clsd-10q_20190930.htm

 

 

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 September 30, 2019

OR

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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

 

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

As of November 4, 2019, the registrant had 41,149,781 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

Page

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements

2

 

Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018

2

 

Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)

3

 

Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)

4

 

Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)

5

 

Notes to the Financial Statements

6

Item 2.

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

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 5.

Other Information

29

Item 6.

Exhibits

30

Signatures

31

 

 

 

 

1


Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

CLEARSIDE BIOMEDICAL, INC.

Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,551

 

 

$

8,043

 

Short-term investments

 

 

 

 

 

32,835

 

Prepaid expenses

 

 

1,468

 

 

 

2,049

 

Other current assets

 

 

27

 

 

 

17

 

Total current assets

 

 

24,046

 

 

 

42,944

 

Property and equipment, net

 

 

655

 

 

 

790

 

Operating lease right-of-use asset

 

 

806

 

 

 

 

Restricted cash

 

 

360

 

 

 

360

 

Other assets

 

 

 

 

 

26

 

Total assets

 

$

25,867

 

 

$

44,120

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,429

 

 

$

6,869

 

Accrued liabilities

 

 

2,698

 

 

 

2,923

 

Current portion of long-term debt

 

 

5,833

 

 

 

556

 

Current portion of operating lease liabilities

 

 

483

 

 

 

 

Current portion of deferred rent

 

 

 

 

 

128

 

Other current liabilities

 

 

375

 

 

 

 

Total current liabilities

 

 

10,818

 

 

 

10,476

 

Long-term debt

 

 

4,329

 

 

 

9,419

 

Operating lease liabilities

 

 

961

 

 

 

 

Deferred rent

 

 

 

 

 

605

 

Total liabilities

 

 

16,108

 

 

 

20,500

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized and no shares issued

   at September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized at September 30, 2019 and December 31, 2018; 41,149,781 and 32,119,227 shares issued and

   outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

41

 

 

 

32

 

Additional paid-in capital

 

 

244,279

 

 

 

230,475

 

Accumulated deficit

 

 

(234,561

)

 

 

(206,887

)

Total stockholders’ equity

 

 

9,759

 

 

 

23,620

 

Total liabilities and stockholders’ equity

 

$

25,867

 

 

$

44,120

 

 

See accompanying notes to the financial statements

2


Table of Contents

CLEARSIDE BIOMEDICAL, INC.

Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Collaboration revenue

 

$

141

 

 

$

 

 

$

231

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,728

 

 

 

20,083

 

 

 

14,353

 

 

 

50,805

 

General and administrative

 

 

3,781

 

 

 

3,873

 

 

 

13,169

 

 

 

10,508

 

Total operating expenses

 

 

6,509

 

 

 

23,956

 

 

 

27,522

 

 

 

61,313

 

Loss from operations

 

 

(6,368

)

 

 

(23,956

)

 

 

(27,291

)

 

 

(61,313

)

Other (expense) income, net

 

 

(168

)

 

 

84

 

 

 

(383

)

 

 

133

 

Net loss

 

$

(6,536

)

 

$

(23,872

)

 

$

(27,674

)

 

$

(61,180

)

Net loss per share of common stock — basic and diluted

 

$

(0.17

)

 

$

(0.75

)

 

$

(0.75

)

 

$

(2.02

)

Weighted average shares outstanding — basic and diluted

 

 

38,414,751

 

 

 

32,024,223

 

 

 

36,747,314

 

 

 

30,292,909

 

 

See accompanying notes to the financial statements.

 


3


Table of Contents

CLEARSIDE BIOMEDICAL, INC.

Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

 

 

 

 

Three and Nine Months Ended September 30, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Paid-In-Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2018

 

 

32,119,227

 

 

$

32

 

 

$

230,475

 

 

$

(206,887

)

 

$

23,620

 

Issuance of common shares from at-the-market sales

   agreement

 

 

4,660,966

 

 

 

5

 

 

 

6,622

 

 

 

 

 

 

6,627

 

Exercise of stock options

 

 

2,727

 

 

 

 

 

 

1

 

 

 

 

 

 

1

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,247

 

 

 

 

 

 

1,247

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(15,404

)

 

 

(15,404

)

Balance at March 31, 2019

 

 

36,782,920

 

 

 

37

 

 

 

238,345

 

 

 

(222,291

)

 

 

16,091

 

Issuance of common shares from at-the-market sales

   agreement

 

 

945,974

 

 

 

1

 

 

 

1,272

 

 

 

 

 

 

1,273

 

Issuance of common shares under employee

   stock purchase plan

 

 

17,252

 

 

 

 

 

 

15

 

 

 

 

 

 

15

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,256

 

 

 

 

 

 

1,256

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,734

)

 

 

(5,734

)

Balance at June 30, 2019

 

 

37,746,146

 

 

 

38

 

 

 

240,888

 

 

 

(228,025

)

 

 

12,901

 

Issuance of common shares from at-the-market sales

   agreement

 

 

3,370,000

 

 

 

3

 

 

 

2,416

 

 

 

 

 

 

2,419

 

Exercise of stock options

 

 

13,635

 

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Vesting of restricted stock units

 

 

20,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation

 

 

 

 

 

 

 

 

970

 

 

 

 

 

 

970

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,536

)

 

 

(6,536

)

Balance at September 30, 2019

 

 

41,149,781

 

 

$

41

 

 

$

244,279

 

 

$

(234,561

)

 

$

9,759

 

 

 

 

 

Three and Nine Months Ended September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Paid-In-Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balance at December 31, 2017

 

 

25,354,651

 

 

$

25

 

 

$

145,618

 

 

$

(124,220

)

 

$

(8

)

 

$

21,415

 

Cumulative effect of accounting change

 

 

 

 

 

 

 

 

 

 

 

151

 

 

 

8

 

 

 

159

 

Issuance of common shares from follow-on

   public offering

 

 

6,538,462

 

 

 

7

 

 

 

79,574

 

 

 

 

 

 

 

 

 

79,581

 

Exercise of stock options

 

 

53,920

 

 

 

 

 

 

237

 

 

 

 

 

 

 

 

 

237

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,138

 

 

 

 

 

 

 

 

 

1,138

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,607

)

 

 

 

 

 

(16,607

)

Balance at March 31, 2018

 

 

31,947,033

 

 

 

32

 

 

 

226,567

 

 

 

(140,676

)

 

 

 

 

 

85,923

 

Issuance of common shares under employee

   stock purchase plan

 

 

7,386

 

 

 

 

 

 

45

 

 

 

 

 

 

 

 

 

45

 

Exercise of stock options

 

 

69,804

 

 

 

 

 

 

196

 

 

 

 

 

 

 

 

 

196

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,199

 

 

 

 

 

 

 

 

 

1,199

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(20,701

)

 

 

 

 

 

(20,701

)

Balance at June 30, 2018

 

 

32,024,223

 

 

 

32

 

 

 

228,007

 

 

 

(161,377

)

 

 

 

 

 

66,662

 

Share-based compensation

 

 

 

 

 

 

 

 

1,286

 

 

 

 

 

 

 

 

 

1,286

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(23,872

)

 

 

 

 

 

(23,872

)

Balance at September 30, 2018

 

 

32,024,223

 

 

$

32

 

 

$

229,293

 

 

$

(185,249

)

 

$

 

 

$

44,076

 

 

See accompanying notes to the financial statements.

 

 

4


Table of Contents

CLEARSIDE BIOMEDICAL, INC.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(27,674

)

 

$

(61,180

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

160

 

 

 

141

 

Share-based compensation expense

 

 

3,473

 

 

 

3,623

 

Non-cash interest expense

 

 

141

 

 

 

107

 

Accretion of debt discount

 

 

46

 

 

 

95

 

Amortization and accretion on available-for-sale investments, net

 

 

(115

)

 

 

(514

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

571

 

 

 

(1,686

)

Other assets and liabilities

 

 

306

 

 

 

(81

)

Accounts payable and accrued liabilities

 

 

(5,665

)

 

 

4,554

 

Net cash used in operating activities

 

 

(28,757

)

 

 

(54,941

)

Investing activities

 

 

 

 

 

 

 

 

Maturities of available-for-sale investments

 

 

32,950

 

 

 

59,970

 

Purchase of available-for-sale investments

 

 

 

 

 

(80,137

)

Acquisition of property and equipment

 

 

(25

)

 

 

(34

)

Net cash provided by (used in) investing activities

 

 

32,925

 

 

 

(20,201

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from at-the-market sales agreement, net of issuance costs

 

 

10,319

 

 

 

 

Proceeds from follow-on public offering, net of issuance costs

 

 

 

 

 

79,581

 

Proceeds from exercise of stock options

 

 

6

 

 

 

433

 

Proceeds from shares issued under employee stock purchase plan

 

 

15

 

 

 

45

 

Proceeds from long-term debt

 

 

 

 

 

10,000

 

Payments made on long-term debt

 

 

 

 

 

(8,300

)

Net cash provided by financing activities

 

 

10,340

 

 

 

81,759

 

Net increase in cash, cash equivalents and restricted cash

 

 

14,508

 

 

 

6,617

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

8,403

 

 

 

9,584

 

Cash, cash equivalents and restricted cash, end of period

 

$

22,911

 

 

$

16,201

 

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

September 30,

 

 

 

2019

 

 

2018

 

Cash and cash equivalents

 

$

22,551

 

 

$

15,841

 

Restricted cash

 

 

360

 

 

 

360

 

Cash, cash equivalents and restricted cash at end of period

 

$

22,911

 

 

$

16,201

 

 

See accompanying notes to the financial statements.

 

5


Table of Contents

CLEARSIDE BIOMEDICAL, INC.

Notes to the Financial Statements

(unaudited)

 

 

1. The Company

 

Clearside Biomedical, Inc. (the “Company”) is a clinical biopharmaceutical company developing first-in-class pharmacological therapies to restore and preserve vision for people with serious eye diseases. The Company’s current product candidates focus on treatments for diseases affecting the retina and choroid and are injected into the suprachoroidal space (“SCS”) using its proprietary SCS Microinjector™. 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 has no current source of revenue to sustain present activities and does not expect to generate meaningful revenue until and unless the Company receives regulatory approval of and successfully commercializes its product candidates. 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, 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 has funded its operations primarily through the sale of convertible preferred stock and common stock and the issuance of long-term debt. On June 30, 2017, the Company entered into an at-the-market sales agreement (“the ATM agreement”) with Cowen and Company LLC (“Cowen”) 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 Cowen acting as sales agent. During the nine months ended September 30, 2019, the Company sold 9.0 million shares of its common stock for net proceeds of $10.3 million under the ATM agreement. The Company’s registration statement on Form S-3 contemplated under the ATM agreement was declared effective by the SEC on July 13, 2017.  The registration statement on Form S-3 includes a prospectus supplement covering the offering up to $18.5 million of shares of common stock over the 12 months ending March 15, 2020 in accordance with the ATM agreement.

 

On October 22, 2019, the Company entered into a License Agreement (the “License Agreement”) with Bausch Health Ireland Limited (“Bausch”). Under the License Agreement, the Company has granted an exclusive license to Bausch for the commercialization and development of XIPERETM, the Company’s proprietary suspension of the corticosteroid triamcinolone acetonide formulated for administration to the back of the eye, in the United States and Canada. Under the License Agreement, the Company received an upfront payment of $5.0 million (see Note 13 Subsequent Events).

In connection with the entry by the Company into the License Agreement, on October 18, 2019, the Company entered into a Third Amendment to Second Amended and Restated Loan and Security Agreement (the “3rd Amendment”) with Silicon Valley Bank (“SVB”). Pursuant to the 3rd Amendment, the Company repaid $5.0 million of the outstanding principal balance of the $10.0 million term loan. In addition, the Company agreed that if the Company’s cash and cash equivalents balance with SVB falls below $10.0 million, then the Company will transfer to a pledged account an amount of cash and cash equivalents equal to the sum of the then-outstanding principal balance of the term loan plus an amount for a final payment fee of $340,441 (see Note 5 Long-Term Debt).

The Company will need to obtain additional resources to fund future operations, including to conduct additional clinical trials and to complete the development of its product candidates. If any such products were to receive regulatory approval, the Company may need to prepare for the potential commercialization of its product candidates, which could include additional collaborations with third parties for the commercial launch of the products.

The Company had cash and cash equivalents of $22.6 million as of September 30, 2019. 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 obtain approval from the U.S. Food and Drug Administration (the “FDA”) to market and then generate significant revenue from any of its product candidates. 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. The Company will need additional resources to fund its operations and may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements.

6


Table of Contents

Based on its current license agreements, research and development plans and forecasted expenses, the Company expects that its existing cash and cash equivalents as of the filing date, November 8, 2019, will enable it to fund its operating expenses and capital expenditure requirements into the third quarter of 2020. The Company’s ability to fund its operations into the third quarter of 2020 gives effect to the potential restriction of cash pursuant to the Second Amended and Restated Loan and Security Agreement, as amended by the 3rd Amendment. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are being issued. Accordingly, the Company has plans to mitigate its going concern risk by raising additional capital, potentially in a combination of equity or debt financings, license agreements or by potentially entering into additional collaborations, partnering and other strategic arrangements. The Company has based this estimate on assumptions that may prove to be wrong, and the Company could exhaust its capital resources sooner than it expects.

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

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Unaudited Interim Financial Information

The accompanying balance sheet as of September 30, 2019, statements of operations for the three and nine months ended September 30, 2019 and 2018, statements of stockholders’ equity for the three and nine months ended September 30, 2019 and 2018 and statements of cash flows for the nine months ended September 30, 2019 and 2018 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of September 30, 2019, its results of its operations for the three and nine months ended September 30, 2019 and 2018, its changes in stockholders’ equity for the three and nine months ended September 30, 2019 and 2018 and its cash flows for the nine months ended September 30, 2019 and 2018. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2019 and 2018 are unaudited. The results for the nine months ended September 30, 2019 are not indicative of results to be expected for the year ending December 31, 2019, 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, 2018.

Use of Estimates

The preparation of 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 the accounting for useful lives to calculate depreciation and amortization, clinical expense accruals, share-based compensation expense and income tax valuation allowance. Actual results could differ from these estimates.

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 clinical trials and preclinical studies;

 

costs associated with nonclinical 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;

7


Table of Contents

 

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 trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, 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 arrangements, 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 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. Compensation expense for options granted to non-employees is determined as the fair value of consideration received or the fair value of the equity instruments issued, whichever is more reliably measured. 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 underlying employees’ roles 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.

Short-Term Investments

Short-term investments are investments with original maturities of between 90 and 365 days when purchased and are comprised of commercial paper and treasury bills. The Company classifies its short-term investments as available-for-sale securities. Short-term investments are recorded at fair value and unrealized gains and losses are recorded within interest income. In addition, the Company evaluates the short-investments with unrealized losses to determine whether such losses are other-than-temporary.

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.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (ASC 842), and subsequently issued updates as part of ASU 2018-11, Leases, Targeted Improvements. The new guidance requires organizations that lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by those leases on their balance sheets. The Company adopted the ASC 842 effective January 1, 2019 using the optional transition method, did not restate any prior periods and adopted the package of practical expedients. Under the package of practical expedients permitted by the new standard, the Company does not have to reassess whether any expired contracts are or contain leases, the classification of leases or whether initial direct costs should be capitalized. The adoption of the new standard resulted in the recognition of a right-of use asset of $1.0 million and lease obligations of $1.7 million on the Company’s balance sheet as of January 1, 2019. The adoption did not have a material impact on the Company’s statements of operations or cash flows.

8


Table of Contents

 

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation: Improvements to Nonemployee Shared-Based Payment Accounting. The ASU update expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The Company adopted ASU 2018-07 effective January 1, 2019, and the adoption did not have a material impact on its financial statements and related disclosures.

 

3. Property and Equipment, Net

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

 

 

 

Estimated

Useful Lives

(Years)

 

September 30, 2019

 

 

December 31,

2018

 

Furniture and fixtures

 

5

 

$

400

 

 

$

382

 

Machinery and equipment

 

5

 

 

121

 

 

 

121

 

Computer equipment

 

3

 

 

19

 

 

 

19

 

Leasehold improvements

 

Lesser of

useful life or

remaining

lease term

 

 

684

 

 

 

677

 

 

 

 

 

 

1,224

 

 

 

1,199

 

Less: Accumulated depreciation

 

 

 

 

(569

)

 

 

(409

)

 

 

 

 

$

655

 

 

$

790

 

 

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Accrued research and development

 

$

403

 

 

$

1,263

 

Accrued employee costs

 

 

1,950

 

 

 

1,191

 

Accrued marketing

 

 

31

 

 

 

47

 

Accrued professional fees

 

 

178

 

 

 

63

 

Accrued interest payable

 

 

 

 

 

76

 

Accrued expense

 

 

136

 

 

 

283

 

 

 

$

2,698

 

 

$

2,923

 

 

5. Long-Term Debt

Loan and Security Agreements

In September 2016, the Company entered into an amended and restated loan and security agreement, which was subsequently amended on October 31, 2017 (as amended, the “1st A&R loan agreement”) with SVB, MidCap Funding XII Trust and MidCap Financial Trust, which amended and restated in its entirety the Company’s prior loan and security agreement. The 1st A&R loan agreement provided for new term loans of up to $15.0 million, with a floating interest rate equal to 7% plus the greater of (i) the 30-day U.S. LIBOR, as reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, or (ii) 0.50%.

Under the terms of the 1st A&R loan agreement, an initial tranche of $8.0 million was advanced on September 28, 2016. The draw period for the remaining $7.0 million available under the 1st A&R loan agreement expired on March 31, 2018. The Company was required to pay accrued interest only on the outstanding $8.0 million balance through December 31, 2017, followed by 30 equal payments of principal and accrued interest. The Company had the option to prepay the outstanding balance of the term loans in full, subject to a prepayment fee of 2% of the original principal amount of the aggregate term loans for any prepayments through May 31, 2020. A final payment of $0.5 million was due at maturity of the loan on June 1, 2020, or upon the prepayment of the facility or the acceleration of amounts due under the facility as a result of an event of default, and was being accreted in long-term debt over the life of the loan. Of the $8.0 million borrowed, $5.3 million was used to repay all amounts outstanding under the original loan agreement.

9


Table of Contents

Closing costs incurred in the refinancing portion of the loan were recorded as expense while the financing costs for the new portion of the loan are recorded in long-term debt and being accreted over the life of the loan. Upon repayment of the original loan agreement, all remaining closing costs associated with the original loan agreement were being accreted to long-term debt over the life of the 1st A&R loan agreement.

On May 14, 2018, the Company entered into a second amended and restated loan and security agreement (the “2nd A&R Loan Agreement”) with SVB, MidCap Funding III Trust and MidCap Financial Trust (together, “MidCap” and collectively with SVB, the “Lenders”), which amended and restated in its entirety the 1st A&R loan agreement. The 2nd A&R Loan Agreement provided for new term loans of up to $20.0 million, with a floating interest rate equal to 6.50% plus the greater of (i) the 30-day U.S. LIBOR, as reported in the Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, or (ii) 1.89%. The 2nd A&R Loan Agreement includes, among other things, the ability of the Lenders to accelerate the payment of the term loan in the event of material adverse change and restrictions on the Company’s ability to sell, assign, license, transfer or otherwise dispose of its assets, including intellectual property assets, without the prior written consent of the Lenders.

The Company borrowed an initial tranche of $10.0 million on May 14, 2018, of which $7.0 million was used to repay all amounts outstanding under the 1st A&R loan agreement, including fees associated with the final payment. The prepayment fees were waived. Of the remaining $10.0 million under the 2nd A&R Loan Agreement, $5.0 million became available for draw but was not drawn by the Company, and the other $5.0 million is not available for draw.

As of September 30, 2019, the Company was required to pay accrued interest only on the $10 million borrowed under the 2nd A&R Loan Agreement through October 31, 2019, followed by consecutive equal monthly payments of principal and interest in arrears continuing through the maturity date of October 1, 2022. The Company had the option to prepay the outstanding balance in full, subject to a prepayment fee of 2% of the original principal amount for any prepayment prior to October 1, 2022. A final payment of 5.50% of the aggregate borrowed amount was due at maturity of the loan on October 1, 2022, or upon the prepayment of the facility or the acceleration of amounts due under the facility as a result of an event of default.

The borrowings under the 2nd A&R Loan Agreement are secured by substantially all of the Company’s assets.

On October 18, 2019, the Company entered into the 3rd Amendment with the Lenders. Pursuant to the 3rd Amendment, the Company repaid $5.0 million of the outstanding principal balance of the $10.0 million term loan. The Company did not pay any final payment or termination fees in connection with the $5.0 million prepayment. In addition, the Company and the Lenders agreed to modify the term loan repayment schedule. As amended, the term loan repayment schedule provides for interest only payments through April 30, 2020, or if the Company completes a specified financial milestone, October 31, 2020, followed by consecutive equal monthly payments of principal and interest in arrears continuing through the maturity date of October 1, 2022. In addition, the Company agreed that if the Company’s cash and cash equivalents balance with SVB falls below $10.0 million, the Company will transfer to a pledged account an amount of cash and cash equivalents equal to the sum of the then-outstanding principal balance of the term loan plus a final payment fee of $340,441. As a result of the 3rd Amendment, as of September 30, 2019, the Company has reflected in current liabilities the amount of principal it expects to pay within the next 12 months.

Interest expense on the borrowings under the loan agreements described above was $223,000 and $220,000 for the three months ended September 30, 2019 and 2018, respectively, and $676,000 and $566,000 for the nine months ended September 30, 2019 and 2018, respectively. Accretion of the scheduled final payment was $47,000 for each of the three months ended September 30, 2019 and 2018, and $141,000 and $107,000 for the nine months ended September 30, 2019 and 2018, respectively. Accretion of the deferred debt issuance costs was $16,000 for each of the three months ended September 30, 2019 and 2018, and $47,000 and $95,000 for the nine months ended September 30, 2019 and 2018, respectively.

As of September 30, 2019, the scheduled payments for the 2nd A&R Loan Agreement, as amended, and the scheduled final payment in 2022, were as follows (in thousands):

 

Year Ending December 31,

 

Principal

 

 

Interest and

Final Payment

 

 

Total

 

2019

 

$

5,000

 

 

$

107

 

 

$

5,107

 

2020

 

 

1,333

 

 

 

392

 

 

 

1,725

 

2021

 

 

2,000

 

 

 

234

 

 

 

2,234

 

2022

 

 

1,667

 

 

 

405

 

 

 

2,072

 

 

 

$

10,000

 

 

$

1,138

 

 

$

11,138

 

 

10


Table of Contents

6. Common Stock

The Company’s amended and restated certificate of incorporation authorizes the Company to issue 100,000,000 shares of $0.001 par value common stock. As of September 30, 2019 and December 31, 2018, there were 41,149,781 and 32,119,227 shares of common stock outstanding, respectively.

 

7. Stock Purchase Warrants

In September 2016, in connection with the 1st A&R loan agreement (see Note 5 Long-Term Debt), 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 7.00 years as of September 30, 2019.

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Research and development

 

$

243

 

 

$

491

 

 

$

1,066

 

 

$

1,365

 

General and administrative

 

 

543

 

 

 

791

 

 

 

2,166

 

 

 

2,246

 

Total

 

$

786

 

 

$

1,282

 

 

$

3,232

 

 

$

3,611

 

 

The following table summarizes the activity related to stock options during the nine months ended September 30, 2019:

 

 

 

 

 

 

 

Weighted

 

 

 

Number of

 

 

Average

 

 

 

Shares

 

 

Exercise Price

 

Options outstanding at December 31, 2018

 

 

3,463,096

 

 

$

6.62

 

Granted

 

 

1,892,600

 

 

 

1.26

 

Exercised

 

 

(16,362

)

 

 

0.40

 

Forfeited

 

 

(1,146,450

)

 

 

5.00

 

Options outstanding at September 30, 2019

 

 

4,192,884

 

 

 

4.67

 

 

 

 

 

 

 

 

 

 

Options exercisable at December 31, 2018

 

 

1,583,749

 

 

 

5.63

 

 

 

 

 

 

 

 

 

 

Options exercisable at September 30, 2019

 

 

2,204,649

 

 

 

5.61

 

11


Table of Contents

 

As of September 30, 2019, the Company had $5.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.4 years.

 

Restricted Stock Units

 

The Company has granted restricted stock units (“RSUs”) to employees from the 2016 Plan. The shares underlying the RSU awards have vesting terms of eight months to two years from the date of grant subject to the employees’ continuous service and subject to accelerated vesting in specified circumstances.

The fair value of the RSUs granted is measured based on the market value of the Company’s common stock on the date of grant and is recognized ratably over the requisite service period, which is generally the vesting period of the awards.

 

The following table summarizes the activity related to RSUs during the nine months ended September 30, 2019:

 

 

 

 

 

 

 

Weighted

 

 

 

Number of

 

 

Average

 

 

 

Shares

 

 

Exercise Price

 

Non-vested RSUs outstanding at December 31, 2018

 

 

 

 

$

 

Granted

 

 

1,339,300

 

 

 

0.88

 

Vested

 

 

(20,000

)

 

 

1.09

 

Non-vested RSUs outstanding at September 30, 2019

 

 

1,319,300

 

 

 

0.88

 

 

The Company recorded $45,000 and $0.2 million of share-based compensation expense for the three and nine months ended September 30, 2019, respectively, for the RSUs. As of September 30, 2019, the Company had $1.0 million of unrecognized compensation expense related to the RSUs, which is expected to be recognized over a weighted average period of 1.4 years.

 

Employee Stock Purchase Plan

 

In January 2016, the Company’s board of directors adopted and approved, and in January 2016 the Company’s stockholders approved, the Clearside Biomedical, Inc. 2016 Employee Stock Purchase Plan (the “2016 ESPP”) which became effective on June 1, 2016. The first offering period for the 2016 ESPP commenced January 1, 2017. The 2016 ESPP is considered a compensatory plan and the fair value of the discount and the look-back period are estimated using the Black-Scholes option pricing model and expense is recognized over the six month withholding period prior to the purchase date. The Company has issued a total of 39,539 shares of common stock purchased under the 2016 ESPP. The Company has recorded $2,000 and $4,000 of share-based compensation expense for the three months ended September 30, 2019 and 2018, respectively, and $15,000 and $12,000 for the nine months ended September 30, 2019 and 2018, respectively, in the statements of operations for the estimated number of shares to be purchased on the next purchase date following the conclusion of the applicable reporting period.

 

 

9. Commitments and Contingencies

Lease Commitment Summary

 

In November 2016, the Company signed an office lease agreement to lease approximately 20,000 square feet of office space in Alpharetta, Georgia for its corporate headquarters. The lease agreement is for a 6.5 year term with a renewal option for one additional five-year term. Rental payments are $35,145 per month subject to an increase of 3% per year. Rent expense under this lease is recognized on a straight-line basis over the term of the lease. In addition, the lease agreement requires payment of the pro-rata share of the annual operating expenses associated with the premises. The Company relocated to this space in March 2017.

 

In August 2018, the Company signed an office lease agreement to lease approximately 3,500 square feet of office space in Berkeley, California for its commercial operations. The lease agreement is for a two-year term with a renewal option for an additional one-year term. The Company has determined that it will not exercise the renewal option for the Berkeley lease. Rental payments are $12,775 per month subject to a 3% increase per year. Rent expense under this lease is recognized on a straight-line basis over the term of the lease. The Company will pay a pro-rata share of the annual operating expenses associated with the premises.

 

12


Table of Contents

The Company’s operating leases included on the balance sheet are as follows (in thousands):

 

 

 

September 30,

2019

 

Operating lease right-of-use asset

 

$

806

 

 

 

 

 

 

Liabilities

 

 

 

 

   Current portion of operating lease liabilities

 

$

483

 

   Operating lease liabilities

 

 

961

 

      Total operating lease liabilities

 

$

1,444

 

The Company recognizes a right-of-use asset for the right to use the underlying asset for the lease term, and a lease liability, which represents the present value of the Company’s obligation to make payments over the lease term. The renewal option is not included in the calculation of the right-of-use asset and the lease liabilities as the Company has not yet determined if the Alpharetta, Georgia lease will be renewed. The present value of the lease payments is calculated using an incremental borrowing rate as the Company’s leases do not provide an implicit interest rate. At September 30, 2019, the Company’s weighted average discount rate was 5.3% and the weighted average lease term was 2.4 years.

Total future undiscounted minimum lease payments were as follows at September 30, 2019 (in thousands):

 

Year Ending December 31,

 

 

 

 

2019

 

$

157

 

2020

 

 

574

 

2021

 

 

496

 

2022

 

 

511

 

2023

 

 

393

 

Total minimum lease payments

 

$

2,131

 

 

Equipment leases with an initial term of 12 months or less are not recorded with operating lease liabilities. The Company recognizes expense for these on a straight-line basis over the lease term. The equipment leases were deemed to be immaterial.

 

Rent expense was $100,000 and $79,000 for the three months ended September 30, 2019 and 2018, respectively, and $300,000 and $195,000 for the nine months ended September 30, 2019 and 2018, respectively. Cash payments included in operating activities on the statement of cash flows for operating lease liabilities were $386,000 for the nine months ended September 30, 2019.

Contract Service Providers

In the course of the Company’s normal business operations, it has agreements with contract service providers to assist in the performance of its research and development, clinical research and manufacturing. Substantially all of these contracts are on an as needed basis.

 

10. Collaboration Agreements

  

The Company has periodically entered into other short-term collaboration agreements, generally with performance obligations of one to two months, to evaluate the potential use of its proprietary SCS Microinjector with third-party product candidates for the treatment of various diseases. Funds received from these collaboration agreements are recognized as revenue over the term of the agreement. The Company recorded $141,000 and $231,000 of revenue from these collaboration agreements during the three and nine months ended September 30, 2019, respectively. In addition, the Company recorded $0.4 million of deferred revenue in other current liabilities from these collaboration agreements as of September 30, 2019.

 

 

11. Fair Value Measurements

The Company records certain financial assets and liabilities at fair value in accordance with the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, on fair value measurements. As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market

13


Table of Contents

participants would use in pricing an asset or a liability. As a basis for considering these assumptions, the guidance defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

 

Level 1—Unadjusted quoted prices in active, accessible markets for identical assets or liabilities.

 

Level 2—Other inputs that are directly or indirectly observable in the marketplace.

 

Level 3—Unobservable inputs that are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s material financial instruments at September 30, 2019 and December 31, 2018 consisted primarily of cash and cash equivalents, short-term investments and long-term debt. The fair values of cash and cash equivalents, other current assets and accounts payable approximate their respective carrying values due to the short term nature of these instruments and are classified as Level 1 in the fair value hierarchy. The fair value of long-term debt approximates the carrying value due to variable interest rates that correspond to market rates and is classified as Level 1 in the fair value hierarchy. The Company has determined its short-term investments, comprised of commercial paper, to be Level 2 in the fair value hierarchy. The fair value was determined using a market approach, based on prices and other relevant information generated by market transactions involving similar assets. The short-term investments consist of investments with original maturity dates from date of acquisition of 90 to 365 days and are classified as available-for-sale.

There were no significant transfers between Levels 1, 2 and 3 during the nine months ended September 30, 2019 and the year ended December 31, 2018.

The following tables summarize the fair value of financial assets that are measured at fair value and the classification by level of input within the fair value hierarchy (in thousands):

 

 

 

September 30, 2019

 

 

 

Level 1

 

 

Level 2

 

 

Level 3