alrn-10q_20210331.htm

 

 

 

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: 001-38130

 

Aileron Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

13-4196017

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

285 Summer Street, Suite 101

Boston, MA

 

02210

(Address of principal executive offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (617) 995-0900

 

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

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, $0.001 par value per share

ALRN

The Nasdaq Capital Market

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 7, 2021, the registrant had 90,327,848 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

 

 

Table of Contents

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

5

Item 1.

 

Financial Statements (Unaudited)

 

5

 

 

Condensed Balance Sheets

 

5

 

 

Condensed Statements of Operations and Comprehensive Loss

 

6

 

 

Condensed Statement of Stockholders’ Equity (Deficit)

 

7

 

 

Condensed Statements of Cash Flows

 

8

 

 

Notes to Financial Statements

 

9

Item 2.

 

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

 

21

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

31

Item 4.

 

Controls and Procedures

 

31

PART II.

 

OTHER INFORMATION

 

32

Item 1.

 

Legal Proceedings

 

32

Item 1A.

 

Risk Factors

 

32

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

71

Item 5.

 

Other Information

 

71

Item 6.

 

Exhibits

 

71

 

 

Signatures

 

72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

 

our plans to develop and commercialize ALRN-6924, including the potential benefits thereof;

 

our ongoing and future clinical trials for ALRN-6924, whether conducted by us or by any future collaborators, including the timing of initiation of these trials and of the anticipated results;

 

our expectations regarding our ability to fund our operating expenses and capital expenditure requirements with our cash, cash equivalents and investments;

 

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;

 

the timing of and our ability to obtain and maintain marketing approvals for our product candidates;  

 

the rate and degree of market acceptance and clinical utility of any products for which we receive marketing approval;

 

our commercialization, marketing and manufacturing capabilities and strategy;

 

our intellectual property position and strategy;

 

our ability to identify additional product candidates with significant commercial potential;

 

our plans to enter into collaborations for the development and commercialization of product candidates;

 

potential benefits of any future collaboration;

 

developments relating to our competitors and our industry;

 

the impact of government laws and regulations;

 

the impact the coronavirus pandemic may have on the timing of our clinical development and on our operations; and

 

our ability to maintain our listing on the Nasdaq Capital Market.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed or incorporated by reference hereto completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.


2


 

 

Summary Risk Factors

 

Our business is subject to a number of risks of which you should be aware in evaluating our company and our business. These risks are discussed more fully in the “Risk Factors” section of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. These risks include the following:

 

Our business depends entirely on the successful development and commercialization of our product candidate, ALRN-6924. Our clinical trials of ALRN-6924 may not be successful. If our trials prove unsuccessful or if we are unable to obtain approval for and commercialize ALRN-6924 or experience significant delays in doing so, our business will be materially harmed.

 

We will need substantial additional funding to continue our operations. Our cash, cash equivalents and investments are not sufficient to enable us to complete the development of or commercialize ALRN-6924.  If we are unable to raise capital when needed, we may be forced to delay, reduce and/or eliminate our research and drug development programs, reduce headcount, and future commercialization efforts, or take other actions that could adversely affect our business.

 

We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.  Even if we are able to develop and commercialize ALRN-6924, we may never generate revenues that are significant or large enough to achieve profitability.

 

The COVID-19 pandemic has affected and may continue to affect our ability to conduct our ongoing and planned clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, which could result in adverse effects on our business and operations.

 

The approach we are taking to discover and develop novel drugs is unproven and may never lead to marketable products.  

 

We are pursuing the development of ALRN-6924 in combination with approved chemotherapeutics. If the U.S. Food and Drug Administration, or the FDA, revokes approval of any such therapeutic, or if safety, efficacy, manufacturing or supply issues arise with any therapeutic that we use in combination with ALRN-6924 in the future, we may be unable to further develop and/or market ALRN-6924, or we may experience significant regulatory delays, and our business could be materially harmed.

 

The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, interim results of a clinical trial, such as the interim results of our Phase 1b clinical trial of ALRN-6924 in patients with p53-mutated small cell lung cancer that we announced in October 2020, do not necessarily predict final results and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.  In addition, results of clinical trials of ALRN-6924 when used with one chemotherapy or in one patient population may not be predictive of the results of other clinical trials of ALRN-6924 when used with a different chemotherapy or in a different patient population.

 

Clinical drug development is a lengthy and expensive process, with an uncertain outcome.  If clinical trials of ALRN-6924 or any other product candidate that we may develop fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise produce positive results, we may incur additional costs, experience delays in completing, or ultimately be unable to complete, the development of ALRN-6924 or any other product candidate that we may develop or be unable to obtain marketing approval.

 

We are conducting clinical trials of ALRN-6924 and plan to conduct additional clinical trials of ALRN-6924 at sites outside the United States. The FDA’s acceptance of data from clinical trials outside of the United States is subject to conditions.  Accordingly, the FDA may not accept data from trials conducted in such locations and the conduct of trials outside the United States could subject us to additional delays and expense.

 

We may not be able to initiate or continue clinical trials for ALRN-6924 or any other product candidate that we may develop if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or comparable foreign regulatory authorities. Patient enrollment is a significant factor in the timing of clinical trials. We do not yet know exactly how many patients will have the genetic profile that ALRN-6924 or other future product candidates are designed to address. In particular, because our clinical trials are targeted at a subset of patients in indications with p53-mutated cancers, our ability to enroll eligible patients may be limited or may result in slower enrollment than we anticipate.

 

If serious adverse or unacceptable side effects are identified during the development of ALRN-6924 or any other product candidate that we may develop or we observe limited efficacy of ALRN-6924 or any other product candidate that we may develop, we may need to abandon or limit the development of ALRN-6924 or other product candidates that we may develop.

 

The FDA or comparable foreign regulatory authorities may, under certain circumstances, require that a companion diagnostic be approved for use with ALRN-6924. If we are unable to successfully develop and obtain approval for such a diagnostic, either on our own or through a third party, or if we experience significant delays in doing so, we may not obtain marketing approval for ALRN-6924 in a timely manner, or at all.

 

We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.

3


 

 

We rely on third parties to conduct our clinical trials and some aspects of our research and preclinical studies, and those third parties may not perform satisfactorily, including failing to meet deadlines for the completion of such trials, research and studies.

 

We contract with third parties for the manufacture of our ALRN-6924 for our ongoing clinical trials and expect to continue to do so for additional clinical trials and ultimately for commercialization. This reliance on third parties increases the risk that we will not have sufficient quantities of ALRN-6924 or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

 

We may seek to enter into strategic collaborations for the development, marketing and commercialization of ALRN-6924 or other product candidates. If we are unable to enter into collaborations or those collaborations into which we enter are not successful, the development, marketing and/or commercialization of ALRN-6924 or such other product candidates that are the subject of such collaborations would be harmed.

 

Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.

 

If we fail to comply with our obligations under our patent licenses with third parties, we could lose license rights that are important to our business.

 

Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time-consuming and uncertain and may prevent us, or any future collaborators, from obtaining approvals for the commercialization of ALRN-6924 or any other product candidate that we may develop. As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize ALRN-6924 or any other product candidate that we may develop.

 

4


 

 

 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

AILERON THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

19,283

 

 

$

7,046

 

Investments

 

 

44,068

 

 

 

6,759

 

Prepaid expenses and other current assets

 

 

948

 

 

 

1,928

 

Restricted cash

 

 

25

 

 

 

593

 

Total current assets

 

 

64,324

 

 

 

16,326

 

Operating lease, right-of-use asset

 

 

228

 

 

 

 

Other non-current assets

 

 

21

 

 

 

 

Property and equipment, net

 

 

98

 

 

 

15

 

Total assets

 

$

64,671

 

 

$

16,341

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

560

 

 

$

1,596

 

Accrued expenses and other current liabilities

 

 

2,091

 

 

 

2,196

 

Paycheck Protection Program loan, current portion

 

 

329

 

 

 

168

 

Operating lease liability, current portion

 

 

93

 

 

 

 

Total current liabilities

 

 

3,073

 

 

 

3,960

 

Paycheck Protection Program loan, net of current portion

 

 

55

 

 

 

219

 

Operating lease liability, net of current portion

 

 

124

 

 

 

 

Total liabilities

 

 

3,252

 

 

 

4,179

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized and no shares

   issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

 

 

 

 

Common stock, $0.001 par value; 150,000,000 shares authorized at

   March 31, 2021 and December 31, 2020; 90,210,557 and 43,804,175 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

 

90

 

 

 

44

 

Additional paid-in capital

 

 

287,603

 

 

 

231,412

 

Accumulated other comprehensive gain/(loss)

 

 

(7

)

 

 

(2

)

Accumulated deficit

 

 

(226,267

)

 

 

(219,292

)

Total stockholders’ equity

 

 

61,419

 

 

 

12,162

 

Total liabilities and stockholders’ equity

 

$

64,671

 

 

$

16,341

 

 

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

5


 

 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Revenue

 

$

 

 

$

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

4,316

 

 

 

4,069

 

General and administrative

 

 

2,673

 

 

 

2,807

 

Total operating expenses

 

 

6,989

 

 

 

6,876

 

Loss from operations

 

 

(6,989

)

 

 

(6,876

)

Gain on sale of property and equipment

 

 

0

 

 

 

66

 

Interest income

 

 

14

 

 

 

62

 

Net loss

 

 

(6,975

)

 

 

(6,748

)

Net loss per share — basic and diluted

 

$

(0.08

)

 

$

(0.24

)

Weighted average common shares outstanding—basic and diluted

 

 

83,384,371

 

 

 

27,810,358

 

Comprehensive loss:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,975

)

 

$

(6,748

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

Unrealized gain (loss) on investments, net of tax of $0

 

 

(5

)

 

 

(8

)

Total other comprehensive gain (loss)

 

 

(5

)

 

 

(8

)

Total comprehensive loss

 

$

(6,980

)

 

$

(6,756

)

 

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

6


 

 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)

(In thousands, except share and per share data)

 

 

 

Common Stock

 

 

Additional

 

 

Accumulated

Other

 

 

 

 

 

 

Total

 

 

 

Shares

 

 

Par

Value

 

 

Paid-in

Capital

 

 

Comprehensive

Loss

 

 

Accumulated

Deficit

 

 

Stockholders'

Equity

 

Balances at December 31, 2020

 

 

43,804,175

 

 

$

44

 

 

$

231,412

 

 

$

(2

)

 

$

(219,292

)

 

$

12,162

 

Issuance of common stock

 

 

46,406,382

 

 

 

46

 

 

 

59,042

 

 

 

 

 

 

 

 

 

59,088

 

Issuance costs

 

 

 

 

 

 

 

 

 

 

(3,482

)

 

 

 

 

 

 

 

 

 

 

(3,482

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

631

 

 

 

 

 

 

 

 

 

631

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,975

)

 

 

(6,975

)

Balances at March 31, 2021

 

 

90,210,557

 

 

$

90

 

 

$

287,603

 

 

$

(7

)

 

$

(226,267

)

 

$

61,419

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

 

27,810,358

 

 

$

28

 

 

$

214,148

 

 

$

7

 

 

$

(198,135

)

 

$

16,048

 

Issuance costs

 

 

 

 

 

 

 

 

(28

)

 

 

 

 

 

 

 

 

(28

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

505

 

 

 

 

 

 

 

 

 

505

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(8

)

 

 

 

 

 

(8

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,748

)

 

 

(6,748

)

Balances at March 31, 2020

 

 

27,810,358

 

 

$

28

 

 

$

214,625

 

 

$

(1

)

 

$

(204,883

)

 

$

9,769

 

 

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

7


 

AILERON THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(6,975

)

 

$

(6,748

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

2

 

 

 

70

 

Net amortization of premiums and discounts on investments

 

 

62

 

 

 

(30

)

Stock-based compensation expense

 

 

631

 

 

 

505

 

Gain on sale of property and equipment

 

 

 

 

 

(66

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

981

 

 

 

280

 

Other assets

 

 

(22

)

 

 

167

 

Accounts payable

 

 

(1,038

)

 

 

(365

)

Operating lease liabilities

 

 

(12

)

 

 

(104

)

Accrued expenses and other current liabilities

 

 

(105

)

 

 

619

 

Net cash used in operating activities

 

 

(6,476

)

 

 

(5,672

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(85

)

 

 

 

Proceeds from sale of property and equipment

 

 

 

 

 

66

 

Purchases of investments

 

 

(41,124

)

 

 

 

Proceeds from sales or maturities of investments

 

 

3,750

 

 

 

10,992

 

Net cash provided by (used in) investing activities

 

 

(37,459

)

 

 

11,058

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

55,604

 

 

 

 

Net cash provided by financing activities

 

 

55,604

 

 

 

0

 

Net increase/(decrease) in cash, cash equivalents and restricted cash

 

 

11,669

 

 

 

5,386

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

7,639

 

 

 

5,904

 

Cash, cash equivalents and restricted cash at end of period

 

$

19,308

 

 

$

11,290

 

 

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

8


 

 

AILERON THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

(Amounts in thousands, except share and per share data)

1. Nature of the Business and Basis of Presentation

Aileron Therapeutics, Inc. (“Aileron” or the “Company”) is a clinical stage chemoprotection oncology company focused on fundamentally transforming the experience of chemotherapy for cancer patients ALRN-6924, the Company’s first-in-class MDM2/MDMX dual inhibitor activating p53, is the only reported chemoprotective agent in clinical development to employ a biomarker strategy, in which the Company exclusively focuses on treating patients with p53-mutated cancers. With this targeted strategy, ALRN-6924 is designed to protect multiple healthy cell types throughout the body from chemotherapy while chemotherapy continues to kill cancer cells.

The Company is subject to risks common to companies in the biotechnology industry, including but not limited to, new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with government regulations, uncertainties in the clinical development of product candidates and in the ability to obtain needed additional financing. ALRN-6924 will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance-reporting capabilities.

There can be no assurance that the Company’s research and development of ALRN-6924 will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that ALRN-6924 will obtain necessary governmental regulatory approval or that if approved, will be commercially viable. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its key employees and consultants.

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).             

Liquidity

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the company’s ability to continue as a going concern within one year after the date that the financial statements are issued. This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Generally, to be considered probable of being effectively implemented, the plans must have been approved before the date that the financial statements are issued.

The Company’s interim financial statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. Through March 31, 2021, the Company has financed operations primarily through $50,009 in net proceeds from its initial public offering, or IPO, in 2017, $33,091 in net proceeds from a registered direct public offering in January 2021, $10,246 in net proceeds from a public offering in June 2020, $23,881 in net proceeds from “at the market” offerings, $4,415 in in net proceeds from sales pursuant to an equity line financing, $23,825 in net proceeds from a private placement of shares and common stock warrants in April 2019, $131,211 from sales of preferred stock prior to its IPO, $552 from the exercise of stock options and $34,910 from a collaboration agreement in 2010.

As of March 31, 2021, the Company had cash, cash equivalents and investments of $63,351. The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $226,267 as of March 31, 2021. The Company expects to continue to generate losses for the foreseeable future.

The Company believes that, based on its current operating plan, its cash, cash equivalents and investments of $63,351 as of March 31, 2021 will enable the Company to fund its operating expenses for greater than twelve months from the date of issuance of these financial statements.

To execute its business plans, the Company will need substantial funding to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its

9


 

operations through the sale of common stock in public offering and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions. The Company may not be able to obtain financing when needed, on acceptable terms or at all. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its clinical programs, product portfolio expansion plans or commercialization efforts, which could adversely affect its business prospects. The interim financial statements do not include any adjustments that might result from the outcome of this uncertainty. 

 

2. Summary of Significant Accounting Policies

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, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of common stock and stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Unaudited Interim Financial Information

The accompanying unaudited condensed financial statements as of March 31, 2021 and for the three months ended March 31, 2021 and 2020 have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 that was filed with the SEC on March 24, 2021.

 

The unaudited interim condensed financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2021, the results of its operations for the three months ended March 31, 2021 and 2020 and its cash flows for the three months ended March 31, 2021 and 2020. The financial data and other information disclosed in these notes related to the three months ended March 31, 2021 and 2020 are unaudited. The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. The accompanying balance sheet as of December 31, 2020 has been derived from the Company’s audited financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 24, 2021.

 

Cash Equivalents

The Company considers all short-term, highly liquid investments with original maturities of 90 days or less at acquisition date to be cash equivalents. Cash equivalents, which consist of money market accounts, corporate notes and commercial paper, are stated at fair value.

Restricted Cash

As of March 31, 2021 restricted cash consisted of $25 deposited in a separate restricted bank account as a security deposit for the Company’s corporate credit cards. As of December 31, 2020, restricted cash consisted of $568 deposited in a separate restricted bank account as a security deposit for the lease of the Company’s facility and $25 deposited in a separate restricted bank account as a security deposit for the Company’s corporate credit cards.

Investments

The Company classifies its available-for-sale debt security investments as current assets on the balance sheet if they mature within one year from the balance sheet date.

10


 

The Company’s investments are measured and reported at fair value using quoted prices in active markets for similar securities or using other inputs that are observable or can be corroborated by observable market data. Unrealized gains and losses on available-for-sale securities are reported as accumulated other comprehensive income (loss), which is a separate component of stockholders’ equity (deficit). The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (expense) within the statements of operations and comprehensive loss.

The Company evaluates its investments with unrealized losses for other-than-temporary impairment. When assessing investments for other-than-temporary declines in value, the Company considers such factors as, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general, among other factors. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statements of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

Concentration of Credit Risk and of Significant Suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and investments. From time to time, the Company has maintained all of its cash, cash equivalents and investment balances at three accredited financial institutions, in amounts that exceed federally insured limits. The Company generally invests its excess cash in money market funds, commercial paper and corporate notes that are subject to minimal credit and market risks. Management has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. The investment portfolio is maintained in accordance with the Company’s investment policy, which defines allowable investments, specifies credit quality standards and limits the credit exposure of any single issuer.

The Company is dependent on third-party manufacturers to supply products for research and development activities of its programs, including preclinical and clinical testing. In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs. These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable.

 

 

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

 

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

 

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The Company’s cash equivalents and investments are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts payable and accrued expenses approximate their fair value due to the short-term nature of these liabilities.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. During the three months ended March 31, 2021 and the year ended December 31, 2020, the Company received aggregate gross proceeds from the sale of common stock of approximately $59,042 and $16,881, respectively before deducting placement agent fees and offering expenses of approximately $3,482 and $1,494, respectively.  

 

11


 

 

Net Loss per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net income (loss) is computed by adjusting income (loss) per share to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share is computed by dividing the diluted net income (loss) by the weighted average number of shares of common stock outstanding for the period, including potential dilutive common shares. For purpose of this calculation, outstanding options, restricted stock units and warrants to purchase common stock are considered potential dilutive common shares. In periods in which the Company reports a net loss, diluted net loss per share is the same as basic net loss per share, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive.

Risks and Uncertainties

In December 2019, an outbreak of respiratory illness caused by a strain of novel coronavirus, COVID-19, began in China. That outbreak has led to millions of confirmed cases worldwide, including in the United States and other countries where the Company is conducting clinical trials or activities in support thereof. The World Health Organization declared the outbreak a global pandemic on March 11, 2020. Recently, new variants of the virus that causes COVID-19 have been identified and are spreading around the world, which may worsen or prolong the pandemic. In addition to those who have been directly affected, millions more have been affected by governmental efforts around the world to slow the spread of the virus. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce. The future progression of the pandemic and its effects on our business and operations are uncertain.

Potential impacts to the Company’s business include disruptions in supply of the Company’s product candidate and/or procurement of items that are essential for the Company’s research and development activities, including, for example, raw materials used in the manufacturing of ALRN-6924, medical and laboratory supplies used in the Company’s clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the COVID-19 pandemic.  While the Company believes that it currently has sufficient supply of its product candidate to continue the Company’s ongoing and planned clinical trials, its product candidate, or materials contained therein, come from facilities located in areas impacted by the COVID-19 pandemic.

Additionally, the Company has enrolled, and is seeking to enroll, cancer patients in the Company’s clinical trials at sites located both in the United States and Europe, which are areas that continue to be impacted by the COVID-19 pandemic. Enrollment at clinical trial sites may be disrupted as the effects of the COVID-19 pandemic persist. In the event that clinical trial sites close to enrollment in the Company’s trials or shift resources to address COVID-19, this could have a material adverse impact on the Company’s clinical trial plans and timelines. The Company may face difficulties recruiting or retaining patients in its ongoing and planned clinical trials if patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the COVID-19 pandemic.

 

Any negative impact that the COVID-19 outbreak has on the ability of the Company’s suppliers to provide materials necessary for the Company’s product candidate or on recruiting or retaining patients in the Company’s clinical trials could cause costly delays to clinical trial activities, which could adversely affect the Company’s ability to obtain regulatory approval for and to commercialize the Company’s product candidate, increase the Company’s operating expenses, affect the Company’s ability to raise additional capital, and impact the Company’s operating and financial results. The capital markets have also experienced significant volatility as a result of the pandemic. Future disruptions in the capital markets could negatively impact the Company’s ability to raise capital in the future.

 

     

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This standard requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. It also limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The standard also establishes additional disclosure requirements related to credit risks. This guidance was originally effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, and early adoption was permitted. In November 2019, the FASB subsequently issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, whereby the effective date of this standard for smaller reporting companies was deferred to annual reporting periods beginning after December 15, 2022, including interim periods within those annual reporting periods, and early adoption is still permitted. Accordingly, the Company will now adopt this standard effective January 1, 2023, and it is currently evaluating the potential impact that ASU 2016-13 may have on its condensed financial statements.

12


 

3. Fair Value of Financial Assets

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

 

 

Fair Value Measurements as of

March 31, 2021 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

5,960

 

 

$

 

 

$

 

 

$

5,960

 

Commercial paper

 

 

 

 

 

3,999

 

 

 

 

 

 

3,999

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

26,478

 

 

 

 

 

 

26,478

 

Treasury bills

 

 

 

 

 

10,096

 

 

 

 

 

 

10,096

 

Corporate notes

 

 

 

 

 

6,493

 

 

 

 

 

 

6,493

 

Agency bonds

 

 

 

 

 

1,001

 

 

 

 

 

 

1,001

 

 

 

$

5,960

 

 

$

48,067

 

 

$

 

 

$

54,027

 

 

 

 

Fair Value Measurements as of

December 31, 2020 using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

4,190

 

 

$

 

 

$

 

 

$

4,190

 

Commercial paper

 

 

 

 

 

1,001

 

 

 

 

 

 

1,001

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agency Bonds

 

 

 

 

 

3,511

 

 

 

 

 

 

3,511

 

Commercial paper

 

 

 

 

 

1,999

 

 

 

 

 

 

1,999

 

Treasury Bills

 

 

 

 

 

1,249

 

 

 

 

 

 

1,249

 

 

 

$

4,190

 

 

$

7,760

 

 

$

 

 

$

11,950

 

 

As of March 31, 2021 and December 31, 2020, the Company’s cash equivalents and investments were valued based on Level 1 and Level 2 inputs. In determining the fair value of its corporate notes and commercial paper at each date presented above, the Company relied on quoted prices for similar securities in active markets or using other inputs that are observable or can be corroborated by observable market data. The Company’s cash equivalents have original maturities of less than 90 days from the date of purchase. All available-for-sale investments have contractual maturities of less than one year. During the three months ended March 31, 2021 and the year ended December 31, 2020, there were no transfers in or out of Level 3.

4. Investments

As of March 31, 2021 and December 31, 2020, the fair value of available-for-sale investments by type of security was as follows:

 

 

 

March 31, 2021

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gain

 

 

Gross

Unrealized

Loss

 

 

Fair

Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

26,481

 

 

$

 

 

$

(3

)

 

$

26,478

 

Treasury bills

 

 

10,094

 

 

 

2

 

 

 

 

 

 

10,096

 

Corporate notes

 

 

6,496

 

 

 

 

 

 

(3

)

 

 

6,493

 

Agency bonds

 

 

1,001

 

 

 

 

 

 

 

 

 

1,001

 

 

 

$

44,072

 

 

$

2

 

 

$

(6

)

 

$

44,068

 

13


 

 

 

 

 

 

December 31, 2020

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gain

 

 

Gross

Unrealized

Loss

 

 

Fair

Value

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

1,999

 

 

$

 

 

$

 

 

$

1,999

 

Treasury bills

 

 

1,249

 

 

 

 

 

 

 

 

 

1,249

 

Agency bonds

 

 

3,511

 

 

 

 

 

 

 

 

 

3,511

 

 

 

$

6,759

 

 

$

 

 

$

 

 

$

6,759

 

 

5. Property and Equipment, Net

Property and equipment, net consisted of the following:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Computer equipment and software

 

 

266

 

 

 

181

 

Less: Accumulated depreciation and amortization

 

 

(168

)

 

 

(166

)

 

 

$

98

 

 

$

15

 

Depreciation and amortization expense for the three months ended March 31, 2021 was $2.  During the year ended December 31, 2020, fully depreciated assets with a cost of $640 were disposed of for proceeds of $208, resulting in a gain of $86.

 

6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

 

 

 

March 31,

2021

 

 

December 31,

2020

 

External research and development services

 

$

956

 

 

$

896

 

Payroll and payroll-related costs

 

 

430

 

 

 

922

 

Professional fees

 

 

497

 

 

 

135

 

Other

 

 

208

 

 

 

243

 

 

 

$

2,091

 

 

$

2,196

 

 

 

7. Paycheck Protection Loan

On April 30, 2020, the Company received loan proceeds in the amount of approximately $384 under the Paycheck Protection Program (“PPP”).  The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1%, with a deferral of payments for the first six months. The Company used the proceeds for purposes consistent with the PPP.

The Company has determined to account for the PPP loan as debt under Accounting Standards Update (“ASC 470”), “Debt”, and has allocated and recorded the loan proceeds between current and non-current liabilities.

14


 

The Company further determined that loan forgiveness would become probable of occurring upon acceptance by the Small Business Association of the Company’s forgiveness application. If and when the loan forgiveness becomes probable, the Company will recognize income for debt extinguishment pursuant to ASC 470-50-15-4.  The Company submitted a loan forgiveness application in December 2020.

 

8. Lease

 

On March 26, 2021, the Company entered into a sublease agreement (the “Sublease”) by and among the Company, Vittoria Industries North America, Inc. (the “Sublessor”) and Waterfront Equity Partners, LLC (the “Lessor”), under which the Company is leasing approximately 3,365 square feet of office space located at 285 Summer Street, Unit 101, Boston, Massachusetts (the “Premises”). The Sublease is subject and subordinate to a lease agreement, dated as of July 13, 2012, by and between the Sublessor and Lessor (the “Prime Lease”), pursuant to which the Sublessor is leasing the Premises from the Lessor.

The term of the Sublease (the “Term”) commenced on April 1, 2021 and terminates upon the earliest to occur of (i) March 31, 2023, (ii) early termination of the Prime Lease or (iii) termination of the Sublease pursuant to the terms thereof. The Company is obligated to pay monthly base rent under the Sublease to the Sublessor in an approximate amount of $12 per month during the Term.  The Company recorded a right of use asset of $228 and operating lease liabilities of $217 upon the inception of the Sublease.

 

 

9. Common Stock

On January 6, 2021, the Company entered into a securities purchase agreement (the “2021 Purchase Agreement”) with certain institutional investors, pursuant to which the Company issued and sold, in a registered direct offering (the “Offering”), an aggregate of 32,630,983 shares of common stock, $0.001 par value per share, at a purchase price per share of $1.10 (the “Shares”). The aggregate gross proceeds of the Offering were $35,894, before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company.  The shares were offered by the Company pursuant to a shelf registration statement on Form S-3 (File No. 333-226650) that was filed with the United States Securities and Exchange Commission (“SEC”) on July 1, 2018, and declared effective by the SEC on July 15, 2019 (the “Registration Statement”), and a prospectus supplement thereunder.  The Offering closed on January 8, 2021.  In addition, during the first quarter, the Company issued and sold an aggregate of 7,174,993 shares of its common stock pursuant to its ATM Sales Agreement with JonesTrading Institutional Services LLC, resulting in net proceeds of $9,368.

On January 29, 2021, the Company entered into a Capital on Demand™ Sales Agreement (the “ATM Sales Agreement”) with JonesTrading Institutional Services LLC (“JonesTrading”) and William Blair & Company, L.L.C. (“William Blair” and, collectively with JonesTrading, the “Agents”), pursuant to which the Company may offer and sell shares of its common stock having an aggregate offering price of up to $30,000 from time to time through or to the Agents (the “ATM Offering”). On January 29, 2021, the Company filed a prospectus supplement with the SEC in connection with the ATM Offering under its Registration Statement. Between January 29, 2021 and March 31, 2021, the Company issued and sold an aggregate of 5,225,406 shares of its common stock pursuant to the ATM Sales Agreement, resulting in net proceeds of $10,594.

During the first quarter the Company issued and sold an aggregate of 1,375,000 shares of its common stock to LPC pursuant to the Purchase Agreement, resulting in gross proceeds of $2,614.

15


 

                

10. Stock-Based Awards

2017 Stock Incentive Plan

The Company’s 2017 Stock Incentive Plan (the “2017 Plan”) was approved by the Company’s stockholders on June 16, 2017 and became effective on June 28, 2017. Under the 2017 Plan, the Company may grant incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, awards of restricted stock units and other stock-based awards. The Company’s employees, officers, directors, consultants and advisors are eligible to receive awards under the 2017 Plan; however, incentive stock options may only be granted to employees. The 2017 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board. The number of shares of common stock covered by options and the date those options become exercisable, type of options to be granted, exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated.

Stock options granted under the 2017 Plan with service-based vesting conditions generally vest over four years and may not have a duration in excess of ten years, although options have been granted with vesting terms of less than four years.

The total number of shares of common stock that may be issued under the 2017 Plan was 5,950,124 as of March 31, 2021, of which 1,328,253 shares remained available for grant. The Company initially reserved 1,244,816 shares of common stock plus the number of shares equal to the sum of the number of shares of common stock then available for issuance under the Company’s 2016 Stock Incentive Plan (the “2016 Plan”), which was 424,601 shares, and the number of shares of common stock subject to outstanding awards under the Company’s 2006 Stock Incentive Plan, as amended (the “2006 Plan”) and the 2016 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right. Pursuant to the terms of the 2017 Plan, the number of shares of common stock that may be issued under the 2017 Plan will automatically increase on each January 1, beginning with the fiscal year ending December 31, 2018 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2027, equal to the least of (i) 1,244,816 shares of common stock, (ii) 4% of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s board of directors. On January 1, 2020 and January 1, 2021, the number of shares issuable under the 2017 Plan automatically increased by 1,112,414 shares and 1,244,816 shares, respectively.

During the three months ended March 31, 2021, pursuant to the terms of the 2017 Plan, the Company granted options to employees and directors to purchase 122,400 shares of common stock at a weighted average exercise price of $1.82 per share.      

Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards.

The exercise price for stock options granted may not be less than the fair market value of the common stock as of the date of grant.

2017 Employee Stock Purchase Plan

On June 16, 2017, the Company’s stockholders approved the 2017 Employee Stock Purchase Plan (the “2017 ESPP”), which became effective on June 28, 2017. A total of 150,000 shares of common stock were initially reserved for issuance under this plan. Under the 2017 ESPP, the number of shares of common stock that may be issued under the 2017 ESPP will automatically increase on each January 1, beginning with the fiscal year ending December 31, 2018 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2027, equal to the least of (i) 622,408 shares, (ii) 1% of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s board of directors. The compensation committee of the board of directors has determined that the number of shares of common stock that may be issued under the 2017 ESPP would not be increased on January 1, 2019 or January 1, 2020. The Company has not issued any shares under the 2017 ESPP.

2016 Stock Incentive Plan

The 2016 Plan provided for the Company to grant incentive stock options or nonqualified stock options, restricted stock, restricted stock units and other equity awards to employees, directors and consultants of the Company. The 2016 Plan was administered by the board of directors or, at the discretion of the board of directors, by a committee of the board. The exercise prices, vesting and other restrictions were determined at the discretion of the board of directors, or its committee if so delegated.

Stock options granted under the 2016 Plan with service-based vesting conditions vest over four years and expire after ten years.

As of the effective date of the 2017 Plan, the board of directors determined to grant no further awards under the 2016 Plan. No stock options or other awards have been made under the 2016 Plan since the adoption of the 2017 Plan.  

16


 

Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future awards under the 2017 Plan. In addition, shares of common stock that are tendered to the Company by a participant to exercise an award are added to the number of shares of common stock available for the grant of awards under the 2017 Plan.     

Stock Option Valuation

The assumptions that the Company used to determine the grant-date fair value of the stock options granted to employees and directors during the three months ended March 31, 2021 and 2020 were as follows, presented on a weighted average basis:

 

 

 

Three Months Ended

March 31, 2021

 

 

Three Months Ended

March 31, 2020

 

Risk-free interest rate

 

 

0.69

%

 

 

1.29

%

Expected term (in years)

 

 

6.3

 

 

 

6.3

 

Expected volatility

 

 

76.0

%

 

 

76.0

%

Expected dividend yield

 

 

0

%

 

 

0

%

 

Stock Options

The following table summarizes the Company’s stock option activity since January 1, 2021:

 

 

 

Number of

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term

 

 

Aggregate

Intrinsic

Value

 

 

 

 

 

 

 

 

 

 

 

(in years)

 

 

 

 

 

Outstanding at December 31, 2020

 

 

4,665,586

 

 

$

2.39

 

 

 

8.1

 

 

$

622

 

Granted

 

 

122,400

 

 

 

1.82

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canceled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(68,813

)

 

 

0.63

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

4,719,173

 

 

$

2.39

 

 

 

7.9

 

 

$

1,283

 

Options exercisable at March 31, 2021

 

 

2,607,908

 

 

$

3.20

 

 

 

7.3

 

 

$

493

 

Options vested and expected to vest at March 31, 2021

 

 

4,655,763

 

 

$

2.41

 

 

 

7.9

 

 

$

1,256

 

Options exercisable at December 31, 2020

 

 

2,377,533

 

 

$

3.28

 

 

 

7.6

 

 

$

197

 

Options vested and expected to vest at December 31, 2020

 

 

4,592,729

 

 

$

2.41

 

 

 

8.1

 

 

$

606

 

 

The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2021 and 2020 was $1.21 and $0.44, respectively.

The aggregate fair value of stock options that vested during the three months ended March 31, 2021 and 2020 was $376 and $447, respectively.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the three months ended March 31, 2021 and 2020 was $0.

17


 

 

Restricted Stock Units

The following table summarizes the Company’s stock option activity since January 1, 2021:

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

Grant Date

 

 

 

Units

 

 

per Unit

 

Outstanding, non-vested at December 31, 2020

 

 

 

 

$

 

Issued

 

 

250,000

 

 

 

1.23

 

Vested

 

 

 

 

 

 

Canceled/forfeited

 

 

 

 

 

 

Outstanding, non-vested at March 31, 2021

 

 

250,000

 

 

$

1.23

 

Stock-Based Compensation

The Company recorded stock-based compensation expense related to stock options and restricted stock units in the following expense categories of its statements of operations and comprehensive loss:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Research and development expenses

 

$

99

 

 

$

149

 

General and administrative expenses

 

 

532

 

 

 

356

 

 

 

$

631

 

 

$

505

 

 

During the three months ended March 31, 2021 and 2020 the Company recognized stock-based compensation expense of $0 and $49, respectively, included in the table above, related to performance-based awards for which achievement of such performance-based conditions were deemed probable.  

 

As of March 31, 2021, the Company had an aggregate of $1,912 of unrecognized stock-based compensation expense, which it expects to recognize over a weighted average period of 2.1 years.

 

11. Net Loss per Share

Basic and diluted net loss per share was calculated as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2021