scyx-10q_20210331.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

☐	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 001-36365

SCYNEXIS, Inc.

(Exact name of registrant as specified in its charter)

Delaware		56-2181648
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1 Evertrust Plaza, 13^th Floor Jersey City, New Jersey		07302-6548
(Address of principal executive offices)		(Zip Code)

(201)-884-5485

(Registrant’s telephone number, including area code)

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

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	SCYX	Nasdaq Global 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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 1, 2021, there were 20,630,750 shares of the registrant’s Common Stock outstanding.

Table of Contents

SCYNEXIS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

TABLE OF CONTENTS

		Page

PART I FINANCIAL INFORMATION		1

Item 1.	Financial Statements	1
	Unaudited Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	1
	Unaudited Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	2
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	3
	Notes to the Condensed Consolidated Financial Statements (unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II OTHER INFORMATION		26

Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 6.	Exhibits	26

Signatures		28

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements.

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	92,011		$	93,041
Prepaid expenses and other current assets		3,310			5,165
Restricted cash		55			—
Total current assets		95,376			98,206
Other assets		692			573
Deferred offering costs		187			187
Restricted cash		218			273
Property and equipment, net		271			298
Intangible assets		378			—
Operating lease right-of-use asset (See Note 6)		2,950			2,999
Total assets	$	100,072		$	102,536
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,516		$	4,639
Accrued expenses		2,134			4,141
Warrant liabilities		16,225			17,564
Operating lease liability, current portion (See Note 6)		57			52
Total current liabilities		24,932			26,396
Other liabilties		140			—
Warrant liabilities		33,635			33,592
Convertible debt and derivative liability (See Note 5)		12,226			16,516
Operating lease liability (See Note 6)		3,215			3,274
Total liabilities		74,148			79,778
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, authorized 5,000,000 shares as of March 31, 2021 and December 31, 2020; 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized as of March 31, 2021 and December 31, 2020; 20,625,637 and 19,663,698 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		21			20
Additional paid-in capital		357,192			349,351
Accumulated deficit		(331,289	)		(326,613	)
Total stockholders’ equity		25,924			22,758
Total liabilities and stockholders’ equity	$	100,072		$	102,536

The accompanying notes are an integral part of the financial statements.

Table of Contents

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	Three Months Ended March 31,
	2021			2020
Revenue	$	12,050		$	—
Operating expenses:
Research and development		6,948			9,866
Selling, general and administrative		6,696			2,613
Total operating expenses		13,644			12,479
Loss from operations		(1,594	)		(12,479	)
Other expense (income):
Loss on extinguishment of debt		2,725			—
Amortization of debt issuance costs and discount		256			278
Interest income		(7	)		(147	)
Interest expense		214			210
Other income		—			(350	)
Warrant liabilities fair value adjustment		(1,296	)		(4,768	)
Derivative liabilities fair value adjustment		90			(700	)
Total other expense (income)		1,982			(5,477	)
Loss before taxes		(3,576	)		(7,002	)
Income tax expense		1,100			—
Net loss	$	(4,676	)	$	(7,002	)
Net loss per share attributable to common stockholders – basic
Net loss per share – basic	$	(0.18	)	$	(0.72	)
Net loss per share attributable to common stockholders – diluted
Net loss per share – diluted	$	(0.23	)	$	(0.72	)
Weighted average common shares outstanding – basic and diluted
Basic		25,802,700			9,744,577
Diluted		26,523,920			9,744,577

The accompanying notes are an integral part of the financial statements.

Table of Contents

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	2021			2020
Cash flows from operating activities:
Net loss	$	(4,676	)	$	(7,002	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		27			28
Stock-based compensation expense		398			410
Accretion of investments discount		—			(31	)
Amortization of debt issuance costs and discount		256			278
Change in fair value of warrant liabilities		(1,296	)		(4,768	)
Change in fair value of derivative liabilities		90			(700	)
Noncash operating lease expense for right-of-use asset		49			48
Loss on extinguishment of debt		2,725			—
Changes in operating assets and liabilities:
Prepaid expenses, other assets, deferred costs, and other		1,736			1,734
Accounts payable, accrued expenses, and other		(68	)		(4,054	)
Net cash used in operating activities		(759	)		(14,057	)
Cash flows from investing activities:
Maturities of investments		—			6,477
Purchases of property and equipment		—			(4	)
Purchase of intangible assets		(200	)		—
Purchases of investments		—			(14,235	)
Net cash used in investing activities		(200	)		(7,762	)
Cash flows from financing activities:
Proceeds from common stock issued		—			214
Payments of offering costs and underwriting discounts and commissions		(62	)		(7	)
Proceeds from common stock issuance under employee stock purchase plan		6			18
Repurchase of shares to satisfy tax withholdings		(15	)		(73	)
Net cash (used in) provided by financing activities		(71	)		152
Net decrease in cash, cash equivalents, and restricted cash		(1,030	)		(21,667	)
Cash, cash equivalents, and restricted cash at beginning of period		93,314			42,193
Cash, cash equivalents, and restricted cash at end of period	$	92,284		$	20,526
Supplemental cash flow information:
Cash paid for interest	$	420		$	420
Cash received for interest	$	5		$	129
Noncash financing and investing activities:
Common stock issued for settlement of senior convertible notes	$	7,452		$	—
Purchased intangible assets included in accounts payable and accrued expenses	$	178		$	—
Deferred offering and issuance costs included in accounts payable and accrued expenses	$	—		$	40

The accompanying notes are an integral part of the financial statements.

Table of Contents

SCYNEXIS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1.	Description of Business and Basis of Preparation

Organization

SCYNEXIS, Inc. (“SCYNEXIS” or the “Company”) is a Delaware corporation formed on November 4, 1999. SCYNEXIS is a biotechnology company, headquartered in Jersey City, New Jersey, pioneering innovative medicines to overcome and prevent difficult-to-treat and drug-resistant infections. The Company is developing its lead product candidate, ibrexafungerp, as the first representative of a novel oral and intravenous triterpenoid antifungal family for the treatment of several fungal infections, including serious and life-threatening invasive fungal infections.

The Company has incurred significant losses and negative cash flows from operations since its initial public offering in May 2014 and expects to continue to incur losses and negative cash flows for the foreseeable future. As a result, the Company had an accumulated deficit of $331.3 million at March 31, 2021 and limited capital resources to fund ongoing operations. These capital resources primarily comprised cash and cash equivalents of $92.0 million at March 31, 2021. While the Company believes its capital resources are sufficient to fund the Company’s on-going operations for a period of at least 12 months subsequent to the issuance of the accompanying unaudited condensed consolidated financial statements, the Company's liquidity could be materially affected over this period by, among other things: (1) its ability to raise additional capital through equity offerings, debt financings, or other non-dilutive third-party funding; (2) costs associated with new or existing strategic alliances, or licensing and collaboration arrangements; (3) negative regulatory events or unanticipated costs related to its development of ibrexafungerp; (4) its ability to potentially commercialize ibrexafungerp for the treatment of vaginal yeast infections and; (5) any other unanticipated material negative events or costs. One or more of these events or costs could materially affect the Company’s liquidity. If the Company is unable to meet its obligations when they become due, the Company may have to delay expenditures, reduce the scope of its research and development programs, or make significant changes to its operating plan. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. Intercompany balances and transactions are eliminated in consolidation.

Reverse Stock Split

On July 16, 2020, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”), which became effective on Friday, July 17, 2020, (a) implementing a 1-for-10 reverse stock split of the Company’s common stock and (b) decreasing the number of authorized shares of the Company’s common stock from 250,000,000 shares to 100,000,000 shares. All share and per share amounts presented in these unaudited condensed consolidated financial statements have been retroactively adjusted for the reverse stock split and certain items in the prior period financial statements have been revised to conform to the current presentation. The reverse stock split affected all shares of the Company’s common stock outstanding immediately prior to the effective time of the reverse stock split, as well as the number of shares of common stock available for issuance under the Company’s equity incentive plans. In addition, the reverse stock split effected a reduction in the number of shares of common stock issuable upon the conversion of outstanding convertible notes or upon the exercise of stock options or warrants outstanding.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying unaudited condensed consolidated financial statements and notes have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”), as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (the “Codification” or “ASC”) for interim financial information. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, and cash flows. The results of operations for the three months ended March 31, 2021, are not necessarily indicative of the results for the full year or the results for any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes set forth in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 29, 2021.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses

Table of Contents

during the reporting periods. Actual results could differ from those estimates. Significant estimates include: determination of the fair value of stock-based compensation grants; the estimate of services and effort expended by third-party research and development service providers used to recognize research and development expense; and the estimates and assumptions utilized in measuring the fair values of the warrant and derivative liabilities each reporting period.

2.	Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements and notes follow the same significant accounting policies as those described in the notes to the audited consolidated financial statements of the Company for the year ended December 31, 2020, except as described below.

Revenue Recognition

The Company has entered into arrangements involving the sale or license of intellectual property and the provision of other services. When entering into any arrangement involving the sale or license of intellectual property rights and other services, the Company determines whether the arrangement is subject to accounting guidance in ASC 606, Revenue from Contracts with Customers (“Topic 606”), as well as ASC 808, Collaborative Arrangements ("Topic 808"). If the Company determines that an arrangement includes goods or services that are central to the Company’s business operations for consideration, the Company will then identify the performance obligations in the contract using the unit-of-account guidance in Topic 606. For a distinct unit-of-account that is within the scope of Topic 606, the Company applies all of the accounting requirements in Topic 606 to that unit-of-account, including the recognition, measurement, presentation and disclosure requirements. For a distinct unit-of-account that is not within the scope of Topic 606, the Company will recognize and measure the distinct unit-of-account based on other authoritative ASC Topics or on a reasonable, rational, and consistently applied policy election.

Analyzing the arrangement to identify performance obligations requires the use of judgment. In arrangements that include the sale or license of intellectual property and other promised services, the Company first identifies if the licenses are distinct from the other promises in the arrangement. If the license is not distinct, the license is combined with other services into a single performance obligation. Factors that are considered in evaluating whether a license is distinct from other promised services include, for example, whether the counterparty can benefit from the license without the promised service on its own or with other readily available resources and whether the promised service is expected to significantly modify or customize the intellectual property.

The Company classifies non-refundable upfront payments, milestone payments and royalties received for the sale or license of intellectual property as revenues within its statements of operations because the Company views such activities as being central to its business operations. For the sale of intellectual property that is distinct, fixed consideration and variable consideration are included in the transaction price and recognized in revenue immediately to the extent that it is probable that there would not be a significant reversal of cumulative revenue in the future. For the license of intellectual property that is distinct, fixed and variable consideration (to the extent there will not be a significant reversal in the future) are also recognized immediately in income, except for consideration received in the form of royalty or sales-based milestones, which is recorded when the customer’s subsequent sales or usages occur. If the sale or license of intellectual property is not distinct, revenue is deferred and recognized over the estimated period of the Company’s combined performance obligation. For contractual arrangements that meet the definition of a collaborative arrangement under Topic 808, consideration received for any units-of-account that are outside the scope of Topic 606 are recognized in the statements of operations by considering (i) the nature of the arrangement, (ii) the nature of the Company’s business operations, and (iii) the contractual terms of the arrangement.

Table of Contents

Basic and Diluted Net Loss per Share of Common Stock

The Company calculates net loss per common share in accordance with ASC 260, Earnings Per Share. Basic net loss per common share for the three months ended March 31, 2021 and 2020 was determined by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. Per ASC 260, Earnings Per Share, the weighted average number of common shares outstanding utilized for determining the basic net loss per common share for the three months ended March 31, 2021 includes the pre-funded warrants to purchase 5,260,000 shares of common stock issued in the December 2020 Public Offering. Diluted net loss per common share for the three months ended March 31, 2021 and 2020 was determined as follows (in thousands, except share and per share amounts):

	Three Months Ended March 31,
	2021			2020
Net loss	$	(4,676	)	$	(7,002	)
Dilutive effect of warrant liability		(1,323	)		—
Net loss allocated to common shares	$	(5,999	)	$	(7,002	)

Weighted average common shares outstanding – basic		25,802,700			9,744,577
Dilutive effect of warrant liability		721,220			—
Weighted average common shares outstanding – diluted		26,523,920			9,744,577

Net loss per share – diluted	$	(0.23	)	$	(0.72	)

The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three months ended March 31, 2021 and 2020, as the result would be anti-dilutive:

	Three Months Ended March 31,
	2021		2020
Outstanding stock options		1,371,606		768,354
Outstanding restricted stock units		96,974		85,754
Warrants to purchase common stock associated with June 2016 public offering		421,867		421,867
Warrants to purchase common stock associated with March 2018 public offering – Series 2		798,810		798,810
Warrants to purchase common stock associated with December 2019 Public Offering		4,472,205		4,472,205
Warrants to purchase common stock associated with December 2020 Public Offering - Series 2		6,800,000		—
Common stock associated with March 2019 Notes		1,138,200		1,138,200
Warrants to purchase common stock associated with Solar loan agreement		12,243		12,243
Total		15,111,905		7,697,433

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The amendments in ASU 2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which revised the effective dates for ASU 2016-13 for public business entities that meet the SEC definition of a smaller reporting company to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. As a smaller reporting company, the Company is currently evaluating the impact ASU 2016-13 will have on its consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options and Derivatives and Hedging—Contracts in Entity’s Own Equity: Accounting for Convertible Instruments and Contracts in and Entity’s Own Equity (“ASU 2020-06”). The amendments in ASU 2020-06 reduce the number of accounting models for convertible debt instruments and revises certain guidance relating to the derivative scope exception and earnings per share. The amendments in ASU 2020-06 are effective for public business entities that meet the definition of a SEC filer and a smaller reporting company for fiscal years beginning after December 15, 2023, and interim periods within those years. As a smaller reporting company, the Company is currently evaluating the impact ASU 2020-06 will have on its consolidated financial statements.

Table of Contents

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes: Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. This guidance was adopted by the Company in the first quarter of 2021 and it did not have a material impact on its unaudited condensed consolidated financial statements.

3.	Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Prepaid research and development services	$	1,300	$	1,535
Prepaid insurance		115		362
Other prepaid expenses		525		19
Other receivables		1,000		2,876
Other current assets		370		373
Total prepaid expenses and other current assets	$	3,310	$	5,165

4.	Accrued Expenses

Accrued expenses consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Accrued research and development expenses	$	647	$	991
Accrued employee bonus compensation		433		2,190
Other accrued expenses		1,054		960
Total accrued expenses	$	2,134	$	4,141

5.	Borrowings

April 2020 Note Purchase Agreement

On April 9, 2020, the Company entered into the April 2020 Note Purchase Agreement with Puissance Life Science Opportunities Fund VI (“Puissance”) and issued and sold to Puissance $10.0 million aggregate principal amount of its April 2020 Notes, resulting in net proceeds of approximately $9.5 million after deducting $0.5 million for an advisory fee and other issuance costs. At December 31, 2020, the fair value of the April 2020 Notes was $7.4 million.

In January 2021, Puissance converted the remaining $6.0 million of the April 2020 Notes for 959,080 shares of common stock. Upon conversion of the $6.0 million of the April 2020 Notes, the Company recognized a $2.7 million extinguishment loss which represents the difference between the total net carrying amount of the convertible debt and derivative liability of $4.8 million and the fair value of the consideration issued of $7.5 million.

March 2019 Note Purchase Agreement

On March 7, 2019, the Company entered into a Senior Convertible Note Purchase Agreement (the “March 2019 Note Purchase Agreement”) with Puissance. Pursuant to the March 2019 Note Purchase Agreement, on March 7, 2019, the Company issued and sold to Puissance $16.0 million aggregate principal amount of its 6.0% Senior Convertible Notes due 2025 (“March 2019 Notes”), resulting in $14.7 million in net proceeds after deducting $1.3 million for an advisory fee and other issuance costs.

As of March 31, 2021, the Company’s March 2019 Notes consists of the convertible debt balance of $9.6 million, presented net of the unamortized debt issuance costs allocated to the convertible debt of $0.4 million, and the bifurcated embedded conversion option derivative liability of $2.6 million. In connection with the Company’s issuance of its March 2019 Notes, the Company bifurcated the embedded conversion option, inclusive of the interest make-whole provision and make-whole fundamental change provision, and recorded the embedded conversion option as a long-term derivative liability in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging, at its initial fair value of $7.0 million as the interest make-whole provision is settled in shares of common stock. For the three months ended March 31, 2021 and 2020, the Company recognized gains of $42,000 and $0.7 million, respectively, on the fair value adjustment for the derivative liability. For each of the three months ended March 31, 2021 and 2020, the Company recognized $0.3 million in amortization of debt issuance costs and discount related to the March 2019 Notes.

The Company estimated the fair value of the convertible debt and derivative liability for the March 2019 Notes using a binomial lattice valuation model and Level 3 inputs. At both March 31, 2021 and December 31, 2020, the fair value of the convertible debt and derivative liability for the March 2019 Notes is $12.9 million.

Table of Contents

The March 2019 Notes were issued and sold for cash at a purchase price equal to 100% of their principal amount, in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), due to the March 2019 Notes being issued to one financially sophisticated investor. The March 2019 Notes bear interest at a rate of 6.0% per annum payable semiannually in arrears on March 15 and September 15 of each year, beginning September 15, 2019. The March 2019 Notes will mature on March 15, 2025, unless earlier converted, redeemed or repurchased. The March 2019 Notes constitute general, senior unsecured obligations of the Company.

The holder of the March 2019 Notes may convert their March 2019 Notes at their option at any time prior to the close of business on the business day immediately preceding March 15, 2025 into shares of the Company’s common stock. The initial conversion rate is 73.9096 shares of common stock per $1,000 principal amount of March 2019 Notes, which is equivalent to an initial conversion price of approximately $13.53 and is subject to adjustment in certain events described in the March 2019 Note Purchase Agreement. The Holder upon conversion may also be entitled to receive, under certain circumstances, an interest make-whole payment payable in shares of common stock. In addition, following certain corporate events that occur prior to the maturity date, the Company will, in certain circumstances, increase the conversion rate if the holder elects to convert its March 2019 Notes in connection with such a corporate event. Subject to adjustment in the conversion rate, the number of shares that the Company may deliver in connection with a conversion of the March 2019 Notes, including those delivered in connection with an interest make-whole payment, will not exceed a cap of 81 shares of common stock per $1,000 principal amount of the March 2019 Notes.

On or after March 15, 2022, the Company has the right, at its election, to redeem all or any portion of the March 2019 Notes not previously converted if the last reported sale price per share of common stock exceeds 130% of the conversion price on each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading days ending on, and including, the trading day immediately before the date the Company sends the related redemption notice. The redemption price will be 100% of the principal amount of the March 2019 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date. If a “fundamental change” (as defined in the March 2019 Note Purchase Agreement) occurs, then, subject to certain exceptions, the Company must offer to repurchase the March 2019 Notes for cash at a repurchase price of 100% of the principal amount of the March 2019 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

6.	Commitments and Contingencies

Leases

On March 1, 2018, the Company entered into a long-term lease agreement for approximately 19,275 square feet of office space in Jersey City, New Jersey, that the Company identified as an operating lease under ASC 842 (the “Lease”). The lease term is eleven years from August 1, 2018, the commencement date, with total lease payments of $7.3 million over the lease term. The Company has the option to renew for two consecutive five-year periods from the end of the first term and the Company is not reasonably certain that the option to renew the Lease will be exercised. Under the Lease, the Company furnished a security deposit in the form of a standby letter of credit in the amount of $0.3 million, which was reduced by fifty-five thousand dollars on the first anniversary of the commencement date. The security deposit will continue to be reduced by fifty-five thousand dollars every two years on the commencement date anniversary for eight years. The security deposit is classified as restricted cash in the accompanying unaudited condensed consolidated balance sheets.

The consideration in the Lease allocated to the single lease component includes the fixed payments for the right to use the office space as well as common area maintenance. The Lease also contains costs associated with certain expense escalation, property taxes, insurance, parking, and utilities which are all considered variable payments and are excluded from the operating lease liability. The incremental borrowing rate utilized approximated the prevailing market interest rate the Company would incur to borrow a similar amount equal to the total Lease payments on a collateralized basis over the term of the Lease. The following table summarizes certain quantitative information associated with the amounts recognized in the unaudited condensed consolidated financial statements for the Lease (dollars in thousands):

	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
Operating lease cost	$	166		$	166
Variable lease cost		(2	)		21
Total operating lease expense	$	164		$	187

Cash paid for amounts included in the measurement of operating lease liability	$	170		$	167

	March 31, 2021			March 31, 2020
Remaining Lease term (years)	8.34				9.34
Discount rate		15	%		15	%

Table of Contents

Future minimum lease payments for the Lease as of March 31, 2021 are as follows (in thousands):

	March 31, 2021
2021	$	347
2022		527
2023		715
2024		730
2025		744
Thereafter		2,789
Total	$	5,852

The presentations of the operating lease liability as of March 31, 2021 are as follows (in thousands):

	March 31, 2021
Present value of future minimum lease payments	$	3,272

Operating lease liability, current portion	$	57
Operating lease liability, long-term portion		3,215
Total operating lease liability	$	3,272

Difference between future minimum lease payments and discounted cash flows	$	2,580

License Arrangement with Potential Future Expenditures

As of March 31, 2021, the Company had a license arrangement with Merck Sharp & Dohme Corp., or Merck, as amended, that involves potential future expenditures. Under the license arrangement, executed in May 2013, the Company exclusively licensed from Merck its rights to ibrexafungerp in the field of human health. In January 2014, Merck assigned the patents related to ibrexafungerp that it had exclusively licensed to the Company. Ibrexafungerp is the Company's lead product candidate. Pursuant to the terms of the license agreement, Merck was originally eligible to receive milestone payments from the Company that could total $19.0 million upon occurrence of specific events, including initiation of a Phase 3 clinical study, new drug application, and marketing approvals in each of the U.S., major European markets, and Japan. In addition, Merck is eligible to receive tiered royalties from the Company based on a percentage of worldwide net sales of ibrexafungerp. The aggregate royalties are mid- to high-single digits.

In December 2014, the Company and Merck entered into an amendment to the license agreement that deferred the remittance of a milestone payment due to Merck, such that no amount would be due upon initiation of the first Phase 2 clinical trial of a product containing the ibrexafungerp compound (the “Deferred Milestone”). The amendment also increased, in an amount equal to the Deferred Milestone, the milestone payment that would be due upon initiation of the first Phase 3 clinical trial of a product containing the ibrexafungerp compound. In December 2016 and January 2018, the Company entered into second and third amendments to the license agreement with Merck which clarified what would constitute the initiation of a Phase 3 clinical trial for the purpose of milestone payment. In January 2019, a milestone payment became due to Merck as a result of the initiation of the VANISH Phase 3 VVC program and was paid in March 2019. On December 2, 2020, the Company entered into a fourth amendment to the license agreement with Merck. The amendment eliminates two cash milestone payments that the Company would have paid to Merck upon the first filing of an NDA, triggered by the FDA acceptance for filing of the Company’s NDA for ibrexafungerp for the treatment of VVC, and first marketing approval in the U.S., anticipated in June 2021 for the Company’s NDA for ibrexafungerp for the treatment of VVC. Such cash milestone payments would have been creditable against future royalties owed to Merck on net sales of ibrexafungerp. With the amendment, these milestones will not be paid in cash and, accordingly, credits will not accrue. Pursuant to the amendment, the Company will also forfeit the credits against future royalties that it had accrued from a prior milestone payment already paid to Merck. All other key terms of the license agreement are unchanged.

Clinical Development Arrangements

The Company has entered into, and expects to continue to enter into, contracts in the normal course of business with various third parties who support its clinical trials, preclinical research studies, and other services related to its development activities. The scope of the services under these agreements can generally be modified at any time, and the agreement can be terminated by either party after a period of notice and receipt of written notice.

7.	Stockholders’ Equity

Table of Contents

Authorized, Issued, and Outstanding Common Stock

The Company’s authorized common stock has a par value of $0.001 per share and consists of 100,000,000 shares as of March 31, 2021, and December 31, 2020; 20,625,637 and 19,663,698 shares were issued and outstanding at March 31, 2021, and December 31, 2020, respectively.

The following table summarizes common stock share activity for the three months ended March 31, 2021 and 2020 (dollars in thousands):

	Three Months Ended March 31, 2021
	Shares of Common Stock		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance, December 31, 2020		19,663,698	$	20	$	349,351		$	(326,613	)	$	22,758
Net loss		—		—		—			(4,676	)		(4,676	)
Stock-based compensation expense		—		—		398			—			398
Common stock issued for conversion of April 2020 Notes		959,080		1		7,452			—			7,453
Common stock issued through employee stock purchase plan		2,184		—		6			—			6
Common stock issued for vested restricted stock units		675		—		(15	)		—			(15	)
Balance, March 31, 2021		20,625,637	$	21	$	357,192		$	(331,289	)	$	25,924

	Three Months Ended March 31, 2020
	Shares of Common Stock		Common Stock		Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity
Balance, December 31, 2019		9,741,372	$	10	$	284,313		$	(271,428	)	$	12,895
Net loss		—		—		—			(7,002	)		(7,002	)
Stock-based compensation expense		—		—		410			—			410
Common stock issued through employee stock purchase plan		2,215		—		18			—			18
Common stock issued, net of expenses		28,527		—		207			—			207
Common stock issued for vested restricted stock units		15,490		—		(73	)		—			(73	)
Balance, March 31, 2020		9,787,604	$	10	$	284,875		$	(278,430	)	$	6,455

Table of Contents

Shares Reserved for Future Issuance

The Company had reserved shares of common stock for future issuance as follows:

	March 31, 2021		December 31, 2020
Outstanding stock options		1,371,606		830,343
Outstanding restricted stock units