UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________________________________________________________________
FORM 10-Q
______________________________________________________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
FOR THE QUARTERLY PERIOD ENDED June 30, 2020
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 001-38501
______________________________________________________________________________
(Exact name of registrant as specified in its charter)
______________________________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) | ||||
( (Registrant’s telephone number, including area code) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
______________________________________________________________________________
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
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | ||||||||
| ☒ | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of August 3, 2020, the registrant had 36,446,872 shares of common stock, $0.001 par value per share, outstanding.
1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
In this Quarterly Report on Form 10-Q, or Quarterly Report, we use the following defined terms:
"product candidate" to refer to one of our investigational product candidates.
"development platform" to refer to our proprietary human-focused development platform.
"dose" to refer to the exposure amount of a product candidate in Clinical Studies or planned Clinical Trials.
"non-drug" to refer to a non-therapeutic use of a product candidate. Such use may be as a food product or dietary supplement.
"Clinical Trial" to refer to a human clinical study of a drug product candidate subject to the requirements for an effective Investigational New Drug application, or an IND.
"Clinical Study" to refer to Institutional Review Board-Approved, or IRB-Approved, clinical studies conducted in humans with our product candidates under U.S. Food and Drug Administration, or the FDA, regulations and guidance supporting research with food outside of an IND (prior to any decision to develop a product candidate as a drug product candidate under an IND or a non-drug product candidate). In these food studies, based on our understanding of FDA regulations and guidance, we evaluate in humans, including individuals with disease, a product candidate for safety, tolerability and effects on the normal structures and functions of the body. These studies are not designed or intended to evaluate a product candidate’s ability to diagnose, cure, mitigate, treat or prevent a disease as these would be evaluated in Clinical Trials if we decide to develop a product candidate as a drug or therapeutic.
This Quarterly Report contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
•the benefits of our product candidates to health and/or disease and their commercial potential;
•the success, cost and timing of our product development activities, including statements regarding the timing of initiation and completion of preclinical studies, Clinical Studies or Clinical Trials and related preparatory work, and the timing of the availability of the results of these preclinical studies, Clinical Studies and Clinical Trials, including our planned IND submissions and Clinical Trials for AXA1125 and AXA1665;
•our ability to obtain and maintain regulatory approval or find alternate regulatory commercialization pathways from the FDA, the European Medicines Agency, or the EMA, and other comparable regulatory authorities for our product candidates, and any related restrictions, limitations or warnings in the label of an approved product candidate;
•the financing needs and sufficiency of our funds to fund company operations and business plans through certain periods of time, including funding necessary to complete further development of our product candidates, and, if successful, commercialization of these candidates as drug or non-drug products;
•our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates, development platform and the type of such protection;
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•our ability and the potential to successfully manufacture our product candidates for preclinical studies, Clinical Studies and Clinical Trials and for commercial use, if approved;
•the size and growth potential of the markets for our product candidates and our ability to serve those markets, either alone or in combination with others;
•the rate and degree of market acceptance of our product candidates, if approved;
•regulatory developments in the United States and foreign countries;
•our ability to enter into a collaboration, partnership, or other agreement with a third party on reasonable terms or at all to develop one or more product candidates or commercialize any of our product candidates, if approved;
•our ability to secure sufficient manufacturing and supply chain capacity;
•the success of competing products or therapies that are or may become available;
•our ability to attract and retain key scientific, management or other necessary personnel;
•our estimates regarding expenses for both product development and as a public company, future revenue, capital requirements and needs for additional financing;
•the potential for faults in our internal controls;
•the effect of the COVID-19 pandemic on any of the foregoing; and
•other risks and uncertainties, including those discussed in Part II, Item 1A, Risk Factors in this Quarterly Report.
Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and with respect to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, Risk Factors and elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.
We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data, and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.
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AXCELLA HEALTH INC.
FORM 10-Q
TABLE OF CONTENTS
| Page | ||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Loss | ||||||||
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PART I - FINANCIAL INFORMATION
Item I. Condensed Consolidated Financial Statements (Unaudited)
AXCELLA HEALTH INC.
Condensed Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data)
| As of | |||||||||||
| June 30, 2020 | December 31, 2019 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Prepaid expenses and other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Security deposits | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and Stockholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses and other current liabilities | |||||||||||
| Current portion of long term debt | |||||||||||
| Total current liabilities | |||||||||||
| Long term debt, net of current portion and discount | |||||||||||
| Other liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders' equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
Treasury stock, | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Total liabilities and stockholders' equity | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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AXCELLA HEALTH INC.
Condensed Consolidated Statements of Operations
and Comprehensive Loss (Unaudited)
(in thousands, except share and per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | $ | $ | $ | $ | |||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Change in fair value of preferred stock warrant liability | ( | ||||||||||||||||||||||
| Interest income (expense), net | ( | ( | ( | ( | |||||||||||||||||||
| Total other income (expense), net | ( | ( | ( | ( | |||||||||||||||||||
| Net loss and comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net loss per share, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted average common shares outstanding, basic and diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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AXCELLA HEALTH INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Six Months Ended June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustment to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation expense | |||||||||||
| Change in fair value of preferred stock warrant liability | |||||||||||
| Non-cash interest expense | |||||||||||
| Changes in current assets and liabilities: | |||||||||||
| Prepaid expenses and other assets | ( | ( | |||||||||
| Accounts payable | ( | ||||||||||
| Accrued expenses and other current liabilities | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common stock, net of issuance costs | |||||||||||
| Payment of success fee obligation | ( | ||||||||||
| Proceeds from exercise of common stock options | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Net increase in cash and cash equivalents | |||||||||||
| Cash and cash equivalents, beginning of period | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
| Reclassification of warrants to additional paid-in capital | $ | $ | |||||||||
| Conversion of preferred stock to common stock upon closing of the initial public offering | $ | $ | |||||||||
| Public offering costs incurred but unpaid at period end | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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AXCELLA HEALTH INC.
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited)
(in thousands, except share data)
| Redeemable convertible preferred stock | Common stock | Treasury stock | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Par Value | Additional paid-in capital | Shares | Amount | Accumulated deficit | stockholders’ equity (deficit) | ||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - December 31, 2018 | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion of preferred stock to redemption value | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - March 31, 2019 | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock to common stock upon closing of the initial public offering | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of issuance costs of $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Reclassification of warrants to additional paid-in capital | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrant | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - BALANCE - June 30, 2019 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - December 31, 2019 | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - March 31, 2020 | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock options | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of issuance costs of $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | $ | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE - June 30, 2020 | $ | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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AXCELLA HEALTH INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. NATURE OF BUSINESS
Axcella Health Inc. and subsidiaries ("Axcella," the "Company" or "we") is a biotechnology company that was incorporated in Delaware on August 27, 2008 and has a principal place of business in Cambridge, Massachusetts. The Company is focused on leveraging endogenous metabolic modulators, or EMMs, to pioneer a new approach for treating complex diseases and improving health. The Company's product candidates are comprised of multiple EMMs that are engineered in distinct combinations and ratios with the goal of simultaneously impacting multiple biological pathways.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, successful development of technology, obtaining additional funding, protection of proprietary technology, compliance with government regulations, risks of failure of preclinical studies, Clinical Studies and Clinical Trials, the need to obtain marketing approval for its product candidates, if required, and successfully market products, fluctuations in operating results, economic pressure impacting therapeutic pricing, dependence on key personnel, risks associated with changes in technologies, development by competitors of technological innovations and the ability to scale manufacturing to large scale production. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and any necessary regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has historically funded its operations with proceeds from sales of preferred and common stock and borrowings under a loan and security agreement. As of June 30, 2020, the Company had an accumulated deficit of $245.0 million. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash and cash equivalents at June 30, 2020 will be sufficient to fund its operations for at least the next twelve months from the date of the issuance of these interim condensed consolidated financial statements.
The COVID-19 pandemic has spread globally, including to the United States and European countries, which has resulted in significant governmental measures being implemented to control the spread of the virus, including quarantines, travel restrictions, business shutdowns and clinical site closures to non-essential care and clinical trials. Although we cannot presently predict the scope and severity of COVID-19, these developments and measures could materially and adversely affect our business, our results of operations and financial condition, particularly if the COVID-19 pandemic adversely impacts our ability to conduct and complete our ongoing Clinical Studies and planned Clinical Trials in a timely manner or at all. Additionally, potential shutdowns of government agencies such as the Securities and Exchange Commission (the “SEC”) or the U.S. Food and Drug Administration (the "FDA") may limit our ability to raise capital and negatively impact our product development timelines.
The Company considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts on the Company’s results of operations and financial position as of and for the three and six months ended June 30, 2020. The full extent of the future impacts of COVID-19 on our operations is uncertain. A prolonged pandemic could have a material adverse impact on financial results and business operations of the Company, including the timing and ability of the Company to complete our ongoing Clinical Studies and planned Clinical Trials and other efforts required to advance the development of our EMMs.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The Company's condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP").
Unaudited Interim Financial Information
The Company's unaudited condensed consolidated financial statements have been prepared in accordance with GAAP and pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2019 and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 23, 2020 (the "2019 Annual Report"). The results for any interim period are not necessarily indicative of results for any future period.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of June 30, 2020, the results of its operations for the three and six months ended June 30, 2020 and 2019, its statement of stockholders’ equity for the six months ended June 30, 2020 and 2019 and its cash flows for the six months ended June 30, 2020 and 2019. Such adjustments are of a normal and recurring nature. The results for the three and six months ended June 30, 2020 are not necessarily indicative of the results for the year ending December 31, 2020, or for any future period.
The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the unaudited condensed consolidated financial statements. As of June 30, 2020, there have been no material changes in the Company's significant accounting policies from those that were disclosed in the 2019 Annual Report.
Use of Estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. The Company bases its estimates on historical experience, known trends and other market-specific or relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.
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3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
| June 30, 2020 | December 31, 2019 | ||||||||||
| Laboratory equipment | $ | $ | |||||||||
| Leasehold improvements | |||||||||||
| Office and computer equipment | |||||||||||
| Furniture and fixtures | |||||||||||
| Property and equipment | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense for the six months ended June 30, 2020 and 2019 was $0.3 million and $0.4 million, respectively.
4. FAIR VALUE MEASUREMENTS
The following table sets forth by level, within the fair value hierarchy, financial assets measured at fair value on a recurring basis (in thousands):
| Fair value measurements at June 30, 2020 using: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
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| Fair value measurements at December 31, 2019 using: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | |||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Cash equivalents are comprised of funds held in an exchange traded money market fund and the fair value of the cash equivalents is determined based upon quoted market price for that fund.
The carrying value of accounts payable and accrued expenses that are reported on the consolidated balance sheets approximate their fair value due to the short-term nature of these assets and liabilities. The carrying value of the long term debt approximates fair value as evidenced by the 2018 amendment to the Company's debt facility.
5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other liabilities consisted of the following (in thousands):
| | June 30, 2020 | December 31, 2019 | |||||||||
| Accrued employee compensation and benefits | $ | $ | |||||||||
| Accrued external research and development expenses | |||||||||||
| Accrued professional fees | |||||||||||
| Other | |||||||||||
| Total accrued expenses and other current liabilities | $ | $ | |||||||||
6. DEBT FINANCING
Long term debt consisted of the following (in thousands):
| | June 30, 2020 | December 31, 2019 | |||||||||
| Principal amount of long term debt | $ | $ | |||||||||
| Debt discount | ( | ( | |||||||||
| Deferred financing fees | ( | ( | |||||||||
| Current portion of long term debt | ( | ||||||||||
| Long term debt, net of current portion and discount | $ | $ | |||||||||
In January 2018, the Company entered into a secured debt facility (the "2018 Facility"). The 2018 Facility has an interest rate equal to the LIBOR plus 8.50 % per annum (8.67 % as of June 30, 2020) payable monthly. The Company granted the lender a first priority security interest in all assets of the Company, excluding intellectual property and granted a negative pledge on such intellectual property.
In October 2018, the Company amended the 2018 Facility (the "Amended 2018 Facility") to extend the interest only period through July 2020 or January 2021 and the Maturity Date to July 2022 or January 2023 if certain conditions are met. The interest rate was not changed through the amendment. Upon completion of the IPO in May 2019, the interest only period was extended through January 2021 and the Maturity Date was extended to January 2023. Monthly principal payments of $1.1 million are to commence February 2021 for 24 months.
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For the six months ended June 30, 2020 and 2019, interest expense arising from the amortization of the debt discount and deferred financing fees was $0.2 million and $0.3 million, respectively.
Terminal Interest Fee
The Company's debt facility includes a terminal interest fee obligation totaling $1.4 million, which is due with the final principal payment of the loan and has been modified from time to time as the facilities were amended. The Company is accruing the terminal fee obligation over the term of the facility. The carrying value of the terminal interest fee was $0.9
The scheduled principal maturity of the long term debt as of June 30, 2020 is as follows (in thousands):
| Year Ending December 31, | |||||
| 2021 | $ | ||||
| 2022 | |||||
| 2023 | |||||
| $ | |||||
7. STOCKHOLDERS' EQUITY
Redeemable Convertible Preferred Stock
Upon closing of the IPO, all outstanding redeemable convertible preferred stock converted into an aggregate of 14,641,997 shares of common stock. The holders of the Company’s preferred stock had certain voting, dividend, and redemption rights, as well as liquidation preferences and conversion privileges. All rights, preferences, and privileges associated with the preferred stock were terminated at the time of the Company’s IPO in conjunction with the conversion of all outstanding shares of preferred stock into shares of common stock.
Initial Public Offering
In May 2019, the Company issued 3,571,428 common shares at a public offering price of $20.00 per share for net proceeds of $64.5 million, after deducting underwriting discounts and commissions and other offering expenses.
2020 Public Offering
On May 18, 2020 the Company completed a follow-on public offering pursuant to which the Company issued an aggregate of 12,650,000 shares of its common stock, which included the full exercise of the underwriters’ option to purchase additional shares, at a public offering price of $4.75 per share, before deducting underwriting discounts and commissions. The Company received aggregate net proceeds of approximately $55.9 million after deducting the underwriting discounts and commissions and other offering expenses.
At-the-Market Offering
On June 5, 2020, the Company entered into a sales agreement with SVB Leerink LLC (“SVB Leerink”) pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $35 million from time to time through SVB Leerink, acting as its agent (the “ATM Offering”). During the three months ended June 30, 2020, the Company sold an aggregate of 405,264 shares of its common stock under the ATM Offering for net cash proceeds of $2.1 million, after deducting commissions and expenses of $0.2 million. Subsequent to June 30, 2020, the Company sold an additional 199,626 shares of its common stock under the ATM Offering for net cash proceeds of $1.1 million.
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2019 Stock Option and Incentive Plan
The 2019 Stock Option and Incentive Plan (the "2019 Plan") was approved by our board of directors on April 29, 2019 and became effective upon completion of the IPO. The 2019 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock units, restricted stock awards, unrestricted stock awards and cash-based awards to the Company's officers, employees, directors and consultants. The number of shares initially reserved for issuance under the 2019 Plan is 905,000 , which shall be cumulatively increased on January 1, 2020 and each January 1 thereafter by 4 % of the number of shares of the Company's common stock outstanding on the immediately preceding December 31, or such lesser number of shares determined by the Company's board of directors or compensation committee of the board of directors. On January 1, 2020, the number of shares available for issuance under the 2019 Plan was automatically increased by 927,553 shares.
The number of shares available for future grant under the 2019 Plan was 686,518 as of June 30, 2020.
2019 Employee Stock Purchase Plan
The 2019 Employee Stock Purchase Plan (the "2019 ESPP") was approved by the Company's board of directors on April 29, 2019 and became effective upon the IPO. A total of 237,181 shares of common stock were initially reserved for issuance under this plan, which shall be cumulatively increased on January 1, 2020 and each January 1 thereafter by 1 % of the number of shares of the Company's common stock outstanding on the immediately preceding December 31, or such lesser number of shares determined by the Company's board of directors or compensation committee of the board of directors. On January 1, 2020, the number of shares available to be issued under the ESPP automatically increased by 231,888 shares.
As of June 30, 2020, the total number of shares that may be issued under the ESPP was 469,069 shares. As of June 30, 2020, no shares have been issued under the ESPP.
The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. As there was no public market for its common stock prior to May 9, 2019, which was the first day of trading, and as the trading history of the Company’s common stock was limited through June 30, 2020, the Company determined the volatility for awards granted based on an analysis of reported data for a group of guideline companies that issued options with substantially similar terms. The expected volatility has been determined using a weighted-average of the historical volatility measures of this group of guideline companies. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The Company has not paid, and does not anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to be zero.
The assumptions that the Company used to determine the grant-date fair value of stock options granted were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Risk-free interest rate | % | % | |||||||||||||||||||||
| Expected option life (in years) | |||||||||||||||||||||||
| Expected dividend yield | % | % | % | % | |||||||||||||||||||
| Expected volatility | % | % | % | % | |||||||||||||||||||
14
Stock Option Activity
The following table summarizes the Company’s stock option activity for the six months ended June 30, 2020:
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (in Years) | Intrinsic Value (in thousands) | ||||||||||||||||||||
| Outstanding as of January 1, 2020 | $ | ||||||||||||||||||||||
| Granted | |||||||||||||||||||||||
| Exercised | ( | ||||||||||||||||||||||
| Canceled | ( | ||||||||||||||||||||||
| Outstanding as of June 30, 2020 | $ | $ | |||||||||||||||||||||
| Exercisable as of June 30, 2020 | $ | $ | |||||||||||||||||||||
| Vested or expected to vest as of June 30, 2020 | $ | $ | |||||||||||||||||||||
The intrinsic value of options exercised was $0
The weighted-average grant date fair value of the options granted during the six months ended June 30, 2020 and 2019, was $2.69 and $7.03 per share, respectively.
Restricted Stock Units
The fair values of restricted stock units are based on the market value of our stock on the date of grant. The following table summarizes the Company's restricted stock unit activity for the six months ended June 30, 2020:
| Number of Shares | Weighted Average Grant Date Fair Value per Share | ||||||||||
| Outstanding as of January 1, 2020 | $ | ||||||||||
| Granted | |||||||||||
| Vested | |||||||||||
| Forfeited | ( | ||||||||||
| Outstanding as of June 30, 2020 | $ | ||||||||||
15
Stock-based compensation expense
The following table summarizes stock-based compensation expense during the three and six months ended June 30, 2020 and 2019 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
| Stock-based compensation expense by type of award: | |||||||||||||||||||||||
| Time-based vesting stock options | $ | $ | $ | $ | |||||||||||||||||||
| Performance vesting stock options | |||||||||||||||||||||||
| Restricted stock units | |||||||||||||||||||||||
| Employee stock purchase plan | |||||||||||||||||||||||
| Total stock compensation expense | $ | $ | $ | $ | |||||||||||||||||||
Stock-based compensation related to stock options and unvested stock awards are classified as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Research and development | $ | $ | $ | $ | |||||||||||||||||||
General and administrative | |||||||||||||||||||||||
| Total stock compensation expense | $ | $ | $ | $ | |||||||||||||||||||
8. NET LOSS PER SHARE
Net Loss Per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Numerator: | |||||||||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Accretion of redeemable convertible preferred stock | ( | ||||||||||||||||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Denominator: | |||||||||||||||||||||||
Weighted average common shares outstanding, basic and diluted | |||||||||||||||||||||||
Net loss per share, basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
16
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
| Six Months Ended June 30, | |||||||||||
| 2020 | 2019 | ||||||||||
Options to purchase common stock | |||||||||||
Unvested restricted stock units | |||||||||||
9. RELATED-PARTY TRANSACTIONS
10.