pand-10q_20200630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2020

OR

 

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

For the transition period from _________________ to _________________

 

Commission File Number: 001-39381

 

PANDION THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

83-3015614

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

134 Coolidge Avenue

Watertown, Massachusetts

02472

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 393-5925

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

PAND

 

Nasdaq Global Select Market

 

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

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

As of August 31, 2020, the registrant had 29,519,902 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “continue” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

 

our ongoing Phase 1a clinical trial of PT101;

 

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

 

our plans to develop our current and future product candidates;

 

the utility of our TALON platform in identifying and discovering product candidates;

 

the timing of and our ability to submit applications for and obtain and maintain regulatory approvals for our current and future product candidates;

 

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash and cash equivalents;

 

the potential advantages of our current and future product candidates;

 

the rate and degree of market acceptance and clinical utility of our products, if approved;

 

our estimates regarding the potential market opportunity for our current and future product candidates;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position;

 

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

 

our estimates regarding expenses, future revenue, timing of any future revenue, capital requirements and needs for additional financing;

 

the impact of government laws and regulations;

 

our competitive position;

 

developments relating to our competitors and our industry;

 

our ability to maintain and establish collaborations or obtain additional funding;

 

the potential direct or indirect impact of the COVID-19 pandemic on our business, operations, and the markets and communities in which we and our partners, collaborators, vendors and customers operate; and  

 

our expectations regarding the time during which we will be an emerging growth company under the JOBS Act.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.

i


You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to our other filings with the SEC completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

BASIS OF PRESENTATION

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, references to “we,” “us,” “our,” the “Company,” “Pandion” and similar references refer: (1) following the consummation of our conversion to a Delaware corporation on July 16, 2020 in connection with our initial public offering, to Pandion Therapeutics, Inc., and (2) prior to the completion of such conversion, to Pandion Therapeutics Holdco LLC. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Corporate Conversion” in this Quarterly Report on Form 10-Q for further information.

ii


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Shares and Members’ Deficit

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

31

PART II.

OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

79

Item 6.

Exhibits

81

Signatures

82

 

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PANDION THERAPEUTICS HOLDCO LLC

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

105,725

 

 

$

15,970

 

Accounts receivable

 

 

1,318

 

 

 

1,035

 

Prepaid expenses and other current assets

 

 

3,377

 

 

 

2,960

 

Total current assets

 

 

110,420

 

 

 

19,965

 

Property and equipment, net

 

 

2,592

 

 

 

1,054

 

Restricted cash

 

 

502

 

 

 

 

Total assets

 

$

113,514

 

 

$

21,019

 

Liabilities and members’ deficit

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,742

 

 

$

1,207

 

Accrued expenses and other current liabilities

 

 

2,260

 

 

 

1,455

 

SAFE agreement

 

 

6,000

 

 

 

 

Current portion of deferred revenue

 

 

4,748

 

 

 

4,365

 

Total current liabilities

 

 

16,750

 

 

 

7,027

 

Deferred revenue, net of current portion

 

 

4,582

 

 

 

6,053

 

Long-term debt, net of issuance costs

 

 

1,815

 

 

 

3,676

 

Other long-term liabilities

 

 

253

 

 

 

85

 

Total liabilities

 

 

23,400

 

 

 

16,841

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Redeemable convertible preferred shares, no par value; 91,534,629 and

   51,217,321 shares authorized at June 30, 2020 and December 31, 2019,

   respectively; 91,441,336 and 35,524,212 shares issued and outstanding at

   June 30, 2020 and December 31, 2019, respectively; liquidation value of

   $152,596 at June 30, 2020

 

 

152,596

 

 

 

46,967

 

Members’ deficit

 

 

 

 

 

 

 

 

Common shares, no par value; 100,000,000 and 62,000,000 shares authorized

   at June 30, 2020 and December 31, 2019, respectively; 1,237,639 shares issued

   at June 30, 2020 and December 31, 2019; 1,195,794 and 1,110,767 shares

   outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

 

 

 

 

Incentive shares, no par value; 13,182,678 and 7,717,678 shares authorized at June

   30, 2020 and December 31, 2019, respectively; 2,364,595 and 946,751 shares issued

   and outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

382

 

 

 

172

 

Accumulated deficit

 

 

(62,864

)

 

 

(42,961

)

Total members’ deficit

 

 

(62,482

)

 

 

(42,789

)

Total liabilities, redeemable convertible preferred shares and members’ deficit

 

$

113,514

 

 

$

21,019

 

 

See accompanying notes to the condensed consolidated financial statements.

1


 

PANDION THERAPEUTICS HOLDCO LLC

Condensed Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)  

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

1,955

 

 

$

 

 

$

3,956

 

 

$

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,860

 

 

 

4,934

 

 

 

15,802

 

 

 

10,019

 

General and administrative

 

 

2,297

 

 

 

840

 

 

 

3,863

 

 

 

1,614

 

Total operating expenses

 

 

11,157

 

 

 

5,774

 

 

 

19,665

 

 

 

11,633

 

Loss from operations

 

 

(9,202

)

 

 

(5,774

)

 

 

(15,709

)

 

 

(11,633

)

Interest income

 

 

4

 

 

 

89

 

 

 

45

 

 

 

143

 

Interest expense

 

 

(39

)

 

 

 

 

 

(82

)

 

 

 

Fair value adjustments to convertible note

 

 

 

 

 

 

 

 

89

 

 

 

 

Net loss

 

 

(9,237

)

 

 

(5,685

)

 

 

(15,657

)

 

 

(11,490

)

Change in redemption value of redeemable convertible

   preferred shares

 

 

(2,712

)

 

 

(982

)

 

 

(4,245

)

 

 

(1,936

)

Net loss attributable to common shareholders

 

 

(11,949

)

 

 

(6,667

)

 

 

(19,902

)

 

 

(13,426

)

Net loss per common share, basic and diluted

 

$

(10.15

)

 

$

(6.30

)

 

$

(17.23

)

 

$

(13.19

)

Weighted-average number of shares outstanding used in computing

   net loss per common share, basic and diluted

 

 

1,177,479

 

 

 

1,057,617

 

 

 

1,154,856

 

 

 

1,018,254

 

 

See accompanying notes to the condensed consolidated financial statements.

 

2


 

PANDION THERAPEUTICS HOLDCO LLC

Condensed Consolidated Statements of Redeemable Convertible Preferred Shares and Members’ Deficit (Unaudited)

(in thousands, except share amounts)

 

 

 

Redeemable

Convertible

 

 

 

Redeemable

Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

 

Preferred Shares

 

 

 

Common Stock

 

 

Common Shares

 

 

Incentive Shares

 

 

Paid-In

 

 

Accumulated

 

 

Members’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance, January 1, 2019

 

 

19,831,103

 

 

$

24,977

 

 

 

 

 

 

$

 

 

 

 

940,713

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

52

 

 

$

(17,109

)

 

$

(17,057

)

Reorganization

 

 

(19,831,103

)

 

 

(24,977

)

 

 

 

19,831,103

 

 

 

24,977

 

 

 

 

(940,713

)

 

 

 

 

 

940,713

 

 

 

 

 

 

 

 

 

52

 

 

 

(52

)

 

 

 

 

 

 

Issuance of Series A redeemable

   convertible preferred shares,

   net of issuance costs of $34

 

 

 

 

 

 

 

 

 

15,693,109

 

 

 

17,966

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of redeemable convertible

   preferred shares to redemption

   value

 

 

 

 

 

 

 

 

 

 

 

 

954

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(954

)

 

 

(954

)

Issuance of incentive shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

230,968

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Vesting of restricted common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,805

)

 

 

(5,805

)

Balance, March 31, 2019

 

 

 

 

$

 

 

 

 

35,524,212

 

 

$

43,897

 

 

 

 

 

 

$

 

 

 

1,019,996

 

 

$

 

 

 

230,968

 

 

$

61

 

 

$

 

 

$

(23,868

)

 

$

(23,807

)

Accretion of redeemable convertible

   preferred shares to redemption

   value

 

 

 

 

 

 

 

 

 

 

 

 

982

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(982

)

 

 

(982

)

Issuance of incentive shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

66,532

 

 

 

11

 

 

 

 

 

 

 

 

 

11

 

Vesting of restricted common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

79,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,685

)

 

 

(5,685

)

Balance, June 30, 2019

 

 

 

 

$

 

 

 

 

35,524,212

 

 

$

44,879

 

 

 

 

 

 

$

 

 

 

1,099,279

 

 

$

 

 

 

297,500

 

 

$

72

 

 

$

 

 

$

(30,535

)

 

$

(30,463

)

 

3


 

PANDION THERAPEUTICS HOLDCO LLC

Condensed Consolidated Statements of Redeemable Convertible Preferred Shares and Members’ Deficit (Unaudited)

(in thousands, except share amounts)

 

 

 

Redeemable

Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Preferred Shares

 

 

 

Common Shares

 

 

Incentive Shares

 

 

Accumulated

 

 

Members’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Deficit

 

Balance, January 1, 2020

 

 

35,524,212

 

 

$

46,967

 

 

 

 

1,110,767

 

 

$

 

 

 

946,751

 

 

$

172

 

 

$

(42,961

)

 

$

(42,789

)

Issuance of Series A redeemable

   convertible preferred shares,

   net of issuance costs of $20

 

 

15,693,109

 

 

 

17,980

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series A Prime

   redeemable convertible

   preferred shares on conversion

   of JDRF note

 

 

948,225

 

 

 

1,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Series B redeemable

   convertible preferred shares,

   net of issuance costs of $271

 

 

19,158,922

 

 

 

39,728

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of redeemable convertible

   preferred shares to redemption

   value

 

 

 

 

 

1,534

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,534

)

 

 

(1,534

)

Issuance of incentive shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60

 

 

 

 

 

 

60

 

Vesting of restricted common shares

 

 

 

 

 

 

 

 

 

54,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,420

)

 

 

(6,420

)

Balance, March 31, 2020

 

 

71,324,468

 

 

$

108,020

 

 

 

 

1,165,537

 

 

$

 

 

 

946,751

 

 

$

232

 

 

$

(50,915

)

 

$

(50,683

)

Issuance of Series B redeemable

   convertible preferred shares,

   net of issuance costs of $136

 

 

20,116,868

 

 

 

41,864

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accretion of redeemable convertible

   preferred shares to redemption

   value

 

 

 

 

 

2,712

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,712

)

 

 

(2,712

)

Issuance of incentive shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,417,844

 

 

 

150

 

 

 

 

 

 

150

 

Vesting of restricted common shares

 

 

 

 

 

 

 

 

 

30,257

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,237

)

 

 

(9,237

)

Balance, June 30, 2020

 

 

91,441,336

 

 

$

152,596

 

 

 

 

1,195,794

 

 

$

 

 

 

2,364,595

 

 

$

382

 

 

$

(62,864

)

 

$

(62,482

)

 

See accompanying notes to the condensed consolidated financial statements.

 

4


 

PANDION THERAPEUTICS HOLDCO LLC

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(15,657

)

 

$

(11,490

)

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

 

 

 

 

 

 

 

 

Depreciation expense

 

 

171

 

 

 

112

 

Equity-based compensation expense

 

 

210

 

 

 

20

 

Fair value adjustments on convertible notes

 

 

(89

)

 

 

 

Noncash interest expense

 

 

39

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(283

)

 

 

 

Prepaid expenses and other current assets

 

 

132

 

 

 

518

 

Accounts payable

 

 

1,630

 

 

 

103

 

Accrued expenses and other current liabilities

 

 

847

 

 

 

(886

)

Deferred revenue

 

 

(1,088

)

 

 

 

Net cash used in operating activities

 

 

(14,088

)

 

 

(11,623

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,228

)

 

 

(437

)

Net cash used in investing activities

 

 

(1,228

)

 

 

(437

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from simple agreement for future equity

 

 

6,000

 

 

 

 

Proceeds from issuance of Series A redeemable convertible preferred shares

 

 

18,000

 

 

 

18,000

 

Series A redeemable convertible preferred share issuance costs

 

 

(20

)

 

 

(33

)

Proceeds from issuance of Series B redeemable convertible preferred shares

 

 

82,000

 

 

 

 

Series B redeemable convertible preferred share issuance costs

 

 

(407

)

 

 

 

Net cash provided by financing activities

 

 

105,573

 

 

 

17,967

 

Net increase in cash and cash equivalents

 

 

90,257

 

 

 

5,907

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

15,970

 

 

 

10,172

 

Cash, cash equivalents and restricted cash, end of period

 

$

106,227

 

 

$

16,079

 

Components of cash, cash equivalents, and restricted cash

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

105,725

 

 

 

16,079

 

Restricted cash

 

 

502

 

 

 

 

Total cash, cash equivalents, and restricted cash

 

$

106,227

 

 

$

16,079

 

Supplemental cash flow disclosures:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

43

 

 

$

 

Supplemental disclosures of noncash activities:

 

 

 

 

 

 

 

 

Exchange of JDRF note and accrued interest for Series A redeemable

   convertible preferred shares

 

$

1,811

 

 

$

 

Deferred offering costs not yet paid

 

$

549

 

 

$

 

Purchase of property and equipment included in accounts payable

 

$

481

 

 

$

 

 

See accompanying notes to the condensed consolidated financial statements.


5


PANDION THERAPEUTICS HOLDCO LLC

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

1.

description of business, organization and liquidity

Business

Pandion Therapeutics Holdco LLC is a clinical stage biopharmaceutical company developing novel therapeutics designed to address the unmet needs of patients suffering from autoimmune diseases. We have combined a network-based conceptualization of the immune system with expertise in advanced protein engineering to develop our TALON (Therapeutic Autoimmune reguLatOry proteiN) drug design and discovery platform.

As used in these financial statements, unless the context otherwise requires, references to the “company”, “we,” “us,” and “our” refer to Pandion Therapeutics Holdco LLC, its wholly owned subsidiaries Pandion Therapeutics, Inc. and Pandion Program Co 1, Inc., and Pandion Securities Corp., a subsidiary of Pandion Therapeutics, Inc.

Pandion Therapeutics, Inc. was incorporated on September 19, 2016 as a Delaware corporation. We began operations in January 2017. Our principal offices are located in Watertown, Massachusetts. On December 31, 2018, Pandion Therapeutics Holdco LLC was formed in the state of Delaware. On January 1, 2019, we completed a series of transactions in which Pandion Therapeutics, Inc. became a direct wholly owned subsidiary of Pandion Therapeutics Holdco LLC and all outstanding equity securities of Pandion Therapeutics, Inc. were canceled and converted on a one-for-one basis into equity securities of Pandion Therapeutics Holdco LLC, which we refer to as the Restructuring. In accordance with the terms of the LLC Operating Agreement, and on the effective date of the Restructuring;

 

each share of Pandion Therapeutics, Inc. common stock issued and outstanding immediately prior to the effective date of the Restructuring was converted into one common share of Pandion Therapeutics Holdco LLC;

 

each share of Pandion Therapeutics, Inc. Series A redeemable convertible preferred stock issued and outstanding immediately prior to the effective date of the Restructuring was converted into one Series A redeemable convertible preferred share of Pandion Therapeutics Holdco LLC;

 

all outstanding stock options to purchase shares of Pandion Therapeutics, Inc. common stock were cancelled and replaced with the same number of incentive shares in Pandion Therapeutics Holdco LLC;

 

each warrant issued by Pandion Therapeutics, Inc. that was outstanding immediately prior to the effective date of the Restructuring was cancelled and an equivalent number of incentive shares of Pandion Therapeutics Holdco LLC were issued; and

 

Pandion Therapeutics, Inc. became a wholly owned subsidiary of Pandion Therapeutics Holdco LLC.

We determined that the Restructuring lacked economic substance and was therefore accounted for in a manner consistent with a common control transaction. Similarly, as there was no change in fair value between shareholders, individually or as a class, we determined that the exchange of shares occurring in the Restructuring should be accounted for as a modification of the equity securities and presented as a reclassification of the components of equity.

Initial Public Offering and Corporate Conversion

As described in Note 14, in July 2020 we completed our initial public offering. In contemplation of the initial public offering, on July 10, 2020, our wholly owned subsidiary Pandion Therapeutics, Inc. changed its name to Pandion Operations, Inc. and we subsequently engaged in the following transactions, which we refer to collectively as the Conversion:

 

we converted from a Delaware limited liability company to a Delaware corporation by filing a certificate of conversion with the Secretary of State of the State of Delaware; and

 

we changed our name from Pandion Therapeutics Holdco LLC to Pandion Therapeutics, Inc.

As part of the Conversion:

 

holders of Series A preferred shares of Pandion Therapeutics Holdco LLC received one share of Series A preferred stock of Pandion Therapeutics, Inc. for each Series A preferred share held immediately prior to the Conversion;

 

holders of Series A prime preferred shares of Pandion Therapeutics Holdco LLC received one share of Series A prime preferred stock of Pandion Therapeutics, Inc. for each Series A prime preferred share held immediately prior to the Conversion;

6


PANDION THERAPEUTICS HOLDCO LLC

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

 

holders of Series B preferred shares of Pandion Therapeutics Holdco LLC received one share of Series B preferred stock of Pandion Therapeutics, Inc. for each Series B preferred share held immediately prior to the Conversion;

 

holders of common shares of Pandion Therapeutics Holdco LLC received one share of common stock of Pandion Therapeutics, Inc. for each common share held immediately prior to the Conversion;

 

holders of outstanding incentive shares in Pandion Therapeutics Holdco LLC, all of which were intended to constitute profits interests for U.S. federal income tax purposes, received a number of shares of common stock of Pandion Therapeutics, Inc. based upon a conversion price determined by our board of directors immediately prior to the Conversion. Of the shares of common stock issued in respect of incentive shares, 1,368,515 continue to be subject to vesting in accordance with the vesting schedule applicable to such incentive shares. Based on the determined fair value of $18.00 per common share, the incentive shares converted into an aggregate of 1,504,586 shares of our common stock, and we granted options to purchase an aggregate of 859,147 shares of our common stock. 

 

Following the Conversion, Pandion Therapeutics, Inc. held all property and assets of Pandion Therapeutics Holdco LLC and assumed all of the debts and obligations of Pandion Therapeutics Holdco LLC. On the effective date of the Conversion, the members of the board of directors of Pandion Therapeutics Holdco LLC became the members of the board of directors of Pandion Therapeutics, Inc. and the officers of Pandion Therapeutics Holdco LLC became the officers of Pandion Therapeutics, Inc.

Liquidity

Since inception, we have devoted substantially all our efforts to business planning, research and development, recruiting management and technical staff, and raising capital and have financed our operations primarily through the issuance of redeemable convertible preferred shares, debt financings, a simple agreement for future equity, or SAFE, and a collaboration.

We are subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if our product development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

We have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued. As of June 30, 2020, we had an accumulated deficit of $62.9 million. We have incurred losses and negative cash flows from operations since inception, including net losses of $15.7 million and $21.9 million for the six months ended June 30, 2020 and for the year ended December 31, 2019, respe