goss-10q_20190630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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 June 30, 2019

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: 001-38796

 

GOSSAMER BIO, INC.

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

47-5461709

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

3013 Science Park Road

San Diego, California

 

92121

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (858) 684-1300

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

GOSS

 

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:    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 August 5, 2019, the registrant had 65,925,183 shares of common stock ($0.0001 par value) outstanding.

1

 


TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1

 

Condensed Consolidated Financial Statements (unaudited)

3

 

 

Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018

3

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2019 and 2018

4

 

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the Six Months ended June 30, 2019 and 2018

5

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

7

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

Item 2

 

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

19

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4

 

Controls and Procedures

27

 

PART II. OTHER INFORMATION

 

Item 1

 

Legal Proceedings

28

Item 1A

 

Risk Factors

28

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3

 

Defaults Upon Senior Securities

28

Item 4

 

Mine Safety Disclosures

28

Item 5

 

Other Information

28

Item 6

 

Exhibits

28

 

 

Exhibit Index

29

 

 

Signatures

30


2

 


PART I. FINANCIAL INFORMATION

 

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

GOSSAMER BIO, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and par value amounts)

 

 

June 30, 2019

 

 

December 31, 2018

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

148,500

 

 

$

105,219

 

Marketable securities

 

 

315,495

 

 

 

123,439

 

Restricted cash

 

 

 

 

 

200

 

Prepaid expenses and other current assets

 

 

25,591

 

 

 

3,095

 

Total current assets

 

 

489,586

 

 

 

231,953

 

Property and equipment, net

 

 

4,814

 

 

 

3,193

 

Operating lease right-of-use assets

 

 

11,407

 

 

 

 

Other assets

 

 

1,367

 

 

 

4,273

 

Total assets

 

$

507,174

 

 

$

239,419

 

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND

   STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,030

 

 

$

2,182

 

Accrued research and development expenses

 

 

15,277

 

 

 

10,653

 

Accrued expenses

 

 

9,204

 

 

 

7,568

 

Total current liabilities

 

 

27,511

 

 

 

20,403

 

Long-term debt

 

 

28,281

 

 

 

 

Operating lease liabilities

 

 

9,938

 

 

 

 

Accrued expenses - long-term

 

 

 

 

 

718

 

Total liabilities

 

 

65,730

 

 

 

21,121

 

Commitments and contingencies - Note 10

 

 

 

 

 

 

 

 

Series Seed convertible preferred stock, $0.0001 par value; 0 shares issued and outstanding as of

   June 30, 2019 and 20,000,000 shares issued and outstanding as of December 31, 2018 and;

   liquidation preference of $0 and $20,000 as of June 30, 2019 and December 31, 2018,

   respectively

 

 

 

 

 

29,200

 

Series A convertible preferred stock, $0.0001 par value; 0 shares issued and outstanding as of

   June 30, 2019 and 45,714,286 shares issued and outstanding as of December 31, 2018;

   liquidation preference of $0 and $80,000 as of June 30, 2019 and December 31, 2018,

   respectively

 

 

 

 

 

79,615

 

Series B convertible preferred stock, $0.0001 par value; 0 shares issued and outstanding as of

   June 30, 2019 and  71,506,513 shares issued and outstanding as of December 31, 2018;

   liquidation preference of $0 and $230,000 as of June 30, 2019 and December 31, 2018,

   respectively

 

 

 

 

 

229,552

 

Stockholders' equity (deficit)

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 700,000,000 shares authorized as of June 30, 2019 and

   49,160,177 shares authorized as of December 31, 2018; 65,925,183 shares issued and

   60,467,380 shares outstanding as of June 30, 2019, and 15,533,450 shares issued and 8,051,418

   shares outstanding as of December 31, 2018

 

 

7

 

 

 

2

 

Additional paid-in capital

 

 

671,913

 

 

 

33,853

 

Accumulated deficit

 

 

(230,972

)

 

 

(153,863

)

Accumulated other comprehensive income (loss)

 

 

496

 

 

 

(61

)

Total stockholders' equity (deficit)

 

 

441,444

 

 

 

(120,069

)

Total liabilities, convertible preferred stock and stockholders' equity (deficit)

 

$

507,174

 

 

$

239,419

 

 

 

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

3

 


GOSSAMER BIO, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

 

 

 

Three months ended June 30,

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

35,676

 

 

$

7,930

 

 

$

60,659

 

 

$

10,554

 

In process research and development

 

 

1,000

 

 

 

20,500

 

 

 

2,000

 

 

 

41,398

 

General and administrative

 

 

9,673

 

 

 

4,606

 

 

 

17,707

 

 

 

7,210

 

Total operating expenses

 

 

46,349

 

 

 

33,036

 

 

 

80,366

 

 

 

59,162

 

Loss from operations

 

 

(46,349

)

 

 

(33,036

)

 

 

(80,366

)

 

 

(59,162

)

Other income, net

 

 

1,851

 

 

 

300

 

 

 

3,257

 

 

 

389

 

Net loss

 

$

(44,498

)

 

$

(32,736

)

 

$

(77,109

)

 

$

(58,773

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on marketable securities, net of tax

 

 

417

 

 

 

3

 

 

 

557

 

 

 

3

 

Other comprehensive income

 

 

417

 

 

 

3

 

 

 

557

 

 

 

3

 

Comprehensive loss

 

 

(44,081

)

 

 

(32,733

)

 

 

(76,552

)

 

 

(58,770

)

Net loss per share, basic and diluted

 

$

(0.74

)

 

$

(5.65

)

 

$

(1.59

)

 

$

(10.14

)

Weighted average common shares outstanding, basic and diluted

 

 

60,265,046

 

 

 

5,795,053

 

 

 

48,357,294

 

 

 

5,796,370

 

 

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

 

 

4

 


GOSSAMER BIO, INC.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share amounts)

 

 

Series Seed

 

Series A

 

Series B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

convertible

preferred stock

 

convertible

preferred stock

 

convertible

preferred stock

 

 

 

Common stock

 

Additional

paid-in

 

Accumulated

 

other

comprehensive

 

Total

stockholders'

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

Shares

 

Amount

 

capital

 

deficit

 

income (loss)

 

equity (deficit)

 

Balance as of

   December 31, 2018

 

20,000,000

 

$

29,200

 

 

45,714,286

 

$

79,615

 

 

71,506,513

 

$

229,552

 

 

 

 

8,051,418

 

$

2

 

$

33,853

 

$

(153,863

)

$

(61

)

$

(120,069

)

Issuance of common stock in connection with a public offering, net of underwriting discounts, commissions, and offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,837,500

 

 

2

 

 

291,342

 

 

 

 

 

 

291,344

 

Conversion of convertible preferred stock into common stock

 

(20,000,000

)

 

(29,200

)

 

(45,714,286

)

 

(79,615

)

 

(71,506,513

)

 

(229,552

)

 

 

 

30,493,460

 

 

3

 

 

338,364

 

 

 

 

 

 

338,367

 

 

Vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,619,592

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,500

 

 

 

 

3,089

 

 

 

 

 

 

3,089

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,611

)

 

 

 

(32,611

)

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

140

 

 

140

 

Balance as of

   March 31, 2019

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

60,029,470

 

$

7

 

$

666,648

 

$

(186,474

)

$

79

 

$

480,260

 

 

Vesting of restricted stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

404,637

 

 

 

 

 

 

 

 

 

 

 

Exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,273

 

 

 

 

86

 

 

 

 

 

 

86

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,140

 

 

 

 

 

 

5,140

 

Other additional paid-in capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

39

 

 

 

 

 

 

39

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,498

)

 

 

 

(44,498

)

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

417

 

 

417

 

Balance as of

   June 30, 2019

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

60,467,380

 

$

7

 

$

671,913

 

$

(230,972

)

$

496

 

$

441,444

 

 

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

5

 


 

 

Series Seed

 

Series A

 

Series B

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

convertible

preferred stock

 

convertible

preferred stock

 

convertible

preferred stock

 

 

 

Common stock

 

Additional

paid-in

 

Accumulated

 

other

comprehensive

 

Total

stockholders'

 

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

 

 

Shares

 

Amount

 

capital

 

deficit

 

income (loss)

 

deficit

 

Balance as of

   December 31, 2017

 

 

$

 

 

 

$

 

 

 

$

 

 

 

 

9,160,888

 

$

 

$

32

 

$

(6,894

)

$

 

$

(6,862

)

 

Issuance of Series A preferred stock for cash, net of $0.4 million in offering costs

 

 

 

 

 

41,328,286

 

 

71,944

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of stock for acquisition

 

20,000,000

 

 

29,200

 

 

 

 

 

 

 

 

 

 

 

 

1,101,278

 

 

 

 

2,874

 

 

 

 

 

 

2,874

 

 

Issuance of Series A preferred stock to convert debt and accrued interest

 

 

 

 

 

3,499,209

 

 

6,124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

605

 

 

 

 

 

 

605

 

 

Incremental vesting conditions place on previously issued common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,580,444

)

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,037

)

 

 

 

(26,037

)

Balance as of

   March 31, 2018

 

20,000,000

 

$

29,200

 

 

44,827,495

 

$

78,068

 

 

 

$

 

 

 

 

5,681,722

 

$

 

$

3,511

 

$

(32,931

)

$

 

$

(29,420

)

 

Issuance of Series A preferred stock to convert debt and accrued interest

 

 

 

 

 

886,791

 

 

1,547

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

251,542

 

 

 

 

1,374

 

 

 

 

 

 

1,374

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,736

)

 

 

 

(32,736

)

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

3

 

Balance as of

   June 30, 2018

 

20,000,000

 

$

29,200

 

 

45,714,286

 

$

79,615

 

 

 

$

 

 

 

 

5,933,264

 

$

 

$

4,885

 

$

(65,667

)

$

3

 

$

(60,778

)

 

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

6

 


GOSSAMER BIO, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Six months ended June 30,

 

 

 

2019

 

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(77,109

)

 

$

(58,773

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

374

 

 

 

38

 

Stock-based compensation expense

 

 

8,229

 

 

 

1,979

 

In process research and development expenses

 

 

2,000

 

 

 

41,398

 

Amortization of long-term debt discount and issuance costs

 

 

59

 

 

 

 

Amortization of premium on investments, net of accretion of discounts

 

 

(1,464

)

 

 

 

Net realized gain on investments

 

 

(1

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Operating lease right of use assets and liabilities, net

 

 

48

 

 

 

 

Prepaid expenses and other current assets

 

 

(4,243

)

 

 

(291

)

Other assets

 

 

2,906

 

 

 

(425

)

Accounts payable

 

 

823

 

 

 

783

 

Accrued expenses

 

 

(1,018

)

 

 

2,330

 

Accrued research and development expenses

 

 

4,624

 

 

 

2,572

 

Accrued compensation and benefits

 

 

188

 

 

 

 

Accrued interest expense

 

 

 

 

 

(117

)

Net cash used in operating activities

 

 

(64,584

)

 

 

(10,506

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Research and development asset acquisitions, net of cash acquired

 

 

(2,000

)

 

 

(9,460

)

Purchase of investments

 

 

(287,038

)

 

 

(20,002

)

Maturities of investments

 

 

74,897

 

 

 

 

Sales of investments

 

 

3,842

 

 

 

 

Purchase of property and equipment

 

 

(1,727

)

 

 

(1,452

)

Net cash used in investing activities

 

 

(212,026

)

 

 

(30,914

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock in a public offering, net

 

 

291,311

 

 

 

 

Proceeds from the issuance of long-term debt,

   net of issuance costs of $1,778

 

 

28,222

 

 

 

 

Proceeds from the exercise of stock options

 

 

158

 

 

 

 

Proceeds from issuance of Series A convertible preferred stock, net

 

 

 

 

 

73,491

 

Repayment of notes payable to related parties

 

 

 

 

 

(40

)

Net cash provided by financing activities

 

 

319,691

 

 

 

73,451

 

Net increase in cash, cash equivalents and restricted cash

 

 

43,081

 

 

 

32,031

 

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

 

 

105,419

 

 

 

315

 

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

 

$

148,500

 

 

$

32,346

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

 

 

 

Acquisition of in-process research and development

   through issuance of stock

 

$

 

 

$

19,284

 

Issuance of Series A convertible preferred stock to convert

   debt and accrued interest

 

$

 

 

$

6,124

 

Recognition of operating lease right of use asset

 

$

12,458

 

 

$

 

Recognition of operating lease liabilities

 

$

13,182

 

 

$

 

Conversion of convertible preferred stock to common stock

 

$

338,367

 

 

$

 

Change in unrealized gain on marketable securities, net of tax

 

$

565

 

 

$

 

Change in unrealized loss on foreign currency translations, net of tax

 

$

8

 

 

$

 

Unpaid property and equipment

 

$

268

 

 

$

 

 

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

7

 


GOSSAMER BIO, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Description of the Business

Gossamer Bio, Inc. (including its subsidiaries, referred to as “we,” “us,” “our,”, or the “Company”) is a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutics in the disease areas of immunology, inflammation and oncology. The Company was incorporated in the state of Delaware on October 25, 2015 (originally as FSG Bio, Inc.) and is based in San Diego, California.

The condensed consolidated financial statements include the accounts of Gossamer Bio, Inc. and its wholly owned subsidiaries. All intercompany balances and transactions among the consolidated entity have been eliminated in consolidation.

Initial Public Offering in February 2019

On February 12, 2019, the Company completed its initial public offering (“IPO”) with the sale of 19,837,500 shares of common stock, including shares of common stock issued upon the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $16.00 per share, resulting in net proceeds of $291.3 million, after deducting underwriting discounts, commissions, and offering expenses.

In addition, in connection with the completion of the IPO, all of the Company’s outstanding shares of convertible preferred stock were automatically converted into 30,493,460 shares of common stock.

Liquidity and Capital Resources

The Company has incurred significant operating losses since its inception. As of June 30, 2019, the Company had an accumulated deficit of $231.0 million. From the Company’s inception through June 30, 2019, the Company has funded its operations primarily through equity financings, including the Company’s IPO which closed on February 12, 2019. The Company raised $601.3 million from October 2017 through March 2019 through Series A and Series B Convertible Preferred Stock financings, a convertible note financing, and the IPO, after deducting underwriting discounts, commissions, and offering expenses. In addition, the Company received $12.8 million in cash in connection with the January 2018 acquisition of AA Biopharma Inc. On May 2, 2019 the Company, as guarantor, and its wholly-owned subsidiary GB001, Inc., as borrower, entered into a credit, guaranty and security agreement (the “Credit Facility”) with MidCap Financial Trust (“MidCap”), an agent and as a lender, and the additional lenders party thereto from time to time (together with MidCap, the “Lenders”), pursuant to which the Lenders, including affiliates of MidCap and Silicon Valley Bank agreed to make term loans available to the Company for working capital and general business purposes, in a principal amount of up to $150.0 million in term loan commitments, including a $30.0 million term loan that was funded at the closing date. Under the Credit Facility, the Company has the ability to access the remaining $120.0 million in three additional tranches (of $40.0 million, $30.0 million and $50.0 million, respectively), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions. As of June 30, 2019, no other tranches under the Credit Facility have been drawn. See Note 5 for additional information regarding the Credit Facility.

The Company expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As a result, the Company will need to raise capital through equity offerings, debt financings other capital sources, including potential collaborations, licenses and other similar arrangements. Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these condensed consolidated financial statements were available to be issued. There can be no assurance that the Company will be successful in acquiring additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.

Subsequent Events

The Company has evaluated subsequent events through August 8, 2019, the issuance date of the condensed consolidated financial statements, and has determined that there were no material subsequent events to recognize or disclose.

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2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (“SEC”) on Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 22, 2019. The results of operations for the interim period shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year. The balance sheet at December 31, 2018, has been derived from the audited financial statements at that date.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to accrued research and development expenses, the valuation of preferred and common stock, the valuation of stock options and the valuation allowance of deferred tax assets resulting from net operating losses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates.

Recently Adopted Accounting Pronouncements

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (commonly referred to as Accounting Standards Codification (“ASC”) 842), as of January 1, 2019, using the optional transition method. The optional transition method provides a method for recording existing leases at adoption and a cumulative catch up adjustment on January 1, 2019 for any differences between ASC 842 and the legacy guidance provided in ASC 840, Leases that would have impacted our income statement. No retrospective restatements are required under the optional transition method. In addition, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. The Company also applied the short-term lease recognition exemption for leases with terms at inception not greater than 12 months.

 

Adoption of the new standard resulted in the recording of additional operating lease right-of-use assets and operating lease liabilities of approximately $12.5 million and $13.2 million, respectively, as of January 1, 2019. The difference between the operating lease right-of-use assets and lease liabilities are due to accrued deferred rent and unamortized lease incentives.

 

Recently Issued Accounting Pronouncements – Not Yet Adopted

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. For trade receivables and other instruments, entities will be required to use a new forward-looking expected loss model that generally will result in the earlier recognition of allowances for losses. For available-for-sale debt securities with unrealized losses, the losses will be recognized as allowances rather than as reductions in the amortized cost of the securities. This guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those years, with early adoption permitted only as of annual reporting periods beginning after December 15, 2018. We are currently evaluating the timing and impact of the adoption of ASU 2016-13 on our unaudited condensed financial statements or related financial statement disclosures.

 

Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share excludes the potential impact of the Company’s Series Seed Convertible Preferred Stock, Series A Convertible Preferred Stock, and Series B Convertible Preferred Stock, common stock options and unvested shares of restricted stock because their effect would be anti-dilutive due to the Company’s net loss. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

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The table below provides potentially dilutive securities not included in the calculation of the diluted net loss per share because to do so would be anti-dilutive:

 

 

As of June 30,

 

 

2019

 

2018

 

Shares issuable upon conversion of Series Seed Convertible

   Preferred Stock

 

 

 

4,444,444

 

Shares issuable upon conversion of Series A Convertible

   Preferred Stock

 

 

 

10,158,710

 

Shares issuable upon exercise of stock options

 

7,919,890

 

 

 

Non-vested shares under restricted stock grants

 

5,457,806

 

 

6,137,411

 

 

3. Balance Sheet Accounts and Supplemental Disclosures

Property and Equipment

Property and equipment, net consisted of the following (in thousands):

 

 

 

Estimated

Useful Life

(in years)

 

June 30,

2019

 

 

December 31, 2018

 

Office equipment

 

3-7

 

$

1,010

 

 

$

918

 

Computer equipment

 

5

 

 

107

 

 

 

15

 

Software

 

3

 

 

50

 

 

 

50

 

Lab equipment

 

2-5

 

 

2,142

 

 

 

1,070

 

Leasehold improvements

 

6-7

 

 

1,839

 

 

 

1,243

 

Construction in process

 

N/A

 

 

337

 

 

 

194

 

Total property and equipment

 

 

 

 

5,485