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Zafgen, Inc.
false
Non-accelerated Filer
2014
10-Q
2014-06-30
2005-11-22
0001374690
--12-31
Q2
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>6. Stock-Based Awards</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
<b>Stock Option Plans</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company’s Amended and Restated 2006 Stock Option Plan
(the “2006 Plan”) provided for the Company to sell or
issue common stock or restricted common stock, or to grant
incentive stock options or nonqualified stock options for the
purchase of common stock, to employees, members of the board of
directors and consultants of the Company. The 2006 Plan is
administered by the board of directors, or at the discretion of the
board of directors, by a committee of the board. The exercise
prices, vesting and other restrictions are determined at the
discretion of the board of directors, or their committee if so
delegated, except that the exercise price per share of stock
options may not be less than 100% of the fair market value of the
share of common stock on the date of grant and the term of stock
option may not be greater than ten years. The total number of
shares of common stock that could be issued under the 2006 Plan was
1,889,150 shares. Upon closing of the Company’s IPO, 168,221
shares reserved and not then subject to outstanding options were
transferred to the 2014 Stock Option and Incentive Plan, and no
further awards will be made under the 2006 Plan.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On June 5, 2014, the Company’s stockholders approved the
2014 Stock Option and Incentive Plan (the “2014 Stock Option
Plan”), which became effective upon the completion of the IPO
of the Company’s shares of common stock in June 2014. The
2014 Stock Option Plan provides for the grant of stock options,
stock appreciation rights, restricted stock, restricted stock
units, unrestricted stock, performance-share awards and cash-based
awards. The number of shares initially reserved for issuance under
the 2014 Stock Option Plan is 2,168,221 shares of common stock
and may be increased by the number of shares under the 2006 Plan
that are not needed to fulfill the Company’s obligations for
awards issued under the 2006 Plan as a result of forfeiture,
expiration, cancellation, termination or net issuances of awards
thereunder. The number of shares of common stock that may be issued
under the plan is also subject to increase on the first day of each
fiscal year by the lesser of (i) 4% of the Company’s
outstanding shares of common stock as of that date, or (ii) an
amount determined by the board of directors.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company generally grants stock-based awards with service
conditions only (“service-based” awards).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
As required by the 2006 Plan and 2014 Stock Option Plan, the
exercise price for stock options granted is not to be less than the
fair value of common shares as of the date of grant. Prior to the
IPO, the value of common stock was determined by the board of
directors by taking into consideration its most recently available
valuation of common shares performed by management and the board of
directors as well as additional factors which might have changed
since the date of the most recent contemporaneous valuation through
the date of grant.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
For the three months ended June 30, 2014, the Company granted
326,542 stock options, 324,950 stock options to employees and 1,592
stock options to a consultant.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>2014 Employee Stock Purchase Plan</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
On June 5, 2014, the Company’s stockholders approved the
2014 Employee Stock Purchase Plan. A total of 265,000 shares
of common stock were reserved for issuance under this plan. The
2014 Employee Stock Purchase Plan became effective upon the
completion of the IPO of the Company’s shares of common
stock. No offering periods have commenced as of June 30,
2014.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Stock Option Valuation</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The fair value of each stock option grant is estimated on the date
of grant using the Black-Scholes option-pricing model. The Company
historically has been a private company and lacks company-specific
historical and implied volatility information. Therefore, it
estimates its expected stock volatility based on the historical
volatility of a publicly traded set of 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 stock options has been
determined utilizing the “simplified” method for awards
that qualify as “plain-vanilla” options. The expected
term of stock options granted to nonemployees 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 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 and does not expect to pay any cash dividends in the
foreseeable future. The assumptions that the Company used to
determine the fair value of the stock options granted to employees
and directors are as follows, presented on a weighted average
basis:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
As of June 30, 2014, there were outstanding unvested
service-based stock options held by nonemployees for the purchase
of 17,513 shares of common stock. Additionally as of June 30,
2014, there were outstanding unvested performance-based stock
options held by nonemployees for the purchase of 796 shares of
common stock.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>Stock-based Compensation</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company recorded stock-based compensation expense related to
stock options and restricted common stock in the following expense
categories of its statements of operations:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="76%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Three Months Ended<br />
June 30,</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Six Months Ended<br />
June 30,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Research and development</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">99</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">43</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">168</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">69</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
General and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">169</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">276</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">84</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">268</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">444</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">153</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
As of June 30, 2014, the Company had an aggregate of $2,798 of
unrecognized stock-based compensation cost, which is expected to be
recognized over a weighted average period of 3.6 years.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Recently Issued and Adopted Accounting Pronouncements</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
In June 2014, the FASB issued Accounting Standards Update
No. 2014-10, Development Stage Entities (Topic 915):
Elimination of Certain Financial Reporting Requirements, Including
an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation. The amendments in this guidance remove all
incremental financial reporting requirements for development stage
entities. Among other changes, this guidance will no longer
require development stage entities to present inception-to-date
information about income statement line items, cash flows, and
equity transactions. This guidance is effective for public
companies in the first annual period beginning after
December 15, 2014. Early application is permitted for
interim and annual periods for which financial statements have not
yet been issued. The Company elected to apply this disclosure
guidance to its consolidated financial statements for the three
months ended June 30, 2014 and as a result, no longer
discloses inception-to-date information in its Consolidated
Statements of Operations and Comprehensive Loss, Cash Flows and
Stockholders’ Deficit and the related notes thereto.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Accounting for Stock-Based Compensation</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company measures all stock options and other stock-based awards
granted to employees and directors at the fair value on the date of
the grant using the Black-Scholes option-pricing model. The fair
value of the awards is recognized as expense, net of estimated
forfeitures, over the requisite service period, which is generally
the vesting period of the respective award. The straight-line
method of expense recognition is applied to all awards with
service-only conditions.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
For stock-based awards granted to consultants and nonemployees,
compensation expense is recognized over the period during which
services are rendered by such consultants and nonemployees until
completed. At the end of each financial reporting period prior to
completion of the service, the fair value of these awards is
re-measured using the then-current fair value of the
Company’s common stock and updated assumption inputs in the
Black-Scholes option-pricing model.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company classifies stock-based compensation expense in its
consolidated statement of operations and comprehensive loss in the
same manner in which the award recipient’s payroll costs are
classified or in which the award recipients’ service payments
are classified.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company recognizes compensation expense for only the portion of
awards that are expected to vest. In developing a forfeiture rate
estimate, the Company has considered its historical experience to
estimate pre-vesting forfeitures for service-based awards. The
impact of a forfeiture rate adjustment will be recognized in full
in the period of adjustment, and if the actual forfeiture rate is
materially different from the Company’s estimate, the Company
may be required to record adjustments to stock-based compensation
expense in future periods.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>7. Commitments and Contingencies</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
<b>Leases</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company leases its office space under an operating lease
agreement that initially expired on July 31, 2013, but was
amended to extend the lease through July 31, 2014.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On May 15, 2014, the Company entered into new lease of office
space in Boston, Massachusetts, effective as of July 28, 2014,
with a term expiring July 31, 2017 and an option to extend the
lease for three additional years.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Future minimum lease payments for its operating leases as of
June 30, 2014, are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="91%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; WIDTH: 92.45pt">
<b>Year Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2014</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">106</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">229</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">235</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">139</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">709</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
During the three months ended June 30, 2014 and 2013, the
Company recognized $27 and $32, respectively, of rental expense
related to office space. During the six months ended June 30,
2014 and 2013, the Company recognized $52 and $64, respectively, of
rental expense related to office space.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Intellectual Property Licenses</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company has acquired exclusive rights to develop patented
compounds and related know-how for beloranib under two licensing
agreements with two third parties in the course of its research and
development activities. The licensing rights obligate the Company
to make payments to the licensors for license fees, milestones,
license maintenance fees and royalties. The Company is also
responsible for patent prosecution costs.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
As of June 30, 2014, the Company is obligated to make
milestone payments of up to $18,950 upon reaching certain
pre-commercialization milestones, such as clinical trials and
government approvals, and up to $12,500 upon reaching certain
product commercialization milestones. Under one of the license
agreements, the Company is also obligated to pay up to $1,250 with
respect to each subsequent licensed product, if any, that is a new
chemical entity. In addition, the Company will owe single-digit
royalties on sales of commercial products developed using these
licensed technologies, if any. The Company is also obligated to pay
to the licensors a percentage of fees received if and when the
Company sublicenses the technology. As of June 30, 2014, the
Company has not yet developed a commercial product using the
licensed technologies and it has not entered into any sublicense
agreements for the technologies. The Company reasonably anticipates
that it may be required to pay $6,700 of milestone payments in
2014, provided various development milestones are achieved.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Indemnification Agreements</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
In the ordinary course of business, the Company may provide
indemnification of varying scope and terms to vendors, lessors,
business partners, and other parties with respect to certain
matters including, but not limited to, losses arising out of breach
of such agreements or from intellectual property infringement
claims made by third parties. In addition, the Company has entered
into indemnification agreements with members of its board of
directors that will require the Company, among other things, to
indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers. The maximum
potential amount of future payments the Company could be required
to make under these indemnification agreements is, in many cases,
unlimited. To date, the Company has not incurred any material costs
as a result of such indemnifications. The Company does not believe
that the outcome of any claims under indemnification arrangements
will have a material effect on its financial position, results of
operations or cash flows, and it has not accrued any liabilities
related to such obligations in its consolidated financial
statements as of June 30, 2014.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Fair Value Measurements</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
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 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:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="2%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 1—Quoted prices in active
markets for identical assets or liabilities.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="2%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">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.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="2%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 3—Unobservable inputs
that are supported by little or no market activity and that are
significant to determining the fair value of the assets or
liabilities, including pricing models, discounted cash flow
methodologies and similar techniques.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company’s cash equivalents of $120,000 and $26,501 as of
June 30, 2014 and December 31, 2013, respectively, were
carried at fair value based on quoted prices in active markets, a
Level 1 measurement. The carrying values of accounts payable and
accrued expenses approximate their fair value due to the short-term
nature of these liabilities. The Company’s carrying value of
outstanding debt issued in the first quarter of 2014 approximates
fair value based on the recent execution date of the credit
facility agreement, and is considered a Level 2 measurement.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>Comprehensive Loss</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
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. For the
three and six months ended June 30, 2014 and 2013, there was
no difference between net loss and comprehensive loss.</p>
</div>
Company effected a 1-for-6.28 reverse stock split of its issued and outstanding shares of common stock and a proportional adjustment to the existing conversion ratios for each series of redeemable convertible preferred stock.
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>Patent Costs</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
All patent-related costs incurred in connection with filing and
prosecuting patent applications are recorded as general and
administrative expenses as incurred, as recoverability of such
expenditures is uncertain.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The following common stock equivalents outstanding as of
June 30, 2014 and 2013, were excluded from the computation of
diluted net loss per share for the three and six months ended
June 30, 2014 and 2013, because they had an anti-dilutive
impact:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0"><!-- Begin Table Head -->
<tr>
<td width="75%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="6" align="center"><b>As of June 30,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: rgb(0,0,0) 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
</tr>
<!-- End Table Head --><!-- Begin Table Body -->
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Options to purchase common stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,839,895</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,283,264</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Redeemable convertible preferred stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">—</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78,372,931</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Total options and redeemable convertible preferred stock
exercisable or convertible into common stock</p>
</td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,839,895</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">79,656,195</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: rgb(0,0,0) 3px double"> </p>
</td>
</tr>
</table>
</div>
The Company was obligated to make monthly, interest-only payments on any term loans funded under the Credit Facility until December 1, 2014 and, thereafter, to pay 36 consecutive, equal monthly installments of principal and interest from January 1, 2015 through December 1, 2017. As per the terms of the agreement, in June 2014, upon the completion of the Company’s IPO, the term of monthly, interest-only payments has been extended until June 1, 2015.
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>4. Notes Payable</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
On March 31, 2014, the Company entered into a loan and
security agreement with Oxford Finance LLC and Midcap Financial
(the “Credit Facility”). The Credit Facility provides
for initial borrowings of $7,500 under a term loan (“Term
Loan A”) and additional borrowings of up to $12,500 under
other term loans, for a maximum of $20,000. On March 31, 2014,
the Company received proceeds of $7,500 from the issuance of
promissory notes under the Term Loan A. Of the additional $12,500
amount that is available, $7,500 (“Term Loan B”) is
available to be drawn down until September 30, 2014 and $5,000
(“Term Loan C”) was available to be drawn down for a
30-day period upon the completion of the Company’s IPO that
occurred in June 2014. The Company elected not to draw down Term
Loan C and this amount is no longer available to the Company. All
promissory notes issued under the Credit Facility are
collateralized by substantially all of the Company’s personal
property, other than its intellectual property.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Upon entering into this Credit Facility, the Company was obligated
to make monthly, interest-only payments on any term loans funded
under the Credit Facility until December 1, 2014 and,
thereafter, to pay 36 consecutive, equal monthly installments of
principal and interest from January 1, 2015 through
December 1, 2017. As per the terms of the agreement, in June
2014, upon the completion of the Company’s IPO, the term of
monthly, interest-only payments has been extended until
June 1, 2015. Outstanding term loans under the Credit Facility
bear interest at an annual rate of 8.1%. In addition, a final
payment equal to 6.0% of any amounts drawn under the Credit
Facility is due upon the earlier of the maturity date, acceleration
of the term loans or prepayment of all or part of the term loans.
The Company accrues the amount due relating to Term Loan A of $450,
to outstanding debt by charges to interest expense using the
effective-interest method from the date of issuance through the
maturity date.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Term Loan A was recorded in the balance sheet net of debt discount
of $114 that was related to fees assessed by the lender at the time
of borrowing. The debt discount is being accreted to the principal
amount of the debt. In addition, deferred financing costs of $49
are being amortized to interest expense using the
effective-interest method over the same term. For both the three
and six months ended June 30, 2014, the Company recorded
additional interest expense of $19 related the accretion of the
debt discount and amortization of deferred financing costs.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company is obligated to pay a separate fee upon any IPO; a sale
of substantially all of the Company’s assets; or a merger,
reorganization or sale of the Company’s voting equity
securities where existing voting stockholders hold less than 50% of
voting equity securities after such transaction. As of
June 30, 2014, the Company recorded additional interest
expense of $225 relating to the accrual of the fee payable upon the
Company’s IPO.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
There are no financial covenants associated with the debt facility;
however, there are negative covenants restricting the
Company’s activities, including limitations on dispositions,
mergers or acquisitions; encumbering or granting a security
interest in its intellectual property; incurring indebtedness or
liens; paying dividends; making certain investments; and certain
other business transactions.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt; TEXT-INDENT: 4%">
The Credit Facility also includes events of default, the occurrence
and continuation of any of which provides the lenders the right to
exercise remedies against the Company and the collateral securing
the loans under the Credit Facility, including cash. These events
of default include, among other things, failure to pay any amounts
due under the Credit Facility, insolvency, the occurrence of a
material adverse event, the occurrence of any default under certain
other indebtedness and a final judgment against the Company in an
amount greater than $250.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Estimated future principal payments due under the Term Loan A are
as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="89%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; WIDTH: 95.55pt">
<b>Years Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2014</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,381</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,936</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,183</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,500</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
During the three and six months ended June 30, 2014, the
Company recognized $443 and $445, respectively, of interest expense
related to the Credit Facility.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company had no debt outstanding as of December 31,
2013.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Future minimum lease payments for its operating leases as of
June 30, 2014 are as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="91%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; WIDTH: 92.45pt">
<b>Year Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2014</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">106</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">229</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">235</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">139</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">709</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Accrued expenses consisted of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="76%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>June 30,<br />
2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,<br />
2013</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued payroll and related expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">465</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued research and development expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">592</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">616</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued professional fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">657</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">196</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued interest expense</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">266</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">65</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">39</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,045</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">900</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Estimated future principal payments due under the Term Loan A are
as follows:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="68%" align="center" border="0">
<tr>
<td width="89%"></td>
<td valign="bottom" width="6%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom" nowrap="nowrap">
<p style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman; BORDER-BOTTOM: #000000 1pt solid; WIDTH: 95.55pt">
<b>Years Ending December 31,</b></p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" colspan="2"> </td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2014</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap">$</td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2015</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,381</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2016</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">2,936</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
2017</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">3,183</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 3em; TEXT-INDENT: -1em">
Total</p>
</td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">7,500</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>3. Accrued Expenses</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Accrued expenses consisted of the following:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="76%"></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="8%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>June 30,<br />
2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>December 31,<br />
2013</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued payroll and related expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">465</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">49</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued research and development expenses</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">592</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">616</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued professional fees</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">657</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">196</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued interest expense</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">266</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">
—  </td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Accrued other</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">65</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">39</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top"></td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">2,045</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">900</td>
<td valign="bottom" nowrap="nowrap"> </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
</div>
1457931
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>5. Stockholders’ Equity</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
On June 5, 2014, the Company effected a 1-for-6.28 reverse
stock split of its issued and outstanding shares of common stock
and a proportional adjustment to the existing conversion ratios for
each series of redeemable convertible preferred stock. Accordingly,
all share and per share amounts for all periods presented in these
consolidated financial statements and notes thereto have been
adjusted retroactively, where applicable, to reflect this reverse
stock split and adjustment of the redeemable convertible preferred
stock conversion ratios.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On June 24, 2014 the Company completed an IPO of its common
stock, which resulted in the sale of 6,900,000 shares at a price of
$16.00 per share. The Company received net proceeds from the IPO of
approximately $102,672 based upon the price of $16.00 per share and
after deducting underwriting discounts and commissions paid by the
Company. The Company also incurred offering costs of $2,508 related
to the IPO.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Upon closing of the IPO, all outstanding shares of the
Company’s redeemable convertible preferred stock were
converted into 15,077,621 shares of common stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
As of June 30, 2014 the Company’s Certificate of
Incorporation, as amended and restated, authorizes the Company to
issue 5,000,000 shares of $0.001 par value preferred stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
As of June 30, 2014 and December 31, 2013, the
Company’s Certificate of Incorporation, as amended and
restated, authorizes the Company to issue 115,000,000 shares of
$0.001 par value common stock.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
During the six months ended June 30, 2013, the Company
reacquired and retired 6,635 shares of restricted common stock, at
cost, that were forfeited by a former employee.</p>
</div>
-10249000
0.02
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Deferred Offering Costs</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company capitalizes certain legal, accounting and other
third-party fees that are directly associated with in-process
equity financings as other assets 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 or as a reduction to the carrying value of preferred
stock issued. As of December 31, 2013, the Company had
recorded $743 of deferred offering costs, included in other assets
in the accompanying consolidated balance sheet in contemplation of
the Company’s IPO of its common stock which closed in June
2014. The Company has no deferred offering costs as of
June 30, 2014.</p>
</div>
P5Y
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Property and Equipment</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Property and equipment are stated at cost less accumulated
depreciation. Depreciation expense is recognized using the
straight-line method over a five-year estimated useful life for
both furniture and fixtures and office equipment. Expenditures for
repairs and maintenance of assets are charged to expense as
incurred. Upon retirement or sale, the cost and related accumulated
depreciation of assets disposed of are removed from the accounts
and any resulting gain or loss is included in loss from
operations.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Cash Equivalents</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company considers all short-term, highly liquid investments
with original maturities of ninety days or less at acquisition date
to be cash equivalents. Cash equivalents, which consist of money
market accounts, are stated at fair value.</p>
</div>
-7.51
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt">
<b>1. Nature of the Business and Basis of Presentation</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Zafgen, Inc. (the “Company”) was incorporated on
November 22, 2005 under the laws of the State of Delaware. The
Company is a biopharmaceutical company dedicated to significantly
improving the health and well-being of patients affected by
obesity. Beloranib, the Company’s lead product candidate, is
a novel, first-in-class, twice-weekly subcutaneous injection being
developed for the treatment of multiple indications, including
obesity and hyperphagia in Prader-Willi syndrome patients,
hypothalamic injury-associated obesity including
craniopharyngioma-associated obesity, and severe obesity in the
general population. Since its inception, the Company has devoted
substantially all of its efforts to research and development,
recruiting management, acquiring operating assets and raising
capital.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company was previously classified as a “development stage
entity” in the Accounting Standards Codification and, as
such, was required to present inception-to-date information in the
Company’s consolidated statements of operations and
comprehensive loss, redeemable convertible preferred stock and
stockholders’ deficit, and cash flows. In June 2014, the
Financial Accounting Standards Board (“FASB”) issued an
accounting standards update that eliminates the concept of a
development stage entity from U.S. generally accepted accounting
principles and removes the related incremental reporting
requirements. See Note 2 below for additional information on this
new standard. The Company elected to early adopt the new standard.
Accordingly, in contrast to the Company’s consolidated
financial statements and the notes thereto for the year ended
December 31, 2013 included in Company’s Registration
Statement on Form S-1 on file with the Securities and Exchange
Commission (“SEC”), the consolidated financial
statements contained in this report do not include
inception-to-date information.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company is subject to risks common to companies in the
biotechnology industry including, but not limited to, new
technological innovations, protection of proprietary technology,
dependence on key personnel, compliance with government regulations
and the need to obtain additional financing. Product candidates
currently under development will require significant additional
research and development efforts, including extensive pre-clinical
and clinical testing and regulatory approval, prior to
commercialization. These efforts require significant amounts of
additional capital, adequate personnel infrastructure, and
extensive compliance-reporting capabilities.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company’s product candidates are all in the development
stage. 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 substantial competition from pharmaceutical and
biotechnology companies. In addition, the Company is dependent
upon the services of its employees and consultants.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries Zafgen Securities
Corporation, Zafgen Australia Pty Limited, and Zafgen Animal
Health, LLC. All significant intercompany balances and transactions
have been eliminated.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally
accepted in the United States of America (“GAAP”).</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
On June 24, 2014 the Company completed an initial public
offering (“IPO”) of its common stock, which resulted in
the sale of 6,900,000 shares at a price of $16.00 per share. The
Company received net proceeds from the IPO of approximately
$102,672 based upon the price of $16.00 per share and after
deducting underwriting discounts and commissions paid by the
Company. The Company also incurred offering costs of $2,508 related
to the IPO.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>Unaudited Interim Financial Information</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The consolidated balance sheet at December 31, 2013 was
derived from audited financial statements, but does not include all
disclosures required by GAAP. The accompanying unaudited
consolidated financial statements as of June 30, 2014 and for
the three months and six months ended June 30, 2014 and 2013
have been prepared by the Company, pursuant to the rules and
regulations of the SEC for interim financial statements. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or
omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to make the
information presented not misleading. These consolidated financial
statements should be read in conjunction with the Company’s
audited consolidated financial statements and the notes thereto for
the year ended December 31, 2013 included in the
Company’s Registration Statement on Form S-1, File Number
333-195391 on file with the SEC. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments
necessary for a fair statement of the Company’s consolidated
financial position as of June 30, 2014 and consolidated
results of operations for the three and six months ended
June 30, 2014 and 2013 and consolidated cash flows for the six
months ended June 30, 2014 and 2013 have been made. The
results of operations for the three and six months ended
June 30, 2014 are not necessarily indicative of the results of
operations that may be expected for the year ending
December 31, 2014.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Research and Development Costs</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Research and development costs are expensed as incurred. Included
in research and development expenses are wages, stock-based
compensation and benefits of employees, third-party license fees
and other operational costs related to the Company’s research
and development activities, including facility-related expenses and
external costs of outside vendors engaged to conduct both
pre-clinical studies and clinical trials. The Company records
research and development expenses net of any research and
development tax incentives the Company is entitled to receive from
government authorities.</p>
</div>
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>8. Retirement Plan</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company has a Savings Incentive Match Plan for employees. Under
the terms of the plan, the Company contributes 2% of an
employee’s annual base salary, up to a maximum of the annual
Internal Revenue Service compensation limits, for all full-time
employees.</p>
<p style="margin-top:12pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
During the three months ended June 30, 2014 and 2013, the
Company recognized $13 and $7, respectively, of expense related to
its contributions to this plan. During the six months ended
June 30, 2014 and 2013, the Company recognized $26 and $14,
respectively, of expense related to its contributions to the
plan.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Concentration of Credit Risk and of Significant
Suppliers</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents. The Company has all cash and cash equivalents balances
at one accredited financial institution, in amounts that exceed
federally insured limits. The Company does not believe that it is
subject to unusual credit risk beyond the normal credit risk
associated with commercial banking relationships.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
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 it with 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.</p>
</div>
<div>
<p style="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">
<b>9. Australia Research and Development Tax Incentive</b></p>
<p style="margin-top:6pt; margin-bottom:0pt; text-indent:4%; font-size:10pt; font-family:Times New Roman">
The Company’s wholly owned subsidiary, Zafgen Australia Pty
Limited, which conducts core research and development activities on
behalf of the Company is eligible to receive a 45% refundable tax
incentive for qualified research and development activities. For
the three months ended June 30, 2014 and 2013, $47 and $418,
respectively, was recorded as a reduction to research and
development expenses in the consolidated statements of operations
and, for the six months ended June 30, 2014 and 2013, $73 and
$1,198, respectively, was recorded as a reduction to research and
development expenses in the consolidated statements of operations.
These amounts represented 45% of the Company’s qualified
research and development spending in Australia. The refund is
denominated in Australian dollars and, therefore, the receivable is
re-measured into U.S. dollars as of each reporting date. For the
three months ended June 30, 2014 and 2013, the Company
recorded in its consolidated statements of operations unrealized
foreign currency exchange (gains) losses of $(22) and $210,
respectively, related to this tax incentive receivable. For the six
months ended June 30, 2014 and 2013, the Company recorded in
its consolidated statements of operations unrealized foreign
currency exchange (gains) losses of $(64) and $205, respectively,
related to this tax incentive receivable. As of June 30, 2014
and December 31, 2013, the Company’s tax incentive
receivable from the Australian government was $1,222 and $1,617,
respectively.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Segment Data</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company manages its operations as a single segment for the
purposes of assessing performance and making operating decisions.
The Company’s singular focus is on advancing novel
therapeutics for patients suffering from severe obesity and
obesity-related disorders. No revenue has been generated since
inception, and all tangible assets are held in the United
States.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>2. Summary of Significant Accounting Policies</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
<b>Use of Estimates</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of expenses during
the reporting periods. Significant estimates and assumptions
reflected in these consolidated financial statements include, but
are not limited to, the accrual of research and development
expenses and the valuation of common stock prior to the IPO and
stock-based awards. Estimates are periodically reviewed in light of
changes in circumstances, facts and experience. Actual results
could differ from the Company’s estimates.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Cash Equivalents</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company considers all short-term, highly liquid investments
with original maturities of ninety days or less at acquisition date
to be cash equivalents. Cash equivalents, which consist of money
market accounts, are stated at fair value.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Concentration of Credit Risk and of Significant
Suppliers</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Financial instruments that potentially expose the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents. The Company has all cash and cash equivalents balances
at one accredited financial institution, in amounts that exceed
federally insured limits. The Company does not believe that it is
subject to unusual credit risk beyond the normal credit risk
associated with commercial banking relationships.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
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 it with 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.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Fair Value Measurements</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
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 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:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="2%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 1—Quoted prices in active
markets for identical assets or liabilities.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 12px">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="2%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">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.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 6pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="100%" border="0">
<tr>
<td width="5%"> </td>
<td valign="top" width="2%" align="left">•</td>
<td valign="top" width="1%"> </td>
<td valign="top" align="left">Level 3—Unobservable inputs
that are supported by little or no market activity and that are
significant to determining the fair value of the assets or
liabilities, including pricing models, discounted cash flow
methodologies and similar techniques.</td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company’s cash equivalents of $120,000 and $26,501 as of
June 30, 2014 and December 31, 2013, respectively, were
carried at fair value based on quoted prices in active markets, a
Level 1 measurement. The carrying values of accounts payable and
accrued expenses approximate their fair value due to the short-term
nature of these liabilities. The Company’s carrying value of
outstanding debt issued in the first quarter of 2014 approximates
fair value based on the recent execution date of the credit
facility agreement, and is considered a Level 2 measurement.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Deferred Offering Costs</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company capitalizes certain legal, accounting and other
third-party fees that are directly associated with in-process
equity financings as other assets 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 or as a reduction to the carrying value of preferred
stock issued. As of December 31, 2013, the Company had
recorded $743 of deferred offering costs, included in other assets
in the accompanying consolidated balance sheet in contemplation of
the Company’s IPO of its common stock which closed in June
2014. The Company has no deferred offering costs as of
June 30, 2014.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Property and Equipment</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Property and equipment are stated at cost less accumulated
depreciation. Depreciation expense is recognized using the
straight-line method over a five-year estimated useful life for
both furniture and fixtures and office equipment. Expenditures for
repairs and maintenance of assets are charged to expense as
incurred. Upon retirement or sale, the cost and related accumulated
depreciation of assets disposed of are removed from the accounts
and any resulting gain or loss is included in loss from
operations.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Impairment of Long-Lived Assets</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Long-lived assets consist of property and equipment. Long-lived
assets 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.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Research and Development Costs</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Research and development costs are expensed as incurred. Included
in research and development expenses are wages, stock-based
compensation and benefits of employees, third-party license fees
and other operational costs related to the Company’s research
and development activities, including facility-related expenses and
external costs of outside vendors engaged to conduct both
pre-clinical studies and clinical trials. The Company records
research and development expenses net of any research and
development tax incentives the Company is entitled to receive from
government authorities.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Research Contract Costs and Accruals</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company has entered into various research and development
contracts with research institutions and other 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, 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.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Patent Costs</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
All patent-related costs incurred in connection with filing and
prosecuting patent applications are recorded as general and
administrative expenses as incurred, as recoverability of such
expenditures is uncertain.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Accounting for Stock-Based Compensation</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company measures all stock options and other stock-based awards
granted to employees and directors at the fair value on the date of
the grant using the Black-Scholes option-pricing model. The fair
value of the awards is recognized as expense, net of estimated
forfeitures, over the requisite service period, which is generally
the vesting period of the respective award. The straight-line
method of expense recognition is applied to all awards with
service-only conditions.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
For stock-based awards granted to consultants and nonemployees,
compensation expense is recognized over the period during which
services are rendered by such consultants and nonemployees until
completed. At the end of each financial reporting period prior to
completion of the service, the fair value of these awards is
re-measured using the then-current fair value of the
Company’s common stock and updated assumption inputs in the
Black-Scholes option-pricing model.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company classifies stock-based compensation expense in its
consolidated statement of operations and comprehensive loss in the
same manner in which the award recipient’s payroll costs are
classified or in which the award recipients’ service payments
are classified.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company recognizes compensation expense for only the portion of
awards that are expected to vest. In developing a forfeiture rate
estimate, the Company has considered its historical experience to
estimate pre-vesting forfeitures for service-based awards. The
impact of a forfeiture rate adjustment will be recognized in full
in the period of adjustment, and if the actual forfeiture rate is
materially different from the Company’s estimate, the Company
may be required to record adjustments to stock-based compensation
expense in future periods.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Income Taxes</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
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 consolidated 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 recovered from future taxable
income 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 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
estimating the future taxable profits expected and considering
prudent and feasible tax planning strategies.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company accounts for uncertainty in income taxes recognized in
the consolidated 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
consolidated 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. The
provision for income taxes includes the effects of any resulting
tax reserves, or unrecognized tax benefits, that are considered
appropriate as well as the related net interest and penalties.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Segment Data</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company manages its operations as a single segment for the
purposes of assessing performance and making operating decisions.
The Company’s singular focus is on advancing novel
therapeutics for patients suffering from severe obesity and
obesity-related disorders. No revenue has been generated since
inception, and all tangible assets are held in the United
States.</p>
<p style="MARGIN-BOTTOM: 0px; FONT-SIZE: 1px; MARGIN-TOP: 18px">
 </p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>Comprehensive Loss</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
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. For the
three and six months ended June 30, 2014 and 2013, there was
no difference between net loss and comprehensive loss.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Net Income (Loss) Per Share</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Upon the closing of the Company’s IPO in June 2014, all of
the Company’s outstanding redeemable convertible preferred
shares were converted into shares of common stock. Prior to this
conversion, the Company followed the two-class method when
computing net income (loss) per share as the Company had issued
shares that meet the definition of participating securities. The
two-class method determines net income (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
shareholders 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. The Company’s redeemable convertible preferred
shares contractually entitled the holders of such shares to
participate in dividends, but did not contractually require the
holders of such shares to participate in losses of the Company.
Accordingly, the two-class method did not apply for periods in
which the Company reported a net loss or a net loss attributable to
common shareholders resulting from dividends or accretion related
to its redeemable convertible preferred shares.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Basic net income (loss) per share attributable to common
shareholders is computed by dividing the net income (loss)
attributable to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted net income
(loss) per share attributable to common shareholders is computed by
dividing the diluted net income (loss) attributable to common
shareholders by the weighted average number of common shares,
including potential dilutive common shares assuming the dilutive
effect of outstanding stock options and unvested restricted common
shares, as determined using the treasury stock method. For periods
in which the Company has reported net losses, diluted net loss per
common share attributable to common shareholders is the same as
basic net loss per common share attributable to common
shareholders, since dilutive common shares are not assumed to have
been issued if their effect is antidilutive.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company reported a net loss attributable to common stockholders
for the three and six months ended June 30, 2014 and 2013.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The following common stock equivalents outstanding as of
June 30, 2014 and 2013, were excluded from the computation of
diluted net loss per share for the three and six months ended
June 30, 2014 and 2013, because they had an anti-dilutive
impact:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="75%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>As of June 30,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Options to purchase common stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,839,895</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,283,264</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Redeemable convertible preferred stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">—</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78,372,931</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Total options and redeemable convertible preferred stock
exercisable or convertible into common stock</p>
</td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,839,895</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">79,656,195</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 3px double"> </p>
</td>
<td> </td>
</tr>
</table>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Recently Issued and Adopted Accounting Pronouncements</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
In June 2014, the FASB issued Accounting Standards Update
No. 2014-10, Development Stage Entities (Topic 915):
Elimination of Certain Financial Reporting Requirements, Including
an Amendment to Variable Interest Entities Guidance in Topic 810,
Consolidation. The amendments in this guidance remove all
incremental financial reporting requirements for development stage
entities. Among other changes, this guidance will no longer
require development stage entities to present inception-to-date
information about income statement line items, cash flows, and
equity transactions. This guidance is effective for public
companies in the first annual period beginning after
December 15, 2014. Early application is permitted for
interim and annual periods for which financial statements have not
yet been issued. The Company elected to apply this disclosure
guidance to its consolidated financial statements for the three
months ended June 30, 2014 and as a result, no longer
discloses inception-to-date information in its Consolidated
Statements of Operations and Comprehensive Loss, Cash Flows and
Stockholders’ Deficit and the related notes thereto.</p>
</div>
1839895000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Impairment of Long-Lived Assets</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Long-lived assets consist of property and equipment. Long-lived
assets 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.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company recorded stock-based compensation expense related to
stock options and restricted common stock in the following expense
categories of its statements of operations:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="92%" align="center" border="0">
<tr>
<td width="76%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Three Months Ended<br />
June 30,</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>Six Months Ended<br />
June 30,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Research and development</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">99</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">43</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">168</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">69</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
General and administrative</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">169</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">60</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">276</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">84</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top"></td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">268</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">103</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">444</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom">$</td>
<td valign="bottom" align="right">153</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt">
<b>Use of Estimates</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements, and the reported amounts of expenses during
the reporting periods. Significant estimates and assumptions
reflected in these consolidated financial statements include, but
are not limited to, the accrual of research and development
expenses and the valuation of common stock prior to the IPO and
stock-based awards. Estimates are periodically reviewed in light of
changes in circumstances, facts and experience. Actual results
could differ from the Company’s estimates.</p>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Net Income (Loss) Per Share</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
Upon the closing of the Company’s IPO in June 2014, all of
the Company’s outstanding redeemable convertible preferred
shares were converted into shares of common stock. Prior to this
conversion, the Company followed the two-class method when
computing net income (loss) per share as the Company had issued
shares that meet the definition of participating securities. The
two-class method determines net income (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
shareholders 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. The Company’s redeemable convertible preferred
shares contractually entitled the holders of such shares to
participate in dividends, but did not contractually require the
holders of such shares to participate in losses of the Company.
Accordingly, the two-class method did not apply for periods in
which the Company reported a net loss or a net loss attributable to
common shareholders resulting from dividends or accretion related
to its redeemable convertible preferred shares.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
Basic net income (loss) per share attributable to common
shareholders is computed by dividing the net income (loss)
attributable to common shareholders by the weighted average number
of common shares outstanding for the period. Diluted net income
(loss) per share attributable to common shareholders is computed by
dividing the diluted net income (loss) attributable to common
shareholders by the weighted average number of common shares,
including potential dilutive common shares assuming the dilutive
effect of outstanding stock options and unvested restricted common
shares, as determined using the treasury stock method. For periods
in which the Company has reported net losses, diluted net loss per
common share attributable to common shareholders is the same as
basic net loss per common share attributable to common
shareholders, since dilutive common shares are not assumed to have
been issued if their effect is antidilutive.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company reported a net loss attributable to common stockholders
for the three and six months ended June 30, 2014 and 2013.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The following common stock equivalents outstanding as of
June 30, 2014 and 2013, were excluded from the computation of
diluted net loss per share for the three and six months ended
June 30, 2014 and 2013, because they had an anti-dilutive
impact:</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 12pt; MARGIN-TOP: 0pt">
 </p>
<table style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; BORDER-COLLAPSE: collapse" cellspacing="0" cellpadding="0" width="76%" align="center" border="0">
<tr>
<td width="75%"></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
<td valign="bottom" width="3%"></td>
<td></td>
<td></td>
<td></td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="6" align="center"><b>As of June 30,</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 8pt; FONT-FAMILY: Times New Roman">
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2014</b></td>
<td valign="bottom"> </td>
<td valign="bottom">  </td>
<td style="BORDER-BOTTOM: #000000 1pt solid" valign="bottom" colspan="2" align="center"><b>2013</b></td>
<td valign="bottom"> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Options to purchase common stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,839,895</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,283,264</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Redeemable convertible preferred stock</p>
</td>
<td valign="bottom">  </td>
<td valign="bottom" nowrap="nowrap"> </td>
<td valign="bottom" nowrap="nowrap" align="right">—</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom">  </td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">78,372,931</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
<tr style="FONT-SIZE: 1px">
<td valign="bottom"></td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
<td valign="bottom">  </td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td valign="bottom">
<p style="BORDER-TOP: #000000 1px solid"> </p>
</td>
<td> </td>
</tr>
<tr style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman" bgcolor="#CCEEFF">
<td valign="top">
<p style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-LEFT: 1em; TEXT-INDENT: -1em">
Total options and redeemable convertible preferred stock
exercisable or convertible into common stock</p>
</td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">1,839,895</td>
<td valign="bottom" nowrap="nowrap">  </td>
<td valign="bottom"><font style="FONT-SIZE: 8pt">  </font></td>
<td valign="bottom"> </td>
<td valign="bottom" align="right">79,656,195</td>
<td valign="bottom" nowrap="nowrap">  </td>
</tr>
</table>
</div>
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Income Taxes</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
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 consolidated 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 recovered from future taxable
income 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 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
estimating the future taxable profits expected and considering
prudent and feasible tax planning strategies.</p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 12pt; TEXT-INDENT: 4%">
The Company accounts for uncertainty in income taxes recognized in
the consolidated 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
consolidated 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. The
provision for income taxes includes the effects of any resulting
tax reserves, or unrecognized tax benefits, that are considered
appropriate as well as the related net interest and penalties.</p>
</div>
93000
1143000
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49000
1000
-459000
57000
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103000
1418000
64000
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26000
2537000
19000
109033000
104331000
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92000
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445000
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791000
445000
97000
0
442000
102672000
7970000
6000
444000
52000
10507000
894000
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 0pt">
<b>Unaudited Interim Financial Information</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The consolidated balance sheet at December 31, 2013 was
derived from audited financial statements, but does not include all
disclosures required by GAAP. The accompanying unaudited
consolidated financial statements as of June 30, 2014 and for
the three months and six months ended June 30, 2014 and 2013
have been prepared by the Company, pursuant to the rules and
regulations of the SEC for interim financial statements. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or
omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures are adequate to make the
information presented not misleading. These consolidated financial
statements should be read in conjunction with the Company’s
audited consolidated financial statements and the notes thereto for
the year ended December 31, 2013 included in the
Company’s Registration Statement on Form S-1, File Number
333-195391 on file with the SEC. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments
necessary for a fair statement of the Company’s consolidated
financial position as of June 30, 2014 and consolidated
results of operations for the three and six months ended
June 30, 2014 and 2013 and consolidated cash flows for the six
months ended June 30, 2014 and 2013 have been made. The
results of operations for the three and six months ended
June 30, 2014 are not necessarily indicative of the results of
operations that may be expected for the year ending
December 31, 2014.</p>
</div>
0.5
0
Ninety days or less
0.45
<div>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 18pt">
<b>Research Contract Costs and Accruals</b></p>
<p style="MARGIN-BOTTOM: 0pt; FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; MARGIN-TOP: 6pt; TEXT-INDENT: 4%">
The Company has entered into various research and development
contracts with research institutions and other 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, 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.</p>
</div>
0.45
73000
On March 31, 2014, the Company received proceeds of $7,500 from the issuance of promissory notes under the Term Loan A. Of the additional $12,500 amount that was available, $7,500 (“Term Loan B”) is available to be drawn down until September 30, 2014 and $5,000 (“Term Loan C”) was available to be drawn down for a 30-day period upon the completion of the Company’s IPO that occurred in June 2014. The Company elected not to draw down Term Loan C and this amount is no longer available to the Company. All promissory notes issued under the Credit Facility are due on December 1, 2017 and are collateralized by substantially all of the Company’s personal property, other than its intellectual property.
2017-12-01
2014-03-31
0.081
225000
0.060
450000
19000
2014-07-31
2013-07-31
2017-07-31
P10Y
276000
168000
1839895000
1.00
0.04
64000
729391
-4.37
-161000
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-2975000
-161000
-3136000
7000
1014000
54000
1961000
103000
32000
2975000
418000
60000
43000
-210000
2178465
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326542
28000
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1000
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13000
1291000
43000
443000
443000
4695000
268000
27000
5986000
47000
19000
169000
99000
1592
324950
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