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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-37783

Clearside Biomedical, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware	45-2437375
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
900 North Point Parkway, Suite 200 Alpharetta, GA	30005
(Address of principal executive offices)	(Zip Code)

(678) 270-3631

Registrant’s telephone number, including area code

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 $0.001 per share	CLSD	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 10, 2023, the registrant had 62,030,494 shares of common stock, $0.001 par value per share, outstanding.


		Page
	PART I - FINANCIAL INFORMATION


Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022	3
	Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022	4
	Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	5
	Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	6
	Notes to the Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
	PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 6.	Exhibits	26
Signatures		27

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CLEARSIDE BIOMEDICAL, INC.

Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	June 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	35,005		$	48,258
Accounts receivable		255			—
Prepaid expenses		542			704
Other current assets		305			439
Total current assets		36,107			49,401
Property and equipment, net		2,052			755
Operating lease right-of-use asset		996			1,117
Other assets		30			30
Total assets	$	39,185		$	51,303
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	1,886		$	1,050
Accrued liabilities		2,674			4,179
Current portion of operating lease liabilities		359			349
Deferred revenue		355			205
Total current liabilities		5,274			5,783
Liability related to the sales of future royalties, net		38,088			33,977
Operating lease liabilities		796			936
Total liabilities		44,158			40,696
Commitments and contingencies
Stockholders’ (deficit) equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized and no shares issued at June 30, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value; 200,000,000 shares authorized at June 30, 2023 and December 31, 2022; 61,717,445 and 60,639,827 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		62			61
Additional paid-in capital		301,789			298,984
Accumulated deficit		(306,824	)		(288,438	)
Total stockholders’ (deficit) equity		(4,973	)		10,607
Total liabilities and stockholders’ (deficit) equity	$	39,185		$	51,303

See accompanying notes to the consolidated financial statements.

CLEARSIDE BIOMEDICAL, INC.

Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
License and other revenue	$	1,018		$	384		$	1,022		$	731
Operating expenses:
Cost of goods sold	213				—		213				—
Research and development		4,948			5,430			9,399			9,966
General and administrative		3,127			2,791			6,285			6,248
Total operating expenses		8,288			8,221			15,897			16,214
Loss from operations		(7,270	)		(7,837	)		(14,875	)		(15,483	)
Other income		458			24			950			26
Non-cash interest expense on liability related to the sales of future royalties		(2,294	)		—			(4,461	)		—
Net loss	$	(9,106	)	$	(7,813	)	$	(18,386	)	$	(15,457	)
Net loss per share of common stock — basic and diluted	$	(0.15	)	$	(0.13	)	$	(0.30	)	$	(0.26	)
Weighted average shares outstanding — basic and diluted		61,654,520			60,150,348			61,413,343			60,107,517

See accompanying notes to the consolidated financial statements.

CLEARSIDE BIOMEDICAL, INC.

Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Six Months Ended June 30, 2023
										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-In-Capital		Deficit			(Deficit) Equity
Balance at December 31, 2022		60,639,827	$	61	$	298,984	$	(288,438	)	$	10,607
Issuance of common shares under at-the-market sales agreement		214,128		—		295		—			295
Vesting and settlement of restricted stock units		471,390		—		—		—			—
Issuance of common shares under employee stock purchase plan		38,954		—		37		—			37
Share-based compensation expense		—		—		1,041		—			1,041
Net loss		—		—		—		(9,280	)		(9,280	)
Balance at March 31, 2023		61,364,299	$	61	$	300,357	$	(297,718	)	$	2,700
Issuance of common shares under at-the-market sales agreement		328,147		1		361		—			362
Exercise of stock options		24,999		—		10		—			10
Share-based compensation expense		—		—		1,061		—			1,061
Net loss		—		—		—		(9,106	)		(9,106	)
Balance at June 30, 2023		61,717,445	$	62	$	301,789	$	(306,824	)	$	(4,973	)


	Six Months Ended June 30, 2022
										Total
	Common Stock				Additional		Accumulated			Stockholders'
	Shares		Amount		Paid-In-Capital		Deficit			Equity
Balance at December 31,2021		59,722,930	$	60	$	293,406	$	(255,491	)	$	37,975
Exercise of stock options		22,727		—		3		—			3
Vesting and settlement of restricted stock units		375,331		—		—		—			—
Issuance of common shares under employee stock purchase plan		26,630		—		62		—			62
Share-based compensation expense		—		—		1,307		—			1,307
Net loss		—		—		—		(7,644	)		(7,644	)
Balance at March 31, 2022		60,147,618	$	60	$	294,778	$	(263,135	)	$	31,703
Exercise of stock options		2,824		—		4		—			4
Share-based compensation expense		—		—		1,354		—			1,354
Net loss		—		—		—		(7,813	)		(7,813	)
Balance at June 30, 2022		60,150,442	$	60	$	296,136	$	(270,948	)	$	25,248

See accompanying notes to the consolidated financial statements.

CLEARSIDE BIOMEDICAL, INC.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Six Months Ended June 30,
	2023			2022
Operating activities
Net loss	$	(18,386	)	$	(15,457	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash interest expense on liability related to the sales of future royalties, net of issuance costs accretion		4,461			—
Depreciation		31			84
Share-based compensation expense		2,102			2,661
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(119	)		10,477
Other assets and liabilities		(9	)		(82	)
Accounts payable and accrued liabilities		(785	)		745
Deferred revenue		150			—
Net cash used in operating activities		(12,555	)		(1,572	)
Investing activities
Acquisition of property and equipment		(1,212	)		—
Net cash used in investing activities		(1,212	)		—
Financing activities
Proceeds from at-the-market sales agreement, net of issuance costs		657			—
Payments to royalty purchase and sale agreement		(350	)		—
Proceeds from exercise of stock options		10			7
Proceeds from shares issued under employee stock purchase plan		37			62
Net cash provided by financing activities		354			69
Net decrease in cash, cash equivalents and restricted cash		(13,413	)		(1,503	)
Cash, cash equivalents and restricted cash, beginning of period		48,418			30,696
Cash, cash equivalents and restricted cash, end of period	$	35,005		$	29,193
Supplemental disclosure
Purchase of property and equipment included in accrued liabilities	$	116		$	—

Reconciliation of cash, cash equivalents and restricted cash:


	June 30,
	2023		2022
Cash and cash equivalents	$	35,005	$	29,033
Restricted cash		—		160
Cash, cash equivalents and restricted cash at end of period	$	35,005	$	29,193

See accompanying notes to the consolidated financial statements.

CLEARSIDE BIOMEDICAL, INC.

Notes to the Consolidated Financial Statements

(unaudited)

1. The Company

Clearside Biomedical, Inc. (the “Company”) is a biopharmaceutical company focused on revolutionizing the delivery of therapies to the back of the eye through the suprachoroidal space (SCS®). Incorporated in the State of Delaware on May 26, 2011, the Company has its corporate headquarters in Alpharetta, Georgia.

The Company’s activities since inception have primarily consisted of developing product and technology rights, raising capital and performing research and development activities. The Company is subject to a number of risks and uncertainties similar to those of other life science companies at a similar stage of development, including, among others, the need to obtain adequate additional financing, successful development efforts including regulatory approval of products, compliance with government regulations, successful commercialization of potential products, protection of proprietary technology and dependence on key individuals.

Liquidity

The Company had cash and cash equivalents of $35.0 million as of June 30, 2023.

In May 2023, the Company terminated its at-the-market sales agreement with Cowen and Company, LLC (the" ATM Agreement"). The Company sold 515,959 shares of its common stock for net proceeds of $0.7 million under its ATM Agreement with Cowen and Company, LLC during the six months ended June 30, 2023, prior to the termination of the ATM Agreement.

In May 2023, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. ("Cantor") under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million through Cantor as its sales agent. During the six months ended June 30, 2023, the Company sold 26,316 shares of its common stock for net proceeds of $32,000 under the Sales Agreement. Subsequent to June 30, 2023, the Company sold an additional 283,894 shares of its common stock pursuant to the Sales Agreement for net proceeds of $0.3 million.

On August 8, 2022, the Company through its wholly-owned subsidiary Clearside Royalty LLC, a Delaware limited liability company (“Royalty Sub”), entered into a Purchase and Sale Agreement (the "Purchase and Sale Agreement") with entities managed by HealthCare Royalty Management, LLC (“HCR”) pursuant to which it sold its rights to receive royalty and milestone payments due to the Company from XIPERE and certain SCS Microinjector license agreements subject to a cap which may be increased under certain circumstances. The Company received a payment of $32.1 million in September 2022, representing the $32.5 million to which the Company was entitled, net of certain of HCR's transaction-related expenses which the Company agreed to reimburse. There were additional issuance costs of $1.5 million related to the Purchase and Sale Agreement resulting in net proceeds of $30.6 million.

The Company has suffered recurring losses and negative cash flows from operations since inception and anticipates incurring additional losses until such time, if ever, that it can generate significant revenue. The Company has no current source of revenue to sustain present activities. The Company does not expect to generate other meaningful revenue until and unless the Company's licensees successfully commercialize XIPERE and the Company has fulfilled its obligations under the Purchase and Sale Agreement, its other licensees receive regulatory approval and successfully commercialize its product candidates, or the Company commercializes its product candidates either on its own or with a third party. In the absence of product or other revenues, the amount, timing, nature or source of which cannot be predicted, the Company’s losses will continue as it conducts its research and development activities.

The Company will continue to need to obtain additional financing to fund future operations, including completing the development, partnering and potential commercialization of its primary product candidates. The Company will need to obtain financing to complete the development and conduct clinical trials for the regulatory approval of its product candidates if requested by regulatory bodies. If such product candidates were to receive regulatory approval, the Company would need to obtain financing to prepare for the potential commercialization of its product candidates, if the Company decides to commercialize the products on its own.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Based on its current plans and forecasted expenses, the Company expects that its cash and cash equivalents as of the filing date, August 14, 2023, will enable it to fund its planned operating expenses and capital expenditure requirements into the third quarter of 2024. The Company has based this estimate on assumptions that may prove to be wrong, and it could exhaust its capital resources sooner than expected. Until the Company can generate sufficient revenue, the Company will need to finance future cash needs through public or private equity offerings, license agreements, debt financings or restructurings, collaborations, strategic alliances and marketing or distribution arrangements.

The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments to reflect the

possible future effects on the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result should the Company be unable to continue as a going concern.

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The Company's consolidated financial statements include the results of the financial operations of Clearside Biomedical, Inc. and its wholly-owned subsidiary, Clearside Royalty, LLC. a Delaware limited liability company, which was formed for the purposes of the transactions contemplated by the Purchase and Sale Agreement describe in Note 5. All intercompany balances and transactions have been eliminated.

The Company’s consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of management, the Company has made all necessary adjustments, which include normal recurring adjustments necessary for a fair statement of the Company’s consolidated financial position and results of operations for the interim periods presented. The results for the three and six months ended June 30, 2023 are not indicative of results to be expected for the year ending December 31, 2023, any other interim periods or any future year or period. These unaudited financial statements should be read in conjunction with the audited financial statements and related footnotes, which are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. 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 financial statements and reported amounts of income and expenses during the reporting periods. Significant items subject to such estimates and assumptions include revenue recognition, the accounting for useful lives to calculate depreciation and amortization, clinical trial expense accruals, share-based compensation expense and income tax valuation allowance. Actual results could differ from these estimates.

Revenue Recognition

The Company recognizes revenue from its contracts with customers under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The Company’s primary revenue arrangements are license agreements which typically include upfront payments, regulatory and commercial milestone payments and royalties based on future product sales. The arrangements may also include payments for the Company’s SCS Microinjector devices as well as payments for assistance and oversight of the customer’s use of the Company’s technology. In determining the amount of revenue to be recognized under these agreements, the Company performs the following steps: (i) identifies the promised goods and services to be transferred in the contract, (ii) identifies the performance obligations, (iii) determines the transaction price, (iv) allocates the transaction price to the performance obligations and (v) recognizes revenue as the performance obligations are satisfied.

The Company receives payments from its customers based on billing schedules established in each contract. Upfront and other payments may require deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.

Research and Development Costs

Research and development costs are charged to expense as incurred and include:

•

employee-related expenses, including salaries, benefits, travel and share-based compensation expense for research and development personnel;

•

expenses incurred under agreements with contract research organizations, contract manufacturing organizations and consultants that conduct preclinical studies and clinical trials;

•

costs associated with preclinical and clinical development activities;

•

costs associated with submitting regulatory approval applications for the Company’s product candidates;

•

costs associated with training physicians on the suprachoroidal injection procedure and educating and providing them with appropriate product candidate information;

•

costs associated with technology and intellectual property licenses;

•

costs for the Company’s research and development facility; and

•

depreciation expense for assets used in research and development activities.

Costs for certain development activities, such as clinical trial activities, are recognized based on an evaluation of the estimated total costs for the clinical trial, progress to completion of specific tasks using data such as patient enrollment, pass through expenses, clinical site activations, data from the clinical sites or information provided to the Company by its vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual contracts and any subsequent amendments, which may differ from the patterns of costs incurred, and are reflected in the financial statements as prepaid or accrued expense.

Share-Based Compensation

Compensation cost related to share-based awards granted to employees, directors and consultants is measured based on the estimated fair value of the award at the grant date. The Company estimates the fair value of stock options using a Black-Scholes option pricing model. The fair value of restricted stock units granted is measured based on the market value of the Company’s common stock on the date of grant. Share-based compensation costs are expensed on a straight-line basis over the relevant vesting period.

Compensation cost related to shares purchased through the Company’s employee stock purchase plan, which is considered compensatory, is based on the estimated fair value of the shares on the offering date, including consideration of the discount and the look back period. The Company estimates the fair value of the shares using a Black-Scholes option pricing model. Compensation expense is recognized over the six-month withholding period prior to the purchase date.

All share-based compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the recipient's underlying role within the Company.

Cash Equivalents

Cash equivalents consist of short-term, highly liquid investments with an original term of three months or less at the date of purchase.

Concentration of Credit Risk Arising From Cash Deposits in Excess of Insured Limits

The Company maintains its cash in bank deposits that at times may exceed federally insured limits. The Company has not experienced any loss in such accounts. The Company believes it is not exposed to any significant risks with respect to its cash balances.

Liability Related to the Sales of Future Royalties and Non-Cash Interest Expense

The Company recognizes a liability related to the sales of future royalties under ASC 470-10 Debt and ASC 835-30 Interest - Imputation of Interest. The initial funds received by the Company pursuant to the terms of the Purchase and Sale Agreement were recorded as a liability and will be accreted under the effective interest method up to the estimated amount of future royalties and milestone payments to be made under the Purchase and Sale Agreement. The issuance costs were recorded as a direct deduction to the carrying amount of the liability and will be amortized under the effective interest method over the estimated period the liability will be repaid. The Company estimated the total amount of future royalty revenue and milestone payments to be generated over the life of the Purchase and Sale Agreement, and a significant increase or decrease in these estimates could materially impact the liability balance and the related interest expense. If the timing of the receipt of royalty payments or milestones is materially different from the original estimates, the Company will prospectively adjust the effective interest and the related amortization of the liability and related issuance costs.

3. Property and Equipment, Net

Property and equipment, net consisted of the following (dollar amounts in thousands):


	Estimated Useful Lives (Years)	June 30, 2023			December 31, 2022
Furniture and fixtures	5	$	249		$	249
Machinery and equipment	5		343			343
Computer equipment	3		20			13
Leasehold improvements	Lesser of useful life or remaining lease term		476			476
Work in process			1,848			527
Total property and equipment			2,936			1,608
Less: Accumulated depreciation			(884	)		(853	)
Property and equipment, net		$	2,052		$	755

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):


	June 30,		December 31,
	2023		2022
Accrued research and development	$	1,215	$	1,817
Accrued employee costs		970		1,837
Accrued professional fees		167		49
Accrued expense		322		476
	$	2,674	$	4,179

5. Royalty Purchase and Sale Agreement

On August 8, 2022 (the “Closing Date”), the Company, through Royalty Sub, entered into the Purchase and Sale Agreement with HCR, pursuant to which Royalty Sub sold to HCR certain of its rights to receive royalty and milestone payments payable to Royalty Sub under the Arctic Vision License Agreement, the Bausch License Agreement, that certain License Agreement, effective as of July 3, 2019, by and between the Company and Aura Biosciences, Inc. (the “Aura License Agreement”), that certain Option and License Agreement, dated as of August 29, 2019, by and between REGENXBIO Inc. and the Company (the “REGENXBIO License Agreement”) and any and all out-license agreements following the Closing Date for, or related to XIPERE or the SCS Microinjector technology (to be used in connection with compounds or products of any third parties) delivered, in whole or in part, by means of the SCS Microinjector technology), excluding, for the avoidance of doubt, any in-licensed or internally developed therapies following the Closing Date (collectively, the “Royalties”), in exchange for up to $65 million. In connection with this transaction, the Company assigned the Arctic Vision License Agreement, Bausch License Agreement, Aura License Agreement, REGENXBIO License Agreement, the Company's license agreement with Emory University and The Georgia Tech Research Corporation and related intellectual property rights to Royalty Sub.

Under the terms of the Purchase and Sale Agreement, Royalty Sub received an initial payment of $32.1 million, representing the $32.5 million to which the Company was entitled, net of certain of HCR's transaction-related expenses which the Company agreed to reimburse. There were additional issuance costs of $1.5 million related to the Purchase and Sale Agreement resulting in net proceeds of $30.6 million. An additional $12.5 million was deposited by HCR in an escrow account to be released to Royalty Sub upon attainment of a pre-specified XIPERE sales milestone achieved no later than March 31, 2024. The terms of the Purchase and Sale Agreement also provide for an additional $20 million milestone payment to Royalty Sub upon attainment of a second pre-specified sales milestone related to 2024 XIPERE sales (the "Second Milestone Event").

The Purchase and Sale Agreement will automatically expire, and the payment of Royalties from the Royalty Sub to HCR will cease, when HCR has received payments of the Royalties equal to 2.5 times the aggregate amount of payments made by HCR under the Agreement if the Second Milestone Event is achieved on or prior to December 31, 2024 (the “Initial Cap”). If the Second Milestone Event is not achieved on or prior to December 31, 2024, payment of Royalties from Royalty Sub to HCR will cease when HCR has received Royalties payments equal to 3.4 times the aggregate amount of payments under the Purchase and Sale Agreement (the “Alternative Cap”, and together with the Initial Cap, the “Cap Amount”). In the event of a change in control, acquiror will have the option to make a payment to HCR of the Cap Amount then in effect, less the aggregate amount of Royalty payments made by

Royalty Sub to HCR under the Purchase and Sale Agreement as a one-time payment at which time, payment of Royalties to HCR will cease. Alternatively, in the event of a change in control, the acquiror will have the option to make an initial payment of 1.0 times the aggregate amount of payments made by HCR under the Purchase and Sale Agreement as of the date of such change in control, then in that event, payment of Royalties from Royalty Sub to HCR will cease when HCR has received total Royalties payments (including the initial payment) equal to the Alternative Cap. After the Purchase and Sale Agreement expires, all rights to receive the Royalties return to Royalty Sub.

Issuance costs pursuant to the Purchase and Sale Agreement consisting primarily of advisory and legal fees, totaled $1.9 million including the amount of HCR's transaction-related expenses that the Company reimbursed. The effective interest rate includes cash flow projections for future royalty and milestone payments, which are sensitive to certain assumptions, including market size, market penetration and sales price, that are forward looking and could be affected by future market conditions.

The following table summarizes the activity of the Purchase and Sale Agreement (in thousands):


Royalty purchase and sale agreement balance at December 31, 2022	$	33,977
Payments		(350	)
Non-cash interest expense		4,461
Balance at June 30, 2023	$	38,088

Effective interest rate		29.1	%

6. Common Stock

The Company’s amended and restated certificate of incorporation authorizes the Company to issue 200,000,000 shares of $0.001 par value common stock. As of June 30, 2023 and December 31, 2022, there were 61,717,445 and 60,639,827 shares of common stock outstanding, respectively.

7. Stock Purchase Warrants

In September 2016, in connection with a loan agreement, the Company issued warrants to purchase up to 29,796 shares of common stock at a price per share of $10.74. The warrants expire in September 2026, or earlier upon the occurrence of specified mergers or acquisitions of the Company, and are immediately exercisable. The warrants were recorded in equity and had a weighted average remaining life of 3.25 years as of June 30, 2023.

8. Share-Based Compensation

Share-based compensation is accounted for in accordance with the provisions of ASC 718, Compensation-Stock Compensation.

Stock Options

The Company has granted stock option awards to employees, directors and consultants from its 2011 Stock Incentive Plan (the “2011 Plan”) and its 2016 Equity Incentive Plan (the “2016 Plan”). The estimated fair value of options granted is determined as of the date of grant using the Black-Scholes option pricing model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the awards.

Share-based compensation expense for options granted under the 2011 Plan and the 2016 Plan is reflected in the statements of operations as follows (in thousands):


	Three Months Ended June 30,			Six Months Ended June 30,
	2023		2022	2023	2022
Research and development	$	295	$