Ms. Griffith
Mr. King
Securities and Exchange Commission
September 20, 2019
Page 2
Statements of Operations, page F-4
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With regard to your response to comment 13, please: |
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tell us why you believe it is appropriate to weight the period of April 3, 2017 to
August 22, 2017 at 51% when there were no shares outstanding to share in the loss, |
RESPONSE:
The Company was incorporated and commenced operations on April 3, 2017. During the period between April 3, 2017 and August 22, 2017, the Company:
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advanced its business plan; |
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negotiated respective stock ownership and agreements with its founders; |
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evaluated possible transactions with potential collaboration and licensing partners and potential financing
sources; |
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analyzed the Company’s intellectual property landscape; and |
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developed aspects of its corporate governance structure that were formally adopted in August 2017.
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The Company incurred expense in connection with all of these early activities of approximately $125,000, or 50% of the
Company’s expenses for the full year.
The period between April 3, 2017 and August 22, 2017 represents approximately 51% of the total
days the Company was operational in 2017. During this period, the number of outstanding shares of the Company was zero. Shares of common stock were subsequently issued to the Company’s founders on August 22, 2017, which event was the initial
stock issuance of the Company.
In reaching the conclusion that such a weighting was appropriate, the Company considered that while ASC 260
does not address this specific fact pattern, ASC 260-10-20 defines weighted-average number of common shares outstanding as “The number of shares determined by relating the portion of time within a reporting period that common shares have been
outstanding to the total time in that period.” The expenses resulting in the net loss were incurred throughout the period from April 3, 2017 through December 31, 2017 and were ultimately paid for by the Company and thus borne by its
shareholders. As a result, since the expenses incurred during the period from April 3, 2017 through August 22, 2017 were included in the numerator for purposes of calculating net loss per share, the Company concluded that the inclusion of that
period in the weighted-average number of shares outstanding calculation was consistent and therefore appropriate. The Company also considered that, hypothetically, if one share had been issued on April 3, 2017, the loss per share would have been
calculated using the same approach that the Company has applied in computing net loss per share, further supporting its conclusion.
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reconcile the issuance of 4,183,250 common shares on August 22, 2017 shown in your response
letter dated September 6, 2019 to the 5,000,000 common shares shown as issued in 2017 on page F-5 of the draft registration statement and explain why the computation is not based on the
5,000,000 shares, |
RESPONSE: The Company issued 5,000,000 common shares to its founders as indicated on page F-5 of Amendment No. 2. However, 816,750 common shares issued to one of the founders of the Company were subject to a vesting provision at issuance. As disclosed in Note 2 to the financial statements for the
year ended December 31, 2018, unvested shares are excluded from outstanding common stock in the computation of weighted-average shares outstanding pursuant to the application of the two-class method
described in ASC 260-10-45-61A. Please refer to the reconciliation provided in the table below.
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provide us your computation of the 204,187 shares and 3,156 shares that vest in some quarters as shown in your
response letter dated September 6, 2019, and |
RESPONSE: The 816,750 unvested common shares
referred to above were initially subject to quarterly vesting of 204,187 shares each over a one-year period. However, vesting of shares to this founder were amended May 4, 2018. The number of shares vesting every quarter was equivalent to 204,187
shares and two vesting periods occurred prior to the May 4, 2018 modification.
The 3,156 shares represent the quarterly vesting of 50,506
unvested common shares issued in January 2018 that vest over four years. These shares are not part of the 5,000,000 shares issued in 2017 as shown on page F-5 of Amendment No. 2.
