of the assets at the time legally available thereof, when, as and if declared by the Board of Directors, on an equal basis according to the number of shares of redeemable convertible preferred stock held by such holders, prior and in preference to the common stock. As of December 31, 2020, the Company had total dividends in arrears for the Series A redeemable convertible preferred stock of $3.8 million and $2.5 million, or $0.72 and $0.48 per share, respectively, and for Series A-1 redeemable convertible preferred stock of $2.5 million and $1.1 million, or $0.40 and $0.56 per share. As of September 30, 2021, the Company had no dividends in arrears as all shares of redeemable convertible preferred stock converted to common stock upon the completion of the IPO. Redemption Under certain circumstances, subsequent to the occurrence of a deemed liquidation event, defined as (1) a majority of the holders of the then outstanding redeemable convertible preferred stock and (2) at least 70% of the then outstanding shares of the Series B redeemable convertible preferred stock could have required the Company to redeem their shares at a price per share equal to the liquidation amount, to the extent that sufficient funds were available. Additionally, holders of the Company’s Series A and Series A-1 redeemable convertible preferred stock initially had the option to redeem their shares beginning in October 2026. As a result, these shares were considered probable of becoming redeemable since redemption is solely dependent on the passage of time. As such, the Company adjusted the carrying value of the redeemable convertible preferred stock by accreting changes in the redemption value over the period from the date of issuance to the earliest redemption date of October 2026. In October 2020, the Company amended the terms of their Certificate of Incorporation to remove the redemption option of their Series A and Series A-1 redeemable convertible preferred stock, as a result the Company ceased recording adjustments to the carrying value of its outstanding redeemable convertible preferred stock for accretion to redemption value. There was no change in value as a result of this modification. There was no accretion to redemption value recorded for the nine months ended September 30, 2021. Voting The holders of the Company’s Series B redeemable convertible preferred stock, voting together as a class, were entitled to elect one (1) member of the Board of Directors (the Series B director). The holders of the Company’s Series A and Series A-1 redeemable convertible preferred stock, voting together as a class, were entitled to elect two (2) members of the Board of Directors (the Series A directors). The holders of the shares of common stock and of any other class or series of voting stock (including the preferred stock), voting together as a class, were entitled to elect the balance of the Company’s directors. Stockholder Rights The holders of the Company’s redeemable convertible preferred stock had protective provisions that required preferred stockholders representing a majority of the outstanding redeemable convertible preferred stock, voting as a single class (on an as-converted basis), to consent to specific actions including the following: changes in the corporation’s certificate of incorporation or bylaws that would affect, alter or change the preference or rights of the redeemable convertible preferred stock, changes in the authorized number of shares, declaration or payment of dividends, repurchase of shares, changes in the size of the Board of directors, creation of a new class or series of stock, or taking any action that would cause a liquidation event. Further, the holders of the Company's Series B redeemable convertible preferred stock had additional protective provisions that required Series B preferred stockholders representing 70% of the outstanding shares of the Series B redeemable convertible preferred stock to consent to specific actions including the following: changes in the corporation’s certificate of incorporation or bylaws that would affect, alter or change the preference or rights of the Series B redeemable convertible preferred stock, changes in the authorized number of shares of Series B redeemable convertible preferred stock, declaration or payment of dividends or distributions shares of capital stock other than the Series A, Series A-1, and Series B redeemable convertible preferred stock, sell shares of Common Stock to the public at price below $17.16 in a firm-commitment underwritten public offering, or taking any action that would cause a liquidation event that would results in proceeds of less than $17.16 per share of the Series B redeemable convertible preferred stock. Additionally, the holders of the Company’s Series A and Series A-1 redeemable convertible preferred stock had additional protective provisions that required preferred stockholders representing a majority of the outstanding redeemable convertible preferred stock, voting as a single class (on an as-converted basis), to consent to specific actions including the following: changes in the corporation’s certificate of incorporation or bylaws that would affect, alter or change the preference or rights of the Series A and Series A-1 redeemable convertible preferred stock and changes or reclassifications of any existing security of the Company that is pari passu with the Series A and/or Series A-1 redeemable convertible preferred stock.

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