UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 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 Number: 001-39438

 

GEMINI THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

85-1612845

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

300 One Kendall Square, 3rd Floor

Cambridge, MA

02139

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (617) 401-4400

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.0001 per share

 

GMTX

 

The Nasdaq Global 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, 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 Exchange Act).    Yes      No  

As of May 11, 2021, the registrant had 43,052,865 shares of common stock, $.0001 par value per share, outstanding.

 

 

 


 

 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

35

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

35

Item 3.

Defaults Upon Senior Securities

35

Item 4.

Mine Safety Disclosures

35

Item 5.

Other Information

35

Item 6.

Exhibits

36

Signatures

37

 

 

 

i


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Gemini Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

184,986

 

 

$

4,503

 

Prepaid expenses and other current assets

 

 

3,619

 

 

 

562

 

Total current assets

 

 

188,605

 

 

 

5,065

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

229

 

 

 

294

 

Restricted cash

 

 

323

 

 

 

323

 

Deferred offering costs

 

 

-

 

 

 

2,637

 

Other assets

 

 

225

 

 

 

-

 

Total assets

 

$

189,382

 

 

$

8,319

 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,562

 

 

$

2,377

 

Accrued expenses and other current liabilities

 

 

5,214

 

 

 

5,810

 

Term loan, current portion

 

 

5,000

 

 

 

5,000

 

Convertible notes

 

 

-

 

 

 

11,689

 

Total current liabilities

 

 

13,776

 

 

 

24,876

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

 

-

 

 

 

76

 

Other liabilities

 

 

316

 

 

 

277

 

Term loan, net of current portion and discount

 

 

4,129

 

 

 

4,951

 

Total liabilities

 

 

18,221

 

 

 

30,180

 

 

 

 

 

 

 

 

 

 

Stockholders' equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued

   and outstanding as of March 31, 2021 and December 31, 2020

 

 

-

 

 

 

-

 

Common stock, $0.0001 par value; 250,000,000 shares authorized; 43,002,144 and

   15,565,380 shares issued and outstanding as of March 31, 2021 and December 31,

   2020, respectively

 

 

4

 

 

 

2

 

Additional paid-in capital

 

 

303,026

 

 

 

90,958

 

Accumulated deficit

 

 

(131,869

)

 

 

(112,821

)

Total stockholders' equity (deficit)

 

 

171,161

 

 

 

(21,861

)

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficit)

 

$

189,382

 

 

$

8,319

 

 

The accompanying notes are an integral part of the financial statements.

1


 

Gemini Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

11,786

 

 

$

8,217

 

General and administrative

 

 

4,704

 

 

 

1,414

 

Total operating expenses

 

 

16,490

 

 

 

9,631

 

Loss from operations

 

 

(16,490

)

 

 

(9,631

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,848

)

 

 

(153

)

Interest income

 

 

1

 

 

 

36

 

Loss on conversion of convertible notes

 

 

(711

)

 

 

-

 

Change in fair value of warrant liability

 

 

-

 

 

 

2

 

Net loss and comprehensive loss

 

$

(19,048

)

 

$

(9,746

)

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders

 

$

(19,048

)

 

$

(9,746

)

Net loss per share attributable to common stockholders, basic and diluted

 

$

(0.59

)

 

$

(0.67

)

Weighted average common shares outstanding, basic and diluted

 

 

32,027,161

 

 

 

14,495,972

 

 

The accompanying notes are an integral part of the financial statements.

 

 

2

 


 

 

Gemini Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share amounts)

 

 

 

Series A

Convertible Preferred Stock

 

 

Series B

Convertible Preferred Stock

 

 

 

Old Gemini

Common Stock

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total

stockholders'

equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

(deficit)

 

Balance at December 31, 2019

   (as previously reported)

 

 

39,722,088

 

 

$

47,113

 

 

 

9,916,375

 

 

$

13,252

 

 

 

 

5,313,766

 

 

$

5

 

 

 

-

 

 

$

-

 

 

$

1,182

 

 

$

(71,984

)

 

$

(70,797

)

Retroactive application of the

   recapitalization due to the Business

   Combination (Note 3)

 

 

(39,722,088

)

 

 

(47,113

)

 

 

(9,916,375

)

 

 

(13,252

)

 

 

 

(5,313,766

)

 

 

(5

)

 

 

11,979,586

 

 

 

1

 

 

 

60,369

 

 

 

-

 

 

 

60,365

 

Balance at December 31, 2019, effect of

   Business Combination (Note 3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

11,979,586

 

 

 

1

 

 

 

61,551

 

 

 

(71,984

)

 

 

(10,432

)

Issuance of Series B convertible preferred

   stock, net of issuance costs of $148

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

3,242,655

 

 

 

1

 

 

 

20,083

 

 

 

-

 

 

 

20,084

 

Issuance of common stock upon exercise of

   stock options

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

17,932

 

 

 

-

 

 

 

10

 

 

 

-

 

 

 

10

 

Vesting of restricted common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

14,470

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

94

 

 

 

-

 

 

 

94

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,746

)

 

 

(9,746

)

Balance at March 31, 2020, effect of

   Business Combination (Note 3)

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

 

 

-

 

 

$

-

 

 

 

15,254,643

 

 

$

2

 

 

$

81,738

 

 

$

(81,730

)

 

$

10

 

 

 

 

Series A

Convertible Preferred Stock

 

 

Series B

Convertible Preferred Stock

 

 

 

Old Gemini

Common Stock

 

 

Common Stock

 

 

Additional

paid-in

 

 

Accumulated

 

 

Total

stockholders'

equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

(deficit)

 

Balance at December 31, 2020

   (as previously reported)

 

 

39,722,088

 

 

$

47,113

 

 

 

24,790,938

 

 

$

33,336

 

 

 

 

6,900,493

 

 

$

7

 

 

 

-

 

 

$

-

 

 

$

10,504

 

 

$

(112,821

)

 

$

(102,310

)

Retroactive application of the

   recapitalization due to the Business

   Combination (Note 3)

 

 

(39,722,088

)

 

 

(47,113

)

 

 

(24,790,938

)

 

 

(33,336

)

 

 

 

(6,900,493

)

 

 

(7

)

 

 

15,565,380

 

 

 

2

 

 

 

80,454

 

 

 

-

 

 

 

80,449

 

Balance at December 31, 2020, effect of

   Business Combination (Note 3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

15,565,380

 

 

 

2

 

 

 

90,958

 

 

 

(112,821

)

 

 

(21,861

)

Issuance of common stock upon Business

   Combination, net of issuance costs

   (Note 3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

25,041,150

 

 

 

2

 

 

 

195,880

 

 

 

-

 

 

 

195,882

 

Conversion of promissory notes (Note 3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

2,341,316

 

 

 

-

 

 

 

14,515

 

 

 

-

 

 

 

14,515

 

Issuance of common stock upon exercise of

   warrants (Note 3)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

15,257

 

 

 

-

 

 

 

76

 

 

 

-

 

 

 

76

 

Vesting of restricted common stock

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

35,561

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Issuance of common stock upon exercise of

   stock options

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

3,480

 

 

 

-

 

 

 

4

 

 

 

-

 

 

 

4

 

Stock-based compensation expense

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,593

 

 

 

-

 

 

 

1,593

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,048

)

 

 

(19,048

)

Balance at March 31, 2021

 

 

-

 

 

$

-

 

 

 

-

 

 

$

-

 

 

 

 

-

 

 

$

-

 

 

 

43,002,144

 

 

$

4

 

 

$

303,026

 

 

$

(131,869

)

 

$

171,161

 

 

The accompanying notes are an integral part of the financial statements.

 

3


 

 

Gemini Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(19,048

)

 

$

(9,746

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation expense

 

 

65

 

 

 

77

 

Stock-based compensation expense

 

 

1,593

 

 

 

94

 

Non-cash interest expense

 

 

188

 

 

 

95

 

Change in fair value of warrant liability

 

 

-

 

 

 

(2

)

Loss on conversion of convertible notes

 

 

711

 

 

 

-

 

Accretion of discount on convertible notes

 

 

1,600

 

 

 

-

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(3,057

)

 

 

117

 

Deferred offering costs

 

 

1,341

 

 

 

-

 

Other assets

 

 

(225

)

 

 

-

 

Accounts payable

 

 

2,173

 

 

 

715

 

Accrued expenses and other current liabilities

 

 

(348

)

 

 

(1,231

)

Net cash used in operating activities

 

 

(15,007

)

 

 

(9,881

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from Business Combination, net

 

 

196,319

 

 

 

-

 

Proceeds from sale of Series B convertible preferred stock, net

 

 

-

 

 

 

20,084

 

Proceeds from exercise of stock options

 

 

4

 

 

 

10

 

Principal payments on term loan

 

 

(833

)

 

 

-

 

Net cash provided by financing activities

 

 

195,490

 

 

 

20,094

 

Increase in cash, cash equivalents and restricted cash

 

 

180,483

 

 

 

10,213

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

4,826

 

 

 

3,309

 

Cash, cash equivalents and restricted cash at end of period

 

$

185,309

 

 

$

13,522

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

60

 

 

$

59

 

 

 

 

 

 

 

 

 

 

Noncash financing activities

 

 

 

 

 

 

 

 

Conversion of convertible notes to Series B preferred stock

 

$

14,515

 

 

$

-

 

Exercise of warrants

 

$

76

 

 

$

-

 

Unpaid issuance costs in accounts payable and accrued expenses and other current liabilities

 

$

437

 

 

$

-

 

 

The accompanying notes are an integral part of the financial statements.

 

4


 

 

Gemini Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

(Amounts in thousands, except share and per share amounts)

 

1. Nature of the business

Gemini Therapeutics, Inc. (the “Company” or “Gemini”) is a clinical-stage precision medicine company developing novel therapeutic compounds to treat genetically defined, age-related macular degeneration. The Company was founded on March 3, 2015 and is currently located in Cambridge, Massachusetts.

Unless the context otherwise requires, references in these notes to “Gemini”, “the Company”, “we”, “us” and “our” and any related terms are intended to mean the post-Business Combination Gemini Therapeutics, Inc. and its consolidated subsidiary.

Business Combination Transaction

On February 5, 2021 (the “Closing Date”), FS Development Corporation, a Delaware corporation (“FSDC”), consummated the previously announced business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of October 15, 2020 (as amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), by and among Gemini Therapeutics, Inc., a Delaware corporation (“Old Gemini”), Shareholder Representative Services LLC, a Colorado limited liability company solely in its capacity as the representative, agent and attorney-in-fact of the Company Securityholders (the “Stockholders’ Representative”), FSDC and FSG Merger Sub Inc., a Delaware corporation (“Merger Sub”).

FSDC was incorporated in Delaware on June 25, 2020 and was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

On the day prior to the Closing Date, Old Gemini changed its name to “Gemini Therapeutics Sub, Inc.” Pursuant to the Merger Agreement, on the Closing Date, (i) FSDC changed its name to “Gemini Therapeutics, Inc.” and (ii) Old Gemini merged with and into Merger Sub (the “Merger”), with Old Gemini as the surviving company in the Merger and, after giving effect to such Merger, Old Gemini becoming a wholly-owned subsidiary of Gemini. Upon the closing of the Business Combination, and pursuant to the terms of the Merger Agreement, the existing shareholders of Old Gemini exchanged their interests for shares of common stock of Gemini.

In connection with the Business Combination, certain investors purchased an aggregate of $95.1 million of the Company’s Common Stock in a private placement of public equity (the “PIPE Financing”). Together with FSDC’s cash resources and funding of the PIPE Financing, the Company received net proceeds of approximately $195.9 million.

For additional information on the Business Combination, please refer to Note 3, Business Combination, to these condensed consolidated financial statements.

2. Risks and Liquidity

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, development by its competitors of new technological innovations, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology, ability to raise additional financing and compliance with government regulations. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate recurring product revenue or achieve profitability.

The Company’s product candidates are in development and will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. 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, 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 significant revenue from product sales. The Company operates in an environment of rapid change in technology and is dependent upon the services of its employees, consultants, third-party contract research organizations and other third-party organizations.

Prior to the Business Combination, the Company primarily financed its operations through the sale of convertible preferred stock, borrowings under convertible promissory notes and borrowings under loan agreements. The Company believes that its $185.0 million of cash and cash equivalents will enable it to fund its planned operations for at least twelve months from the issuance date of these condensed consolidated financial statements, though the Company may pursue additional cash resources through public or private equity

5


 

or debt financings. Management’s expectations with respect to its ability to fund current planned operations is based on estimates that are subject to risks and uncertainties. Its operating plan may change as a result of many factors currently unknown to management and there can be no assurance that the current operating plan will be achieved in the time frame anticipated by the Company, and it may need to seek additional funds sooner than anticipated. If adequate funds are not available to the Company on a timely basis, management may be required to delay, limit, reduce or terminate certain of its research, product development or future commercialization efforts, obtain funds through arrangements with collaborators on terms unfavorable to the Company, or pursue merger or acquisition strategies, all of which could adversely affect the holdings or the rights of its stockholders.  

Impact of the COVID-19 Pandemic

In March 2020, the WHO declared the COVID-19 outbreak a pandemic. The COVID-19 outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The COVID-19 pandemic continues to present significant business challenges in 2021, and the future progression of the outbreak and its effects on the Company’s business and operations are uncertain.

The Company and its third-party contract manufacturers (“CMOs”), contract research organizations (“CROs”) and clinical sites may experience disruptions in supply of product candidates and/or procurement of items that are essential for the Company’s research and development activities, including raw materials used in the manufacturing of its product candidates, medical and laboratory supplies used in its clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the outbreak.

Additionally, the Company has enrolled, and will seek to enroll, patients in its clinical trials at sites located both in the United States and internationally. Most of the Company’s clinical trial sites are in areas affected by COVID-19 and, as a result, its trials are being impacted. The Company cannot predict how long or impactful these delays may be on its clinical trials. In addition, even if sites are initiating and actively recruiting, the Company may face difficulties recruiting or retaining patients in its clinical trials if patients are affected by the virus or are unable to or are fearful of visiting or traveling to clinical trial sites because of the outbreak. Prolonged delays or closure to enrollment in the Company’s trials or patient discontinuations could have a material adverse impact on its clinical trial plans and timelines. In addition, the Company’s ability to collect and verify data requested of patients enrolled in its clinical trials during this pandemic is being impacted to varying degrees. Clinical trial data collection continues for each of the Company’s clinical trials but at a slower pace, and with challenges and interruptions in data collection, including, in some instances, disruption of collection of complete study data. This could have a material adverse impact on the Company’s data quality and analysis. In addition, clinical trial sites may be unable or unwilling to initiate a new trial if factors relevant to the pandemic render this impracticable.  These COVID-19 related issues may prolong the time required to conduct ongoing clinical trials and/or impact the quality of the data obtained from one or more of these studies.

The Company has not incurred impairment losses in the carrying values of its assets as a result of the COVID-19 pandemic, and it is not aware of any specific related event or circumstance that would require it to revise its estimates reflected in these condensed consolidated financial statements. Although the COVID-19 pandemic did not have a significant impact on the Company’s condensed consolidated financial results in the first quarter of 2021, the full extent to which the COVID-19 pandemic will impact the Company’s business, results of operations, financial condition and cash flows will depend on future developments that are highly uncertain, and the estimates of the impact on the Company’s business may change based on new information that may emerge concerning COVID-19, including the duration of the pandemic, any potential subsequent waves or strains of COVID-19 infection, the effectiveness, distribution and acceptance of COVID-19 vaccines and the actions to contain it or treat its impact and the economic impact on local, regional, national and international markets.

3. Business Combination

On February 5, 2021, Old Gemini and FSDC completed the Business Combination pursuant to the Merger Agreement with Old Gemini surviving the merger as a wholly owned subsidiary of FSDC. Net proceeds from the Business Combination totaled approximately $195.9 million, which included funds held in FSDC’s trust account and the completion of the concurrent PIPE Financing.

In accordance with the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger, (i) all shares of Old Gemini’s Series B Preferred Stock (including shares of Series B Preferred Stock issued upon conversion of outstanding convertible promissory notes), Series A Preferred Stock and Common Stock (collectively, “Old Gemini Stock”) issued and outstanding immediately prior to the effective time of the Merger, whether vested or unvested, were converted into the right to receive their pro rata portion of the 17,942,274 shares of FSDC Class A Common Stock (the “Common Stock”) issued as Merger consideration (the “Merger Consideration”), provided that 2,150,000 shares of Common Stock are held in escrow for a period of 12 months from the closing date to satisfy any indemnification obligations of Old Gemini under the Merger Agreement; (ii) each option exercisable for Old Gemini

6


 

Stock that was outstanding immediately prior to effective time of the Merger was assumed and continues in full force and effect on the same terms and conditions as were previously applicable to such options, subject to adjustments to exercise price and number of shares Common Stock issuable upon exercise based on the final conversion ratio calculated in accordance with the Merger Agreement, and (iii) 4,264,341 shares of Common Stock were reserved for issuance under the newly adopted 2021 Stock Option and Incentive Plan (the “2021 Plan”).

The Company accounted for the Business Combination as a reverse recapitalization, which is the equivalent of Old Gemini issuing stock for the net assets of FSDC, accompanied by a recapitalization, with FSDC treated as the acquired company for accounting purposes. The determination of FSDC as the “acquired” company for accounting purposes was primarily based on the fact that subsequent to the Business Combination, Gemini has a majority of the voting power of the combined company, Gemini will comprise all of the ongoing operations of the combined entity, a majority of the governing body of the combined company and Gemini’s senior management will comprise all of the senior management of the combined company. The net assets of FSDC were stated at historical cost with no goodwill or other intangible assets recorded. Reported results from operations included herein prior to the Business Combination are those of Old Gemini. The shares and corresponding capital amounts and loss per share related to Old Gemini’s outstanding convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect the conversion ratio established in the Merger Agreement (1.00 Old Gemini share for .2180 shares of Gemini, the “Conversion Ratio”).

In connection with the Business Combination, the Company incurred underwriting fees and other costs considered direct and incremental to the transaction totaling $21.0 million, consisting of legal, accounting, financial advisory and other professional fees. These amounts are reflected within additional paid-in capital in the condensed consolidated balance sheet as of March 31, 2021.

PIPE Financing

Concurrent with the execution of the Business Combination, the Company entered into subscription agreements with certain investors (the “PIPE Investors”) pursuant to which the PIPE Investors subscribed for and purchased an aggregate of 9,506,000 shares of Common Stock for an aggregate purchase price of $95.1 million.

Summary of Net Proceeds

The following table summarizes the elements of the net proceeds from the Business Combination as of March 31, 2021 (in thousands):

 

Cash - FSDC Trust Account and cash (net of redemptions)

 

$

121,782

 

Cash - PIPE Financing

 

 

95,060

 

Less: Underwriting fees and other issuance costs paid prior to March 31, 2021

 

 

(20,523

)

Proceeds from Business Combination, net of issuance costs paid per the Cash Flows

from Financing Activities

 

$

196,319

 

Less: Other issuance costs included in accounts payable and accrued expenses and

      other current liabilities

 

 

(437

)

Net proceeds from the Business Combination

 

$

195,882

 

 

Summary of Shares Issued

The following table summarizes the number of shares of Common Stock outstanding immediately following the consummation of the Business Combination:

 

FSDC shares outstanding prior to the Business Combination

 

 

15,535,150

 

Shares issued pursuant to the PIPE Financing

 

 

9,506,000

 

Business Combination and PIPE Financing shares

 

 

25,041,150

 

Conversion of Old Gemini Series A preferred stock for common stock

 

 

8,657,869

 

Conversion of Old Gemini Series B preferred stock for common stock

 

 

7,744,785

 

Conversion of Old Gemini common stock for common stock

 

 

1,539,603

 

Issuance of common stock upon exercise of warrants

 

 

15,257

 

Total shares of New Gemini common stock outstanding immediately following

   the Business Combination

 

 

42,998,664

 

 

7


 

 

4. Summary of Significant Accounting Policies

Basis of presentation

The accompanying unaudited condensed consolidated financial statements include those of the Company and its subsidiary, Gemini Therapeutics Sub, Inc., after elimination of all intercompany accounts and transactions. The accompanying unaudited condensed consolidated financial statements and notes hereto have been prepared in conformity with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting and, therefore, omit or condense certain footnotes and other information normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board’s (“FASB”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the FASB.

In the opinion of management, all adjustments necessary for a fair statement of the financial information, which are of a normal and recurring nature, have been made for the interim periods reported. Results of operations for the three months ended March 31, 2021 and 2020 are not necessarily indicative of the results for the entire fiscal year or any other period. The condensed consolidated financial information for the three months ended March 31, 2021 and 2020 have been prepared on the same basis as and should be read in conjunction with Old Gemini’s audited financial statements and notes thereto for the year ended December 31, 2020 included the Company’s Form 8-K/A as filed with the SEC on March 29, 2021.

As a result of the Business Combination, the shares and corresponding capital amounts and loss per share related to Old Gemini’s outstanding convertible preferred stock and common stock prior to the Business Combination have been retroactively restated to reflect the Conversion Ratio established in the Merger Agreement. For additional information regarding the Business Combination, please refer to Note 3, Business Combination, to these condensed consolidated financial statements.

Use of estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Significant estimates contained within these financial statements include, but are not limited to, the accruals of research and development expenses, share-based awards utilized for stock-based compensation purposes and, prior to the Business Combination, the estimated fair value of the Company’s common stock and warrant liability. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Actual results may differ materially from those estimates or assumptions.

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the time of initial purchase to be cash equivalents. The objectives of the Company’s cash management policy are to safeguard and preserve funds to maintain liquidity sufficient to meet the Company’s cash flow requirements and to attain a market rate of return. The Company’s cash equivalents consist of amounts invested in money market mutual funds as of March 31, 2021 and December 31, 2020.

Restricted cash

Restricted cash amounted to $323 thousand as of March 31, 2021 and December 31, 2020, which consists of $100 thousand to collateralize the Company’s credit card and $223 thousand to collateralize its irrevocable standby letter of credit for its facility lease arrangement. The letter of credit is in the name of the landlord and is required to fulfill lease requirements in the event the Company should default on its lease obligation.

A reconciliation of the cash and cash equivalents and restricted cash as presented in the Company’s balance sheets to the Company’s statements of cash flows is as follows:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Cash and cash equivalents

 

$

184,986

 

 

$

4,503

 

Restricted cash

 

 

323

 

 

 

323

 

Total cash, cash equivalents and restricted cash

 

$

185,309

 

 

$

4,826

 

 

8


 

 

Concentration of credit risk and of significant suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in accredited financial institutions in amounts that could exceed federally insured limits. Cash equivalents are invested in money market funds. The Company maintains each of its cash balances with high-quality and accredited financial institutions and accordingly, such funds are not exposed to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Property and equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. The estimated useful lives are as follows:

 

Computer equipment

3 years

Furniture and fixtures

5 years

Laboratory equipment

3 years

Leasehold improvements

Shorter of the useful life of the asset
or the life of the lease

 

Costs for capital assets not yet placed in service are capitalized and depreciated once placed into service. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for normal, recurring or periodic repairs and maintenance activities are charged to expense as incurred.

Impairment of long-lived assets

Long-lived assets, comprised of property and equipment, to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset over its fair value, determined based on discounted cash flows. To date, the Company has not recorded any impairment losses on long-lived assets.

Offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss. The Company had no deferred offering costs as of March 31, 2021. As of December 31, 2020, the Company recorded deferred offering costs of $2.6 million related to the costs incurred in connection with the Business Combination.

Fair value measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be

9


 

classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1 – Quoted prices in active markets that are identical assets or liabilities.

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and preferred stock warrant liability (outstanding as of December 31, 2020 only) are carried at fair value, determined according to the fair value hierarchy described above (see Note 5). The carrying values of the Company’s prepaid expenses and other current assets and accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. The carrying value of the Company’s term loan as of March 31, 2021 and December 31, 2020 (see Note 7) approximated fair value based on interest rates currently available to the Company.

Debt issuance costs

The carrying value of the Company’s term loan was recorded net of issuance costs and discount relating to the issuance of warrants. The debt discounts are amortized over the term of the debt using the effective interest method and recognized as interest expense.

Warrants

In February 2019, concurrent with the Company’s term loan agreement (see Note 7), the Company issued warrants to purchase shares of Old Gemini’s Series A preferred stock. The Company accounts for the warrants to purchase Series A preferred stock as a liability as these warrants are freestanding financial instruments that may require the Company to transfer assets upon exercise. The fair value of the warrants classified as liabilities is estimated using the Black-Scholes Option Pricing Model and adjusted to fair value at the end of each reporting period. Changes in the fair value of the warrant are recognized as a component of other income (expense) in the condensed consolidated statements of operations and comprehensive loss. The estimates in the Black-Scholes Option Pricing Model are based, in part, on subjective assumptions, including, stock price volatility, term of the warrants, risk-free interest rate, dividend yield and the fair value of the preferred stock underlying the warrants. Such assumptions could differ materially in the future.

At the closing of the Business Combination, the warrants were automatically exercised for 15,257 shares of the Company’s common stock.

Segment information

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company’s singular focus is the development of novel therapies for genetically defined, age-related macular degeneration. The Company has determined that it operates as a single operating segment and has one reportable segment. The Company’s long-lived assets are located in the United States.

Research and development contract costs and accruals

Research and development expenses include employee payroll, consulting, contract research, depreciation, rent and other corporate costs attributable to research and development activities and are expensed as incurred.

Upfront payments and milestone payments made for the licensing of technology are expensed as research and development expenses in the period in which they are incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

The Company has entered into various research and development contracts with companies both inside and outside of the United States. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies or trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

10


 

Patent costs

The Company expenses all patent-related costs incurred in connection with filing and prosecuting patent applications. It records such costs within general and administrative expenses in its accompanying statements of operations and comprehensive loss.

Stock-based compensation

The Company measures all stock-based awards granted to employees, directors and non-employees based on the fair value on the date of grant and recognizes compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. Forfeitures are accounted for as they occur. The Company grants stock options and restricted stock awards that are subject to either service or performance-based vesting conditions. Compensation expense related to awards to employees and non-employees with performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated attribution method to the extent achievement of the performance condition is probable. The Company estimates the probability that certain performance criteria will be met and does not recognize compensation expense until it is probable that the performance-based vesting condition will be achieved.

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Determination of Fair Value – Preferred and Common Stock

Prior to the completion of the Business Combination transaction, given that there had been no public market for the Company’s common stock, the estimated fair value of its common stock was determined by its most recently available third-party valuations of common stock. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. The Company’s common stock valuations were prepared using an option pricing method, or OPM, or a hybrid method, both of which used market approaches to estimate its enterprise value. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock. The hybrid method is a probability-weighted expected return method, or PWERM, where the equity value in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of the Company’s common stock based upon an analysis of its future values, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. There are significant judgments and estimates inherent in the determination of the fair value of the Company’s common stock. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred securities, the superior rights and preferences of securities senior to the common securities at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date.

Subsequent to the closing of the Business Combination, the fair value of each share of common stock underlying stock-based awards is determined based on the closing price of the Company’s common stock as reported by Nasdaq on the date of grant.

Determination of Fair Value – Stock Option Awards

The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of the Company’s common stock on that same date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model, which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the award, the risk-free interest rate and expected dividends.

Prior to the Business Combination, the Company was a private company and, therefore, lacked company-specific historical and implied volatility information for its stock. Therefore, it estimated its expected stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the

11


 

award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Income taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by analyzing carryback capacity in periods with taxable income, reversal of existing taxable temporary differences and estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. To the extent an income tax provision is necessary, the provision for income taxes would include the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Comprehensive loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. There was no difference between net loss and comprehensive loss for each of the periods presented in the accompanying condensed consolidated financial statements.

Net loss per share

The Company calculates earnings per share in accordance with ASC Topic 260, Earnings per Share. The two-class method of computing earnings per share is required for entities that have participating securities. Under the two-class method, net income is allocated between ordinary shares and participating securities based on dividends declared (or accumulated) and participating rights in undistributed earnings as if all the earnings for the reporting 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 stock. For purpose of this calculation, outstanding options, unvested restricted common stock and convertible preferred stock are considered potential dilutive common stock and are excluded from the computation of net loss per share as their effect is anti-dilutive.

In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to be outstanding if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the three months ended March 31, 2021 and 2020.

Emerging growth company status

Following the closing of the Business Combination, the Company is an “emerging growth company” (“EGC”), as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act, which provides that an EGC can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. The Company has elected to avail itself of the extended transition period and, therefore, while the Company is an EGC it will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not EGCs, unless it chooses to early adopt a new or revised accounting standard. As a result of this election, the condensed consolidated financial statements may not be comparable to companies that comply with public company FASB standards’ effective dates.

12


 

Recently adopted accounting pronouncements

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018-13”). The new standard removes certain disclosures, modifies certain disclosures and adds additional disclosures related to fair value measurement. ASU 2018-13 is effective for annual periods after December 15, 2019. This standard became effective for the Company on January 1, 2020 and did not have a material impact on the Company’s disclosures.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606, (“ASU 2018-18”). The amendments in this update clarify that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. This standard became effective for the Company on January 1, 2021 and did not have an impact on its condensed consolidated financial statements for the three months ended March 31, 2021.

Recently issued accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), Amendments to the FASB Accounting Standards Codification (“ASU 2016-02”), which replaces the existing guidance for leases. ASU 2016-02 requires the identification of arrangements that should be accounted for as leases by lessees. In general, for lease arrangements exceeding a twelve-month term, these arrangements must now be recognized as assets and liabilities on the balance sheet of the lessee. Under ASU 2016-02, a right-of-use asset and a lease liability will be recorded for all leases, whether operating or financing, while the income statement will reflect lease expense for operating leases and amortization/interest expense for financing leases. The balance sheet amount recorded for existing leases at the date of adoption of ASU 2016-02 must be calculated using the applicable incremental borrowing rate at the date of adoption. The guidance is effective for annual reporting periods beginning after December 15, 2021 and interim periods beginning after December 15, 2022, and early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial InstrumentsCredit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments, which has been subsequently amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-3 (“ASU 2016-13”). The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for the Company on January 1, 2023, with early adoption permitted. The Company is currently evaluating the potential impact that ASU 2016-13 may have on its financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify the accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The new standard will be effective for annual reporting periods beginning after December 15, 2021. The Company is currently evaluating the potential impact ASU 2018-18 will have on its financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”), which reduces the number of accounting models for convertible debt instruments and convertible preferred stock as well as amends the derivatives scope exception for contracts in an entity’s own equity. ASU 2020-06 is effective for the Company on January 1, 2024, with early adoption permitted. The Company is currently evaluating the potential impact that this standard may have on its financial statements and related disclosures.

 

5. Fair value measurements

The following tables present information about the Company’s financial assets and liabilities measured at fair value (in thousands) on a recurring basis and indicate the level of the fair value hierarchy used to determine such fair values:

 

March 31, 2021

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds in cash and cash equivalents

 

$

184,061

 

 

$

-

 

 

$

-

 

 

$

184,061

 

 

 

$

184,061

 

 

$

-

 

 

$

-

 

 

$

184,061

 

 

13


 

 

December 31, 2020

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds in cash and cash equivalents

 

$

4,015

 

 

$

-

 

 

$

-

 

 

$

4,015

 

 

 

$

4,015

 

 

$

-

 

 

$

-

 

 

$

4,015

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$

-

 

 

$

-

 

 

$

76

 

 

$

76

 

 

 

$

-

 

 

$

-

 

 

$

76

 

 

$

76

 

 

The values of cash equivalents are classified as Level 1 measurements under the fair value hierarchy, as these assets have been valued using quoted market prices in active markets and do not have any restrictions on redemption. As of March 31, 2021 and December 31, 2020, cash equivalents were comprised of funds in money market accounts. There were no transfers or reclassifications between Level 1, Level 2 and Level 3 during the three months ended March 31, 2021.

The value of the warrant liability is classified as a Level 3 measurement under the fair value hierarchy, as this liability has been valued based on significant inputs not observable in the market.

Warrants to purchase Series A Preferred Stock

In February 2019, concurrent with the Company’s term loan agreement, the Company issued warrants to purchase 15,257 shares of Old Gemini’s Series A preferred stock. The warrants had an exercise price of $5.46 per share and expired in February 2029, representing a contractual term of ten years from issuance. At the closing of the Business Combination, the warrants were automatically exercised for 15,257 shares of the Company’s common stock.

The fair value of the warrants was recorded as a liability on the date of issuance and was revalued at the end of each reporting period until being exercised upon the closing of the Business Combination.

The following table sets forth a summary of the activities of the Company’s Series A preferred stock warrant liability, which represents a recurring measurement that is classified within Level 3 of the fair value hierarchy wherein fair value is estimated using significant unobservable inputs:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Beginning warrant liability balance

 

$

76

 

 

$

68

 

Change in fair value

 

 

-

 

 

 

(2

)

Warrant exercise

 

 

(76

)

 

 

-

 

Ending warrant liability balance

 

$

-

 

 

$

66

 

 

6. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Accrued payroll and benefits

 

$

726

 

 

$

1,500

 

Accrued external research and development

 

 

3,794