FORTE BIOSCIENCES, INC., 10-K filed on 2/27/2020
Annual Report
v3.19.3.a.u2
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Feb. 21, 2020
Jun. 30, 2019
Cover [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Interactive Data Current Yes    
Trading Symbol TOCA    
Entity Current Reporting Status Yes    
Entity Registrant Name Tocagen Inc    
Entity Central Index Key 0001419041    
Current Fiscal Year End Date --12-31    
Entity Filer Category Accelerated Filer    
Entity Shell Company false    
Entity Small Business true    
Entity Emerging Growth Company true    
Entity Ex Transition Period true    
Title of 12(b) Security Common Stock, par value $0.001 per share    
Security Exchange Name NASDAQ    
Entity File Number 001-38052    
Entity Incorporation, State or Country Code DE    
Entity Tax Identification Number 26-1243872    
Entity Address, Address Line One 4242 Campus Point Court    
Entity Address, Address Line Two Suite 600    
Entity Address, City or Town San Diego    
Entity Address, State or Province CA    
Entity Address, Postal Zip Code 92121    
City Area Code 858    
Local Phone Number 412-8400    
Document Annual Report true    
Document Transition Report false    
Entity Common Stock, Shares Outstanding   23,899,261  
Entity Public Float     $ 223
Documents Incorporated by Reference

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission, or SEC, subsequent to the date hereof pursuant to Regulation 14A in connection with the registrant’s 2019 Annual Meeting of Stockholders, are incorporated by reference into Part III of this Annual Report on Form 10-K. Such proxy statement will be filed with the SEC not later than 120 days after the conclusion of the registrant’s fiscal year ended December 31, 2019.

   
v3.19.3.a.u2
Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 8,986 $ 40,813
Marketable securities 12,835 55,273
Prepaid expenses and other current assets 1,135 1,662
Total current assets 22,956 97,748
Property and equipment, net 1,689 3,973
Operating lease right-of-use asset 3,515  
Other assets   1,360
Total assets 28,160 103,081
Current liabilities:    
Accounts payable 3,218 3,404
Accrued liabilities 5,242 13,094
Notes payable, current portion 4,744  
Deferred license revenue   36
Total current liabilities 13,204 16,534
Operating lease liability, net of current portion 4,027  
Notes payable, net of current portion   26,201
Deferred rent, net of current portion   2,201
Other long term liabilities 81  
Total liabilities 17,312 44,936
Commitments and contingencies (Note 12)
Stockholders’ equity    
Common stock, $0.001 par value; 200,000,000 shares authorized at December 31, 2019 and 2018, respectively; 23,899,261 and 23,000,151 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively 23 23
Additional paid-in capital 290,215 274,029
Accumulated deficit (279,400) (215,884)
Accumulated other comprehensive income (loss) 10 (23)
Total stockholders’ equity 10,848 58,145
Total liabilities and stockholders’ equity $ 28,160 $ 103,081
v3.19.3.a.u2
Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Statement Of Financial Position [Abstract]    
Common stock, par value $ 0.001 $ 0.001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 23,899,261 23,000,151
Common stock, shares outstanding 23,899,261 23,000,151
v3.19.3.a.u2
Statements of Operations and Comprehensive Loss - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Income Statement [Abstract]      
License revenue $ 36 $ 18,036 $ 41
Type of Revenue [Extensible List] us-gaap:LicenseMember us-gaap:LicenseMember us-gaap:LicenseMember
Operating expenses:      
Research and development $ 45,299 $ 51,080 $ 29,113
General and administrative 16,248 12,809 8,556
Total operating expenses 61,547 63,889 37,669
Loss from operations (61,511) (45,853) (37,628)
Other income (expense), net:      
Interest income 1,564 1,534 595
Interest expense (3,820) (2,930) (1,932)
Loss on disposal of assets (1,187) (7)  
Gain on lease modification 1,439    
Change in fair value of preferred stock warrants     37
Loss before income taxes (63,515) (47,256) (38,928)
Income tax expense 1 1,699 1
Net loss (63,516) (48,955) (38,929)
Other comprehensive income (loss):      
Net unrealized gain (loss) on investments 33 11 (34)
Comprehensive loss $ (63,483) $ (48,944) $ (38,963)
Net loss per common share, basic and diluted $ (2.69) $ (2.44) $ (2.66)
Weighted-average number of common shares outstanding, basic and diluted 23,630,422 20,059,541 14,607,609
v3.19.3.a.u2
Statements of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) - USD ($)
$ in Thousands
Total
Convertible Preferred Stock
Common Stock
Additional Paid-In Capital
Accumulated Deficit
Accumulated Other Comprehensive Income (Loss)
Beginning balance at Dec. 31, 2016 $ (124,417)   $ 2 $ 3,581 $ (128,000)  
Beginning balance, shares at Dec. 31, 2016   46,163,605        
Beginning balance at Dec. 31, 2016   $ 131,413        
Beginning balance, shares at Dec. 31, 2016     2,202,517      
Exercise of stock options 81     81    
Exercise of stock options, shares     55,669      
Issuance of common stock pursuant to employee stock purchase plan 426     426    
Issuance of common stock pursuant to employee stock purchase plan, shares     50,121      
Stock-based compensation 4,451     4,451    
Fractional shares adjustment upon reverse stock split, shares     2      
Preferred stock converted into shares of common stock 131,410   $ 7 131,403    
Preferred stock converted into shares of common stock, shares   (46,163,605)        
Preferred stock converted into shares of common stock   $ (131,413)        
Preferred stock converted into shares of common stock, shares     6,690,066      
Initial public offering of common shares,net of issuance costs/offering costs 86,948   $ 10 86,938    
Initial public offering of common shares,net of issuance costs/offering costs, shares     9,775,000      
Convertible promissory notes converted into shares of common stock, net of issuance costs 11,057   $ 1 11,056    
Convertible promissory notes converted into shares of common stock, net of issuance costs, shares     1,109,176      
Preferred stock warrant liabilities converted into warrants to purchase shares of common stock 89     89    
Other comprehensive loss (34)         $ (34)
Net Loss (38,929)       (38,929)  
Ending balance at Dec. 31, 2017 71,082   $ 20 238,025 (166,929) (34)
Ending balance, shares at Dec. 31, 2017     19,882,551      
Exercise of stock options 67     67    
Exercise of stock options, shares     45,073      
Issuance of common stock pursuant to employee stock purchase plan 594     594    
Issuance of common stock pursuant to employee stock purchase plan, shares     72,527      
Stock-based compensation 6,870     6,870    
Initial public offering of common shares,net of issuance costs/offering costs 27,997   $ 3 27,994    
Initial public offering of common shares,net of issuance costs/offering costs, shares     3,000,000      
Issuance of common stock warrants 479     479    
Other comprehensive loss 11         11
Net Loss (48,955)       (48,955)  
Ending balance at Dec. 31, 2018 58,145   $ 23 274,029 (215,884) (23)
Ending balance, shares at Dec. 31, 2018     23,000,151      
Exercise of stock options 252     252    
Exercise of stock options, shares     69,697      
Issuance of common stock pursuant to employee stock purchase plan $ 299     299    
Issuance of common stock pursuant to employee stock purchase plan, shares 191,972   69,324      
Stock-based compensation $ 8,060     8,060    
Initial public offering of common shares,net of issuance costs/offering costs 7,575     7,575    
Initial public offering of common shares,net of issuance costs/offering costs, shares     760,089      
Other comprehensive loss 33         33
Net Loss (63,516)       (63,516)  
Ending balance at Dec. 31, 2019 $ 10,848   $ 23 $ 290,215 $ (279,400) $ 10
Ending balance, shares at Dec. 31, 2019     23,899,261      
v3.19.3.a.u2
Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
OPERATING ACTIVITIES      
Net loss $ (63,516) $ (48,955) $ (38,929)
Adjustments to reconcile net loss to net cash used in operating activities:      
Stock-based compensation 8,060 6,870 4,451
Depreciation 843 625 292
Noncash interest expense 1,698 1,161 590
Change in fair value of preferred stock warrants     (37)
Accretion of discount on investments, net 161 (248) (19)
Loss on disposal of property and equipment 1,212    
Gain on lease modification (1,439)    
Changes in operating assets and liabilities:      
Prepaid expenses and other current assets 2,502 (208) (679)
Accounts payable (58) 1,260 304
Accrued liabilities (8,911) 4,127 2,946
Deferred license revenue (36) (36) (41)
Other 246 935 (11)
Net cash used in operating activities (59,238) (34,469) (31,133)
INVESTING ACTIVITIES      
Proceeds from the sale/maturity of marketable securities 93,473 68,524 43,725
Purchases of marketable securities (51,163) (70,746) (70,797)
Purchases of property and equipment (428) (1,968) (655)
Proceeds from sale of property and equipment 437   20
Net cash provided by (used in) investing activities 42,319 (4,190) (27,707)
FINANCING ACTIVITIES      
Proceeds from issuance of notes payable, net of issuance costs   26,325  
Cash paid on extinguishment of debt   (8,631)  
Principal payments on notes payable (23,155) (3,000) (7,200)
Proceeds from issuance of common stock 551 661 507
Proceeds from offering of common stock, net of issuance costs 7,696 28,200 88,618
Proceeds from issuance of convertible promissory notes, net of issuance costs     7,338
Cash paid for deferred equity issuance costs   (16)  
Net cash (used in) provided by financing activities (14,908) 43,539 89,263
Net increase (decrease) in cash and cash equivalents (31,827) 4,880 30,423
Cash and cash equivalents, beginning of period 40,813 35,933 5,510
Cash and cash equivalents, end of period 8,986 40,813 35,933
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION      
Cash paid for interest $ 2,290 1,522 1,210
Allowance for tenant improvements included in deferred rent   1,243  
Property and equipment purchases included in accounts payable and accrued liabilities   178 111
Fair value of common stock warrants issued in connection with notes payable   479  
Convertible preferred stock converted into shares of common stock     131,410
Convertible promissory notes principal and accrued interest converted into shares of common stock     11,057
Preferred stock warrant liabilities converted into warrants to purchase shares of common stock     89
Deferred equity issuance costs paid in previous periods reclassified to equity on effective date of initial public offering     1,574
Deferred equity issuance costs in accounts payable and accrued liabilities   $ 310 $ 96
v3.19.3.a.u2
Organization and Basis of Presentation
12 Months Ended
Dec. 31, 2019
Organization Consolidation And Presentation Of Financial Statements [Abstract]  
Organization and Basis of Presentation

1. Organization and Basis of Presentation

Tocagen Inc. (Tocagen or the Company) is a clinical-stage, cancer-selective gene therapy company focused on developing first-in-class, broadly-applicable product candidates designed to activate a patient’s immune system against their own cancer. The Company’s cancer-selective gene therapy platform is built on retroviral replicating vectors which are designed to selectively deliver therapeutic genes into the DNA of cancer cells. Tocagen’s gene therapy approach is designed to fight cancer through immunotherapeutic mechanisms of action without the autoimmune toxicities commonly experienced with other immunotherapies. The Company views its operations and manages its business in one operating segment.

From inception through December 31, 2019, the Company has devoted substantially all of its efforts to developing its gene therapy platform and its lead product candidate, Toca 511 & Toca FC, as well as raising capital and building its infrastructure. The Company has not generated revenues from its principal operations.

On October 1, 2019, the Company commenced a corporate restructuring plan that included reducing its workforce by approximately 65% in order to preserve the Company’s resources. The restructuring was approved by the Company’s Board of Directors on October 1, 2019, and affected employees were informed on October 2, 2019. The Company incurred a personnel-related restructuring charge of $0.9 million for employee severance and other related termination benefits. As of December 31, 2019, $0.2 million of severance related payments remained unpaid.

ATM Facility

In November 2018, the Company entered into an Equity Distribution Agreement with Citigroup Global Markets Inc. (“Citigroup”), pursuant to which the Company may sell and issue shares of its common stock having an aggregate offering price of up to $30,000,000 from time to time through Citigroup, as its sales agent (the “ATM facility”).  As of December 31, 2019, the Company has sold 760,089 shares of common stock and received net proceeds of $7.7 million under the ATM facility.

Public Offering

In December 2018, the Company completed a public offering in which it sold an aggregate of 3,000,000 shares of common stock at a price of $10.00 per share. Net proceeds from the public offering, after deducting underwriting discounts, commissions and offering expenses, were approximately $28.0 million.

Liquidity

The accompanying financial statements have been prepared on a basis which assumes the Company is a going concern, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from any uncertainty related to the Company’s ability to continue as a going concern. The Company has experienced net losses and negative cash flows from operating activities since its inception. As of December 31, 2019, the Company had an accumulated deficit of $279.4 million and working capital of $9.8 million available to fund future operations.

 

Based on the Company’s operating plans, cash, cash equivalents and marketable securities may not be sufficient to fund operations for the next 12 months. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. All amounts due under the Term Loans (see note 5) have been classified as a current liability as of December 31, 2019 due to the considerations discussed above and the assessment that a material adverse change clause under the Term Loans is not within the Company’s control. On October 31, 2019, the Company entered into an amendment (the Second Amendment) to its Amended and Restated Loan and Security Agreement with the two lenders, dated May 18, 2018, which was further amended on August 3, 2018 (the Loan Agreement), and made a prepayment of $23.3 million, which amount was used to prepay i) a portion equal to $21.5 million of the outstanding principal of the Term Loans plus all accrued and unpaid interest thereon through the prepayment date, ii) prorated portion of the final payment with respect to the portion of such Term Loans being prepaid, plus iii) all outstanding lenders’ expenses as of the date of the Second Amendment.

The Company may seek to fund its losses from operations and capital needs through debt and equity financing, or through collaborations or partnerships with other entities, such funding may not be available on a timely basis on terms acceptable to the Company, or at all.  If the Company is unable to raise additional capital when required or on acceptable terms, the Company may be required to further scale back or discontinue the advancement of product candidates, further reduce headcount, reorganize, merge with another entity, file for bankruptcy, or cease operations.  

As of December 31, 2019, the Company had cash, cash equivalents and marketable securities of $21.8 million.

Use of Estimates

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States, which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the financial statements accompanying notes. Significant estimates in the Company’s financial statements relate to clinical trial accruals, the valuation of equity awards and the development period used for license revenue recognition. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results may differ from these estimates under different assumptions or conditions.

v3.19.3.a.u2
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Cash, Cash Equivalents and Marketable Securities

Cash consists of the balance in a readily available checking account. Cash equivalents consist of money market funds, corporate debt securities and certificates of deposit with remaining maturities of three months or less at the time of purchase, and are considered highly liquid investments. Marketable securities consist of corporate debt securities, commercial paper, U.S. treasury securities and asset-backed securities that have original maturities greater than three months at the time of purchase.

The Company classifies its investments as available-for-sale and records such assets at fair value in the balance sheet, with unrealized gains and losses, if any, reported in stockholders’ equity. Realized gains and losses are calculated on the specific identification method and recorded to interest income.

A decline in the market value of any marketable security below cost that is determined to be other-than-temporary results in a revaluation of its carrying amount to fair value and a new cost basis for the security. Impairment losses are recognized in other expense in the statement of operations.

Concentration of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash equivalents and marketable securities. The Company’s investment policy includes guidelines for the quality of the related institutions and financial instruments, and defines allowable investments that the Company may invest in, which the Company believes minimizes the exposure to concentration of credit risk.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets primarily represent amounts related to insurance, clinical trial and manufacturing agreements, and investment interest receivable.

Property and Equipment

Property and equipment is stated at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method. Leasehold improvements are depreciated using the straight-line method over the lesser of the remaining lease term or an estimated useful life .

Costs of major additions and betterments are capitalized and depreciated on a straight-line basis over their useful lives. Repairs and maintenance costs are expensed as incurred. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is credited or charged to expense.

Deferred Equity Issuance Costs

Specific incremental costs directly attributable to an offering of securities are deferred and charged against the gross proceeds of the offering through additional paid-in capital.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment. An impairment loss is recorded if and when events and circumstances indicate that assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amount of those assets. No impairment loss has been recognized for the years ended December 31, 2019 and 2018.

Fair Value of Financial Instruments

The Company’s financial instruments consist principally of cash, cash equivalents, marketable securities, prepaid expenses, other current assets, accounts payable and notes payable. The carrying amounts of these financial instruments approximate the related fair values due to the short-term maturities of these instruments.

The authoritative accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the authoritative accounting guidance establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

Level 1:Observable inputs such as quoted prices in active markets;

Level 2:Inputs, other than the quoted prices in active markets, 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 that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

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.

Clinical Trial Accruals

Expenses related to clinical studies are based on estimates of the services received and efforts expended pursuant to the Company’s contract arrangements. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to the Company’s service providers will temporarily exceed the level of services provided and result in a prepayment of the clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients, site initiation and the completion of clinical milestones. The Company makes estimates of its accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known at that time. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from its estimate, the Company adjusts the accrual or prepaid expense balance accordingly. Historically, the Company’s estimated accrued liabilities have materially approximated actual expense incurred.

Revenue Recognition

Revenue generally consists of license revenue with upfront payments and development milestones considered probable of achievement.

Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those goods and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the transaction price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when or as the Company satisfies the performance obligation(s).

At contract inception, the Company assesses the goods and services promised within each contract and assesses whether each promised good or service is distinct and determines that those are performance obligations. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company considers a performance obligation satisfied once the Company has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. The Company recognizes revenue for satisfied performance obligations only when the Company determines there are no uncertainties regarding payment terms or transfer of control.

Collaborative Arrangements

The Company enters into collaborative arrangements with partners that may include payment to the Company of one or more of the following: (i) license fees; (ii) payments related to the achievement of developmental, regulatory, or commercial milestones; and (iii) royalties on net sales of licensed products.  Where a portion of non‑refundable upfront fees or other payments received are allocated to continuing performance obligations under the terms of a collaborative arrangement, they are recorded as contract liabilities and recognized as revenue when (or as) the underlying performance obligation is satisfied.  

As part of the accounting for these arrangements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligation(s). The stand-alone selling price may include items such as forecasted revenues, development timelines, discount rates, and probabilities of technical and regulatory success. The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time. In addition, variable consideration must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.

License Fees

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront 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 progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration or other revenues and earnings in the period of adjustment.

Milestone Payments

At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price. If it is probable that a milestone event would occur at the inception of the arrangement, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each reporting period, the Company evaluates the probability of achievement of such milestones and any related constraint(s), and if necessary, may adjust the Company’s estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration or other revenues and earnings in the period of adjustment.

Royalties

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which 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, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from its collaborative arrangements.

Research and Development Costs

Research and development expenses consist primarily of salaries and other personnel related expenses including non-cash stock-based compensation costs, preclinical costs, clinical trial costs, costs related to acquiring and manufacturing clinical trial materials, contract services, facilities costs, overhead costs, and depreciation. All research and development costs are expensed as incurred.

Patent Costs

Costs related to filing and pursuing patent applications are recorded as general and administrative expense and expensed as incurred because recoverability of such expenditures is uncertain.

Grant Funding

The Company receives certain research and development funding through grants from nonprofit organizations that serve the brain cancer community. The Company evaluates the terms of each grant to assess the Company’s obligations, and such funding is recognized in the statement of operations as a reduction to research and development expense as the related costs are incurred to meet those obligations over the grant period. Certain grants contain repayment provisions contingent on future events, such as future revenue milestones related to the Company’s lead product candidate under development. For each repayment provision, the Company assesses if it is obligated to repay the funds provided by the other parties regardless of the outcome of the funded research and development. For each arrangement, the Company also reviews the repayment provisions to determine the likelihood of repayment at the execution of each grant and on an ongoing basis. If the likelihood of repayment of a grant is determined to be remote and the Company is not obligated to repay the funds regardless of the outcome of the funded research and development, the grant is recognized as a reduction to research and development expense as related costs are incurred over the grant period. The Company subsequently reviews the repayment provisions of each grant at each reporting date and will record a related grant repayment liability if and when such repayment obligation is determined to be probable. If, at the execution of a grant with repayment provisions, the probability of repayment is probable, the Company will record the grant as a liability until such time as the grant requirements have been satisfied and the repayment provisions have lapsed.

Debt Issuance Costs

Debt issuance costs incurred to obtain debt financing are deferred and are amortized over the term of the debt using the effective interest method. The costs are recorded as a reduction to the carrying value of the debt and the amortization expense is included in interest expense in the statement of operations.

Warrants for Shares of Common Stock

The Company accounts for warrants for shares of common stock as equity instruments in the accompanying balance sheets at their fair value on the date of issuance because such warrants are indexed to the Company’s common stock and no cash settlement is required except for (i) liquidation of the Company, or (ii) a change in control in which the common stockholders also receive cash.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax assets will be realized.

The Company records uncertain tax positions on the basis of a two-step process whereby (i) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Company will recognize interest and penalties in income tax expense if and when incurred.

Comprehensive Income (Loss)

All components of comprehensive income (loss) are reported in the financial statements in the period in which they are recognized. Other comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources, including unrealized gains and losses on investments. The Company’s only component of other comprehensive loss is unrealized gains (losses) on investments. Comprehensive gains (losses) have been reflected in the statements of operations and comprehensive loss for all periods presented.

Stock-Based Compensation

Stock-based compensation expense represents the cost of the grant date fair value of stock awards, including stock options, and stock purchase rights granted to employees and members of the Company’s board of directors. For awards with time-based vesting provisions, the Company estimates the fair value of stock options on the date of grant using the Black-Scholes option pricing model and recognizes the expense over the requisite service period of the awards, which is generally the vesting period, on a straight-line basis. For awards with performance-based vesting provisions, the Company estimates the fair value of stock option grants on the date of grant, or the date when all of the terms of the grant have been agreed to, if later, and recognizes the expense based on the probability of the occurrence of the individual milestones at each reporting period. The expense is recognized over the implicit service period that commences once management believes the performance criteria are probable of being met.  For purchase rights, the Company estimates the fair value of the purchase as of the plan enrollment date and recognizes expense on a straight-line basis over the applicable offering period.  The Company accounts for forfeitures when they occur, and reverses any compensation cost previously recognized for awards for which the requisite service has not been completed, in the period that the award is forfeited.

Net Loss Per Share

Basic and diluted net loss per common share for the periods presented is computed by dividing net loss by the weighted-average number of common shares outstanding during the respective periods, without consideration of common stock equivalents as they are anti-dilutive. Common stock equivalents that could potentially dilute earnings in the future are comprised of shares issuable upon the conversion of options to purchase shares of common stock outstanding under the Company’s equity incentive plan and warrants for the purchase of shares of common. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Common stock equivalents from potentially dilutive securities that are not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows:

 

 

 

Years Ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

Common stock options

 

 

4,334,935

 

 

 

3,476,847

 

 

 

2,589,348

 

Common stock warrants

 

 

66,514

 

 

 

67,238

 

 

 

10,660

 

Total

 

 

4,401,449

 

 

 

3,544,085

 

 

 

2,600,008

 

 

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard is aimed at making leasing activities more transparent and comparable. Under the new guidance, lessees are required to recognize substantially all leases on their balance sheet as a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The Company adopted Topic 842 on January 1, 2019 using the modified retrospective approach with a cumulative-effect adjustment as of January 1, 2019. The Company recognized a right-of-use asset and a lease liability on the balance sheet for the discounted value of future lease payments from the date of adoption. The impact on the balance sheet as of the date of adoption was as follows (in thousands):

 

 

 

ASC 840

 

 

ASC 842

 

 

Impact of

 

 

 

January 1, 2019

 

 

January 1, 2019

 

 

Adoption

 

Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

Accrued liabilities

 

$

154

 

 

$

645

 

 

$

491

 

Deferred rent, net of current portion

 

 

2,201

 

 

 

 

 

 

(2,201

)

Operating lease right-of-use asset

 

 

 

 

 

8,060

 

 

 

8,060

 

Operating lease liability, net of current portion

 

 

 

 

 

9,770

 

 

 

9,770

 

 

In June 2018, the FASB issued ASU 2018-07, Compensation- Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting. This new standard is intended to simplify aspects of share-based compensation issued to non-employees by aligning the accounting for share-based payment awards issued to employees and non-employees as it relates to the measurement date and impact of performance conditions. The new standard became effective January 1, 2019 and did not have a material impact to the overall financial statements of the Company.  

v3.19.3.a.u2
Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments

3. Fair Value of Financial Instruments

Fair Values of Assets Measured on a Recurring Basis

The following tables summarize the Company’s assets that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements at End of Period Using:

 

 

 

Total

 

 

Quoted Market

Prices for

Identical Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

3,700

 

 

$

 

 

$

3,700

 

 

$

 

Commercial paper

 

 

5,485

 

 

 

 

 

 

5,485

 

 

 

 

Asset-backed securities

 

 

3,650

 

 

 

 

 

 

3,650

 

 

 

 

 

 

$

12,835

 

 

$

 

 

$

12,835

 

 

$

 

 

 

 

 

 

 

 

Fair Value Measurements at End of Period Using:

 

 

 

Total

 

 

Quoted Market

Prices for

Identical Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

4,783

 

 

$

 

 

$

4,783

 

 

$

 

Commercial paper

 

 

1,987

 

 

 

 

 

 

1,987

 

 

 

 

 

 

$

6,770

 

 

$

 

 

$

6,770

 

 

$

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

16,301

 

 

$

 

 

$

16,301

 

 

$

 

Commercial paper

 

 

24,576

 

 

 

 

 

 

24,576

 

 

 

 

U.S. treasury securities

 

 

1,997

 

 

 

1,997

 

 

 

 

 

 

 

Asset-backed securities

 

 

12,399

 

 

 

 

 

 

12,399

 

 

 

 

 

 

$

55,273

 

 

$

1,997

 

 

$

53,276

 

 

$

 

 

Marketable Securities. For fair values determined by Level 1 inputs, which utilize quoted prices in active markets for identical assets, the level of judgment required to estimate fair value is relatively low. The fair values of investments in U.S. treasury securities were determined using Level 1 inputs. 

Fair values determined by Level 2 inputs, which utilize data points that are observable such as quoted prices, interest rates and yield curves, require the exercise of judgment and use of estimates, that if changed, could significantly affect the Company’s financial position and results of operations. Investments in corporate debt securities, certificates of deposit, commercial paper, repurchase agreements and asset-backed securities are valued using Level 2 inputs. Level 2 securities are initially valued at the transaction price and subsequently valued and reported utilizing inputs other than quoted prices that are observable either directly or indirectly, such as quotes from third-party pricing vendors.

There were no transfers in or out of Level 1 or Level 2 investments during the years ended December 31, 2019 or 2018.

At December 31, 2019 and 2018, the Company had investments in money market funds of $6.3 million and $30.9 million, respectively, that were measured at fair value using the net asset value per share (or its equivalent) that have not been classified in the fair value hierarchy. The funds invest primarily in U.S. government securities.    

 

Fair Values of Other Financial Instruments

The carrying amounts of certain of the Company’s financial instruments, including cash and accounts payable, approximate their respective fair values due to their short-term nature. The carrying amount of the Company’s notes payable of $4.7 million at December 31, 2019 approximated their fair value as the terms of the notes are consistent with the market terms of transactions with similar profiles (Level 2 inputs).

v3.19.3.a.u2
Certain Financial Statement Caption Information
12 Months Ended
Dec. 31, 2019
Balance Sheet Related Disclosures [Abstract]  
Certain Financial Statement Caption Information

4. Certain Financial Statement Caption Information

Marketable Securities

The following is a summary of the Company’s marketable securities (in thousands):

 

 

 

Maturity

(in years)

 

Amortized

Cost

 

 

Unrealized

Gain

 

 

Unrealized

Loss

 

 

Fair

Value

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

1 or less

 

$

2,699

 

 

$

1

 

 

$

 

 

$

2,700

 

Corporate debt securities

 

>1 and <5

 

 

999

 

 

 

1

 

 

 

 

 

 

1,000

 

Commercial paper

 

1 or less

 

 

5,481

 

 

 

4

 

 

 

 

 

 

5,485

 

Asset-backed securities

 

1 or less

 

 

3,646

 

 

 

4

 

 

 

 

 

 

3,650

 

 

 

 

 

$

12,825

 

 

$

10

 

 

$

 

 

$

12,835

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

1 or less

 

$

10,013

 

 

$

1

 

 

$

(4

)

 

$

10,010

 

Corporate debt securities

 

>1 and <5

 

 

6,293

 

 

 

2

 

 

 

(4

)

 

 

6,291

 

Commercial paper

 

1 or less

 

 

24,584

 

 

 

 

 

 

(8

)

 

 

24,576

 

U.S. treasury securities

 

1 or less

 

 

1,997

 

 

 

 

 

 

 

 

 

1,997

 

Asset-backed securities

 

1 or less

 

 

10,612

 

 

 

 

 

 

(8

)

 

 

10,604

 

Asset-backed securities

 

>1 and <5

 

 

1,797

 

 

 

 

 

 

 

(2

)

 

 

1,795

 

 

 

 

 

$

55,296

 

 

$

3

 

 

$

(26

)

 

$

55,273

 

 

The Company has classified all of its available-for-sale investment securities, including those with maturity greater than one year, as current assets on the balance sheet based on the highly liquid nature of these investment securities and because these investment securities are considered available for use in current operations.

There were no impairments considered other-than-temporary during the periods presented, as it is management’s intention and ability to hold the securities until a recovery of the cost basis or recovery of fair value. Gross realized gains and losses on sales of marketable securities were immaterial for all periods presented.

Property and Equipment

Property and equipment is comprised of (in thousands):

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Laboratory equipment

 

$

2,184

 

 

$

4,445

 

Computers, software and office equipment

 

 

252

 

 

 

322

 

Furniture and fixtures

 

 

216

 

 

 

610

 

Leasehold improvements

 

 

636

 

 

 

1,927

 

 

 

 

3,288

 

 

 

7,304

 

Less: accumulated depreciation

 

 

(1,599

)

 

 

(3,331

)

 

 

$

1,689

 

 

$

3,973

 

 

Depreciation expense was $0.8 million and $0.6 million for the years ended December 31, 2019 and 2018, respectively. 

Accrued Liabilities

Accrued liabilities are comprised of (in thousands):

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Clinical trial expenses

 

$

2,404

 

 

$

4,535

 

Payroll and other employee-related expenses

 

 

1,116

 

 

 

2,840

 

Contract manufacturing services

 

 

387

 

 

 

3,411

 

Lease liability

 

 

416

 

 

 

 

Professional fees

 

 

330

 

 

 

474

 

Interest payable

 

 

37

 

 

 

205

 

Other

 

 

552

 

 

 

1,629

 

Total accrued liabilities

 

$

5,242

 

 

$

13,094

 

 

v3.19.3.a.u2
Notes Payable
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Notes Payable

5. Notes Payable

Loan Agreement

On October 30, 2015, the Company entered into a Loan and Security Agreement (Prior Agreement) with two lenders whereby it borrowed $18.0 million (the Initial Loans). Balances under the Prior Agreement were due in monthly principal and interest payments, with final maturity of the Initial Loans in May 2019. Each Initial Loan included a final payment fee of 7.95% of the original principal amount due upon maturity.

On May 18, 2018, the Company entered into an Amended and Restated Loan and Security Agreement, which was further amended on August 3, 2018, pursuant to which the lenders agreed to lend the Company $26.5 million as term loans (the Term Loans). Of the total proceeds, $8.6 million was applied to the repayment of outstanding principal, interest and final payment owed pursuant to the Initial Loans.

The Company evaluated the May 2018 Amended and Restated Loan and Security Agreement in accordance with ASC Topic 470, which requires assessment of whether the modification is considered a substantial modification, in which case the modification would be accounted for as a debt extinguishment. Based on the Company’s evaluation, the May 2018 Amended and Restated Loan and Security Agreement was considered substantial and therefore the unamortized discount associated with the Prior Agreement was written off through interest expense and the principal balance of the Prior Agreement was written off.    

The Term Loans will mature on December 1, 2022 (the Maturity Date) and the Company makes interest-only payments through January 1, 2020, followed by 36 equal monthly payments of principal and interest.

The Term Loans bear interest at a floating per annum rate equal to the greater of (i) 8.50% and (ii) the sum of (a) the prime rate reported in the Wall Street Journal on the last business day of the month that immediately proceeds the month in which the interest will accrue, plus (b) 3.75%. The Company will be required to make a final payment of 7.95% of the principal amount of the Term Loans payable on the earlier of (i) the Maturity Date, (ii) the acceleration of any Term Loans, or (iii) the prepayment of the Term Loans. On October 31, 2019, the Company entered into the Second Amendment and made a prepayment of $23.3 million, which amount was used to prepay i) a portion equal to $21.5 million of the outstanding principal of the Term Loans plus all accrued and unpaid interest thereon through the prepayment date, ii) prorated portion of the final payment with respect to the portion of such Term Loans being prepaid, plus iii) all outstanding lenders’ expenses as of the date of the Second Amendment.

In connection with the Second Amendment, the lenders (i) agreed to waive any prepayment fee otherwise applicable to a prepayment of the Term Loans in connection with any prepayment of the Term Loans on or after the date of the Second Amendment, (ii) consent to the sale of certain specified equipment, so long as the net cash proceeds from the sale of such assets are used to repay the Term Loans, and (iii) release their lien on the specified equipment upon the closing of any such sale. Under the Second Amendment, the Company has also agreed to grant a security interest in the Company’s intellectual property as additional collateral to secure the Term Loans for the ratable benefit of the lenders.

In conjunction with the Loan Agreement, the Company issued the lenders warrants exercisable for 56,578 shares of common stock (the Warrants). The Warrants are exercisable in whole or in part, immediately, and have a per share exercise price of $9.35. The Warrants will terminate on the earlier of May 18, 2028 or the closing of a certain merger or consolidation transaction. The Company recorded the Warrants as a debt discount, which is a contra-liability against debt. The offset to the contra-liability is recorded as additional paid in capital in the Company’s balance sheet as the Warrants were determined to be an equity instrument. The Company determined the fair value of the Warrants at the date of issuance was $0.5 million using the Black-Scholes option pricing model based on significant unobservable inputs (Level 3) with an expected term of 10 years, volatility of 85.6%, risk free rate of 3.1% and expected dividend of 0%.  

The costs incurred to issue the Term Loans of $0.1 million were deferred and are included in the discount to the carrying value of the Term Loans in the accompanying balance sheet. The deferred costs and the final payment fee are amortized to interest expense over the expected term of the Term Loans using the effective interest method with an effective interest rate of 10.7%.

The aggregate carrying amounts of the Term Loans and Initial Loans are comprised of the following, as applicable (in thousands):

 

 

 

December 31,

 

  

 

2019

 

 

2018

 

Principal

 

$

5,000

 

 

$

26,450

 

Add: accreted liability for final payment fee

 

138

 

 

276

 

Less: unamortized discount

 

 

(394

)

 

 

(525

)

 

 

$

4,744

 

 

$

26,201

 

 

The Term Loans are secured by all of the Company’s assets, including intellectual property. The Company is also required to maintain its primary operating accounts at all times with one of the lenders. The Loan Agreement contains customary conditions of borrowing, events of default and covenants, including covenants that restrict the Company’s ability to dispose of assets, merge with or acquire other entities, incur indebtedness and make distributions to holders of its capital stock. Should an event of default occur, including the occurrence of a material adverse change, the Company could be liable for immediate repayment of all obligations under the Loan Agreement. As of December 31, 2019, the Company was in compliance with the covenants contained in the Loan Agreement.

 

Based on the Company’s operating plans, cash, cash equivalents and marketable securities may not be sufficient to fund operations for the next 12 months. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. All amounts due under the Term Loans have been classified as a current liability on the balance sheet.

Future maturities of the Term Loans, including the final payment fee, as of December 31, 2019 are as follows (in thousands):

 

 

 

December 31, 2019

 

Year ending December 31, 2020

 

 

1,667

 

Year ending December 31, 2021

 

 

1,667

 

Year ending December 31, 2022

 

 

2,064

 

Notes payable, current portion

 

 

5,398

 

Unaccreted balance for final payment fee on Loans

 

 

(260

)

Unamortized discounts

 

 

(394

)

 

 

 

4,744

 

 

v3.19.3.a.u2
Stockholders' Equity
12 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Stockholders' Equity

6. Stockholders’ Equity

Upon completion of the Company’s IPO, all of the Company’s outstanding shares of convertible preferred stock were converted into an aggregate of 6,690,066 shares of the Company’s common stock.  As of December 31, 2019, the Company’s authorized capital stock consists of 200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.

In December 2018, the Company completed a public offering in which it sold an aggregate of 3,000,000 shares of common stock at a price of $10.00 per share. Net proceeds from the public offering, after deducting underwriting discounts, commissions and offering expenses, were approximately $28.0 million.

During the year ended December 31, 2019, the Company sold 760,089 shares of common stock under the Sales Agreement, respectively. The sales were made at a weighted average price of $10.41. The Company received net proceeds of $7.7 million during the year ended December 31, 2019 and may sell up to an additional $22.1 million in shares of the Company’s common stock under the Sales Agreement.

Common Stock Reserved for Future Issuance

Common stock reserved for future issuance as of December 31, 2019 and 2018 is as follows:

 

 

 

December 31,

 

 

 

2019

 

 

2018

 

Issued and Outstanding:

 

 

 

 

 

 

 

 

Stock options

 

 

4,334,935

 

 

 

3,476,847

 

Warrants for common stock

 

 

66,514

 

 

 

67,238

 

Shares reserved for issuance under the ESPP

 

 

486,855

 

 

 

326,178

 

Shares reserved for future award grants

 

 

543,284

 

 

 

451,063

 

v3.19.3.a.u2
Equity Incentive Plans and Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Equity Incentive Plans and Stock-Based Compensation

7. Equity Incentive Plans and Stock-Based Compensation

2017 Equity Incentive Plan

In March 2017, the Company’s board of directors and stockholders approved and adopted the Company’s 2017 Equity Incentive Plan, which became effective on April 12, 2017 and was subsequently amended September 30, 2018 and further amended February 12, 2019 (the 2017 Plan). The 2017 Plan provides for the grant of incentive stock options (ISOs), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, other forms of equity compensation and performance cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants of the Company and its affiliates.

Initially, 1,600,000 new shares of common stock were approved for issuance under the 2017 Plan and, on April 12, 2017, 75,517 shares of common stock reserved for issuance under the Company’s 2009 Equity Incentive Plan, as amended (the 2009 Plan), were added to the shares initially reserved under the 2017 Plan. No further grants will be made under the 2009 Plan and any shares subject to outstanding stock options under the 2009 Plan that would otherwise be returned to the 2009 Plan will instead be added to the shares reserved under the 2017 Plan. Additionally, the number of shares of common stock reserved for issuance under the 2017 Plan will automatically increase on January 1 of each calendar year through January 1, 2027, by 4% of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s board of directors.

All grants of options to purchase common stock under the 2017 Plan expire in 10 years. Grants with time-based vesting provisions are generally subject to a four-year vesting schedule with 25% vesting after the first year, and the balance vesting monthly over the remaining 36 months. Grants with performance-based vesting provisions vest upon the achievement of three separate development and regulatory milestones, with one-third of the options vesting upon the achievement of each milestone.

The following table summarizes stock option activity under the Company’s equity incentive plans for the year ended December 31, 2019:

 

 

 

Shares

Subject to

Options

 

 

Weighted-

Average

Exercise

Price per

Share

 

 

Weighted-

Average

Remaining

Contractual

Term

(in years)

 

Aggregate

Intrinsic Value

(in thousands)

 

Options Outstanding at December 31, 2018

 

 

3,476,847

 

 

$

12.67

 

 

 

 

 

 

 

Granted

 

 

1,841,380

 

 

$

7.60

 

 

 

 

 

 

 

Exercised

 

 

(69,697

)

 

$

3.61

 

 

 

 

 

 

 

Forfeitures and cancellations

 

 

(913,595

)

 

$

11.67

 

 

 

 

 

 

 

Options Outstanding at December 31, 2019

 

 

4,334,935

 

 

$

10.87

 

 

7.2

 

 

 

 

Options Exercisable at December 31, 2019

 

 

2,128,758

 

 

$

11.58

 

 

5.8

 

$

-

 

 

The following table summarizes certain information regarding stock options (in thousands):

 

 

 

Years Ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

Fair value of options vested during the period

 

$

6,336

 

 

$

6,318

 

 

$

2,194

 

Cash received from options exercised during the period

 

$

252

 

 

$

67

 

 

$

81

 

Intrinsic value of options exercised during the period

 

$

491

 

 

$

508

 

 

$

677

 

 

The aggregate intrinsic value of options is calculated as the difference between the exercise price of the options and the fair value of the Company’s common stock for those options that had exercise prices lower than the fair value of the Company’s common stock.

2017 Employee Stock Purchase Plan

In March 2017, the Company’s board of directors and stockholders approved and adopted the Company’s 2017 Employee Stock Purchase Plan (ESPP) whereby eligible employees may elect to withhold up to 15% of their earnings to purchase shares of the Company’s common stock at a price per share equal to the lower of (i) 85% of the fair market value of a share of the Company’s common stock on the first date of an offering or (ii) 85% of the fair market value of a share of the Company’s common stock on the date of purchase (purchase right). The ESPP became effective on April 12, 2017.  Initially, 250,000 shares of the Company’s common stock were approved for issuance under the ESPP pursuant to purchase rights granted to the Company’s employees or to employees of any of the Company’s designated affiliates. The number of shares of common stock reserved for issuance will automatically increase on January 1 of each calendar year through January 1, 2027, by the lesser of (a) 1% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, (b) 300,000 shares, or (c) a number determined by the Company’s board of directors that is less than (a) and (b).          

As of December 31, 2019, the Company had issued 191,972 shares of common stock under the ESPP, with 69,324 of such shares of common stock being issued during the year ended December 31, 2019. The Company had 486,855 shares available for future issuance under the ESPP as of December 31, 2019. Effective December 11, 2019, the Company suspended the ESPP for any additional offering periods after December 10, 2019. Any enrollments that have been submitted to date for the next enrollment period that was scheduled to begin on December 11, 2019 have been cancelled.

Stock-Based Compensation Expense

The weighted average assumptions used in the Black-Scholes option pricing model to determine the fair value of the employee stock option grants with both time-based and performance-based vesting provisions and stock purchase rights were as follows:

 

 

 

Years Ended December 31,

 

 

 

2019

 

 

2018

 

 

2017

 

Time based stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

 

 

2.2

%

 

 

 

2.7

%

 

 

 

2.0

%

Volatility

 

 

 

82.6

%

 

 

 

85.9

%

 

 

 

82.2

%

Dividend yield

 

 

 

0

%

 

 

0%

 

 

 

0%

 

Expected term (in years)

 

 

5.9

 

 

 

6.1

 

 

 

6.1

 

Grant date fair value per share

 

$

5.31

 

 

$

8.12

 

 

$

10.39

 

Performance based stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk-free interest rate

 

 

 

 

 

 

 

 

 

 

 

2.1

%

Volatility

 

 

 

 

 

 

 

 

 

 

 

75.9

%

Dividend yield

 

 

 

 

 

 

 

 

 

 

 

0

%

Expected term (in years)

 

 

 

 

 

 

 

 

 

 

6.3

 

Grant date fair value per share

 

$

 

 

 

$

 

 

 

$

6.73

 

Employee stock purchase plan