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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 SEPTEMBER 30, 2021

OR

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

FOR THE TRANSITION PERIOD FROM                  TO                 

Commission File Number 001-36365

 

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, 13th 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.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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

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

As of November 1, 2021, there were 23,950,121 shares of the registrant’s Common Stock outstanding.

 

 

 


Table of Contents

 

 

SCYNEXIS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

PART I FINANCIAL INFORMATION

 

1

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020

 

1

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020

 

2

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 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

 

20

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

30

Item 4.

 

Controls and Procedures

 

30

 

 

 

PART II OTHER INFORMATION

 

31

 

 

 

 

 

Item 1A.

 

Risk Factors

 

31

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

31

Item 6.

 

Exhibits

 

32

 

 

 

Signatures

 

33

 

 

 

 


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)

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

100,109

 

 

$

93,041

 

Prepaid expenses and other current assets

 

 

3,164

 

 

 

5,165

 

Accounts receivable, net

 

 

29

 

 

 

 

Inventory

 

 

631

 

 

 

 

Total current assets

 

 

103,933

 

 

 

98,206

 

Other assets

 

 

1,365

 

 

 

573

 

Deferred offering costs

 

 

206

 

 

 

187

 

Restricted cash

 

 

218

 

 

 

273

 

Property and equipment, net

 

 

165

 

 

 

298

 

Intangible assets

 

 

1,145

 

 

 

 

Operating lease right-of-use asset (See Note 6)

 

 

2,850

 

 

 

2,999

 

Total assets

 

$

109,882

 

 

$

102,536

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,510

 

 

$

4,639

 

Accrued expenses

 

 

4,608

 

 

 

4,141

 

Warrant liabilities

 

 

1,037

 

 

 

17,564

 

Operating lease liability, current portion (See Note 6)

 

 

65

 

 

 

52

 

Total current liabilities

 

 

13,220

 

 

 

26,396

 

Other liabilities

 

 

2,099

 

 

 

 

Warrant liabilities

 

 

14,298

 

 

 

33,592

 

Convertible debt and derivative liability (See Note 5)

 

 

10,805

 

 

 

16,516

 

Loan payable

 

 

28,579

 

 

 

 

Operating lease liability (See Note 6)

 

 

3,267

 

 

 

3,274

 

Total liabilities

 

 

72,268

 

 

 

79,778

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, authorized 5,000,000 shares as of September 30, 2021 and December 31, 2020; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value, 100,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 23,885,570 and 19,663,698 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

27

 

 

 

20

 

Additional paid-in capital

 

 

367,823

 

 

 

349,351

 

Accumulated deficit

 

 

(330,236

)

 

 

(326,613

)

Total stockholders’ equity

 

 

37,614

 

 

 

22,758

 

Total liabilities and stockholders’ equity

 

$

109,882

 

 

$

102,536

 

 

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

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Table of Contents

 

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

 

$

516

 

 

$

 

 

$

516

 

 

$

 

License agreement revenue

 

 

 

 

 

 

 

 

12,050

 

 

 

 

Total revenue

 

 

516

 

 

 

 

 

 

12,566

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenues

 

 

145

 

 

 

 

 

 

145

 

 

 

 

Research and development

 

 

4,401

 

 

 

8,030

 

 

 

16,083

 

 

 

26,364

 

Selling, general and administrative

 

 

15,411

 

 

 

3,481

 

 

 

34,879

 

 

 

9,448

 

Total operating expenses

 

 

19,957

 

 

 

11,511

 

 

 

51,107

 

 

 

35,812

 

Loss from operations

 

 

(19,441

)

 

 

(11,511

)

 

 

(38,541

)

 

 

(35,812

)

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

2,725

 

 

 

806

 

Amortization of debt issuance costs and discount

 

 

413

 

 

 

311

 

 

 

937

 

 

 

910

 

Interest income

 

 

(8

)

 

 

(5

)

 

 

(20

)

 

 

(188

)

Interest expense

 

 

1,019

 

 

 

330

 

 

 

1,678

 

 

 

859

 

Other income

 

 

 

 

 

 

 

 

 

 

 

(386

)

Other expense

 

 

 

 

 

20

 

 

 

 

 

 

602

 

Warrant liabilities fair value adjustment

 

 

(18,810

)

 

 

(7,786

)

 

 

(35,378

)

 

 

(16,114

)

Derivative liabilities fair value adjustment

 

 

(1,400

)

 

 

(5,290

)

 

 

(1,772

)

 

 

(6,683

)

Total other income

 

 

(18,786

)

 

 

(12,420

)

 

 

(31,830

)

 

 

(20,194

)

(Loss) income before taxes

 

 

(655

)

 

 

909

 

 

 

(6,711

)

 

 

(15,618

)

Income tax benefit

 

 

(50

)

 

 

 

 

 

(3,088

)

 

 

(3,144

)

Net (loss) income

 

$

(605

)

 

$

909

 

 

$

(3,623

)

 

$

(12,474

)

Net (loss) income per share attributable to common stockholders – basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share – basic

 

$

(0.02

)

 

$

0.09

 

 

$

(0.14

)

 

$

(1.23

)

Net loss per share attributable to common stockholders – diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share – diluted

 

$

(0.06

)

 

$

(0.28

)

 

$

(0.73

)

 

$

(1.37

)

Weighted average common shares outstanding – basic and diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

26,616,628

 

 

 

10,627,618

 

 

 

26,147,658

 

 

 

10,129,098

 

Diluted

 

 

27,754,828

 

 

 

13,389,014

 

 

 

26,326,006

 

 

 

11,220,802

 

 

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

2


Table of Contents

 

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(3,623

)

 

$

(12,474

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

133

 

 

 

82

 

Stock-based compensation expense

 

 

1,528

 

 

 

1,220

 

Amortization of debt issuance costs and discount

 

 

937

 

 

 

910

 

Change in fair value of warrant liabilities

 

 

(35,378

)

 

 

(16,114

)

Change in fair value of derivative liabilities

 

 

(1,772

)

 

 

(6,683

)

Noncash operating lease expense for right-of-use asset

 

 

149

 

 

 

144

 

Loss on extinguishment of debt

 

 

2,725

 

 

 

806

 

Noncash consideration associated with common stock purchase agreement

 

 

 

 

 

602

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses, other assets, deferred costs, and other

 

 

1,271

 

 

 

1,482

 

Accounts payable, accrued expenses, and other

 

 

4,990

 

 

 

(2,757

)

Net cash used in operating activities

 

 

(29,040

)

 

 

(32,782

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Maturities of investments

 

 

 

 

 

20,713

 

Purchases of property and equipment

 

 

 

 

 

(4

)

Purchase of intangible assets

 

 

(589

)

 

 

 

Purchases of investments

 

 

 

 

 

(14,235

)

Net cash (used in) provided by investing activities

 

 

(589

)

 

 

6,474

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock issued

 

 

8,027

 

 

 

4,702

 

Payments of offering costs and underwriting discounts and commissions

 

 

(151

)

 

 

(279

)

Proceeds from loan payable

 

 

30,000

 

 

 

 

Payments of loan payable issuance costs

 

 

(1,253

)

 

 

 

Proceeds from common stock issuance under employee stock purchase plan

 

 

22

 

 

 

28

 

Repurchase of shares to satisfy tax withholdings

 

 

(3

)

 

 

(75

)

Proceeds from senior convertible notes

 

 

 

 

 

10,000

 

Payments of senior convertible notes issuance costs

 

 

 

 

 

(494

)

Net cash provided by financing activities

 

 

36,642

 

 

 

13,882

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

 

7,013

 

 

 

(12,426

)

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

 

 

93,314

 

 

 

42,193

 

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

 

$

100,327

 

 

$

29,767

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,569

 

 

$

840

 

Cash received for interest

 

$

18

 

 

$

186

 

Noncash financing and investing activities:

 

 

 

 

 

 

 

 

Common stock issued for settlement of senior convertible notes

 

$

7,452

 

 

$

2,784

 

Purchased intangible assets included in accounts payable and accrued expenses

 

$

556

 

 

$

 

Deferred offering and issuance costs included in accounts payable and accrued expenses

 

$

50

 

 

$

54

 

Deferred offering costs reclassified to additional-paid-in capital

 

$

30

 

 

$

1

 

Common stock issued for commitment shares

 

$

 

 

$

602

 

Reclass of warrant liability to additional paid in capital

 

$

298

 

 

$

 

Reclass of deferred asset associated with issuance of loan payable to debt discount

 

$

390

 

 

$

 

Settlement of liability for exercise of warrants

 

$

805

 

 

$

 

 

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

3


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 a broad-spectrum, intravenous (IV)/oral agent for multiple fungal indications in both the community and hospital settings. In June 2021, the Company announced that the U.S. Food and Drug Administration (“FDA”) approved BREXAFEMME (ibrexafungerp tablets) for oral use in patients with vulvovaginal candidiasis (“VVC”), also known as vaginal yeast infection, and the Company has commenced the commercialization of BREXAFEMME in the U.S.  

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 $330.2 million at September 30, 2021 and limited capital resources to fund ongoing operations. These capital resources primarily comprised cash and cash equivalents of $100.1 million at September 30, 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 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.

New Jersey Technology Business Tax Certificate Transfer (NOL) Program

The New Jersey Technology Business Tax Certificate Transfer (NOL) program, administered by the New Jersey Economic Development Authority, enables approved biotechnology companies to sell their unused net operating losses (“NOLs”) and research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey.  For the nine months ended September 30, 2021, the Company recognized a $4.1 million income tax benefit for the sale of a portion of the Company’s unused New Jersey NOLs and research and development credits.  

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 and nine months ended September 30, 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 during the reporting periods. Actual results could differ from those estimates. Significant estimates include: revenue recognition, determination of the fair value of stock-based compensation grants; the estimate of services and effort expended by

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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.

Accounts Receivable, Net

Accounts receivable are reported on the unaudited condensed consolidated balance sheets at outstanding amounts due from customers for product sales net of discounts and chargebacks.  The Company evaluates the collectability of accounts receivable on a regular basis, by reviewing the financial condition and payment history of its customers, an overall review of collections experience on other accounts, and economic factors or events expected to affect future collections experience. An allowance for doubtful accounts is recorded when a receivable is deemed to be uncollectible.  The Company recorded no allowance for doubtful accounts as of September 30, 2021.

Inventory

Inventory is stated at the lower of cost or net realizable value. Costs include amounts related to third party manufacturing.  Prior to the regulatory approval of an investigational drug, the Company recognizes as research and development expense costs related to the manufacture of an investigational drug when incurred.  Upon regulatory approval, the Company begins capitalizing such manufacturing expenses as inventory.  For BREXAFEMME, capitalization of costs as inventory began upon regulatory approval on June 1, 2021.

Revenue Recognition

The Company accounts for revenue in accordance with Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”). Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of goods and services, in an amount that reflects the consideration that the entity expects to be entitled in exchange for those goods and services. The Company performs the following five steps to recognize revenue under ASC Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only recognizes revenue when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services that will be transferred to the customer.

Product Revenue, Net

The Company sells BREXAFEMME primarily to wholesalers in the United States and are initially invoiced at contractual list prices. These wholesalers subsequently resell BREXAFEMME to specialty and other retail pharmacies. In addition to agreements with the wholesalers, the Company enters into arrangements with third-party payors that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts for the purchase of BREXAFEMME.

The Company determined that performance obligations are satisfied and revenue is recognized when a customer takes control of the Company’s product, which occurs at a point in time. This occurs upon delivery of the BREXAFEMME to customers, at which point the Company recognizes revenue. Payment is typically received 70 to 90 days after satisfaction of the Company’s performance obligations.

Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to a customer (“transaction price”). The transaction price for product sales is reduced by variable consideration related to chargebacks, rebates, discounts, incentives, and returns.  The Company will estimate the amount of variable consideration that should be included in the transaction price using the expected value method. These estimates take into consideration prescription demand from commercial providers, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns, and historical trends. These provisions reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the contract. The amount of variable consideration that is included in the transaction price may be constrained and is included in net sales only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period.  Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.  Sales commissions and other incremental costs of obtaining customer contracts are expensed as incurred as the amortization periods would be less than one year.

 

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License Agreement Revenue

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, 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. 

Cost of Product Revenues

The cost of product revenues consists primarily of distribution and freight costs and other manufacturing costs. Prior to the regulatory approval of BREXAFEMME on June 1, 2021, the Company expensed as research and development the costs associated with the third-party manufacture of BREXAFEMME.

 

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Basic and Diluted Net (Loss) Income per Share of Common Stock

The Company calculates net (loss) income per common share in accordance with ASC 260, Earnings Per Share. Basic net (loss) income per common share for the three and nine months ended September 30, 2021 and 2020 was determined by dividing net (loss) income 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) income per common share for the three and nine months ended September 30, 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 and nine months ended September 30, 2021 and 2020 was determined as follows (in thousands, except share and per share amounts):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net (loss) income

$

(605

)

 

$

909

 

 

$

(3,623

)

 

$

(12,474

)

Dilutive effect of convertible debt

 

(988

)

 

 

 

 

 

 

 

 

 

Dilutive effect of warrant liability

 

 

 

 

(4,649

)

 

 

(15,719

)

 

 

(2,917

)

Net loss allocated to common shares

$

(1,593

)

 

$

(3,740

)

 

$

(19,342

)

 

$

(15,391

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

26,616,628

 

 

 

10,627,618

 

 

 

26,147,658

 

 

 

10,129,098

 

Dilutive effect of stock options and restricted stock units

 

 

 

 

1,058

 

 

 

 

 

 

 

Dilutive effect of convertible debt

 

1,138,200

 

 

 

 

 

 

 

 

 

 

Dilutive effect of warrant liability

 

 

 

 

2,760,338

 

 

 

178,348

 

 

 

1,091,704

 

Weighted average common shares outstanding – diluted

 

27,754,828

 

 

 

13,389,014

 

 

 

26,326,006

 

 

 

11,220,802

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share – diluted

$

(0.06

)

 

$

(0.28

)

 

$

(0.73

)

 

$

(1.37

)

 

The following potentially dilutive shares of common stock have not been included in the computation of diluted net loss per share for the three and nine months ended September 30, 2021 and 2020, as the result would be anti-dilutive:

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Outstanding stock options

 

1,643,506

 

 

 

808,855

 

 

 

1,643,506

 

 

 

817,855

 

Outstanding restricted stock units

 

149,134

 

 

 

80,137

 

 

 

149,134

 

 

 

80,137

 

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

 

 

 

798,810

 

 

 

798,810

 

Warrants to purchase common stock associated with December 2019 Public Offering

 

4,472,205

 

 

 

4,472,205

 

 

 

4,472,205

 

 

 

4,472,205

 

Warrants to purchase common stock associated with December 2020 Public Offering - Series 1

 

6,439,866

 

 

 

 

 

 

 

 

 

 

Warrants to purchase common stock associated with December 2020 Public Offering - Series 2

 

6,800,000

 

 

 

 

 

 

6,800,000

 

 

 

 

Warrants to purchase common stock associated with Loan Agreement

 

170,410

 

 

 

 

 

 

170,410

 

 

 

 

Warrants to purchase common stock associated with Solar loan agreement

 

 

 

 

12,243

 

 

 

 

 

 

12,243

 

Common stock associated with March 2019 Notes

 

 

 

 

 

 

 

1,138,200

 

 

 

1,138,200

 

Total

 

20,473,931

 

 

 

6,594,117

 

 

 

15,172,265

 

 

 

7,741,317

 

 

 

Recently Issued Accounting Pronouncements

7


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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 – C