UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
Zevra Therapeutics, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| The (Nasdaq Global Select 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.
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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 | ☐ |
| | ☒ | Smaller reporting company | |
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| 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
As of November 3, 2023, the registrant had
ZEVRA THERAPEUTICS, INC.
FORM 10-Q
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as “may,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “assume,” “intend,” “potential,” “continue” or other similar words or the negative of these terms. We have based these forward-looking statements largely on our current expectations about future events and financial trends that we believe may affect our business, financial condition and results of operations. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in Part II, Item 1A. "Risk Factors" and elsewhere in this Quarterly Report on Form 10-Q and Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 7, 2023. Accordingly, you should not place undue reliance upon these forward-looking statements. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur, the timing of events and circumstances and actual results could differ materially from those anticipated in the forward-looking statements. Forward-looking statements contained in this report include, but are not limited to, statements about:
| ● | the consummation of the Proposed Merger (as defined below); | |
| ● | transaction fees and Merger-related costs in connection with the Proposed Merger; | |
| ● | our ability to integrate Acer (as defined below) into our business successfully or realize the anticipated synergies and related benefits of the Proposed Merger; | |
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the progress of, outcome or and timing of any regulatory approval for any of our product candidates and the expected amount or timing of any payment related thereto under any of our collaboration agreements; |
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the progress of, timing of and expected amount of expenses associated with our research, development and commercialization activities; |
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our ability to raise additional funds on commercially reasonable terms, or at all, in order to support our continued operations; |
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the sufficiency of our cash resources to fund our operating expenses and capital investment requirements for any period; |
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the expected timing of our clinical trials for our product candidates and the availability of data and results of those trials; |
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our expectations regarding federal, state and foreign regulatory requirements; |
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the potential therapeutic benefits and effectiveness of our products and product candidates; |
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the size and characteristics of the markets that may be addressed by our products and product candidates; |
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our intention to seek to establish, and the potential benefits to us from, any strategic collaborations or partnerships for the development or sale of our products and product candidates; if approved; |
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our expectations as to future financial performance, expense levels and liquidity sources; |
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the timing of commercializing our products and product candidates, if approved; |
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| ● | senior leadership and board member transitions and refreshments; and | |
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other factors discussed elsewhere in this report. |
The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We have included or made reference to important factors in the cautionary statements included in this report, particularly in the section entitled "Risk Factors" where we make reference to Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 7, 2023, that we believe 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, joint ventures or investments we may make. Except as required by law, we do not assume any intent to update any forward-looking statements after the date on which the statement is made, whether as a result of new information, future events or circumstances or otherwise.
Note Regarding Company Reference
Unless the context otherwise requires, we use the terms “Zevra,” “Company,” “we,” “us” and “our” in this Quarterly Report on Form 10-Q to refer to Zevra Therapeutics, Inc., formerly known as KemPharm, Inc. prior to February 21, 2023. We have proprietary rights to a number of trademarks used in this Quarterly Report on Form 10-Q that are important to our business, including LAT® and the Zevra logo. All other trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. Solely for convenience, the trademarks and trade names in this Quarterly Report on Form 10-Q are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.
On August 30, 2023, the Company and Aspen Z Merger Sub, Inc., an indirect wholly-owned subsidiary of Zevra (“Merger Sub”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Acer Therapeutics Inc. (the “Proposed Merger”). At the time the Merger becomes effective (the "Effective Time"), Merger Sub will merge with and into Acer, with Acer continuing as the surviving entity and as a wholly-owned subsidiary of Zevra. The Merger is subject to certain customary closing conditions, including stockholder approval by Acer’s stockholders. Both companies will continue to operate their businesses independently until the close of the Merger. The Merger is expected to close in the fourth quarter of 2023.
PART I — FINANCIAL INFORMATION
| Item 1. |
unaudited condensed CONSOLIDATED Financial Statements |
ZEVRA THERAPEUTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and par value amounts)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Securities at fair value | ||||||||
| Secured corporate notes | ||||||||
| Short-term investments - other | ||||||||
| Accounts and other receivables | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Inventories | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right-of-use assets | ||||||||
| Long-term investments - other | ||||||||
| Other long-term assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and stockholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Current portion of operating lease liabilities | ||||||||
| Current portion of discount and rebate liabilities | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Line of credit payable | ||||||||
| Secured promissory note | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Discount and rebate liabilities, less current portion | ||||||||
| Other long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note D) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock: | ||||||||
| Undesignated preferred stock, $ par value, shares authorized, shares issued or outstanding as of September 30, 2023 or December 31, 2022 | ||||||||
| Common stock, $ par value, shares authorized, shares issued and shares outstanding as of September 30, 2023; shares issued and shares outstanding as of December 31, 2022 | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock, at cost | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive (loss) income | ( | ) | ||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
| Three months ended September 30, |
Nine months ended September 30, |
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| 2023 |
2022 |
2023 |
2022 |
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| Revenue, net |
$ | $ | $ | $ | ||||||||||||
| Operating expenses: |
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| Cost of revenue |
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| Research and development |
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| Selling, general and administrative |
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| Acquired in-process research and development |
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| Total operating expenses |
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| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
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| Other income (expense): |
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| Interest expense |
( |
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) | ( |
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| Fair value adjustment related to derivative and warrant liability |
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| Fair value adjustment related to investments |
( |
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| Interest and other income, net |
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| Total other income (expense) |
( |
) | ( |
) | ||||||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income tax (expense) benefit |
( |
) | ||||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Basic and diluted net loss per share of common stock: |
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| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of shares of common stock outstanding: |
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| Basic and diluted |
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See accompanying notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
| Three months ended September 30, |
Nine months ended September 30, |
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| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive loss: |
||||||||||||||||
| Foreign currency translation adjustment |
( |
) | ||||||||||||||
| Other comprehensive loss: |
$ | ( |
) | |||||||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands)
| Additional |
Treasury |
Other |
Total |
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| Common |
Paid-in |
Stock, |
Accumulated |
Comprehensive |
Stockholders' |
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| Stock |
Capital |
at cost |
Deficit |
Income (loss) |
Equity |
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| Balance as of January 1, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||
| Net loss |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
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| Shares repurchased as part of the Share Repurchase Program |
( |
) | ( |
) | ||||||||||||||||||||
| Issuance of common stock in exchange for consulting services |
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| Severance expense |
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| Other comprehensive loss |
( |
) | ( |
) | ||||||||||||||||||||
| Balance as of March 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
| Net loss |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
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| Issuance of common stock in exchange for consulting services |
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| Severance expense |
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| Issuance of common stock as part of the Employee Stock Purchase Plan |
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| Other comprehensive loss |
( |
) | ( |
) | ||||||||||||||||||||
| Balance as of June 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
| Net loss |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
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| Issuance of common stock in connection with the Proposed Merger (Note K) |
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| Issuance of common stock in exchange for consulting services |
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| Severance expense |
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| Other comprehensive loss |
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| Balance as of September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
ZEVRA THERAPEUTICS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY, CONTINUED
(in thousands)
| Additional |
Other |
Total |
||||||||||||||||||||||
| Common |
Paid-in |
Treasury |
Accumulated |
Comprehensive |
Stockholders' |
|||||||||||||||||||
| Stock |
Capital |
Stock, at cost |
Deficit |
Income |
Equity |
|||||||||||||||||||
| Balance as of January 1, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||
| Net loss |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||
| Shares repurchased as part of the Share Repurchase Program |
( |
) | ( |
) | ( |
) | ||||||||||||||||||
| Issuance of common stock in exchange for consulting services |
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| Balance as of March 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||
| Net income |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
||||||||||||||||||||||||
| Issuance of common stock in exchange for consulting services |
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| Issuance of common stock as part of the Employee Stock Purchase Plan |
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| Balance as of June 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||
| Net loss |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation expense |
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| Issuance of common stock in exchange for consulting services |
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| Other comprehensive income |
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| Balance as of September 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Nine months ended September 30, |
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| 2023 |
2022 |
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| Cash flows from operating activities: |
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| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Stock-based compensation expense |
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| Severance expense |
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| Depreciation and amortization expense |
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| Fair value adjustment related to derivative and warrant liability |
( |
) | ||||||
| Fair value adjustment related to investments |
( |
) | ||||||
| Loss on sublease and disposal of property and equipment |
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| Consulting fees paid in common stock |
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| Acquired in-process research and development |
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| Gain on foreign currency exchange |
( |
) | ||||||
| Change in assets and liabilities: |
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| Accounts and other receivables |
( |
) | ( |
) | ||||
| Prepaid expenses and other assets |
( |
) | ||||||
| Inventories |
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| Operating lease right-of-use assets |
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| Long-term investments - other |
( |
) | ||||||
| Accounts payable and accrued expenses |
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| Discount and rebate liability |
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| Operating lease liabilities |
( |
) | ( |
) | ||||
| Other liabilities |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| Cash flows from investing activities: |
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| Acquisitions, net |
( |
) | ||||||
| Purchases of property and equipment |
( |
) | ( |
) | ||||
| Purchases of investments |
( |
) | ( |
) | ||||
| Purchases of secured corporate notes |
( |
) | ||||||
| Maturities of investments |
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| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
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| Proceeds from issuance of debt |
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| Repayment of debt |
( |
) | ||||||
| Proceeds from insurance financing arrangements |
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| Proceeds from Employee Stock Purchase Plan |
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| Payments of principal on insurance financing arrangements |
( |
) | ( |
) | ||||
| Payments to repurchase shares as part of the Share Repurchase Program |
( |
) | ( |
) | ||||
| Payment of offering costs |
( |
) | ||||||
| Repayment of principal on finance lease liabilities |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
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| Effect of exchange rate changes on cash and cash equivalents |
( |
) | ||||||
| Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
| Cash and cash equivalents, beginning of period |
||||||||
| Cash and cash equivalents, end of period |
$ | $ | ||||||
| Supplemental cash flow information: |
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| Cash paid for interest |
$ | $ | ||||||
| Supplemental disclosure of noncash investing activities: |
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| Issuance of common stock for Proposed Merger (Note K) |
( |
) | ||||||
| Supplemental disclosure of noncash investing activities: |
||||||||
| Issuance of secured promissory note for Proposed Merger (Note K) |
( |
) | ||||||
See accompanying notes to unaudited condensed consolidated financial statements.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| A. | Description of Business, Basis of Presentation, and Significant Transactions |
Organization
Zevra Therapeutics, Inc. (the "Company") is a rare disease company melding science, data and patient need to create transformational therapies for diseases with limited or no treatment options. The Company has a diverse portfolio of products and product candidates, which includes a combination of both a clinical stage pipeline and commercial stage assets. The Company's pipeline includes arimoclomol, an orally-delivered, first-in-class investigational product candidate being developed for Niemann-Pick disease type C ("NPC"), which has been granted orphan drug designation, Fast-track designation, Breakthrough Therapy designation and rare pediatric disease designation for the treatment of NPC by the U.S. Food and Drug Administration ("FDA") and orphan medical product designation for the treatment of NPC by the European Medicines Agency ("EMA"). KP1077 is the Company's lead clinical development product candidate which is being developed as a treatment for idiopathic hypersomnia ("IH"), a rare neurological sleep disorder, and narcolepsy. KP1077 is comprised solely of serdexmethylphenidate ("SDX"), the Company's proprietary prodrug of d-methylphenidate (“d-MPH”). The FDA has granted KP1077 orphan drug designation for the treatment of IH. The Company changed its name from KemPharm, Inc. to Zevra Therapeutics, Inc. effective as of February 21, 2023. On March 1, 2023, following its name change, the Company's common stock began trading on the Nasdaq Global Select Market under the ticker symbol "ZVRA".
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and related notes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included in the accompanying consolidated financial statements. Operating results for the three and nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023.
This interim information should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the United States Securities and Exchange Commission (“SEC”) on March 7, 2023.
Basis of Presentation
The Company prepared the unaudited condensed consolidated financial statements in accordance with U.S. GAAP and the rules and regulations of the SEC and, in the Company's opinion, reflect all adjustments, including normal recurring items that are necessary.
Acer Proposed Merger
On August 30, 2023, the Company and Aspen Z Merger Sub, Inc., a wholly-owned subsidiary of Zevra (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Acer Therapeutics Inc. (“Acer”), a pharmaceutical company focused on development and commercialization of therapies for rare and life-threatening diseases (the “Proposed Merger”). At the time the Proposed Merger becomes effective (the "Effective Time"), Merger Sub will merge with and into Acer, with Acer continuing as the surviving entity and as a wholly-owned subsidiary of Zevra. In connection therewith, Zevra has also purchased Acer’s secured debt from Nantahala Capital Management, LLC ("NCM”), certain of its affiliates and certain other parties (collectively with NCM, “Nantahala”) through a series of transactions and Zevra agreed to provide Acer with a bridge loan facility for up to $
Arimoclomol Acquisition
On May 15, 2022, the Company and Zevra Denmark A/S (formerly known as KemPharm Denmark A/S prior to February 21, 2023) (“Zevra DK”), a newly formed Danish company and wholly-owned subsidiary of the Company, entered into an asset purchase agreement (the “Arimoclomol Purchase Agreement”) with Orphazyme A/S in restructuring, a Danish public limited liability company (“Orphazyme”). The Arimoclomol Purchase Agreement closed on May 31, 2022. Under the terms of the Arimoclomol Purchase Agreement, Zevra DK purchased all of the assets and operations of Orphazyme related to arimoclomol and settled all of Orphazyme’s actual outstanding liabilities to its creditors with a cash payment of $
The Company accounted for the arimoclomol acquisition as an asset acquisition as the majority of the value of the assets acquired related to the arimoclomol acquired in-process research and development (“IPR&D”) asset. The intangible asset associated with IPR&D relates to arimoclomol. The estimated fair value of $
In accordance with Accounting Standards Codification ("ASC"), Subtopic 730-10-25, Accounting for Research and Development Costs, the up-front payments to acquire a new drug compound, as well as future milestone payments when paid or payable, are immediately expensed as acquired IPR&D in transactions other than a business combination provided that the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no alternative future use. Therefore, the portion of the purchase price that was allocated to the IPR&D assets acquired was immediately expensed. Other assets acquired and liabilities assumed, were recorded at fair value. The Company also recorded a $
The following represents the consideration paid and purchase price allocation for the acquisition of arimoclomol (in thousands):
| Cash | $ | |||
| Assumed reserve liability | ||||
| Total consideration | $ | |||
| Total consideration | $ | |||
| Direct transaction costs associated with the acquisition (1) | ||||
| Total purchase price to be allocated | $ | |||
| Property and equipment, inventory and assembled workforce acquired | $ | |||
| IPR&D (2) | ||||
| Total allocated purchase price | $ |
| (1) As a result of the asset acquisition accounting, the transaction costs associated with the acquisition should be included in the costs of the assets acquired and allocated amongst qualifying assets using the relative fair value basis. The transaction costs primarily included financial advisor fees and legal expenses. | ||||
| (2) The primary asset acquired, the IPR&D asset, was expensed and the allocated transaction related costs were included with and expensed with this asset. |
Amendment to Registration Statement on Form S-3
On January 25, 2022, the Company filed an amendment to the registration statement on Form S-1 (File No. 333-250945) on Form S-3 covering the issuance of the shares of the Company's common stock issuable upon the exercise of the warrants issued in the Company's January 2021 underwritten public offering (the "Public Offering") and remaining unexercised as of the date of the amendment, which was declared effective on February 1, 2022.
Entry into 2021 ATM Agreement
On July 2, 2021, the Company entered into an equity distribution agreement (the "2021 ATM Agreement") with JMP Securities LLC ("JMP") and RBC Capital Markets, LLC ("RBCCM") under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $
Share Repurchase Program
On December 20, 2021, the Company initiated a share repurchase program (the "Share Repurchase Program") pursuant to which the Company may repurchase up to $
Reclassifications
Certain reclassifications were made to the 2022 unaudited condensed consolidated financial statements to conform to the classifications used in 2023. These reclassifications had no impact on the consolidated net loss, changes in stockholder's equity, or cash flows previously reported.
| B. | Summary of Significant Accounting Policies |
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to revenue recognition, the useful lives of property and equipment, the recoverability of long-lived assets, the incremental borrowing rate for leases, and assumptions used for purposes of determining stock-based compensation, income taxes, the fair value of investments and the fair value of the derivative and warrant liability and discount and rebate liabilities, among others. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable, the results of which form the basis for making judgments about the carrying value of assets and liabilities.
Investments
The Company maintains investment securities that are classified as available-for-sale securities for which the Company has elected the fair value option under ASC 825, Financial Instruments ("ASC 825"). As such, these securities are carried at fair value with unrealized gains and losses included in fair value adjustment related to investments on the unaudited condensed consolidated statements of operations. The securities primarily consist of U.S. Treasury securities, U.S. government-sponsored agency securities, and corporate notes and are included in securities at fair value in the unaudited condensed consolidated balance sheets. As of September 30, 2023, and December 31, 2022, the Company held securities with an aggregate fair value of $
Variable Interest Entities
The primary beneficiary of a variable interest entity ("VIE") is required to consolidate the assets and liabilities of the VIE. When the Company obtains a variable interest in another entity, it assesses at the inception of the relationship and upon occurrence of certain significant events whether the entity is a VIE, and if so, whether the Company is the primary beneficiary of the VIE based on its power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the Company's obligation to absorb losses or the rights to receive benefits from the VIE that could potentially be significant to the VIE.
To assess whether the Company has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, the Company considers all the facts and circumstances, including the Company's role in establishing the VIE and the Company's ongoing rights and responsibilities. The assessment includes identifying the activities that most significantly impact the VIE's economic performance and identifying which party, if any, has the power to direct those activities. In general, the parties that make the most significant decisions affecting the VIE (management and representation on the Board of Directors) and have the right to unilaterally remove those decision makers are deemed to have the power to direct the activities of a VIE.
To assess whether the Company has the obligation to absorb losses of the VIE or the rights to receive benefits from the VIE that could potentially be significant to the VIE, the Company considers all of its economic interests that are deemed to be variable interests in the VIE. This assessment requires judgement in determining whether these interests, in the aggregate, are considered potentially significant to the VIE.
As of September 30, 2023, the Company identified Acer Therapeutics Inc. ("Acer") to be the Company's sole interest in a VIE (Note K). The Company did not identify any interests in VIE's as of December 31, 2022.
The Company recognizes revenue in accordance with the provisions of ASC 606, Revenue from Contracts with Customers (“ASC 606”) and, as a result, follows the five-step model when recognizing revenue: 1) identifying a contract; 2) identifying the performance obligations; 3) determining the transaction price; 4) allocating the price to performance obligations; and 5) recognizing revenue when the performance obligations have been fulfilled.
Arimoclomol Early Access Program
Net revenue includes revenue from the sale of arimoclomol for the treatment of NPC under the remunerated early access compassionate use program in France (“French nATU”). An early access compassionate use program is a program giving specific patients access to a drug, which is not yet approved for commercial sale. Only drugs targeting serious or rare indications and for which there is currently no appropriate treatment are considered for early access compassionate use programs. Further, to be considered for the early access compassionate use program, the drug must have proven efficacy and safety and must either be undergoing price negotiations or seeking marketing approval.
In accordance with ASC 606, the Company recognizes revenue when fulfilling its performance obligation under the Arimoclomol Early Access Program ("Arimoclomol EAP") by transferring control of promised goods or services to its customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. In determining when the customer obtains control of the product, the Company considers certain indicators, including whether the Company has a present right to payment from the customer, whether title and/or significant risks and rewards of ownership have transferred to the customer and whether the customer acceptance has been received. Revenue is recognized net of sales deductions, including discounts, rebates, applicable distributor fees, and revenue-based taxes.
The French Health Authorities and the manufacturer have agreed to a price for sales during the French nATU, but the final transaction price depends on the terms and conditions in the contracts with the French Health Authorities and is subject to price negotiations with the French Health Authorities, following market approval. Any excess in the price charged the manufacturer compared to the price agreed with the health authorities once the drug product is approved in France must be repaid. The repayment is considered in the clawback liability (rebate). An estimate of net revenue and clawback liability are recognized using the ‘expected value’ method. Accounting for net revenue and clawback liability requires determination of the most appropriate method for the expected final transaction price. This estimate also requires assumptions with respect to inputs into the method, including current pricing of comparable marketed products within the rare disease area in France. Management has considered the expected final sales price as well as the price of similar drug products. The Company is operating within a rare disease therapeutic area where there is unmet treatment need and hence a limited number of comparable commercialized drugs products. The limited available relevant market information for directly comparable commercialized drugs within rare disease increases the uncertainty in management's estimate.
For the three and nine months ended September 30, 2023, the Company recognized revenue related to the Arimoclomol EAP in France of $
Licensing Agreements
The Company enters into licensing agreements with licensees that fall under the scope of ASC 606.
The terms of the Company’s licensing agreements typically include one or more of the following: (i) upfront fees; (ii) milestone payments related to the achievement of development, regulatory, or commercial goals; and (iii) royalties on net sales of licensed products. Each of these payments may result in licensing revenues.
As part of the accounting for these agreements, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation which determines how the transaction price is allocated among the performance obligations. Generally, the estimation of the stand-alone selling price may include such estimates as independent evidence of market price, forecasted revenues or costs, development timelines, discount rates, and probability of regulatory success. The Company evaluates each performance obligation to determine if they can be satisfied at a point in time or over time, and it measures the services delivered to the licensee which are periodically reviewed based on the progress of the related program. The effect of any change made to an estimated input component and, therefore revenue or expense recognized, would be recorded as a change in estimate. In addition, variable consideration (e.g., milestone payments) must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price.
Up-front Fees: If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from the transaction price allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time.
Milestone Payments: At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the licensee’s control, such as non-operational developmental and regulatory approvals, are generally not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones that are within its or the licensee’s control, such as operational developmental milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration revenues and earnings in the period of adjustment. Revisions to the Company’s estimate of the transaction price may also result in negative licensing revenues and earnings in the period of adjustment.
AZSTARYS License Agreement
In September 2019, the Company entered into a Collaboration and License Agreement (the “AZSTARYS License Agreement”) with Commave Therapeutics SA ("Commave"), an affiliate of Gurnet Point Capital ("GPC"). Under the AZSTARYS License Agreement, the Company granted to Commave an exclusive, worldwide license to develop, manufacture and commercialize the Company’s product candidates containing SDX and d-MPH, including AZSTARYS, or any other product candidates containing SDX and developed to treat ADHD or any other central nervous system ("CNS") disease. Corium, Inc. ("Corium") was tasked by Commave to lead all commercialization activities for AZSTARYS under the AZSTARYS License Agreement. Pursuant to the AZSTARYS License Agreement, Commave agreed to pay milestone payments upon the occurrence of specified regulatory milestones related to AZSTARYS, additional fixed payments upon the achievement of specified U.S. sales milestones, and quarterly, tiered royalty payments based on a range of percentages of net sales. Commave is obligated to make such royalty payments on a product-by-product basis until expiration of the royalty term for the applicable product.
In April 2021, the Company entered into Amendment No. 1 to the AZSTARYS License Agreement (the "AZSTARYS Amendment"). Pursuant to the AZSTARYS Amendment, the Company and Commave agreed to modify the compensation terms of the AZSTARYS License Agreement. The AZSTARYS Amendment increased the total remaining future regulatory and sales milestone payments related to AZSTARYS to up to an aggregate of $
Commave also agreed to be responsible for and reimburse the Company for all of the development, commercialization and regulatory expenses incurred on the licensed products, subject to certain limitations as set forth in the AZSTARYS License Agreement. As part of this agreement, the Company is obligated to perform consulting services on behalf of Commave related to the licensed products. For these consulting services, Commave has agreed to pay the Company a set rate per hour on any consulting services performed on behalf of Commave for the benefit of the licensed products.
In accordance with the terms of the Company’s March 20, 2012 Termination Agreement with Aquestive Therapeutics, Aquestive Therapeutics has the right to receive an amount equal to
The AZSTARYS License Agreement is within the scope of ASC 606, as the transaction represents a contract with a customer where the participants function in a customer / vendor relationship and are not exposed equally to the risks and rewards of the activities contemplated under the AZSTARYS License Agreement. Using the concepts of ASC 606, the Company identified the grant of the exclusive, worldwide license and the performance of consulting services, which includes the reimbursement of out-of-pocket third-party research and development costs, as its only two performance obligations at inception. The Company further determined that the transaction price, at inception, under the agreement was $10.0 million upfront payment plus the fair value of the Development Costs (as defined in the AZSTARYS License Agreement) which was allocated among the performance obligations based on their respective related stand-alone selling price.
The Company is entitled to additional payments from Commave conditioned upon the achievement of specified regulatory milestones related to AZSTARYS and the achievement of certain U.S. sales milestones. Further, Commave will pay the Company quarterly, tiered royalty payments based on a range of percentage of Net Sales (as defined in the AZSTARYS License Agreement). The Company concluded that these regulatory milestones, sales milestones and royalty payments each contain a significant uncertainty associated with a future event. As such, these milestone and royalty payments are constrained at contract inception and are not included in the transaction price as the Company could not conclude that it is probable a significant reversal in the amount of cumulative revenue recognized will not occur surrounding these milestone payments. At the end of each reporting period, the Company updates its assessment of whether the milestone and royalty payments are constrained by considering both the likelihood and magnitude of the potential revenue reversal. For the three and nine months ended September 30, 2023, the Company recognized $
Consulting Arrangements
The Company enters into consulting arrangements with third parties that fall under the scope of ASC 606. These arrangements may require the Company to deliver various rights, services, including research and development services, regulatory services and/or commercialization support services. The underlying terms of these arrangements generally provide for consideration to the Company in the form of consulting fees and reimbursements of out-of-pocket third-party research and development, regulatory and commercial costs.
Corium Consulting Agreement
In July 2020, the Company entered into a consultation services arrangement (the “Corium Consulting Agreement”) with Corium under which Corium engaged the Company to guide the product development and regulatory activities for certain current and potential future products in Corium’s portfolio, as well as continue supporting preparation for the potential commercial launch of AZSTARYS (together, “Corium Consulting Services”). Corium is a portfolio company of GPC and was tasked by Commave to lead all commercialization activities for AZSTARYS under the AZSTARYS License Agreement, as discussed above.
Under the Corium Consulting Agreement, the Company was entitled to receive payments from Corium of up to $
The Company determined that the performance of consulting services, including reimbursement of third-party pass-through costs, is a performance obligation that is satisfied over time as the services are performed and the reimbursable costs are paid. As such, the revenue related to the performance obligation was recognized as the consulting services were performed and the services associated with the reimbursable third-party pass-through costs were incurred and paid by the Company, in accordance with the practical expedient allowed under ASC 606 regarding an entity’s right to consideration from a customer in an amount that corresponds directly to the value to the customer of the entity’s performance completed to date.
For the nine months ended September 30, 2023, the Company recognized$
Foreign currency
Assets and liabilities are translated into the reporting currency using the exchange rates in effect on the unaudited consolidated condensed balance sheet dates. Equity accounts are translated at historical rates, except for the change in retained earnings during the year, which is the result of the income statement translation process. Revenue and expense accounts are translated using the weighted average exchange rate during the period. The cumulative translation adjustments associated with the net assets of foreign subsidiaries are recorded in accumulated other comprehensive income/loss in the accompanying unaudited condensed consolidated statements of stockholders’ equity.
Accounts and Other Receivables
Accounts and other receivables consist of receivables under the AZSTARYS License Agreement and Arimoclomol EAP, as well as receivables related to consulting arrangements, income tax receivables and other receivables due to the Company. Receivables under the AZSTARYS License Agreement are recorded for amounts due to the Company related to reimbursable third-party costs and royalties on product sales. Receivables under the Arimoclomol EAP are recorded for product sales under the French nATU. These receivables, as well as the receivables related to consulting arrangements, are evaluated to determine if any reserve or allowance should be established at each reporting date. As of September 30, 2023, the Company had receivables related to the Arimoclomol EAP of $
| C. |
Debt Obligations |
Secured Promissory Note
In connection with the Proposed Merger (Note K), on August 30, 2023, the Company and Nantahala, entered into a secured promissory note payable by Zevra to Nantahala in the original principal amount of $
As of September 30, 2023, the Company had a secured promissory note outstanding, in the aggregate principal amount, as follows (in thousands):
| September 30, | ||||
| 2023 | ||||
| Secured promissory note | $ | |||
| Unamortized original issue premium | ||||
| Less: debt issuance costs | ( |
) | ||
| Secured promissory note, net | $ | |||
Future minimum principal payments under the secured promissory note as of September 30, 2023, were as follows (in thousands):
| Year Ending December 31, | ||||
| 2023 | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total minimum payments | ||||
| Plus: unamortized debt premium and debt issuance costs | ||||
| Secured promissory note, net | $ |
Line of Credit
On May 31, 2022, the Company and Ameris Bank, as lender, entered into a $
The revolving facility under the Line of Credit is secured by a perfected security interest in deposit accounts. The revolving facility under the Line of Credit is subject to customary affirmative and negative covenants.
The latest maturity date of the loans under the Line of Credit was May 31, 2025. The Line of Credit contained customary events of default that could have led to an acceleration of the loans, including cross-default, bankruptcy and payment defaults. As of December 31, 2022, the Company had drawn $
On January 26, 2023, the Company and Wells Fargo, as lender, entered into a revolving margin account agreement. The Company's investments are used as collateral for the loan and the amount the Company is able to borrow is limited to
| D. | Commitments and Contingencies |
From time to time, the Company is involved in various legal proceedings arising in the normal course of business. For some matters, a liability is not probable, or the amount cannot be reasonably estimated and, therefore, an accrual has not been made. However, for such matters when it is probable that the Company has incurred a liability and can reasonably estimate the amount, the Company accrues and discloses such estimates.
On May 31, 2023, the Company and KVK-Tech, Inc. ("KVK") terminated the Collaboration and License Agreement (the “Agreement”) that the parties entered into on October 25, 2018. In conjunction with the termination of the Agreement, the Company agreed to pay a settlement to KVK of $
| E. | Stock and Warrants |
Authorized, Issued, and Outstanding Common Shares
As of September 30, 2023, and December 31, 2022, the Company had authorized shares of common stock of
As of September 30, 2023 and December 31, 2022, the Company had reserved authorized shares of common stock for future issuance as follows:
| September 30, 2023 | December 31, 2022 | |||||||
| Outstanding awards under equity incentive plans | ||||||||
| Outstanding common stock warrants | ||||||||
| Possible future issuances under equity incentive plans | ||||||||
| Possible future issuances under employee stock purchase plans | ||||||||
| Total common shares reserved for future issuance | ||||||||
Common Stock Activity
The following table summarizes common stock activity for the nine months ended September 30, 2023:
| Shares of Common Stock | ||||
| Balance as of January 1, 2023 | ||||
| Common stock issued as compensation to third parties | ||||
| Common stock repurchased as a result of the Stock Repurchase Plan | ( | ) | ||
| Common stock issued as a result of stock warrants exercised | ||||
| Balance as of March 31, 2023 | ||||
| Common stock issued as a result of the Employee Stock Purchase Plan | ||||
| Common stock issued as compensation to third parties | ||||
| Balance as of June 30, 2023 | ||||
| Common stock issued as compensation to third-parties | ||||
| Common stock issued in connection with the Proposed Merger (Note K) | ||||
| Balance as of September 30, 2023 | ||||
Authorized, Issued, and Outstanding Preferred Stock
As of September 30, 2023, and December 31, 2022, the Company had
Warrants to Purchase Common Stock
In prior periods, the Company issued warrants to purchase common stock to various third parties, of which
The remaining
Of the outstanding and exercisable warrants,
| F. | Stock-Based Compensation |
The Company maintains a stock-based compensation plan (the “Incentive Stock Plan”) that governs stock awards made to employees and directors prior to completion of the IPO.
In November 2014, the Board of Directors of the Company ("the Board"), and in April 2015, the Company’s stockholders, approved the Company’s 2014 Equity Incentive Plan (the “2014 Plan”), which became effective in April 2015. The 2014 Plan provides for the grant of stock options, other forms of equity compensation, and performance cash awards. In June 2021, the Company's stockholders approved an Amended and Restated 2014 Equity Incentive Plan (the "A&R 2014 Plan"), following its adoption by the Board in April 2021, which among other things added
During the three and nine months ended September 30, 2023, and 2022,
In June 2021, the Company's stockholders approved an Employee Stock Purchase Plan (the "ESPP"), following its adoption by the Board in April 2021. The maximum number of shares of common stock that may be issued under the ESPP is
In January 2023, the Board approved the 2023 Employment Inducement Award Plan (the "2023 Plan"). The maximum number of shares of common stock that may be issued under the 2023 Plan is
In May 2023, the Board approved the Ninth Amended and Restated Non-Employee Director Compensation Policy (the “Non-Employee Director Compensation Policy”). The equity compensation made pursuant to the Non-Employee Director Compensation Policy will be granted under the A&R 2014 Plan.
Stock-based compensation expense recorded under the Incentive Stock Plan, A&R 2014 Plan, ESPP and 2023 Plan is included in the following line items in the accompanying unaudited condensed consolidated statements of operations (in thousands):
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Research and development | $ | $ | $ | $ | ||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
There was
As a result of the Mickle Transition Agreement and the Pascoe Transition Agreement, as further discussed in Note J, certain stock options were modified, resulting in a net decrease in stock-based compensation expense of $
| G. | Fair Value of Financial Instruments |
The accounting standard for fair value measurements provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.
The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value. The three tiers are defined as follows:
|
|
● |
Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets; |
|
|
● |
Level 2—Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and |
|
|
● |
Level 3—Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions. |
The carrying amounts of certain financial instruments, including cash and cash equivalents, investments, and accounts payable and accrued expenses, approximate their respective fair values due to the short-term nature of such instruments.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached regarding fair value measurements as of September 30, 2023, and December 31, 2022 (in thousands):
| Balance as of September 30, 2023 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Securities: | ||||||||||||||||
| U.S. government-sponsored agency securities | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury securities | ||||||||||||||||
| Total assets | $ | $ | $ | $ | ||||||||||||
| Balance as of December 31, 2022 | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||
| Securities: | ||||||||||||||||
| U.S. government-sponsored agency securities | $ | $ | $ | $ | ||||||||||||
| U.S. Treasury securities | ||||||||||||||||
| Total assets | $ | $ | $ | $ |
| H. | Net Loss Per Share |
For all periods presented herein, the Company did not use the two-class method to compute net loss per share of common stock, even though it had issued securities, other than common stock, that contractually entitled the holders to participate in dividends and earnings, because these holders are not obligated to participate in a loss. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.
Under the two-class method, for periods with net income, basic net income per share of common stock is computed by dividing the undistributed net income by the weighted average number of shares of common stock outstanding during the period. Undistributed net income is computed by subtracting from net income the portion of current period earnings that participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed and subtracting the actual or deemed dividends declared. No such adjustment to earnings is made during periods with a net loss as the holders of the participating securities have no obligation to fund losses. Diluted net income per share of common stock is computed under the two-class method by using the weighted average number of shares of common stock outstanding plus the potential dilutive effects of stock options, warrants and other outstanding convertible securities. In addition to analyzing under the two-class method, the Company analyzes the potential dilutive effect of stock options and warrants, under the treasury-stock method and other outstanding convertible securities under the if-converted method when calculating diluted income (loss) per share of common stock, in which it is assumed that the stock options, warrants and other outstanding convertible securities convert into common stock at the beginning of the period or date of issuance, if the stock option, warrant or other outstanding convertible security was issued during the period. The Company reports the more dilutive of the approaches (two-class or treasury-stock/if-converted) as its diluted net income (loss) of common stock during the period.
As noted above, for all periods presented herein, the Company did not utilize the two-class approach as the Company was in a net loss position and the holders of the participating securities have no obligation to fund losses. The Company did analyze diluted net loss per share of common stock under the treasury-stock/if-converted method and noted that all outstanding stock options and warrants were anti-dilutive for the periods presented. For all periods presented, basic net loss per share of common stock was the same as diluted net loss per share of common stock.
The following securities, presented on a common stock equivalent basis, have been excluded from the calculation of weighted average number of shares of common stock outstanding because their effect is anti-dilutive:
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Awards under equity incentive plans |
||||||||||||||||
| Common stock warrants |
||||||||||||||||
| Total securities excluded from the calculation of weighted average number of shares of common stock outstanding |
||||||||||||||||
A reconciliation from net loss to basic and diluted net loss per share of common stock for the three and nine months ended September 30, 2023, and 2022, is as follows (in thousands):
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Basic and diluted net loss per share of common stock: |
||||||||||||||||
| Net loss, basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of shares of common stock outstanding, basic and diluted |
||||||||||||||||
| Basic and diluted net loss per share of common stock |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| I. | Leases |
The Company has operating and finance leases for office space, laboratory facilities and various laboratory equipment, furniture and office equipment and leasehold improvements. The Company determines if an arrangement is a lease at contract inception. Lease assets and lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. The Company does not separate lease and non-lease components. Leases with a term of 12 months or less at commencement are not recorded on the unaudited condensed consolidated balance sheets. Lease expense for these arrangements is recognized on a straight-line bases over the lease term. The Company's leases have remaining lease terms of less than
Effective June 1, 2021, the Company agreed to sublease office space in Florida, comprised of one of the two contiguous suites, under a non-cancelable operating lease, which expires in February 2026.
The components of lease expense were as follows (in thousands):
| Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
| Lease Cost |
2023 |
2022 |
2023 |
2022 |
||||||||||||
| Finance lease cost: |
||||||||||||||||
| Amortization of right-of-use assets |
$ | $ | $ | $ | ||||||||||||
| Interest on lease liabilities |
||||||||||||||||
| Total finance lease cost |
||||||||||||||||
| Operating lease cost |
||||||||||||||||
| Short-term lease cost |
||||||||||||||||
| Variable lease cost |
||||||||||||||||
| Less: sublease income |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total lease costs |
$ | $ | $ | $ | ||||||||||||
Supplemental cash flow information related to leases was as follows (in thousands):
| Nine months ended September 30, |
||||||||
| 2023 |
2022 |
|||||||
| Cash paid for amounts included in the measurement of lease liabilities: |
||||||||
| Operating cash flows from finance leases |
$ | $ | ||||||
| Financing cash flows from finance leases |
||||||||
| Operating cash flows from operating leases |
||||||||
| Operating cash flows from short-term leases |
||||||||
| Operating cash flows from variable lease costs |
||||||||
| Right-of-use assets obtained in exchange for lease liabilities: |
||||||||
| Finance leases |
$ | $ | ||||||
| Operating leases |
||||||||
Supplemental balance sheet information related to leases was as follows (in thousands, except weighted average remaining lease term and weighted average discount rate):
| September 30, |
December 31, |
|||||||
| 2023 |
2022 |
|||||||
| Finance Leases |
||||||||
| Property and equipment, at cost |
$ | $ | ||||||
| less: accumulated depreciation and amortization |
( |
) | ( |
) | ||||
| Property and equipment, net |
$ | $ | ||||||