The accompanying notes are an integral part of these condensed financial statements.
The accompanying notes are an integral part of these condensed financial statements.
The accompanying notes are an integral part of these condensed financial statements.
The accompanying notes are an integral part of these condensed financial statements.
Notes to Unaudited Condensed Financial Statements
Note 1. Organization
Description of Business
Cortexyme, Inc. (the “Company”) was incorporated in the State of Delaware in June 2012 and is headquartered in South San Francisco, California. The Company is a clinical stage biopharmaceutical company focused on developing therapeutics based on data supporting a new theory of the cause of Alzheimer’s disease and other degenerative disorders. Cortexyme is targeting a specific, infectious pathogen tied to neurodegeneration and chronic inflammation in humans and animal models.
Reverse Stock Split
On April 25, 2019, the Company’s Board of Directors approved a one-for-0.367647 reverse split of the Company’s issued and outstanding common stock, redeemable convertible preferred stock, and stock options.
The par value of the common stock was not adjusted as a result of the reverse stock split. All share and per share amounts in the accompanying unaudited condensed financial statements and notes to the unaudited condensed financial statements have been retroactively adjusted for all periods presented to reflect the reverse stock split.
Initial Public Offering
On May 8, 2019, the Company’s registration statement on Form S-1 (File No. 333-230853) for its initial public offering of common stock (“IPO”) was declared effective by the Securities and Exchange Commission (“SEC”). On May 13, 2019, the Company closed its IPO with the sale of 5,073,800 shares of common stock, which included 661,800 shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $17.00 per share, resulting in net proceeds of $78.1 million, after deducting underwriting discounts and commissions and estimated offering expenses paid by the Company.
In addition, in connection with the closing of the IPO, all of the Company’s outstanding shares of redeemable convertible preferred stock were automatically converted into 18,161,027 shares of common stock, and there are no shares of redeemable convertible preferred stock outstanding.
As of March 31, 2019, the Company had incurred $1.1 million of deferred offering costs which are included in prepaid expenses and other current assets on the balance sheet and will be offset against the net proceeds received from the sale of common stock.
Liquidity and Capital Resources
The Company has incurred losses and negative cash flows from operations since inception and expects to continue to generate operating losses for the foreseeable future. As of March 31, 2019, the Company had an accumulated deficit of $38.5 million. Since inception through March 31, 2019, the Company has funded operations primarily with the net proceeds of the convertible promissory notes and from the issuance of redeemable convertible preferred stock. As of March 31, 2019, the Company had cash, cash equivalents, and short-term investments of $59.0 million, which it believes will be sufficient to fund its planned operations for a period of at least 12 months from the date of the issuance of the accompanying unaudited financial statements.
Management expects to incur additional losses in the future to fund its operations and conduct product research and development and may need to raise additional capital to fully implement its business plan. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidate.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to
the instructions of the SEC on
Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.
5
The condensed balance sheet as of March 31, 2019, the condensed statements of operations and comprehensive loss for the three months ended March 31, 2019 and 2018, the co
ndensed statements of stockholders’ deficit as of March 31, 2019 and 2018, the condensed statements of cash flows for the three months ended March 31, 2019 and 2018, and the financial data and other financial information disclosed in the notes to the conde
nsed financial statements are unaudited
.
These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the Company’s final prospectus filed wit
h the SEC on May 9, 2019.
The results of operations for the three months ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period.
Use of Estimates
The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosure of contingent assets and liabilities. The most significant estimates used in the Company’s financial statements relate to the determination of the fair value of common stock and stock-based awards and other issuances, valuation of derivative instruments, accruals for research and development costs, useful lives of long-lived assets, stock-based compensation and related assumptions, the incremental borrowing rate for leases and income tax uncertainties, including a valuation allowance for deferred tax assets; and contingencies. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from the Company’s estimates.
Significant Accounting Policies
There have been no significant changes to the accounting policies during the three months ended March 31, 2019, as compared to the significant accounting policies described in the Company’s final prospectus, dated May 8, 2019 and filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended (the “Securities Act”).
Cash, Cash Equivalents, and Restricted Cash
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash and cash equivalents. Cash equivalents, which consist of amounts invested in money market funds, are stated at fair value. There are no unrealized gains or losses on the money market funds for the periods presented.
Restricted cash as of March 31, 2019 relates to a compensating balance to secure a credit card facility.
The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that sum to the total of the same amounts shown in the condensed statements of cash flows (in thousands):
|
|
Three Months Ended March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash and cash equivalents
|
|
$
|
20,634
|
|
|
$
|
4,404
|
|
Restricted cash
|
|
|
250
|
|
|
|
50
|
|
Total cash, cash equivalents and restricted cash
|
|
$
|
20,884
|
|
|
$
|
4,454
|
|
Fair Value Measurements
The fair value of our financial instruments reflects the amounts that we estimate we would receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). We disclose and recognize the fair value of our
assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:
Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;
Level 2 - Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly, including inputs in markets that are not considered to be active;
6
Level 3 - Inputs that are unobservable. Asse
ts and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Our assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. During the years presented, the Company has not changed the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period.
Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842), to enhance the transparency and comparability of financial reporting related to leasing arrangements. The Company adopted the standard effective January 1, 2019.
The Company determines if an arrangement includes a lease at inception. Right-of-use assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. The Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The lease terms may include options to extend or terminate the lease. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. Prior period amounts have not been adjusted and continue to be reported in accordance with the Company’s historical accounting under previous lease guidance, ASC 840, Leases (Topic 840).
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to not use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies.
Recent Accounting Pronouncements adopted
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). This ASU requires that substantially all leases be recognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operating leases. The ASU is effective for interim and annual periods beginning after December 15, 2018. Additionally, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which offers an additional transition method whereby entities may apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings rather than application of the new leases standard at the beginning of the earliest period presented in the financial statements. The Company elected this transition method and adopted ASC 842 on January 1, 2019 and as a result, recorded a right-of-use asset of $0.9 million, a short-term lease liability of $0.3 million, and a long-term lease liability of $0.6 million and no cumulative effect adjustment was made to the retained earnings as of the adoption date. The Company also elected the package of practical expedients under the transition guidance that will retain the historical lease classification and initial direct costs for any leases that exist prior to adoption of the new guidance and the practical expedient to not separate lease and nonlease components. See Note 5 for further disclosure.
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (“ASU 2017-11”). Part I applies to entities that issue financial instruments such as warrants, convertible debt or redeemable convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. For public entities, ASU 2017-11 is required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The adoption of ASU 2017-11 did not have any impact on the Company’s financial statements since the Company did not have any instruments subject to the scope of the ASU.
7
Recent accounting pronouncements not yet adopted
The following are new accounting pronouncements that the Company is evaluating for future impacts on its financial statements:
Fair Value Measurement—Disclosure Framework: 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. The new guidance changes disclosure requirements related to fair value measurements as part of the disclosure framework project. The disclosure framework project aims to improve the effectiveness of disclosures in the notes to the financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. This guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the provisions of the updated guidance and assessing the impact on its financial statements.
Financial Instruments—Credit Losses: In June 2016, the FASB issued new guidance which amends the principles around the recognition of credit losses by mandating entities incorporate an estimate of current expected credit losses when determining the value of certain assets. The guidance also amends reporting around allowances for credit losses on available-for-sale marketable securities. This guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the provisions of the updated guidance and assessing the impact on its financial statements.
In August 2018, the FASB issued Accounting Standards Update No. 2018-15, Intangibles – Goodwill and other – Internal-Use Software (Subtopic 350-40), which amended its guidance for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This new standard also requires customers to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The guidance is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is evaluating the impact of adopting this amendment to its financial statements.
Note 3. Fair Value Measurements
The Company measures and reports its cash equivalents, restricted cash, and investments at fair value.
Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1. Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs.
Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2019 and December 31, 2018 are presented in the following tables (in thousands):
|
|
Fair Value Measurements at March 31, 2019
|
|
|
|
Fair Value
Hierarchy
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
Money market funds
|
|
Level 1
|
|
$
|
3,565
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,565
|
|
Certificates of Deposit
|
|
Level 2
|
|
|
11,025
|
|
|
|
1
|
|
|
|
(2
|
)
|
|
|
11,024
|
|
Repurchase Agreements
|
|
Level 2
|
|
|
12,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
Commercial paper
|
|
Level 2
|
|
|
5,388
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,388
|
|
Corporate notes
|
|
Level 2
|
|
|
8,386
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
8,385
|
|
U.S. government notes
|
|
Level 2
|
|
|
12,588
|
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
12,584
|
|
Asset backed securities
|
|
Level 2
|
|
|
7,443
|
|
|
|
3
|
|
|
|
(20
|
)
|
|
|
7,426
|
|
Total cash equivalents and investments
|
|
|
|
$
|
60,395
|
|
|
$
|
5
|
|
|
$
|
(28
|
)
|
|
$
|
60,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
16,546
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,410
|
|
Long-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,416
|
|
Total cash equivalents and investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,372
|
|
8
|
|
Fair Value Measurements at December 31, 2018
|
|
|
|
Fair Value
Hierarchy
|
|
Amortized
Cost
|
|
|
Unrealized
Gains
|
|
|
Unrealized
Losses
|
|
|
Fair Value
|
|
Money market funds
|
|
Level 1
|
|
$
|
11,815
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
11,815
|
|
Commercial paper
|
|
Level 2
|
|
|
14,362
|
|
|
|
—
|
|
|
|
(2
|
)
|
|
|
14,360
|
|
Corporate notes
|
|
Level 2
|
|
|
16,129
|
|
|
|
—
|
|
|
|
(18
|
)
|
|
|
16,111
|
|
U.S. government notes
|
|
Level 2
|
|
|
8,980
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
8,979
|
|
Asset backed securities
|
|
Level 2
|
|
|
9,220
|
|
|
|
—
|
|
|
|
(28
|
)
|
|
|
9,192
|
|
Total cash equivalents and investments
|
|
|
|
$
|
60,506
|
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
|
$
|
60,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classified as:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13,613
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,844
|
|
Total cash equivalents and investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
60,457
|
|
As of March 31, 2019, the remaining contractual maturities of available-for-sale securities were less than five months. There have been no significant realized losses on available-for-sale securities for the period presented. Based on the Company’s review of its available-for-sale securities, the Company believes it had no other-than-temporary impairments on these securities as of March 31, 2019, because the Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before the recovery of their amortized cost basis.
There were no transfers between Levels 1, 2 or 3 for the period presented.
Note 4. Balance Sheet Components
Prepaid expenses and Other Current Assets
Prepaid expenses and Other Current Assets consist of the following (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Prepaid expenses
|
|
$
|
243
|
|
|
$
|
13
|
|
Deferred issuance costs
|
|
|
1,128
|
|
|
|
34
|
|
Prepaid clinical trial expenses
|
|
|
2,678
|
|
|
|
587
|
|
Prepaid research and development expenses
|
|
|
60
|
|
|
|
166
|
|
Other assets
|
|
|
387
|
|
|
|
68
|
|
Total prepaid expenses and other current assets
|
|
$
|
4,496
|
|
|
$
|
868
|
|
Property and Equipment
Property and Equipment consist of the following (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Lab Equipment
|
|
$
|
428
|
|
|
$
|
378
|
|
Less: accumulated depreciation
|
|
|
(114
|
)
|
|
|
(95
|
)
|
Property and equipment, net
|
|
$
|
314
|
|
|
$
|
283
|
|
9
Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Personnel expenses
|
|
$
|
182
|
|
|
$
|
483
|
|
Professional fees
|
|
|
385
|
|
|
|
75
|
|
Research and development expenses
|
|
|
1,136
|
|
|
|
380
|
|
Other
|
|
|
21
|
|
|
|
24
|
|
Total accrued liabilities
|
|
$
|
1,724
|
|
|
$
|
962
|
|
Note 5. Leases
As described in “Note 2
Summary of Significant Accounting Policies,
” the Company adopted Topic 842 as of January 1, 2019. Prior period amounts have not been adjusted and continue to be reported in accordance with historic accounting under Topic 840.
Real Estate Operating Lease
In June 2018, the Company entered into a three-year lease agreement with no renewal options with a related party, one of the investors in the Series B redeemable convertible preferred stock. The lease began on July 16, 2018 and provides 3,185 square feet of office and laboratory space in South San Francisco, California. The Company issued 114,437 shares of its Series B redeemable convertible preferred stock with a fair value of $1.1 million in exchange for the leased facility. No other payments are due under the lease. 100% of the issued shares were initially subject to a repurchase option. Each month beginning on the one-month anniversary of the commencement date of the lease, 1/36
th
of the total shares are released from the repurchase option until all shares are released over the lease period of 3 years. The scheduled release of shares will cease immediately on the occurrence of a termination event.
In the event of a termination of the lease for any reason other than (i) a material, uncured default of the tenant or (ii) the voluntary or involuntary liquidation, dissolution or winding up of the tenant, the Company has an irrevocable exclusive option for a period of three months from the termination to repurchase any unvested shares. In the event of (i) or (ii) above or an acquisition or initial public offering of the tenant, any unvested shares will fully and immediately vest, and any repurchase option will lapse in respect to any unvested shares.
The Company recognizes lease expense on a straight-line basis over the term of its operating lease. The common area maintenance and other operating costs are included in the base rent
. As of March 31, 2019, 89,006 unvested shares were subject to the repurchase option representing $856,000 of future rent expense to be recognized over the remaining term of 28 months on a straight-line basis over the respective lease period.
As described in “Note 10 Subsequent Events”, the Company has completed its IPO on May 13, 2019. As there will be no unvested shares upon the initial public offering, the operating lease liability balance will be fully extinguished.
Maturities of the lease liabilities as of March 31, 2019 are presented in the following table (in thousands):
Year:
|
|
|
|
|
2019 (excluding the three months ended March 31, 2019)
|
|
$
|
275
|
|
2020
|
|
|
366
|
|
2021
|
|
|
214
|
|
Total liabilities
|
|
|
855
|
|
Less imputed interest
|
|
|
(40
|
)
|
Total
|
|
$
|
815
|
|
|
|
|
|
|
Reported as:
|
|
|
|
|
Operating lease liabilities
|
|
$
|
340
|
|
Operating lease liabilities, net of current portion
|
|
|
475
|
|
Total lease liability
|
|
$
|
815
|
|
10
The Company determined its operating lease liabilities for operating lease using a discount rate of 4.00% based on the rate that the Company would have to pay to borrow on a collateralized basis for a similar lease an amount equal to the lease payments in
a similar economic environment. Lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. As of March 31, 2019, the weighted-average remaining lease term was 2.40 years.
Rent expense for the operating lease for the three months ended March 31, 2019 was $92,000.
Note 6. Stock-Based Compensation
In 2014, the Company adopted the 2014 Stock Plan (the 2014 Plan) under which 2,973,736 shares of the Company’s common stock have been reserved for issuance to employees, directors and consultants. Under the 2014 Plan, the Board of Directors may grant incentive stock options or non-statutory stock options. Incentive stock options may only be granted to Company employees. The exercise price of incentive stock options and non- statutory stock options will be no less than 100% of the fair value per share of the Company’s common stock on the grant date. If an individual owns capital stock representing more than 10% of the outstanding shares, the price of each share will be at 110% of the fair value. Fair value is determined by the Board of Directors. Options expire after ten years (five years for stockholders owning greater than 10% of all classes of stock). For options that have been exercised prior to vesting, the Company has a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s employment with the Company for any reason.
As noted in Note 10 Subsequent Events,
our 2014 Stock Plan was amended, restated and re-named the 2019 Equity Incentive Plan, or 2019 Plan, by our board of directors on April 24, 2019 and our stockholders on April 25, 2019. The 2019 Plan became effective on May 7, 2019.
For the three months ended March 31, 2019, the Company recognized $190,000 of stock-based compensation expense related to options granted to employees and non-employees. The compensation expense is allocated on a departmental basis, based on the classification of the option holder. No income tax benefits have been recognized in the statement of operations for stock-based compensation arrangements.
|
|
Number of
Options and
Unvested
Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
average
remaining
contractual
life (years)
|
|
|
Aggregate
intrinsic
value
|
|
Balance at December 31, 2018
|
|
|
1,885,504
|
|
|
|
1.57
|
|
|
|
9.07
|
|
|
|
1,252,496
|
|
Options granted
|
|
|
397,055
|
|
|
|
6.91
|
|
|
|
9.87
|
|
|
|
|
|
Options exercised
|
|
|
(154,557
|
)
|
|
|
0.41
|
|
|
|
|
|
|
|
|
|
Options cancelled
|
|
|
(66,180
|
)
|
|
|
2.23
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2019
|
|
|
2,061,822
|
|
|
|
2.66
|
|
|
|
9.20
|
|
|
|
8,759,422
|
|
Options vested and expected to vest as of
March 31, 2019
|
|
|
2,061,822
|
|
|
|
2.66
|
|
|
|
9.20
|
|
|
|
8,759,422
|
|
Options exercisable as of March 31, 2019
|
|
|
1,003,660
|
|
|
|
0.82
|
|
|
|
8.05
|
|
|
|
6,114,427
|
|
The total unrecognized share-based compensation cost at March 31, 2019 amounted to approximately $3,155,694 which is expected to be recognized over the next four years.
Note 7. Related Party Transactions
In June 2014, the Company entered into a research grant and license agreement (the Agreement) with a stockholder of the Company. The Agreement requires the Company to pay royalties to the stockholder in the amount of 3% of gross revenues not to exceed $1.05 million. This agreement was amended in April 2019 and the royalty payment provision was removed.
As described in Note 5, the Company entered into a three-year lease agreement with a Series B redeemable preferred stock investor. The lease began on July 16, 2018 and provides 3,185 square feet of office space in South San Francisco, California. The Company issued 114,437 restricted shares of its Series B redeemable convertible preferred stock in exchange for the leased facility. During the three months ended March 31, 2019, 9,537 shares vested under the lease agreement.
11
As described in Note
1
, the Company completed its
IPO in May 2019. As a result of the IPO, 82,649 shares of previously restricted Series B redeemable
convertible
preferred stock under the
lease agreement became fully vested and were converted to common stock.
Note 8. Income Taxes
The Company has a history of losses and expects to record a loss in 2019.
The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations. No provision for income taxes has been recorded due to the available net operating loss carry forwards of approximately $28 million will begin to expire in 2034. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future deferred tax assets.
Note 9. Net Loss Per Share
The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share for the period presented due to their anti-dilutive effect:
|
|
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Series A redeemable convertible preferred stock
|
|
|
9,008,919
|
|
|
|
9,008,919
|
|
Series B redeemable convertible preferred stock
|
|
|
9,152,108
|
|
|
|
—
|
|
Warrants
|
|
|
27,941
|
|
|
|
27,941
|
|
Options issued and outstanding
|
|
|
2,061,822
|
|
|
|
879,696
|
|
Total
|
|
|
20,250,790
|
|
|
|
9,916,556
|
|
Note 10. Subsequent Events
In May 2019, the Company completed an initial public offering (“IPO”) through issuing and selling 5,073,800 shares of common stock at a public offering price of $17.00 per share, including 661,800 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares. The aggregate net proceeds received by the Company from the offering, net of underwriting discounts and commissions and offering expenses, was approximately $78.1 million. Upon the closing of the IPO, all of the outstanding shares of redeemable convertible preferred stock automatically converted into 18,161,027 shares of common stock. Subsequent to the closing of the IPO, there were no shares of redeemable convertible preferred stock outstanding.
In April 2019, the Company’s 2014 Stock Plan was amended, restated and re-named the 2019 Equity Incentive Plan (the “2019 Plan”), by the Company’s board of directors and the Company’s stockholders. The 2019 Plan became effective on May 7, 2019, the day prior to the effectiveness of the registration statement filed in connection with the IPO. Under the 2019 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares to individuals who are then employees, officers, directors or consultants of the Company, and employees and consultants of the Company’s subsidiaries. A total of 5,131,549 shares of common stock were approved to be initially reserved for issuance under the 2019 Plan. The number of shares that remained available for issuance under the 2014 Plan as of the effective date of the 2019 Plan and shares subject to outstanding awards under the 2014 Plan as of the effective date of the 2019 Plan that are subsequently canceled, forfeited or repurchased by the Company will be added to the shares reserved under the 2019 Plan. In addition, the number of shares of common stock available for issuance under the 2019 Plan will be automatically increased on the first day of each calendar year during the ten-year term of the 2019 Plan, beginning with January 1, 2020 and ending with January 1, 2029, by an amount equal to the least of 4% of the outstanding number of shares of the Company’s common stock on December 31st of the preceding calendar year, 2,146,354 shares or such lesser amount as determined by the Company’s board of directors.
12
The Company’s Employee Stock Purchase Plan, or 2019 ESPP, was adopted by
the Company’s
board of directors on April 24, 2019 and approved by
the Company’s stockholders
on April 25, 2019. The 2019 ESPP
became
effective on
May 7, 2019
.
The Company
reserved 26
8,295 shares of
its
common stock for issuance under the 2019 ESPP. The number of shares reserved for issuance under the 2019 ESPP will be increased automatically on the first day of each fiscal year for a period of up to ten years, starting with the 2020 f
iscal year
.
The ESPP has not
yet
been implemented and it may or may not be implemented at the discretion of the Company.
The Company has completed an evaluation of all subsequent events through the date these financial were issued to ensure that these financial statements include appropriate disclosure of events both recognized in the financial statements and events which occurred but were not recognized in the financial statements.
13