NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
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Description of Business and Basis of Preparation
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Organization
SCYNEXIS, Inc. (“SCYNEXIS” or the “Company”) is a Delaware corporation formed on November 4, 1999. SCYNEXIS is a biotechnology company, headquartered in Jersey City, New Jersey, pioneering innovative medicines to help millions of patients worldwide in need of new options to overcome and prevent difficult-to-treat and drug resistant infections. The Company is developing its lead product candidate, ibrexafungerp, as a broad-spectrum, intravenous (IV)/oral agent in late stage development for multiple indications, ranging from the treatment of vaginal yeast infections in the community setting to life-threatening invasive fungal infections in hospitalized patients.
The Company has incurred significant losses and negative cash flows from operations since its initial public offering in May 2014 and expects to continue to incur losses and negative cash flows for the foreseeable future. As a result, the Company had an accumulated deficit of $284.8 million at June 30, 2020 and limited capital resources to fund ongoing operations. These capital resources primarily comprised cash and cash equivalents of $34.0 million and short-term investments of $3.6 million at June 30, 2020. The Company believes its existing cash and cash equivalents, and short-term investments may not be sufficient to enable it to meet its obligations and fund operations over the next twelve months without generating positive cash flows by raising additional capital from outside sources. While the Company plans to continue to pursue its plan to launch products and generate positive cash flows from operations, as well as pursue sources of additional capital from outside sources, the Company's liquidity could be materially affected over this period by, among other things: (1) its ability to raise additional capital through equity offerings, debt financings, or other non-dilutive third-party funding; (2) costs associated with new or existing strategic alliances, or licensing and collaboration arrangements; (3) negative regulatory events or unanticipated costs related to its development of ibrexafungerp; or (4) any other unanticipated material negative events or costs. These financial conditions raise substantial doubt about the Company’s ability to continue as a going concern. If the Company is unable to meet its obligations when they become due, the Company may have to delay expenditures, reduce the scope of its research and development programs, or make significant changes to its operating plan.
As noted in Note 8, the Company entered into a Common Stock Purchase Agreement with Aspire Capital, pursuant to which the Company has the right to sell to Aspire Capital from time to time in its sole discretion up to $20.0 million in shares of the Company’s common stock through October 2022. The number of shares issued would be determined based on the closing price of the Company’s common stock as of the date the Company elects to issue shares to Aspire Capital, however, the total number of shares the Company may issue to Aspire Capital under this agreement may not exceed 1,956,547 shares of our common stock (which is equal to approximately 19.99% of the Company’s total common stock outstanding on the date of the Common Stock Purchase Agreement) without obtaining shareholder approval prior to such issuances. The Company has not sold any shares to Aspire Capital pursuant to this agreement as of June 30, 2020.
The accompanying unaudited interim condensed consolidated financial information has been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying unaudited interim condensed consolidated financial information does not include any adjustments that might result from the outcome of this uncertainty.
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany balances and transactions are eliminated in consolidation.
Shelf Registration Filing
On August 31, 2018, the Company filed a shelf registration statement on Form S-3 (File No. 333-227167) with the Securities and Exchange Commission (“SEC”), which was declared effective on September 14, 2018 (the “Shelf Registration”). The Shelf Registration contained three prospectuses:
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•
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a base prospectus which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $175.0 million of the Company’s common stock, preferred stock, debt securities and warrants, including common stock or preferred stock issuable upon conversion of debt securities, common stock issuable upon conversion of preferred stock, or common stock, preferred stock or debt securities issuable upon the exercise of warrants;
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a prospectus covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $25.0 million of the Company's common stock that may be issued and sold under a Controlled Equity Offering Sales AgreementSM (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”). Pursuant to the Sales Agreement, the Company may sell from time to time, at its option, up to an aggregate of $25.0 million of the Company’s common stock, through Cantor, as sales agent. Pursuant to the Sales Agreement, sales of the common stock, if any, will be made under the Company’s effective Shelf Registration; and
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•
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a warrant prospectus covering the offering, issuance, and sale of the Company’s common stock issuable upon the exercise of warrants, consisting of (i) warrants to purchase 421,869 shares of the Company’s common stock at an exercise price of $30.00 per share originally issued by the Company on June 24, 2016, (ii) warrants to purchase 1,319,807 shares of the Company’s common stock at an exercise price of $18.50 per share originally issued by the Company on March 8, 2018, and (iii) warrants to purchase 798,810 shares of the Company’s common stock at an exercise price of $20.00 per share originally issued by the Company on March 8, 2018. The warrants to purchase 1,319,807 shares of the Company’s common stock expired on March 14, 2019. Upon full exercise for cash of the warrants covered by this warrant prospectus that were outstanding on June 30, 2020, the holders of the warrants would pay the Company an aggregate of approximately $28.6 million. See Note 8 for further details.
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The common stock that may be offered, issued and sold by the Company under the Sales Agreement is included in the $175.0 million of securities that may be offered, issued and sold by the Company under the base prospectus. Upon termination of the Sales Agreement with Cantor, any portion of the $25.0 million included in the Sales Agreement that is not sold pursuant to the Sales Agreement will be available for sale in other offerings pursuant to the base prospectus and a corresponding prospectus supplement. As of June 30, 2020, approximately $124.8 million of securities registered under the base prospectus are available to be offered, issued and sold by the Company.
December 2019 Public Offering
On December 12, 2019, the Company completed a public offering (the "December 2019 Public Offering") of its common stock and warrants pursuant to the Company's effective Shelf Registration. The Company sold an aggregate of 3,888,888 shares of the Company’s common stock and warrants to purchase up to an aggregate of 3,888,888 shares of the Company’s common stock at a public offering price of $9.00 per share and accompanying warrant. Net proceeds from the December 2019 Public Offering were approximately $32.5 million, after deducting the underwriting discount and offering expenses. In addition, the Company granted to the underwriters an option to purchase up to 583,333 additional shares of common stock and/or warrants to purchase up to an aggregate of an additional 583,333 shares of common stock, in each case at the public offering price, less underwriting discounts and commissions. The underwriters exercised their option to purchase 583,333 warrants in December 2019. The option to purchase up to 583,333 additional shares of common stock was not exercised by the underwriters and the option expired in January 2020. See Note 8 for further details.
April 2020 Note Purchase Agreement
In April 2020, the Company entered into a Senior Convertible Note Purchase Agreement (“April 2020 Note Purchase Agreement”) with Puissance Life Science Opportunities Fund VI (“Puissance”). Pursuant to the April 2020 Note Purchase Agreement, on April 9, 2020, the Company issued and sold to Puissance $10.0 million aggregate principal amount of its 6.0% Senior Convertible Notes due 2026 (“April 2020 Notes”). See Note 6 for details.
Common Stock Purchase Agreement
On April 10, 2020, the Company entered into a Common Stock Purchase Agreement (the “Common Stock Purchase Agreement”) with Aspire Capital Fund, LLC, an Illinois limited liability company (“Aspire Capital”), pursuant to which the Company has the right to sell to Aspire Capital from time to time in its sole discretion up to $20.0 million in shares of the Company’s common stock over the next 30 months, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. See Note 8 for details.
New Jersey Technology Business Tax Certificate Transfer (NOL) Program
The New Jersey Technology Business Tax Certificate Transfer (NOL) program, administered by the New Jersey Economic Development Authority, enables approved biotechnology companies to sell their unused net operating losses (“NOLs”) and research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey up to a maximum lifetime benefit of $15 million per business. For the three and six months ended June 30, 2020, the Company recognized a $3.1 million income tax benefit for the sale of a portion of the Company’s unused New Jersey NOLs and research and development credits. As of June 30, 2020, the Company has received approximately $9.8 million under the program.
Reverse Stock Split
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On July 16, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”), which became effective on Friday, July 17, 2020, (a) implementing a 1-for-10 reverse stock split of the Company’s common stock and (b) decreasing the number of authorized shares of the Company’s common stock from 250,000,000 shares to 100,000,000 shares. On the effective date of July 17, 2020, the number of the Company’s issued and outstanding shares of common stock was decreased from 105,083,291 to 10,508,302 and the par value per common share remained unchanged. No fractional shares were issued as a result of the reverse stock split. Stockholders who would otherwise have been entitled to receive a fractional share received a cash payment in lieu thereof. All share and per share amounts presented in these unaudited condensed consolidated financial statements have been retroactively adjusted for the reverse stock split and certain items in the prior period financial statements have been revised to conform to the current presentation.
The reverse stock split affected all shares of the Company’s common stock outstanding immediately prior to the effective time of the reverse stock split, as well as the number of shares of common stock available for issuance under the Company’s equity incentive plans. In addition, the reverse stock split effected a reduction in the number of shares of common stock issuable upon the conversion of outstanding convertible notes or upon the exercise of stock options or warrants outstanding.
Unaudited Interim Condensed Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, and cash flows. The results of operations for the three and six months ended June 30, 2020, are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes set forth in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 11, 2020.
Use of Estimates
The preparation of unaudited condensed consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates include: determination of the fair value of stock-based compensation grants; the estimate of services and effort expended by third-party research and development service providers used to recognize research and development expense; and the estimates and assumptions utilized in measuring the fair values of the warrant and derivative liabilities each reporting period.
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2.
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Summary of Significant Accounting Policies
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The accompanying unaudited condensed consolidated financial statements and notes follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2019, except as described below.
Basic and Diluted Net Loss per Share of Common Stock
The Company calculates net loss per common share in accordance with ASC 260, Earnings Per Share. Basic net loss per common share for the three and six months ended June 30, 2020 and 2019 was determined by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period.
The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three and six months ended June 30, 2020 and 2019, as the result would be anti-dilutive:
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Three and Six Months Ended June 30,
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2020
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2019
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Warrants to purchase common stock associated with Solar loan agreement
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12,243
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12,243
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Warrants to purchase common stock associated with June 2016 public offering
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421,867
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|
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421,867
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Warrants to purchase common stock associated with March 2018 public offering – Series 2
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798,810
|
|
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798,810
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Outstanding stock options
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781,685
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|
|
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557,769
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Outstanding restricted stock units
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84,929
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|
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96,720
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Common stock associated with March 2019 Notes
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1,138,200
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|
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1,138,200
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Common stock associated with April 2020 Notes
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1,622,138
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|
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—
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Warrants to purchase common stock associated with December 2019 Public Offering
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4,472,205
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|
|
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—
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Total
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9,332,077
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3,025,609
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Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which revised the effective dates for ASU 2016-13 for public business entities that meet the SEC definition of a smaller reporting company to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. As a smaller reporting company, the Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements.
Recently Adopted Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). ASU 2018-13 removes, modifies and adds certain disclosure requirements in Topic 820, Fair Value Measurement. ASU 2018-13 eliminates certain disclosures related to transfers and the valuation process, modifies disclosures for investments that are valued based on net asset value, clarifies the measurement uncertainty disclosure, and requires additional disclosures for Level 3 fair value measurements. ASU 2018-13 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company adopted ASU 2018-13 during the three and six months ended June 30, 2020 and as a result, included the required additional disclosures for its Level 3 fair value measurements in its unaudited condensed consolidated financial statements (see Note 10). The Company did not identify any other material impacts of ASU 2018-13 on its unaudited condensed consolidated financial statements.
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3.
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Short-term Investments
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The following table summarizes the held-to-maturity securities held at June 30, 2020 and December 31, 2019 (in thousands):
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Amortized
Cost
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Unrealized
Gains
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Unrealized
Losses
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Fair Value
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As of June 30, 2020
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Commercial paper
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$
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3,594
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|
|
|
—
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|
|
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—
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|
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$
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3,594
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Total short-term investments
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$
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3,594
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|
|
|
—
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|
|
|
—
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|
|
$
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3,594
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Amortized
Cost
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|
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Unrealized
Gains
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|
|
Unrealized
Losses
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|
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Fair Value
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As of December 31, 2019
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|
|
|
|
|
|
|
|
|
|
|
|
|
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U.S. government securities
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$
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1,996
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$
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15
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|
$
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(14
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)
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$
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1,997
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Commercial paper
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998
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|
|
|
—
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|
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—
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|
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998
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Overnight repurchase agreement
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3,500
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—
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|
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—
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3,500
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Total short-term investments
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$
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6,494
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$
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15
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$
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(14
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)
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$
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6,495
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All held-to-maturity short-term investments at June 30, 2020 and December 31, 2019 will mature in less than one year. The gross unrealized gains and losses for the Company’s commercial paper and overnight repurchase agreement are not significant. The Company carries short-term investments at amortized cost. The fair value of the short-term investments is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.
4.
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Prepaid Expenses and Other Current Assets
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Prepaid expenses and other current assets consisted of the following (in thousands):
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June 30, 2020
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|
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December 31, 2019
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Prepaid research and development services
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$
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1,254
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|
|
$
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3,043
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Prepaid insurance
|
|
|
773
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|
|
|
252
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|
Other prepaid expenses
|
|
|
62
|
|
|
|
19
|
|
Other current assets
|
|
|
863
|
|
|
|
674
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Total prepaid expenses and other current assets
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$
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2,952
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|
|
$
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3,988
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Accrued expenses consisted of the following (in thousands):
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June 30, 2020
|
|
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December 31, 2019
|
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Accrued research and development expenses
|
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$
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654
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|
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$
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1,296
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Accrued employee bonus compensation
|
|
|
759
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|
|
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1,798
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Other accrued expenses
|
|
|
974
|
|
|
|
707
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Total accrued expenses
|
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$
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2,387
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|
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$
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3,801
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April 2020 Note Purchase Agreement
On April 9, 2020, the Company entered into the April 2020 Note Purchase Agreement with Puissance and issued and sold to Puissance $10.0 million aggregate principal amount of its April 2020 Notes, resulting in net proceeds of approximately $9.5 million after deducting $0.5 million for an advisory fee and other issuance costs The April 2020 Notes were issued and sold for cash at a purchase price equal to 100% of their principal amount, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), due to the April 2020 Notes being issued to one financially sophisticated investor.
The April 2020 Notes will bear interest at a rate of 6.0% per annum, payable semiannually in arrears on April 15 and October 15 of each year, beginning October 15, 2020. The April 2020 Notes will mature on April 15, 2026, unless earlier converted, redeemed or repurchased. The April 2020 Notes constitute general, senior unsecured obligations of the Company.
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As of June 30, 2020, the Company’s April 2020 Notes consists of the convertible debt balance of $1.5 million, presented net of the unamortized debt issuance costs allocated to the convertible debt of $0.1 million, and the bifurcated embedded conversion option derivative liability of $5.2 million. In connection with the Company’s issuance of its April 2020 Notes, the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging, at its initial fair value of $8.1 million as the interest make-whole provision is settled in shares of common stock. Debt issuance costs of $0.4 million initially allocated to the derivative liability were written off upon issuance of the April 2020 Notes and were recognized in the loss on the fair value adjustment for the derivative liability for the three months ended June 30, 2020. For each of the three and six months ended June 30, 2020, the Company recognized a gain of $1.3 million on the fair value adjustment for the derivative liability and recognized $0.1 million in amortization of debt issuance costs and discount for each of the three and six months ended June 30, 2020, related to the April 2020 Notes.
In June 2020, Puissance converted $2.0 million of the April 2020 Notes for 316,461 shares of common stock. Upon conversion of the $2.0 million of the April 2020 Notes, the Company recognized a $0.8 million extinguishment loss which represents the difference between the total net carrying amount of the convertible debt and derivative liability of $2.0 million and the fair value of the consideration issued of $2.8 million.
The Company estimated the fair value of the convertible debt and derivative liability for the April 2020 Notes using a binomial lattice valuation model and Level 3 inputs. At June 30, 2020, the fair value of the April 2020 Notes is $9.6 million.
The holders of the April 2020 Notes may convert their April 2020 Notes at their option at any time prior to the close of business on the business day immediately preceding April 15, 2026 into shares of the Company’s common stock. The initial conversion rate is 111.1108 shares of common stock per $1,000 principal amount of the April 2020 Notes, which is equivalent to an initial conversion price of approximately $9.00 per share, and is subject to adjustment in certain events described in the April 2020 Note Purchase Agreement. Holders who convert may also be entitled to receive, under certain circumstances, an “interest make-whole payment” (as defined in the April 2020 Note Purchase Agreement) payable in shares of common stock. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate for a holder who elects to convert its April 2020 Notes in connection with such a corporate event. Unless the Company seeks and receives stockholder approval, the number of shares that the Company may deliver in connection with a conversion of the April 2020 Notes, including those delivered in connection with an “interest make-whole payment” or a “make-whole fundamental change” (each as defined in the April 2020 Note Purchase Agreement), will not exceed a cap of 1,938,600 shares of common stock.
On or after April 15, 2023, the Company has the right, at its election, to redeem all or any portion of the April 2020 Notes not previously converted if the last reported sale price per share of common stock exceeds 130% of the conversion price on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. The redemption price will be 100% of the principal amount of the April 2020 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.
If a “fundamental change” (as defined in the April 2020 Note Purchase Agreement) occurs, then, subject to certain exceptions, the Company must offer to repurchase the April 2020 Notes for cash at a repurchase price of 100% of the principal amount of the April 2020 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
March 2019 Note Purchase Agreement
On March 7, 2019, the Company entered into a Senior Convertible Note Purchase Agreement (the “March 2019 Note Purchase Agreement”) with Puissance. Pursuant to the March 2019 Note Purchase Agreement, on March 7, 2019, the Company issued and sold to Puissance $16.0 million aggregate principal amount of its 6.0% Senior Convertible Notes due 2025 (“March 2019 Notes”), resulting in $14.7 million in net proceeds after deducting $1.3 million for an advisory fee and other issuance costs. The Company used the net proceeds to pay the remaining outstanding Solar term loan in full and recorded a loss on debt extinguishment of $0.8 million during the three months ended March 31, 2019. The loss on debt extinguishment of $0.8 million for the three months ended March 31, 2019 was recognized as the difference between the reacquisition price of the outstanding Solar debt of $15.9 million and the $15.1 million net carrying value of the Solar debt obligation prior to repayment.
As of June 30, 2020, the Company’s March 2019 Notes consists of the convertible debt balance of $8.9 million, presented net of the unamortized debt issuance costs allocated to the convertible debt of $0.5 million, and the bifurcated embedded conversion option derivative liability of $2.7 million. In connection with the Company’s issuance of its March 2019 Notes, the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the
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Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging, at its initial fair value of $7.0 million as the interest make-whole provision is settled in shares of common stock. Debt issuance costs of $0.6 million initially allocated to the derivative liability were written off upon issuance of the March 2019 Notes and were recognized in the loss on the fair value adjustment for the derivative liability for the three months ended March 31, 2019. For the three months ended June 30, 2020 and 2019, the Company recognized a loss of $0.2 million and a gain of $1.3 million, respectively, on the fair value adjustment for the derivative liability. For the six months ended June 30, 2020 and 2019, the Company recognized a $0.5 million gain and a $2.1 million loss, respectively, on the fair value adjustment for the derivative liability. The Company recognized $0.2 million and $0.4 million in amortization of debt issuance costs and discount for the three months ended June 30, 2020 and 2019, respectively, related to the March 2019 Notes. For each of the six months ended June 30, 2020 and 2019, the Company recognized $0.5 million in amortization of debt issuance costs and discount.
In April 2019, Puissance converted $2.0 million of the March 2019 Notes for 162,600 shares of common stock. Upon conversion of the $2.0 million of the March 2019 Notes, the Company recognized a $0.2 million extinguishment loss which represents the difference between the total net carrying amount of the convertible debt and derivative liability of $2.8 million and the fair value of the consideration issued of $3.0 million.
The Company estimated the fair value of the convertible debt and derivative liability for the March 2019 Notes using a binomial lattice valuation model and Level 3 inputs. At June 30, 2020, the fair value of the convertible debt and derivative liability for the March 2019 Notes is $11.2 million.
The March 2019 Notes were issued and sold for cash at a purchase price equal to 100% of their principal amount, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), due to the March 2019 Notes being issued to one financially sophisticated investor. The March 2019 Notes bear interest at a rate of 6.0% per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning September 15, 2019. The March 2019 Notes will mature on March 15, 2025, unless earlier converted, redeemed or repurchased. The March 2019 Notes constitute general, senior unsecured obligations of the Company.
The holder of the March 2019 Notes may convert their March 2019 Notes at their option at any time prior to the close of business on the business day immediately preceding March 15, 2025 into shares of the Company’s common stock. The initial conversion rate is 73.9096 shares of common stock per $1,000 principal amount of March 2019 Notes, which is equivalent to an initial conversion price of approximately $13.53 and is subject to adjustment in certain events described in the March 2019 Note Purchase Agreement. The Holder upon conversion may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in shares of common stock. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate if the holder elects to convert its March 2019 Notes in connection with such a corporate event. Subject to adjustment in the conversion rate, the number of shares that the Company may deliver in connection with a conversion of the March 2019 Notes, including those delivered in connection with an interest make-whole payment, will not exceed a cap of 81 shares of common stock per $1,000 principal amount of the March 2019 Notes.
On or after March 15, 2022, the Company has the right, at its election, to redeem all or any portion of the March 2019 Notes not previously converted if the last reported sale price per share of common stock exceeds 130% of the conversion price on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. The redemption price will be 100% of the principal amount of the March 2019 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If a “fundamental change” (as defined in the March 2019 Note Purchase Agreement) occurs, then, subject to certain exceptions, the Company must offer to repurchase the March 2019 Notes for cash at a repurchase price of 100% of the principal amount of the March 2019 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.
Solar Loan Agreement
On September 30, 2016, the Company entered into a loan agreement with Solar Capital Ltd. (“Solar”), in its capacity as administrative and collateral agent and as lender. Pursuant to the loan agreement, Solar was providing the Company with a 48-month secured term loan in the amount of $15.0 million. The term loan bore interest at a floating rate equal to the LIBOR rate in effect plus 8.49%. The Solar term loan was paid in full in March 2019.
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7.
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Commitments and Contingencies
|
Leases
On March 1, 2018, the Company entered into a long-term lease agreement for approximately 19,275 square feet of office space in Jersey City, New Jersey, that the Company identified as an operating lease under ASC 842 (the “Lease”). The lease term is eleven years from August 1, 2018, the commencement date, with total lease payments of $7.3 million over the lease term. The Company has the option to renew for two consecutive five-year periods from the end of the first term and the Company is not reasonably certain that the option to renew the Lease will be exercised. Under the Lease, the Company furnished a security deposit in the form of a standby letter of credit in the amount of $0.3 million, which was reduced by fifty-five thousand dollars on the first anniversary of the commencement date. The security deposit will continue to be reduced by fifty-five thousand dollars every two years on the commencement date anniversary for eight years. The security deposit is classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.
The consideration in the Lease allocated to the single lease component includes the fixed payments for the right to use the office space as well as common area maintenance. The Lease also contains costs associated with certain expense escalation, property taxes, insurance, parking, and utilities which are all considered variable payments and are excluded from the operating lease liability. The incremental borrowing rate utilized approximated the prevailing market interest rate the Company would incur to borrow a similar amount equal to the total Lease payments on a collateralized basis over the term of the Lease. The following table summarizes certain quantitative information associated with the amounts recognized in the unaudited condensed consolidated financial statements for the Lease (dollars in thousands):
|
|
Three Months Ended June 30, 2020
|
|
|
Six Months Ended June 30, 2020
|
|
Operating lease cost
|
|
$
|
166
|
|
|
$
|
332
|
|
Variable lease cost
|
|
|
6
|
|
|
|
27
|
|
Total operating lease expense
|
|
$
|
172
|
|
|
$
|
359
|
|
|
|
|
|
|
|
|
|
|
Cash paid for amounts included in the measurement of operating lease liability
|
|
$
|
56
|
|
|
$
|
223
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
Remaining Lease term (years)
|
|
|
|
|
|
|
9.09
|
|
Discount rate
|
|
|
|
|
|
|
15
|
%
|
Future minimum lease payments for the Lease as of June 30, 2020 are as follows (in thousands):
|
|
June 30, 2020
|
|
2020
|
|
$
|
284
|
|
2021
|
|
|
517
|
|
2022
|
|
|
527
|
|
2023
|
|
|
715
|
|
2024
|
|
|
730
|
|
Thereafter
|
|
|
3,533
|
|
Total
|
|
$
|
6,306
|
|
The presentation of the operating lease liability and right-of-use asset as of June 30, 2020 are as follows (in thousands):
|
|
June 30, 2020
|
|
Present value of future minimum lease payments
|
|
$
|
3,373
|
|
|
|
|
|
|
Operating lease liability, current portion
|
|
$
|
43
|
|
Operating lease liability, long-term portion
|
|
|
3,330
|
|
Total operating lease liability
|
|
$
|
3,373
|
|
|
|
|
|
|
Difference between future minimum lease payments and discounted cash flows
|
|
$
|
2,933
|
|
|
|
|
|
|
Operating lease right-of-use asset
|
|
$
|
3,094
|
|
11
Table of Contents
License Arrangement with Potential Future Expenditures
As of June 30, 2020, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, that involves potential future expenditures. Under the license arrangement, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. Ibrexafungerp is the Company’s lead product candidate. Pursuant to the terms of the license agreement, Merck is eligible to receive milestone payments from the Company that could total $19.0 million upon occurrence of specific events, including initiation of a Phase 3 clinical study, new drug application, and marketing approvals in each of the U.S., major European markets and Japan. In addition, Merck is eligible to receive tiered royalties from the Company based on a percentage of worldwide net sales of ibrexafungerp. The aggregate royalty percentages are mid- to high-single digits.
In December 2014, the Company and Merck entered into an amendment to the license agreement that deferred the remittance of a milestone payment due to Merck, such that no amount would be due upon initiation of the first Phase 2 clinical trial of a product containing the ibrexafungerp compound (the “Deferred Milestone”). The amendment also increased, in an amount equal to the Deferred Milestone, the milestone payment that would be due upon initiation of the first Phase 3 clinical trial of a product containing the ibrexafungerp compound. In December 2016 and January 2018, the Company entered into second and third amendments, respectively, to the license agreement with Merck which clarified what would constitute the initiation of a Phase 3 clinical trial for the purpose of milestone payment. Except as described above, all other terms and provisions of the license agreement remain in full force and effect. In January 2019, a milestone payment became due to Merck as a result of the initiation of the VANISH Phase 3 VVC program and was paid in March 2019. The milestone payment was recognized in the unaudited condensed consolidated statement of operations in research and development expense for the six months ended June 30, 2020 and is included in cash used in operating activities on the statement of cash flows.
Clinical Development Arrangements
The Company has entered into, and expects to continue to enter into, contracts in the normal course of business with various third parties who support its clinical trials, preclinical research studies, and other services related to its development activities. The scope of the services under these agreements can generally be modified at any time, and the agreement can be terminated by either party after a period of notice and receipt of written notice.
Authorized, Issued, and Outstanding Common Stock
The Company’s authorized common stock has a par value of $0.001 per share and consists of 100,000,000 shares as of June 30, 2020, and December 31, 2019; 10,478,927 and 9,741,372 shares were issued and outstanding at June 30, 2020, and December 31, 2019, respectively.
On July 16, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”), which became effective on Friday, July 17, 2020, (a) implementing a 1-for-10 reverse stock split of the Company’s common stock and (b) decreasing the number of authorized shares of the Company’s common stock from 250,000,000 shares to 100,000,000 shares.
The reverse stock split affected all shares of the Company’s common stock outstanding immediately prior to the effective time of the reverse stock split, as well as the number of shares of common stock available for issuance under the Company’s equity incentive plans. In addition, the reverse stock split effected a reduction in the number of shares of common stock issuable upon the conversion of outstanding convertible notes or upon the exercise of stock options or warrants outstanding. No fractional shares will be issued as a result of the reverse stock split.
12
Table of Contents
The following table summarizes common stock share activity for the three and six months ended June 30, 2020 and 2019 (dollars in thousands):
|
|
Three Months Ended June 30, 2020
|
|
|
|
Shares of
Common Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
|
|
Balance, March 31, 2020
|
|
|
9,787,604
|
|
|
$
|
10
|
|
|
$
|
284,875
|
|
|
$
|
(278,430
|
)
|
|
$
|
6,455
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(6,381
|
)
|
|
|
(6,381
|
)
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
410
|
|
|
|
—
|
|
|
|
410
|
|
Common stock issued for exercise of stock options
|
|
|
151
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Common stock issued, net of expenses
|
|
|
303,038
|
|
|
|
—
|
|
|
|
2,463
|
|
|
|
—
|
|
|
|
2,463
|
|
Common stock issued for conversion of April 2020 Notes
|
|
|
316,461
|
|
|
|
—
|
|
|
|
2,784
|
|
|
|
—
|
|
|
|
2,784
|
|
Common stock issued for Commitment Shares
|
|
|
70,910
|
|
|
|
—
|
|
|
|
602
|
|
|
|
—
|
|
|
|
602
|
|
Common stock issued for vested restricted stock units
|
|
|
762
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance, June 30, 2020
|
|
|
10,478,927
|
|
|
$
|
10
|
|
|
$
|
291,134
|
|
|
$
|
(284,811
|
)
|
|
$
|
6,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
|
|
Shares of
Common Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
|
|
Balance, December 31, 2019
|
|
|
9,741,372
|
|
|
$
|
10
|
|
|
$
|
284,313
|
|
|
$
|
(271,428
|
)
|
|
$
|
12,895
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(13,383
|
)
|
|
|
(13,383
|
)
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
821
|
|
|
|
—
|
|
|
|
821
|
|
Common stock issued through employee stock purchase and stock option plans
|
|
|
2,368
|
|
|
|
—
|
|
|
|
18
|
|
|
|
—
|
|
|
|
18
|
|
Common stock issued, net of expenses
|
|
|
331,565
|
|
|
|
—
|
|
|
|
2,669
|
|
|
|
—
|
|
|
|
2,669
|
|
Common stock issued for conversion of April 2020 Notes
|
|
|
316,461
|
|
|
|
—
|
|
|
|
2,784
|
|
|
|
—
|
|
|
|
2,784
|
|
Common stock issued for Commitment Shares
|
|
|
70,910
|
|
|
|
—
|
|
|
|
602
|
|
|
|
—
|
|
|
|
602
|
|
Common stock issued for vested restricted stock units
|
|
|
16,250
|
|
|
|
—
|
|
|
|
(73
|
)
|
|
|
—
|
|
|
|
(73
|
)
|
Balance, June 30, 2020
|
|
|
10,478,927
|
|
|
$
|
10
|
|
|
$
|
291,134
|
|
|
$
|
(284,811
|
)
|
|
$
|
6,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2019
|
|
|
|
Shares of
Common Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
|
|
Balance, March 31, 2019
|
|
|
5,023,242
|
|
|
$
|
5
|
|
|
$
|
251,951
|
|
|
$
|
(240,626
|
)
|
|
$
|
11,330
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,403
|
)
|
|
|
(8,403
|
)
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
446
|
|
|
|
—
|
|
|
|
446
|
|
Common stock issued, net of expenses
|
|
|
266,090
|
|
|
|
—
|
|
|
|
4,046
|
|
|
|
—
|
|
|
|
4,046
|
|
Common stock issued for conversion of March 2019 Notes
|
|
|
162,600
|
|
|
|
—
|
|
|
|
2,984
|
|
|
|
—
|
|
|
|
2,984
|
|
Common stock issued for vested restricted stock units
|
|
|
79
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
—
|
|
|
|
(1
|
)
|
Balance, June 30, 2019
|
|
|
5,452,011
|
|
|
$
|
5
|
|
|
$
|
259,426
|
|
|
$
|
(249,029
|
)
|
|
$
|
10,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2019
|
|
|
|
Shares of
Common Stock
|
|
|
Common
Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Equity
|
|
Balance, December 31, 2018
|
|
|
4,797,198
|
|
|
$
|
5
|
|
|
$
|
248,938
|
|
|
$
|
(217,718
|
)
|
|
$
|
31,225
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(31,311
|
)
|
|
|
(31,311
|
)
|
Stock-based compensation expense
|
|
|
—
|
|
|
|
—
|
|
|
|
938
|
|
|
|
—
|
|
|
|
938
|
|
Common stock issued through employee stock purchase plan
|
|
|
1,926
|
|
|
|
—
|
|
|
|
21
|
|
|
|
—
|
|
|
|
21
|
|
Common stock issued, net of expenses
|
|
|
488,747
|
|
|
|
—
|
|
|
|
6,556
|
|
|
|
—
|
|
|
|
6,556
|
|
Common stock issued for conversion of March 2019 Notes
|
|
|
162,600
|
|
|
|
—
|
|
|
|
2,984
|
|
|
|
—
|
|
|
|
2,984
|
|
Common stock issued for vested restricted stock units
|
|
|
1,540
|
|
|
|
—
|
|
|
|
(11
|
)
|
|
|
—
|
|
|
|
(11
|
)
|
Balance, June 30, 2019
|
|
|
5,452,011
|
|
|
$
|
5
|
|
|
$
|
259,426
|
|
|
$
|
(249,029
|
)
|
|
$
|
10,402
|
|
13
Table of Contents
Shares Reserved for Future Issuance
The Company had reserved shares of common stock for future issuance as follows:
|
June 30, 2020
|
|
|
December 31, 2019
|
|
Outstanding stock options
|
|
781,685
|
|
|
|
526,070
|
|
Outstanding restricted stock units
|
|
84,929
|
|
|
|
96,637
|
|
Warrants to purchase common stock associated with June 2016 Public Offering
|
|
421,867
|
|
|
|
421,867
|
|
Warrants to purchase common stock associated with March 2018 Public Offering – Series 2
|
|
798,810
|
|
|
|
798,810
|
|
Warrants to purchase common stock associated with December 2019 Public Offering
|
|
4,472,205
|
|
|
|
4,472,205
|
|
Option to purchase common stock associated with December 2019 Public Offering
|
|
—
|
|
|
|
583,333
|
|
Warrants to purchase common stock associated with Solar loan agreement
|
|
12,243
|
|
|
|
12,243
|
|
For possible future issuance for the conversion of the March 2019 Notes
|
|
1,138,200
|
|
|
|
1,138,200
|
|
For possible future issuance for the conversion of the April 2020 Notes
|
|
1,622,138
|
|
|
|
—
|
|
For possible future issuance under 2014 Equity Incentive Plan (Note 9)
|
|
194,629
|
|
|
|
55,478
|
|
For possible future issuance under Employee Stock Purchase Plan
|
|
8,179
|
|
|
|
7,423
|
|
For possible future issuance under 2015 Inducement Award Plan (Note 9)
|
|
14,050
|
|
|
|
31,550
|
|
Total common shares reserved for future issuance
|
|
9,548,935
|
|
|
|
8,143,816
|
|
Common Stock Purchase Agreement
On April 10, 2020, the Company entered into the Common Stock Purchase Agreement with Aspire Capital pursuant to which the Company has the right to sell to Aspire Capital from time to time in its sole discretion up to $20.0 million in shares of the Company’s common stock over the next 30 months, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. The aggregate number of shares that we can sell to Aspire Capital under the Common Stock Purchase Agreement may in no case exceed 1,956,547 shares of our common stock (which is equal to approximately 19.99% of the common stock outstanding on the date of the Common Stock Purchase Agreement), including the 70,910 commitment shares (the Exchange Cap), unless either (a) shareholder approval is obtained to issue more, in which case the Exchange Cap will not apply, or (b) the average purchase price of all shares sold under the Common Stock Purchase Agreement exceeds $8.461; provided that at no time shall Aspire Capital (together with its affiliates) beneficially own more than 19.99% of our common stock.
Under the Common Stock Purchase Agreement, on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 25,000 shares of Common Stock per business day, up to $20.0 million of common stock in the aggregate at a per share price (the “Purchase Price”) equal to the lesser of:
|
•
|
the lowest sale price of Common Stock on the purchase date; or
|
|
•
|
the arithmetic average of the three (3) lowest closing sale prices for Common Stock during the ten (10) consecutive trading days ending on the trading day immediately preceding the purchase date.
|
The Company and Aspire Capital also may mutually agree to increase the number of shares that may be sold to as much as an additional 200,000 shares per business day.
In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount equal to at least 25,000 shares, the Company also has the right, in its sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of stock equal to up to 30% of the aggregate shares of Common Stock traded on its principal market on the next trading day (the “VWAP Purchase Date”), subject to a maximum number of shares the Company may determine. The purchase price per share pursuant to such VWAP Purchase Notice is generally the lessor of (i) the closing sale price on the VWAP Purchase Date, or (ii) 97% of the volume-weighted average price for common stock traded on its principal market on the VWAP Purchase Date.
The Purchase Price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the period(s) used to compute the Purchase Price. The Company may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Common Stock Purchase Agreement, so long as the most recent purchase has been completed.
14
Table of Contents
The Common Stock Purchase Agreement provides that the Company and Aspire Capital shall not effect any sales under the Common Stock Purchase Agreement on any purchase date where the closing sale price of common stock is less than $0.25. There are no trading volume requirements or restrictions under the Common Stock Purchase Agreement, and the Company will control the timing and amount of sales of common stock to Aspire Capital. Aspire Capital has no right to require any sales by the Company, but is obligated to make purchases from the Company as directed by the Company in accordance with the Common Stock Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Common Stock Purchase Agreement. In consideration for entering into the Common Stock Purchase Agreement, concurrently with the execution of the Common Stock Purchase Agreement, the Company issued to Aspire Capital 70,910 shares of common stock (the “Commitment Shares”). The fair value of the Commitment Shares of $0.6 million was recognized in other expense in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2020. The Common Stock Purchase Agreement may be terminated by the Company at any time, at its discretion, without any cost to the Company. Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of common stock during any time prior to the termination of the Common Stock Purchase Agreement. Any proceeds that the Company receives under the Common Stock Purchase Agreement are expected to be used for general corporate purposes, including working capital.
Convertible Debt and Derivative Liabilities
In connection with the Company’s issuances of its April 2020 Notes and March 2019 Notes, the Company bifurcated the embedded conversion options, inclusive of the interest make-whole provisions and make-whole fundamental change provisions, and recorded the embedded conversion options as long-term derivative liabilities in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging. The convertible debt and derivative liabilities associated with the April 2020 Notes and March 2019 Notes are presented in total on the accompanying unaudited condensed consolidated balance sheets as the convertible debt and derivative liabilities. The derivative liabilities will be remeasured at each reporting period using the binomial lattice model with changes in fair value recorded in the statements of operations in other (income) expense. For the three months ended June 30, 2020 and 2019, the Company recorded gains of $0.7 million and $1.3 million due to the change in fair value of the derivative liabilities. For the six months ended June 30, 2020 and 2019, the Company recorded a gain of $1.4 million and a loss of $2.1 million, respectively.
Warrants Associated with June 2016, March 2018, and December 2019 Public Offerings
The outstanding warrants associated with the June 2016, March 2018, and December 2019 public offerings contain a provision where the warrant holder has the option to receive cash, equal to the Black-Scholes fair value of the remaining unexercised portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). Due to this provision, ASC 480, Distinguishing Liabilities from Equity, requires that these warrants be classified as liabilities. The fair values of these warrants have been determined using the Black-Scholes valuation model, and the changes in the fair value are recorded in the accompanying unaudited condensed consolidated statements of operations. During the three months ended June 30, 2020 and 2019, the Company recorded gains of $3.6 million and $2.0 million, respectively, due to the change in fair value of the warrant liabilities. During the six months ended June 30, 2020 and 2019, the Company recorded a gain of $8.3 million and a loss of $4.5 million, respectively. As of June 30, 2020, the fair value of the warrant liabilities was $10.1 million.
Warrant Associated with Solar Loan Agreement
On the closing date of the Company’s previous loan agreement with Solar, pursuant to the loan agreement the Company issued to Solar the warrant to purchase an aggregate of up to 12,243 shares of the Company’s common stock at an exercise price of $36.754 per share. The warrant will expire five years from the date of the grant. The warrant was classified as equity and recorded at its relative fair value at issuance in the stockholders’ equity section of the balance sheet.
9.
|
Stock-based Compensation
|
Pursuant to the terms of the Company’s 2014 Equity Incentive Plan (“2014 Plan”), on January 1, 2020 and 2019, the Company automatically added 389,654 and 191,887 shares to the total number shares of common stock available for future issuance under the 2014 Plan, respectively. As of June 30, 2020, there were 194,629 shares of common stock available for future issuance under the 2014 Plan.
As of June 30, 2020, there were 14,050 shares of common stock available for future issuance under the Company’s 2015 Inducement Award Plan (“2015 Plan”). During the six months ended June 30, 2020 and 2019, there were 17,500 and 11,500 granted options of the Company’s common stock under the 2015 Plan, respectively.
15
Table of Contents
The activity for the Company’s 2009 Stock Option Plan, 2014 Plan, and 2015 Plan, for the six months ended June 30, 2020, is summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Weighted-
Average
Remaining
Contractual
Life (in years)
|
|
|
Aggregate
Intrinsic
Value ($000)
|
|
Outstanding — December 31, 2019
|
|
|
526,070
|
|
|
$
|
30.55
|
|
|
|
7.62
|
|
|
$
|
60
|
|
Granted
|
|
|
278,537
|
|
|
$
|
8.59
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(166
|
)
|
|
$
|
8.60
|
|
|
|
|
|
|
|
|
|
Forfeited/Cancelled
|
|
|
(22,756
|
)
|
|
$
|
20.66
|
|
|
|
|
|
|
|
|
|
Outstanding — June 30, 2020
|
|
|
781,685
|
|
|
$
|
23.01
|
|
|
|
7.60
|
|
|
$
|
21
|
|
Exercisable — June 30, 2020
|
|
|
385,059
|
|
|
$
|
35.22
|
|
|
|
6.42
|
|
|
$
|
19
|
|
Vested or expected to vest — June 30, 2020
|
|
|
781,685
|
|
|
$
|
23.01
|
|
|
|
7.60
|
|
|
$
|
21
|
|
Restricted stock unit (“RSU”) activity under the 2014 Plan and 2015 Plan for the six months ended June 30, 2020, is summarized as follows:
|
|
Number of
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
Per Share
|
|
Non-vested at December 31, 2019
|
|
|
96,637
|
|
|
$
|
14.18
|
|
Granted
|
|
|
25,695
|
|
|
$
|
8.63
|
|
Vested
|
|
|
(23,926
|
)
|
|
$
|
14.56
|
|
Forfeited/Cancelled
|
|
|
(13,477
|
)
|
|
$
|
12.63
|
|
Non-vested at June 30, 2020
|
|
|
84,929
|
|
|
$
|
12.65
|
|
The fair value of RSUs is based on the market price of the Company’s common stock on the date of grant. RSUs generally vest 25% annually over a four-year period from the date of grant. Upon vesting, the RSUs are net share settled to cover the required withholding tax with the remaining shares issued to the holder. The Company recognizes compensation expense for such awards ratably over the corresponding vesting period.
Compensation Cost
The compensation cost that has been charged against income for stock awards under the 2014 Plan and the 2015 Plan was $0.4 million for both the three months ended June 30, 2020 and 2019, and $0.8 million and $0.9 million for the six months ended June 30, 2020 and 2019, respectively. The total income tax benefit recognized in the statements of operations for share-based compensation arrangements was zero for each of the three and six months ended June 30, 2020 and 2019.
Stock-based compensation expense related to stock options is included in the following line items in the accompanying unaudited condensed consolidated statements of operations (in thousands):
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
128
|
|
|
$
|
165
|
|
|
$
|
264
|
|
|
$
|
323
|
|
Selling, general and administrative
|
|
|
283
|
|
|
|
281
|
|
|
|
557
|
|
|
|
615
|
|
Total
|
|
$
|
411
|
|
|
$
|
446
|
|
|
$
|
821
|
|
|
$
|
938
|
|
16
Table of Contents
10.
|
Fair Value Measurements
|
The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached as of June 30, 2020 and December 31, 2019 for financial instruments measured at fair value on a recurring basis (in thousands):
|
|
|
|
|
|
Fair Value Hierarchy Classification
|
|
|
|
Balance
|
|
|
Quoted
Prices in
Active
Markets for
Identical
Assets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
247
|
|
|
$
|
247
|
|
|
|
—
|
|
|
|
—
|
|
Restricted cash
|
|
|
273
|
|
|
|
273
|
|
|
|
—
|
|
|
|
—
|
|
Money market funds
|
|
|
33,774
|
|
|
|
33,774
|
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
|
$
|
34,294
|
|
|
$
|
34,294
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
$
|
10,067
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
10,067
|
|
Derivative liabilities
|
|
|
7,896
|
|
|
|
—
|
|
|
|
—
|
|
|
|
7,896
|
|
Total liabilities
|
|
$
|
17,963
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
17,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
23
|
|
|
$
|
23
|
|
|
|
—
|
|
|
|
—
|
|
Restricted cash
|
|
|
273
|
|
|
|
273
|
|
|
|
—
|
|
|
|
—
|
|
Money market funds
|
|
|
41,897
|
|
|
|
41,897
|
|
|
|
—
|
|
|
|
—
|
|
Total assets
|
|
$
|
42,193
|
|
|
$
|
42,193
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant liabilities
|
|
$
|
18,396
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
18,396
|
|
Derivative liability
|
|
|
3,192
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,192
|
|
Total liabilities
|
|
$
|
21,588
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
21,588
|
|
The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.
Level 3 financial liabilities consist of the warrant liabilities for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The Company uses the Black-Scholes option valuation model to value the Level 3 warrant liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility. The unobservable input for all of the Level 3 warrant liabilities includes volatility. The historical volatility of the Company, using its closing common stock prices, is utilized to reflect future volatility over the expected term of the warrants. At June 30, 2020, the range and weighted average of the Level 3 volatilities utilized in the Black-Scholes model to fair value the warrant liabilities were 69.1% to 76.4% and 74.0%, respectively. Additionally, the expected term associated with the December 2019 Public Offering warrants is an unobservable unit given that the expiration of the warrants is the earlier of (i) such date that is six months after the Company publicly announces the approval from the U.S. Food and Drug Administration for ibrexafungerp for the treatment of vulvovaginal candidiasis and (ii) June 12, 2023. The Company utilized a probability assessment to estimate the likelihood of occurrence for the two potential expiration dates and allocated the probability of occurrence percentage to the fair values calculated based on the two potential expected terms. The
17
Table of Contents
weighted average expected term is 1.9 years as of June 30, 2020 for the December 2019 Public Offering warrants with a range of 1.4 to 3.0 years.
The Company uses the binomial lattice valuation model to value the Level 3 derivative liabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, dividend yield, risk-free rate, historical volatility, credit rating, market credit spread, and estimated effective yield. The unobservable inputs associated with the Level 3 derivative liabilities are adjusted equity volatility, market credit spread, and estimated yield. As of June 30, 2020, these inputs were 55.4%, 1,864 basis points, and 19.0%, respectively. The senior convertible notes are initially fair valued using the binomial lattice model and with the straight debt fair value calculated using the discounted cash flow method. The discount for lack of marketability, 6.13% as of June 30, 2020, is applied to the value of the March 2019 Notes. The residual difference represents the fair value of the embedded derivative liabilities and the fair value of the embedded derivative liabilities are reassessed using the binomial lattice valuation model on a quarterly basis.
A reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):
|
|
|
Warrant Liabilities
|
|
Balance – December 31, 2019
|
|
|
$
|
18,396
|
|
Gain adjustment to fair value
|
|
|
|
(8,329
|
)
|
Balance – June 30, 2020
|
|
|
$
|
10,067
|
|
|
|
|
|
|
|
|
|
|
Derivative Liabilities
|
|
Balance – December 31, 2019
|
|
|
$
|
3,192
|
|
Bifurcated embedded conversion option associated with April 2020 Notes
|
|
|
|
8,110
|
|
Adjustment for partial conversion of April 2020 Notes
|
|
|
|
(1,612
|
)
|
Gain adjustment to fair value
|
|
|
|
(1,794
|
)
|
Balance – June 30, 2020
|
|
|
$
|
7,896
|
|
On July 16, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”), which became effective on Friday, July 17, 2020, (a) implementing a 1-for-10 reverse stock split of the Company’s common stock and (b) decreasing the number of authorized shares of the Company’s common stock from 250,000,000 shares to 100,000,000 shares. On the effective date of July 17, 2020, the number of the Company’s issued and outstanding shares of common stock was decreased from 105,083,291 to 10,508,302 and the par value per common share remained unchanged. All share and per share amounts presented in these unaudited condensed consolidated financial statements have been retroactively adjusted for the reverse stock split and certain items in the prior period financial statements have been revised to conform to the current presentation.
The reverse stock split affected all shares of the Company’s common stock outstanding immediately prior to the effective time of the reverse stock split, as well as the number of shares of common stock available for issuance under the Company’s equity incentive plans. In addition, the reverse stock split effected a reduction in the number of shares of common stock issuable upon the conversion of outstanding convertible notes or upon the exercise of stock options or warrants outstanding. No fractional shares were issued as a result of the reverse stock split.
18
Table of Contents