UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

WASHINGTON, D.C. 20549

 

AMENDMENT NO. 1
TO
FORM 8-K

 

CURRENT REPORT 

PURSUANT TO SECTION 13 OR 15(d) OF THE 

SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): October 6, 2021

 

Science 37 Holdings, Inc. 

(Exact name of registrant as specified in its charter)

 

Delaware   001-39727   84-4278203
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

 

600 Corporate Pointe

Suite 320

Culver City, CA

  90230
(Address of principal executive offices)   (Zip Code)

 

(984) 377-3737
Registrant’s telephone number, including area code

 

LifeSci Acquisition II Corp. 

250 West 55th Street, #3401 

New York, New York 10019 

(Former name or former address, if changed since last report.)

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

  ¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     
  ¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     
  ¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     
  ¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which
registered
Common stock, par value $0.0001 per share   SNCE   The Nasdaq Stock Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company x

 

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.  ¨

 

 

 

 

 

 

INTRODUCTORY NOTE

 

Unless the context otherwise requires, “we,” “us,” “our,” “S37” and the “Company” refer to Science 37 Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries, including Science 37, Inc., following the Closing (as defined below). Unless the context otherwise requires, references to “LSAQ” refer to LifeSci Acquisition II Corp., a Delaware corporation, prior to the Closing. All references herein to the “Board” refer to the board of directors of the Company.

 

Terms used in this Current Report on Form 8-K (this “Report”) but not defined herein, or for which definitions are not otherwise incorporated by reference herein, shall have the meaning given to such terms in the Proxy Statement /Prospectus (as defined below) in the section entitled “Frequently Used Terms” beginning on page 1 thereof, and such definitions are incorporated herein by reference.

 

This Current Report on Form 8-K/A (this “Amendment”) amends the Current Report on Form 8-K filed with the SEC on October 13, 2021 (the “Original Form 8-K”). The Company is filing this Amendment to the Original Form 8-K to (a) supplement Item 1.01 and Item 5.03 solely to include the specific disclosures contained below and include a new exhibit 10.20, (b) amend and restate Item 9.01 to include (i) the unaudited condensed consolidated financial statements of the Company as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 as Exhibit 99.3, (ii) the Management’s Discussion and Analysis of Financial Conditions and Results of Operations of the Company for the three and nine months ended September 30, 2021 and 2020 as Exhibit 99.4 and (iii) the unaudited pro forma condensed combined financial information of the Company for the year ended December 31, 2020 and as of and for the nine months ended September 30, 2021 as Exhibit 99.2, and (c) update Exhibits 3.1, 4.3, 10.13, 10.16 and 10.17 to reflect the documents as actually entered into or adopted, as applicable, at the Closing.

 

Except as set forth herein, the Original Form 8-K otherwise remains unchanged.

 

Item 1.01. Entry into a Material Definitive Agreement

 

Director Nomination Agreement

 

In connection with the closing of the Business Combination (the “Closing”), LSAQ, LifeSci Holdings LLC (the “Sponsor”), Science 37, Inc. (“Legacy Science 37”) and certain stockholders of Legacy Science 37 (such stockholders, the “Stockholders”) entered into that certain Director Nomination Agreement, dated October 6, 2021 (the “Director Nomination Agreement”), to provide for certain governance matters relating to the Company.

 

Pursuant to the terms of the Director Nomination Agreement, the size of the board of directors of the Company (the “Board”) initially consists of seven directors (the “Initial Board”).At least three of the independent directors must meet the independence requirements under Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended and the rules of NASDAQ Stock Market (“Nasdaq”) with respect to service on the audit committee of the Board (each, an “Audit Committee Qualified Director”). The Initial Board consists of: (i) the Chief Executive Officer of the Company following the Closing, who is David Coman; (ii) one independent director who meets the independence requirements under the rules and regulations of Nasdaq designated by the Redmile Stockholder (as defined in the Director Nomination Agreement), who is Robert Faulkner; (iii) one independent designated by the Lux Stockholder (as defined in the Director Nomination Agreement), who is Adam Goulburn; (iv) one independent designated by the PPD Stockholder (as defined in the Director Nomination Agreement), who is Bhooshi DeSilva; and (v) three additional independent directors, who are John W. Hubbard, Neil Tiwari and Emily Rollins.

 

Upon the first vacancy on the Board, so long as the Sponsor (together with its affiliates) beneficially owns more than 1% of the issued and outstanding common stock of the Company and subject to the terms and conditions of the Director Nomination Agreement, the Sponsor is entitled to designate one independent director (the “LSAQ Director”) to the Board who will be appointed as a Class III director.

 

Subject to the rules of the Nasdaq, from and after October 6, 2021, each Stockholder is entitled to nominate one person to continue to serve on the Board until such time as he holds less than 10% of the issued and outstanding common stock of the Company, and the Company will include such nominees in its proxy materials for each applicable meeting of stockholders and, subject to applicable law and the exercise of fiduciary duties, recommend to the Company stockholders that each such nominee be elected at such meeting. Mr. Faulkner will serve as the initial Chairman of the Board and any successor Chairman of the Board will be designated as provided in the bylaws of the Company.

 

The foregoing description of the Director Nomination Agreement is qualified in its entirety by reference to the full text of the Director Nomination Agreement, a copy of which is filed as Exhibit 10.20 to this Report, and incorporated herein by reference.

 

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year

 

Effective as of the Closing, the Board approved a fiscal year of the Company beginning on January 1 of each year and ending on December 31 of each year, with such change to the fiscal year commencing on January 1, 2022.

 

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Item 9.01. Financial Statement and Exhibits.

 

(a) Financial statements of businesses acquired.

 

The audited consolidated financial statements of Legacy Science 37 as of December 31, 2020 and 2019 and for the years then ended are included in the Proxy Statement/Prospectus beginning on page F-36 and are incorporated herein by reference.

 

The unaudited condensed consolidated financial statements of Legacy Science 37 as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 are included in the Proxy Statement/Prospectus beginning on page F-21 and are incorporated herein by reference.

 

The unaudited condensed consolidated financial statements of the Company as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 are filed as Exhibit 99.3 and is incorporated herein by reference.

 

The Management’s Discussion and Analysis of Financial Condition of the Company as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 are filed as Exhibit 99.4 and is incorporated herein by reference.

 

(b) Pro forma financial information.

 

The unaudited pro forma condensed combined financial information of the Company as of September 30, 2021 and for the nine months then ended and for the year ended December 31, 2020 is filed as Exhibit 99.2 and is incorporated herein by reference.

 

(d) Exhibits.

 

Exhibit       Incorporated by Reference
Number   Description   Form   Exhibit   Filing Date
2.1#   Agreement and Plan of Merger, dated as of May 6, 2021, by and among LifeSci Acquisition II Corp., LifeSci Acquisition II Merger Sub, Inc. and Science 37, Inc.   8-K   2.1   May 7, 2021
3.1   Amended and Restated Certificate of Incorporation.   S-1   3.1   November 5, 2021
3.2   Amended and Restated By-Laws of LifeSci Acquisition II Corp.   8-K   3.2   October 13, 2021
3.3   Amended and Restated By-Laws of Science 37 Holdings, Inc.   8-K   3.3   October 13, 2021
4.1   Specimen Stock Certificate of Science 37 Holdings, Inc.   8-K   4.1   October 13, 2021
4.2   Private Warrant Agreement, dated November 24, 2020, between LSAQ and the Sponsor.   8-K   4.1   November 25, 2020
4.3*   Warrant Exchange Agreement between LSAQ and the Sponsor.            
10.1   Letter Agreements, dated November 20, 2020, by and among LSAQ, its officers, its directors and its initial stockholders.   8-K   10.1   November 25, 2020
10.2   Investment Management Trust Agreement, dated November 20, 2020, by and between Continental Stock Transfer & Trust Company and LSAQ.   8-K   10.2   November 25, 2020
10.3   Registration and Stockholders Rights Agreement, dated November 20, 2020, by and among LSAQ and its initial stockholders.   8-K   10.4   November 25, 2020
10.4   Stock Escrow Agreement, dated November 20, 2020, by and among LSAQ, its initial stockholders, and Continental Stock Transfer & Trust Company.   8-K   10.3   November 25, 2020
10.5   Administrative Services Agreement, dated November 20, 2020, by and between the Registrant and LifeSci Capital LLC.   8-K   10.6   November 25, 2020
10.6   Subscription Agreement, dated November 20, 2020, by and among LSAQ and its initial stockholders.   8-K   10.5   November 25, 2020
10.7   Sponsor Support Agreement, dated May 6, 2021, by and among LSAQ and the LifeSci Capital LLC.   8-K   10.1   May 7, 2021
10.8   Form of PIPE Subscription Agreement.   S-4/A   10.10   August 31, 2021
10.9+   Form of Indemnification Agreement.   S-4/A   10.8   August 31, 2021
10.10+   Offer Letter by and between Science 37, Inc. and David Coman, dated November 13, 2019.   S-4   10.15   July 28, 2021
10.11+   Offer Letter by and between Science 37, Inc. and Stephen Geffon, dated November 13, 2019.   S-4   10.16   July 28, 2021
10.12+   Offer Letter by and between Science 37, Inc. and Jonathan Cotliar, dated October 20, 2016.   S-4   10.17   July 28, 2021
10.13+   2021 Science 37 Holdings, Inc. Incentive Award Plan.   S-1   10.13   November 5, 2021
10.14+   Form of Option Agreement under 2021 Science 37 Holdings, Inc. Incentive Award Plan.   8-K   10.14   October 13, 2021

 

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10.15+   Form of Restricted Stock Unit Agreement under 2021 Science 37 Holdings, Inc. Incentive Award Plan.   8-K   10.15   October 13, 2021
10.16+   2021 Science 37 Holdings, Inc. Employee Stock Purchase Plan.   S-1   10.16   November 5, 2021
10.17   Amended and Restated Registration Rights Agreement by and among LSAQ, the Company and certain stockholders.   S-1   10.17   November 5, 2021
10.18*   Sponsor Lock-up Agreement            
10.19*   Science 37 Holders Support Agreement            
10.20   Director Nomination Agreement   S-1   10.20   November 5, 2021
16.1   Letter from WithumSmith+Brown PC to the U.S. Securities and Exchange Commission dated October 13, 2021.   8-K   16.1   October 13, 2021
21.1   Subsidiaries of the Company.   8-K   21.1   October 13, 2021
99.1   Press release dated October 6, 2021.   8-K   99.1   October 13, 2021
99.2*   Unaudited pro forma condensed combined financial information of the Company.            
99.3*   Unaudited condensed consolidated financial statements of the Company as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020.            
99.4*   Management’s Discussion and Analysis of Financial Condition of the Company as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020.            

 

* Filed herewith.

 

# Certain of the exhibits and schedules to this Exhibit have been omitted in accordance with Regulation S-K Item 601(a)(5). The Company agrees to furnish a copy of all omitted exhibits and schedules to the SEC upon its request.

 

+ Indicates management contract or compensatory plan or arrangement.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    Science 37 Holdings, Inc.
     
Date: November 15, 2021 By: /s/ David Coman
    Name: David Coman
    Title: Chief Executive Officer

 

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Exhibit 4.3

 

WARRANT EXCHANGE AGREEMENT

 

This WARRANT EXCHANGE AGREEMENT dated as of October 6, 2021, is by and between LifeSci Acquisition II Corp. a Delaware corporation (the “Company”) LifeSci Holdings LLC, a Delaware limited liability company (“Holder”).

 

WHEREAS, on November 24, 2020, the Company entered into a Private Warrant Agreement (the “Warrant Agreement”) by and between the Company and the Holder;

 

WHEREAS, simultaneous with the closing of the Company’s initial public offering, the Company sold warrants (the “Private Warrants”) to purchase 3,146,453 shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) at a price of $11.50 per share;

 

WHEREAS, the Company and Holder entered into that certain Support Agreement dated as of May 6, 2021 (the “Support Agreement”) with Science 37, Inc., a Delaware corporation (“Science 37”), pursuant to which Holder agreed to, among other things, amend the Warrant Agreement or enter into such other agreement that provides for the Private Warrants to convert into the right to receive 3,146,453 shares of Common Stock, in the aggregate, immediately prior to the effective time of the Merger (as defined below); and

 

WHEREAS, the Support Agreement was entered into in connection with that certain Merger Agreement dated as of May 6, 2021 (“Merger Agreement”), by and among the Company, Science 37, and LifeSci Acquisition II Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Parent (“Merger Sub”), pursuant to which, among other things Merger Sub will merge with and into Science 37, with Science 37 surviving as the surviving corporation and a wholly owned subsidiary of the Parent (“Merger”)

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

 

1.                  The Holder is the registered owner of 3,146,453 Private Warrants. Contingent upon consummation of the Merger, and effective as of immediately prior to the effective time of the Merger, the Holder is returning the Private Warrants to the Company for cancellation and the Company is issuing to the Holder an equal number of shares of Common Stock.

 

2.                  The Company and the Holder have the full legal capacity to enter into this Agreement on their own behalf.

 

3.                  No further authorization or approval is required on the part of the Company or Holder to enter into this Agreement and carry out the provisions hereof.

 

[Intentionally Blank. Signature Page Follows.]

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

  LIFESCI ACQUISITION II CORP.  
         
  By:   /s/ Andrew McDonald  
      Name: Andrew McDonald  
      Title: Chief Executive Officer  

 

Holder:  
       
Accepted and Agreed:  
       
LIFESCI HOLDINGS, LLC  
       
       
By:   /s/ Andrew McDonald  
Name: Andrew McDonald  
Title: Manager  
       
       
By:   /s/ David Dobkin  
Name: David Dobkin  
Title: Manager  
       
       
By:   /s/ Michael Rice  
Name: Michael Rice  
Title: Manager  

 

 

[Signature Page to Warrant Exchange Agreement]

 

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Exhibit 10.18

 

SPONSOR LOCK-UP AGREEMENT

 

THIS SPONSOR LOCK-UP AGREEMENT (this “Agreement”) is dated as of May 6, 2021, by and between the undersigned (the “Holder”) and LifeSci Acquisition II Corp., a Delaware corporation (“Parent”). Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Merger Agreement (as defined below).

 

BACKGROUND

 

A.                 Parent, LifeSci Acquisition II Merger Sub, Inc. a Delaware corporation and wholly owned subsidiary of Parent, and Science 37, Inc., a Delaware corporation (the “Company”), entered into a Merger Agreement dated as of May 6, 2021 (the “Merger Agreement”).

 

B.                  Pursuant to the Merger Agreement, Parent will become the 100% stockholder of the Company (the “Transaction”).

 

C.                  The Holder is the record and/or beneficial owner of (i) certain shares Parent Common Stock and (ii) certain Parent Warrants.

 

D.                 As a condition of, and as a material inducement for the Company to enter into and consummate the transactions contemplated by the Merger Agreement, the Holder has agreed to execute and deliver this Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties, intending to be legally bound, agree as follows:

 

AGREEMENT

 

1. Lock-Up.

 

(a)                Subject to Section 1(e), during the Lock-up Period (as defined below), the Holder irrevocably agrees that it, he or she will not (i) offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any of the Lock-up Shares (as defined below), (ii) enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such Lock-up Shares, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of any such Lock-up Shares, in cash or otherwise, (iii) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement or (iv) engage in any Short Sales (as defined below) with respect to any security of Parent; provided, for the avoidance of doubt, that nothing in this Agreement shall restrict the Holder’s right to cause the Company to file and cause to become effective a registration statement with the U.S. Securities and Exchange Commission (the “SEC”) naming such Holder as a selling securityholder (and to make any required disclosures in respect thereof), if applicable.

 

(b)                In furtherance of the foregoing, Parent will (i) place an irrevocable stop order on all Lock-up Shares, including those which may be covered by a registration statement, and (ii) notify Parent’s transfer agent in writing of the stop order and the restrictions on such Lock-up Shares under this Agreement and direct Parent’s transfer agent not to process any attempts by the Holder to resell or transfer any Lock-up Shares, except in compliance with this Agreement.

 

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(c)                For purposes hereof, “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 promulgated under Regulation SHO under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker dealers or foreign regulated brokers.

 

(d)                For purpose of this Agreement, the “Lock-up Period” means, with respect to the Lock-up Shares, the period commencing on the Closing Date and ending on the date that is 180 calendar days thereafter.

 

(e)                Notwithstanding the provisions set forth in this Section 1, the restrictions set forth herein shall not apply to: (i) transfers or distributions to the Holder’s current or former general or limited partners, managers or members, stockholders, other equityholders or other direct or indirect affiliates (within the meaning of Rule 405 under the Securities Act of 1933, as amended) or to the estates of any of the foregoing; (ii) transfers by operation of law; (iii) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Lock-up Shares; provided, that such plan does not pro- vide for the transfer of Lock-up Shares during the Lock-up Period; (iv) gifts to a charitable organization; (v) transfers in connection with any bona fide mortgage, encumbrance or pledge to a financial institution in connection with any bona fide loan or debt transaction or enforcement thereunder; (vi) transfers to Parent or the Company; (vii) transfers to (A) Parent’s or the Company’s officers or directors or (B) any affiliates or family members of Parent’s or the Company’s officers or directors; (viii) the exercise of warrants to purchase shares of Parent Common Stock and any related transfer of shares of Parent Common Stock in connection therewith (A) deemed to occur upon the “cashless” or “net” exercise of such warrants or (B) for the purpose of paying the exercise price of such warrants or for paying taxes due as a result of the exercise of such warrants or the vesting of such warrants, it being understood that all shares of Parent Common Stock received upon such exercise or transfer will remain subject to the restrictions of this Agreement during the Lock-up Period or (ix) transactions relating to shares of Parent Common Stock acquired in open market transactions, in each of clauses (i), (ii), (iii), (iv) and (vii), where such transferee agrees to be bound by the terms of this Agreement.

 

(f)                 In addition, after the Closing Date, if there is a Change of Control, then upon the consummation of such Change of Control, all Lock-up Shares shall be automatically released from the restrictions contained herein. A “Change of Control” means: (a) the sale of all or substantially all of the consolidated assets of Parent and its Subsidiaries to a third-party purchaser; (b) a sale resulting in no less than a majority of the voting power of the Parent being held by any Person that did not own a majority of the voting power prior to such sale; or (c) a merger, consolidation, recapitalization or reorganization of Parent with or into a third-party purchaser that results in the inability of the pre-transaction equity holders of Parent to designate or elect a majority of the board of directors (or its equivalent) of the resulting entity or its parent company.

 

2.                   Representations and Warranties. Each party hereto, by its respective execution and delivery of this Agreement, hereby represents and warrants to the other party hereto and to all third party beneficiaries of this Agreement that (a) such party has the full right, capacity and authority to enter into, deliver and perform such party’s respective obligations under this Agreement, (b) this Agreement has been duly executed and delivered by such party and is the binding and enforceable obligation of such party, enforceable against such party in accordance with the terms of this Agreement, and (c) the execution, delivery and performance of such party’s obligations under this Agreement will not conflict with or breach the terms of any other agreement, contract, commitment or understanding to which such party is a party or to which the assets or securities of such party are bound.

 

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3.                   Beneficial Ownership. The Holder hereby represents and warrants that it does not beneficially own, directly or through its nominees (as determined in accordance with Section 13(d) of the Exchange Act, and the rules and regulations promulgated thereunder), any shares of capital stock of Parent, or any economic interest in or derivative of such stock, other than those securities specified on the signature page hereto. For purposes of this Agreement, (i) the shares of Parent Common Stock and (ii) Parent Warrants beneficially owned by the Holder as specified on the signature page hereto are collectively referred to as the “Lock-up Shares.”

 

4.                   No Additional Fees/Payment. Other than the consideration specifically referenced herein, the parties hereto agree that no fee, payment or additional consideration in any form has been or will be paid to the Holder in connection with this Agreement.

 

5.                   Notices. All notices and other communications to be given or made hereunder shall, unless otherwise specified herein, be in writing and shall be deemed to have been duly given or made on the date of receipt by the recipient thereof if received prior to 5:00 p.m. Eastern Time in the place of receipt and such day is a Business Day (or otherwise on the next succeeding Business Day) if (a) served by personal delivery or by a nationally recognized overnight courier service upon the party for whom it is intended, (b)  delivered by registered or certified mail, return receipt requested, or (c) sent by email. Such communications shall be sent to the respective parties at the following street addresses or email addresses or at such other street address or email address for a party as shall be specified for such purpose in a notice given in accordance with this Section 5:

 

(a) If to Parent, to:

 

LifeSci Acquisition II Corp.

250 West 55th Street, #3401

New York, NY 10019

Attention: Andrew McDonald

E-mail: andrew@lifesciacquisition.com

 

with a copy to (which shall not constitute notice):

 

Loeb & Loeb

345 Park Avenue, 19th Floor New York, NY 10154

Attention: Mitchell S. Nussbaum, Esq.

E-mail: mnussbaum@loeb.com

 

(b) If to the Holder, to the addresses set forth on the Holder’s signature page hereto.

 

or to such other address as any party may have furnished to the others in writing in accordance herewith.

 

6.                   Enumeration and Headings. The enumeration and headings contained in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of any of the provisions of this Agreement.

 

7.                   Counterparts. This Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. The exchange of copies of this Agreement and signature pages by email in .pdf or .tif

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format (and including, without limitation, any electronic signature complying with the U.S. ESIGN Act of 2000, e.g., www.docusign.com), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Agreement as to the parties hereto and may be used in lieu of the original Agreement for all purposes. Such execution and delivery shall be considered valid, binding and effective for all purposes.

 

8.                   Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party hereto shall be permitted to assign any of such party’s rights or delegate any of its obligations under this Agreement, in whole or in part, by operation of Law or otherwise, without the prior written consent of the other party hereto, and any attempted or purported assignment or delegation in violation of this Section 8 shall be null and void.

 

9.                   Severability. The provisions of this Agreement shall be deemed severable and the illegality, invalidity or unenforceability of any provision shall not affect the legality, validity or enforceability of the other provisions of this Agreement. If any provision of this Agreement, or the application of such provision to any Person or any circumstance, is illegal, invalid or unenforceable, (a) a suitable and equitable provision to be negotiated by the parties hereto, each acting reasonably and in good faith, shall be substituted therefor in order to carry out, so far as may be legal, valid and enforceable, the intent and purpose of such legal, invalid or unenforceable provision, and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such illegality, invalidity or unenforceability, nor shall such illegality, invalidity or unenforceability affect the legality, validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

 

10.                 Amendment. This Agreement may be amended or modified by written agreement executed by each of the parties hereto.

 

11.                 Further Assurances. Each party hereto shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

12.                 No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rules of strict construction will be applied against any party hereto.

 

13.                 Governing Law. This Agreement, and any claims or Proceedings arising out of this Agreement or the subject matter hereof (whether at law or equity, in contract or in tort or otherwise), shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the conflict of law principles thereof (or any other jurisdiction) to the extent that such principles would direct a matter to another jurisdiction.

 

14.                 Controlling Agreement. To the extent the terms of this Agreement (as amended, supplemented, restated or otherwise modified from time to time) directly conflicts with a provision in the Merger Agreement, the terms of this Agreement shall control.

 

 

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

 

  LIFESCI ACQUISITION II CORP.  
       
       
By: /s/ Andrew McDonald  
    Name: Andrew McDonald
    Title: Chief Executive Officer

 

 

[Signature Page to Sponsor Lock-Up Agreement]

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Lock-up Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

  HOLDER  
     
  LIFESCI HOLDINGS LLC  
       
       
By: /s/ Andrew McDonald  
    Name: Andrew McDonald
    Title: Chief Executive Officer

 

    Address for Notice:
     
    LifeSci Holdings LLC
    250 West 55th Street, #3401
    New York, NY 10019
    (646) 889-1200
    Attn: Andrew McDonald
    Email: andrew@lifesciacquisition.com
     
    with a copy, which shall not constitute notice, to:
     
    Loeb and Loeb LLP
    345 Park Avenue, 19th Floor
    New York, NY 10154
    Attn: Mitchell Nussbaum
    Email: mnussbaum@loeb.com

 

 

  NUMBER OF LOCK-UP SHARES:
   
  1,772,034 shares of Parent Common Stock
   
  3,146,453 Parent Warrants

 

[Signature Page to Sponsor Lock-Up Agreement]

 

Exhibit 10.19

 

 

May 6, 2021

LifeSci Acquisition II Corp.

250 W. 55th St., #3401
New York, NY 10019
Attention: Andrew McDonald

 

Re: Support Agreement

 

Ladies and Gentlemen:

 

This letter (this “Support Agreement”) is being delivered by each of those stockholders of Science 37, Inc., a Delaware corporation (the “Company”), whose names appear on the signature pages of this Agreement (each, a “Stockholder” and, collectively, the “Stockholders”), to LifeSci Acquisition II Corp., a Delaware corporation (the “Parent”), in accordance with that Merger Agreement dated as of the date hereof, by and among the Parent, the Company and LifeSci Acquisition II Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Parent (the “Merger Sub”). Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Merger Agreement. As used herein, the term “Section” shall, unless otherwise specified, refer to the specified Section of this Support Agreement.

 

As of the date hereof, each Stockholder owns of record the number of shares of Company Common Stock and Company Preferred Stock as set forth opposite such Stockholder’s name on Exhibit A hereto (all such shares of Company Common Stock and Company Preferred Stock and any shares of Company Common Stock and Company Preferred Stock of which ownership of record or the power to vote is hereafter acquired by the Stockholders prior to the termination of this Support Agreement being referred to herein as the “Stockholder Shares”).

 

In order to induce the Parent to enter into the Merger Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each Stockholder hereby agrees with Parent and the Company as follows:

 

1.                  Voting Agreements. Each Stockholder, in his, her or its capacity as a stockholder of the Company, irrevocably and unconditionally covenants and agrees that, (i) at any meeting of the Company’s stockholders related to the transactions contemplated by the Merger Agreement or the Transaction Documents (the “Transactions”), whether annual or special and whether or not an adjourned or postponed meeting, and however called, and (ii) in connection with any written consent of the Company’s stockholders related to the Transactions (all such meetings or consents collectively referred to herein as the “Meeting”), such Stockholder shall, as applicable to such Stockholder:

 

a. when the Meeting is held, appear at the Meeting or otherwise cause his, her or its Stockholder Shares to be counted as present thereat for the purpose of establishing a quorum;

 

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b. vote (or execute and return an action by written consent), or cause to be voted at the Meeting (or validly execute and return and cause such consent to be granted with respect to), all of his, her or its Stockholder Shares in favor of each of the proposals relating to the Transactions;

 

c. authorize and approve the Merger to the extent the approval of any of the Company’s stockholders is required or applicable pursuant to the Company’s Amended and Restated Certificate of Incorporation (the “Company Charter”);

 

d. convert each share of Company Preferred Stock into shares of Company Common Stock in accordance with the terms of the Company Charter Article IV, Section B(4)(b)(ii) and the Merger Agreement; and

 

e. vote (or execute and return an action by written consent), or cause to be voted at the Meeting (or validly execute and return and cause such consent to be granted with respect to), all of his, her or its Stockholder Shares against, and withhold consent with respect to, any action that would reasonably be expected to (x) impede, interfere with, delay, postpone or adversely affect the Merger or any of the Transactions (including as a result of not satisfying any of the conditions to Closing set forth in Section 8.1 or 8.2 of the Merger Agreement), (y) result in a breach of any covenant, representation or warranty or other obligation or agreement of the Company under the Merger Agreement, or (z) result in a breach of any covenant, representation or warranty or other obligation or agreement of such Stockholder contained in this Support Agreement.

 

Without limiting the foregoing, prior to any valid termination of the Merger Agreement in accordance with 9.1, 9.2, 9.3 or 9.4 thereof, each Stockholder shall take, or cause to be taken, all actions and to do, or cause to be done, all things reasonably necessary under applicable Laws to consummate the Merger and the Transactions and on the terms and subject to the conditions set forth therein. The obligations of such Stockholder specified in this Section 1 shall apply whether or not the Merger, any of the Transactions or any action described above is recommended by the Company’s board of directors.

 

2.                  Stop Transfers; Certificates. Each Stockholder agrees that except for transfers of his, her or its Stockholder Shares pursuant to the Merger Agreement, such Stockholder shall not request that the Company register the transfer (book entry or otherwise) of any of his, her or its Stockholder Shares if such transfer is not permitted by this Support Agreement. In furtherance of the foregoing, such Stockholder hereby agrees to (a) place a revocable stop order on all of his, her or its Stockholder Shares subject to this Support Agreement, and (b) notify the Company’s transfer agent (if any) in writing of such stop order and the restrictions on such Stockholder Shares under this Section 2 and Section 4 below and direct the Company’s transfer agent (if any) not to process any attempts by such Stockholder to Transfer any Stockholder Shares except in compliance with this Section 2 and Section 6 below.

 

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3.                  Termination of Company Financing Agreements. Each Stockholder, by this Agreement with respect to its Stockholder Shares, severally and not jointly, hereby agrees to terminate, subject to the Closing and effective as of the Effective Time, (a) those certain agreements set forth on Exhibit B attached hereto, if applicable to such Stockholder (the “Company Financing Agreements”); (b) any management rights or side letters between the Company and such Stockholder; and (c) any rights under any letter or agreement providing for redemption rights, put rights, purchase rights or other similar rights not generally available to stockholders of the Company (clauses (a) through (c), collectively, the “Terminating Rights”) between such Stockholder and the Company, but excluding, (i) for the avoidance of doubt, any rights such Stockholder may have that relate to any commercial or employment agreements or arrangements between such Stockholder and the Company or any Subsidiary thereof, which shall survive the Closing in accordance with their respective terms, and (ii) any indemnification, advancement of expenses and exculpation rights of any Stockholder or any of its Affiliates set forth in the foregoing documents, which shall survive the Closing in accordance with their respective terms.

 

4.                  Waiver. Each Stockholder hereby irrevocably and unconditionally (i) waives any rights of appraisal, dissenter’s rights and any similar rights relating to the Merger Agreement and the consummation by the parties of the transactions contemplated thereby, including the Merger, that such Stockholder may have under applicable law (including Section 262 of the Delaware General Corporation Law or otherwise), (ii) consents to, on behalf of itself, the conversion of all outstanding shares of Company Preferred Stock into shares of Company Common Stock, with such conversion to be in accordance with the terms of the Company Charter and effective as of immediately prior to the Effective Time of the Merger, and (iii) waives, on behalf of themselves, its right to certain payments upon liquidation of the Company pursuant to Article IV, Section 2 of the Company Charter.

 

5.                  Damages; Remedies. Each Stockholder acknowledges and agrees that the rights of the other parties hereto to consummate the Transactions are special, unique and of extraordinary character and that if for any reason any of the provisions of this Support Agreement are not performed or complied with in accordance with their terms or are otherwise breached, immediate and irreparable harm or damage would be caused for which money damages would not be an adequate remedy. Accordingly, each party hereto agrees that, in addition to any other available remedies a party hereto may have in equity or at law, each party hereto shall be entitled to equitable remedies against another party hereto for its breach or threatened breach of this Support Agreement, including to enforce specifically the terms and provisions of this Support Agreement or to obtain an injunction restraining any such breach or threatened breach of the provisions of this Support Agreement in the Chosen Courts (as defined below), in each case, (i) without necessity of posting a bond or other form of security and (ii) without proving the inadequacy of money damages or another remedy at law. In the event that a party hereto seeks equitable remedies in any Proceeding (including to enforce the provisions of this Support Agreement or prevent breaches or threatened breaches of this Support Agreement), no party hereto shall raise any defense or objection, and each party hereto hereby waives any and all defenses and objections, to such equitable remedies on grounds that (x) money damages would be adequate or there is another adequate remedy at law or (y) the party seeking equitable remedies must either post a bond or other form of security and prove the inadequacy of money damages or another remedy at law.

 

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6.                  Transfer Restrictions. Hereafter until the earlier to occur of (i) the Effective Time and (ii) such date and time as the Merger Agreement shall be terminated in accordance with Sections 9.1, 9.2, 9.3 or 9.4 thereof, each Stockholder agrees that such Stockholder shall not, directly or indirectly, (a) sell, assign, transfer (including by operation of Law), place a lien on, pledge, hypothecate, grant an option to purchase, distribute, dispose of or otherwise encumber any of his, her or its Stockholder Shares except in accordance with the Merger Agreement or otherwise enter into any contract, option or other arrangement or undertaking to do any of the foregoing (a “Transfer”), (b) deposit any of his, her or its Stockholder Shares into a voting trust or enter into a voting agreement or arrangement or grant any proxy or power of attorney with respect to any of his, her or its Stockholder Shares that conflicts with any of the covenants or agreements set forth in this Support Agreement or (c) take any action that would have the effect of preventing or materially delaying the performance of its obligations hereunder; provided, however, that nothing herein shall prohibit a Transfer to an Affiliate of such Stockholder (a “Permitted Transfer”); provided further, that any Permitted Transfer shall be permitted only if, as a precondition to such Transfer, the transferee also in agrees in writing, reasonably satisfactory in form and substance to the Parent, to assume all of the obligations of such Stockholder hereunder, and be bound by the terms of this Support Agreement. Any attempted Transfer of the Stockholder Shares, or any interest in any of the foregoing in violation of this Section 6 shall be null and void.

 

7.                  New Shares. During the period commencing on the date hereof and ending on the earlier to occur of (i) the Effective Time and (ii) such date and time as the Merger Agreement shall be terminated in accordance with Sections 9.1, 9.2, 9.3 or 9.4 thereof, in the event that, (a) any shares of Company Common Stock, Company Preferred Stock or other equity securities of Company are issued to any Stockholder after the date of this Support Agreement pursuant to any stock dividend, stock split, recapitalization, reclassification, combination or exchange of the Company securities owned by such Stockholder, (b) any Stockholder purchases or otherwise acquires beneficial ownership of any shares of Company Common Stock, Company Preferred Stock or other equity securities of the Company after the date of this Support Agreement or (c) any Stockholder acquires the right to vote or share in the voting of any Company Common Stock, Company Preferred Stock or other equity securities of Parent after the date of this Support Agreement (such Company Common Stock, Company Preferred Stock or other equity securities of the Company, collectively the “New Securities”), then such New Securities acquired or purchased by such Stockholder shall be subject to the terms of this Support Agreement to the same extent as if they constituted his, her or its Stockholder Shares as of the date hereof.

 

8.                  Consent to Disclosure. Each Stockholder hereby consents to the publication and disclosure in the Registration Statement (and, as and to the extent otherwise required by applicable securities Laws or the SEC or any other securities authorities, any other documents or communications provided by the Parent or the Company to any Governmental Authority or to securityholders of the Parent) of such Stockholder’s identity and beneficial ownership of Stockholder Shares and the nature of such Stockholder’s commitments, arrangements and understandings under and relating to this Agreement and, if deemed appropriate by the Parent or the Company, a copy of this Agreement, provided that any such documents shall be provided to any Stockholder being named at least one (1) business day prior to such publishing or disclosure for review and comment by such Stockholder. Each Stockholder will promptly provide any information reasonably requested by the Parent or the Company for any regulatory application or filing made or approval sought in connection with the Transactions (including filings with the SEC).

 

9.                  Entire Agreement; Amendment. This Support Agreement and the other agreements referenced herein constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and supersede all prior understandings, agreements or representations by or among the parties hereto, written or oral, to the extent they relate in any way to the subject matter hereof or the transactions contemplated hereby. This Support Agreement may not be changed, amended, modified or waived (other than to correct a typographical error) as to any particular provision, except by a written instrument executed by all parties hereto.

 

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10.              Assignment. This Support Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party hereto shall be permitted to assign any of its rights or delegate any of its obligations under this Support Agreement, in whole or in part, by operation of Law or otherwise, without the prior written consent of the other parties hereto, and any attempted or purported assignment or delegation in violation of this Section 10 shall be null and void. Notwithstanding anything to the contrary in this Agreement, all obligations of a party hereto are being provided on a several basis by such party and not on a joint basis or a joint and several basis with the other parties hereto.

 

11.              Counterparts. This Support Agreement may be executed in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. The exchange of copies of this Support Agreement and signature pages by email in .pdf or .tif format (and including, without limitation, any electronic signature complying with the U.S. ESIGN Act of 2000, e.g., www.docusign.com), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, or by combination of such means, shall constitute effective execution and delivery of this Support Agreement as to the parties hereto and may be used in lieu of the original Support Agreement for all purposes. Such execution and delivery shall be considered valid, binding and effective for all purposes.

 

12.              Severability. The provisions of this Support Agreement shall be deemed severable and the illegality, invalidity or unenforceability of any provision shall not affect the legality, validity or enforceability of the other provisions of this Support Agreement. If any provision of this Support Agreement, or the application of such provision to any Person or any circumstance, is illegal, invalid or unenforceable, (i) a suitable and equitable provision to be negotiated by the parties hereto, each acting reasonably and in good faith, shall be substituted therefor in order to carry out, so far as may be legal, valid and enforceable, the intent and purpose of such legal, invalid or unenforceable provision, and (ii) the remainder of this Support Agreement and the application of such provision to other Persons or circumstances shall not be affected by such illegality, invalidity or unenforceability, nor shall such illegality, invalidity or unenforceability affect the legality, validity or enforceability of such provision, or the application of such provision, in any other jurisdiction.

 

13.              Governing Law; Jurisdiction; Jury Trial Waiver.

 

a. This Support Agreement, and any claims or Proceedings arising out of this Support Agreement or the subject matter hereof (whether at law or equity, in contract or in tort or otherwise), shall be governed by and construed in accordance with the laws of the State of Delaware without regard to the conflict of law principles thereof (or any other jurisdiction) to the extent that such principles would direct a matter to another jurisdiction.

 

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b. Each of the parties hereto agrees that: (i) it shall bring any Proceeding in connection with, arising out of or otherwise relating to this Support Agreement, any agreement, certificate, instrument or other document delivered pursuant to this Support Agreement or the Transactions exclusively in the Court of Chancery of the State of Delaware, or (and only if) such court finds it lacks subject matter jurisdiction, the Superior Court of the State of Delaware (Complex Commercial Division); provided that if subject matter jurisdiction over the Proceeding is vested exclusively in the United States federal courts, then such Proceeding shall be heard in the United States District Court for the District of Delaware (the “Chosen Courts”); and (ii) solely in connection with such Proceedings, (1) it irrevocably and unconditionally submits to the exclusive jurisdiction of the Chosen Courts, (2) it waives any objection to the laying of venue in any Proceeding in the Chosen Courts, (3) it waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party, (4) mailing of process or other papers in connection with any such Proceeding in the manner provided in Section 11.6 of the Merger Agreement or in such other manner as may be permitted by applicable Law shall be valid and sufficient service thereof and (5) it shall not assert as a defense, any matter or claim waived by the foregoing clauses (1) through (4) of this Section 13 or that any Governmental Order issued by the Chosen Courts may not be enforced in or by the Chosen Courts.

 

c. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY BE IN CONNECTION WITH, ARISE OUT OF OR OTHERWISE RELATE TO THIS SUPPORT AGREEMENT, ANY INSTRUMENT OR OTHER DOCUMENT DELIVERED PURSUANT TO THIS SUPPORT AGREEMENT OR THE TRANSACTIONS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY, IN CONNECTION WITH, ARISING OUT OF OR OTHERWISE RELATING TO THIS SUPPORT AGREEMENT, ANY INSTRUMENT OR OTHER DOCUMENT DELIVERED PURSUANT TO THIS SUPPORT AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HERETO HEREBY ACKNOWLEDGES AND CERTIFIES (A) THAT NO REPRESENTATIVE OF THE OTHER PARTIES HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTIES WOULD NOT, IN THE EVENT OF ANY ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) IT MAKES THIS WAIVER VOLUNTARILY AND (D) IT HAS BEEN INDUCED TO ENTER INTO THIS SUPPORT AGREEMENT AND THE TRANSACTIONS, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS, ACKNOWLEDGMENTS AND CERTIFICATIONS CONTAINED IN THIS SECTION 13.

 

14.              Notice. Any notice, consent or request to be given in connection with any of the terms or provisions of this Support Agreement shall be in writing and shall be sent or given in accordance with the terms of Section 11.6 of the Merger Agreement to the applicable party, with respect to the Company, at the address set forth in Section 11.6 of the Merger Agreement, and, with respect to the Stockholders, at the address set forth on each Stockholder’s signature page.

 

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15.              Termination. This Support Agreement and the obligations of Stockholders under this Support Agreement shall automatically terminate and any waivers of rights by Stockholders under this Support Agreement shall automatically be reinstated, in each case, upon the earliest of: (i) the Effective Time; (ii) the termination of the Merger Agreement in accordance with Section 9.1 thereof; and (iii) the mutual written agreement of the Parent and the Stockholders. Upon the termination or expiration of this Support Agreement, no party hereto shall have any further obligations or liabilities under this Support Agreement; provided, however, such termination or expiration shall not relieve any party hereto from liability for any willful breach of this Support Agreement occurring prior to its termination.

 

16.              Stockholder Representations: Each Stockholder represents and warrants to the Company, as of the date hereof and as of the Closing Date, that:

 

a. such Stockholder has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license or registration denied, suspended or revoked;

 

b. such Stockholder has full right and power, without violating any agreement to which it is bound (including, without limitation, any non-competition or non-solicitation agreement with any employer or former employer), to enter into this Support Agreement;

 

c. in the case of any entity, it is duly organized or formed, as applicable, validly existing and in good standing under the Laws of the jurisdiction in which it is organized or formed, as applicable, and the execution, delivery and performance of this Support Agreement and the consummation of the transactions contemplated hereby are within such Stockholder’s corporate, partnership or limited liability company powers, as applicable, and have been duly authorized by all necessary corporation, partnership or limited liability company actions, as applicable, on the part of such Stockholder;

 

d. this Support Agreement has been duly executed and delivered by such Stockholder and, assuming due authorization, execution and delivery by the other parties to this Support Agreement, this Support Agreement constitutes a legally valid and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with the terms hereof (except as enforceability may be limited by bankruptcy Laws, other similar Laws affecting creditors’ rights and general principles of equity affecting the availability of specific performance and other equitable remedies);

 

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e. the execution and delivery of this Support Agreement by such Stockholder does not, and the performance by such Stockholder of its obligations hereunder will not, (i) conflict with or result in a violation of the organizational documents of such Stockholder, or (ii) require any consent or approval from any third party that has not been given or other action that has not been taken by any third party, in each case, to the extent such consent, approval or other action would prevent, enjoin or materially delay the performance by such Stockholder of his, her or its obligations under this Support Agreement;

 

f. there are no Proceedings pending against such Stockholder or, to the knowledge of such Stockholder, threatened against such Stockholder, before (or, in the case of threatened Proceedings, that would be before) any arbitrator or any Governmental Authority, which in any manner challenges or seeks to prevent, enjoin or materially delay the performance by such Stockholder of his, her or its obligations under this Support Agreement;

 

g. such Stockholder has had the opportunity to read the Merger Agreement and this Support Agreement and has had the opportunity to consult with tax and legal advisors of his, her or its own choosing;

 

h. such Stockholder has not entered into, and shall not enter into, any agreement that would prevent or delay such Stockholder from performing any of its obligations hereunder;

 

i. such Stockholder has good title to the Stockholder Shares set forth opposite such Stockholder’s name on Exhibit A, free and clear of any Liens, and such Stockholders has the sole power to vote or cause to be voted such Stockholder Shares; and

 

j. the Stockholder Shares identified in Section 2 of this Support Agreement are the only voting securities of the Company owned of record or beneficially owned by such Stockholder as of the date hereof, and none of such Stockholder Shares are subject to any proxy, voting trust or other agreement or arrangement with respect to the voting of such Stockholder Shares that is inconsistent with such Stockholder’s obligations pursuant to this Support Agreement or the disposition of such Stockholder Shares.

 

17.              Adjustment for Stock Split. If, and as often as, there are any changes in the Company or the Stockholder Shares by way of stock split, stock dividend, combination or reclassification, or through merger, consolidation, reorganization, recapitalization or business combination, or by any other means, equitable adjustment shall be made to the provisions of this Support Agreement as may be required so that the rights, privileges, duties and obligations hereunder shall continue with respect to the Stockholders, the Company and the Stockholder Shares as so changed.

 

18.              Further Actions. Each of the parties hereto agrees to execute and deliver hereafter any further document, agreement or instrument of assignment, transfer or conveyance as may be necessary or desirable to effectuate the purposes hereof and as may be reasonably requested in writing by another party hereto.

 

[remainder of page intentionally left blank]

 

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If the above correctly reflects our understanding and agreement with respect to the foregoing matters, please so confirm by signing in the space below and returning this letter agreement to us.

 

  Sincerely,
       
  LUX VENTURES IV, L.P.
       
  By: Lux Venture Partners IV, LLC, its General Partner
       
       
  By:   /s/ Peter Herbert
  Name: Peter Herbert
  Title: Managing Director
       
       
  LUX CO-INVEST OPPORTUNITIES, L.P.
       
  By: Lux Co-Invest Partners, LLC, its General Partner
       
       
  By   /s/ Peter Herbert
  Name: Peter Herbert
  Title: Managing Director
       

 

  Address:   1600 El Camino Real, Suite 290
      Menlo Park, CA, 94025

 

Signature Page to

Stockholders Support Agreement

 

 

  PHARMACEUTICAL PRODUCT DEVELOPMENT, LLC
       
       
  By:   /s/ B. Judd Hartman
  Name: B. Judd Hartman
  Title: Executive Vice President and Chief Administrative Officer

 

  Address:   929 North Front Street
      Wilmington, NC 28401

 

 

Signature Page to

Stockholders Support Agreement

 

 

  REDMILE PRIVATE INVESTMENTS II, L.P.
       
  By: Redmile Private Investments II (GP), LLC, its general partner
       
  By: Redmile Group, LLC, its managing member
       
       
  By:   /s/ Joshua Garcia
  Name: Joshua Garcia
  Title: Authorized Signatory
       
       
  REDMILE CAPITAL OFFSHORE II MASTER FUND, LTD.
       
  By: Redmile Group, LLC, its investment manager
       
  By:   /s/ Joshua Garcia
  Name: Joshua Garcia
  Title: Authorized Signatory
       
       
  REDMILE STRATEGIC MASTER FUND, LP
       
  By: Redmile Group, LLC, its investment manager
       
  By:   /s/ Joshua Garcia
  Name: Joshua Garcia
  Title: Authorized Signatory
       
       
 

RAF, L.P.

   
  By: RAF GP, LLC, its general partner
   
       
  By:   /s/ Joshua Garcia
  Name: Joshua Garcia
  Title: Authorized Signatory

 

  Address:   c/o Redmile Group, LLC
      One Letterman Drive
      Building D, Suite D3-300
      San Francisco, CA 94129
      Email: operations@redmilegrp.com
      Attn: Josh Garcia

 

 

Signature Page to

Stockholders Support Agreement

 

 

  DRX CAPITAL AG
       
  By:   /s/ Neil Tiwari
  Name: Neil Tiwari
  Title: General Partner

 

  Address:   44 Montgomery
      San Francisco, CA

 

 

Signature Page to

Stockholders Support Agreement

 

 

  /s/ David Coman
  David Coman

 

 

Signature Page to

Stockholders Support Agreement

 

 

  /s/ Laura Podlsky
  Laura Podlsky

 

 

Signature Page to

Stockholders Support Agreement

 

 

  /s/ Jonathan Reitman
  Jonathan Reitman

 

 

Signature Page to

Stockholders Support Agreement

 

 

  /s/ Anita Modi
  Anita Modi

  

 

Signature Page to

Stockholders Support Agreement

 

 

  LIFESCI VENTURE PARTNERS II, LP
       
       
  By:   /s/ Andrew McDonald
  Name: Andrew McDonald
  Title: Partner

 

 

Signature Page to

Stockholders Support Agreement

 

 

Accepted and Agreed:

 

SCIENCE 37, INC.

 

 

By:   /s/ David Coman  
           
    Name:   David Cowan  
    Title:   Chief Executive Officer  
           
           
LIFESCI ACQUISITION II CORP.  
           
           
By:   /s/ Andrew McDonald  
           
    Name:   Andrew McDonald  
    Title:   CEO  

 

Signature Page to

Stockholders Support Agreement

 

 

EXHIBIT A

 

LIST OF STOCKHOLDERS

 

 

Name of Stockholder

Number of Shares of Company Common Stock Owned Number of Shares of Company Preferred Stock Owned
Pharmaceutical Product Development, LLC 0 9,298,410
Lux Ventures IV, L.P. 0 6,422,296
dRx Capital AG 0 5,651,398
Redmile Private Investments II, L.P. 0 3,995,153
RAF, L.P. 0 2,109,251
Lux Co-Investment Opportunities, L.P. 0 1,765,997
Redmile Capital Offshore II Master Fund, Ltd. 0 1,713,503
LifeSci Venture Partners II, LP 0 1,016,831
Redmile Strategic Master Fund LP 0 339,360
David Coman 304,000 0
Laura Podolsky 299,307 32,284
Jonathan Reitman 195,025 32,284
Anita Modi 50,000 0

 

 

Exhibit A

 

 

 

EXHIBIT B

 

COMPANY FINANCING AGREEMENTS

 

1. Amended and Restated Investors’ Rights Agreement, dated as of August 5, 2020, by and among the Company and each of the investors listed on Schedule A attached thereto.

 

2. Amended and Restated Voting Agreement, dated as of August 5, 2020, by and among the Company, the holders of the Company’s Preferred Stock listed on the Schedule of Investors attached as Schedule A thereto, and the holders of the Company’s Common Stock listed on the Schedule of Key Holders attached as Schedule B thereto, and any subsequent stockholders, or any transferees who became party thereto.

 

3. Amended and Restated First Refusal and Co-Sale Agreement, dated as of August 5, 2020, by and among the Company, the holders of Company Common Stock listed on Schedule A attached thereto, and the holders of Company Preferred Stock listed on Schedule B attached thereto.

 

 

 

Exhibit B

 

 

Exhibit 99.2

 

UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL INFORMATION

 

Defined terms included below have the same meaning as terms defined and included elsewhere in Current Report on Form 8-K.

 

The following unaudited pro forma condensed combined financial statements present the combination of the financial information of LSAQ and Science 37, adjusted to give effect to the Business Combination. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final SEC rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

 

The unaudited pro forma condensed combined balance sheet as of September 30, 2021 combines the historical consolidated balance sheet of LSAQ and the historical balance sheet of Science 37, on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on September 30, 2021. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 and the nine months ended September 30, 2021, combine the historical statements of operations of LSAQ and Science 37 on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on January 1, 2020, the beginning of the earliest period presented.

 

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements are provided for informational purposes only and are based on available information and assumptions that we believe are reasonable. It does not purport to represent what the actual consolidated results of operations or the consolidated financial position of Science 37 and LSAQ would have been if the Business Combination occurred on the dates indicated, nor is it necessarily indicative of future consolidated results of operations or consolidated financial position. The actual financial position and results of operations will differ, perhaps significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information and changes in operating results following the date of the unaudited pro forma condensed combined financial statements.

 

On October 4, 2021, the Business Combination was approved in an LSAQ shareholder vote. The Business Combination was consummated on October 6, 2021. In connection with the consummation of the Business Combination, the parties took the actions described below under “Description of Business Combination.”

 

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect solely to transaction accounting adjustments to the extent they are adjustments that reflect the accounting for the Business Combination.

 

The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

 

  the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

  the historical audited consolidated financial statements of LSAQ as of September 30, 2021 and 2020 and for the quarter ended September 30, 2021 and for the period from December 18, 2019 (inception) through September 30, 2020 and the related notes, which are incorporated by reference into this Current Report on Form 8-K from the proxy statement/ prospectus of LSAQ dated September 24, 2021 (the “Proxy Statement”);

 

  the historical audited financial statements of Science 37 as of December 31, 2020 and 2019 and for the years then ended and the related notes, which are incorporated by reference into this Current Report on Form 8-K from the Proxy Statement;

 

  the historical unaudited financial statements of LSAQ as of December 31, 2020 and for the six months then ended and the related notes incorporated by reference into this Current Report on Form 8-K from the Proxy Statement;

 

  the historical unaudited financial statements of Science 37 as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 and the related notes, which are incorporated by reference into this Current Report on Form 8-K from the Proxy Statement; and

 

  other information relating to LSAQ and Science 37 incorporated by reference into this Current Report on Form 8-K from the Proxy Statement, including the Merger Agreement and the description of certain terms thereof set forth in the section entitled “The Merger Agreement.”

 

 

 

 

Description of Business Combination

 

On May 6, 2021, LifeSci Acquisition II Corp., a Delaware corporation (“LSAQ”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among LSAQ, LifeSci Acquisition II Merger Sub, Inc. a Delaware corporation and a wholly-owned subsidiary of LSAQ (“Merger Sub”), and Science 37, Inc., a Delaware corporation (“Science 37”). Pursuant to the terms of the Merger Agreement, a business combination between LSAQ and Science 37 will be effected through the merger of Merger Sub with and into Science 37, with Science 37 surviving the merger as a wholly-owned subsidiary of LSAQ (the “Business Combination”).

 

Treatment of Science 37 Securities

 

Preferred Stock. Immediately prior to the effective time of the Business Combination (the “Effective Time”) and subject to the consent of the holders of a majority of the then outstanding shares of Science 37’s Series A, Series, B, Series C, Series D and Series D-1 preferred stock, par value $0.0001 per share (collectively, the “Science 37 Preferred Stock”), voting together as a single class on an as-converted basis, each issued and outstanding share of Science 37 Preferred Stock were converted into shares of the common stock, par value $0.0001 per share, of Science 37 (the “Science 37 Common Stock”) at the then-applicable conversion rates (the “Science 37 Preferred Stock Conversion”).

 

Common Stock. At the Effective Time, following the Science 37 Preferred Stock Conversion, each share of Science 37 Common Stock (including shares of Science 37 Common Stock outstanding as a result of the Science 37 Preferred Stock Conversion, but excluding shares the holders of which perfect rights of appraisal under Delaware law) was converted into the right to receive such number of shares of LSAQ Common Stock equal to the Exchange Ratio (subject to rounding mechanisms as described in the Merger Agreement) and a number of Earn-Out Shares (as defined below). The Exchange Ratio is defined in the Merger Agreement to be the quotient of (i) 100,000,000 divided by the number of shares of Science 37’s Fully Diluted Capital Stock (as defined in the Merger Agreement). The Exchange Ratio was equal to approximately 1.815.

 

Stock Options. At the Effective Time, each outstanding option to purchase shares of Science 37 Common Stock granted under the Science 37, Inc. 2015 Stock Plan (each, a “Science 37 Option”), whether or not then vested and exercisable, was converted automatically (and without any required action on the part of such holder of outstanding Science 37 Option) into an option to purchase a number of shares of LSAQ Common Stock equal to the number of shares of Science 37 Common Stock subject to such Science 37 Option immediately prior to the Effective Time multiplied by the Exchange Ratio (rounded down to the nearest whole share), with a per share exercise price equal to the exercise price per share of Science 37 Common Stock of such Science 37 Option immediately prior to the Effective Time divided by the Exchange Ratio (rounded up to the nearest whole cent). Notwithstanding the foregoing, in the event the per share exercise price of a Science 37 Option is greater than or equal to the cash equivalent of a number of shares of LSAQ Common Stock equal to the Exchange Ratio, subject to rounding pursuant to the Merger Agreement, such Science 37 Option was cancelled for no consideration.

 

Earn-Out Shares. Following the closing of the Business Combination, former holders of shares of Science 37 Common Stock (including shares received as a result of the Science 37 Preferred Stock conversion) and former holders of Science 37 Options will be entitled to receive their respective pro rata shares of up to 12,500,000 additional shares of LSAQ Common Stock (the “Earn-Out Shares”) if, within a three-year period following the date of the consummation of the Business Combination, the closing share price of the LSAQ Common Stock equals or exceeds any of two thresholds over any 20 trading days within a 30-day trading period (each, a “Triggering Event”), subject to, in respect of a former holder of Science 37 Options, continued services to LSAQ or one of its subsidiaries at the time of the applicable Triggering Event. If there is a change of control of LSAQ or its successor within the three-year period following the consummation of the Business Combination that will result in the holders of LSAQ Common Stock receiving a per share price equal to or in excess of any Triggering Event threshold(s), then immediately prior to such change of control, any Triggering Event that has not previously occurred shall be deemed to have occurred and LSAQ shall issue the Earn-Out Shares to the former holders of shares of Science 37 Common Stock and former holders of Science 37 Options in accordance with their respective pro rata shares.

  

The potential issuance of the 12,500,000 earn-out shares represents a contingent liability to be recorded at fair value on the balance sheet. This is because the potential transferee pro rata share is variable and may change as stock option holders may forfeit their pro rata share if termination occurs prior to the Triggering Event(s), and the forfeited pro rata share is reallocated to the remaining holders.

 

PIPE Investment

 

On May 6, 2021, in connection with the execution of the Merger Agreement, LSAQ entered into subscription agreements (collectively, the “Subscription Agreements”) with certain investors (the “Subscribers”) pursuant to which the Subscribers have agreed to purchase, and LSAQ has agreed to sell to the Subscribers, an aggregate of 20,000,000 shares of LSAQ Common Stock (collectively, the “PIPE Shares”), for a purchase price of $10.00 per share and an aggregate purchase price of $200,000,000. The obligations to consummate the transactions contemplated by the Subscription Agreements are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Merger Agreement. The sale and purchase of the PIPE Shares was consummated concurrently with the Business Combination.

 

 

 

 

Redemption of LSAQ Common Stock Prior to the Closing of the Business Combination

 

Prior to the closing of the Business Combination, holders of shares of LSAQ Common Stock were offered the opportunity to redeem, upon the closing of the Business Combination, all or a portion of Science 37 Common Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing) in the Trust Account. Holders of 2,299,493 shares of LSAQ Common Stock exercised their right to have such shares redeemed. Accordingly, pro forma shares outstanding upon consummation of the Business Combination consist of the following:

 

LSAQ Initial Stockholders     2,002,260  
Shares from Conversion of LSAQ Private Warrants     3,146,453  
LSAQ Public Stockholders     5,709,548  
Science 37 Rollover Shares     83,848,889  
PIPE Shares     20,000,000  
Total     114,707,150  

 

 

 

 

SCIENCE 37 HOLDINGS, INC.

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2021

(in thousands)

 

                Transaction            
    Science 37     LSAQ     Accounting         Pro Forma  
    Historical     Historical     Adjustments     Notes   Combined  
Assets                                    
Cash and equivalents   $ 7,996     $ 201     $ 80,122     2A   $ 242,991  
                      (22,324 )   2B        
                      200,000     2F        
                          2G        
                      (23,004 )   2I        
Restricted cash     ---                 2G      
Accounts receivable (including amounts with related parties)     6,999                       6,999  
Prepaid expenses and other current assets     4,226       89       (986 )   2B     3,329  
Total current assets     19,221        290       233,808           253,319  
Cash and marketable securities held in Trust Account           80,122       (80,122 )   2A      
Property, plant and equipment, net     1,158                       1,158  
Capitalized software, net     16,679                       16,679  
Operating lease right-of-use assets     2,362                       2,362  
Other assets     326                       326  
Total assets   $ 39,746     $ 80,412     $ 153,686         $ 273,844  
Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit)                                    
Accounts payable   $ 7,489     $ 715     $ (649)     2B    $ 7,555  
Accrued expenses and other liabilities     10,727             (181)     2B      10,546  
Deferred revenue     6,571                       6,571  
Total current liabilities     24,787       715       (830)           24,672  
Long-term deferred revenue     1,056                       1,056  
Operating lease liabilities     1,485                       1,485  
Contingent liability for issuance of earn-out shares                     81,800     2J     81,800  
Other long-term liabilities     1,542                       1,542  
Total liabilities     28,870       715       80,970           110,555  
Common stock subject to possible redemptions           80,091       (80,091 )   2C      
Redeemable convertible preferred stock     143,086             (143,086 )   2D      
Stockholders’ Equity (Deficit)                                    
Common stock, par value     1                 2C     11  
                      1     2C        
                      (1 )   2E        
                      8     2E        
                      2     2F        
                          2I        
Additional paid-in capital     4,769       998       (998 )   2C     300,258  
                      81,087     2C        
                      (22,479 )   2B        
                      143,086     2D        
                      (8 )   2E        
                      1     2E        
                      199,998     2F        
                      (81,800 )   2J        
                      (23,004 )   2I        
                      (1,392 )   2H        
Accumulated deficit     (136,980 )     (1,392 )     1,392     2H     (136,980 )
Total stockholders’ equity (deficit)     (132,210 )     (394)       295,893           163,289  
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)   $ 39,746     $ 80,412     $ 153,686         $ 273,844  

 

 

 

 

SCIENCE 37 HOLDINGS, INC.

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR

THE YEAR ENDED DECEMBER 31, 2020

(in thousands, except share and per share data)

 

                Pro Forma Combined  
                Transaction            
    Science 37     LSAQ     Accounting         Pro Forma  
    Historical     Historical     Adjustments     Notes   Combined  
Revenues (including amounts with related parties)   $ 23,704     $     $         $ 23,704  
Operating expenses:                                    
Cost of revenues (including amounts with related parties)     22,597                       22,597  
Selling, general and administrative     28,351       84                 28,435  
Depreciation     4,447                       4,447  
Restructuring costs     772                       772  
Total operating expenses     56,167       84                 56,251  
Loss from operations     (32,463 )     (84 )               (32,547 )
Other income:                                    
Interest income     77       5       (5 )   K     77  
Sublease income (including amounts with related parties)     709                       709  
Other income     3                       3  
Total other income     789       5       (5 )         789  
Net loss   $ (31,674 )   $ (79 )   $ (5 )       $ (31,758 )
Weighted average common shares outstanding                           Note 3     114,707,150  
                                     
Basic and diluted net loss per common share                           Note 3   $ (0.28 )

 

 

 

 

SCIENCE 37 HOLDINGS, INC.

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021

(in thousands, except share and per share data)

 

                Pro Forma Combined  
                Transaction            
    Science 37     LSAQ     Accounting         Pro Forma  
    Historical     Historical     Adjustments     Notes   Combined  
Revenues (including amounts with related parties)   $ 39,222     $     $         $ 39,222  
Operating expenses:                                    
Cost of revenues (including amounts with related parties)     26,246                       26,246  
Selling, general and administrative     37,477       1,337       (649)         38,165  
Depreciation     5,189                       5,189  
Total operating expenses     68,912       1,337       (649)           69,600  
Loss from operations     (29,690 )     (1,337 )     649           (30,378 )
Other income:                                    
Interest income     2       27       (27 )   K     2  
Sublease income     444                       444  
Other income     12                       12  
Total other income     458       27       (27 )         458  
Net loss   $ (29,232 )   $ (1,310 )   $ 622         $ (29,920 )
Weighted average common shares outstanding                           Note 3     114,707,150  
                                     
Basic and diluted net loss per common share                           Note 3   $ (0.26 )

 

 

 

 

NOTES TO THE UNAUDITED PRO FORMA

CONDENSED COMBINED FINANCIAL STATEMENTS

 

1. Description of Business Combination and Basis of Pro Forma Presentation

 

On May 6, 2021, LifeSci Acquisition II Corp., a Delaware corporation (“LSAQ”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among LSAQ, LifeSci Acquisition II Merger Sub, Inc. a Delaware corporation and a wholly-owned subsidiary of LSAQ (“Merger Sub”), and Science 37, Inc., a Delaware corporation (“Science 37”). Pursuant to the terms of the Merger Agreement, a business combination between LSAQ and Science 37 was effected through the merger of Merger Sub with and into Science 37, with Science 37 surviving the merger as a wholly-owned subsidiary of LSAQ (the “Business Combination”). See the introduction section to this Unaudited Pro Forma Condensed Combined Financial Information for further additional details of the Business Combination.

 

The Business Combination is expected to be accounted for as a reverse recapitalization resulting from the acquisition by a non-operating public company that is a shell company (as defined in Rule 12b-2 under the Securities Exchange Act of 1934). This accounting treatment as a recapitalization is consistent with Securities and Exchange Commission guidance promulgated in staff speeches and the SEC Reporting Manual, Topic 12 on Reverse Acquisitions and Recapitalizations. As such, the Business Combination is outside the scope of FASB ASC 805. Specifically, the Business Combination is expected to be treated as a reverse recapitalization in which the entity that issues securities (the legal acquirer) is determined to be the accounting acquiree, while the entity receiving securities (the legal acquiree) is the accounting acquirer.

 

Accordingly, the Business Combination is expected to be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded. Under this method of accounting, LSAQ is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of Science 37 issuing stock for the net assets of LSAQ, accompanied by a recapitalization. The net assets of LSAQ are stated at historical cost, with no goodwill or other intangible assets recorded.

 

In May 2020, the SEC adopted Release No. 33-10786, “Amendments to Financial Disclosures about Acquired and Disposed Businesses” (the “Final Rule”). The Final Rule became effective on January 1, 2021, and the unaudited pro forma condensed combined financial statements herein are presented in accordance therewith.

 

The accompanying unaudited pro forma condensed combined financial statements give effect to the Business Combination in which Merger Sub, a wholly-owned subsidiary of LSAQ, merged with and into Science 37, with Science 37 surviving the merger as a wholly-owned subsidiary of LSAQ, and the related PIPE Investment. The unaudited pro forma condensed combined financial statements are based on the historical financial statements of Science 37 and LSAQ, and the assumptions and adjustments set forth in these notes.

 

The unaudited pro forma condensed combined balance sheet as of September 30, 2021 gives pro forma effect to the Business Combination as if it had been consummated on September 30, 2021. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 and the nine months ended September 30, 2021, give pro forma effect to the Business Combination as if it had been consummated on January 1, 2020.

 

Adjustments included in the column under the heading “Transaction Accounting Adjustments” are solely based on information contained within the Merger Agreement. Transaction Accounting Adjustments are required adjustments that reflect only the application of required accounting to the Business Combination. The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of post-combination company shares outstanding, assuming the Business Combination occurred on January 1, 2020.

 

Given the history of net losses and valuation allowance of Science 37 and LSAQ, management assumed a statutory tax rate of 0%. Therefore the pro forma adjustments to the statement of operations resulted in no income tax adjustment to the pro forma financial statements.

 

Science 37 and LSAQ have not had any historical relationship prior to the Business Combination.

  

Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

 

 

 

2. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

 

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

 

The adjustments included in the unaudited pro forma condensed combined balance sheet as of September 30, 2021 are as follows:

 

  A Reflects the reclassification of cash and investments held in the Trust Account that will become available for operations following the Business Combination.

 

  B Represents the payment of transaction costs of $23.1 million as an increase to Stockholders’ deficit.

 

  C Represents the conversion of LSAQ historical common stock and additional paid-in-capital accounts to approximately 7.7 million newly issued shares of Science 37 Common Stock and the conversion of LSAQ warrants to approximately 3.1 million newly issued shares of Science 37 Common Stock.

 

  D Represents the conversion of Science 37 preferred stock to newly issued shares of common stock upon consummation of the Business Combination.

 

  E Represents the issuance of 83.9 million new shares of Science 37 Common Stock to existing common and preferred stockholders at historical cost and the elimination of the previous par value accounts.

 

  F Represents the issuance of 20.0 million new shares of LSAQ Common Stock at $10.00 per share in the PIPE Investment for total cash of $200.0 million.

 

  G Represents the transfer of restricted cash to available cash and equivalents accounts as it is assumed restrictions would not have been required upon consummation of the Business Combination.

 

  H Represents the elimination of LSAQ accumulated deficit upon recapitalization of the Combined Company.

 

  I Represents adjustment to reflect redemptions of 2,299,493 shares of LSAQ Common Stock for an aggregate payment of approximately $23.0 million from the Trust Account.

 

  J Reflects the fair value of the Earn-Out Shares contingently issuable to the former holders of shares of Science 37 Common Stock and Science 37 Options. The fair value was determined based on information available as of the date of these unaudited pro forma condensed combined financial information. For more information, see Note 4.

 

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

 

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020 and for the six months ended September 30, 2021 is as follows:

 

  K

Represents the pro forma adjustment to eliminate interest income generated by the Trust Account.

 

  L

Represents facilitative transaction costs which should have no P&L impact on a pro forma basis

 

3. Net Loss per Share of Non-Redeemable Common Stock

 

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares of common stock in connection with the Business Combination, and assuming the shares were outstanding since January 1, 2020. As the Business Combination is being reflected as if it had occurred at the beginning of the earliest period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire periods presented. Also, assumes that all stock options and warrants are not included in the per share calculation as there is a net loss in all periods presented and including them would be anti-dilutive. 

 

Holders of 2,299,493 shares of LSAQ Common Stock exercised their right to have such shares redeemed. Accordingly, pro forma shares outstanding upon consummation of the Business Combination consist of the following:

 

LSAQ Initial Stockholders     2,002,260  
Shares from Conversion of LSAQ Private Warrants     3,146,453  
LSAQ Public Stockholders     5,709,548  
Science 37 Rollover Shares     83,848,889  
PIPE Shares     20,000,000  
Total     114,707,150  

 

 

 

 

4. Earn-Out Shares Consideration

 

The Earn-Out obligations to issue the Earn-Out Share Consideration will be accounted for as liability- classified instruments that are earned upon achieving certain triggering events, which includes a change in control event that is not solely indexed to the LSAQ Stock. The preliminary estimated fair value of the Earnout Consideration is $81.8 million. The estimated fair value at September 30, 2021 of the Earn-Out Shares Consideration was determined by using a Monte Carlo simulation valuation model. The preliminary estimated fair value of Earn-Out Consideration was determined using the most reliable information available. Assumptions used in the preliminary valuation were as follows:

 

Current stock price: The stock price was set at $10.00 per share based on the closing price per share of LSAQ.

 

Expected volatility: The volatility rate was determined by using an average of comparable public companies annualized over three years.

 

Risk-free interest rate: The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of issuance for zero-coupon U.S. Treasury notes with one-year maturity.

 

Expected term: The expected term is three years.

 

 

 

 

Exhibit 99.3

 

Condensed consolidated financial statements (unaudited)

Science 37, Inc.

For the Three and Nine Months Ended September 30, 2021 and 2020 

 

 

 

Science 37, Inc.

 

Condensed Consolidated Balance Sheets

  

    (unaudited)        
    September 30, 2021     December 31, 2020  
Assets                
Current assets:                
Cash and cash equivalents   $ 7,996,362     $ 32,478,948  
Restricted cash     -       1,004,142  
Accounts receivable, net (including amounts with related parties)     6,998,708       11,200,252  
Prepaid expenses and other current assets     4,226,079       1,364,162  
Total current assets     19,221,149       46,047,504  
                 
Property and equipment, net     1,157,818       535,384  
Operating lease right-of-use assets     2,362,445       2,210,253  
Capitalized software, net     16,679,024       8,054,367  
Other assets     325,782       183,718  
Total assets   $ 39,746,218     $ 57,031,226  
                 
Liabilities, redeemable convertible preferred stock and stockholders’ deficit                
Current liabilities:                
Accounts payable   $ 7,488,575     $ 4,401,874  
Accrued expenses and other liabilities     10,727,474       8,762,839  
Deferred revenue     6,571,281       5,136,457  
Total current liabilities     24,787,330       18,301,170  
                 
Long-term liabilities:                
Long-term deferred revenue     1,055,624       427,667  
Operating lease liabilities     1,485,288       1,127,837  
Other long-term liabilities     1,541,313       223,619  
Total liabilities     28,869,555       20,080,293  
                 
Redeemable convertible preferred stock:                
Preferred stock, $0.0001 par value; 41,692,230 shares authorized, 41,587,368 issued and outstanding at September 30, 2021 and December 31, 2020     143,086,271       143,086,271  
                 
Stockholders’ deficit:                
Common stock, $0.0001 par value; 74,666,115 shares authorized, 4,595,168 and 2,765,097 issued and outstanding at September 30, 2021 and December 31, 2020, respectively     1,039       856  
Additional paid-in capital     4,769,114       1,611,049  
Accumulated deficit     (136,979,761 )     (107,747,243 )
Total stockholders’ deficit     (132,209,608 )     (106,135,338 )
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit   $ 39,746,218     $ 57,031,226  

  

See accompanying notes to condensed consolidated financial statements.

 

1

 

 

Science 37, Inc.

 

 Condensed Consolidated Statements of Operations and Comprehensive Loss

 (unaudited)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020     2021     2020  
Revenues (including amounts with related parties)   $ 14,235,697     $ 6,583,413     $ 39,221,524     $ 12,541,208  
                                 
Operating expenses:                                
Cost of revenues (including amounts with related parties)     10,318,268       7,050,897       26,245,932       10,929,068  
Selling, general and administrative     16,931,866       6,301,712       37,477,055       17,870,603  
Depreciation and amortization     1,915,517       1,141,801       5,188,586       3,162,424  
Restructuring costs                       699,473  
Total operating expenses     29,165,651       14,494,410       68,911,573       32,661,568  
                                 
Loss from operations     (14,929,954 )     (7,910,997 )     (29,690,049 )     (20,120,360 )
                                 
Other income:                                
Interest income     151       1,554       1,424       76,019  
Sublease income (including amounts with related parties)     230,235       232,294       444,153       696,882  
Other income     7,697       (6,681 )     11,954       (2,489 )
Total other income     238,083       227,167       457,531       770,412  
                                 
Net loss and other comprehensive loss   $ (14,691,871 )   $ (7,683,830 )   $ (29,232,518 )   $ (19,349,948 )
                                 
Loss per share:                                
Basic and diluted   $ (3.23 )   $ (0.90 )   $ (7.66 )   $ (2.29 )
                                 
Weighted average common shares outstanding:                                
Weighted average shares used to compute basic and diluted net loss per share     4,551,755       8,522,923       3,818,717       8,458,434  

  

See accompanying notes to condensed consolidated financial statements.  

 

2

 

 

Science 37, Inc.

  

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

 

Three, Six, and Nine Months Ended September 30, 2021 and 2020

 (unaudited)

 

    Redeemable Convertible           Additional           Total  
    Preferred Stock     Common Stock     Paid-In     Accumulated     Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Deficit     Deficit  
Balances at December 31, 2020     41,587,368     $ 143,086,271       2,765,097     $ 856     $ 1,611,049     $ (107,747,243 )   $ (106,135,338 )
Stock-based compensation expense     -       -       -       -       225,623       -       225,623  
Proceeds from option exercises     -       -       506,707       51       331,740       -       331,791  
Net loss     -       -       -       -       -       (6,825,527 )     (6,825,527 )
Balances at March 31, 2021     41,587,368     $ 143,086,271       3,271,804     $ 907     $ 2,168,412     $ (114,572,770 )   $ (112,403,451 )
Stock-based compensation expense     -       -       -       -       689,494       -       689,494  
Proceeds from option exercises     -       -       1,216,612       121       805,773       -       805,894  
Net loss     -       -       -       -       -       (7,715,120 )     (7,715,120 )
Balances at June 30, 2021     41,587,368     $ 143,086,271       4,488,416     $ 1,028     $ 3,663,679     $ (122,287,890 )   $ (118,623,183 )
Stock-based compensation expense     -       -       -       -       997,979       -       997,979  
Proceeds from option exercises     -       -       106,752       11       107,456       -       107,467  
Net loss     -       -       -       -       -       (14,691,871 )     (14,691,871 )
Balances at September 30, 2021     41,587,368     $ 143,086,271       4,595,168     $ 1,039     $ 4,769,114     $ (136,979,761 )   $ (132,209,608 )

 

                               
    Redeemable Convertible           Additional           Total  
    Preferred Stock     Common Stock     Paid-In     Accumulated     Stockholders’  
    Shares     Amount     Shares     Amount     Capital     Deficit     Deficit  
Balances at December 31, 2019     32,653,742     $ 106,884,111       8,396,425     $ 839     $ 1,374,318     $ (75,961,521 )   $ (74,586,364 )
Impact of adoption of ASC 842     -       -       -       -       -       (111,637 )     (111,637 )
Stock-based compensation expense     -       -       -       -       32,414       -       32,414  
Proceeds from option exercises     -       -       13,284       2       16,937       -       16,939  
Net loss     -       -       -       -       -       (5,749,171 )     (5,749,171 )
Balances at March 31, 2020     32,653,742     $ 106,884,111       8,409,709     $ 841     $ 1,423,669     $ (81,822,329 )   $ (80,397,819 )
Stock-based compensation expense     -       -       -       -       (135,966 )     -       (135,966 )
Proceeds from option exercises     -       -       59,033       5       56,047       -       56,052  
Net loss     -       -       -       -       -       (5,916,947 )     (5,916,947 )
Balances at June 30, 2020     32,653,742     $ 106,884,111       8,468,742     $ 846     $ 1,343,750     $ (87,739,276 )   $ (86,394,680 )
Stock-based compensation expense     -       -       -       -       105,341       -       105,341  
Proceeds from option exercises     -       -       75,694       8       43,241       -       43,249  
Preferred Series D1 issuance, net of issuance costs     9,038,488       39,923,805       -       -       -       -       -  
Net loss     -       -       -       -       -       (7,683,830 )     (7,683,830 )
Balances at September 30, 2020     41,692,230     $ 146,807,916       8,544,436     $ 854     $ 1,492,332     $ (95,423,106 )   $ (93,929,920 )

  

See accompanying notes to condensed consolidated financial statements.    

 

3

 

 

Science 37, Inc.

 

Condensed Consolidated Statements of Cash Flows

 (unaudited)

  

    Nine Months Ended September 30,  
    2021     2020  
Operating activities                
Net loss   $ (29,232,518 )   $ (19,349,948 )
Adjustments to reconcile net loss to net cash used in                
operating activities:                
Depreciation and amortization     5,188,586       3,162,424  
Amortization of operating ROU assets     1,153,257       1,400,294  
Stock based compensation     1,913,096       1,789  
Changes in assets and liabilities:                
Accounts receivable (including amounts with related parties)     4,201,546       (3,265,235 )
Prepaid expenses and other current assets     (2,861,917 )     (1,265,844 )
Other assets     (142,065 )     363,156  
Accounts payable     2,109,901       3,163,309  
Accrued expenses and other current liabilities     577,494       3,158,333  
Deferred revenue     2,062,780       (976,377 )
Operating lease liabilities     (947,997 )     (3,399,177 )
Other long-term liabilities     1,317,693       143,369  
Net cash used in operating activities     (14,660,144 )     (16,863,907 )
                 
Investing activities                
Capitalized software development costs     (11,338,853 )     (3,938,788 )
Purchases of fixed assets     (732,883 )     (244,677 )
Net cash used in investing activities     (12,071,736 )     (4,183,465 )
                 
Financing activities                
Proceeds from Series D-1 financing, net of issuance costs           39,923,805  
Cash received from stock option exercises     1,245,152       116,240  
Net cash provided by financing activities     1,245,152       40,040,045  
                 
Net decrease in cash, cash equivalents, and restricted cash     (25,486,728 )     18,992,673  
Cash, cash equivalents, and restricted cash, beginning of period     33,483,090       28,808,017  
Cash, cash equivalents, and restricted cash, end of period   $ 7,996,362     $ 47,800,690  
Supplemental disclosures of non-cash activities:                
Net change in accounts payable and accrued expenses and other current liabilities related to capitalized software and fixed asset additions   $ (2,363,941 )   $ (208,363 )
ROU asset obtained in exchange for operating lease liabilities   $ (1,305,448 )   $ -  

 

See accompanying notes to condensed consolidated financial statements.    

 

4

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited)

 

September 30, 2021

 

1. Company Background and Basis of Presentation

 

Organization

 

Science 37, Inc. or “the Company”, a Delaware Corporation, was formed on September 8, 2014.

 

Description of Business

 

The Company is a leading provider of technology-based solutions that enable decentralized clinical trials on behalf of biopharmaceutical sponsors. The Company pioneered the decentralized clinical trial model and developed the industry’s first Decentralized Clinical Trial Operating System (DCT OS), combining its technology platform, which orchestrates workflows, supports evidence generation, and harmonizes data seamlessly, with its Specialized Network of patient communities, on-demand telemedicine investigators, flexible mobile nurses, scalable remote coordinators and robust connected technologies. By bringing research to patients and providers more directly, the Company’s operating system increases access and patient diversity, which can help speed the development of potentially life-saving drug treatments.

 

On May 7, 2021, the Company announced a planned merger with LifeSci Acquisition II Corp (“LSAQ”) under a definitive business combination agreement. The merger was consummated on October 6, 2021, whereby LSAQ acquired 100% of the Company’s issued and outstanding securities through a reverse merger of the Company with and into a wholly owned subsidiary of LSAQ, with the Company surviving the merger as Science 37 Holdings, Inc, now a public company. In conjunction with this merger, the Company received $200 million through a private investment in public entity (PIPE) offering from leading institutional and strategic investors to further fund the Company’s decentralized trial technology platform and extend into new adjacencies.

 

Unaudited Interim Financial Information and Use of Estimates

 

The Company prepared the accompanying unaudited condensed consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all the information and notes required by GAAP for complete financial statements. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies followed for annual financial reporting.

 

The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These estimates are based on historical experience and various other assumptions believed reasonable under the circumstances. The Company evaluates its estimates on an ongoing basis and makes changes to the estimates and related disclosures as experience develops or new information becomes known, including facts and circumstances related to the novel coronavirus disease pandemic. Actual results will most likely differ from those estimated. The Company’s most significant estimates and assumptions used in the preparation of the accompanying condensed consolidated financial statements relate to contract cost estimates in revenue recognition, capitalized software costs, and the valuation of the Company’s common stock.

 

The condensed consolidated financial statements, in management’s opinion, include all adjustments of a normal recurring nature necessary for a fair presentation. The information included in this filing should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in this filing for the year ended December 31, 2020. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year ending December 31, 2021 or any other future period. The consolidated balance sheet at December 31, 2020 is derived from the amounts in the audited balance sheet included in this filing for the year ended December 31, 2020.

 

5

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

1. Company Background and Basis of Presentation (continued)

 

Liquidity

 

The Company has continued to experience increased costs that adversely affect the Company’s current results of operations and liquidity. The Company’s condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The financial statements for the three and nine months ended September 30,2021 do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from uncertainty related to the Company's ability to continue as a going concern.

 

As of September 30, 2021, the Company had $7,996,362 of unrestricted cash. On October 6, 2021, the definitive business combination agreement between the Company and LifeSci Acquisition II Corp (LSAQ) was consummated. LSAQ acquired 100% of the Company’s issued and outstanding securities through a reverse merger of the Company with and into a wholly owned subsidiary of LSAQ, with the Company surviving the merger as Science 37 Holdings, Inc, now a public company. In conjunction with this merger, the Company received $200 million through a private investment in public entity (PIPE) offering from institutional and strategic investors to further fund the Company’s decentralized trial technology platform and extend into new adjacencies. As a result of the merger and inclusive of the PIPE financing, the Company received $234.2 million, net of fees and expenses paid in connection with the closing of the business combination.

 

The Company believes that its $8.0 million of cash as of September 30, 2021, in addition to the proceeds received from the merger with LSAQ and PIPE offering, are sufficient to fund planned operations for at least 12 months from the date these financial statements were available to be filed.

 

Concentration Risks

 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, deposits of up to $250,000 at Federal Deposit Insurance Corporation (FDIC) insured institutions are covered by FDIC insurance. At times, deposits at the Company’s financial institution may exceed federally insured limits. Management periodically assesses the financial condition of the institution and believes that any possible credit risk is minimal. The Company has not experienced any loss from such risk.

 

COVID-19 Pandemic

 

In March 2020 the World Health Organization declared the global novel coronavirus disease 2019 (COVID-19) outbreak a pandemic. The Company’s original sublease tenant in San Francisco was unable to fulfill its sublease obligations due to the pandemic’s impact on its business operations. The sublessee vacated the facility in February 2021 and a new sublessee was not secured until May 2021, at terms substantially similar to the original sublessee. For the nine months ended September 30, 2021 and 2020, the Company wrote-off $228,946 and $0 of sublease receivable against sublease income due to low probability of collection from the original sublessee. No other significant impacts to the Company’s operations due to the COVID-19 outbreak have occurred.

  

Capitalized Software

 

The Company’s internal use proprietary software organizes workflows, captures real-time evidence, and harmonizes data during clinical trial support for its customers. Capitalized software is recorded at cost less accumulated amortization. The Company capitalizes software development cost related to the development of the Company’s proprietary platform in accordance with ASC 350 guidance. Internal and external costs incurred during the preliminary stage are expensed as incurred. Costs incurred during the application development stage are capitalized and consist of payroll labor and benefits to the extent of time spent directly on the project and external direct costs of materials and labor. Training and maintenance costs are expensed as incurred. The Company commences amortization once the respective assets are placed into service. The estimated useful life for capitalized software is 3 years.

 

Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the expected undiscounted future cash flow from the use of the asset and its eventual disposition is less than the carrying amount of the asset, an impairment loss is recognized and measured using the fair value of the related asset. No material impairments were recognized during the three and nine months ended September 30, 2021 and 2020.

 

6

 

  

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

1. Company Background and Basis of Presentation (continued)

 

Net Loss Per Share

 

Basic net loss per share is calculated by dividing net loss by the weighted average shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, preferred stock, stock options and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

 

Segments

 

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company has determined that its Senior Executive Committee, which includes the Chief Executive Officer, together with the Board of Directors is the CODM. The Company operates in a single operating segment as the CODM reviews financial information presented on a consolidated basis, at the Company level, for the purposes of making operating decisions, allocation of resources, and evaluating financial performance.

 

As of and for the nine months ended September 30, 2021 and 2020, the Company did not have material revenue earned or assets located outside of the United States.

 

Accounting Pronouncements Issued but Not Adopted as of September 30, 2021

 

In June 2016, the FASB issued a new accounting standard intended to provide financial statement users with more decision-useful information about expected credit losses and other commitments to extend credit held by a reporting entity. The standard replaces the incurred loss impairment methodology in current GAAP with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company does not expect the adoption of the guidance to have a material effect on the Company’s consolidated financial statements. This is based on factors including the Company’s assessment of historical losses, customer’s creditworthiness, and the fact that the Company’s trade receivables are short term in duration. The Company expects to implement this new standard in January 2022.

 

2. Revenue

 

Revenues by Geography

 

Substantially all of the Company’s revenue for the three and nine months ending September 30, 2021 and 2020 was derived from services performed within the United States. No other country represented more than 10% of total revenue for either period.

 

Unsatisfied Performance Obligations

 

As of September 30, 2021, the aggregate amount of transaction price allocated to the unsatisfied performance obligations was $118,892,662. The Company expects to recognize this revenue over the remaining contract term of the individual projects, with contract terms generally ranging from one month to 6.4 years. The amount of unsatisfied performance obligations is lower than the potential contractual revenue since it excludes revenue that is constrained. Revenue amounts excluded due to constraints include those amounts under contracts that are wholly unperformed in which the customer has a unilateral right to cancel the arrangement, or that require the Company to undertake numerous activities to fulfill the performance obligations, including various activities that are outside of the Company’s control.

 

7

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

2. Revenue (continued)

 

Timing of Billing and Performance

 

During the three and nine months ended September 30, 2021, the Company recognized approximately $3,151,080 and $3,962,270 of revenue that was included in the deferred revenue balance at the beginning of the period. During the three and nine months ended September 30, 2021, revenue recognized from performance obligations partially satisfied in previous periods was $3,170,297 and $6,322,520. These cumulative catch-up adjustments primarily related to contract modifications executed in the current period, which resulted in changes to the transaction price resulting from change orders.

 

Accounts Receivable, Unbilled Services, and Deferred Revenue

 

Accounts receivable and unbilled services (including contract assets) consisted of the following:

 

    September 30, 2021     December 31, 2020  
Accounts receivable   $ 6,233,698     $ 8,688,441  
Unbilled services   $ 907,840       2,511,811  
Total accounts receivable and unbilled services     7,141,538       11,200,252  
Allowance for doubtful accounts     (142,830 )     -  
Total accounts receivable and unbilled services, net   $ 6,998,708     $ 11,200,252  

 

As of September 30, 2021 and December 31, 2020, contract assets of $907,840 and $2,511,811, respectively, were included in unbilled services.

 

Deferred revenue consisted of the following:

 

    September 30, 2021     December 31, 2020  
Deferred revenue   $ 7,626,905     $ 5,564,124  

 

The changes in the Company’s contract assets and deferred revenue resulted from the timing difference between the Company’s satisfaction of performance obligations under its contracts, achievement of billing milestones, and customer payments.

 

Concentration of Credit Risk

 

Financial assets that subject the Company to credit risk primarily consist of cash and cash equivalents, accounts receivable and unbilled services. Based on the short-term nature and historical realization of the financial assets as well as the reputable credit ratings of the financial institutions holding the deposits, the Company believes it bears minimal credit risk.

 

For the three months ended September 30, 2021 and 2020, four and three customers individually (totaling 58.7% and 64.9%, respectively) accounted for greater than 10% of revenue. For the nine months ended September 30, 2021 and 2020, three customers individually (totaling 57.7% and 55.2%, respectively) accounted for greater than 10% of revenue. As of September 30, 2021 and December 31, 2020, three and two customers individually (totaling 68.1% and 73.5%, respectively) accounted for greater than 10% of accounts receivable, net.

 

8

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

3. Fair Value Measurements

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or the most advantageous market when no principal market exists. Market participants are assumed to be independent, knowledgeable, able, and willing to transact an exchange and not under duress. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value. Accordingly, estimates of fair value are not necessarily indicative of the amounts that could be realized in a current or future market exchange. Fair values for substantially all the Company’s financial and non-financial instruments were measured using market, income, or cost approaches. The three levels of input are as follows:

 

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

 

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

 

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

Financial instruments, including cash and cash equivalents, are recorded at cost, which approximates fair value. The Company does not have any assets or liabilities measured at Level 2 or Level 3.

 

4. Restructuring Costs

 

The Company carried out a reduction in force on February 28, 2020. Twenty employees were severed under a one-time restructuring arrangement at a total cost to the Company of $771,942. As of December 31, 2020, there were no restructuring accruals remaining on the balance sheet as all severance was fully paid to severed employees during the year. There were no restructuring activities for the nine months ended September 30, 2021.

 

5. Preferred Stock

 

Par value for each preferred stock share series is $0.0001. Redeemable convertible preferred stock shares outstanding as of September 30, 2021 and 2020 was 41,587,368 and 41,692,230, respectively. During the nine months ended September 30, 2020, 9,038,488 redeemable convertible preferred stock shares were issued through a series D-1 funding totaling $39,999,919. No redeemable convertible preferred stock shares were repurchased during the nine months ended September 30, 2021. No redeemable convertible preferred stock shares were issued or repurchased during the nine months ended September 30, 2021.

 

6. Stockholders’ Deficit

 

Par value for common shares is $0.0001. The following is a summary of common share activity for the nine months ended September 30, 2021 and 2020:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2021     2020     2021     2020  
Common shares, beginning balance     4,488,416       8,468,742       2,765,097       8,396,425  
Issuance of common shares     106,752       75,694       1,830,071       148,011  
Common shares, ending balance     4,595,168       8,544,436       4,595,168       8,544,436  

 

The Company has one common stock warrant outstanding with available shares to be issued of 6,439 and an exercise price of $1.61 per share as of September 30, 2021. This warrant was exercised on October 4, 2021.

 

9

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

7. Loss Per Share

 

The following is a reconciliation of the numerators and denominators of the basic and diluted loss per share computations for the three and nine months ended September 30, 2021 and 2020:

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2021     2020     2021     2020  
Numerator:                                
Net Loss   $ (14,691,871 )   $ (7,683,830 )   $ (29,232,518 )   $ (19,349,948 )
Denominator:                                
Basic weighted average common shares outstanding     4,551,755       8,522,923       3,818,717       8,458,434  
Earnings (loss) per share:                                
Basic and diluted   $ (3.23 )   $ (0.90 )   $ (7.66 )   $ (2.29 )

 

Potential common shares outstanding that are considered anti-dilutive are excluded from the computation of diluted earnings per share. As the Company has incurred losses from inception to date, due to its start-up nature, potential common shares are anti-dilutive due to this net loss. The number of potential shares outstanding that were anti-dilutive and therefore excluded from the computation of diluted earnings per share, weighted for the portion of the period they were outstanding, were as follows for the three and nine months ended September 30, 2021 and 2020, respectively.

 

    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2021     2020     2021     2020  
Preferred stock     41,587,368       32,653,742       41,587,368       41,692,230  
Stock options outstanding     8,852,171       7,684,943       8,601,614       6,414,452  
Warrants outstanding     6,439       6,439       6,439       6,439  
Total     50,445,978       40,345,124       50,195,421       48,113,121  

 

8. Related-Party Transactions

 

In 2020, the Company subleased office space in Torrance, California to Good Dermatology, a professional medical corporation owned by the Founder and former CEO. Under the terms of the sublease, lease expenses incurred by the Company were 100% passed through to Good Dermatology. Total sublease income was $29,174 and $87,523 for the three and nine months ended September 30, 2020. The sublease was terminated as of November 30, 2020.

 

For the three months ended September 30, 2021 and 2020, the Company had revenue of $2,756,011 and $3,146,148, respectively, and for the nine months ended September 30, 2021 and 2020, the Company had revenue of $10,803,604 and $3,243,667, respectively, and expenses of $128,084 and $0, respectively, and as of September 30, 2021 and December 31, 2020, receivables of $2,244,157 and $6,927,470, respectively, from Pharmaceutical Products Development, LLC, a shareholder who holds a minority interest in the Company and a seat on the Company’s Board of Directors. Pharmaceutical Products Development, LLC became a minority shareholder of the Company during the first quarter of 2019.

 

10

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

8. Related-Party Transactions (continued)

 

For the three months ended September 30, 2021 and 2020, the Company had revenue of $269,547 and $108,280, respectively, and for the nine months ended September 30, 2021 and 2020, the Company had revenue of $565,092 and $226,843, respectively, and as of September 30, 2021 and December 31, 2020, receivables of $166,474 and $129,857, respectively, from Novartis, who has a 50% ownership in dRX Capital AG, a shareholder who, until July 2021, had a minority interest in the Company and a seat on the Company’s Board of Directors. In July 2021, dRX Capital AG was dissolved and their interest in the Company was distributed to their owners. This dissolution and distribution did not cause any other shareholder of the Company to obtain a minority interest in the Company.

 

For the three months ended September 30, 2021 and 2020, the Company had revenue of $9,875 and $0, respectively, and for the nine months ended September 30, 2021 and 2020, the Company had revenue of $350,585 and $0, respectively, and as of September 30, 2021 and December 31, 2020, receivables of $2,185 and $0, respectively, from Allovir, who is an investee of a minority shareholder and Board of Directors seat holder of the Company. The minority shareholder became a shareholder of the Company in the third quarter of 2016.

 

9. Commitments and Contingencies

 

Legal Proceedings

 

During 2019 and 2020, the Company was in state court litigation in California. Noah Craft and Belinda Tan, former co-founders and former Chief Executive Officer and Chief Medical Officer, respectively, asserted derivative claims purportedly on behalf of the Company alleging that several of its current and former directors and investors committed various breaches of duty in connection with the termination of Craft and Tan’s employment. Craft and Tan also asserted direct tort claims arising from the same facts against the non-Company defendants. Moreover, Tan asserted a direct claim against the Company and certain current and former directors for gender discrimination. The Company disputed that it was liable, and that none of Craft and Tan’s claims had merit.

 

Notwithstanding the Company’s stance, the litigation was settled in court in November 2020. As of September 30, 2021, all elements and payments associated with the settlement have been completed which included the following:

 

1) In June 2020, the Director Defendants paid $100,000 to the Company, which was used to offset the legal settlement in 3) below.

 

2) As part of the settlement, the Company paid $3,675,000 to Plaintiffs (“First Payment”) in December 2020. In return, the Plaintiffs conveyed all the Company shares and any other securities or interest in the Company shares. The Plaintiffs held the equivalent on an as converted basis of 5,901,076 common shares.

 

3) In December 2020, the Company accrued $1,225,000 for the legal settlement which was paid in June 2021 (“Second Payment”).

  

New Office Lease

 

In March 2021, the Company entered into an operating lease agreement to lease office space in Culver City, California commencing in July 2021 through October 2024 totaling $1,578,821.

 

11

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

9. Commitments and Contingencies (continued)

 

Future minimum lease payments under non-cancellable leases as of September 30, 2021 were as follows:

 

    Operating Leases  
2021 (remaining three months)   $ 188,943  
2022     1,286,301  
2023     629,369  
2024     599,327  
2025     137,888  
2026     11,517  
Thereafter     -  
Total future minimum lease payments   $ 2,853,345  
Less imputed interest     (264,774 )
Total   $ 2,588,571  
         
Reported as of September 30, 2021:        
Other current liabilities   $ 1,103,283  

Operating lease liabilities 

    1,485,288  
Total   $ 2,588,571  

 

10. Stock-Based Compensation

 

The Company currently has one equity-based compensation plan, the 2015 Stock Option Plan (the 2015 Plan) from which stock-based compensation awards can be granted to employees, consultants, and non-executive directors. The 2015 Plan provides for awards in the form of service-based incentive stock options.

 

A summary of stock option awards outstanding as of September 30, 2021 and changes during the nine months then ended is as follows:

 

    Number of Units     Weighted Average
Exercise Price
 
Outstanding at January 1, 2021     7,478,736     $ 0.68  
Granted     3,720,500       8.18  
Exercised     (1,830,071 )     0.67  
Forfeited     (472,211 )     1.19  
Outstanding at September 30, 2021     8,896,954     $ 3.79  

 

Stock-Based Compensation Valuation and Expense

 

The Company accounts for stock options under the fair value method which requires the Company to estimate the grant-date fair value of its stock-based awards and amortize this value to compensation expense over the requisite service period. The Company uses the Black-Scholes-Merton model to estimate the value of such awards granted to its employees, consultants, and non-executive directors. Within this model, expected volatility is based upon the historical volatility of a peer group for a period equal to the expected term, as the Company does not have adequate history to calculate its own volatility. The Company believes the expected volatility will approximate the historical volatility of the peer group. The Company does not currently anticipate paying dividends. The expected term represents the period in which the grants are expected to be outstanding. The risk- free interest rate is based on the United States Treasury yield curve in effect at the time of the grant. Due to the absence of an active market for the Company’s common stock, the fair value of the Company’s common stock for purposes of determining the common stock price for stock option grants was determined by the Company’s Board of Directors.

 

Stock-based compensation expense is recognized net of forfeitures such that expense is recognized only for those stock-based awards that are expected to vest. If forfeitures during the period are greater than expenses recognized, net stock-based compensation expense can be negative.

 

12

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

10. Stock-Based Compensation (continued)

 

Total stock-based compensation expense was classified in the statements of operations for the three and nine months ended September 30, 2021 and 2020 as follows:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020     2021     2020  
Cost of revenues     129,464       4,381       346,516       (70,058 )
Selling, general and administrative     868,515       100,960       1,566,580       71,847  
Total stock-based compensation expense     997,979       105,341       1,913,096       1,789  

 

11. Income Taxes

 

The Company is treated as a “C” corporation for U.S. tax purposes.

 

Adoption of Recent Accounting Pronouncements

 

In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (ASU 2019-12), which eliminates certain exceptions to the guidance in Income Taxes (Topic 740) related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The standard is effective for fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. Early adoption is permitted in an interim or annual period. Entities that elect to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, entities that elect early adoption must adopt all the amendments in the same period. Entities will apply the guidance prospectively, except for certain amendments. The Company adopted ASU 2019-12 effective January 1, 2021. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

 

The Company has incurred net operating losses since inception and is forecasting additional losses through December 31, 2021. Therefore, no U.S. Federal, state or foreign income taxes are expected for 2021 and no provision for such taxes has been recorded as of September 30, 2021. Due to the Company’s history of losses since inception, there is not enough evidence at this time to support the conclusion that the Company will generate future income of a sufficient amount and nature to utilize the benefits of the Company’s net deferred tax assets. Accordingly, as of September 30, 2021 and December 31, 2020, the Company provided a full valuation allowance against its net deferred tax assets since as of that time, the Company could not assert that it was more likely than not that these deferred tax assets would be realized.

 

12. Subsequent Events

 

Merger with LSAQ

 

On May 7, 2021, the Company announced a planned merger with LSAQ under a definitive business combination agreement. On October 6, 2021, the agreement was consummated, with the Company surviving the merger as Science 37 Holdings, Inc, now a public company. All outstanding common and preferred shares of legacy Science 37, Inc. converted into common shares of the surviving Science 37 Holdings, Inc. through application of an exchange ratio of approximately 1.815. In addition, awards under the Company’s existing 2015 stock incentive plan continue under the same terms and conditions as were previously applicable to such awards, subject to the same exchange ratio for exercise price and number of options outstanding. Common shares and warrants held by former LSAQ shareholders were converted to 10,858,261 common shares of Science 37 Holdings, Inc. Science 37 Holdings, Inc. began trading on the Nasdaq stock exchange as SNCE effective October 7, 2021.

 

13

 

 

Science 37, Inc.

 

Notes to Condensed Consolidated Financial Statements (unaudited) (continued)

 

12. Subsequent Events (continued)

 

The financial statements as of September 30, 2021, including share and per share amounts, do not include the effects of the merger. The table below shows, on a pro forma basis, the impact of the merger on certain condensed balance sheet items as of September 30, 2021:

 

Balance Sheet Data:   Actual     Pro Forma  
Cash and cash equivalents   $ 7,996,362     $ 242,991,191  
Working capital     (5,566,182 )     228,647,166  
Total assets     39,746,217       273,843,757  
Redeemable convertible preferred stock     143,086,271       -  
Accumulated deficit     (136,979,761 )     (136,979,761 )
Total stockholders' equity (deficit)   $ (132,209,608 )   $ 163,290,011  

 

Share Data:   Actual     Pro Forma  
Redeemable convertible preferred stock outstanding     41,587,368       -  
Common stock outstanding     4,595,168       114,707,150  

 

Going Concern

 

From August 2021, the Company began to accelerate investments in hiring and in other critical areas, such as the technology platform, to facilitate the delivery of anticipated revenues, resulting from an increase in net bookings. Also, as several meaningful conditions of the contemplated transaction were met, the Company increased spend related to the requirements of being a publicly-traded company. The Company’s increased costs adversely affected the Company’s results of operations and liquidity and there was substantial doubt as to the Company’s ability to continue as a going concern at that time. On October 6, 2021, the definitive business combination agreement was consummated, with Science 37, Inc. surviving the merger as Science 37 Holdings, Inc., a now public company. All outstanding common and preferred shares of legacy Science 37, Inc. converted into common shares of the surviving Science 37 Holdings, Inc. through application of an exchange ratio of approximately 1.815. In addition, awards under the Company’s existing 2015 stock incentive plan continue under the same terms and conditions as were previously applicable to such awards, subject to the same exchange ratio for exercise price and number of options outstanding. Science 37 Holdings, Inc. began trading on the Nasdaq stock exchange as SNCE effective October 7, 2021.

 

In conjunction with this merger, Science 37, Inc. received funds held in LSAQ’s working capital and trust accounts together with $200 million in PIPE financing from institutional and strategic investors to further fund Science 37, Inc.’s decentralized trial technology platform and extend into new adjacencies. As a result of the Merger and inclusive of the PIPE financing, Science 37, Inc. received $234.2 million, net of fees and expenses paid in connection with the closing of the business combination. The transaction will be accounted for as a reverse capitalization in accordance with GAAP. Under the reverse capitalization model, the merger will be treated as Science 37, Inc. is issuing equity for the net assets of LSAQ, with no goodwill or intangible assets recorded, and LSAQ will be treated as the acquiree for financial reporting purposes. This is primarily because, subsequent to the merger, Science 37, Inc. shareholders have a majority of the voting power of the combined company. In addition, Science 37, Inc. comprises all of the ongoing operations, senior management, and a majority of the governing body of the combined company. As a result of the merger and related PIPE financing, the substantial doubt about the Company’s ability to continue as a going concern has been alleviated.

 

The Company has evaluated subsequent events through November 15, 2021, the date on which the accompanying condensed consolidated financial statements were issued, noting no additional items requiring disclosure.

 

14

 

Exhibit 99.4

 

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

 

You should read the following discussion and analysis of the Company’s financial condition and results of operations together with the “Selected Historical Consolidated Financial Data” section of this proxy statement/prospectus and the Company’s audited consolidated financial statements and unaudited condensed consolidated financial statements and the related notes appearing at the end of this proxy statement/prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this proxy statement/prospectus, including information with respect to the Company’s plans and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this proxy statement/prospectus, the Company’s actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. See “Cautionary Note Regarding Forward-Looking Statements.”

 

Overview of Our Business and Services

 

The Company is a leading provider of technology-based solutions that enable decentralized clinical trials (or direct-to-patient virtual studies) on behalf of biopharmaceutical sponsors. The Company pioneered the decentralized clinical trial model and developed the industry’s first Decentralized Clinical Trial Operating System (“DCT OS”) combining its technology platform, which orchestrates workflows, supports evidence generation and harmonizes data seamlessly, with its expansive network of patient communities, on-demand telemedicine investigators, flexible mobile nurses, scalable remote coordinators and robust connected technologies. By bringing research to patients and providers more directly, the Company’s operating system increases access and patient diversity, which can help speed the development of potentially life-saving drug treatments.

 

Backlog and Net Bookings

 

The Company manages and assesses its business using a number of metrics including backlog and net bookings. The Company’s backlog represents anticipated revenue for work not yet completed or performed (i) under signed contracts, letters of intent and, in some cases, bookings that are supported by other forms of written communication and (ii) where there is sufficient or reasonable certainty about the customer’s ability and intent to fund and commence the services within six months. Backlog and backlog conversion (defined as quarterly revenue for the period divided by opening backlog for that period) vary from period to period depending upon new authorizations, contract modifications, cancellations and the amount of revenue recognized under existing contracts.

 

The Company continually evaluates its backlog to determine if any previously awarded work is no longer expected to be performed. If the Company determines that previously awarded work is no longer probable of performance, it will remove the value from the Company’s backlog based on the risk of cancellation. The Company recognizes revenue from these bookings as services are performed, provided the Company has received proper authorization from the customer. The Company excludes from backlog revenues that have been recognized and reported in the statement of operations.

 

 

 

 

Although an increase in backlog will generally result in an increase in future revenue to be recognized over time (depending on future contract modifications, contract cancellations and other adjustments), an increase in backlog at a particular point in time does not necessarily correspond to an increase in revenue during a particular period. The timing and extent to which backlog will result in revenue depends on many factors, including the timing of commencement of work, the rate at which services are performed, scope changes, cancellations, delays, receipt of regulatory approvals and the nature, duration, size, complexity and phase of the studies. The Company’s contracts generally have terms ranging from several months to several years. In addition, delayed projects remain in backlog unless they are canceled. As a result of these and other factors, including those from the impact of the COVID-19 pandemic, the Company’s backlog might not be a reliable indicator of future revenue and the Company might not realize all or any part of the revenue from the authorizations in backlog as of any point in time.

 

Net bookings represent new business wins, net of contract modifications, contract cancellations, and other adjustments. Net bookings vary from period to period depending on numerous factors, including customer authorization volume, sales performance and the overall health of the life sciences industry, among others.

 

Our backlog as of September 30, 2021 and 2020 and net bookings for the three months ended September 30, 2021 and 2020 were as follows:

 

    2021     2020     Change  
Backlog   $ 141,059,335     $ 49,403,119     $ 91,656,216       185.5 %
Net bookings     35,864,148       8,113,128       21,751,020       342.1 %

 

The increase in net bookings for the three months ended September 30, 2021 and the increase in backlog as of September 30, 2021 as compared to the prior period were primarily due to new business as a result of increased demand for the Company’s remote clinical trial support, partially offset by cancellations and scope reductions consistent with industry standards. We expect this growth to continue as companies are pursuing and realizing the many benefits of decentralized trials.

 

 

 

 

Components of Results of Operations

 

Revenues

 

The Company derives its revenues primarily from two sources: (i) contractual arrangements to enable and enhance clinical trials through technology and/or services, and (ii) licensing of its proprietary technology platform to a variety of life science institutions.

 

Total revenues are comprised of revenues from the provision of the Company’s decentralized services, including enhanced services from the use of the Company’s hosted proprietary software. Revenues also include reimbursable and out of pocket expenses provided for in the Company’s contracts with its customers.

 

Cost of Revenues

 

Cost of revenues includes the cost to conduct the Company’s trials remotely and make available the Company’s technology solutions. Cost of revenues consist primarily of compensation, benefits, and other employee-related costs, including expenses for stock-based compensation, contract labor, trial advertising and marketing, investigator payments, and reimbursable out-of-pocket expenses directly related to delivering on the Company’s contracts.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative expenses include costs related to sales, marketing, and administrative functions (including human resources, legal, finance and general management) such as compensation and benefits, travel, professional services, facilities, recruiting and relocation, training, sales commissions and expenses for stock-based compensation and information technology.

 

Depreciation and Amortization

 

Depreciation and amortization represent the costs charged for the Company’s property, equipment and capitalized software. The Company records depreciation and amortization on property and equipment using the straight-line method, based on the estimated useful lives of the respective assets. The Company depreciates leasehold improvements over the shorter of the lease term or the estimated useful lives of the improvements. The Company amortizes software developed for internal use over three years.

 

Restructuring Costs

 

Restructuring costs consist of employee severance and benefits. The Company carried out a reduction in force in administrative positions on February 28, 2020 to better align resources with its then-current needs.

 

 

 

 

Other Income (Expense), Net

 

Other income (expense), net, consists of interest income, sublease income, and other income (expense).

 

Results of Operations

 

Three Months Ended September 30, 2021 Compared to Three Months Ended September 30, 2020

 

Revenue

 

Revenue for the three months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Revenue   $ 14,235,697     $ 6,583,413     $ 7,652,284       116.2 %

 

Revenue increased $7.7 million, or 116.2%, to $14.2 million for the three months ended September 30, 2021 as compared to the same period in 2020 due to organic volume growth resulting from higher opening backlog at the beginning of the period as compared to the prior year, as well as from new bookings and associated revenue related to the COVID-19 pandemic where, beginning in the second quarter of 2020, we experienced significant and continuing growth in demand for our core competency, decentralized trials and trial support. We expect this growth to continue as companies are pursuing and realizing the many benefits of decentralized trials.

 

Cost of Revenues

 

Cost of revenues for the three months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Cost of revenues, exclusive of depreciation and amortization   $ 10,318,268     $ 7,050,897     $ 3,267,371       46.3 %
% of revenue     72.5 %     107.1 %                

 

Cost of revenues increased $3.3 million, or 46.3% for the three months ending September 30, 2021 compared to the same period in 2020, primarily to support revenue growth during 2021. To support the revenue growth in 2021 the Company experienced increases in direct compensation-related expenses and higher vendor costs for translation, investigators, and nurses for trial-related patient activity. Staffing also increased to enable rapid expansion into new markets and therapeutic areas. The increase was partially offset by a decline in trial advertising for patient recruitment which was at its peak for one of the Company’s customers in the second half of 2020.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative costs for the three months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Selling, general and administrative expenses   $ 16,931,866     $ 6,301,712     $ 10,630,154       168.7 %
% of revenue     118.9 %     95.7 %                

 

 

 

 

Selling, general and administrative expense increased by $10.6 million, or 168.7% for the three months ended September 30, 2021 as compared to the same period in 2020, mainly due to increased headcount to support significant company growth as well as planned investment in anticipation of the merger with LSAQ. The increased headcount lead to increases in salary and benefits, web services and software, and employee recruiting costs. The Company also saw increases in Consulting costs, related to the accelerated timeline imposed by the merger agreement, stock-based compensation expense due to an increase in the value of the Company’s stock during the second quarter of 2021 in anticipation of the merger with LSAQ, professional fees and marketing, largely related to company growth and the merger, and capitalized sales commissions amortization expense due to significantly more bookings and revenue for the three months ended September 30, 2021 compared to the same period in 2020. These increases were partially offset by an increase in salaries recorded to capitalized software due to a large increase in technology related payroll due to additional focus on proprietary software improvements.

 

Depreciation and Amortization

 

Depreciation and amortization expense for the three months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Depreciation and amortization   $ 1,915,517     $ 1,141,801     $ 773,716       67.8 %
% of revenue     13.5 %     17.3 %                

 

Depreciation and amortization expense increased by $0.8 million, or 67.8%, for the three months ended September 30, 2021 as compared to the same period in 2020 due to amortization on a larger capitalized software balance year over year consistent with the Company’s focus on continuous improvement of its proprietary software.

 

Restructuring

 

There were no restructuring activities for the three months ended September 30, 2021 or 2020.

 

Other Income, Net

 

Other income, net for the three months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Interest income   $ 151     $ 1,554     $ (1,403 )     -90.3 %
Sublease income   $ 230,235     $ 232,294     $ (2,059 )     -0.9 %
Other income (expense)   $ 7,697     $ (6,681 )   $ 14,378       215.2 %

 

 

 

 

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

 

Revenue

 

Revenue for the nine months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Revenue   $ 39,221,524     $ 12,541,208     $ 26,680,316       212.7 %

 

Revenue increased $26.7 million, or 212.7%, to $39.2 million for the nine months ended September 30, 2021 as compared to the same period in 2020 due to organic volume growth resulting from higher opening backlog at the beginning of the period as compared to the prior year, as well as from new bookings and associated revenue related to significant and continuing growth in demand for the Company’s core competency, decentralized trial and trial support. We expect this growth to continue as companies are pursuing and realizing the many benefits of decentralized trials.

 

Cost of Revenues

 

Cost of revenues for the nine months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Cost of revenues, exclusive of depreciation and amortization   $ 26,245,932     $ 10,929,068     $ 15,316,864       140.1 %
% of revenue     66.9 %     87.1 %                

 

Cost of revenues increased $15.3 million, or 140.1% for the nine months ending September 30, 2021 compared to the same period in 2020, primarily to support revenue growth during 2021. To support revenue growth the Company experienced increases in compensation-related expenses including passthrough costs and nurses for trial-related patient activity. Staffing also increased to enable rapid expansion into new markets and therapeutic areas. The increase was partially offset by a decrease in trial advertising for patient recruitment which was at its peak for one of the Company’s customers in the second half of 2020.

 

Selling, General and Administrative Expenses

 

Selling, general and administrative costs for the nine months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Selling, general and administrative expenses   $ 37,477,055     $ 17,870,603     $ 19,606,452       109.7 %
% of revenue     95.6 %     142.5 %                

 

 

 

 

Selling, general and administrative expense increased by $19.6 million, or 109.7% for the nine months ended September 30, 2021 as compared to the same period in 2020, mainly due to investments to support significant company growth as well as planned investment in anticipation of the merger with LSAQ. This resulted in increased headcount leading to increases in salary and benefits, web services, software, and employee recruiting costs. Stock based compensation also increased due to an increase in the value of the Company’s stock during the second quarter of 2021 in anticipation of the merger with LSAQ. Consulting services increased due to technology consulting needs for an increased number of contracts and individual contract proprietary software needs, human resources consulting to assist with the Company’s expansion, and non-facilitative merger related consulting. Capitalized sales commissions amortization expense increased due to significantly more bookings and revenue for the nine months ended September 30, 2021 compared to the same period in 2020. These increases were partially offset by an increase in salaries recorded to capitalized software due to a large increase in technology related payroll due to additional focus on proprietary software improvements.

 

Depreciation and Amortization

 

Depreciation and amortization expense for the nine months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Depreciation and amortization   $ 5,188,586     $ 3,162,424     $ 2,026,162       64.1 %
% of revenue     13.2 %     25.2 %                

 

Depreciation and amortization expense increased by $2.0 million, or 64.1%, for the nine months ended September 30, 2021 as compared to the same period in 2020 due to amortization on a larger capitalized software balance year over year consistent with the Company’s focus on continuous improvement of its proprietary software.

 

Restructuring

 

Restructuring costs for the nine months ended September 30, 2021 and 2020 were as follows:

 

  2021     2020  
Restructuring costs   $ -     $ 699,473  

 

Restructuring costs decreased for the nine months ended September 30, 2021 compared to the same period in 2020 due to a reduction in force in administrative positions in early 2020 to better align resources with then-current needs and future growth strategy. There were no restructuring activities for the nine months ended September 30, 2021.

 

Other Income, Net

 

Other income, net for the nine months ended September 30, 2021 and 2020 was as follows:

 

    2021     2020     Change  
Interest income   $ 1,424     $ 76,019     $ (74,595 )     -98.1 %
Sublease income   $ 444,153   $ 696,882     $ (252,729 )     -36.3 %
Other income (expense)   $ 11,954     $ (2,489 )   $ 14,443       580.4 %

 

Interest income decreased ($0.1) million primarily due to a lower average rate of interest earned on the Company’s money market investment account resulting from changes in the economy throughout the period of the COVID-19 pandemic, as well as a lower cash balance, on average, for the nine months ended September 30, 2021 compared to the same period in 2020.

 

Sublease income decreased by ($0.3) million due to one of the Company’s sublease tenant’s inability to pay caused by the impact of COVID-19 on their business operations and their eventual vacating of the premises. A new subtenant was not secured until May 2021.

 

 

 

Non-GAAP Financial Measures

 

In addition to our results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operational performance. We use these non-GAAP measures to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that non-GAAP financial information, when taken collectively with GAAP financial information, may be helpful to investors in assessing our operating performance. These results should be considered in addition to, not as a substitute for, nor superior to, results reported in accordance with GAAP. Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss) are not measurements determined in accordance with GAAP and are therefore susceptible to varying methods of calculation. These metrics, as presented, may not be comparable to other similarly titled measures of other companies.

 

Adjusted EBITDA, Adjusted Gross Profit, and Adjusted Net Income (Loss)

 

Adjusted EBITDA is defined as net income (loss), adjusted for income tax benefit (expense), depreciation and amortization, interest expense (net), stock-based compensation, other income (expense), net, restructuring and related charges, and certain other non-cash or non-recurring items impacting net income (loss) such as those associated with the Merger Agreement. Adjusted gross profit is defined as gross profit (loss) adjusted for stock-based compensation included in direct labor. Adjusted Net Income (including adjusted diluted earnings per share) is defined as net income excluding transactions that the Company believes are not representative of our core operations, including, restructuring and other costs; transaction and integration-related expenses; share-based compensation expense; other income (expense), net; and gain or loss on extinguishment of debt. Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss) are intended as supplemental measures of the Company’s performance that are neither required by, nor presented in accordance with, GAAP. The Company believes that the use of Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss) provides an additional tool for investors to use in evaluating ongoing operating results and trends since they are used as a metric by management to track business performance and compensation related incentives. They may also be used by investors in comparing the Company’s financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that, when evaluating Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss), the Company may incur future expenses similar to those excluded when calculating these measures. In addition, the Company’s presentation of these measures should not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. The Company’s computation of Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss) may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss) in the same fashion.

 

Because of these limitations, Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss) should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. The Company compensates for these limitations by relying primarily on the Company’s GAAP results and using Adjusted EBITDA, adjusted gross profit, and adjusted net income (loss) on a supplemental basis. You should review the reconciliation of net loss to Adjusted EBITDA, gross profit to adjusted gross profit, and net loss to adjusted net loss below and not rely on any single financial measure to evaluate the Company's business.

 

 

 

The following tables reconcile net loss to Adjusted EBITDA, gross profit to adjusted gross profit, and net loss to adjusted net loss for the three and nine months ended September 30, 2021 and 2020:

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020     2021     2020  
Net loss   $ (14,691,871 )   $ (7,683,830 )   $ (29,232,518 )   $ (19,349,948 )
Interest income     (151 )     (1,554 )     (1,424 )     (76,019 )
Depreciation and amortization     1,915,517       1,141,801       5,188,586       3,162,424  
Other income (1)     (237,932 )     (225,613 )     (456,107 )     (694,394 )
Stock-based compensation expense     997,979       105,341       1,913,096       1,789  
Restructuring costs     -        -       -        699,473  
Adjusted EBITDA   $ (12,016,458 )   $ (6,663,855 )   $ (22,588,367 )   $ (16,256,674 )

 

(1) For the three months ended September 30, 2021 and 2020, other income includes $230,235 and $232,294, respectively, of sublease income. For the nine months ended September 30, 2021 and 2020, other income includes $444,153 and $696,882, respectively, of sublease income.

 

  Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020     2021     2020  
Gross profit   $ 3,917,429     $ (467,485 )   $ 12,975,591     $ 1,612,140  
Stock-based compensation expense (direct)   129,464     4,381       346,516       (70,058 )
Adjusted gross profit   $ 4,046,894     $ (463,104 )   $ 13,322,108     $ 1,542,082  

 

 

  Three Months Ended September 30,     Nine Months Ended September 30,  
    2021     2020     2021     2020  
Net loss   $ (14,691,871 )   $ (7,683,830 )   $ (29,232,518 )   $ (19,349,948 )
Interest income     (151 )     (1,554 )     (1,424 )     (76,019 )
Other income (1)     (237,932 )     (225,613 )     (456,107 )     (694,394 )
Stock-based compensation expense     997,979       105,341       1,913,096       1,789  
Restructuring costs     -        -       -        699,473  
Adjusted net loss   $ (13,931,976 )   $ (7,805,656 )   $ (27,776,953 )   $ (19,419,098 )

 

(1) For the three months ended September 30, 2021 and 2020, other income includes $230,235 and $232,294, respectively, of sublease income. For the nine months ended September 30, 2021 and 2020, other income includes $444,153 and $696,882, respectively, of sublease income.

 

Liquidity

 

The Company has sustained recurring losses and negative cash flows from operations due to the start-up nature of its business. The Company completed a Series D-1 funding round of $39,999,919 on August 5, 2020. As of September 30, 2021 and December 31, 2020, the Company had $7,996,362 and $32,478,948, respectively, of unrestricted cash.

 

 

 

In conjunction with the merger of the Company with LifeSci Acquisition II Corp., which consummated on October 6, 2021, the Company received $200 million in PIPE financing from leading institutional and strategic investors to further fund the Company’s decentralized trial technology platform and extend into new adjacencies. As a result of the Merger and inclusive of the PIPE financing, the Company received $234.2 million, net of fees and expenses paid in connection with the closing of the business combination.

 

The Company is required to evaluate principal conditions and events that may raise substantial doubt about its ability to continue as a going concern within one year from the date that its financial statements for the three and nine months ended September 30, 2021 were issued. The Company has performed this evaluation and has determined the entity has sufficient ability to continue as a going concern and to meet its obligations within one year after the issuance date of such financial statements.

 

Cash, Cash Equivalents and Restricted Cash

 

Our cash flows from operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 were as follows:

 

      2021       2020       Change  
Net cash (used in) operating activities   $ (14,660,144 )   $ (16,863,907 )   $ 2,203,763  
Net cash (used in) investing activities     (12,071,737 )     (4,183,465 )     (7,888,272 )
Net cash provided by financing activities     1,245,152       40,040,045       (38,794,893 )

  

For the nine months ended September 30, 2021, cash flows used in operating activities decreased compared to the same period in the prior year due to larger non-cash items and the favorable impact of net changes in operating assets and liabilities. This was primarily due to period over period fluctuations in the timing of collections of cash from accounts receivable and a favorable change in deferred revenue, operating lease liabilities, and other long-term liabilities partially offset by a higher year over year net loss plus unfavorable changes in prepaid expenses and other assets, accounts payable, and accrued expenses and other current liabilities as compared to the same period in 2020.

  

Net cash used in investing activities increased for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 mainly due to the Company’s continued expanded focus on its proprietary software platform enhancements year over year plus higher computer purchases due to higher year over year headcount increases.

 

 

 

For the nine months ended September 30, 2021, net cash received from financing activities decreased over the same period in the prior year due to proceeds from Series D-1 financing in 2020 compared to no proceeds in 2021, partially offset by more cash received from stock option exercises.

 

Contractual Obligations and Commitments

 

With the exception of the Business Combination, the Company’s new operating lease agreement and the $1.2 million litigation settlement paid to Good Dermatology in June 2021 disclosed elsewhere in this filing ($3.7 million having previously been paid in respect of such settlement), there have been no material changes, outside of the ordinary course of business, to the Company’s contractual obligations as of September 30, 2021.

 

The Company assesses its significant sources of cash outflows, namely Cost of Revenues and Technology investment expenditures, to ensure such commitments are aligned with management’s expectation that the Company’s operations will deliver sufficient income to mitigate risks of liquidity commensurate with such expenditures. Cost of revenues consist primarily of compensation, benefits, and other employee-related costs, including expenses for stock-based compensation, contract labor, trial advertising and marketing, investigator payments, and reimbursable out-of-pocket expenses directly related to delivering on our contracts. The sourcing, and subsequent expenditure(s), of such expenses is done in a manner that reflects the sourcing needs related to contracted and highly probable new work. Capital expenditures related to Technology can be in-house or outsourced and, as such, is also viewed as a variable expenditure as it relates to liquidity. The Company reviews and approves such expenditures with reasonable likelihood that such investment(s) will generate a return on invested capital through enhanced product offerings and marketability.