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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

Form 10-Q

 

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

For the quarterly period ended September 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 001-35996

 

Organovo Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

27-1488943

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

440 Stevens Ave, Suite 200,

Solana Beach, CA 92075

 

(858) 224-1000

(Address of principal executive offices and zip code)

 

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading symbol

Name of Each Exchange on which registered

Common Stock, $0.001 par value

ONVO

The Nasdaq Stock Market LLC

 

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

 

 

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 November 1, 2021, a total of 8,705,454 shares of the registrant’s Common Stock, $0.001 par value, were outstanding.

 

 

 

 

 


 

 

ORGANOVO HOLDINGS, INC.

INDEX

PART I. FINANCIAL INFORMATION

 

Item 1.

 

Financial Statements

 

3

 

 

Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and March 31, 2021

 

3

 

 

Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss for the Three and Six Months Ended September 30, 2021 and 2020

 

4

 

 

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended September 30, 2021 and 2020

 

5

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2021 and 2020

 

6

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

7

Item 2.

 

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

 

15

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

22

Item 4.

 

Controls and Procedures

 

22

 

PART II. OTHER INFORMATION

Item 1.

 

Legal Proceedings

 

23

Item 1A.

 

Risk Factors

 

23

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

40

Item 3.

 

Defaults Upon Senior Securities

 

40

Item 4.

 

Mine Safety Disclosure

 

40

Item 5.

 

Other Information

 

40

Item 6.

 

Exhibits

 

41

 

 

 

2


 

 

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

Organovo Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands except for share and per share data)

 

 

 

September 30, 2021

 

 

March 31, 2021

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

33,791

 

 

$

37,364

 

Prepaid expenses and other current assets

 

 

512

 

 

 

1,034

 

Total current assets

 

 

34,303

 

 

 

38,398

 

Fixed assets, net

 

 

552

 

 

 

381

 

Restricted cash

 

 

111

 

 

 

111

 

Prepaid expenses and other assets, net

 

 

915

 

 

 

1,027

 

Total assets

 

$

35,881

 

 

$

39,917

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

958

 

 

$

281

 

Accrued expenses

 

 

717

 

 

 

440

 

Total current liabilities

 

 

1,675

 

 

 

721

 

Stockholders’ Equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized, 8,705,454

   and 8,670,492 shares issued and outstanding at September 30, 2021 and

   March 31, 2021, respectively

 

 

9

 

 

 

9

 

Additional paid-in capital

 

 

336,526

 

 

 

335,479

 

Accumulated deficit

 

 

(302,328

)

 

 

(296,291

)

Treasury stock, 46 shares at cost

 

 

(1

)

 

 

(1

)

Total stockholders’ equity

 

 

34,206

 

 

 

39,196

 

Total Liabilities and Stockholders’ Equity

 

$

35,881

 

 

$

39,917

 

 

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

 

3


 

 

Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Loss

(in thousands except share and per share data)

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2021

 

 

September 30, 2020

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

$

679

 

 

$

28

 

 

$

1,259

 

 

$

28

 

Selling, general and administrative expenses

 

 

2,828

 

 

 

8,922

 

 

 

4,807

 

 

 

11,708

 

Total costs and expenses

 

 

3,507

 

 

 

8,950

 

 

 

6,066

 

 

 

11,736

 

Loss from Operations

 

 

(3,507

)

 

 

(8,950

)

 

 

(6,066

)

 

 

(11,736

)

Other Income (Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain (loss) on fixed asset disposals

 

 

 

 

 

(5

)

 

 

 

 

 

1

 

Interest income

 

 

2

 

 

 

4

 

 

 

4

 

 

 

12

 

Other income

 

 

 

 

 

1

 

 

 

25

 

 

 

6

 

Total Other Income (Expense)

 

 

2

 

 

 

 

 

 

29

 

 

 

19

 

Income Tax Expense

 

 

 

 

 

 

 

 

 

 

 

(2

)

Net Loss

 

$

(3,505

)

 

$

(8,950

)

 

$

(6,037

)

 

$

(11,719

)

Net loss per common share—basic and diluted

 

$

(0.40

)

 

$

(1.36

)

 

$

(0.69

)

 

$

(1.79

)

Weighted average shares used in computing net

   loss per common share—basic and diluted

 

 

8,705,327

 

 

 

6,565,245

 

 

 

8,701,029

 

 

 

6,547,430

 

Comprehensive Loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(3,505

)

 

$

(8,950

)

 

$

(6,037

)

 

$

(11,719

)

Comprehensive loss

 

$

(3,505

)

 

$

(8,950

)

 

$

(6,037

)

 

$

(11,719

)

 

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

 

4


 

 

Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

 

 

 

Three and Six Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury Stock

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Total

 

Balance at March 31, 2020

 

 

6,528

 

 

$

7

 

 

$

306,089

 

 

 

 

 

$

 

 

$

(279,465

)

 

$

26,631

 

Issuance of common stock under employee and

   director stock option, RSU, and purchase plans

 

 

3

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

 

 

(1

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

925

 

 

 

 

 

 

 

 

 

 

 

 

925

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,769

)

 

 

(2,769

)

Balance at June 30, 2020  (Unaudited)

 

 

6,531

 

 

$

7

 

 

$

307,013

 

 

 

 

 

$

 

 

$

(282,234

)

 

$

24,786

 

Issuance of common stock under employee and

   director stock option, RSU, and purchase plans

 

 

201

 

 

 

 

 

 

13

 

 

 

 

 

 

 

 

 

 

 

 

13

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,138

 

 

 

 

 

 

 

 

 

 

 

 

4,138

 

Treasury stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,950

)

 

 

(8,950

)

Balance at September 30, 2020 (Unaudited)

 

 

6,732

 

 

$

7

 

 

$

311,164

 

 

 

 

 

$

(1

)

 

$

(291,184

)

 

$

19,986

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three and Six Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Treasury Stock

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Shares

 

 

Amount

 

 

Deficit

 

 

Total

 

Balance at March 31, 2021

 

 

8,671

 

 

$

9

 

 

$

335,479

 

 

 

 

 

$

(1

)

 

$

(296,291

)

 

$

39,196

 

Issuance of common stock from public offering, net

 

 

27

 

 

 

 

 

 

251

 

 

 

 

 

 

 

 

 

 

 

 

251

 

Stock-based compensation

 

 

 

 

 

 

 

 

415

 

 

 

 

 

 

 

 

 

 

 

 

415

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,532

)

 

 

(2,532

)

Balance at June 30, 2021 (Unaudited)

 

 

8,698

 

 

$

9

 

 

$

336,145

 

 

 

 

 

$

(1

)

 

$

(298,823

)

 

$

37,330

 

Issuance of common stock under employee and

   director stock option, RSU, and purchase plans

 

 

7

 

 

 

 

 

 

(45

)

 

 

 

 

 

 

 

 

 

 

 

(45

)

Stock-based compensation

 

 

 

 

 

 

 

 

426

 

 

 

 

 

 

 

 

 

 

 

 

426

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,505

)

 

 

(3,505

)

Balance at September 30, 2021 (Unaudited)

 

 

8,705

 

 

$

9

 

 

$

336,526

 

 

 

 

 

$

(1

)

 

$

(302,328

)

 

$

34,206

 

 

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

5


 

Organovo Holdings, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

Cash Flows From Operating Activities

 

 

 

 

 

 

 

 

Net loss

 

$

(6,037

)

 

$

(11,719

)

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

 

 

 

 

 

 

 

 

Gain on disposal of fixed assets

 

 

 

 

 

1

 

Depreciation and amortization

 

 

59

 

 

 

8

 

Stock-based compensation

 

 

841

 

 

 

5,063

 

Increase (decrease) in cash resulting from changes in:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

92

 

Prepaid expenses and other assets

 

 

627

 

 

 

(2,011

)

Accounts payable

 

 

677

 

 

 

(519

)

Accrued expenses

 

 

277

 

 

 

(633

)

Net cash used in operating activities

 

 

(3,556

)

 

 

(9,718

)

Cash Flows From Investing Activities

 

 

 

 

 

 

 

 

Purchases of fixed assets

 

 

(223

)

 

 

 

Proceeds from disposals of fixed assets

 

 

 

 

 

7

 

Net cash provided by (used in) investing activities

 

 

(223

)

 

 

7

 

Cash Flows From Financing Activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

251

 

 

 

 

Employee taxes paid related to net share settlement of equity awards

 

 

(45

)

 

 

(2

)

Proceeds from exercise of stock options

 

 

 

 

 

14

 

Purchase of treasury stock

 

 

 

 

 

(1

)

Net cash provided by financing activities

 

 

206

 

 

 

11

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(3,573

)

 

 

(9,700

)

Cash, cash equivalents, and restricted cash at beginning of period

 

 

37,475

 

 

 

27,356

 

Cash, cash equivalents, and restricted cash at end of period

 

$

33,902

 

 

$

17,656

 

Reconciliation of cash, cash equivalents, and restricted cash to the condensed

   consolidated balance sheets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

33,791

 

 

$

17,656

 

Restricted cash

 

 

111

 

 

 

 

Total cash, cash equivalent and restricted cash

 

$

33,902

 

 

$

17,656

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

 

 

Fixed asset reclass

 

$

 

 

$

31

 

Income taxes paid

 

$

 

 

$

2

 

 

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

 

 

6


 

 

Organovo Holdings, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1. Description of Business

Nature of Operations

Organovo Holdings, Inc. (“Organovo Holdings,” “Organovo,” and the “Company”) is an early-stage biotechnology company that focuses on building high fidelity, 3D tissues that recapitulate key aspects of human disease. The Company uses these models to identify gene targets capable of modulating the disease phenotype across multiple patients and intends to initiate drug discovery programs around these validated targets. The Company is initially targeting the intestine and has ongoing 3D tissue development efforts in Ulcerative colitis (“UC”) and Crohn’s disease (“CD”). The Company intends to add additional tissues/diseases/targets to its portfolio in the coming year. In line with these plans, the Company is building upon both its external and in house scientific expertise, which will be essential to its drug development effort.

The Company uses its proprietary technology to build functional 3D human tissues that mimic key aspects of native human tissue composition, architecture, function and disease. Organovo’s advances include cell type-specific compartments, prevalent intercellular tight junctions, and the formation of microvascular structures. Management believes these attributes can enable critical complex, multicellular disease models that can be used to develop clinically effective drugs for a variety of therapeutic areas.

The Company’s NovoGen Bioprinters® are automated devices that enable the fabrication of 3D living tissues comprised of mammalian cells. The Company believes that the use of its bioprinting platform as well as complementary 3D technologies will allow it to develop an understanding of disease biology that leads to validated novel drug targets, and that it can develop therapeutics to those targets to treat disease.

The majority of the Company’s current focus is in inflammatory bowel disease (“IBD”), including CD and UC.  The Company expects to create disease models, leveraging its prior work including the work found in its peer-reviewed publication on bioprinted intestinal tissues (Madden et al. Bioprinted 3D Primary Human Intestinal Tissues Model Aspects of Native Physiology and ADME/Tox Functions. iScience. 2018 Apr 27;2:156-167. doi: 10.1016/j.isci.2018.03.015.)  The Company’s current understanding of intestinal tissue models and IBD disease models leads it to believe that it can create models that provide greater insight into the biology of these diseases than are generally currently available.  Using these disease models, the Company intends to identify and validate therapeutic targets.  After finding novel therapeutic drug targets, the Company intends to develop novel small molecule, antibody, or other therapeutic drug candidates to treat the disease, and advance these novel drug candidates towards an Investigational New Drug (“IND”) filing and clinical trials.  

The Company expects to broaden its work into additional therapeutic areas over time and is currently exploring specific tissues for development.  In the Company’s work to identify the areas of interest, it evaluates areas that might be better served with 3D disease models than currently available models as well as the potential commercial opportunity.

Except where specifically noted or the context otherwise requires, references to “Organovo Holdings”, “the Company”, and “Organovo” in these notes to the unaudited condensed consolidated financial statements refers to Organovo Holdings, Inc. and its wholly owned subsidiaries, Organovo, Inc. and Opal Merger Sub, Inc.

 

COVID-19

In December 2019, a respiratory illness caused by a novel strain of coronavirus, SARS-CoV-2, causing the Coronavirus Disease 2019, also known as COVID-19 emerged. While initially the outbreak was largely concentrated in China, it has since spread globally and has been declared a pandemic by the World Health Organization. Global health concerns relating to the COVID-19 pandemic have been weighing on the macroeconomic environment, and the pandemic has significantly increased economic volatility and uncertainty. The pandemic has resulted in government authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. In 2020, the Company adapted quickly to COVID-19, instituting universal masking and distancing in the lab and in the offices. The Company encouraged and enabled remote work whenever possible. The Company instituted safety check software to monitor symptoms and successfully maintained a robust level of progress while ensuring the safety of its employees. As the viral load and variants allow, the Company intends to carefully return to more typical lab and office work flow.

The extent to which COVID-19 impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the rise of vaccine-resistant variants, duration of the outbreak, travel bans and restrictions, quarantines, shelter-in-place or stay-at-home orders, and business shutdowns. In particular, the continued COVID-19

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pandemic could adversely impact various aspects of the Company’s operations, including among others, the ability to raise additional capital, the timing and ability to pursue the Company’s strategy, given the impact the pandemic may have on the manufacturing and supply chain, sales and marketing and clinical trial operations of potential strategic partners, and the ability to advance its research and development activities and pursue development of its pipeline products, each of which could have an adverse impact on the Company’s business and financial results.

 

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not necessarily include all information and notes required by GAAP for complete financial statements. The condensed consolidated balance sheet at March 31, 2021 is derived from the Company’s audited consolidated balance sheet at that date.

The unaudited condensed consolidated financial statements include the accounts of Organovo and its wholly owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments, which are only normal and recurring, necessary for a fair statement of the Company’s financial position, results of operations, stockholders’ equity and cash flows. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended March 31, 2021, as filed with the Securities and Exchange Commission (“SEC”). Operating results for any interim period are not necessarily indicative of the operating results for any other interim period or the Company’s full fiscal year ending March 31, 2022 (see “Note 1. Description of Business”).

 

Liquidity

As of September 30, 2021, the Company had cash and cash equivalents of approximately $33.8 million, restricted cash of approximately $0.1 million and an accumulated deficit of approximately $302.3 million. The restricted cash was pledged as collateral for a letter of credit that the Company is required to maintain as a security deposit under the terms of the lease agreement for its facilities. The Company also had negative cash flows from operations of approximately $3.6 million during the six months ended September 30, 2021.

Through September 30, 2021, the Company has financed its operations primarily through the sale of convertible notes, warrants, the private placement of equity securities, the sale of common stock through public and at-the-market (“ATM”) offerings, and through revenue derived from product and research service-based agreements, collaborative agreements, licenses, and grants. During the three and six months ended September 30, 2021, the Company issued 0 and 27,545 shares of its common stock through its ATM facility and received net proceeds of approximately $0 and $0.3 million, respectively.

The Company believes its cash and cash equivalents on hand will be sufficient to meet its financial obligations for at least the next 12 months of operations. As the Company continues to recommence operations and focus its efforts on drug discovery and development, it will need to raise additional capital to implement this new business plan. The Company cannot predict with certainty the exact amount or timing for any future capital raises. If required, the Company may seek to raise additional capital through debt or equity financings, or through some other financing arrangement. However, the Company cannot be sure that additional financing will be available if and when needed, or that, if available, it can obtain financing on terms favorable to its stockholders. Any failure to obtain financing when required will have a material adverse effect on the Company’s business, operating results, financial condition and ability to continue as a going concern.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Significant estimates used in preparing the unaudited condensed consolidated financial statements include those assumed in the valuation of stock-based compensation expense and the valuation allowance on deferred tax assets. On an ongoing basis, management reviews these estimates and assumptions. Though the impact of the COVID-19 pandemic to its business and operating results presents additional uncertainty, the Company continues to use the best information available to inform its significant accounting estimates.

Net Loss Per Share

Basic and diluted net loss per share has been computed using the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares used to compute diluted loss per share excludes any assumed exercise of

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stock options, shares reserved for purchase under the Company’s 2016 Employee Stock Purchase Plan (“ESPP”), the assumed vesting of restricted stock units (“RSUs”), and shares subject to repurchase as the effect would be anti-dilutive. No dilutive effect was calculated for the three and six months ended September 30, 2021 and 2020 as the Company reported a net loss for each respective period and the effect would have been anti-dilutive.

Common stock equivalents excluded from computing diluted net loss per share due to their anti-dilutive effect were approximately 0.7 million at September 30, 2021 and 0.9 million at September 30, 2020.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies. Unless otherwise stated, the Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its consolidated financial position or results of operations upon adoption.

Note 3. Stockholders’ Equity

Stock-based Compensation Expense and Valuation Information

Stock-based awards include stock options and RSUs under the Company’s Amended and Restated 2012 Equity Incentive Plan (“2012 Plan”), inducement awards, performance-based RSUs under an Incentive Award Performance-Based Restricted Stock Unit Agreement, the Company’s 2021 Inducement Equity Incentive Plan (“Inducement Plan”), and rights to purchase stock under the ESPP. The Company calculates the grant date fair value of all stock-based awards in determining the stock-based compensation expense.

Stock-based compensation expense for all stock-based awards consists of the following (in thousands):

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2021

 

 

September 30, 2020

 

Research and development

 

$

80

 

 

$

7

 

 

$

156

 

 

$

7

 

General and administrative

 

$

346

 

 

$

4,131

 

 

$

685

 

 

$

5,056

 

Total

 

$

426

 

 

$

4,138

 

 

$

841

 

 

$

5,063

 

 

The total unrecognized compensation cost related to unvested stock option grants as of September 30, 2021 was approximately $3.4 million and the weighted average period over which these grants are expected to vest is 2.44 years.

The total unrecognized compensation cost related to unvested RSUs (not including performance-based RSUs) as of September 30, 2021 was approximately $0.2 million, which will be recognized over a weighted average period of 3.29 years.

 

The Company uses either the Black-Scholes or Monte Carlo option-pricing models to calculate the fair value of stock options, depending on the complexity of the equity grants. Stock-based compensation expense is recognized over the vesting period using the straight-line method. The assumed dividend yield is based on the Company’s expectation of not paying dividends in the foreseeable future. The Company uses the Company-specific historical volatility rate as the indicator of expected volatility. The risk-free interest rate assumption is based on U.S. Treasury rates. The weighted average expected life of options was estimated using the average of the contractual term and the weighted average vesting term of the options. The measurement and classification of share-based payments to non-employees is consistent with the measurement and classification of share-based payments to employees. The fair value of stock options was estimated at the grant date using the following weighted average assumptions:

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

Six Months Ended

 

 

Six Months Ended

 

 

 

September 30, 2021

 

 

September 30, 2020

 

 

September 30, 2021

 

 

September 30, 2020

 

Dividend yield

 

 

 

 

 

 

 

 

 

 

 

 

Volatility

 

 

116.83

%

 

 

108.39

%

 

 

116.83

%

 

 

108.39

%

Risk-free interest rate

 

 

0.73

%

 

 

0.27

%

 

 

0.73

%

 

 

0.27

%

Expected life of options

 

6.00 years

 

 

6.00 years

 

 

6.00 years

 

 

6.00 years

 

Weighted average grant

   date fair value

 

$

6.52

 

 

$

6.22

 

 

$

6.52

 

 

$

6.22

 

 

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The fair value of each RSU and performance-based RSU is recognized as stock-based compensation expense over the vesting term of the award. The fair value is based on the closing stock price on the date of the grant.

The Company uses the Black-Scholes valuation model to calculate the fair value of shares issued pursuant to the ESPP. Stock-based compensation expense is recognized over the purchase period using the straight-line method. The assumed dividend yield is based on the Company’s expectation of not paying dividends in the foreseeable future. The Company uses the Company-specific historical volatility rate as the indicator of expected volatility. The risk-free interest rate assumption is based on U.S. Treasury rates. The expected life is the 6-month purchase period. There were no participants in the ESPP for the current purchase period (beginning September 1, 2021), nor any participants in the ESPP for the comparative period.  

Preferred Stock

The Company is authorized to issue 25,000,000 shares of preferred stock. There are no shares of preferred stock currently outstanding, and the Company has no current plans to issue shares of preferred stock.

Common Stock

The Company previously had an effective shelf registration statement on Form S-3 (File No. 333-222929) and the related prospectus previously declared effective by the SEC on February 22, 2018 (the “2018 Shelf”), which registered $100.0 million of common stock, preferred stock, warrants and units, or any combination of the foregoing, that was set to expire on February 22, 2021. On January 19, 2021, the Company filed a shelf registration statement on Form S-3 (File No. 333-252224) to register $150.0 million of the Company’s common stock, preferred stock, debt securities, warrants and units, or any combination of the foregoing (the “2021 Shelf”) and a related prospectus. The 2021 Shelf was declared effective by the SEC on January 29, 2021 and replaced the 2018 Shelf at that time.

On January 29, 2021, the Company entered into a Sales Agreement (“Sales Agreement”) with H.C. Wainwright & Co., LLC and Jones Trading Institutional Services LLC (each an “Agent” and together, the “Agents”) and filed a prospectus supplement to the 2021 Shelf, pursuant to which the Company could offer and sell, from time to time through the Agents, shares of its common stock in at-the-market sales transactions having an aggregate offering price of up to $50.0 million. Any shares offered and sold will be issued pursuant to the 2021 Shelf. During the three and six months ended September 30, 2021, the Company issued 0 and 27,545 shares of common stock for net proceeds of $0 million and $0.3 million in at-the-market offerings under the Sales Agreement, respectively. As of September 30, 2021, the Company has sold an aggregate of 1,580,862 shares of common stock in at-the-market offerings under the Sales Agreement, with gross proceeds of approximately $21.7 million. As of September 30, 2021, there was approximately $128.3 million available for future offerings under the 2021 Shelf, and approximately $28.3 million available for future offerings through the Company’s ATM program under the Sales Ageement.

In March 2021, the Company’s Board of Directors (“Board”) approved the Inducement Plan. The Inducement Plan authorized the issuance of up to 750,000 shares of common stock for awards of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, RSUs, performance units, performance shares, and other stock or cash awards.

RSUs

The following table summarizes the Company’s RSUs (not including performance-based RSUs) activity from March 31, 2021 through September 30, 2021:

 

 

 

Number of

Shares

 

 

Weighted

Average Price

 

Unvested at March 31, 2021

 

 

21,057

 

 

$

10.79

 

Granted

 

 

 

 

$

 

Vested

 

 

(290

)

 

$

21.72

 

Cancelled / forfeited

 

 

 

 

$

 

Unvested at September 30, 2021

 

 

20,767

 

 

$

10.64

 

 

Performance-based RSUs

 

On July 2, 2019, the Company issued Performance-Based Restricted Stock Unit Awards (the “PBRSU Retention Awards”) for an aggregate of 301,391 shares of common stock to its management team. The PBRSUs were issued pursuant to the 2012 Plan. The PBRSU Retention Awards vest in full upon the earlier of: (i) the Company’s engagement in a pre-IND meeting with the FDA, (ii) twenty-four months from the grant date, or (iii) a change in control. As of September 30, 2021, 111,682 shares were forfeited due to terminations, vesting for 177,480 shares was accelerated due to a change in control that was triggered by changes to the Board in 2020, and the remaining 12,229 shares vested on July 1, 2021, twenty-four months from the grant date, as these particular shares required two of the conditions to be met in order to vest.

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The following table summarizes the Company’s performance-based RSUs activity from March 31, 2021 through September 30, 2021:

 

 

 

Number of

Shares

 

 

Weighted

Average Price

 

Unvested at March 31, 2021

 

 

12,229

 

 

$

9.80

 

Granted

 

 

 

 

$

 

Vested

 

 

(12,229

)

 

$

9.80

 

Cancelled / forfeited

 

 

 

 

$

 

Unvested at September 30, 2021

 

 

 

 

$

 

 

Stock Options

The following table summarizes the Company’s stock option activity from March 31, 2021 to September 30, 2021:

 

 

 

Options

Outstanding

 

 

Weighted

Average

Exercise Price

 

 

Aggregate

Intrinsic

Value

 

Outstanding at March 31, 2021

 

 

1,004,655

 

 

$

20.03

 

 

$

856,400

 

Options granted

 

 

12,000

 

 

$

7.66

 

 

$

 

Options cancelled / forfeited

 

 

(354,530

)

 

$

40.95

 

 

$

 

Options exercised

 

 

 

 

$

 

 

$

 

Outstanding at September 30, 2021