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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2021

or

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

For the transition period from                                to                               

Commission File Number: 001-36332

 

ALDEYRA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

20-1968197

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

131 Hartwell Avenue, Suite 320

 

 

Lexington, MA

 

02421

(Address of principal executive offices)

 

(Zip Code)

 

(781) 761-4904

(Registrant’s telephone number, including area code)

 

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

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

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

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

 

 

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

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

Securities registered pursuant to 12(b) of the Act:

 

Title of Class

Trading Symbol

Name of exchange on which registered

Common Stock, $0.001 par value per share

ALDX

The Nasdaq Stock Market LLC

 

As of May 4, 2021, there were 57,631,203 shares of the registrant’s common stock issued and outstanding.

 

 

 


 

 

 

Aldeyra Therapeutics, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended March 31, 2021

INDEX

 

 

Page

PART I – FINANCIAL INFORMATION

ITEM 1.

Condensed Consolidated Financial Statements:

3

 

Consolidated Balance Sheets at March 31, 2021 (Unaudited) and December 31, 2020

3

 

Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (Unaudited)

4

 

Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2021 and 2020 (Unaudited)

5

 

Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (Unaudited)

6

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (Unaudited)

7

 

Notes to Condensed Consolidated Financial Statements

8

ITEM 2.

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

16

ITEM 3.

Quantitative and Qualitative Disclosures about Market Risk

24

ITEM 4.

Controls and Procedures

24

PART II – OTHER INFORMATION

 

ITEM 1.

Legal Proceedings

25

ITEM 1A.

Risk Factors

25

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

62

ITEM 3.

Defaults Upon Senior Securities

62

ITEM 4.

Mine Safety Disclosures

62

ITEM 5.

Other Information

62

ITEM 6.

Exhibits

62

Signatures

63

 

2


 

 

Part I – FINANCIAL INFORMATION

Item 1.

Condensed Consolidated Financial Statements

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

 

 

 

March 31,

 

 

 

 

 

 

 

2021

 

 

December 31,

 

 

 

(unaudited)

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

88,442,379

 

 

$

52,858,311

 

Cash equivalent - reverse repurchase agreements

 

 

50,000,000

 

 

 

25,000,000

 

Prepaid expenses and other current assets

 

 

8,630,543

 

 

 

5,200,957

 

Total current assets

 

 

147,072,922

 

 

 

83,059,268

 

Right-of-use assets

 

 

175,619

 

 

 

233,310

 

Fixed assets, net

 

 

57,559

 

 

 

59,925

 

Total assets

 

$

147,306,100

 

 

$

83,352,503

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

448,591

 

 

$

381,638

 

Accrued expenses

 

 

5,371,681

 

 

 

8,134,765

 

Current portion of credit facility

 

 

5,094,938

 

 

 

3,659,776

 

Current portion of operating lease liabilities

 

 

175,619

 

 

 

233,310

 

Total current liabilities

 

 

11,090,829

 

 

 

12,409,489

 

Long-term debt

 

 

10,140,799

 

 

 

11,434,456

 

Total liabilities

 

 

21,231,628

 

 

 

23,843,945

 

Commitments and contingencies (Notes 14 and 15)

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, voting, $0.001 par value; 150,000,000 authorized and 47,651,035

   and 38,667,491 shares issued and outstanding, respectively

 

 

47,651

 

 

 

38,667

 

Additional paid-in capital

 

 

374,232,411

 

 

 

296,385,619

 

Accumulated other comprehensive income

 

 

 

 

 

 

Accumulated deficit

 

 

(248,205,590

)

 

 

(236,915,728

)

Total stockholders’ equity

 

 

126,074,472

 

 

 

59,508,558

 

Total liabilities and stockholders’ equity

 

$

147,306,100

 

 

$

83,352,503

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3


 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

7,726,342

 

 

$

6,633,603

 

General and administrative

 

 

3,104,702

 

 

 

3,004,841

 

Loss from operations

 

 

(10,831,044

)

 

 

(9,638,444

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

23,762

 

 

 

210,100

 

Interest expense

 

 

(482,580

)

 

 

(439,816

)

Total other income (expense), net

 

 

(458,818

)

 

 

(229,716

)

Net loss

 

$

(11,289,862

)

 

$

(9,868,160

)

Net loss per share - basic and diluted

 

$

(0.25

)

 

$

(0.34

)

Weighted average common shares outstanding - basic and diluted

 

 

45,630,910

 

 

 

29,210,889

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4


 

 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net loss

 

$

(11,289,862

)

 

$

(9,868,160

)

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities, net of tax

 

 

 

 

 

51,728

 

Total other comprehensive income

 

$

 

 

$

51,728

 

Comprehensive loss

 

$

(11,289,862

)

 

$

(9,816,432

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

 

 

 

Stockholders' Equity

 

 

 

Common Voting Stock

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in Capital

 

 

Other

Comprehensive

Income/(Loss),

net of tax

 

 

Accumulated

Deficit

 

 

Total

Stockholders'

Equity

 

Balance, December 31, 2020

 

 

38,667,491

 

 

$

38,667

 

 

$

296,385,619

 

 

$

 

 

$

(236,915,728

)

 

$

59,508,558

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,292,170

 

 

 

 

 

 

 

 

 

1,292,170

 

Release of restrictions on Helio

   founders’ shares

 

 

35,005

 

 

 

35

 

 

 

(35

)

 

 

 

 

 

 

 

 

 

Issuance of common stock in connection

with Helio Vision, Inc. acquisition milestone

 

 

246,562

 

 

 

247

 

 

 

2,499,744

 

 

 

 

 

 

 

 

 

2,499,991

 

Issuance of common stock, net of

   issuance costs

 

 

7,868,421

 

 

 

7,868

 

 

 

70,041,582

 

 

 

 

 

 

 

 

 

70,049,450

 

Issuance of common stock, exercise

   of stock options

 

 

543,826

 

 

 

544

 

 

 

4,003,746

 

 

 

 

 

 

 

 

 

4,004,290

 

Issuance of common stock, employee

   stock purchase plan

 

 

2,786

 

 

 

3

 

 

 

9,872

 

 

 

 

 

 

 

 

 

9,875

 

Issuance of common stock, vested

   restricted stock awards

 

 

286,944

 

 

 

287

 

 

 

(287

)

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,289,862

)

 

 

(11,289,862

)

Balance, March 31, 2021

 

 

47,651,035

 

 

$

47,651

 

 

$

374,232,411

 

 

$

 

 

$

(248,205,590

)

 

$

126,074,472

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2019

 

 

28,656,832

 

 

$

28,657

 

 

$

247,409,793

 

 

$

5,866

 

 

$

(199,361,999

)

 

$

48,082,317

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,953,652

 

 

 

 

 

 

 

 

 

1,953,652

 

Release of restrictions on Helio

   founders’ shares

 

 

142,156

 

 

 

142

 

 

 

(142

)

 

 

 

 

 

 

 

 

 

Issuance of common stock, net of

   issuance costs

 

 

562,669

 

 

 

563

 

 

 

3,172,261

 

 

 

 

 

 

 

 

 

3,172,824

 

Issuance of common stock,

exercise of stock options

 

 

2,000

 

 

 

2

 

 

 

10,268

 

 

 

 

 

 

 

 

 

10,270

 

Issuance of common stock, employee

   stock purchase plan

 

 

14,151

 

 

 

14

 

 

 

69,875

 

 

 

 

 

 

 

 

 

69,889

 

Issuance of common stock, vested

   restricted stock awards

 

 

129,021

 

 

 

129

 

 

 

(129

)

 

 

 

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

51,728

 

 

 

 

 

 

51,728

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,868,160

)

 

 

(9,868,160

)

Balance, March 31, 2020

 

 

29,506,829

 

 

$

29,507

 

 

$

252,615,578

 

 

$

57,594

 

 

$

(209,230,159

)

 

$

43,472,520

 

 

6


 

 

ALDEYRA THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Net loss

 

$

(11,289,862

)

 

$

(9,868,160

)

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

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

2,381,656

 

 

 

1,953,652

 

Non-cash interest expense

 

 

141,505

 

 

 

141,505

 

Net amortization of premium on debt securities available for sale

 

 

 

 

 

(67,220

)

Depreciation and amortization expense

 

 

67,863

 

 

 

72,040

 

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(3,429,586

)

 

 

429,321

 

Accounts payable

 

 

66,953

 

 

 

264,595

 

Accrued expenses

 

 

(1,410,270

)

 

 

(8,285,485

)

Net cash used in operating activities

 

 

(13,471,741

)

 

 

(15,359,752

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Acquisitions of fixed assets

 

 

(7,806

)

 

 

 

Purchases of marketable securities

 

 

 

 

 

(5,776,090

)

Sales and maturities of marketable securities

 

 

 

 

 

12,000,000

 

Net cash (used in) provided by investing activities

 

 

(7,806

)

 

 

6,223,910

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

70,049,450

 

 

 

3,172,824

 

Proceeds from exercise of stock options

 

 

4,004,290

 

 

 

10,270

 

Proceeds from employee stock purchase plan

 

 

9,875

 

 

 

69,889

 

Net cash provided by financing activities

 

 

74,063,615

 

 

 

3,252,983

 

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

60,584,068

 

 

 

(5,882,859

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

77,858,311

 

 

 

44,425,830

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

138,442,379

 

 

$

38,542,971

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

Cash paid during the period for interest

 

$

341,250

 

 

$

345,042

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION AND DISCLOSURES OF NONCASH ACTIVITIES:

 

 

 

 

 

 

 

 

Common stock issued in connection with Helio Vision, Inc. acquisition milestone

 

$

2,499,991

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7


 

ALDEYRA THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

1.

NATURE OF BUSINESS

Aldeyra Therapeutics, Inc., together with its wholly-owned subsidiaries (the “Company” or “Aldeyra”), a Delaware corporation, is a clinical-stage biotechnology company devoted to developing and commercializing next-generation medicines to improve the lives of patients with immune-mediated diseases.

The Company’s principal activities to date include raising capital and research and development activities.

2.

BASIS OF PRESENTATION

The accompanying interim condensed consolidated financial statements and related disclosures are unaudited and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on March 11, 2021 (the “2020 Form 10-K”).

The financial information as of March 31, 2021, and the three months ended March 31, 2021 and 2020, respectively, is unaudited. In the opinion of management all adjustments, consisting only of normal recurring adjustments considered necessary for the fair presentation of financial position, results of operations, and cash flows at the dates and for the periods presented, have been included. The balance sheet data as of December 31, 2020 was derived from audited consolidated financial statements. The results of the Company’s operations for any interim periods are not necessarily indicative of the results that may be expected for any other interim period or for a full fiscal year.

 

Based on its current operating plan, the Company believes that its cash and cash equivalents, as of March 31, 2021, together with the net proceeds from the sale of common stock from the underwritten public offering in May 2021, will be sufficient to fund currently projected operating expenses through the end of 2023, including potential new drug application (“NDA”) submission for reproxalap; initial commercialization of reproxalap, if approved; and continued early and late-stage development of our product candidates in ocular and systemic immune-mediated diseases.  As a result of the COVID-19 pandemic, clinical site availability, staffing, and patient recruitment have been negatively affected and the timelines to complete the Company’s clinical trials may be delayed. The Company’s assessment of its liquidity and capital resources includes an estimate of the financial impacts of these changes. The Company will need to secure additional funding in the future, from one or more equity or debt financings, collaborations, or other sources, in order to carry out all of the Company’s planned research and development activities and regulatory activities; commercialize product candidates; or conduct any substantial, additional development requirements requested by the FDA. Additional funding may not be available to the Company on acceptable terms, or at all. If the Company is unable to secure additional capital, it will be required to significantly decrease the amount of planned expenditures and may be required to cease operations.

Curtailment of operations would cause significant delays in the Company’s efforts to develop and introduce its products to market, which is critical to the realization of its business plan and the future operations of the Company.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions, including fair value estimates for investments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting periods. The Company’s management evaluates its estimates and assumptions on an ongoing basis. Management’s most significant estimates in the Company’s consolidated financial statements include, but are not limited to, estimates related to clinical trial accruals, estimates related to prepaid and accrued research and development costs, acquired in-process research and development (“IPR&D”) expense, contingent liabilities, and accounting for income taxes and related valuation allowance. Although these estimates and assumptions are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates and assumptions.

8


 

Summary of Significant Accounting Policies

There were no changes to significant accounting policies during the three months ended March 31, 2021, as compared to the those identified in the 2020 Form 10-K.

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 requires that credit losses be reported as an allowance using an expected losses model, representing the entity’s current estimate of credit losses expected to be incurred. The accounting guidance currently in effect is based on an incurred loss model. For available-for-sale debt securities with unrealized losses, this standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. The amendments under ASU 2016-13 are effective for interim and annual fiscal periods beginning after December 15, 2022. The Company is continuing to evaluate the impact of ASU 2016-13 but does not expect the adoption of this ASU to have a material impact on its consolidated financial statements.

3.

Helio Vision Acquisition

On January 28, 2019 (the “Closing Date”), the Company acquired Helio Vision, Inc. (“Helio”). As a result of the acquisition, the Company initially issued an aggregate of 1,160,444 shares of common stock to the former securityholders and an advisor of Helio. The founders of Helio were issued 568,627 shares and non-founders were issued 591,817 shares. The Helio founders’ shares are subject to vesting based on continued service to the Company over three years from the Closing Date, of which, 79% are vested as of March 31, 2021. The Company recognizes the expense associated with the founders’ restricted shares as research and development compensation expense on a straight-line basis as the shares vest over the three-year period. For the three months ended March 31, 2021 and March 31, 2020, the Company recorded $0.3 million and $0.4 million of research and development compensation expense, respectively, for the founders’ restricted shares.

In January 2021, pursuant to the terms of the acquisition agreement, the Company issued 246,562 shares of its common stock to the former securityholders of Helio. In addition, the Company, subject to the conditions of the acquisition agreement, is contingently obligated to make additional payments to the former securityholders of Helio as follows:(a) $10.0 million of common stock following approval by the FDA of a new drug approval application for the prevention and/or treatment of proliferative vitreoretinopathy or a substantially similar label prior to the 10th anniversary of the Closing Date; and (b) $2.5 million of common stock following FDA approval of a new drug application for an indication (other than proliferative vitreoretinopathy) prior to the 12th anniversary of the Closing Date (the shares of common stock issuable pursuant to the preceding clauses (a) and (b) are referred to herein as the “Milestone Shares”), provided that in no event shall the Company be obligated to issue more than an aggregate of 5,248,885 shares of common stock (including the shares issued in January 2021). Additionally, in the event of certain change of control or divestitures by the Company, certain former convertible noteholders of Helio will be entitled to a tax gross-up payment in an amount not to exceed $1.0 million.

The Company determined that liability accounting is not required for the Milestone Shares under FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). The Company also determined that the Milestone Shares meet the scope exception as a derivative under FASB ASC Topic 815, Derivatives and Hedging (“ASC 815”), from inception of the Milestone Shares through March 31, 2021. Accordingly, the Milestone Shares are evaluated under FASB ASC Topic 450, Contingencies (“ASC 450”) and the Company will record a liability related to the Milestone Shares if the milestones are achieved, and the obligation to make additional payment(s) becomes probable. At that time, the Company will record the cost of the Milestone Shares issued to the founders as compensation expense and to the Helio non-founders as IPR&D expense if there is no alternative future use. At December 31, 2020, the Milestones Shares associated with the preceding clause (a) were considered probable of issuance and $2.5 million was accrued as contingent consideration payable in stock and the Company recorded $1.8 million to IPR&D (the “Milestone IPR&D”), which included a $0.5 million income tax benefit, and $1.2 million of compensation expense related to these Milestone Shares, which amounted to 246,562 shares and were issued during the quarter ended March 31, 2021. No other milestones related to the Milestone Shares are probable of being achieved as of March 31, 2021.

4.

NET LOSS PER SHARE

As of March 31, 2021 and 2020, diluted weighted average common shares outstanding is equal to basic weighted average common shares due to the Company’s net loss position.

9


 

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Options to purchase common stock

 

 

3,856,204

 

 

 

5,432,554

 

Restricted stock units

 

 

454,635

 

 

 

936,591

 

Nonvested founder shares (1)

 

 

117,851

 

 

 

284,317

 

Total of common stock equivalents

 

 

4,428,690

 

 

 

6,653,462

 

 

(1)

Represents 117,851 shares of common stock that are issued and outstanding but that were subject to vesting based on service requirements at March 31, 2021 and are not included in stockholders’ equity pursuant to GAAP.

 

5.

CASH, CASH EQUIVALENTS AND MARKETABLE SECURITIES

Cash and cash equivalents, were comprised of:

 

 

 

March 31, 2021

 

 

 

Carrying

Amount

 

 

Unrecognized

Gain

 

 

Unrecognized

Loss

 

 

Estimated

Fair Value

 

 

Cash and Cash

Equivalents

 

Cash

 

$

84,073,606

 

 

$

 

 

$

 

 

$

84,073,606

 

 

$

84,073,606

 

Money market funds

 

 

4,368,773

 

 

 

 

 

 

 

 

 

4,368,773

 

 

 

4,368,773

 

Reverse repurchase agreements

 

 

50,000,000

 

 

 

 

 

 

 

 

 

50,000,000

 

 

 

50,000,000

 

Total Cash and cash equivalents

 

$

138,442,379

 

 

$

 

 

$

 

 

$

138,442,379

 

 

$

138,442,379

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

Carrying

Amount

 

 

Unrecognized

Gain

 

 

Unrecognized

Loss

 

 

Estimated

Fair Value

 

 

Cash and Cash

Equivalents

 

Cash

 

$

23,494,920

 

 

$

 

 

$

 

 

$

23,494,920

 

 

$

23,494,920

 

Money market funds

 

 

29,363,391

 

 

 

 

 

 

 

 

 

29,363,391

 

 

 

29,363,391

 

Reverse repurchase agreements

 

 

25,000,000

 

 

 

 

 

 

 

 

 

25,000,000

 

 

 

25,000,000

 

Total Cash and cash equivalents

 

$

77,858,311

 

 

$

 

 

$

 

 

$

77,858,311

 

 

$

77,858,311

 

 

 There were no marketable securities held at March 31, 2021 or December 31, 2020.

 

  

6.

FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820, Fair Value Measurements, establishes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Level 1 – Quoted prices in active markets that are accessible at the market date for identical unrestricted assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

There were no liabilities measured at fair value at March 31, 2021 or December 31, 2020.

Money market funds included in cash and cash equivalents in the consolidated balance sheets, are recorded at fair value and considered as Level 1 inputs under the fair value hierarchy.

10


 

Reverse repurchase agreements are recorded at fair market value and considered as Level 2 inputs under the fair value hierarchy.

Financial instruments including cash equivalents, clinical trial prepayments to contract research organizations, and accounts payable are carried in the consolidated financial statements at amounts that approximate their fair value based on the short maturities of those instruments. The carrying amount of the Company’s term loan under its credit facility approximates market rates currently available to the Company.

7.

PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets were comprised of:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Deferred research and development expenses

 

 

8,277,148

 

 

 

4,793,794

 

Deferred offering costs

 

 

137,569

 

 

 

 

Miscellaneous prepaid expenses and other current assets

 

 

215,826

 

 

 

407,163

 

Total prepaid expenses and other current assets

 

$

8,630,543

 

 

$

5,200,957

 

 

8.

ACCRUED EXPENSES

Accrued expenses were comprised of:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Accrued compensation

 

$

2,387,916

 

 

$

1,323,138

 

Contingent consideration payable in stock

 

 

 

 

$

2,500,000

 

Accrued research and development

 

 

2,343,210

 

 

 

3,944,094

 

Accrued general and administrative

 

 

640,555

 

 

 

367,533

 

Accrued expenses

 

$

5,371,681

 

 

$

8,134,765

 

 

9.

CREDIT FACILITY

The Company’s long-term debt obligation consists of amounts the Company is obligated to repay under its credit facility with Hercules Capital, Inc. (“Hercules”). In March 2019, the Company entered into a Loan and Security Agreement with Hercules and several banks and other financial institutions or entities, from time-to-time parties thereto (collectively, referred to as “Lender”), providing for a term loan of up to $60.0 million, subject to the satisfaction of certain conditions contained therein, that is secured by a lien covering all of the Company’s assets, other than the Company’s intellectual property (the “Loan and Security Agreement” or the “Hercules Credit Facility”). The Loan and Security Agreement provided for (i) an initial term loan advance of up to $5.0 million at the Company’s option, which expired unutilized on April 15, 2019; (ii) three additional term loan advances of up to $15.0 million each, at the Company’s option, available to the Company upon the occurrence of certain funding conditions prior to September 30, 2019 (the “2019 Tranche”), March 31, 2020 (the “2020 Tranche”), and March 31, 2021 (the “2021 Tranche”); and (iii) a final additional term loan advance (the “Fourth Loan Tranche”) of up to $10.0 million prior to December 31, 2021, at the Company’s option, subject to approval by the Lender’s investment committee. The 2019 Tranche was drawn down in full by the Company in September 2019 and the 2020 Tranche and 2021 Tranche expired unutilized prior to the Company satisfying the funding conditions for such tranche.  As of March 31, 2021, $15.0 million was outstanding under the Hercules Credit Facility and no additional amounts were available for borrowing. As of March 31, 2021, the Company was in material compliance with all covenants of the Hercules Credit Facility.

As of March 31, 2021, the term loan bore interest at an annual rate equal to the greater of (i) 9.10% and (ii) the prime rate (as reported in the Wall Street Journal or any successor publication thereto) plus 3.10%. The Loan and Security Agreement provided for interest-only payments until May 1, 2021, with an option to extend the interest-only period to May 1, 2022 based upon the achievement of certain milestones. Repayment of the aggregate outstanding principal balance of the term loan, in monthly installments, was to start upon expiration of the interest-only period and continues through October 1, 2023 (the “Maturity Date”). Associated with this debt facility, the Company incurred a commitment charge of $25,000, transaction costs of $273,186, a fee of $375,000 upon closing, and is required to pay a fee (the “End of Term Charge”) of 6.95% multiplied by the aggregate amount of advances under the Loan and Security Agreement at maturity. The fees, transaction costs, and the End of Term Charge are amortized to interest expense through the Maturity Date using the effective interest method. The effective

11


 

interest rate was 12.9% at March 31, 2021. At the Company’s option, the Company may elect to prepay all, but not less than all, of the outstanding term loan by paying the entire principal balance and all accrued and unpaid interest thereon plus all fees and other amounts due under the Loan and Security Agreement, including a prepayment charge equal to 1.5% of the principal amount being prepaid.

 

On April 20, 2021, the Company entered into the First Amendment (the “First Amendment”) to Loan and Security Agreement with Hercules, The First Amendment makes certain changes to the Loan and Security Agreement, including, among other things, (i) increasing the Fourth Loan Tranche from $10 million to $20 million; (ii) lowering the variable per annum rate of interest on borrowings under the Loan and Security Agreement to the greater of (a) the Prime Rate plus 3.10% or (b) 8.60%; (iii) extending the expiration of the period in which interest-only payments on borrowings under the Loan and Security Agreement are required from May 1, 2021 to July 1, 2022; and (iv) further extending the expiration of the period in which interest-only payments on borrowings under the Loan and Security Agreement (the “Interest Only Period”) are required from July 1, 2022 to May 1, 2023 in the event certain conditions as set forth in the First Amendment are satisfied. The Interest Only Period extension conditions were satisfied in April 2021, resulting in the Interest Only Period being extended to May 1, 2023. Following the effective time of the First Amendment, an aggregate of $35 million, subject to the terms and conditions of the Loan and Security Agreement, may be made available to the Company for borrowing, $15 million of which was funded prior to the date of the First Amendment.

Long-term debt consisted of the following:

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Term loan payable

 

$

15,000,000

 

 

$

15,000,000

 

End of term charge

 

 

534,556

 

 

 

445,464

 

Unamortized debt issuance costs

 

 

(298,819

)

 

 

(351,232

)

Less: current portion

 

 

(5,094,938

)

 

 

(3,659,776

)

Total long-term debt

 

$

10,140,799

 

 

$

11,434,456

 

 

Future principal payments, including the End of Term Charge, are as follows:

 

 

 

Years Ending

 

 

 

December 31,

 

2021

 

 

3,659,776

 

2022

 

 

5,931,718

 

2023

 

 

6,451,006

 

Total

 

$

16,042,500

 

 

The Loan and Security Agreement also contains certain events of default, representations, warranties and non-financial covenants of the Company. In addition, subject to the terms of the agreement, the Company granted the Lender the right to purchase up to an aggregate of $2.0 million of the Company’s equity securities, or instruments exercisable for or convertible into equity securities, sold to investors in financings upon the same terms and conditions afforded to such other investors.

10.

STOCKHOLDERS’ EQUITY

 

In December 2018, the Company entered into an Open Market Sales Agreement SM (“2018 Jefferies Sales Agreement”) with Jefferies LLC (“Jefferies”), as sales agent, pursuant to which the Company could offer and sell, from time to time through Jefferies, shares of common stock providing for aggregate sales proceeds of up to $50.0 million.  The Company had no obligation to sell any shares under the 2018 Jefferies Sales Agreement, and could at any time suspend solicitations and offers under the 2018 Jefferies Sales Agreement. From January 1, 2020 through December 31, 2020, the Company sold, at a volume-weighted average price of $4.62 per share, an aggregate of 9.4 million shares of common stock with net proceeds of $40.7 million after deducting commissions related to the 2018 Jefferies Sales Agreement and other offering costs. As of December 31, 2020, the Company had sold the maximum allowable amount and no further sales may be made under the 2018 Jefferies Sales Agreement.

 

12


 

 

In January 2021, the Company sold 7.9 million shares of its common stock in an underwritten public offering at $9.50 per share, for an aggregate gross cash purchase price of $74.7 million or proceeds of $70.0 million after underwriters’ discount, commissions, and other offering expenses.

 

In March 2021, the Company entered into an Open Market Sales Agreement SM (“2021 Jefferies Sales Agreement”) with Jefferies, as sales agent, pursuant to which the Company may offer and sell, from time to time through Jefferies, shares of common stock providing for aggregate sales proceeds of up to $100.0 million.  The Company has no obligation to sell any shares under the 2021 Jefferies Sales Agreement, and could at any time suspend solicitations and offers under the 2021 Jefferies Sales Agreement. No sales had been made pursuant to the 2021 Jefferies Sales Agreement as of March 31, 2021.

 

In May 2021, the Company sold 10.0 million shares of its common stock at a public offering price of $12.50 per share, in an underwritten public offering, for an aggregate gross cash purchase price of $125.0 million or proceeds of $117.5 million after underwriters’ discount and expenses.

 

11.

INCOME TAXES

No provision for federal and state income taxes has been recorded as the Company has incurred losses since inception for tax purposes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

In assessing the realizability of net deferred taxes in accordance with ASC 740, the Company considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. Based on the weight of available evidence, primarily the incurrence of net losses since inception, anticipated net losses in the near future, reversals of existing temporary differences, and expiration of various federal and state attributes, the Company does not consider it more likely than not that some or all of the net deferred taxes will be realized. Accordingly, a 100% valuation allowance has been applied against net deferred taxes.

Under Section 382 of the Internal Revenue Code of 1986, as amended, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses (“NOLs”) and certain other tax assets (tax attributes) to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period (generally three years). Transactions involving the Company’s common stock, within the testing period, even those outside the Company’s control, such as purchases or sales by investors, within the testing period could result in an ownership change. A limitation on the Company’s ability to utilize some or all its NOLs or credits could have a material adverse effect on the Company’s results of operations and cash flows. Prior to December 31, 2017, the Company believes it underwent three ownership changes, however, management believes that sufficient “Built-In-Gains” will offset any Section 382 limitation generated by such ownership changes. Any future ownership changes, including those resulting from the Company’s recent or future financing activities, may cause its existing tax attributes to incur additional limitations.  

All tax years are open for examination by the taxing authorities for both federal and state purposes.

The Company accounts for uncertain tax positions pursuant to ASC 740 which prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. If the tax position meets this threshold, the benefit to be recognized is measured as the tax benefit having the highest likelihood of being realized upon ultimate settlement with the taxing authority. Accordingly, in the provision for income taxes, the Company recognizes interest accrued related to unrecognized tax benefits and penalties; however, management is currently unaware of any uncertain tax positions.

The Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted in the United States on March 27, 2020. CARES includes several income tax provisions such as NOL carryback and carryforward benefits and other tax deduction benefits. As noted previously, the Company’s U.S. deferred tax asset has a full valuation, accordingly these NOL and other benefit provisions have no impact on the Company’s financial statements for the period ended March 31, 2021.

12.

STOCK-BASED COMPENSATION

The Company has two equity incentive plans that provide for the granting of stock options, restricted stock, stock appreciation rights, stock units, and performance cash awards to certain employees, members of the board of directors, and consultants of the Company with a generally prescribed contractual term of ten years.  As of March 31, 2021, there were 3,947,976 shares of common stock available for grant under the Company’s equity incentive plans.  

13


 

In 2019 and 2020 the Company granted performance cash awards. The bonus units vest in four annual installments from the date of grant and entitle the employees to receive a cash payment, on the earlier of (i) four years from the date of grant or (ii) a change of control, equal in value to the amount by which the then value of the Company’s common stock exceeds the base value. As of March 31, 2021, $1.4 million was accrued as compensation expense for vested performance cash awards.

The Company recognizes stock-based compensation expense over the requisite service period. The Company’s share-based awards are accounted for as equity instruments. The amounts included in the consolidated statements of operations relating to stock-based compensation associated with the two equity incentive plans and Helio founders’ shares are as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Research and development expenses

 

$

1,192,867

 

 

$

945,738

 

General and administrative expenses

 

 

1,188,789

 

 

 

1,007,914

 

Total stock-based compensation expense

 

$

2,381,656

 

 

$

1,953,652

 

 

Stock Options

The table below summarizes activity relating to stock options under the incentive plans for the three months ended March 31, 2021:

 

 

 

Number of

Shares

 

 

Weighted

Average

Exercise Price

 

 

Weighted

Average

Contractual

Term

 

 

Aggregate

Intrinsic

Value(a)

 

Outstanding at December 31, 2020

 

 

4,608,311

 

 

$

5.73