item 14 principal accountant fees services information required item incorporated reference information caption “ratification appointment independent registered public accounting firm” contained proxy statement part iv item 15 item 7 management’s discussion analysis financial condition results operations following discussion analysis read conjunction audited consolidated financial statements related notes appearing elsewhere report discussion may contain forwardlooking statements based upon current expectations involve risks uncertainties actual results may differ materially anticipated forwardlooking statements result various factors including set forth section titled “risk factors” set forth report historical results necessarily indicative future results unless context otherwise requires references “management’s discussion analysis financial condition results operations” “vincerx” “the company” “we” “us” “our” refer business operations vincerx prior following closing business combination december 23 2020 lsac consummated business combination legacy vincera pharma pursuant merger agreement business combination accounted reverse recapitalization accordance us generally accepted accounting principles gaap method accounting lsac treated “acquired” company financial reporting purposes except otherwise provided herein financial statement presentation includes 1 results legacy vincera pharma accounting predecessor periods prior completion business combination 2 results company periods completion business combination overview clinicalstage biopharmaceutical company focused leveraging extensive development oncology expertise advance new therapies intended address unmet medical needs treatment cancer current pipeline entirely derived bayer license agreement pursuant granted exclusive royaltybearing worldwide license certain bayer patents knowhow develop use manufacture commercialize sublicense distribute clinicalstage followon small molecule drug program ii preclinical stage bioconjugationnextgeneration antibodydrug conjugate platform intend use product candidates treat various cancers patientspecific targeted approach believe product candidates differentiated current programs targeting similar cancer biology approved may improve clinical outcomes patients cancer despite several decades advances targeted therapies cancer continues second leading cause death united states population per national center health statistics cancer single disease rather constellation maladies requiring unique approach vanquish vision address unmet medical needs patients cancer diverse pipeline targeted medicines small molecule drug program includes vip152 formerly known bay 1251152 highly selective clinicalstage ptefbcdk9 inhibitor vip152 may deliver valuegenerating data second half 2021 adc platform includes vip943 formerly known bay943 vip924 formerly known bay924 nextgeneration adc compounds addressing known novel oncology targets believe could deliver greater safety efficacy profile current adc compounds bioconjugation program also includes vip236 smdc solid tumors addition lead products acquired rights additional product candidates still preclinical stage eg vip217 oral ptefbcdk9 inhibitor license agreement bayer following closing business combination paid bayer 50 million upfront license fee bayer license agreement addition responsible significant development commercial milestone payments bayer well ongoing royalties commercial sales see “businessbayer license agreement” discussion “liquidity capital resources” basis presentation currently conduct business one operating segment prerevenue company commercial operations activities date limited conducted primarily united states historical results reported gaap us dollars components results operations research development stage company historical results may indicative future results reasons may difficult anticipate accordingly drivers future financial results well components results may comparable historical results operations revenue date recognized revenue sources including product sales expect generate revenue sale products foreseeable future development efforts product candidates successful result regulatory approval license agreements third parties may generate revenue future product sales however assurance generate revenue research development expense research development expenses future periods may consist preclinical development product candidates discovery efforts including conducting preclinical studies manufacturing development efforts preparing conducting clinical trials activities related regulatory filings product candidates research development expenses recognized incurred payments made prior receipt goods services used research development capitalized goods services received costs incurred obtaining technology licenses asset acquisitions charged research development expense licensed technology reached technological feasibility alternative future use research development expenses include could include • employeerelated expenses including salaries bonuses benefits stockbased compensation related costs employees involved research development efforts • external research development expenses incurred agreements clinical research organizations investigative sites consultants conduct preclinical studies • costs related manufacturing material preclinical studies clinical trials including fees paid contract manufacturing organizations • laboratory supplies research materials • costs related compliance regulatory requirements • facilities depreciation allocated expenses include direct allocated expenses rent maintenance facilities insurance equipment research development activities central business model currently intend track research development expenses programbyprogram basis costs deployed across multiple projects development product candidates later stages clinical development generally higher development costs earlier stages clinical development primarily due increased size duration laterstage clinical trials plan substantially increase research development expenses foreseeable future develop product candidates manufacturing processes conduct discovery research activities preclinical clinical programs cannot determine certainty timing initiation duration completion costs current future preclinical studies clinical trials product candidates due inherently unpredictable nature preclinical clinical development clinical preclinical development timelines probability success development costs differ materially expectations anticipate make determinations product candidates pursue much funding direct product candidate ongoing basis response results ongoing future preclinical studies clinical trials regulatory developments ongoing assessments product candidate’s commercial potential need raise substantial additional capital future clinical development costs expected increase significantly commence continue expand clinical trials future expenses may vary significantly period based factors • expenses incurred conduct preclinical studies required advance product candidates clinical trials • per patient clinical trial costs including based number doses patients receive • number patients enroll clinical trial • number clinical trials required approval • number sites included clinical trials • countries clinical trials conducted • length time required enroll eligible patients • dropout discontinuation rates patients • potential additional safety monitoring requested regulatory agencies • duration patient participation clinical trials followup • phase development product candidate • third party contractors failing comply regulatory requirements meet contractual obligations us timely manner • cost insurance including product liability insurance connection clinical trials • regulators institutional review boards requiring investigators suspend terminate clinical development various reasons including noncompliance regulatory requirements finding participants exposed unacceptable health risks • efficacy safety profile product candidates general administrative expenses general administrative expenses consist principally salaries related costs personnel executive administrative functions including stockbased compensation travel expenses recruiting expenses general administrative expenses include professional fees legal accounting taxrelated services insurance costs anticipate general administrative expenses increase future increase headcount support expanded operations infrastructure well initiation continuation expansion preclinical studies clinical trials product candidates also anticipate general administrative expenses increase result payments accounting audit legal consulting services well costs associated maintaining compliance nasdaq listing rules sec requirements director officer liability insurance investor public relations activities expenses associated operating public company results operations comparison year ended december 31 2020 period march 1 2019 date inception december 31 following table sets forth historical operating results periods indicated amounts thousands research development research development expenses increased 21 million year ended december 31 2020 compared period march 1 2019 december 31 2019 increase primarily related increase 20 million stockbased compensation grant stock options purchase 473000 shares common stock grant date fair value approximately 56 million recognized research development expense research developmentlicense acquired year ended december 31 2020 incurred 50 million research development cost related bayer license agreement general administrative general administrative expenses increased approximately 36 million year ended december 31 2020 compared period march 1 2019 december 31 2019 increase primarily related increase 23 million stockbased compensation grant stock options purchase approximately 575000 shares common stock grant date fair value approximately 68 million recognized general administrative expense increase also related incurrence 11 million legal professional expenses primarily related bayer license agreement business combination 02 million related employee’s salaries year ended december 31 2020 interest expense interest expense increased 8000 year ended december 31 2020 compared period march 1 2019 december 31 2019 due interest incurred respect related party’s outstanding loan upon close business combination loan repaid full liquidity capital resources date generated revenue source including commercial sale approved drug products expect generate revenue foreseeable future fail complete development product candidates timely manner fail obtain regulatory approval ability generate future revenue adversely affected know generate revenue product candidates expect generate revenue unless obtain regulatory approval commercialize product candidates expect expenses increase significantly connection ongoing activities particularly continue research development preclinical studies initiate continue expand clinical trials seek marketing approval product candidates addition obtain approval product candidates expect incur significant commercialization expenses related sales marketing manufacturing distribution furthermore expect incur additional costs associated operating public company also responsible significant payments bayer license agreement paid bayer upfront license fee 50 million following closing business combination receipt initial qualified financing addition also responsible bayer significant future contingent payments bayer license agreement upon achievement certain development commercial sales milestones well ongoing royalties net commercial sales size timing milestone payments vary greatly depending factors particular licensed product whether involves ptefb licensed product bioconjugation licensed product bioconjugation program number distinct disease indications number different countries respect milestone achieved level net commercial sales therefore difficult estimate total payments could become payable bayer payments would due achieve milestones countries disease indications would obligated pay development commercial milestone payments range 1100 million 3180 million per licensed product upon successful commercialization least five licensed products could required pay aggregate milestone payments excess 10 billion required pay certain milestone payments prior time able generate sufficient revenue commercial sales product candidates addition milestone payments also required pay bayer license agreement ongoing royalties single digit low doubledigit percentage range net commercial sales licensed products therefore anticipate need substantial additional funding connection continuing operations upon completion business combination approximately 622 million cash equivalents intend devote net proceeds business combination preclinical clinical development product candidates public company compliance costs certain milestone payments bayer license agreement based current business plans believe anticipated net proceeds business combination enable us fund operating expenses capital requirements least next 12 months estimate long expect net proceeds business combination able fund operating expenses capital requirements based assumptions may prove wrong could use available capital resources sooner currently expect changing circumstances may beyond control could result fewer cash equivalents available us cause us consume capital significantly faster currently anticipate may need choose seek additional funds sooner planned numerous risks uncertainties associated research development commercialization pharmaceutical drug products unable estimate exact amount operating capital requirements future funding requirements depend many factors including limited • extent develop inlicense acquire product candidates technologies product candidate pipeline • costs timing process development manufacturing scaleup activities associated product candidates programs advance preclinical clinical development • number development requirements product candidates may pursue • costs timing outcome regulatory review product candidates • timing amount milestone payments bayer license agreement • headcount growth associated costs expand research development capabilities establish expand commercial infrastructure operations • costs timing future commercialization activities including product manufacturing marketing sales distribution product candidates receive marketing approval • royalty payments bayer license agreement • costs timing preparing filing prosecuting patent applications maintaining enforcing intellectual property rights defending intellectual propertyrelated claims • revenue received commercial sales product candidates receive marketing approval • costs operating public company identifying potential product candidates conducting preclinical studies clinical trials timeconsuming expensive uncertain process takes many years complete may never generate necessary data results required obtain marketing approval achieve product sales addition product candidates approved may achieve commercial success commercial revenues derived sales product candidates expect commercially available near term accordingly need continue rely additional financing achieve business objectives adequate additional financing may available us acceptable terms extent raise additional capital sale equity convertible debt securities terms equity securities debt may restrict ability operate future debt financing equity financing available may involve covenants limiting restricting ability take specific actions incurring additional debt making capital expenditures entering profitsharing arrangements declaring dividends raise additional funds collaborations strategic alliances marketing distribution licensing arrangements third parties may required relinquish valuable rights technologies future revenue streams research programs product candidates grant licenses terms may favorable us unable raise capital needed acceptable terms could forced delay reduce eliminate research development programs future commercialization efforts adequate additional financing may available us acceptable terms extent raise additional capital sale equity convertible debt securities ownership interest stockholders could diluted terms securities may include liquidation preferences adversely affect rights stockholders future debt financing equity financing available may involve covenants limiting restricting ability take specific actions incurring additional debt making capital expenditures entering profitsharing arrangements declaring dividends raise additional funds collaborations strategic alliances marketing distribution licensing arrangements third parties may required relinquish valuable rights technologies future revenue streams research programs product candidates grant licenses terms may favorable us unable raise capital needed acceptable terms could forced delay reduce eliminate research development programs future commercialization efforts continuing assess effect covid19 pandemic may business operations extent covid19 may impact business operations depend future developments highly uncertain cannot predicted confidence geographic spread disease duration outbreak duration effect business disruptions shortterm effects ultimate effectiveness travel restrictions quarantines social distancing requirements business closures united states countries contain treat disease potential economic impact brought duration covid19 may difficult assess predict widespread pandemic could result significant disruption global financial markets reducing ability access capital could future negatively affect liquidity addition recession market correction resulting spread covid19 could materially affect business value common stock cash flows following table provides summary cash flow data periods indicated amounts thousands cash flows operating activities cash flows used operating activities date primarily comprised payroll professional service fees related research development general administrative activities continue ramp hiring continue expand clinical trials seek marketing approval product candidates expect cash used operating activities increase significantly start generate material cash flows business net cash used operating activities approximately 23 million year ended december 31 2020 compared 0 period march 1 2019 december 31 2019 significant components cash used operating activities consists approximately 10 million legal professional services support completion bayer license agreement formation business preparation merger lsac patent costs associated portfolio compounds well additional 10 million insurance premiums paid upon transition public company net loss year ended december 31 2020 approximately 108 million included noncash expenses 50 million related bayer license approximately 44 million related stockbased compensation cash flows financing activities net cash provided financing activities 641 million year ended december 31 2020 compared 0 period march 1 2019 december 31 2019 received approximately 641 million net proceeds business combination december 23 2020 received 03 million issuance shares certain founders issuance note related party year ended december 31 2020 made 03 million payment note payable related party repaid note full offbalance sheet arrangements party offbalance sheet arrangements defined sec rules critical accounting policies estimates consolidated financial statements prepared accordance gaap preparation consolidated financial statements management required use judgment making estimates assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities date consolidated financial statements well reported expenses incurred reporting periods consider accounting judgment estimate assumption critical 1 estimate assumption complex nature requires high degree judgment 2 use different judgments estimates assumptions could material impact consolidated financial statements significant accounting policies described note 2 audited consolidated financial statements included elsewhere report critical accounting policies estimates described research development research development expenses may consist primarily salaries benefits related costs expenses including stockbased compensation connection preclinical development product candidates discovery efforts including conducting preclinical studies manufacturing development efforts preparing conducting clinical trials activities related regulatory filings product candidates addition research development expenses may include payments bayer third parties development product candidates estimated fair value issuance equity license rights products development prior marketing approval expenses related clinical trials may primarily related activities contract research organizations design gain approval conduct clinical trials behalf amounts recognized expense related goods delivered services performed contingent milestone payments described responsible significant payments bayer license agreement responsible bayer significant future contingent payments bayer license agreement upon achievement certain development regulatory commercial sales milestones size timing milestone payments vary greatly depending numerous factors outlined transactions provided bayer license agreement accounted asset acquisition contingent consideration asset acquisition generally recognized probable liability incurred amount reasonably estimated none milestone payments probable liability incurred date filing income taxes income taxes recorded accordance asc 740 income taxes asc 740 provides deferred taxes using asset liability approach recognize deferred tax assets liabilities expected future tax consequences events included consolidated financial statements tax returns deferred tax assets liabilities determined based difference financial statement tax bases assets liabilities using enacted tax rates effect year differences expected reverse net operating loss nol carryforwards research development tax credit carryforwards valuation allowances provided based upon weight available evidence likely deferred tax assets realized recorded full valuation allowance reduce net deferred income tax assets zero event determine would able realize deferred income tax assets future adjustment deferred income tax asset valuation allowance would increase income period determination made stockbased compensation recognize cost sharebased awards granted employees nonemployees directors based estimated grantdate fair value awards cost recognized straightline basis service period generally vesting period award reverse previously recognized costs unvested options period forfeitures occur determine fair value stock options using blackscholes option pricing model impacted following assumptions • expected termwe use simplified method calculating expected term due insufficient historical exercise data • expected volatilitygiven limited market trading history common stock volatility based benchmark comparable companies within biopharmaceutical industry • expected dividend yieldwe never paid cash dividends common stock anticipate foreseeable future • riskfree interest ratethe interest rates used based implied yield available us treasury zerocoupon issues equivalent remaining term equal expected life award emerging growth company status section 102b1 jobs act exempts emerging growth companies required comply new revised financial accounting standards private companies required comply new revised financial accounting standards jobs act provides company choose take advantage extended transition period comply requirements apply nonemerging growth companies election take advantage extended transition period irrevocable company “emerging growth company” defined section 2a securities act elected take advantage benefits extended transition period new revised financial accounting standards company expects remain emerging growth company least end 2021 fiscal year expects continue take advantage benefits extended transition period although may decide early adopt new revised accounting standards extent permitted standards may make difficult impossible compare financial results financial results another public company either emerging growth company emerging growth company chosen take advantage extended transition period exemptions potential differences accounting standards used recent accounting pronouncements see note 2 audited consolidated financial statements report information recent accounting pronouncements timing adoption extent made one review potential impact financial condition results operations cash flows item 7a item 7a quantitative qualitative disclosures market risk exposed market risks ordinary course business including effects interest rate changes fluctuations foreign currency exchange rates information quantitative qualitive disclosures market risks set forth interest rate risk cash equivalents consist solely cash held depository accounts affected either increase decrease interest rates furthermore consider highly liquid investments cash equivalents currently possess cash equivalents short term nature investments would also significantly impacted changes interest rates interestbearing instruments carry degree risk however exposed anticipate exposed material risks due changes interest rates hypothetical 10 change interest rates periods presented would material impact consolidated financial statements foreign currency risk operations principally denominated us dollars expect future operating results significantly affected foreign currency transaction risk hypothetical 10 change foreign exchange rates periods presented would material impact consolidated financial statements item 8 item 8 financial statements supplementary data report independent registered public accounting firm stockholders vincerx pharma inc opinion consolidated financial statements audited accompanying consolidated balance sheets vincerx pharma inc “company” december 31 2020 2019 related consolidated statements operations stockholders’ equity deficit cash flows year ended december 31 2020 period march 1 2019 date inception december 31 2019 related notes collectively referred “consolidated financial statements” opinion consolidated financial statements present fairly material respects financial position company december 31 2020 2019 results operations cash flows year ended december 31 2020 period march 1 2019 date inception december 31 2019 conformity accounting principles generally accepted united states america basis opinion consolidated financial statements responsibility company’s management responsibility express opinion company’s consolidated financial statements based audits public accounting firm registered public company accounting oversight board united states “pcaob” required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audits obtain reasonable assurance whether consolidated financial statements free material misstatement whether due error fraud company required engaged perform audit internal control financial reporting part audit required obtain understanding internal control financial reporting purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audits included performing procedures assess risks material misstatement consolidated financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures consolidated financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation consolidated financial statements believe audits provides reasonable basis opinion withumsmithbrown pc whippany new jersey march 22 2021 served company’s auditor since 2020 vincerx pharma inc consolidated balance sheets thousands except share per share amounts accompanying notes integral part consolidated financial statements vincerx pharma inc consolidated statements operations thousands except per share amounts accompanying notes integral part consolidated financial statements vincerx pharma inc consolidated statements stockholders’ equity deficit thousands accompanying notes integral part consolidated financial statements vincerx pharma inc consolidated statements cash flows thousands accompanying notes integral part consolidated financial statements vincerx pharma inc notes consolidated financial statements december 31 2020 1 nature business organization lifesci acquisition corp “lsac” initially formed december 19 2018 delaware corporation formed purpose effecting merger share exchange asset acquisition share purchase reorganization similar business combination one businesses september 25 2020 lsac entered merger agreement “merger agreement” lifesci acquisition merger sub inc delaware corporation whollyowned subsidiary lsac “merger sub” vnrx corp fka vincera pharma inc delaware corporation “vincera pharma” raquel e izumi representative stockholders vincera pharma stockholders “vincera pharma stockholders” pursuant terms merger agreement business combination lsac vincera pharma effected merger sub vincera pharma vincera pharma surviving company whollyowned subsidiary lsac december 23 2020 connection closing business combination “business combination” lifesci acquisition corp changed name vincera pharma inc january 2021 vincera pharma inc changed name vincerx pharma inc together consolidated subsidiaries “company” company clinicalstage biopharmaceutical company focused leveraging extensive development oncology expertise advance new therapies intended address unmet medical needs treatment cancer company’s current pipeline entirely derived bayer license agreement see note 4 pursuant company granted exclusive royaltybearing worldwide license certain bayer patents knowhow develop use manufacture commercialize sublicense distribute clinicalstage followon small molecule drug program preclinical stage bioconjugationnextgeneration adc platform company intends use product candidates treat various cancers patientspecific targeted approach early months 2020 covid19 emerged subsequently spread worldwide world health organization declared covid19 pandemic resulting federal state local governments private entities mediating various restrictions including travel restrictions public gatherings stay home orders advisories quarantining people may exposed virus management currently evaluating impact covid19 pandemic future plans concluded reasonably possible virus could negative effect company’s financial position results operations specific impact readily determinable date consolidated financial statements 2 summary significant accounting policies basis presentation company’s consolidated financial statements prepared conformity accounting principles generally accepted united states america “gaap” determined financial accounting standards board “fasb” accounting standards codification “asc” pursuant regulations us securities exchange commission “sec” include accounts vincerx whollyowned subsidiary vincera pharma inc also known vnrx corp intercompany accounts transactions eliminated pursuant merger agreement business combination accounted reverse recapitalization goodwill intangible assets recorded accordance gaap method vincerx pharma inc notes consolidated financial statements december 31 2020 accounting lsac treated “acquired” company financial reporting purposes accordingly accounting purposes business combination treated equivalent vincera pharma issuing stock net assets lsac accompanied recapitalization result references “company” herein may refer vincera pharma prior consummation business combination acquired net assets lsac stated historical cost goodwill intangible assets recorded emerging growth company “emerging growth company” defined section 2a securities act modified jumpstart business startups act 2012 “jobs act” may take advantage certain exemptions various reporting requirements applicable public companies emerging growth companies including limited required comply independent registered public accounting firm attestation requirements section 404 sarbanesoxley act reduced disclosure obligations regarding executive compensation periodic reports proxy statements exemptions requirements holding nonbinding advisory vote executive compensation stockholder approval golden parachute payments previously approved section 102b1 jobs act exempts emerging growth companies required comply new revised financial accounting standards private companies securities act registration statement declared effective class securities registered exchange act required comply new revised financial accounting standards jobs act provides company elect opt extended transition period comply requirements apply nonemerging growth companies election opt irrevocable company elected opt extended transition period means standard issued revised different application dates public private companies company emerging growth company adopt new revised standard time private companies adopt new revised standard may make comparison company’s consolidated financial statements another public company neither emerging growth company emerging growth company opted using extended transition period difficult impossible potential differences accounting standards used use estimates preparation financial statements accordance gaap requires management make estimates assumptions affect reported amounts assets liabilities disclosure commitments contingencies date financial statements well reported amounts expenses reporting periods estimates made company include limited related valuation common stock prior business combination stockbased compensation company bases estimates historical experience various assumptions believes reasonable circumstances results form basis making judgments carrying amounts assets liabilities readily apparent sources actual results could differ materially estimates concentrations credit risk company subject risks common companies biotechnology industry including limited development company competitors technological innovations risks failure clinical studies dependence key personnel protection proprietary technology compliance government regulations ability transition preclinical manufacturing commercial production products company’s future product candidates require approvals us food drug administration comparable foreign regulatory agencies prior commercial sales respective vincerx pharma inc notes consolidated financial statements december 31 2020 jurisdictions assurance product candidates receive necessary approvals company denied approval delayed company unable maintain approval product candidate could material adverse impact company cash equivalents management considers highly liquid investments insignificant interest rate risk original maturities three months less cash equivalents fair value measurement company applies fair value accounting financial assets liabilities measured recurring nonrecurring basis fair value defined exit price representing amount would received sell asset paid transfer liability orderly transaction market participants measurement date fair value marketbased measurement determined based assumptions market participants would use pricing asset liability accounting guidance established fair value hierarchy based three levels inputs first two considered observable last unobservable used determine fair value financial instruments financial instrument’s level within fair value hierarchy based lowest level input significant fair value measurement level 1 quoted prices active markets identical assets liabilities entity ability access level 2 inputs level 1 observable either directly indirectly quoted prices similar assets liabilities quoted prices markets active inputs observable corroborated observable market data substantially full term assets liabilities level 3 unobservable inputs supported little market activity significant fair value assets liabilities segments operating segments identified components enterprise separate discrete financial information available evaluation chief operating decisionmaker making decisions regarding resource allocation assessing performance company views operations manages business single operating segment research development costs company expenses research development costs operating expenses incurred expenses include acquired inprocess research development expenses alternative future use salaries research development personnel consulting fees product development preclinical studies clinical trial costs fees costs related development technology stockbased compensation company adopted asu 201807 simplifies accounting sharebased payments granted nonemployees goods services march 1 2019 date inception company measures recognizes compensation expense stockbased awards made employees directors nonemployees including stock options restricted shares based estimated fair values recognized requisite service period vincerx pharma inc notes consolidated financial statements december 31 2020 fair value options granted estimated grant date using blackscholes option valuation model valuation model stockbased compensation expense requires company make assumptions judgments variables used calculation including expected term weightedaverage period time options granted expected outstanding volatility company’s common stock assumed riskfree interest rate company accounts forfeitures occur company uses simplified calculation expected life takes consideration grant’s contractual life vesting period assumes options exercised vesting date contractual term option awards issued market condition nonstandard terms given lack public market vincera pharma’s stock prior business combination estimate volatility based average historical volatilities common stock several entities characteristics similar company since comparable companies operate industry segment company expects would share similar characteristics risk profiles volatility capital intensity market growth patterns drivers riskfree rate based us treasury yield curve effect time grant periods corresponding expected life option income taxes income taxes recorded accordance asc 740 income taxes “asc 740” provides deferred taxes using asset liability approach company recognizes deferred tax assets liabilities expected future tax consequences events included financial statements tax returns deferred tax assets liabilities determined based difference financial statement tax bases assets liabilities using enacted tax rates effect year differences expected reverse net operating loss “nol” carryforwards research development tax credit “rd credit” carryforwards valuation allowances provided based upon weight available evidence likely deferred tax assets realized company recorded full valuation allowance reduce net deferred income tax assets zero event company determine would able realize deferred income tax assets future adjustment deferred income tax asset valuation allowance would increase income period determination made company accounts uncertain tax positions accordance provisions asc 740 uncertain tax positions exist company recognizes tax benefit tax positions extent benefit would likely realized assuming examination taxing authority determination whether tax benefit likely realized based upon technical merits tax position well consideration available facts circumstances december 31 2020 2019 company liability income tax associated uncertain tax positions company would recognize corresponding interest penalties associated income tax positions income tax expense income tax interest penalties incurred 2020 2019 since inception comprehensive income loss comprehensive loss equal net loss presented accompanying consolidated statements operations company comprehensive income loss periods presented net loss per share common stock basic net loss per share computed dividing net loss weightedaverage number shares common stock outstanding period vincerx pharma inc notes consolidated financial statements december 31 2020 diluted earnings per share adjusts basic earnings per share potentially dilutive impact stock options warrants company reported losses periods presented potentially dilutive securities including stock options warrants antidilutive accordingly basic net loss per share equals diluted net loss per share recent accounting pronouncements december 2019 fasb issued asu 201912 income taxes topic 740 simplifying accounting income taxes intended simplify various aspects related accounting income taxes asu 201912 removes certain exceptions general principles asc 740 also clarifies amends existing guidance improve consistent application guidance effective fiscal years interim periods within fiscal years beginning december 15 2020 early adoption permitted company currently evaluating impact standard consolidated financial statements august 2020 fasb issued asu 202006 debtdebt conversion options subtopic 47020 derivatives hedgingcontracts entity’s equity subtopic 81540 accounting convertible instruments contracts entity’s equity simplifies accounting convertible instruments removing major separation models required current gaap asu removes certain settlement conditions required equity contracts qualify derivative scope exception also simplifies diluted earnings per share calculation certain areas asu effective fiscal years beginning december 15 2023 including interim periods within fiscal years early adoption permitted earlier fiscal years beginning december 15 2021 adoption must beginning company’s annual fiscal year company currently evaluating impact standard financial statements related disclosures 3 business combination discussed note 1 december 23 2020 company consummated business combination vincera pharma surviving merger whollyowned subsidiary company immediately prior effective time business combination share vincerx pharma common stock canceled vincera pharma stockholders received 0570895 shares common stock share vincera pharma common stock held immediately prior effective time business combination ii certain rights earnout shares closing business combination vincera pharma stockholders entitled receive earnout shares daily volumeweighted average price company’s common stock equals exceeds following prices 20 trading days within 30 tradingday period following closing business combination 1 trading period prior 42 month anniversary closing business combination upon achievement daily volumeweighted average price least 2000 per share number shares company’s common stock equals quotient 200 million divided closing price per share 2 trading period prior six year anniversary closing upon achievement daily volumeweighted average price least 3500 per share number shares company’s common stock equals quotient 200 million divided closing price per share 3 trading period prior eight year anniversary closing upon achievement daily volumeweighted average price least 4500 per share number shares company’s common stock equals quotient 200 million divided closing price per share total 906 rounded nearest whole share earnout shares earned issuable shall issued vincera pharma stockholders prorata basis based percentage number shares vincera pharma common stock owned immediately prior vincerx pharma inc notes consolidated financial statements december 31 2020 closing business combination remaining earnout shares would otherwise issuable shall issuable vincera pharma stockholders lieu thereof number authorized shares available issuance company’s 2020 stock incentive plan “2020 plan” shall automatically increased equivalent number shares company’s common stock business combination accounted reverse recapitalization accordance gaap method accounting lsac treated “acquired” company vincerx pharma treated acquirer financial reporting purposes accordingly accounting purposes business combination treated equivalent vincera pharma issuing stock net assets lsac accompanied recapitalization net assets lsac stated historical cost goodwill intangible assets recorded following table reconciles elements business combination statement cash flows statement stockholders’ equity deficit year ended december 31 2020 amounts thousands number shares common stock issued immediately following consummation business combination amounts thousands 4 bayer license agreement october 7 2020 vincerx pharma entered bayer license agreement became effective december 23 2020 upon closing business combination pursuant bayer license agreement vincerx pharma exclusive worldwide royaltybearing license certain bayer patents knowhow develop use manufacture commercialize sublicense distribute clinicalstage small molecule drug platform including ptefb inhibitor compound ii preclinical stage bioconjugationsnextgeneration adc platform including nextgeneration adc compounds following closing business combination company paid bayer 50 million upfront license fee january 5 2021 december 31 2020 company recorded 50 million license payable bayer company achieves development commercial sales milestones license products bayer license agreement countries disease indications company would obligated pay milestone payments range 1100 million 3180 million per licensed product upon successful commercialization least five licensed products company could required pay aggregate milestone payments excess 1 billion addition milestone payments company also required pay bayer license agreement ongoing royalties single digit low doubledigit percentage range net commercial sales licensed products vincerx pharma inc notes consolidated financial statements december 31 2020 5 notes payable related party august 9 2020 vincera pharma entered promissory note dr raquel e izumi one founders “holder” principal amount 10 million amount outstanding advances made holder company agreed pay holder 20000 origination fee interest shall accrue 7 maturity date august 9 2023 august december 31 2020 company received 300000 holder note agreement december 23 2020 company repaid 325000 holder including 20000 origination fee 5000 outstanding interest december 31 2020 amounts outstanding note agreement 6 commitments contingencies litigation company currently party material legal proceedings aware pending threatened claims time company may subject various legal proceedings claims arise ordinary course business activities commitments december 23 2020 company entered 5year term lease agreement commenced january 1 2021 annual rent expense approximately 847000 company’s future minimum lease payments follows december 31 2020 thousands 7 stockholders’ equity company’s certificate incorporation authorizes issuance 120000000 shares common stock 00001 par value per share 30000000 shares undesignated preferred stock 00001 par value per share december 31 2020 2019 13984441 shares common stock include 2744586 shares common stock constituting part units 5196000 shares common stock respectively shares preferred stock outstanding founders shares vincera pharma’s three founders “founders” issued 1618199 shares 2834497 shares prior effects reverse merger vincera pharma’s common stock “founders shares” august 2019 founders paid company aggregate par value founder shares december 31 2019 amounts owed issuance founders shares settled cash july 2020 vincerx pharma inc notes consolidated financial statements december 31 2020 restricted shares july august 2019 vincera pharma issued 471850 shares 826510 shares prior effects reverse merger restricted stock par value certain management persons amounts owed issuance restricted shares settled cash july 2020 grant date fair value restricted stock approximately 6000 may 2020 vincera pharma issued additional 173552 shares 304000 shares prior effects reverse merger restricted stock fair value 007 per share exchange services pursuant restricted share agreements term vesting represents expiration vincera pharma’s repurchase right underlying shares december 31 2020 approximately 13000 unrecognized stockbased compensation related restricted stock amortized 34 years summary restricted stock activity year ended december 31 2020 period ended 2019 presented warrants december 31 2020 10133767 warrants purchase common stock outstanding consisting 6563767 public warrants include 2744586 public warrants constituting part units 3570000 private warrants unit consists one share common stock one public warrant exercisable onehalf one share common stock public warrant entitles registered holder purchase onehalf 12 share common stock price 1150 per whole share common stock subject adjustment discussed time commencing later one year closing initial public offering lsac consummation business combination warrants expire 500 pm new york city time december 23 2025 five years closing company’s initial business combination private warrants identical warrants underlying units except private warrant exercisable one share common stock exercise price 1150 per share ii private warrants exercisable cash even registration statement covering shares common stock issuable upon exercise private warrants effective cashless basis holder’s option except respect 500000 private warrants held rosedale park llc 500000 private warrants held vincerx pharma inc notes consolidated financial statements december 31 2020 lifesci holdings llc amended remove cashless exercise provision redeemable us except respect 500000 private warrants held rosedale park llc 500000 private warrants held lifesci holdings llc amended include redemption provision substantially identical public warrants provided however redemption rights may exercised first 12 months following closing business combination unless last sales price company’s common stock equal greater 2000 per share 20 trading days within 30 trading day period ending third business day prior date notice redemption given case long still held initial purchasers affiliates private warrants purchased rosedale park llc expire march 5 2025 provided private warrants beneficially owned chardan capital markets llc related persons anymore private warrants may exercised five years following completion company’s initial business combination public warrants private warrants determined equity classified accordance asc 815 derivatives hedging 8 equity incentive plans connection business combination stockholders approved 2020 plan became effective upon closing business combination december 23 2020 december 31 2020 company 2790824 shares common stock reserved issuance 2020 plan 2020 plan allows grant stock options rights acquire restricted stock employees directors consultants company terms conditions specific awards set discretion company’s board directors options granted 2020 plan expire later 10 years date grant unvested common shares obtained upon early exercise options subject repurchase company original issue price stock option activity plan follows amounts thousands except per share amount stockbased compensation expense based grantdate fair value company recognizes compensation expense stockbased awards straightline basis requisite service period awards generally option vesting term three years company recognized stockbased compensation approximately 44 million approximately 1000 year ended december 31 2020 period march 1 2019 date inception december 31 2019 respectively december 31 2020 company stockbased compensation approximately 81 million related unvested stock options yet recognized expected recognized estimated weighted average period 20 years vincerx pharma inc notes consolidated financial statements december 31 2020 following weighted average assumptions used inputs blackscholes option valuation model determining estimated grantdate fair value company’s stock options granted year ended december 31 2020 total stockbased compensation expense recognized accompanying consolidated statements operations stock option awards follows amounts thousands 9 net loss per share applicable common stockholders basic loss per common share computed dividing net loss weighted average number common shares outstanding reporting period diluted loss per common share computed similarly basic loss per common share except reflects potential dilution could occur dilutive securities obligations issue common stock exercised converted common stock following table sets forth computation loss per share years ended december 31 2020 period march 1 2019 date inception december 31 2019 respectively amounts thousands except per share number vincerx pharma inc notes consolidated financial statements december 31 2020 following table presents potential common stock outstanding excluded computation diluted net loss per share common stock periods presented including would antidilutive 10 income taxes company provision income taxes year ended december 31 2020 period march 1 2019 date inception december 31 2019 company current tax expense losses deferred expense valuation allowance reconciliation us statutory rate 21 effective rate follows significant components company’s net deferred tax assets december 31 2020 2019 follows amounts thousands vincerx pharma inc notes consolidated financial statements december 31 2020 recognition deferred tax assets appropriate realization assets likely based upon weight available evidence includes company’s historical operating performance cumulative net losses projected future losses company provided full valuation allowance deferred tax assets company’s valuation allowance increased 30 million year ended december 31 2020 december 31 2020 company federal state net operating loss carryforwards approximately 46 million federal net operating loss carryforwards carried forward indefinitely year ended december 31 2020 period march 1 2019 date inception december 31 2019 company used 100 apportionment factor california net operating losses portion state net operating loss carryforwards expire beginning 2039 utilized december 31 2020 company also federal california research development credits 1820 1365 respectively federal tax credit carryforwards expire beginning 2039 utilized state tax credit carryforwards expire utilization net operating losses tax credit carryforwards may limited “ownership change” rules defined section 382 internal revenue code limitation “section 382 limitation” similar rules may apply state tax laws company performed analysis determine whether “ownership change” occurred inception december 31 2020 utilization portion company’s net operating losses credit carryforwards taxable year could limited however section 382 limitations expected result permanent loss net operating losses credit carryforwards reduction company’s gross deferred tax asset net operating loss tax credit carryforwards necessary prior considering valuation allowance asc 74010 income taxes prescribes recognition threshold measurement attribute financial statement recognition measurement uncertain tax positions taken expected taken company’s income tax return also provides guidance derecognition classification interest penalties accounting interim periods disclosure transition company identified unrecognized tax benefit accordance asc 74010 federal state income tax returns open statute limitations subject tax examinations tax years ended december 31 2020 2019 extent company tax attribute carryforwards tax year attribute generated may still adjusted upon examination irs state tax authorities extent utilized future period march 27 2020 december 27 2020 united states enacted coronavirus aid relief economic security cares act consolidated appropriation act caa respectively contain among matters numerous income tax provisions tax provisions expected effective retroactively years ending date enactment company evaluated current legislation anticipate cares act caa material impact consolidated financial statements june 29 2020 california’s governor newsom signed ab85 suspending california net operating loss utilization imposing cap amount business incentives tax credits rd credit tax years 20202022 given expected tax loss 2020 suspension material impact company’s provision income taxes consolidated financial statements vincerx pharma inc notes consolidated financial statements december 31 2020 11 subsequent events mentioned note 6 company’s office lease agreement became effective january 1 2021 upon adoption asu 201602 leases topic 842 upon occupancy company expects record rightofuse assets lease liabilities approximately 33 million represents discounted cash flows operating lease commencement date item 9 item 15 exhibit financial statement schedules documents filed part report 1 financial statements reference made index financial statements vincerx pharma inc included item 8 part ii hereof 2 financial statement schedules omitted required applicable required information included financial statements notes thereto 3 exhibits see item 15b management contract compensating plan arrangement required filed identified b exhibits schedules exhibits agreement omitted pursuant item 601b2 regulation sk copy omitted schedule andor exhibit furnished sec upon request indicates management contract compensatory plan arrangement portions exhibit omitted accordance item 601 regulation sk  accordance item 601b32ii regulation sk sec release 3447986 certifications furnished exhibits 321 322 hereto deemed accompany form 10k deemed “filed” purposes section 18 securities exchange act 1934 “exchange act deemed incorporated reference filing exchange act securities act 1933 except extent registrant specifically incorporates reference c financial statement schedules reference made item 15a 2 item 16 form 10k summary applicable signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized vincerx pharma inc dr ahmed hamdy name dr ahmed hamdy title chief executive officer date march 22 2021 power attorney know persons present person whose signature appears constitutes appoints dr ahmed hamdy dr raquel e izumi alexander seelenberger true lawful attorneysinfact full power substitution capacities sign amendments report form 10k file exhibits thereto documents connection therewith securities exchange commission hereby ratifying confirming said attorneysinfact substitute substitutes may cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons behalf registrant dates capacities indicated