540
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 November 8, 2022, the registrant had
Table of Contents
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PART I. |
2 |
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Item 1. |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Condensed Consolidated Statements of Stockholders' Equity (Deficit) |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
26 |
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Item 4. |
26 |
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PART II. |
27 |
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Item 1. |
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Item 1A. |
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Item 2. |
65 |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
66 |
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67 |
i
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
BETTER THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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September 30, |
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December 31, |
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2022 |
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2021 |
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ASSETS |
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(unaudited) |
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(audited) |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses |
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Other current assets |
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Total current assets |
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Capitalized software development costs, net |
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Property and equipment, net |
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Other long-term assets |
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Total Assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued payroll |
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Other accrued expenses |
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Current portion of long-term debt |
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— |
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Total current liabilities |
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Long-term debt, net of current portion and debt issuance costs |
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Total liabilities |
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(Note 9) |
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Stockholders' equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders' Equity |
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Total Liabilities and Stockholders’ Equity |
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$ |
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$ |
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The accompanying notes are an integral part of these Financial Statements.
2
BETTER THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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$ |
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$ |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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( |
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Interest expense, net |
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( |
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— |
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( |
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( |
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Change in fair value of SAFEs |
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— |
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( |
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— |
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( |
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Gain on loan forgiveness |
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— |
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— |
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— |
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Loss before provision (benefit) from income taxes |
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Provision (benefit) from income taxes |
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— |
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Net loss |
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( |
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( |
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Cumulative preferred dividends allocated to Series A Preferred Shareholders |
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— |
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( |
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— |
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Net loss attributable to common shareholders, basic and diluted |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss per share attributable to common shareholders, basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average shares used in computing net loss per share |
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The accompanying notes are an integral part of these Financial Statements.
3
BETTER THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share data)
(Unaudited)
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Common Stock |
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Additional Paid-in |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance as of December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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Issuance of common stock |
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— |
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— |
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Share based compensation |
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— |
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— |
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— |
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Balance as of March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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Issuance of common stock |
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— |
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— |
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Share based compensation |
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— |
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— |
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— |
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Balance as of June 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Issuance of common stock |
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— |
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— |
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Share based compensation |
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— |
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— |
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— |
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Balance as of September 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Additional Paid-in |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance as of December 31, 2020, as adjusted |
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$ |
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$ |
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$ |
( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Forfeiture of restricted stock |
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( |
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— |
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— |
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— |
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— |
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Share based compensation |
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— |
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— |
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— |
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Balance as of March 31, 2021, as adjusted |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Forfeiture of restricted stock |
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( |
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— |
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— |
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— |
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- |
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Share based compensation |
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— |
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— |
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— |
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Balance as of June 30, 2021, as adjusted |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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Share based compensation |
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— |
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— |
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— |
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Balance as of September 30, 2021, as adjusted |
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$ |
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$ |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these Financial Statements.
4
BETTER THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
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Nine months ended |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Change in fair value of SAFEs |
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— |
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Share based compensation expense |
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Deferred income taxes |
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— |
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( |
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Loss on write-off of property and equipment |
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— |
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Gain on loan forgiveness |
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— |
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( |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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( |
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Accounts payable |
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Accrued expenses and other liabilities |
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Net cash used in operating activities |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES |
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Purchase of property and equipment |
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Capitalized internal-use software costs |
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Net cash used in investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES |
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Proceeds from issuance of SAFE notes |
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— |
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Proceeds from exercise of common stock options |
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— |
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Proceeds from the issuance of shares under the employee stock purchase plan |
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— |
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Proceeds from the issuance of long-term debt |
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— |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Cash paid for interest |
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$ |
( |
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$ |
— |
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Cash paid for taxes |
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$ |
— |
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$ |
— |
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The accompanying notes are an integral part of these Financial Statements.
5
BETTER THERAPEUTICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Description of Business and Summary of Significant Accounting Policies
Description of Business
Better Therapeutics, Inc. (“we”, “us”, “the Company”, or “Better”), a Delaware corporation, is a prescription digital therapeutics company developing a novel form of cognitive behavioral therapy ("CBT") to address the root causes of cardiometabolic diseases. We are developing a proprietary platform of FDA-regulated, software-based, prescription digital therapeutics ("PDTs") for treating cardiometabolic conditions that share lifestyle behaviors as common root causes. Our clinically validated PDTs are intended to be prescribed by physicians and reimbursed by payers like traditional medicines. The CBT delivered by our PDTs is designed to enable changes in neural pathways of the brain so that lasting changes in behavior become possible. Addressing the underlying causes of these diseases has the potential to dramatically improve patient health and lower healthcare costs. Our clinical development candidates are intended to treat cardiometabolic diseases, including type 2 diabetes ("T2D"), hypertension, hyperlipidemia, non-alcoholic fatty liver disease ("NAFLD"), non-alcoholic steatohepatitis ("NASH") and chronic kidney disease ("CKD").
Our lead product candidate, BT-001, completed a first-in-class randomized, controlled clinical trial of a prescription digital therapeutic for the treatment of patients with T2D in July 2022. The trial met both its primary and secondary endpoints showing statistically significant and clinically meaningful durable decreases in blood sugar, when compared to a control group receiving standard of care. In addition, exploratory data revealed a host of cardiometabolic improvements as well as lower medication utilization compared to the control group. In October 2022, the U.S. Food and Drug Administration ("FDA") notified us that our de novo classification request seeking marketing authorization for BT-001, was accepted for substantive review, making it one step closer to potentially being the first validated, prescription solution to make CBT available to T2D patients 18 and older at scale, from their digital devices.
We initiated a real world evidence program to evaluate the long-term effectiveness and healthcare utilization changes associated with the use of BT-001 for the treatment of T2D. The randomized, controlled, multi-site studies are expected to enroll patients for a treatment period of at least 12 months. Change in A1c and healthcare resource utilization will be evaluated and compared to usual care. Interim study results are expected to be reported in 2023, once a sufficient number of patients have completed an incremental 180 days of treatment. The study is expected to generate evidence supporting payer coverage and reimbursement.
The Company completed enrollment in a first ever clinical study evaluating the feasibility of our digitally delivered CBT to reduce fatty liver and improve liver disease biomarkers as a potential treatment for NAFLD and NASH. The single arm interventional cohort study has completed enrollment of
We are a remote, "fully distributed" company, and do not have offices.
Basis of Presentation
The financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for fair presentation have been included. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022. Accordingly, these interim financial statements should be read in conjunction with the audited financial statements and accompanying notes for the years ended December 31, 2021 and 2020.
Reclassification
Certain prior year amounts have been reclassified for consistency with the current period presentation. An adjustment has been made to the Statement of Operations and Comprehensive Loss for the three and nine months ended September 30, 2021 to reclassify $
6
BETTER THERAPEUTICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Emerging Growth Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we do not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies until required by private company accounting standards.
Liquidity and Capital Resources
The Company is in the development stage and our activities have consisted principally of raising capital and performing research and development. Since inception we have incurred significant losses from operations. As of September 30, 2022, we had cash of $
We have incurred negative cash flows from operating activities and investing activities and significant losses from operations in the past. We expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our product candidates, ongoing internal research and development programs and general and administrative activities. At this time, we cannot reasonably estimate the nature, timing or aggregate amount of costs for our development, potential commercialization, internal research and development programs and general and administrative activities. However, in order to complete our planned product development, and to complete the process of obtaining regulatory authorization or clearance for our product candidates, as well as to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding in the future. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are unable to raise additional capital when desired, our business, results of operations, and financial condition would be adversely affected. Under our current operating plan, we believe we have sufficient capital to fund our operations through the first quarter of 2023. These factors raise substantial doubt regarding the Company's ability to continue as a going concern.
Significant Risks and Uncertainties
The Company is subject to those risks common in its industry and also those risks common to early-stage companies including, but not limited to, the possibility of not being able to successfully develop or market its products, technological obsolescence, competition, dependence on key personnel, the successful protection of its proprietary technologies, compliance with government regulations, and the possibility of not being able to obtain additional financing when needed.
At this time, there remains uncertainty relating to the ongoing COVID-19 pandemic and the impact of related responses. Any impact of COVID-19 on our business, results of operations and financial condition will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
7
BETTER THERAPEUTICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. The estimates and assumptions used in the accompanying financial statements are based upon management’s evaluation of the relevant facts and circumstances. Such estimates, judgments, and assumptions include estimated costs and useful lives for capitalized internal-use software, fair values of stock-based awards, valuation allowance for deferred tax assets and fair value of SAFEs. Actual results could be different from these estimates. To the extent there are material differences between these estimates, judgments, or assumptions and actual results, our financial statements will be affected.
Net Loss Per Share Attributable to Common Stockholders
Basic and diluted net loss per share attributable to common stock is presented in conformity with the two-class method required for participating securities. Under the two-class method, the net loss attributable to common stock is not allocated to the preferred stock as the holders of our convertible preferred stock did not have a contractual obligation to share in our losses. Under the two-class method, net loss is attributed to common stock and participating securities based on their participation rights. Basic net loss per share attributable to common stock is computed by dividing the net loss attributable to common stock by the weighted-average number of shares of common stock outstanding during the period. Cumulative dividends attributable to participating securities are subtracted from net loss in determining net loss attributable to common stockholders. As we have reported net losses for all periods presented, all potentially dilutive securities are anti-dilutive and, accordingly, basic net loss per share equals diluted net loss per share.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which modifies lease accounting for lessees to increase transparency and comparability by recording lease assets and liabilities for operating leases and disclosing key information about leasing arrangements. In July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, and ASU No. 2018-11, Leases (Topic 842), Targeted Improvements, which affect certain aspects of the previously issued guidance. In December 2018, the FASB issued ASU No. 2018-20, Narrow-Scope Improvements for Lessor, Leases (Topic 842), which provides guidance on sales tax and other taxes collected from lessees. In December 2019, the FASB issued ASU No. 2019-01, Codification Improvements to Topic 842, Leases, which affect certain aspects of the previously issued guidance. Amendments include an additional transition method that allows entities to apply the new standard on the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings, as well as a new practical expedient for lessors.
We
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Note 2. Business Combination
On April 6, 2021, the Company entered into a merger agreement with Mountain Crest Acquisition Corp. II, ("MCAD"), a special purpose acquisition company. In connection with the merger agreement, MCAD entered into subscription agreements (the “Subscription Agreements”) dated as of
8
BETTER THERAPEUTICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On October 28, 2021, pursuant to the terms of the merger agreement, MCAD merged with and into former Better Therapeutics, Inc, ("Legacy BTX"), (the "Business Combination"), with Legacy BTX surviving as a wholly owned subsidiary of MCAD with the new name Better Therapeutics, Inc. We raised $
We accounted for the Business Combination as a reverse recapitalization, which is the equivalent of Legacy BTX issuing stock for the net assets of MCAD, accompanied by a recapitalization, with MCAD treated as the acquired company for accounting purposes. The determination of MCAD as the “acquired” company for accounting purposes was primarily based on the fact that subsequent to the Business Combination, Legacy BTX has a majority of the voting power of the combined company, Legacy BTX will comprise all of the ongoing operations of the combined entity, a majority of the governing body of the combined company and Legacy BTXs' senior management will comprise all of the senior management of the combined company. The net assets of MCAD were stated at historical cost with no goodwill or other intangible assets recorded. Reported results from operations included herein prior to the Business Combination are those of Legacy BTX. The shares and corresponding capital amounts and loss per share related to Legacy BTXs' outstanding redeemable convertible preferred stock, redeemable convertible common stock and common stock prior to the Business Combination have been retroactively restated to reflect the exchange ratio established in the Business Combination of
In connection with the Business Combination, we incurred underwriting fees and other costs considered direct and incremental to the transaction totaling $
PIPE Financing (Private Placement)
Concurrent with the execution of the Business Combination Agreement, we entered into subscription agreement with MCAD. Pursuant to the Subscription Agreements, each PIPE Investor subscribed for and purchased, and MCAD issued and sold to such investors an aggregate of
We received $
Note 3. Debt
On May 9, 2020 (the “Origination Date”), the Company received $
9
BETTER THERAPEUTICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
On August 18, 2021, we entered into a $
Note 4. SAFE Agreements
Beginning in 2020, the Company issued Simple Agreements for Future Equity ("SAFEs") to fund its operations. The SAFEs included a provision allowing for cash redemption upon the occurrence of a change of control, the occurrence of which is outside the control of the Company. Therefore, the SAFEs were classified as marked-to-market liabilities, pursuant to ASC 480, in other long-term liabilities.
The SAFEs were marked to fair value as of September 30, 2021 resulting in a change in fair value reported as a loss of $
On October 28, 2021 in connection with the Business Combination all SAFEs were converted to common stock.
Note 5. Fair Value Measurements
The Company measures and reports certain financial instruments as assets and liabilities at fair value on a recurring basis.
The Company’s SAFE agreements were historically recorded at fair value in our balance sheet. The fair value of the Company’s SAFE agreements was based on significant inputs not observable in the market which cause the instrument to be classified as Level 3 measurements within the fair value hierarchy. We measured financial assets and liabilities at fair value at each reporting period using a fair value hierarchy that required the use of observable inputs and minimized the use of unobservable inputs. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company assessed these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates were obtained. Changes in the fair value of the SAFE agreements were recognized within the statement of operations and comprehensive loss. The fair value of the Company’s SAFE agreements was