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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

 

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

 

For the quarterly period ended 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: 001-38529

 

Verrica Pharmaceuticals Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-3137900

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

44 West Gay Street, Suite 400

West Chester, PA

19380

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (484) 453-3300

10 North High Street, Suite 200

West Chester, Pa 19380

(Former address of principal executive offices)

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value

 

VRCA

 

The Nasdaq Stock Market LLC

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

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

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

 

As of May 3, 2021, the registrant had 27,409,576 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

VERRICA PHARMACEUTICALS INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements (Unaudited)

 

1

 

 

 

 

 

Item 2.

 

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

 

15

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risks

 

23

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

23

 

 

 

 

 

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

23

 

 

 

 

 

Item 1A.

 

Risk Factors

 

23

 

 

 

 

 

Item 2.

 

Recent Sales of Unregistered Securities and Use of Proceeds

 

25

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

25

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

25

 

 

 

 

 

Item 5.

 

Other Information

 

25

 

 

 

 

 

Item 6.

 

Exhibits

 

25

 

 

 

 

 

Signatures

 

27

 

 

 


 

PART I. FINANCIAL INFORMATION

 

Item 1.

Unaudited Condensed Financial Statements

VERRICA PHARMACEUTICALS INC.

CONDENSED BALANCE SHEETS

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

44,101

 

 

$

10,686

 

Marketable securities

 

 

43,585

 

 

 

54,784

 

License receivable

 

 

11,500

 

 

 

 

Prepaid expenses and other assets

 

 

2,860

 

 

 

2,180

 

Total current assets

 

 

102,046

 

 

 

67,650

 

Property and equipment, net

 

 

3,329

 

 

 

3,102

 

Operating lease right-of-use asset

 

 

1,780

 

 

 

1,836

 

Other non-current assets

 

 

947

 

 

 

1,566

 

Total assets

 

$

108,102

 

 

$

74,154

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

878

 

 

$

348

 

Accrued expenses and other current liabilities

 

 

2,881

 

 

 

3,114

 

Operating lease liability

 

 

230

 

 

 

198

 

Deferred revenue

 

 

 

 

 

500

 

Current debt, net

 

 

40,669

 

 

 

35,315

 

Total current liabilities

 

 

44,658

 

 

 

39,475

 

Operating lease liability

 

 

1,634

 

 

 

1,693

 

Total liabilities

 

 

46,292

 

 

 

41,168

 

Commitments and Contingencies (Note 10)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares

   issued and outstanding as of March 31, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value; 200,000,000 authorized;

   27,595,864 shares issued and 27,490,720 shares outstanding as of March 31, 2021 and

   25,546,257 shares issued and 25,441,113 shares outstanding as of December 31, 2020

 

 

3

 

 

 

3

 

Treasury stock, at cost, 105,144 shares as of March 31, 2021 and

   December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

166,626

 

 

 

136,868

 

Accumulated deficit

 

 

(104,822

)

 

 

(103,886

)

Accumulated other comprehensive gain

 

 

3

 

 

 

1

 

Total stockholders’ equity

 

 

61,810

 

 

 

32,986

 

Total liabilities and stockholders’ equity

 

$

108,102

 

 

$

74,154

 

 

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

1


VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(Unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

License revenue

 

$

12,000

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

5,362

 

 

 

4,892

 

General and administrative

 

 

6,578

 

 

 

4,988

 

Total operating expenses

 

 

11,940

 

 

 

9,880

 

Income (loss) from operations

 

 

60

 

 

 

(9,880

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest income

 

 

32

 

 

 

278

 

Interest expense

 

 

(1,028

)

 

 

(220

)

Total other (expense) income

 

 

(996

)

 

 

58

 

Net loss

 

$

(936

)

 

$

(9,822

)

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.04

)

 

$

(0.39

)

Weighted average common shares outstanding, basic and diluted

 

 

25,602,404

 

 

 

24,964,167

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(936

)

 

$

(9,822

)

Other comprehensive gain:

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities

 

 

2

 

 

 

 

Comprehensive loss

 

$

(934

)

 

$

(9,822

)

 

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

 

 

2


 

VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Additional

 

 

Subscription

 

 

Accumulated

 

 

Treasury Stock

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares Issued

 

 

Amount

 

 

Paid-in Capital

 

 

Receivable

 

 

Deficit

 

 

Shares

 

 

Cost

 

 

Gain (Loss)

 

 

Equity

 

January 1, 2021

 

 

25,546,257

 

 

$

3

 

 

$

136,868

 

 

$

 

 

$

(103,886

)

 

 

105,144

 

 

$

 

 

$

1

 

 

$

32,986

 

Issuance of common stock net of issuance costs

 

 

2,033,899

 

 

 

 

 

 

28,115

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28,115

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,403

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,403

 

Exercise of stock options

 

 

15,708

 

 

 

 

 

 

240

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

240

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(936

)

 

 

 

 

 

 

 

 

 

 

 

(936

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

2

 

March 31, 2021

 

 

27,595,864

 

 

$

3

 

 

$

166,626

 

 

$

 

 

$

(104,822

)

 

 

105,144

 

 

$

 

 

$

3

 

 

 

61,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 1, 2020

 

 

25,912,137

 

 

$

3

 

 

$

126,594

 

 

$

(410

)

 

$

(61,192

)

 

 

105,144

 

 

$

 

 

$

20

 

 

$

65,015

 

Repayment of subscription receivable

 

 

 

 

 

 

 

 

 

 

 

410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

410

 

Stock-based compensation

 

 

 

 

 

 

 

 

998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

998

 

Exercise of stock options

 

 

7,500

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,822

)

 

 

 

 

 

 

 

 

 

 

 

(9,822

)

March 31, 2020

 

 

25,919,637

 

 

$

3

 

 

$

127,599

 

 

$

 

 

$

(71,014

)

 

 

105,144

 

 

$

 

 

$

20

 

 

 

56,608

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

3


 

VERRICA PHARMACEUTICALS INC.

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(936

)

 

$

(9,822

)

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

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

1,403

 

 

 

998

 

Accretion of discounts on marketable securities

 

 

(14

)

 

 

(93

)

Depreciation expense

 

 

11

 

 

 

14

 

Non cash interest expense

 

 

393

 

 

 

65

 

Reduction in operating lease right-of-use asset

 

 

56

 

 

66

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

License receivable

 

 

(11,500

)

 

 

 

Prepaid expenses and other assets

 

 

13

 

 

 

701

 

Accounts payable

 

 

525

 

 

 

(82

)

Accrued expenses and other current liabilities

 

 

(209

)

 

 

279

 

Deferred revenue

 

 

(500

)

 

 

 

Operating lease liability

 

 

(27

)

 

 

(32

)

Net cash used in operating activities

 

 

(10,785

)

 

 

(7,906

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Sales and maturities of marketable securities

 

 

20,500

 

 

 

24,355

 

Purchases of marketable securities

 

 

(9,285

)

 

 

(5,382

)

Purchases of property and equipment

 

 

(311

)

 

 

(699

)

Deposits

 

 

(69

)

 

 

 

Net cash provided by investing activities

 

 

10,835

 

 

 

18,274

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

240

 

 

 

7

 

Proceeds from issuance of debt, net

 

 

4,975

 

 

 

34,460

 

Proceeds from issuance of common stock, net of issuance costs

 

 

28,150

 

 

 

 

Repayment of subscription receivable

 

 

 

 

 

410

 

Net cash provided by financing activities

 

 

33,365

 

 

 

34,877

 

Net increase in cash and cash equivalents

 

 

33,415

 

 

 

45,245

 

Cash and cash equivalents at the beginning of the period

 

 

10,686

 

 

 

9,241

 

Cash and cash equivalents at the end of the period

 

$

44,101

 

 

$

54,486

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Property and equipment purchases payable or accrued at period end

 

$

253

 

 

$

333

 

Change in unrealized gain on marketable securities

 

$

2

 

 

$

 

Cash paid for interest

 

$

634

 

 

$

 

Debt discount costs included in accrued expense at period end

 

$

 

 

$

125

 

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

 

 

 

4


 

 

VERRICA PHARMACEUTICALS INC.

Notes to Condensed Financial Statements

(Unaudited)

Note 1—Nature of Business

Verrica Pharmaceuticals Inc. (the “Company”) was formed on July 3, 2013 and is incorporated in the State of Delaware. The Company is a dermatology therapeutics company committed to the development and commercialization of novel treatments that provide meaningful benefit for people living with skin diseases.

 

Liquidity and Capital Resources

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. On March 17, 2021, the Company entered into the Torii Agreement (Note 11), pursuant to which the Company received an upfront payment from Torii of $11.5 million in April 2021. On March 25, 2021, the Company closed a follow-on public offering in which it sold 2,033,899 shares of common stock at a public offering price of $14.75 per share, resulting in net proceeds of $28.1 million after deducting underwriting discounts and commissions and offering expenses. As of March 31, 2021, the Company had an accumulated deficit of $104.8 million.  

In March 2020, the Company entered into a Mezzanine Loan Agreement (see Note 7) pursuant to which the Company borrowed (i) $35.0 million in March 2020 and (ii) $5.0 million on March 1, 2021.  As discussed in Note 7, the Mezzanine Loan Agreement was amended on October 26, 2020 and now includes a minimum liquidity covenant.  If the Company is not in compliance with the minimum liquidity ratio covenant, the outstanding debt and any related final payment fees, prepayment fees, and accrued interest become due upon demand.  The Company believes that, without additional financing, it is probable that it will not be in compliance with the minimum liquidity ratio covenant at some point in the next twelve months.  Even if the Company is not in compliance with the minimum liquidity covenant and the debt becomes due, management believes the Company currently has sufficient funds to meet its operational requirements for at least the next twelve months from the issuance of these financial statements.

 

Note 2—Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) as determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. They may not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on March 17, 2021. The results of operations for any interim periods are not necessarily indicative of the results that may be expected for the entire fiscal year or any other interim period.

The Company has been actively monitoring the novel coronavirus (“COVID-19”) pandemic and its impact globally. Management believes the financial results for the year ended December 31, 2020 were not significantly impacted by COVID-19. In addition, management believes the remote working arrangements, travel restrictions and any other regulations imposed by various governmental jurisdictions have had limited impact on the Company’s ability to maintain internal operations during the year. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19. As a direct result of COVID-19, the Company initially decided to delay the initiation of its previously planned Phase 3 clinical trials to evaluate VP-102 in subjects with common warts as well as its previously planned Phase 2 clinical trial to evaluate VP-103 in subjects with plantar warts. Based on feedback from the FDA regarding a potential Phase 3 trial protocol, we are currently evaluating conducting an additional Phase 2 clinical trial of VP-102 for the treatment of common warts.

Use of Estimates

The preparation of financial statements in conformity 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 financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the

5


 

basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Significant Accounting Policies

Revenue

In accordance with FASB’s ASC 606, Revenue from Contracts with Customers (“ASC 606”), the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, it performs the following five steps: 

 

(i)

identify the contract(s) with a customer;

 

(ii)

identify the performance obligations in the contract;

 

(iii)

determine the transaction price; 

 

(iv)

allocate the transaction price to the performance obligations in the contract; and

 

(v)

recognize revenue when (or as) the entity satisfies a performance obligation.

The Company applies the five-step model to contracts when it determines that it is probable it will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

License Revenues

The Company’s revenues have been solely generated through licensing arrangements. The terms of the agreement typically include payments to the Company of one or more of the following: nonrefundable, up-front license fees: regulatory and commercial milestone payments; payments for manufacturing supply services; materials shipped to support development; and royalties on net sales of licensed products. 

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: 

 

(i)

identification of the promised goods or services in the contract;

 

(ii)

determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;

 

(iii)

measurement of the transaction price, including the constraint on variable consideration;

 

(iv)

allocation of the transaction price to the performance obligations; and

 

(v)

recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company also assesses whether there is an option in a contract to acquire additional goods or services. An option gives rise to a performance obligation only if the option provides a material right to the customer that it would not receive without entering into that contract. Factors that the Company considers in evaluating whether an option represents a material right include, but are not limited to: (i) the overall objective of the arrangement, (ii) the benefit the collaborator might obtain from the arrangement without exercising the option, (iii) the cost to exercise the option (e.g. priced at a significant and incremental discount) and (iv) the likelihood that the option will be exercised. With respect to options determined to be performance obligations, the Company recognizes revenue when those future goods or services are transferred or when the options expire.

The Company’s revenue arrangements may include the following:

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring

6


 

progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of an agreement that includes regulatory or commercial milestone payments, the Company evaluates whether each milestone is considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At each reporting period, the Company assesses the probability of achievement of each milestone under its current agreements.

Royalties: If the Company is entitled to receive sales-based royalties from its collaborator, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, provided the reported sales are reliably measurable, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Manufacturing Supply and Research Services: Arrangements that include a promise for future supply of drug substance or drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. The Company assesses if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations.

The Company receives payments from its licensees based on schedules established in each contract. Upfront payments are recorded as deferred revenue upon receipt, and may require deferral of revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less.  See Note 11 for a full discussion of the Company’s license revenue.

There have been no material changes in the Company’s other significant accounting policies to those previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Net Loss per Share

Net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share excludes the potential impact of common stock options and unvested shares of restricted stock because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

 

The table below provides potential shares outstanding that were not included in the computation of diluted net loss per common share, as the inclusion of these securities would have been anti-dilutive:

 

 

 

As of March 31,

 

 

 

2021

 

 

2020

 

Shares issuable upon exercise of stock options

 

 

3,571,708

 

 

 

2,563,674

 

Non-vested shares under restricted stock grants

 

 

475,000

 

 

 

1,148,859

 

 

Note 3—Investments in Marketable Securities

 

Investments in marketable securities consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

7


 

 

 

 

March 31, 2021

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Gross Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

U.S. Treasury securities

 

$

9,305

 

 

$

3

 

 

$

 

 

$

9,308

 

Commercial paper

 

 

34,277

 

 

 

 

 

 

 

 

 

34,277

 

Total marketable securities

 

$

43,582

 

 

$

3

 

 

$

 

 

$

43,585

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

Amortized

 

 

Gross Unrealized

 

 

Gross Unrealized

 

 

Fair

 

 

 

Cost

 

 

Gains

 

 

Losses

 

 

Value

 

U.S. Treasury securities

 

$

11,607

 

 

$

2

 

 

$

 

 

$

11,609

 

Commercial paper

 

 

41,674

 

 

 

 

 

 

(1

)

 

 

41,673

 

Asset-backed securities

 

 

1,502

 

 

 

 

 

 

 

 

 

1,502

 

Total marketable securities

 

$

54,783

 

 

$

2

 

 

$

(1

)

 

$

54,784

 

 

Unrealized gains and losses on marketable securities are recorded as a separate component of accumulated other comprehensive gain included in stockholders’ equity. Realized gains (losses) are included in interest income (expense) in the statement of operations and comprehensive loss on a specific identification basis. There were no marketable securities with a maturity of greater than one year for either period presented. To date, the Company has not recorded any impairment charges on marketable securities related to other-than-temporary declines in market value.

 

Accretion of bond discount on marketable securities and interest income on marketable securities is recorded as interest income on the statement of operations and comprehensive loss.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

 

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

 

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that 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.

 

The following tables presents fair value of the Company’s marketable securities (in thousands):

 

 

 

Fair Value Measurement as of March 31, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

9,308

 

 

$

 

 

$

 

 

$

9,308

 

Commercial paper

 

 

 

 

 

34,277

 

 

 

 

 

 

34,277

 

Total assets

 

$

9,308

 

 

$

34,277

 

 

$

 

 

$

43,585

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement as of December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

11,609

 

 

$

 

 

$

 

 

$

11,609

 

Commercial paper

 

 

 

 

 

41,673

 

 

 

 

 

 

41,673