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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________

Form 10-Q

_____________________

(Mark One)

þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 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: 000-29959

_______________

Cassava Sciences, Inc.

(Exact name of registrant as specified in its charter)

Delaware

91-1911336

(State or other jurisdiction of

(I.R.S.  Employer

incorporation or organization)

Identification Number)

7801 N. Capital of Texas Highway, Suite 260, Austin, TX 78731

(512) 501-2444

(Address, including zip code, of registrant’s principal executive offices and

telephone number, including area code)

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

0

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value

 

SAVA

 

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 þ   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 þ   No ¨

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

Large Accelerated Filer ¨

Accelerated Filer ¨

Non-accelerated Filer þ

Smaller Reporting Company þ

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 þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.001 par value

40,014,695

Shares Outstanding as of August 2, 2021

 

1


CASSAVA SCIENCES, INC.

TABLE OF CONTENTS

Page No.

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Balance Sheets – June 30, 2021 and December 31, 2020

3

Condensed Statements of Operations – Three and Six Months Ended June 30, 2021 and 2020

4

Condensed Statements of Cash Flows – Six Months Ended June 30, 2021 and 2020

5

Notes to Condensed Financial Statements

6

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

31

PART II.

OTHER INFORMATION

Item 1.

Legal Proceedings

31

Item 1A

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3.

Defaults Upon Senior Securities

31

Item 4.

Mine Safety Disclosures

31

Item 5.

Other Information

31

Item 6.

Exhibits

32

Signatures

33

 

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CASSAVA SCIENCES, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands, except share and par value data)

June 30, 2021

December 31, 2020

ASSETS

Current assets:

Cash and cash equivalents

$

278,254

$

93,506

Prepaid expenses and other current assets

1,304

488

Total current assets

279,558

93,994

Operating lease right-of-use assets

252

295

Property and equipment, net

75

11

Other assets

1,420

Total assets

$

281,305

$

94,300

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

1,912

$

911

Accrued development expense

2,462

719

Accrued compensation and benefits

120

83

Operating lease liabilities, current

93

58

Other current liabilities

50

94

Total current liabilities

4,637

1,865

Operating lease liabilities, non-current

188

235

Total liabilities

4,825

2,100

Commitments and contingencies (Notes 6 and 8)

 

 

Stockholders' equity:

Preferred stock, $0.001 par value; 10,000,000 shares authorized, none issued and outstanding

Common stock, $0.001 par value; 120,000,000 shares authorized; 40,011,894 and 35,237,987 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

40

35

Additional paid-in capital

460,012

267,086

Accumulated deficit

(183,572)

(174,921)

Total stockholders' equity

276,480

92,200

Total liabilities and stockholders' equity

$

281,305

$

94,300

See accompanying notes to condensed financial statements.


3


 

CASSAVA SCIENCES, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited, in thousands, except per share data)

Three months ended

Six months ended

June 30,

June 30,

2021

2020

2021

2020

Operating expenses:

Research and development, net of grant reimbursement

$

3,901

$

591

$

6,430

$

1,135

General and administrative

1,237

818

2,241

1,596

Gain on sale of property and equipment

(246)

(346)

Total operating expenses

5,138

1,163

8,671

2,385

Operating loss

(5,138)

(1,163)

(8,671)

(2,385)

Interest income

13

27

20

99

Net loss

$

(5,125)

$

(1,136)

$

(8,651)

$

(2,286)

Net loss per share, basic and diluted

$

(0.13)

$

(0.05)

$

(0.22)

$

(0.09)

Shares used in computing net loss per share, basic and diluted

39,953

24,779

38,843

24,630

See accompanying notes to condensed financial statements.


4


 

CASSAVA SCIENCES, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)

Six months ended June 30,

2021

2020

Cash flows from operating activities:

Net loss

$

(8,651)

$

(2,286)

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

Stock-based compensation

665

522

Depreciation and amortization

9

20

Gain on sale of property and equipment

(346)

Changes in operating assets and liabilities:

Prepaid and other assets

(2,236)

82

Operating lease right-of-use assets and liabilities

31

Accounts payable

1,001

(37)

Accrued development expense

1,743

(22)

Accrued compensation and benefits

37

26

Other current liabilities

(44)

5

Net cash used in operating activities

(7,445)

(2,036)

Cash flows from investing activities:

Purchase of property and equipment

(73)

Proceeds from sale of property and equipment

360

Net cash (used in) provided by investing activities

(73)

360

Cash flows from financing activities:

Proceeds from exercise of stock options

1,749

Proceeds from exercise of common stock warrants

692

3,849

Proceeds from registered direct offering, net of issuance costs

189,825

Net cash provided by financing activities

192,266

3,849

Net increase in cash and cash equivalents

184,748

2,173

Cash and cash equivalents at beginning of period

93,506

23,081

Cash and cash equivalents at end of period

$

278,254

$

25,254

See accompanying notes to condensed financial statements.


5


Cassava Sciences, Inc.

Notes to Condensed Financial Statements

(Unaudited)

Note 1. General and Liquidity

Cassava Sciences, Inc. (the “Company”) discovers and develops proprietary pharmaceutical product candidates that may offer significant improvements to patients and healthcare professionals. The Company generally focuses its discovery and product development efforts on disorders of the nervous system.

The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to the Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, the condensed financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management of the Company, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for any other interim period or for the year 2021. For further information, refer to the financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Coronavirus Disease 2019 (COVID-19)

The widespread outbreak of a novel infectious disease called Coronavirus Disease 2019, or COVID-19, has not significantly impacted the Company’s operations or financial condition as of August 4, 2021. However, this pandemic has created a dynamic and uncertain situation in the national economy. The Company continues to closely monitor the latest information to make timely, informed business decisions and public disclosures regarding the potential impact of pandemic on its operations and financial condition. The scope of pandemic is unprecedented and its long-term impact on the Company’s operations and financial condition cannot be reasonably estimated at this time.

Liquidity

The Company has incurred significant net losses and negative cash flows since inception, and as a result has an accumulated deficit of $183.6 million at June 30, 2021. The Company expects its cash requirements to be significant in the future. The amount and timing of the Company’s future cash requirements will depend on regulatory and market acceptance of its product candidates and the resources it devotes to researching and developing, formulating, manufacturing, commercializing and supporting its products. The Company may seek additional funding through public or private financing in the future, if such funding is available and on terms acceptable to the Company. There are no assurances that additional financing will be available on favorable terms, or at all. However, management believes that the current working capital position will be sufficient to meet the Company’s working capital needs for at least the next 12 months.

Note 2.  Significant Accounting Policies

Use of Estimates

The Company makes estimates and assumptions in preparing its condensed financial statements in conformity with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements and the reported amount of revenue earned and expenses incurred during the reporting period. The Company evaluates its estimates on an ongoing basis, including those estimates related to manufacturing agreements and research collaborations. Actual results could differ from these estimates and assumptions.

Cash and Cash Equivalents and Concentration of Credit Risk

The Company invests in cash and cash equivalents. The Company considers highly liquid financial instruments with original maturities of three months or less to be cash equivalents. Highly liquid investments that are considered

6


cash equivalents include money market accounts and funds, certificates of deposits, and U.S. Treasury securities. The Company maintains its cash and cash equivalents at one financial institution.

Fair Value Measurements

The Company recognizes financial instruments in accordance with the authoritative guidance on fair value measurements and disclosures for financial assets and liabilities. This guidance defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. The guidance also establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1 includes quoted prices in active markets.

Level 2 includes significant observable inputs, such as quoted prices for identical or similar securities, or other inputs that are observable and can be corroborated by observable market data for similar securities. The Company uses market pricing and other observable market inputs obtained from third-party providers. It uses the bid price to establish fair value where a bid price is available. The Company does not have any financial instruments where the fair value is based on Level 2 inputs.

Level 3 includes unobservable inputs that are supported by little or no market activity. The Company does not have any financial instruments where the fair value is based on Level 3 inputs.

If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The fair value of cash and cash equivalents was based on Level 1 inputs at June 30, 2021 and December 31, 2020.



Proceeds from Grants



During the three months ended June 30, 2021 and 2020, the Company received reimbursements totaling $0.9 million and $1.1 million pursuant to National Institutes of Health (“NIH”) research grants, respectively. During the six months ended June 30, 2021 and 2020, the Company received reimbursements totaling $1.5 million and $2.4 million pursuant to NIH research grants, respectively. The Company records the proceeds from these grants as reductions to its research and development expenses.

 

Stock-based Compensation 



The Company recognizes non-cash expense for the fair value of all stock options and other share-based awards. The Company uses the Black-Scholes option valuation model (“Black-Scholes”) to calculate the fair value of stock options, using the single-option award approach and straight-line attribution method. For all options granted, it recognizes the resulting fair value as expense on a straight-line basis over the vesting period of each respective stock option, generally four years.



The Company has granted share-based awards that vest upon achievement of certain performance criteria (“Performance Awards”). The Company multiplies the number of Performance Awards by the fair value of its common stock on the date of grant to calculate the fair value of each award. It estimates an implicit service period for achieving performance criteria for each award. The Company recognizes the resulting fair value as expense over the implicit service period when it concludes that achieving the performance criteria is probable. It periodically reviews and updates as appropriate its estimates of implicit service periods and conclusions on achieving the performance criteria. Performance Awards vest and common stock is issued upon achievement of the performance criteria.



Net Loss per Share



The Company computes basic net loss per share on the basis of the weighted-average number of common shares outstanding for the reporting period. Diluted net loss per share is computed on the basis of the weighted-average number of common shares outstanding plus potential dilutive common shares outstanding using the treasury-stock method. Potential dilutive common shares consist of outstanding common stock options and warrants.  There is no difference between the Company’s net loss and comprehensive loss.

7


The Company included the following in the calculation of basic and diluted net loss per share (in thousands, except per share data):

Three months ended

Six months ended

June 30,

June 30,

2021

2020

2021

2020

Numerator:

Net loss

$

(5,125)

$

(1,136)

$

(8,651)

$

(2,286)

Denominator:

Shares used in computing net loss per share, basic and diluted

39,953 

24,779 

38,843 

24,630 

Net loss per share, basic and diluted

$

(0.13)

$

(0.05)

$

(0.22)

$

(0.09)

Dilutive common stock options excluded from net loss per share, diluted

2,129 

2,294 

2,163 

2,177 

Common stock warrants excluded from net loss per share, diluted

1,427 

1,427 

The Company excluded common stock options and warrants outstanding from the calculation of net loss per share, diluted, because the effect of including options and warrants outstanding would have been anti-dilutive.

Fair Value of Financial Instruments   

Financial instruments include accounts payable and accrued liabilities. The estimated fair value of certain financial instruments may be determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value; therefore, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange. The effect of using different market assumptions and/or estimation methodologies may be material to the estimated fair value amounts. The carrying amounts of accounts payable and accrued liabilities are at cost, which approximates fair value due to the short maturity of those instruments.

Research Contract Costs and Accruals

The Company has entered into various research and development contracts with research institutions and other third-party vendors. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from actual costs.

Incentive Bonus Plan

In 2020, the Company established the 2020 Cash Incentive Bonus Plan (the “Plan”) to incentivize Plan participants. Awards under the Plan are accounted for as liability awards under Accounting Standards Codification (ASC) 718 “Stock-based Compensation”. The fair value of each potential Plan award will be determined once a grant date occurs and will be remeasured each reporting period. Compensation expense associated with the Plan will be recognized over the expected achievement period for each Plan award, when a Performance Condition is considered probable of being met. See Note 8 for further discussion of the Plan.

Leases

The Company recognizes assets and liabilities that arise from leases. For operating leases, the Company is required to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments during the lease term, in the condensed balance sheets. The Company elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company does not recognize right-of-use assets or lease liabilities. As the Company`s leases do not provide an implicit rate, it uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

8


Income Taxes 

The Company accounts for income taxes under the asset and liability method.  Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax balances are adjusted to reflect tax rates based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. The Company has accumulated significant deferred tax assets that reflect the tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of certain deferred tax assets is dependent upon future earnings. The Company is uncertain about the timing and amount of any future earnings. Accordingly, the Company offsets these deferred tax assets with a valuation allowance.

The Company accounts for uncertain tax positions in accordance with ASC 740, “Income Taxes”, which clarifies the accounting for uncertainty in tax positions. These provisions require recognition of the impact of a tax position in the Company’s condensed financial statements only if that position is more likely than not of being sustained upon examination by taxing authorities, based on the technical merits of the position. Any interest and penalties related to uncertain tax positions will be reflected as a component of income tax expense.

 

Note 3. Prepaid and Other Assets

Prepaid and other assets at June 30, 2021 and December 31, 2020 consisted of the following (in thousands):

June 30, 2021

December 31, 2020

Prepaid insurance

$

$

457 

Contract research organization deposit

1,166 

Other

138 

31 

Total prepaid expenses and other current assets

$

1,304 

$

488 

Contract research organization deposit

$

1,420 

$

Total other assets

$

1,420 

$

Note 4. Stockholders’ Equity and Stock-Based Compensation Expense

Stockholders’ Equity Activity during the Six Months Ended June 30, 2021 and 2020

During the six months ended June 30, 2021 and 2020, the Company’s common stock outstanding and stockholders’ equity changed as follows:

Common Stock

Stockholders' equity
(in thousands)

Balance at December 31, 2019

21,841,810 

$

22,099 

Stock-based compensation for:

Stock options for employees

261 

Stock options for non-employees

9 

Proceeds from exercise of common stock warrants

2,888,092 

3,613 

Net loss

(1,150)

Balance at March 31, 2020

24,729,902 

$

24,832 

Stock-based compensation for:

Stock options for employees

249 

Stock options for non-employees

3 

Proceeds from exercise of common stock warrants

189,431 

236 

Net loss

(1,136)

Balance at June 30, 2020

24,919,333 

$

24,184 

9


Balance at December 31, 2020

35,237,987 

$

92,200 

Stock-based compensation for:

Stock options for employees

249 

Stock options for non-employees

1 

Proceeds from exercise of common stock warrants

554,019 

692 

Exercise of stock options

135,015 

1,746 

Proceeds from registered direct offering of common stock

4,081,633 

189,825 

Net loss

(3,526)

Balance at March 31, 2021

40,008,654 

$

281,187 

Stock-based compensation for:

Stock options for employees

410 

Stock options for non-employees

5 

Exercise of stock options

3,240 

3 

Net loss

(5,125)

Balance at June 30, 2021

40,011,894 

$

276,480 

2021 Registered Direct Offering

On February 12, 2021, the Company completed a common stock offering pursuant to which certain investors purchased 4,081,633 shares of common stock at a price of $49.00 per share. Net proceeds of the offering were approximately $189.8 million after deducting offering expenses.

At-the-Market Common Stock Offering

In March 2020, the Company established an at-the-market offering program (“ATM”) to sell, from time to time, shares of Company common stock having an aggregate offering price of up to $100 million in transactions pursuant to a shelf registration statement that was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on May 5, 2020. The Company is obligated to pay a commission of 3.0% of the gross proceeds from the sale of shares of common stock in the offering. The Company is not obligated to sell any shares in the offering.

There were no common stock sales under the ATM during the three and six months ended June 30, 2021 and 2020.

Common Stock Warrants

In August 2018, the Company issued warrants to purchase up to an aggregate of 9.1 million shares of its common stock in conjunction with an offering of its common stock. 

The Company did not receive any proceeds from exercise of common stock warrants during the three months ended June 30, 2021. During the three months ended June 30, 2020, the Company received proceeds of $0.2 million from the exercise of 0.2 million shares pursuant to warrants.

During the six months ended June 30, 2021, the Company received proceeds of $0.7 million from the exercise of 0.6 million shares pursuant to warrants. During the six months ended June 30, 2020, the Company received proceeds of $3.8 million from the exercise of 3.1 million shares pursuant to warrants.

There were no remaining common stock warrants outstanding as of June 30, 2021.

Stock Option and Performance Award Activity in 2021

During the six months ended June 30, 2021, stock options and unvested Performance Awards outstanding under the Company’s stock option plans changed as follows:

10


Stock Options

Performance Awards

Outstanding as of December 31, 2020

2,817,504 

138,055 

Options granted

85,000 

Options exercised

(234,994)

Options forfeited/canceled

(9,338)

Outstanding as of June 30, 2021

2,658,172 

138,055 

The weighted average exercise price of options outstanding at June 30, 2021 was $11.40. As outstanding options vest over the current remaining vesting period of 2.2 years, the Company expects to recognize stock-based compensation expense of $6.7 million. If and when outstanding Performance Awards vest, the Company will recognize stock-based compensation expense of $2.3 million over the implicit service period.

During the three months ended June 30, 2021, there were 71,596 stock options exercised. Of the stock options exercised, 68,356 stock options were net settled in satisfaction of the exercise price, with no cash proceeds received. Cash proceeds to the Company totaled $3,000 during the three months ended June 30, 2021.

During the six m