NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Nature of the Business and Basis of Presentation Organization Morphic Holding, Inc. was f ormed under the laws of the State of Delaware in August 2014 under the name Integrin Rock, LLC. The Company subsequently changed its name to Morphic Rock Holding, LLC in October 2014 and then to Morphic Holding, LLC in June 2016. As more fully described in Note 7 below, on December 5, 2018, the Company completed a series of transactions (the Reorganization) pursuant to which Morphic Holding, LLC was converted in a tax free reorganization into Morphic Holding, Inc. and three wholly-owned subsidiaries, namely Lazuli, Inc., Tourmaline, Inc, and Phyllite, Inc, were merged with and into another wholly-owned subsidiary, Morphic Therapeutic, Inc. As part of the Reorganization, all convertible preferred units and common units of Morphic Holding, LLC issued and outstanding immediately prior to the Reorganization were exchanged for shares of Morphic Holding Inc. capital stock of the same class or series on a one-for-one basis. Previously outstanding vested and unvested incentive units, irrespective of threshold amounts (defined as the fair value of common unit on the date the incentive unit award is granted) or voting rights, were exchanged for an equal number of shares of common stock or restricted common stock, respectively. The restricted common stock was issued with the same vesting terms as the unvested incentive units held immediately prior to the Reorganization. Upon consummation of the Reorganization, the historical consolidated financial statements of Morphic Holding, LLC became the historical consolidated financial statements of Morphic Holding Inc. Except as otherwise indicated or the context otherwise requires, all information included in this filing is presented giving effect to the Reorganization. At the time of the Reorganization, the Company created a Massachusetts Securities Corporation (the Security Corporation) to take advantage of the favorable tax treatment of income earned on securities held within such entity. As of June 30, 2019, all of the Companys excess funds were temporarily invested through the Security Corporation. The Company is a biopharmaceutical company applying proprietary insights into integrin medicine to discover and develop first-in-class oral small molecule integrin therapeutics. Integrins are a validated target class with multiple approved drugs for the treatment of serious chronic diseases. Despite significant biopharmaceutical industry investment, no oral integrin therapies have been approved. The Company has created the Morphic integrin technology platform, or MInT Platform, by leveraging our unique understanding of integrin structure and biology, to develop a pipeline of novel product candidates designed to achieve potency, high selectivity, and the pharmaceutical properties required for oral administration. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Companys drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales. The Company expects to continue to incur losses from operations for the foreseeable future; the Company expects that its cash and cash equivalents and marketable securities and the funds received from the Companys initial public offering (IPO) will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months from the date these financial statements were issued. On July 1, 2019, the Company completed an IPO, in which the Company issued and sold 6,900,000 shares of its common stock at a public offering price of $15.00 per share, including 900,000 shares of common stock sold pursuant to the underwriters exercise of their option to purchase additional shares of common stock, for aggregate gross proceeds of $103.5 million. The Company raised approximately $93.4 million in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company . Upon the closing of the IPO, all of the outstanding shares of convertible preferred stock automatically converted into 21,017,232 shares of common stock at the applicable conversion ratio then in effect. Subsequent to the closing of the IPO, there were no shares of preferred stock outstanding. In connection with the closing of the IPO, the Company amended and restated its Fourth Amended and Restated Certificate of Incorporation to change the authorized capital stock to 400,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock, all with a par value of $0.0001 per share. The financial statements as of June 30, 2019, including share and per share amounts, do not give effect to the IPO, as it closed subsequent to June 30, 2019. Basis of Presentation The consolidated financial statements include the accounts of Morphic Holding, Inc. and its wholly owned subsidiaries described above. All intercompany balances have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States (GAAP). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (ASC) and Accounting Standards Update (ASU) of the Financial Accounting Standards Board (FASB). The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company's financial position as of June 30, 2019 and the results of its operations for the three and six months ended June 30, 2019 and 2018 and its cash flows for the six months ended June 30, 2019 and 2018. Financial statement disclosures for the six months ended June 30, 2019 and 2018 are condensed and do not include all disclosures required for an annual set of financial statements in accordance with GAAP and should be read in conjunction with the Companys audited financial statements and notes in the prospectus filed with the Securities and Exchange Commission on June 27, 2019. The results for the three and six months ended June 30, 2019 are not necessarily indicative of results to be expected for the year ended December 31, 2019, any other interim periods, or any future year or period. On June 10, 2019, the Companys board of directors and stockholders approved a 5.8311-to-one reverse stock split of the Companys issued and outstanding shares of common stock and convertible preferred stock. All unit, per unit, share and per share amounts in the consolidated financial statements and notes thereto have been retrospectively adjusted for all periods presented to give effect to the reverse stock split.