10-Q
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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, 2021 

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 August 6, 2021, the registrant had 59,479,568 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


 

 

Page

 

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

 

Balance Sheets as of June 30, 2021 and December 31, 2020

3

 

Statements of Operations for the three and six months ended June 30, 2021 and 2020

4

 

Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020

5

Statements of Cash Flows for the six months ended June 30, 2021 and 2020

6

Notes to the Financial Statements

7

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

PART II - OTHER INFORMATION

 

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

26

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 6.

Exhibits

26

Signatures

27

 

 

 

 


 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CLEARSIDE BIOMEDICAL, INC.

Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,414

 

 

$

17,287

 

Prepaid expenses

 

 

359

 

 

 

722

 

Other current assets

 

 

880

 

 

 

109

 

Total current assets

 

 

27,653

 

 

 

18,118

 

Property and equipment, net

 

 

327

 

 

 

416

 

Operating lease right-of-use asset

 

 

452

 

 

 

528

 

Restricted cash

 

 

160

 

 

 

260

 

Total assets

 

$

28,592

 

 

$

19,322

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,220

 

 

$

1,997

 

Accrued liabilities

 

 

2,196

 

 

 

1,582

 

Current portion of long-term debt

 

 

 

 

 

991

 

Current portion of operating lease liabilities

 

 

380

 

 

 

373

 

Deferred revenue

 

 

5,000

 

 

 

5,000

 

Total current liabilities

 

 

8,796

 

 

 

9,943

 

Operating lease liabilities

 

 

458

 

 

 

616

 

Total liabilities

 

 

9,254

 

 

 

10,559

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized and no
   shares issued at June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized at
   June 30, 2021 and December 31, 2020;
59,091,591 and
   
51,860,941 shares issued and outstanding at June 30, 2021 and
   December 31, 2020, respectively

 

 

59

 

 

 

52

 

Additional paid-in capital

 

 

288,592

 

 

 

264,578

 

Accumulated deficit

 

 

(269,313

)

 

 

(255,867

)

Total stockholders’ equity

 

 

19,338

 

 

 

8,763

 

Total liabilities and stockholders’ equity

 

$

28,592

 

 

$

19,322

 

 

See accompanying notes to the financial statements

3


 

CLEARSIDE BIOMEDICAL, INC.

Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

License and other revenue

 

$

780

 

 

$

354

 

 

$

814

 

 

$

4,451

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

4,060

 

 

 

3,300

 

 

 

9,550

 

 

 

7,111

 

General and administrative

 

 

2,816

 

 

 

2,611

 

 

 

5,709

 

 

 

5,733

 

Total operating expenses

 

 

6,876

 

 

 

5,911

 

 

 

15,259

 

 

 

12,844

 

Loss from operations

 

 

(6,096

)

 

 

(5,557

)

 

 

(14,445

)

 

 

(8,393

)

Other income

 

 

1

 

 

 

 

 

 

999

 

 

 

 

Other expense

 

 

 

 

 

(197

)

 

 

 

 

 

(272

)

Net loss

 

$

(6,095

)

 

$

(5,754

)

 

$

(13,446

)

 

$

(8,665

)

Net loss per share of common stock — basic and diluted

 

$

(0.11

)

 

$

(0.13

)

 

$

(0.23

)

 

$

(0.19

)

Weighted average shares outstanding — basic and diluted

 

 

57,745,465

 

 

 

45,214,500

 

 

 

57,394,017

 

 

 

44,984,005

 

 

See accompanying notes to the financial statements.

 

4


 

CLEARSIDE BIOMEDICAL, INC.

Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)

 

 

 

Six Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Paid-In-Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

51,860,941

 

 

$

52

 

 

$

264,578

 

 

$

(255,867

)

 

$

8,763

 

Issuance of common shares under a direct
   registered offering

 

 

4,209,050

 

 

 

4

 

 

 

11,074

 

 

 

 

 

 

11,078

 

Issuance of common shares under at-the-market
   sales agreement

 

 

1,186,579

 

 

 

2

 

 

 

3,247

 

 

 

 

 

 

3,249

 

Exercise of stock options

 

 

62,493

 

 

 

 

 

 

38

 

 

 

 

 

 

38

 

Vesting and settlement of restricted stock units

 

 

227,754

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares under employee stock
   purchase plan

 

 

31,908

 

 

 

 

 

 

54

 

 

 

 

 

 

54

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,154

 

 

 

 

 

 

1,154

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,351

)

 

 

(7,351

)

Balance at March 31, 2021

 

 

57,578,725

 

 

 

58

 

 

 

280,145

 

 

 

(263,218

)

 

 

16,985

 

Issuance of common shares under at-the-market
   sales agreement

 

 

1,397,436

 

 

 

1

 

 

 

7,083

 

 

 

 

 

 

7,084

 

Exercise of stock options

 

 

21,673

 

 

 

 

 

 

33

 

 

 

 

 

 

33

 

Vesting and settlement of restricted stock units

 

 

93,757

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,331

 

 

 

 

 

 

1,331

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,095

)

 

 

(6,095

)

Balance at June 30, 2021

 

 

59,091,591

 

 

$

59

 

 

$

288,592

 

 

$

(269,313

)

 

$

19,338

 

 

 

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Paid-In-Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2019

 

 

44,413,372

 

 

$

44

 

 

$

248,770

 

 

$

(237,657

)

 

$

11,157

 

Issuance of common shares under at-the-market
   sales agreement

 

 

455,186

 

 

 

1

 

 

 

1,192

 

 

 

 

 

 

1,193

 

Share-based compensation expense

 

 

 

 

 

 

 

 

1,001

 

 

 

 

 

 

1,001

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,911

)

 

 

(2,911

)

Balance at March 31, 2020

 

 

44,868,558

 

 

 

45

 

 

 

250,963

 

 

 

(240,568

)

 

 

10,440

 

Issuance of common shares under at-the-market
   sales agreement

 

 

800,170

 

 

 

1

 

 

 

1,606

 

 

 

 

 

 

1,607

 

Exercise of stock options

 

 

58,333

 

 

 

 

 

 

72

 

 

 

 

 

 

72

 

Vesting and settlement of restricted stock units

 

 

512,550

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common shares under employee
   stock purchase plan

 

 

35,359

 

 

 

 

 

 

31

 

 

 

 

 

 

31

 

Share-based compensation expense

 

 

 

 

 

 

 

 

891

 

 

 

 

 

 

891

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,754

)

 

 

(5,754

)

Balance at June 30, 2020

 

 

46,274,970

 

 

$

46

 

 

$

253,563

 

 

$

(246,322

)

 

$

7,287

 

 

See accompanying notes to the financial statements.

 

5


 

CLEARSIDE BIOMEDICAL, INC.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(13,446

)

 

$

(8,665

)

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

 

 

 

 

 

 

Depreciation

 

 

89

 

 

 

90

 

Share-based compensation expense

 

 

2,485

 

 

 

1,892

 

Gain on extinguishment of debt

 

 

(998

)

 

 

 

Non-cash interest expense

 

 

 

 

 

59

 

Accretion of debt discount

 

 

 

 

 

129

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(408

)

 

 

1,418

 

Other assets and liabilities

 

 

(75

)

 

 

(68

)

Accounts payable and accrued liabilities

 

 

(156

)

 

 

(878

)

Net cash used in operating activities

 

 

(12,509

)

 

 

(6,023

)

Investing activities

 

 

 

 

 

 

Acquisition of property and equipment

 

 

 

 

 

(55

)

Net cash provided by (used in) investing activities

 

 

 

 

 

(55

)

Financing activities

 

 

 

 

 

 

Proceeds from registered direct offering, net of issuance costs

 

 

11,078

 

 

 

 

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

 

 

10,333

 

 

 

2,800

 

Proceeds from exercise of stock options

 

 

71

 

 

 

72

 

Proceeds from shares issued under employee stock purchase plan

 

 

54

 

 

 

31

 

Proceeds from long-term debt

 

 

 

 

 

991

 

Payments made on long-term debt

 

 

 

 

 

(5,340

)

Net cash provided by (used in) financing activities

 

 

21,536

 

 

 

(1,446

)

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

9,027

 

 

 

(7,524

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

17,647

 

 

 

22,955

 

Cash, cash equivalents and restricted cash, end of period

 

$

26,674

 

 

$

15,431

 

Supplemental disclosure of noncash financing activities

 

 

 

 

 

 

Forgiveness of PPP Loan and accrued interest

 

$

998

 

 

$

 

 

Reconciliation of cash, cash equivalents and restricted cash:

 

 

June 30,

 

 

 

2021

 

 

2020

 

Cash and cash equivalents

 

$

26,414

 

 

$

15,071

 

Restricted cash (including $100 for each period recorded in other current assets)

 

 

260

 

 

 

360

 

Cash, cash equivalents and restricted cash at end of period

 

$

26,674

 

 

$

15,431

 

 

See accompanying notes to the financial statements.

 

6


 

CLEARSIDE BIOMEDICAL, INC.

Notes to the Financial Statements

(unaudited)

 

 

1. The Company

Clearside Biomedical, Inc. (the “Company”) is a biopharmaceutical company dedicated to developing and delivering treatments that restore and preserve vision for people with serious back of the eye diseases. The Company’s proprietary SCS Microinjector targets the suprachoroidal space and offers unique access to the macula, retina and choroid where sight-threatening disease often occurs. This suprachoroidal space injection is an inherently flexible, in-office, non-surgical procedure, intended to provide targeted delivery to the site of disease and to work with both established and new formulations of medications, as well as future therapeutic innovations. 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, either on its own or with a third party. 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 $26.4 million as of June 30, 2021. On January 6, 2021, the Company entered into a securities purchase agreement with certain institutional purchasers that purchased 4.2 million shares of its common stock in a registered direct offering at a price of $2.851 per share. The Company raised net proceeds of $11.1 million after deducting offering expenses. During the six months ended June 30, 2021, the Company sold 2.6 million shares of its common stock for net proceeds of $10.3 million under its at-the-market agreement with Cowen and Company, LLC. Subsequent to June 30, 2021, the Company sold an additional 0.3 million shares of its common stock for net proceeds of $1.9 million under its at-the-market agreement with Cowen and Company, LLC.

The Company has funded its operations primarily through the sale of common stock and convertible preferred stock and the issuance of long-term debt. 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 conduct additional trials for the regulatory approval of its product candidates if requested by regulatory bodies, and completing the development of any product candidates that might be acquired. If such products 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.

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 regulatory approval to sell, and then generate significant revenue from commercializing its lead product candidate, XIPERE™ (triamcinolone acetonide suprachoroidal injectable suspension) with its licensees. 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.

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 10, 2021, will enable it to fund its planned operating expenses and capital expenditure requirements into the second quarter of 2022. This estimate does not give effect to additional development milestone payments the Company might receive under the agreements with Bausch, REGENXBIO or Arctic Vision, or in connection with any other potential license or collaboration agreement for XIPERE or any future product candidates. 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.

7


 

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 June 30 2021, statements of operations for the three and six months ended June 30, 2021 and 2020, statements of stockholders’ equity for the three and six months ended June 30, 2021 and 2020 and statements of cash flows for the six months ended June 30, 2021 and 2020 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 June 30, 2021, its results of its operations for the three and six months ended June 30, 2021 and 2020, its changes in stockholders’ equity for the three and six months ended June 30, 2021 and 2020 and its cash flows for the six months ended June 30, 2021 and 2020. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2021 and 2020 are unaudited. The results for the six months ended June 30, 2021 are not indicative of results to be expected for the year ending December 31, 2021, 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, 2020.

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 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.

Effects of COVID-19

The COVID-19 pandemic has created global volatility, economic uncertainty and general market disruption. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, the Company is not aware of any specific event or circumstance that would require us to update its estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. These estimates may change as new events occur and additional information is obtained and are recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

Revenue Recognition

The Company recognizes revenue from its contracts with customers under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). 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.

8


 

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 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.

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 December 2019, the FASB issued Accounting Standards Update ("ASU") 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions 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 ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. These changes aim to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing the disclosures. The Company adopted ASU 2019-12 on January 1, 2021, and the adoption did not have a material impact on its financial statements and related disclosures.

 

9


 

 

3. Property and Equipment, Net

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

 

 

Estimated
Useful Lives
(Years)

 

June 30,
2021

 

 

December 31,
2020

 

Furniture and fixtures

 

5

 

$

337

 

 

$

337

 

Machinery and equipment

 

5

 

 

176

 

 

 

176

 

Computer equipment

 

3

 

 

13

 

 

 

13

 

Leasehold improvements

 

Lesser of
useful life
 or
remaining
lease term

 

 

667

 

 

 

667

 

 

 

 

 

 

1,193

 

 

 

1,193

 

Less: Accumulated depreciation

 

 

 

 

(866

)

 

 

(777

)

 

 

 

 

$

327

 

 

$

416

 

 

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accrued research and development

 

$

1,095

 

 

$

234

 

Accrued employee costs

 

 

837

 

 

 

1,132

 

Accrued professional fees

 

 

27

 

 

 

56

 

Accrued expense

 

 

237

 

 

 

160

 

 

 

$

2,196

 

 

$

1,582

 

 

5. CARES Act Paycheck Protection Program Loan

On April 20, 2020, the Company entered into a loan agreement with Silicon Valley Bank (the “PPP Lender”) under the terms of which the PPP Lender made a loan to the Company in an aggregate principal amount of $1.0 million (the “PPP Loan”) pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan is evidenced by a promissory note (the “Note”) containing the terms and conditions for repayment of the PPP Loan.

Under the terms of the Note and the PPP Loan, interest accrued on the outstanding principal amount at the rate of 1.0% per annum. The term of the Note was until April 2022, with the Company obligated to make equal monthly payments of principal and interest, beginning in November 2020 and continuing until the maturity date.

The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. On January 11, 2021, the Company was notified by the PPP Lender that the PPP Loan had been forgiven in full, including approximately $7,000 of accrued interest. In accordance with ASC 405-20, Extinguishment of Liabilities, the income from the forgiveness of the amount borrowed and the accrued interest was recognized in the statement of operations in other income as a gain on extinguishment of debt.

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 June 30, 2021 and December 31, 2020, there were 59,091,591 and 51,860,941 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 5.50 years as of June 30, 2021.

10


 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Research and development

 

$

414

 

 

$

286

 

 

$

791

 

 

$

592

 

General and administrative

 

 

514

 

 

 

379

 

 

 

936

 

 

 

792

 

Total

 

$

928

 

 

$

665

 

 

$

1,727

 

 

$

1,384

 

 

The following table summarizes the activity related to stock options during the six months ended June 30, 2021:

 

 

 

 

 

 

Weighted

 

 

 

Number of

 

 

Average

 

 

 

Shares

 

 

Exercise Price

 

Options outstanding at December 31, 2020

 

 

4,248,193

 

 

$

3.95

 

Granted

 

 

1,794,906

 

 

 

3.93

 

Exercised

 

 

(84,166

)

 

 

0.83

 

Forfeited

 

 

 

 

 

 

Options outstanding at June 30, 2021

 

 

5,958,933

 

 

 

3.99

 

 

 

 

 

 

 

 

Options exercisable at December 31, 2020

 

 

2,355,900

 

 

 

4.96

 

 

 

 

 

 

 

 

Options exercisable at June 30, 2021

 

 

3,015,204

 

 

 

4.55

 

 

As of June 30, 2021, the Company had $7.4 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 2.9 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 two to four 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 total share-based compensation expense related to RSUs is reflected in the statements of operations as follows (in thousands):

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Research and development

 

$

196

 

 

$

109

 

 

$

367

 

 

$

234

 

General and administrative

 

 

192

 

 

 

114

 

 

 

362

 

 

 

268

 

Total

 

$

388

 

 

$

223

 

 

$

729

 

 

$

502

 

 

11


 

The following table summarizes the activity related to RSUs during the six months ended June 30, 2021:

 

 

 

 

 

 

Weighted Average

 

 

 

Number of

 

 

Grant Date

 

 

 

Shares

 

 

Fair Value

 

Non-vested RSUs outstanding at December 31, 2020

 

 

767,271

 

 

$

1.78

 

Granted

 

 

965,344

 

 

 

4.01

 

Vested

 

 

(321,511

)

 

 

1.43

 

Non-vested RSUs outstanding at June 30, 2021

 

 

1,411,104

 

 

 

3.39

 

 

As of June 30, 2021, the Company had $4.2 million of unrecognized compensation expense related to the RSUs which is expected to be recognized over a weighted average period of 3.3 years.

Employee Stock Purchase Plan

The 2016 Employee Stock Purchase Plan (the “2016 ESPP”) became effective on June 1, 2016. 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 share-based compensation expense recognized for the 2016 ESPP is reflected in the statements of operations and comprehensive loss as follows (in thousands):

 

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Research and development

 

$

9

 

 

$

1

 

 

$

17

 

 

$

2

 

General and administrative

 

 

6

 

 

 

2

 

 

 

12

 

 

 

4

 

Total

 

$

15

 

 

$

3

 

 

$

29

 

 

$

6

 

 

During the six months ended June 30, 2021, the Company issued 31,908 shares of common stock purchased under the 2016 ESPP.

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

 

 

June 30,
2021

 

Operating lease right-of-use asset