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, 2017MARCH 31, 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.)

 

 

 

101 Hudson Street

Suite 36101 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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

 

  (Do not check if a smaller reporting company)

 

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 NovemberMay 1, 2017,2021, there were 28,558,95720,630,750  shares of the registrant’s Common Stock outstanding.

 

 

 


Table of Contents

 

SCYNEXIS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2017MARCH 31, 2021

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

PART I FINANCIAL INFORMATION

 

1

 

 

 

 

 

Item 1.

 

Financial Statements

 

1

 

 

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2017,March 31, 2021 and December 31, 20162020

 

1

 

 

Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30,
2017
March 31, 2021 and 2016
2020

 

2

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the ninethree months ended September 30, 2017
March 31, 2021 and 2016
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 1.1A.

 

Legal ProceedingsRisk Factors

 

26

Item 1A.2.

 

Risk FactorsUnregistered Sales of Equity Securities and Use of Proceeds

 

26

Item 6.

 

Exhibits

 

26

 

 

 

Signatures

 

2728

 

 

 

 


Table of Contents

 

PART I. FINANCIALFINANCIAL INFORMATION

Item 1.

Financial StatementsStatements.

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

 

 

September 30, 2017

 

 

December 31, 2016

 

 

March 31, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,749

 

 

$

35,656

 

 

$

92,011

 

 

$

93,041

 

Short-term investments

 

 

38,960

 

 

 

22,930

 

Prepaid expenses and other current assets

 

 

1,014

 

 

 

741

 

 

 

3,310

 

 

 

5,165

 

Restricted cash

 

 

55

 

 

 

0

 

Total current assets

 

 

48,723

 

 

 

59,327

 

 

 

95,376

 

 

 

98,206

 

Other assets

 

 

577

 

 

 

120

 

 

 

692

 

 

 

573

 

Deferred offering costs

 

 

319

 

 

 

345

 

 

 

187

 

 

 

187

 

Restricted cash

 

 

218

 

 

 

273

 

Property and equipment, net

 

 

271

 

 

 

298

 

Intangible assets

 

 

378

 

 

 

0

 

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

 

 

2,950

 

 

 

2,999

 

Total assets

 

$

49,619

 

 

$

59,792

 

 

$

100,072

 

 

$

102,536

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,832

 

 

$

2,192

 

 

$

6,516

 

 

$

4,639

 

Accrued expenses

 

 

1,737

 

 

 

1,268

 

 

 

2,134

 

 

 

4,141

 

Deferred revenue, current portion

 

 

257

 

 

 

257

 

Loan payable, current portion

 

 

2,849

 

 

 

 

Warrant liabilities

 

 

16,225

 

 

 

17,564

 

Operating lease liability, current portion (See Note 6)

 

 

57

 

 

 

52

 

Total current liabilities

 

 

6,675

 

 

 

3,717

 

 

 

24,932

 

 

 

26,396

 

Deferred revenue, non-current

 

 

185

 

 

 

378

 

Deferred rent

 

 

 

 

 

25

 

Warrant liability

 

 

3,792

 

 

 

6,601

 

Loan payable, long term

 

 

11,703

 

 

 

14,252

 

Other liabilties

 

 

140

 

 

 

0

 

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

 

 

22,355

 

 

 

24,973

 

 

 

74,148

 

 

 

79,778

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, authorized 5,000,000 shares as of September

30, 2017 and December 31, 2016; 0 shares issued and outstanding as of

September 30, 2017 and December 31, 2016

 

 

 

 

 

 

Common stock, $0.001 par value, 125,000,000 shares authorized as of

September 30, 2017, and December 31, 2016; 28,335,836 and 24,609,411

shares issued and outstanding as of September 30, 2017, and December 31,

2016, respectively

 

 

28

 

 

 

24

 

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

 

 

0

 

 

 

0

 

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

 

 

224,896

 

 

 

214,918

 

 

 

357,192

 

 

 

349,351

 

Accumulated deficit

 

 

(197,660

)

 

 

(180,123

)

 

 

(331,289

)

 

 

(326,613

)

Total stockholders’ equity

 

 

27,264

 

 

 

34,819

 

 

 

25,924

 

 

 

22,758

 

Total liabilities and stockholders’ equity

 

$

49,619

 

 

$

59,792

 

 

$

100,072

 

 

$

102,536

 

 

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

1


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,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Revenue

 

$

64

 

 

$

64

 

 

$

193

 

 

$

193

 

 

$

12,050

 

 

$

0

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development, net

 

 

4,459

 

 

 

4,890

 

 

 

12,927

 

 

 

16,293

 

Research and development

 

 

6,948

 

 

 

9,866

 

Selling, general and administrative

 

 

2,004

 

 

 

1,880

 

 

 

6,425

 

 

 

6,086

 

 

 

6,696

 

 

 

2,613

 

Total operating expenses

 

 

6,463

 

 

 

6,770

 

 

 

19,352

 

 

 

22,379

 

 

 

13,644

 

 

 

12,479

 

Loss from operations

 

 

(6,399

)

 

 

(6,706

)

 

 

(19,159

)

 

 

(22,186

)

 

 

(1,594

)

 

 

(12,479

)

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

100

 

 

 

 

 

 

300

 

 

 

 

Loss on extinguishment of debt

 

 

2,725

 

 

 

0

 

Amortization of debt issuance costs and discount

 

 

256

 

 

 

278

 

Interest income

 

 

(109

)

 

 

(48

)

 

 

(261

)

 

 

(115

)

 

 

(7

)

 

 

(147

)

Interest expense

 

 

373

 

 

 

 

 

 

1,081

 

 

 

 

 

 

214

 

 

 

210

 

Warrant liability fair value adjustment

 

 

1,638

 

 

 

4,570

 

 

 

(2,809

)

 

 

4,469

 

Other income

 

 

0

 

 

 

(350

)

Warrant liabilities fair value adjustment

 

 

(1,296

)

 

 

(4,768

)

Derivative liabilities fair value adjustment

 

 

90

 

 

 

(700

)

Total other expense (income)

 

 

2,002

 

 

 

4,522

 

 

 

(1,689

)

 

 

4,354

 

 

 

1,982

 

 

 

(5,477

)

Loss before taxes

 

 

(3,576

)

 

 

(7,002

)

Income tax expense

 

 

1,100

 

 

 

0

 

Net loss

 

$

(8,401

)

 

$

(11,228

)

 

$

(17,470

)

 

$

(26,540

)

 

$

(4,676

)

 

$

(7,002

)

Net loss per share - basic and diluted

 

$

(0.31

)

 

$

(0.48

)

 

$

(0.67

)

 

$

(1.53

)

Weighted average common shares outstanding - basic and diluted

 

 

27,091,061

 

 

 

23,425,007

 

 

 

26,096,046

 

 

 

17,329,441

 

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.

2


Table of Contents

 

SCYNEXIS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(17,470

)

 

$

(26,540

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

40

 

 

 

11

 

Stock-based compensation expense

 

 

1,241

 

 

 

908

 

Write off of deferred offering costs

 

 

 

 

 

111

 

Amortization of investment premium

 

 

151

 

 

 

 

Amortization of debt discount

 

 

300

 

 

 

 

Change in fair value of warrant liability

 

 

(2,809

)

 

 

4,469

 

Changes in deferred rent

 

 

(7

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses, other assets, and deferred costs

 

 

(743

)

 

 

(939

)

Accounts payable and accrued expenses

 

 

92

 

 

 

5

 

Accrued severance and retention cost obligations

 

 

 

 

 

(2,631

)

Deferred revenue

 

 

(193

)

 

 

(193

)

Net cash used in operating activities

 

 

(19,398

)

 

 

(24,799

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Maturities of investments

 

 

45,377

 

 

 

6,932

 

Purchases of property and equipment

 

 

(2

)

 

 

(24

)

Proceeds from sale of Services Business

 

 

 

 

 

500

 

Purchase of investments

 

 

(61,558

)

 

 

(35,506

)

Net cash used in investing activities

 

 

(16,183

)

 

 

(28,098

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock issued

 

 

8,926

 

 

 

23,077

 

Payments of deferred offering costs and underwriting discounts and

   commissions

 

 

(288

)

 

 

(1,788

)

Proceeds from Loan Agreement

 

 

 

 

 

15,000

 

Proceeds from Loan Agreement issuance costs

 

 

 

 

 

(589

)

Proceeds from employee stock purchase plan issuance

 

 

36

 

 

 

21

 

Net cash provided by financing activities

 

 

8,674

 

 

 

35,721

 

Net decrease in cash and cash equivalents

 

 

(26,907

)

 

 

(17,176

)

Cash and cash equivalents, beginning of period

 

 

35,656

 

 

 

46,985

 

Cash and cash equivalents, end of period

 

$

8,749

 

 

$

29,809

 

Supplemental cash flow information:

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,081

 

 

$

 

Cash received for interest

 

$

393

 

 

$

67

 

Noncash financing and investing activities:

 

 

 

 

 

 

 

 

Loan Agreement issuance costs included in accounts payable

 

$

 

 

$

426

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

 

 

$

 

Deferred offering costs reclassified to additional-paid-in capital

 

$

27

 

 

$

65

 

 

 

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

 

 

0

 

 

 

(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

 

 

 

0

 

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

 

 

0

 

 

 

6,477

 

Purchases of property and equipment

 

 

0

 

 

 

(4

)

Purchase of intangible assets

 

 

(200

)

 

 

0

 

Purchases of investments

 

 

0

 

 

 

(14,235

)

Net cash used in investing activities

 

 

(200

)

 

 

(7,762

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from common stock issued

 

 

0

 

 

 

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

 

 

$

0

 

Purchased intangible assets included in accounts payable and accrued expenses

 

$

178

 

 

$

0

 

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

 

$

0

 

 

$

40

 

 

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, committedpioneering innovative medicines to positively impacting the lives of patients suffering fromovercome and prevent difficult-to-treat and often life-threatening infections by delivering innovative anti-infective therapies.drug-resistant infections.  The Company is developing its lead product candidate, SCY-078,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 is currently dosing patients in two clinical studies evaluating oral SCY-078:

Phase 2 dose-finding study (“DOVE study”) for the treatment of vulvovaginal candidiasis (“VVC”). We expect to report top-line results for this study in mid-2018;

Global, open-label study for the treatment of invasive fungal infections that are refractory to or intolerant of standard antifungal agents (“FURI study”).

The DOVE study is a randomized, multicenter, double-blind, active-controlled, dose-finding study designed to evaluate the safety and efficacy of oral SCY-078 versus oral fluconazole in adult female patients. Approximately 180 patients with moderate to severe acute VVC are being randomized to one of five different regimens of oral SCY-078 or oral fluconazole, the current standard of care. Efficacy will be measured by the percentage of patients with clinical cure (complete resolution of signs and symptoms) at the test-of-cure visit at day 10 (primary endpoint) and at a follow-up visit on day 25. Mycological eradication (negative fungal culture) will also be evaluated at the same time points.

The FURI study is a global, open-label study in which oral SCY-078 is being administered to patients with invasive fungal infections that are refractory to, or that are intolerant of, standard therapy (azoles, echinocandins and/or polyenes). The Company continues to open sites in the U.S. and in Europe, providing access to oral SCY-078 for patients that have failed other therapies and for whom limited treatment options are available.

The Company is initiating a global, open-label study for the treatment of Candida auris infections (CARES study) in the fourth quarter of this year. Candida auris is typically a multidrug resistant pathogen and systemic infections caused by Candida auris are associated with high mortality. The CARES study is intended to provide rapid access to oral SCY-078 for patients suffering from this life-threatening infection.  

The Company believes that compelling data from the FURI and/or CARES studies could allow SCY-078 to become eligible for the regulatory Limited Population Pathway for Antibacterial and Antifungal Drugs (“LPAD”) potentially resulting in an initial New Drug Application (“NDA”) based on streamlined development.

In addition, based on promising in vitro and in vivo data of SCY-078 against Aspergillus infections, as a single agent and in combination with standard of care, the Company is evaluating potential subsequent clinical development steps for this indication.

On March 2, 2017, the Company announced that the U.S. Food and Drug Administration (“FDA”) required the Company to hold the initiation of any new clinical studies with the IV formulation of SCY-078 following three thrombotic events observed in healthy volunteers receiving IV SCY-078 in a Phase 1 study. Based on previous discussions with the FDA, the Company is in the process of gathering the required data that will enable the Company to submit a complete response supporting the Company’s request to lift the clinical hold on the IV formulation of SCY-078. There can be no assurance that the FDA will lift the clinical hold and allow initiation of any new clinical studies with the IV formulation of SCY-078 or agree with the Company's trial designs involving the IV formulation of SCY-078.

The Company has incurred significant losses and negative cash flows from operations since its initial public offering ("IPO") in May 2014 and expects to continue to incur losses.  Thelosses 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 over the next 12 months 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 (e.g., grants),funding; (2) costs associated with new or existing strategic alliances, andor licensing orand collaboration arrangements; key SCY-078 development and(3) negative regulatory events;events or unanticipated costs related to its development of SCY-078;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 other factors.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.

4


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

Shelf Registration FilingReverse Stock Split

On October 30, 2015,July 16, 2020, the Company filed a shelf registration statement on Form S-3 with the SECCertificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Amendment”), which was declaredbecame effective on November 16, 2015. The registration statement contained two prospectuses:

Friday, July 17, 2020, (a) implementing a base prospectus which covers the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $150.0 million1-for-10 reverse stock split of the Company'sCompany’s common stock preferred stock, debt securities and warrants, including(b) decreasing the number of authorized shares of the Company’s common stock or preferredfrom 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 issuable upon conversionsplit 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 debt securities,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 preferred stock,outstanding convertible notes or common stock, preferred stock or debt securities issuable upon the exercise of stock options or warrants (the "Shelf Registration"), and

a prospectus covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $40.0 million of the Company's common stock that may be issued and sold under a sales agreement with Cowen and Company, LLC ("Cowen").  On April 10, 2016, the Company terminated the sales agreement with Cowen and on April 11, 2016, entered into a Controlled Equity Offering Sales AgreementSM (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”).  Pursuant to the Sales Agreement, the Company may sell from time to time, at its option, up to an aggregate of $40.0 million of the Company’s common stock, through Cantor, as sales agent.  Pursuant to the Sales Agreement, sales of the common stock, if any, will be made under the Company’s previously filed and currently effective registration statement on Form S-3 (File No. 333-207705).

The common stock that may be offered, issued and sold by the Company under the Sales Agreement is included in the $150.0 million of securities that may be offered, issued and sold by the Company under the base prospectus. Upon termination of the Sales Agreement with Cantor, any portion of the $40.0 million included in the Sales Agreement that is not sold pursuant to the Sales Agreement will be available for sale in other offerings pursuant to the base prospectus and a corresponding prospectus supplement, and if no shares are sold under the Sales Agreement, the full $150.0 million of securities may be sold in other offerings pursuant to the base prospectus.

June 2016 Public Offering

On June 21, 2016, the Company completed a public offering (the "June 2016 Public Offering") of its common stock and warrants pursuant to the Company's effective Shelf Registration. The Company sold an aggregate of 9,375,000 shares of common stock and warrants to purchase up to 4,218,750 shares of the Company's common stock at a public offering price of $2.40 per share.  The warrant exercise price is $3.00 per share.  Net proceeds from the June 2016 Public Offering were approximately $20.8 million, after deducting underwriting discounts and commissions and offering expenses of approximately $1.7 million.  See Note 8 for further details.

Loan and Security Agreement

On September 30, 2016, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Solar Capital Ltd. (“Solar”), in its capacity as administrative and collateral agent and as lender. Pursuant to the Loan Agreement, Solar is providing the Company with a 48-month secured term loan in the amount of $15.0 million (the “Term Loan”) and the Term Loan matures on September 30, 2020 (the “Maturity Date”). See Note 6 for further details.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 or (“US GAAP,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, 2017,March 31, 2021, are not necessarily indicative of the results for the full year or the results for any future periods. These interimunaudited 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"SEC”) on March 13, 2017.29, 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

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during the reporting periods. Actual results could differ from those estimates. Significant estimates include: determination of the fair value of the Company’s common stock used to measure stock-based compensation for options granted to employees and nonemployees and to determine the fair value of common stock warrants;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 liability fair valueand derivative liabilities each reporting period.

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2.

Summary of Significant Accounting Policies

ConcentrationThe 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 Credit Risk

Financial instruments, which potentially expose the Company to concentrations of credit risk, consist principally of cash on deposit and cash equivalents held with one bank which exceed FDIC insured limits and certain short-term investments. Ongoing credit evaluations of the customer’s financial condition are performed and independent credit ratings for the associated counterparties are reviewed by the Company and collateral is not required. The Company's money market fund investment (recognizedyear ended December 31, 2020, except as cash and cash equivalents) is with what the Company believes to be a high quality issuer. The Company has not experienced any losses in such account.

Cash and Cash Equivalents

The Company considers any highly liquid investments with a remaining maturity of three months or less when purchased to be cash and cash equivalents.  The Company's cash and cash equivalents include cash on deposit and a money market fund.

Short-Term Investments

The Company's held-to-maturity investments in U.S. government securities, commercial paper, and its overnight repurchase agreement are carried at amortized cost and any premiums or discounts are amortized or accreted through the maturity date of the investment.  Any impairment that is not deemed to be temporary is recognized in the period identified.

Deferred Offering Costs

Deferred offering costs are expenses directly related to the Form S-3 filed with the SEC on October 30, 2015 and declared effective on November 16, 2015. These costs consist of legal, accounting, printing, and filing fees that the Company has capitalized, including fees incurred by the independent registered public accounting firm directly related to the Shelf Registration. Deferred costs associated with the Shelf Registration are reclassified to additional paid in capital on a pro-rata basis when the Company completes offerings under the Shelf Registration, with any remaining deferred offering costs to be charged to the results of operations at the end of the three-year life of the Shelf Registration.  During the three months ended March 31, 2016, the Company expensed $0.1 million of deferred offering costs associated with the Shelf Registration as a result of the termination of the "at the market" offering program entered into with Cowen on November 11, 2015.

Warrant Liability

On June 21, 2016, the Company sold an aggregate of 9,375,000 shares of common stock and warrants to purchase up to 4,218,750 shares of the Company's common stock under the Shelf Registration at a public offering price of $2.40 per share of common stock sold. The Company accounted for these warrants as a liability instrument measured at its fair value. The fair values of these warrants have been determined using the Black-Scholes valuation model ("Black-Scholes"). The warrants are subject to remeasurement at each balance sheet date, using Black-Scholes, with any changes in the fair value of the outstanding warrants recognized in the accompanying statements of operation. See Note 8 for further details.

Comprehensive Loss

The Company has no items of comprehensive income or loss other than net loss.described below.

Revenue Recognition and Deferred Revenue

The Company has entered into arrangements involving intellectual property rights, some of which include multiple elements, such as the sale or license of intellectual property and the provision of developmentother services.  Under these arrangements,When entering into any arrangement involving the sale or license of intellectual property rights and other services, the Company may be entitleddetermines whether the arrangement is subject to receive development milestone payments and royaltiesaccounting guidance in the form of a designated percentage of product sales.

The Company assesses these contractual arrangements, and presents costs incurred and payments received in accordanceASC 606, Revenue from Contracts with Customers (“Topic 606”), as well as ASC 808, Collaborative Arrangements ("Topic 808"), when. If the Company determines that the contractualan arrangement includes a joint operating activity, has active participation by both parties, and both partiesgoods or services that are subject to significant risks and rewards under the arrangement. When reimbursement payments are duecentral to the Company’s business operations for consideration, the Company underwill then identify the performance obligations in the contract using the unit-of-account guidance in Topic 606.  For a collaborative arrangementdistinct unit-of-account that is within the scope of Topic 808,606, the Company determinesapplies all of the appropriate classificationaccounting 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 each specific reimbursement paymentexample, 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. The Company's August 2013 development, license, and supply agreement with R- Pharm, CJSC (“R-Pharm”), combined with the supplemental arrangement in November 2014, is a collaborative arrangement pursuant to Topic 808.

When entering into any arrangement involving intellectual property rights, the Company also determines whether the arrangement includes multiple deliverables and is subject to accounting guidance in ASC subtopic 605-25, Multiple-Element Arrangements. If the Company determines that an arrangement includes multiple elements, it determines whether the

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arrangement should be divided into separate units of accounting and how the arrangement consideration should be measured and allocated among the separate units of accounting. An element qualifies as a separate unit of accounting when the delivered element has standalone value to the customer. The Company’s arrangements do not include a general right of return relative to delivered elements. Any delivered elements that do not qualify as separate units of accounting are combined with other undelivered elements within the arrangement as a single unit of accounting. If the arrangement constitutes a single combined unit of accounting, the Company determines the revenue recognition method for the combined unit of accounting and recognizes the revenue over the period from inception through the date the last deliverable within the single unit of accounting is delivered.

Non-refundable upfront license fees are recorded as deferred revenue and recognized into revenue on a straight-line basis over the estimated period of the Company’s substantive performance obligations. If the Company does not have substantive performance obligations, the Company recognizes non-refundable upfront fees into revenue through the date the deliverable is satisfied. Analyzing the arrangement to identify deliverables requires the use of judgment and each deliverable may be an obligation to deliver services, a right or license to use an asset, or another performance obligation. In arrangements that include license rights and other non-contingent deliverables, such as participation in a steering committee, these deliverables do not have standalone value because the non-contingent deliverables are dependent on the license rights. That is, the non-contingent deliverables would not have value without the license rights, and only the Company can perform the related services. Upfront license rights and non-contingent deliverables, such as participation in a steering committee, do not have standalone value as they are not sold separately and they cannot be resold. In addition, when non-contingent deliverables are sold with upfront license rights, the license rights do not represent the culmination of a separate earnings process. As such, the Company accounts for the license and the non-contingent deliverables as a single combined unit of accounting. In such instances, the license revenue in the form of non-refundable upfront payments is deferred and recognized over the applicable relationship period, which historically has been the estimated period of the Company’s substantive performance obligations or the period the rights granted are in effect. The Company recognizes contingent event-based payments under license agreements when the payments are received. The Company has not received any royalty payments to date.

The Company will recognize a milestone payment when earned if it is substantive and the Company has no ongoing performance obligations related to the milestone. A milestone payment is considered substantive if it: 1) is commensurate with either the Company’s performance to achieve the milestone or the enhanced value of the delivered item as a result of a specific outcome from the Company’s performance to achieve the milestone; 2) relates solely to past performance; and 3) is reasonable relative to all of the deliverables and payment terms, including other potential milestone consideration, within the arrangement.

Amounts received prior to satisfying all revenue recognition criteria are recorded as deferred revenue in the accompanying balance sheets.

The Company’s deferred revenue includes non-refundable upfront payments received under certain licensing and collaboration arrangements that contain substantive performance obligations that the Company is providing over respective defined service or estimated relationship periods. Such non-refundable upfront payments are recognized over these defined service or estimated relationship periods. The Company received a non-refundable upfront payment of $1.5 million from R-Pharm in August 2013 which is being recognized over a period of 70 months. The Company recognized revenue from this upfront payment of $0.1 million and $0.2 million for the three and nine months ended September 30, 2017, respectively.

The reimbursements due from R-Pharm for specified research and development costs incurred by the Company are classified as a reduction to research and development expense in the accompanying statements of operations. The reimbursements due to the Company are recorded as a reduction of expense when (i) the reimbursable expenses have been incurred by the Company, (ii) persuasive evidence of a cost reimbursement arrangement exists, (iii) reimbursable costs are fixed or determinable, and (iv) the collection of the reimbursement payment is reasonably assured. The Company recorded receivables for unpaid reimbursement amounts due from R-Pharm of $0.3 million and $0.2 million as of September 30, 2017 and December 31, 2016, respectively, which are presented in prepaid expenses and other current assets in the accompanying balance sheets.

In July 2016, the Company entered into an Asset Purchase agreement with UK-based Cypralis Limited (or "Cypralis"), a life sciences company, for the sale of its cyclophilin inhibitor assets. Cypralis also acquired all patents, patent applications and know-how related to the acquired portfolio. In connection with the Asset Purchase agreement, the Company is eligible to receive milestone payments upon the successful progression of Cypralis clinical candidates into later stage clinical studies and royalties payable upon product commercialization. The Company retains the right to repurchase the portfolio assets from Cypralis if abandoned or deprioritized.

Research and Development

Major components of research and development costs include clinical trial activities and services, including related drug formulation, manufacturing, and other development, preclinical studies, cash compensation, stock-based compensation, fees

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paid to consultants and other entities that conduct certain research and development activities on the Company’s behalf, materials and supplies, legal services, and regulatory compliance.

The Company is required to estimate its expenses resulting from its obligations under contracts with clinical research organizations, clinical site agreements, vendors, and consultants in connection with conducting SCY-078 clinical trials and preclinical development. The financial terms of these contracts are subject to negotiations which vary from contract to contract, and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts. The Company’s objective is to reflect the appropriate development and trial expenses in its financial statements by matching those expenses with the period in which the services and efforts are expended. For clinical trials, the Company accounts for these expenses according to the progress of the trial as measured by actual hours expended by CRO personnel, investigator performance or completion of specific tasks, patient progression, or timing of various aspects of the trial. For preclinical development services performed by outside service providers, the Company determines accrual estimates through financial models, taking into account development progress data received from outside service providers and discussions with applicable Company and service provider personnel.

Reimbursements of certain research and development costs by parties under collaborative arrangements have been recorded as a reduction of research and development expense presented within the statement of operations. Such reimbursements were recognized under the collaboration arrangement with R-Pharm during the three and nine months ended September 30, 2017. Information about the Company’s research and development expenses and reimbursements due under collaboration arrangements for the three and nine months ended September 30, 2017 and 2016, is presented as follows (in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Research and development expense, gross

 

$

4,459

 

 

$

5,091

 

 

$

12,946

 

 

$

16,881

 

Less: Reimbursement of research and development expense

 

 

 

 

 

201

 

 

 

19

 

 

 

588

 

Research and development expense, net of reimbursements

 

$

4,459

 

 

$

4,890

 

 

$

12,927

 

 

$

16,293

 

Patent Expenses

Costs related to filing and pursuing patent applications, as well as costs related to maintaining the Company's existing patent portfolio, are recorded as expense as incurred since recoverability of such expenditures is uncertain.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company’s principal or, in absence of a principal, most advantageous market for the specific asset or liability.  The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:

Level 1 — Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;

Level 2 — Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and

Level 3 — Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances.

Amortization of Debt Discount

The Company's Term Loan with Solar is recorded net of debt discount which comprised issuance costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the Term Loan (Note 8). The resulting debt discount is being amortized over the term of the Term Loan using the straight-line method, which approximates the effective interest method, and the amortization of debt discount is included in the accompanying statements of operations.

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Income Taxes

The Company provides for deferred income taxes under the asset and liability method, whereby deferred income taxes result from temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. Valuation allowances are established when necessary to reduce deferred tax assets to the amount that the Company believes is more likely than not to be realized.

The Company recognizes uncertain tax positions when the positions will be more likely than not sustained based solely upon the technical merits of the positions.

Certain modifications made to an outstanding incentive stock option award at any time after the initial grant dates which are considered to be “material modifications”, as defined within the Internal Revenue Code, may result in the affected award being recharacterized as a non-statutory stock option. The effects of any recharacterization modification for purposes of income tax accounting are recognized on a prospective basis.

Stock-Based Compensation

The Company measures and recognizes compensation expense for all stock-based payment awards made to employees, officers, and directors based on the estimated fair values of the awards as of grant date. The Company values equity instruments and stock options granted to employees and non-employee directors using the Black-Scholes valuation model. The value of the award is recorded as expense over the requisite service periods and the Company recognizes forfeitures as they occur in the period.

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 ("Topic 260”). Basic and diluted 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

)

 

 

0

 

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

 

 

 

0

 

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 all periodsthe three months ended March 31, 2021 and 2020, as the result would be anti-dilutive.

anti-dilutive:

 

 

September 30,

 

 

 

2017

 

 

2016

 

Warrants to purchase Series C-1 Preferred

 

 

14,033

 

 

 

14,033

 

Warrants to purchase common stock associated with Loan Agreement

 

 

122,435

 

 

 

122,435

 

Warrants to purchase common stock associated with June 2016 Public Offering

 

 

4,218,750

 

 

 

4,218,750

 

Stock options

 

 

2,888,146

 

 

 

1,815,583

 

 

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

 

 

 

0

 

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

 

Effect of RecentRecently Issued Accounting Pronouncements

In May 2014,June 2016, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606, or 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2014-09.2016-13”). The amendments in ASU 2014-09 establishes2016-13 require a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP. The standard outlines a single comprehensive model for entitiesnet amount expected to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance.be collected. In applying the new revenue recognition model to contracts with customers, an entity: (1) identifies the contract(s) with a customer; (2) identifies the performance obligations in the contract(s); (3) determines the transaction price; (4) allocates the transaction price to the performance obligations in the contract(s); and (5) recognizes revenue when (or as) the entity satisfies a performance obligation. The accounting standards update applies to all contracts with customers except those that are within the scope of other topics inNovember 2019, the FASB Accounting Standards Codification. The accounting standards update also requires significantly expanded quantitativeissued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and qualitative disclosures regardingHedging (Topic 815), and Leases (Topic 842) (“ASU 2019-10”), which revised the nature, amount, timing and uncertaintyeffective dates for ASU 2016-13 for public business entities that meet the SEC definition of revenue and cash flows arising from contracts with customers. This guidance is effective fora smaller reporting company to fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts2022, with Customers, or ASU 2016-10. The new guidance is an update to ASC 606 and provides clarity on: identifying performance obligations and licensing implementation. For public companies, ASU 2016-10 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. As the Company has not yet received regulatory approval for any products, the impact of this standard is not expected to be material. However, the new standard will require the Company to estimate variable consideration associated with the prior sale of intellectual property to Cypralis, the effects of which have yet to be determined. Additionally, the Company is currently evaluating whether any changes to the accounting for the arrangement with R-Pharm and other third party collaborators may be necessary, as well as the implementation method that will be applied upon adoption.

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In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, or ASU 2014-15. ASU 2014-15 will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. The Company adopted ASU 2014-15 in 2016 and ASU 2014-15 did not materially impact the Company's financial statements.

In February 2016, the FASB issued Accounting Standards Update ("ASU") No. 2016-02, Leases, or ASU 2016-02. The new guidance requires lessees to recognize the assets and liabilities arising from leases on the balance sheet. For public companies, ASU 2016-02 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2018, and early adoption is permitted.  TheAs a smaller reporting company, the Company is currently evaluating the impact that the implementation of ASU 2016-022016-13 will have on the Company’sits consolidated financial statements.

In March 2016,August 2020, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation, or 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 2016-09.2020-06”). The newamendments in ASU 2020-06 reduce the number of accounting models for convertible debt instruments and revises certain guidance is an updaterelating to ASC 718the derivative scope exception and simplifies several aspects of the accounting for share-based transactions. For public companies,earnings per share.  The amendments in ASU 2016-09 is2020-06 are effective for annual periods, includingpublic 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 annual periods, beginning after December 15, 2016. The Company adopted ASU 2016-09 inyears.  As a smaller reporting company, the three month period ended March 31, 2017, and ASU 2016-09 did not materially impact the Company's financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation, or ASU 2017-09. The new guidance is an update to ASC 718 and simplifies the modification accounting for share-based payment awards. For public companies, ASU 2017-09 is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. The Company is currently evaluating the impact that the implementation of ASU 2017-092020-06 will have on its consolidated financial statements.

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Recently Adopted Accounting Pronouncements

In December 2019, the Company’sFASB 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.

Short-term Investments

The following table summarizes the held-to-maturity securities held at September 30, 2017 (in thousands):

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

As of September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

15,486

 

 

$

68

 

 

$

(74

)

 

$

15,480

 

Commercial paper

 

 

13,474

 

 

 

 

 

 

 

 

 

13,474

 

Overnight repurchase agreement

 

 

10,000

 

 

 

 

 

 

 

 

 

10,000

 

Total short-term investments

 

$

38,960

 

 

$

68

 

 

$

(74

)

 

$

38,954

 

All held-to-maturity short-term investments at September 30, 2017 will mature in less than one year.  The gross unrealized gains and losses for the Company's commercial paper and overnight repurchase agreement are not significant.

4.

Prepaid Expenses and Other Current Assets

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

 

September 30, 2017

 

 

December 31, 2016

 

 

March 31, 2021

 

 

December 31, 2020

 

Prepaid SCY-078 development services

 

$

134

 

 

$

153

 

Prepaid research and development services

 

$

1,300

 

 

$

1,535

 

Prepaid insurance

 

 

470

 

 

 

243

 

 

 

115

 

 

 

362

 

Other prepaid expenses

 

 

73

 

 

 

71

 

 

 

525

 

 

 

19

 

Other receivable due from R-Pharm

 

 

251

 

 

 

233

 

Other receivables

 

 

1,000

 

 

 

2,876

 

Other current assets

 

 

86

 

 

 

41

 

 

 

370

 

 

 

373

 

Total prepaid expenses and other current assets

 

$

1,014

 

 

$

741

 

 

$

3,310

 

 

$

5,165

 

 

5.4.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

 

 

September 30, 2017

 

 

December 31, 2016

 

Accrued research and development expenses

 

$

745

 

 

$

318

 

Accrued employee bonus compensation

 

 

643

 

 

 

730

 

Employee withholdings

 

 

24

 

 

 

22

 

Other accrued expenses

 

 

325

 

 

 

198

 

Total accrued expenses

 

$

1,737

 

 

$

1,268

 

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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

 

 

6.5.

Borrowings

April 2020 Note Purchase Agreement

On September 30, 2016,April 9, 2020, the Company entered into the LoanApril 2020 Note Purchase Agreement with Solar,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 its capacity as administrativenet proceeds of approximately $9.5 million after deducting $0.5 million for an advisory fee and collateral agentother 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 as lender.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 LoanMarch 2019 Note Purchase Agreement, Solar is providingon 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 48-month secured Term Loanlong-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.

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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 $15.0 million.the Securities Act of 1933, as amended (the “Securities Act”), due to the March 2019 Notes being issued to one financially sophisticated investor. The Term Loan bearsMarch 2019 Notes bear interest at a floating rate equal to the LIBOR rateof 6.0% per annum payable semiannually in effect plus 8.49%arrears on March 15 and the Company is required to make interest-only paymentsSeptember 15 of each year, beginning September 15, 2019. The March 2019 Notes will mature on the Term Loan beginning November 1, 2016 and continuing through March 1, 2018.  Beginning April 1, 2018 (the “Amortization Date”), the Company is required to make monthly payments of interest plus equal monthly principal payments from the Amortization Date through the Maturity Date15, 2025, unless earlier converted, redeemed or repurchased. The March 2019 Notes constitute general, senior unsecured obligations of the Term Loan.  If the Company receives certain positive clinical data prior to March 31, 2018, and receives unrestricted net cash proceeds of not less than $20.0 million after September 8, 2016, from certain financing, licensing, or other non-dilutive agreements, the Amortization Date is extended for an additional six months (extending the interest-only period by six months).  However, the ultimate termCompany.

The holder of the Term Loan is not extended and the equal monthly payments of principal will be calculated based on the remaining term of the Term Loan.  The obligations under the Loan Agreement are secured by a lien on substantially all assets of the Company other than its intellectual property, which is subject to a negative pledge.  

The Loan Agreement contains customary affirmative covenants, including covenants regarding the payment of taxes and other obligations, maintenance of insurance, reporting requirements and compliance with applicable laws and regulations. Further, the Loan Agreement contains customary negative covenants limiting the ability of the Company, among other things, to incur debt, grant liens, make investments, make acquisitions, make certain restricted payments and sell assets, subject to certain exceptions, and maintain certain minimum liquidity requirements. Upon the occurrence and during the continuance of an event of default, the lendersMarch 2019 Notes may declare all outstanding principal and accrued but unpaid interest under the Loan Agreement immediately due and payable and may exercise the other rights and remedies provided for under the Loan Agreement and related loan documents. The events of default under the Loan Agreement include payment defaults, cross defaults with certain other agreements, breaches of covenants or representations and warranties, the occurrence of a material adverse effect and certain bankruptcy events. The Company has the right to prepay the Term Loan in wholeconvert their March 2019 Notes at their option at any time and the Loan Agreement contains customary prepayment and closing fees.

Pursuantprior to the Loan Agreement,close of business on September 30, 2016 (the "Closing Date"), the Company issued to Solar a warrant (the “Solar Warrant”) to purchase an aggregate of up to 122,435business 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 atper $1,000 principal amount of March 2019 Notes, which is equivalent to an exerciseinitial conversion price of $3.6754approximately $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 share. The Solar Warrant will expire five years from$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 grant.  The Solar Warrant is classified as equityprincipal amount of the March 2019 Notes to be redeemed, plus accrued and was recorded at its relative fair value at issuanceunpaid interest to, but excluding, the redemption date.  If a “fundamental change” (as defined in the stockholders' equity sectionMarch 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 balance sheet (See Note 8).

Future principal debt payments onamount of the currently outstanding Term Loan payable as of September 30, 2017 are as follows (in thousands):

2017

 

$

 

2018

 

 

4,500

 

2019

 

 

6,000

 

2020

 

 

4,500

 

Total principal payments

 

 

15,000

 

Final fee due at maturity

 

 

750

 

Total principal and final fee payment

 

 

15,750

 

Unamortized discount and debt issuance costs

 

 

(1,198

)

Less current portion

 

 

(2,849

)

Loan payable, long term

 

$

11,703

 

March 2019 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

7.6.

Commitments and Contingencies

Leases

The Company leases its headquarters facilities under a long-term non-cancelable operating lease. On July 13, 2015,March 1, 2018, the Company entered into a sublease (the "Sublease") that became effective July 22, 2015, to sublet certain premises consisting of 10,141long-term lease agreement for approximately 19,275 square feet of office space (the "Subleased Premises") located at 101 Hudson Street,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 Optimer Pharmaceuticals, Inc.August 1, 2018, the commencement date, with total lease payments of $7.3 million over the lease term. The termCompany has the option to renew for two consecutive five-year periods from the end of the Sublease commenced on August 1, 2015 (the "Commencement Date")first term and is scheduled to expire on July 30, 2018. No base rent was due under the Sublease until one month after the Commencement Date. Under the Sublease, the Company is obligatednot reasonably certain that the option to pay monthly base rent of approximately twenty-five thousand dollars per month, which

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amount increases by 3% annually on each anniversary ofrenew the Commencement Date. In addition,Lease will be exercised. Under the Lease, the Company was required to fundfurnished a security deposit within the sublandlordform of a standby letter of credit in the amount of $0.1 million.  Rent expense$0.3 million, which was approximately $0.1 million and $0.2 millionreduced by NaN 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 threeright 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 nine months ended September 30, 2017, respectively.  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

%

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Future minimum lease payments for all operating leasesthe Lease as of September 30, 2017March 31, 2021 are as follows (in thousands):

 

September 30, 2017 to December 31, 2017

 

$

78

 

2018

 

 

182

 

 

March 31, 2021

 

2021

 

$

347

 

2022

 

 

527

 

2023

 

 

715

 

2024

 

 

730

 

2025

 

 

744

 

Thereafter

 

 

 

 

 

2,789

 

Total

 

$

260

 

 

$

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 September 30, 2017,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 SCY-078ibrexafungerp in the field of human health.  SCY-078In 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 iswas 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 SCY-078.ibrexafungerp. The aggregate royalty percentagesroyalties 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 SCY-078ibrexafungerp compound (the "Deferred Milestone"“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 SCY-078ibrexafungerp compound.  In December 2016 and January 2018, the Company entered into a second amendmentand 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.  ExceptIn January 2019, a milestone payment became due to Merck as described above, alla 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 and provisions of the license agreement remain in full force and effect.

The Company has two additional licensing agreements for other compounds that could require it to make payments of up to $2.3 million upon achievement of certain milestones by the Company.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.

Legal Proceeding

On March 8, 2017, a purported stockholder class action lawsuit was filed in the United States District Court for the District of New Jersey against the Company and certain of its current and former officers, captioned Gibson v. Scynexis, Inc., et al.  The action was filed on behalf of a putative class of all persons who purchased or otherwise acquired the Company's securities (1) pursuant or traceable to the Company's IPO, or (2) on the open market between May 2, 2014, and March 2, 2017.  It asserts claims for violation of Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.  The complaint seeks, among other things, compensatory damages and attorneys’ fees and costs on behalf of the putative class.  The Company believes that the claims lack merit and intends to defend the litigation vigorously.

ASC Topic 450, Contingencies, requires a loss contingency to be accrued by a charge to operating results if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Legal costs in connection with a loss contingency are expensed as incurred. As of September 30, 2017, the Company has not recognized a liability associated with the class action lawsuit contingency.

8.7.

Stockholder'sStockholders’ Equity

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Authorized, Issued, and Outstanding Common Stock

The Company’s authorized common stock has a par value of $0.001 per share and consists of 125,000,000 authorized100,000,000 shares as of September 30, 2017,March 31, 2021, and December 31, 2016; 28,335,8362020; 20,625,637 and 24,609,41119,663,698 shares were issued and outstanding at September 30,

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2017,March 31, 2021, and December 31, 2016,2020, respectively.

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.  

The following table summarizes common stock share activity for the ninethree months ended September 30, 2017March 31, 2021 and 2020 (dollars in thousands): 

 

 

 

Shares of

Common Stock

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Total

Stockholders'

Equity

 

Balance, December 31, 2016

 

 

24,609,411

 

 

$

24

 

 

$

214,918

 

 

$

(180,123

)

 

$

34,819

 

Cumulative stock-based compensation forfeiture

   adjustment

 

 

 

 

 

 

 

 

67

 

 

 

(67

)

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,470

)

 

 

(17,470

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,241

 

 

 

 

 

 

1,241

 

Common stock issued through employee stock

   purchase plan

 

 

18,132

 

 

 

 

 

 

36

 

 

 

 

 

 

36

 

Common stock issued under Shelf Registration, net

   of expenses

 

 

3,708,293

 

 

 

4

 

 

 

8,634

 

 

 

 

 

 

8,638

 

Balance, September 30, 2017

 

 

28,335,836

 

 

$

28

 

 

$

224,896

 

 

$

(197,660

)

 

$

27,264

 

 

 

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

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(4,676

)

 

 

(4,676

)

Stock-based compensation expense

 

 

0

 

 

 

0

 

 

 

398

 

 

 

0

 

 

 

398

 

Common stock issued for conversion of April 2020 Notes

 

 

959,080

 

 

 

1

 

 

 

7,452

 

 

 

0

 

 

 

7,453

 

Common stock issued through employee stock purchase plan

 

 

2,184

 

 

 

0

 

 

 

6

 

 

 

0

 

 

 

6

 

Common stock issued for vested restricted stock units

 

 

675

 

 

 

0

 

 

 

(15

)

 

 

0

 

 

 

(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

 

 

0

 

 

 

0

 

 

 

0

 

 

 

(7,002

)

 

 

(7,002

)

Stock-based compensation expense

 

 

0

 

 

 

0

 

 

 

410

 

 

 

0

 

 

 

410

 

Common stock issued through employee stock purchase plan

 

 

2,215

 

 

 

0

 

 

 

18

 

 

 

0

 

 

 

18

 

Common stock issued, net of expenses

 

 

28,527

 

 

 

0

 

 

 

207

 

 

 

0

 

 

 

207

 

Common stock issued for vested restricted stock units

 

 

15,490

 

 

 

0

 

 

 

(73

)

 

 

0

 

 

 

(73

)

Balance, March 31, 2020

 

 

9,787,604

 

 

$

10

 

 

$

284,875

 

 

$

(278,430

)

 

$

6,455

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Shares Reserved for Future Issuance

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

 

 

September 30, 2017

 

 

December 31, 2016

 

 

March 31, 2021

 

 

December 31, 2020

 

Outstanding stock options

 

 

2,888,146

 

 

 

1,819,444

 

 

 

1,371,606

 

 

 

830,343

 

Outstanding Series C-1 Preferred warrants

 

 

14,033

 

 

 

14,033

 

Outstanding restricted stock units

 

 

96,974

 

 

 

29,087

 

Warrants to purchase common stock associated with June 2016 Public Offering

 

 

4,218,750

 

 

 

4,218,750

 

 

 

421,867

 

 

 

421,867

 

Warrants to purchase common stock associated with Loan Agreement

 

 

122,435

 

 

 

122,435

 

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 1

 

 

6,800,000

 

 

 

6,800,000

 

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

 

 

6,800,000

 

 

 

6,800,000

 

Prefunded warrants to purchase common stock associated with December 2020 Public Offering

 

 

5,260,000

 

 

 

5,260,000

 

Warrants to purchase common stock associated with Solar loan agreement

 

 

12,243

 

 

 

12,243

 

For possible future issuance for the conversion of the March 2019 Notes

 

 

1,138,200

 

 

 

1,138,200

 

For possible future issuance for the conversion of the April 2020 Notes

 

 

0

 

 

 

1,299,790

 

For possible future issuance under 2014 Equity Incentive Plan (Note 9)

 

 

522,230

 

 

 

668,921

 

 

 

318,097

 

 

 

146,488

 

For possible future issuance under Employee Stock Purchase Plan (Note 9)

 

 

83,617

 

 

 

72,338

 

For possible future issuance under 2015 Inducement Plan (Note 9)

 

 

165,000

 

 

 

165,000

 

For possible future issuance under Employee Stock Purchase Plan

 

 

6,652

 

 

 

5,895

 

For possible future issuance under 2015 Inducement Award Plan (Note 9)

 

 

14,050

 

 

 

14,050

 

Total common shares reserved for future issuance

 

 

8,014,211

 

 

 

7,080,921

 

 

 

27,510,704

 

 

 

28,028,978

 

 

Warrants Associated with Convertible PreferredCommon Stock IssuancesPurchase Agreement

In July 2006,On April 10, 2020, the Company issued warrantsentered into the Common Stock Purchase Agreement with Aspire Capital pursuant to purchase 196,923 shares of Series C-1 Preferred Stock, which converted intothe Company has the right to purchase 14,033sell to Aspire Capital from time to time in its sole discretion up to $20.0 million in shares of the Company’s common stock over the next 30 months, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement.  The aggregate number of shares that we can sell to Aspire Capital under the Common Stock Purchase Agreement may in no case exceed 1,956,547 shares of the Company’s common stock (which is equal to approximately 19.99% of the common stock outstanding on the date of the Common Stock Purchase Agreement), including the 70,910 commitment shares (the Exchange Cap), unless either (a) shareholder approval is obtained to issue more, in which case the Exchange Cap will not apply, or (b) the average purchase price of all shares sold under the Common Stock Purchase Agreement exceeds $8.461; provided that at no time shall Aspire Capital (together with its affiliates) beneficially own more than 19.99% of the Company’s common stock.  During the three months ended March 31, 2021 and 2020, the Company did not sell any shares of its common stock under the Common Stock Purchase Agreement.

Convertible Debt and Derivative Liabilities

In connection with the Company's IPO; however,Company’s issuances of its April 2020 Notes and March 2019 Notes, the Company refers to these warrantsbifurcated the embedded conversion options, inclusive of the interest make-whole provisions and make-whole fundamental change provisions, and recorded the embedded conversion options as its Series C-1 Preferred warrants.long-term derivative liabilities in the Company’s balance sheet in accordance with ASC 815, Derivatives and Hedging.  The Series C-1 Preferred warrants were issued in conjunction with a loan financing agreement with an original exercise price of $3.25 per share of Series C-1 Preferred, which converted into an exercise price of $45.61 per share of common stock in connectionconvertible debt and derivative liability associated with the Company's IPO. These warrants remain outstandingMarch 2019 Notes are presented in total on the accompanying unaudited condensed consolidated balance sheets as of September 30, 2017the convertible debt and will expire on May 7, 2019, which is the five year anniversary of the Company's IPO.derivative liability.  The fair value at the date of grant for these instruments was $0.5 million, which was recorded as a debt discount. The debt discount related to these warrants was fully amortized as of December 31, 2010. The Company determined that the warrants should be recorded as a derivative liability and stated at fair valuewill be remeasured at each reporting period.  Asperiod using the binomial lattice model with changes in fair value recorded in the statements of September 30, 2017operations in other (income) expense.  For the three months ended March 31, 2021 and December 31, 2016,2020, the Company recorded a loss of $0.1 million and a gain of $0.7 million, respectively, due to the change in fair value of the warrant derivative liability was zero.liabilities.  

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Warrants Associated with June 2016, March 2018, December 2019, and December 2020 Public OfferingOfferings

On June 21, 2016, the Company completedThe outstanding warrants associated with the June 2016, Public Offering of its common stockMarch 2018, December 2019, and warrants pursuant to the Company's effective Shelf Registration (see Note 1).  Each purchaser received a warrant to purchase 0.45 of a share for each share purchased in the June 2016 Public Offering. There is not expected to be any trading market for the warrants. Each warrant was exercisable immediately upon issuance, will expire five years from the date of issuance, and has an exercise price of $3.00 per share.

The warrantsDecember 2020 public offerings contain a provision where the warrant holder has the option to receive cash, equal to the Black-Scholes fair value of the remaining unexercised portion of the warrant, as cash settlement in the event that there is a fundamental transaction (contractually defined to include various merger, acquisition or stock transfer activities). Due to this provision, ASC 480,Distinguishing Liabilities from Equity, requires that these warrants be classified as liabilities. The fair values of these warrants have been determined using the Black-Scholes valuation model, and the changes in the fair value are recorded in the

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accompanying unaudited condensed consolidated statements of operations.  During the three and nine months ended September 30, 2017,March 31, 2021 and 2020, the Company recorded a lossgains of $1.6$1.3 million and a gain of $2.8$4.8 million, respectively, due toin the change inwarrant liabilities fair value of the warrant liability.adjustment.  As of September 30, 2017,March 31, 2021 and 2020, the fair value of the warrant liabilityliabilities was $3.8 million.$49.9 million and $51.2 million, respectively.

Warrant Associated with Solar Loan Agreement

PursuantOn the closing date of the Company’s previous loan agreement with Solar, pursuant to the Loan Agreement, on the Closing Dateloan agreement the Company issued to Solar the Solar Warrantwarrant to purchase an aggregate of up to 122,43512,243 shares of the Company’s common stock at an exercise price of $3.6754$36.754 per share. The Solar Warrantwarrant will expire five years from the date of the grant. The Solar Warrantwarrant was classified as equity and recorded at its relative fair value at issuance in the stockholders'stockholders’ equity section of the balance sheet. 

9.8.

Stock-based Compensation

2009 Stock Option Plan

The Company had a share-based compensation plan (the “2009 Stock Option Plan”) under which the Company granted options to purchase shares of common stock to employees, directors, and consultants as either incentive stock options or nonqualified stock options. Incentive stock options could be granted with exercise prices not less than 100% to 110% of the fair market value of the common stock. Options granted under the plan generally vest over three to four years and expire 10 years from the date of grant.

2014 Equity Incentive Plan

In February 2014, the Company’s board of directors adopted the 2014 Equity Incentive Plan, or the 2014 Plan, which was subsequently ratified by its stockholders and became effective on May 2, 2014 (the “Effective Date”). The 2014 Plan, as amended on June 18, 2014 and February 25, 2015, is the successor to and continuation of the 2009 Stock Option Plan. As of the Effective Date, no additional awards will be granted under the 2009 Stock Option Plan, but all stock awards granted under the 2009 Stock Option Plan prior to the Effective Date will remain subject to the terms of the 2009 Stock Option Plan. All awards granted on and after the Effective Date will be subject to the terms of the 2014 Plan. The 2014 Plan provides for the grant of the following awards: (i) incentive stock options, (ii) nonstatutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards, and (vi) other stock awards. Employees, directors, and consultants are eligible to receive awards.  Options granted under the plan generally vest over three to four years and expire in 10 years from the date of grant.

Under the 2014 Plan, after giving effect to the increases to the share reserve approved by the Company’s stockholders in September 2014, and June 2015, but excluding the automatic increases discussed below, the aggregate number of shares of common stock that could be issued from and after the Effective Date (the “share reserve”) could not exceed the sum of (i) 1,122,731 new shares, (ii) the shares that represented the 2009 Stock Option Plan’s available reserve on the Effective Date, and (iii) any returning shares from the 2009 Stock Option Plan. Under the 2014 Plan, the share reserve will automatically increase on January 1st of each year, for a period of not more than 10 years, commencing on January 1, 2015, and ending on January 1, 2024, in an amount equal to 4.0% of the total number of shares of capital stock outstanding on December 31st of the preceding calendar year. The board of directors may act prior to January 1st of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur.

Pursuant to the terms of the Company’s 2014 Equity Incentive Plan (“2014 Plan”), on January 1, 2017, 20162021 and 2015,2020, the Company automatically added 984,376, 556,223,786,547 and 340,484389,650 shares to the total number shares of common stock available for future issuance under the 2014 Plan, respectively. As of September 30, 2017,March 31, 2021, there were 522,230318,097 shares of common stock available for future issuance under the 2014 Plan.

2015 Inducement Plan

OnAs of March 26, 2015, the Company's board of directors adopted the 2015 Inducement Plan, or the 2015 Plan. The 2015 Plan has a share reserve covering 450,000 shares of common stock. During the nine months ended September 30, 2017,31, 2021, there were no grants of the Company's common stock under the 2015 Inducement Plan.  As of September 30, 2017, there were 165,00014,050 shares of common stock available for future issuance under the Company’s 2015 Plan.Inducement Award Plan (“2015 Plan”).  During the three months ended March 31, 2021 and 2020, there were 0 and 17,500 granted options of the Company’s common stock under the 2015 Plan, respectively.   On April 30, 2021, the Company’s board of directors amended the 2015 Plan, and the share reserve for the 2015 Plan was increased from 90,000 to 500,000 shares of common stock.

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The activity for the Company’s 2009 Stock Option Plan, 2014 Plan, and 2015 Plan, for the ninethree months ended September 30, 2017,March 31, 2021, is summarized as follows:

 

 

Number of

Shares

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Life (in years)

 

 

Aggregate

Intrinsic

Value ($000)

 

Outstanding — December 31, 2016

 

 

1,819,444

 

 

$

7.52

 

 

 

6.98

 

 

$

32

 

Granted

 

 

1,068,922

 

 

$

2.97

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

$

 

 

 

 

 

 

 

 

 

Canceled

 

 

(220

)

 

$

9.64

 

 

 

 

 

 

 

 

 

Outstanding — September 30, 2017

 

 

2,888,146

 

 

$

5.83

 

 

 

7.31

 

 

$

68

 

Exercisable — September 30, 2017

 

 

1,472,704

 

 

$

7.40

 

 

 

5.80

 

 

$

19

 

Vested or expected to vest — September 30, 2017

 

 

2,888,146

 

 

$

5.83

 

 

 

7.31

 

 

$

68

 

 

 

Number of

Shares

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Life (in years)

 

 

Aggregate

Intrinsic

Value ($000)

 

Outstanding — December 31, 2020

 

 

830,343

 

 

$

21.52

 

 

 

7.71

 

 

$

96

 

Granted

 

 

545,450

 

 

$

7.57

 

 

 

 

 

 

 

 

 

Forfeited/Cancelled

 

 

(4,187

)

 

$

8.48

 

 

 

 

 

 

 

 

 

Outstanding — March 31, 2021

 

 

1,371,606

 

 

$

16.01

 

 

 

8.33

 

 

$

355

 

Exercisable — March 31, 2021

 

 

500,625

 

 

$

29.27

 

 

 

6.72

 

 

$

37

 

Vested or expected to vest — March 31, 2021

 

 

1,371,606

 

 

$

16.01

 

 

 

8.33

 

 

$

355

 

 

Restricted stock unit ("RSU"(“RSU”) activity under the 2014 Plan and 2015 Plan for the ninethree months ended September 30, 2017,March 31, 2021, is summarized as follows:

 

 

Number of

Shares

 

 

Weighted

Average

Grant Date

Fair Value

Per Share

 

Non-vested at December 31, 2016

 

 

 

 

 

 

Granted

 

 

62,365

 

 

$

2.72

 

Vested

 

 

 

 

 

 

Forfeited

 

 

 

 

 

 

Non-vested at September 30, 2017

 

 

62,365

 

 

 

 

 

 

Number of

Shares

 

 

Weighted

Average

Grant Date

Fair Value

Per Share

 

Non-vested at December 31, 2020

 

 

29,087

 

 

$

9.52

 

Granted

 

 

73,675

 

 

$

7.55

 

Vested

 

 

(5,788

)

 

$

10.68

 

Non-vested at March 31, 2021

 

 

96,974

 

 

$

7.95

 

 

The fair value of RSUs is based on the market price of the Company'sCompany’s common stock on the date of grant.  RSUs are only issued to non-executive employees andgenerally vest 25% annually over a four yearfour-year period from the date of grant. Upon vesting, the RSUs are net share settled to

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cover the required withholding tax with the remaining shares issued to the holder.  The Company recognizes compensation expense for such awards ratably over the corresponding vesting period.

2014 Employee Stock Purchase Plan

In February 2014, the Company’s board of directors adopted the 2014 Employee Stock Purchase Plan (“ESPP”), which was subsequently ratified by the Company’s stockholders and became effective on May 2, 2014. The purpose of the ESPP is to provide means by which eligible employees of the Company and of certain designated related corporations may be given an opportunity to purchase shares of the Company’s common stock, and to seek and retain services of new and existing employees and to provide incentives for such persons to exert maximum efforts for the success of the Company. Common stock that may be issued under the ESPP will not exceed 47,794 shares, plus the number of shares of common stock that are automatically added on January 1st of each year for a period of ten years, commencing on January 1, 2015 and ending on January 1, 2024, in an amount equal to the lesser of (i) 0.8% of the total number of shares of outstanding common stock on December 31 of the preceding calendar year, and (ii) 29,411 shares of common stock. Similar to the 2014 Plan, the board of directors may act prior to January 1st of a given year to provide that there will be no increase in the share reserve or that the increase will be a lesser number of shares than would otherwise occur. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Internal Revenue Code.

In the nine months ended September 30, 2017, the number of shares of common stock available for issuance under the ESPP was automatically increased by 29,411 shares pursuant to the terms of the ESPP and the Company issued 18,132 shares of common stock under the ESPP. During the nine months ended September 30, 2016, the number of shares of common stock available for issuance under the ESPP was automatically increased by 29,411 shares pursuant to the terms of the ESPP and the Company issued 7,356 shares of common stock under the ESPP.  As of September 30, 2017, there were 83,617 shares of common stock available for future issuance under the ESPP; and there were 10,465 shares issued by the Company under the ESPP during the three months ended September 30, 2017.

Compensation Cost

The compensation cost that has been charged against income for stock awards under the 2009 Stock Option2014 Plan the 2014 Plan,and the 2015 Plan and the ESPP was $0.4 million and $1.2 million for both the three and nine months ended September 30,

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2017, respectively,March 31, 2021 and $0.3 million and $0.9 million for the three and nine months ended September 30, 2016, respectively.2020.  The total income tax benefit recognized in the statements of operations for share-based compensation arrangements was zero0 for each of the three and nine months ended September 30, 2017March 31, 2021 and 2016. Cash received from options exercised was zero for the three and nine months ended September 30, 2017, and 2016.2020.

Stock-based compensation expense related to stock options is included in the following line items in the accompanying unaudited condensed consolidated statements of operations (in thousands):

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended March 31,

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

 

2021

 

 

2020

 

Research and development

 

$

120

 

 

$

67

 

 

$

334

 

 

$

223

 

 

$

126

 

 

$

136

 

Selling, general and administrative

 

 

287

 

 

 

226

 

 

 

907

 

 

 

685

 

 

 

272

 

 

 

274

 

Total

 

$

407

 

 

$

293

 

 

$

1,241

 

 

$

908

 

 

$

398

 

 

$

410

 

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10.9.

Fair Value Measurements

The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their respective fair values due to the short-term nature of such instruments.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period, pursuant to the policy described in Note 2.period. This determination requires significant judgments to be made. The following table summarizes the conclusions reached as of September 30, 2017March 31, 2021 and December 31, 20162020 for financial instruments measured at fair value on a recurring basis (in thousands):

 

 

 

 

 

Fair Value Hierarchy Classification

 

 

 

 

 

 

Fair Value Hierarchy Classification

 

 

Balance

 

 

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs (Level 3)

 

 

Balance

 

 

Quoted

Prices in

Active

Markets for

Identical

Assets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs (Level 3)

 

December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash on deposit

 

$

9,767

 

 

$

9,767

 

 

 

 

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

236

 

 

$

236

 

 

 

0

 

 

 

0

 

Restricted cash

 

 

273

 

 

 

273

 

 

 

0

 

 

 

0

 

Money market funds

 

 

25,889

 

 

 

25,889

 

 

 

 

 

 

 

 

 

91,775

 

 

 

91,775

 

 

 

0

 

 

 

0

 

Total assets

 

$

35,656

 

 

$

35,656

 

 

 

 

 

 

 

 

$

92,284

 

 

$

92,284

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$

6,601

 

 

 

 

 

 

 

 

$

6,601

 

Warrant liabilities

 

$

49,860

 

 

 

0

 

 

 

0

 

 

$

49,860

 

Derivative liability

 

 

2,618

 

 

 

0

 

 

 

0

 

 

 

2,618

 

Total liabilities

 

$

6,601

 

 

 

 

 

 

 

 

$

6,601

 

 

$

52,478

 

 

 

0

 

 

 

0

 

 

$

52,478

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash on deposit

 

$

2,150

 

 

$

2,150

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

117

 

 

$

117

 

 

 

0

 

 

 

0

 

Restricted cash

 

 

273

 

 

 

273

 

 

 

0

 

 

 

0

 

Money market funds

 

 

6,599

 

 

 

6,599

 

 

 

 

 

 

 

 

 

92,924

 

 

 

92,924

 

 

 

0

 

 

 

0

 

Total assets

 

$

8,749

 

 

$

8,749

 

 

 

 

 

 

 

 

$

93,314

 

 

$

93,314

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$

3,792

 

 

 

 

 

 

 

 

$

3,792

 

Warrant liabilities

 

$

51,156

 

 

 

0

 

 

 

0

 

 

$

51,156

 

Derivative liabilities

 

 

5,954

 

 

 

0

 

 

 

0

 

 

 

5,954

 

Total liabilities

 

$

3,792

 

 

 

 

 

 

 

 

$

3,792

 

 

$

57,110

 

 

 

0

 

 

 

0

 

 

$

57,110

 

 

The Company measures cash equivalents at fair value on a recurring basis. The fair value of cash equivalents is determined based on “Level 1” inputs, which consist of quoted prices in active markets for identical assets.

Level 3 financial liabilities consist of the warrant liabilityliabilities for which there is no current market such that the determination of fair value requires significant judgment or estimation. Changes in fair value measurements categorized within Level 3 of the fair value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate. The

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Company uses the Black-Scholes option valuation model to value the Level 3 warrant liabilityliabilities at inception and on subsequent valuation dates. This model incorporates transaction details such as the Company’s stock price, contractual terms, maturity, risk free rates, as well as volatility.  The unobservable input for all of the Level 3 warrant liabilities includes volatility.  The historical volatility of the Company, using its closing common stock prices, is utilized to reflect future volatility over the expected term of the warrants.  At March 31, 2021, the range and weighted average of the Level 3 volatilities utilized in the Black-Scholes model to fair value the warrant liabilities were 69.6% to 82.5% and 77.6%, respectively.  Additionally, the expected term associated with the December 2019 Public Offering warrants is an unobservable unit given that the expiration of the warrants is the earlier of (i) such date that is six months after the Company publicly announces the approval from the U.S. Food and Drug Administration for ibrexafungerp for the treatment of vulvovaginal candidiasis and (ii) June 12, 2023.  The Company utilized a probability assessment to estimate the likelihood of occurrence for the two potential expiration dates and allocated the probability of occurrence percentage to the fair values calculated based on the two potential expected terms.  The weighted average expected term is 0.9 years as of March 31, 2021 for the December 2019 Public Offering warrants with a range of 0.66 to 2.2 years.  

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The Company uses the binomial lattice valuation model to value the Level 3 derivative liabilities at inception and on subsequent valuation dates.  This model incorporates transaction details such as the Company’s stock price, contractual terms, dividend yield, risk-free rate, historical volatility, credit rating, market credit spread, and estimated effective yield.  The unobservable inputs associated with the Level 3 derivative liabilities are adjusted equity volatility, market credit spread, and estimated yield.  As of March 31, 2021, these inputs were 61.5%, 1,451 basis points, and 15.1%, respectively.  The senior convertible notes are initially fair valued using the binomial lattice model and with the straight debt fair value calculated using the discounted cash flow method.  The discount for lack of marketability, 7.1% as of March 31, 2021, is applied to the value of the March 2019 Notes.  The residual difference represents the fair value of the embedded derivative liabilities and the fair value of the embedded derivative liabilities are reassessed using the binomial lattice valuation model on a quarterly basis.  

A reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) is as follows (in thousands):

Balance - January 1, 2017

 

$

6,601

 

Gain adjustment to fair value

 

 

(2,809

)

Balance - September 30, 2017

 

$

3,792

 

 

 

 

Warrant Liabilities

 

Balance – December 31, 2020

 

 

$

51,156

 

Gain adjustment to fair value

 

 

 

(1,296

)

Balance – March 31, 2021

 

 

$

49,860

 

 

 

 

 

 

 

 

 

 

Derivative Liabilities

 

Balance – December 31, 2020

 

 

$

5,954

 

Adjustment for conversion of April 2020 Notes

 

 

 

(3,426

)

Gain adjustment to fair value

 

 

 

90

 

Balance – March 31, 2021

 

 

$

2,618

 

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Item 2.10.

License Agreement Revenue

In February 2021, the Company entered into an Exclusive License and Collaboration Agreement (the “Agreement”) with Hansoh (Shanghai) Health Technology Co., Ltd., and Jiangsu Hansoh Pharmaceutical Group Company Limited(collectively, “Hansoh”), pursuant to which the Company granted to Hansoh an exclusive license to research, develop and commercialize ibrexafungerp in the Greater China region, including mainland China, Hong Kong, Macau, and Taiwan (the “Territory”).  The Company also granted to Hansoh a non-exclusive license to manufacture ibrexafungerp solely for development and commercialization in the Territory. Under the terms of the Agreement, Hansoh shall be responsible for the development, regulatory approval and commercialization of ibrexafungerp in the Territory.  

Pursuant to the terms of the Agreement, the Company received as consideration for the licenses a nonrefundable upfront cash payment of $10.0 million and is entitled to an additional payment that was payable upon the transfer of certain data related to the manufacturing license.  In addition, the Company will also be eligible to receive up to $110.0 million in potential development and commercial milestones.  In addition, during the term of the licensing agreement, the Company is entitled to low double-digit royalties on net product sales.  The obligation to pay royalties with respect to sales in a specified region will continue until the later of the date of expiration of all intellectual property and regulatory exclusivity for the product in the region and ten years from the first commercial sale, unless earlier terminated by Hansoh with advanced notice for convenience or under other specified circumstances.  The Company is also eligible to receive a milestone related to the successful completion of a manufacturing batch by Hansoh.

The Company evaluated the Agreement and concluded that it was subject to ASC 606 as the Company viewed the Agreement as a contract with a customer as the activities were central to its business operations.  As such, the Company assessed the terms of the Agreement and identified one performance obligation for the licenses to research, develop, manufacture and commercialize ibrexafungerp in the Territory, including the underlying know-how related to such licenses.  The Company also evaluated options for additional goods and services included in the Agreement related to (1) optional technical assistance related to development, regulatory or manufacturing activities and (2) an optional supply agreement for ibrexafungerp.  Such options for additional goods or services were not considered to contain material rights as pricing approximated standalone selling prices and therefore the Company concluded that such options did not represent performance obligations and will be accounted for as separate transactions if and when they occur in the future.

The Company determined that the transaction price of $12.1 million included the fixed upfront cash payment of $10.0 million, an additional amount that was payable upon the transfer of certain data related to the manufacturing license, and $1.1 million related to withholding tax obligations that Hansoh remitted on behalf of the Company.  The remaining amounts related to the successful completion of a manufacturing batch by Hansoh and potential development milestones represent variable consideration and were constrained as it was concluded that it was not probable that a significant reversal in cumulative revenue recognized will not occur and therefore not included in the transaction price as of March 31, 2021.  Potential

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commercial milestones and royalties on net product sales will be recognized in the same period that the underlying net product sales occur as they were determined to relate to the license.  The transaction price was recorded in revenue during the quarter March 31, 2021 at a point in time upon control of the license transferring to Hansoh.  The Company will reevaluate the transaction price at the end of each reporting period as uncertain events or resolved, or as other changes in circumstances occur.

Additionally, pursuant to the Agreement, both the Company and Hansoh agreed to make reasonable efforts to account for applicable taxes, fees, duties, levies, or similar amounts imposed on net income, franchise taxes and profits arising directly or indirectly from the activities of the Agreement.  To the extent Hansoh is required by applicable laws to withhold or deduct any tax on any payment to the Company, Hansoh agreed to make certain increases on payments to the Company to ensure that the Company receives a sum equal to what the Company would have received had there been no deduction or withholding.  As a result, the Company has recorded revenue and tax withholding expense primarily associated with the up-front payment received by the Company on a gross basis.  For the three months ended March 31, 2021, the Company recognized $1.1 million in revenue and $1.1 million in income tax expense to account for the tax withholding expense primarily on the $10.0 million up-front that the Company is responsible to remit under applicable tax law.  

In July 2016, the Company entered into an asset purchase agreement with UK-based Cypralis Limited (or "Cypralis"), a life sciences company, for the sale of its cyclophilin inhibitor assets. Cypralis also acquired all patents, patent applications and know-how related to the acquired portfolio. In connection with the asset purchase agreement, the Company is eligible to receive milestone payments upon the successful progression of Cypralis clinical candidates into later stage clinical studies and royalties payable upon product commercialization. The Company retains the right to repurchase the portfolio assets from Cypralis if abandoned or deprioritized.  For the three months ended March 31, 2021, there was 0 revenue recognized associated with this agreement given the variable consideration associated with the sale of intellectual property to Cypralis was fully constrained as of March 31, 2021.  Additionally, in October 2014 the Company entered into a license agreement with Waterstone Pharmaceutical HK Limited (or “Waterstone”) and granted Waterstone an exclusive, worldwide license to develop and commercialize certain non-strategic compounds.  The Company is entitled to receive potential milestones and royalties from Waterstone; however, there was 0 revenue recognized by the Company associated with this agreement given the variable consideration was fully constrained as of March 31, 2021.

11.

Subsequent Events

In May 2021, the Company entered into an agreement with a third party to sell a portion of its unused New Jersey net operating losses (NOLs) for approximately $4.2 million.

In May 2021, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”), as administrative agent and collateral agent (in such capacity, the “Agent”) and a lender, and Silicon Valley Bank, as a lender (“SVB,” and collectively with Hercules, the “Lenders”) for an aggregate principal amount of $60.0 million (the “Term Loan”). Pursuant to the Loan Agreement, the Term Loan is available to the Company in 4 tranches, subject to certain terms and conditions.

Under the terms of the Loan Agreement, the Company received an initial tranche of $20.0 million from the Lenders on the Closing Date. The second tranche of the Term Loan, consisting of up to an additional $10.0 million, will become available to the Company upon receipt of approval from the Food and Drug Administration of ibrexafungerp for the treatment of vaginal yeast infections (the “First Performance Milestone”) and will be available, if specified conditions are met, during the period beginning on June 1, 2021 through June 30, 2022. The third tranche of the Term Loan, consisting of an additional $5.0 million, will be available to the Company upon (a) the First Performance Milestone and (b) the achievement of the primary endpoint from the Phase 3 study of ibrexafungerp in patients with recurrent vulvovaginal candidiasis, and will be available, if specified conditions are met, from September 30, 2021 through June 30, 2022. The fourth tranche of the Term Loan, consisting of up to an additional $25.0 million, will be available to the Company from January 1, 2022 through December 31, 2023 in $5.0 million increments, subject to certain terms and conditions, including in maintaining a ratio of total outstanding Term Loan principal to net product revenues for ibrexafungerp below a certain specified level for a given draw period.

The Term Loan will mature on March 3, 2025 (the “Maturity Date”); provided that, the Maturity Date shall be automatically extended to May 1, 2025 subject to the occurrence of certain conditions set forth in the Loan Agreement. The Term Loan bears interest at a variable annual rate equal to the greater of (a) 9.05% and (b) the Prime Rate (as reported in the Wall Street Journal) plus 5.80% (the “Interest Rate”). The Company may make payments of interest only through November 1, 2023, which may be extended to May 1, 2024 upon the achievement of the First Performance Milestone prior to November 1, 2023, and which is further extendable in quarterly increments until the Maturity Date, subject to continued compliance with the financial covenant of the Loan Agreement (the “interest-only period”). After the interest-only period, the principal balance and related interest will be required to be repaid in equal monthly installments and continuing until the Maturity Date.

The Loan Agreement contains customary closing fees, prepayment fees and provisions, events of default, and representations, warranties and covenants, including a financial covenant requiring the Company to maintain certain levels of trailing three-month net product revenue solely from the sale of ibrexafungerp commencing on June 30, 2022. The financial covenant will be waived at any time in which the Company maintains unrestricted and unencumbered cash in accounts maintained with SVB equal to at least 50.0% of the total outstanding Term Loan principal amount, subject to certain requirements.  

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In connection with the entry into the Loan Agreement, the Company issued to each of Hercules and SVB a warrant (collectively, the “Warrants”) to purchase shares of SCYNEXIS’s common stock, par value $0.001 per share (the “Shares”).  The amount of shares that may be purchased for the Warrants, collectively between Hercules and SVB, will not exceed 0.04 multiplied by the aggregate amount of the term loan advances, divided by the exercise price of the Warrants.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.

Operating results for the three and nine months ended September 30, 2017,March 31, 2021, are not necessarily indicative of results that may occur in future interim periods or future fiscal years. Some of the statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to our management and involve significant elements of subjective judgment and analysis. Words such as “expects,” “will,” “anticipate,” “target,” “goal,” “intend,” “plan,” “believe,” “seek,” “estimate,” “potential,” “should,” “could,” variations of such words, and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include those discussed under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2017.29, 2021, and in Part II, Item 1A of this Quarterly Report on Form 10-Q.  These and many other factors could affect our future financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this Quarterly Report on Form 10-Q.In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into or review of, all relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely on these statements.

Overview

SCYNEXIS, Inc. is a biotechnology company committedpioneering innovative medicines to positively impacting the livespotentially help millions of patients suffering fromworldwide in need of new options to overcome and prevent difficult-to-treat and often life-threatening infections by delivering innovative anti-infective therapies.drug-resistant infections.  We are developing our lead product candidate, SCY-078,ibrexafungerp, as a broad-spectrum, intravenous (IV)/oral agent for multiple fungal indications in both the community and hospital settings. In December 2020, we announced that we had received the acceptance letter from the U.S. Food and Drug Administration (FDA) for our New Drug Application (NDA) for oral ibrexafungerp for the treatment of vulvovaginal candidiasis (VVC, also known as vaginal yeast infection) with a Prescription Drug User Fee Act (PDUFA) action goal date of June 1, 2021.  The FDA has conditionally approved “Brexafemme” as the brand name for oral ibrexafungerp for vaginal yeast infections. We are also continuing late-stage clinical development for the prevention of recurrent VVC as well as the treatment of life-threatening invasive fungal infections in hospitalized patients.

Ibrexafungerp, the first representative of a novel oralclass of antifungal agents called triterpenoids and intravenous triterpenoid antifungal family fordesignated by the treatment of several fungal infections, including serious and life-threatening invasive fungal infections. SCY-078suffix “-fungerp”, is a structurally distinct glucan synthase inhibitor thatand has been shown to be effective in vitro andin vivo activity against a broad range of human fungifungal pathogens such asCandida,  andAspergillus species, including multidrug-resistant strains, as well asPneumocystis, spp.  Coccidioides, Histoplasma and Blastomyces species.Candida andAspergillus species are the fungi responsible for approximately 85% of all invasive fungal infections in the United States (U.S.) and Europe. To date, we have characterized the antifungal activity, pharmacokinetics, and safety profile of the oral and intravenous (IV)IV formulations of SCY-078ibrexafungerp in multiple Phase 1in vitroin vivo, and clinical studies. In a Phase 2 study, evaluating oral SCY-078 as a step-down therapy in patients withThe FDA has granted Qualified Infectious Disease Product (QIDP) and Fast Track designations to ibrexafungerp for the indications of VVC (including the treatment of VVC episodes and the prevention of recurrent VVC), invasive candidiasis we confirmed(IC) (including candidemia), and invasive aspergillosis (IA), and has granted Orphan Drug designations for the IC and IA indications. These designations may provide us with additional market exclusivity and expedited regulatory paths.

Ibrexafungerp Update

We previously announced that oral SCY-078 achieved the intended plasma exposureFDA has accepted for efficacy and was well-tolerated. In another Phase 2 proof-of-concept study, evaluating oral SCY-078 in patients with vulvovaginal candidiasis (VVC), we observed numerically higher clinical cure rates at test-of-cure and fewer recurrences of VVC at the four-month follow-up when compared to the standard of care (oral fluconazole).

We are currently dosing patients in two clinical studies evaluating oral SCY-078:

Phase 2 dose-finding study (DOVE study)filing our NDA for ibrexafungerp for the treatment of VVC, also known as vaginal yeast infections. The FDA has granted this application Priority Review, a designation which is granted to applications for potential drugs that, if approved, would be significant improvements in the safety or effectiveness of the treatment of serious conditions when compared to standard applications.  Under the PDUFA, the FDA has set a target action date of June 1, 2021. Additionally, the FDA has communicated that it is not currently planning to hold an advisory committee meeting to discuss the application.  The NDA is supported by positive results from two Phase 3, randomized, double-blind, placebo-controlled, multi-center studies (VANISH-303 and VANISH-306), in which oral ibrexafungerp demonstrated statistically superior efficacy and a favorable tolerability profile in women with VVC.  We expectare currently in discussions with the FDA to report top-line resultsfinalize its recommended wording for this study in mid-2018;

Global, open-label studydifferent sections of the Prescribing Information to provide adequate information about efficacy, safety and potential contraindications, warnings and precautions of ibrexafungerp for the treatment of invasive fungal infections that are refractory to or intolerant of standard antifungal agents (FURI study).VVC.

The DOVE

Enrollment is complete in the CANDLE study, is a Phase 3, multi-center, randomized, multicenter, double-blind, active-controlled, dose-finding studyplacebo-controlled trial designed to evaluate the safetyefficacy and efficacysafety of oral SCY-078 versus oral fluconazoleibrexafungerp for the prevention of recurrent VVC, for which there is no approved therapy in adult female patients. Approximately 180 patients with moderate to severe acute VVC are being randomized to one of five different regimens of oral SCY-078 or oral fluconazole, the current standard of care. Efficacy will be measuredU.S.  We expect the last-patient/last-visit for the CANDLE study by the percentageend of patients with clinical cure (complete resolution2021.  We anticipate

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both top-line data and symptoms) ata potential supplemental NDA submission for the test-of-cure visit at day 10 (primary endpoint) and atprevention of recurrent VVC in the first half of 2022, resulting infollow-up visit on day 25. Mycological eradication (negative fungal culture) will also be evaluated at the same time points.potential approval in late 2022.

The FURI studyEnrollment is a global, open-label studyongoing in which oral SCY-078 is being administered to patients withour refractory invasive fungal infections that are refractory(rIFI) program, which comprises two open-label Phase 3 studies (FURI and CARES) designed to or that are intolerant of, standard therapy (azoles, echinocandins and/or polyenes). We continue to open sites insupport a potential future NDA submission through the U.S. and in Europe, providing access to oral SCY-078 for patients that have failed other therapies and for whom limited treatment options are available.

We are initiating a global, open-label study for the treatment of Candida auris infections (CARES study) in the fourth quarter of this year. Candida auris is typically a multidrug resistant pathogen and systemic infections caused by Candida auris are associated with high mortality. The CARES study is intended to provide rapid access to oral SCY-078 for patients suffering from this life-threatening infection.  

We believe that compelling data from the FURI and/or CARES studies could allow SCY-078 to become eligible for the regulatory Limited Population Pathway for Antibacterial and Antifungal Drugs (LPAD) potentially resulting in an initial New Drug Application (NDA) based on streamlined development.

In addition, based on promising in vitro and in vivo data, as well as our Phase 2 study (SCYNERGIA study) of SCY-078 against Aspergillus infections, as a single agent andoral ibrexafungerp in combination with standardvoriconazole (SoC) in patients with IA.  Similar to interim analyses of care,data previously reported, we are evaluatingintend to analyze the data of patients that have completed the treatment course in our FURI and CARES studies and announce these findings when complete.  

Enrollment is ongoing in our Phase 1, randomized, double-blind, placebo-controlled study to evaluate the safety, tolerability, and pharmacokinetics of the IV liposomal formulation of ibrexafungerp in healthy subjects. The study is being conducted in South Africa and dosing started in March 2021.

Impact of COVID-19 Pandemic on Our Business

A novel strain of coronavirus (COVID-19) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020.  The full extent of the future impacts of COVID-19 on our operations is uncertain.  We have continued to monitor the COVID-19 situation closely and have not identified any significant adverse effects on our business.

Corporate Update

In May 2021, we entered into a Loan and Security Agreement (the Loan Agreement) with Hercules Capital, Inc. (Hercules), as administrative agent and collateral agent (in such capacity, the Agent) and a lender, and Silicon Valley Bank, as a lender (SVB, and collectively with Hercules, the Lenders) for an aggregate principal amount of $60.0 million (the Term Loan) and we recently received $20.0 upon closing of the Loan Agreement. Pursuant to the Loan Agreement, the Term Loan is available to us in four tranches, subject to certain terms and conditions.

In May 2021, we appointed a Chief Commercial Officer, who will play a significant role in the anticipated U.S. launch of and commercialization of Brexafemme, the expected trade name for ibrexafungerp.

In May 2021, we entered into an agreement with a third party to sell a portion of our unused New Jersey NOLs for approximately $4.2 million.

In February 2021, we partnered with Amplity Inc. (Amplity) for the potential subsequent clinical development stepsupcoming commercial launch of ibrexafungerp for this indication.the treatment of VVC.  Under the terms of the 5-year agreement, we will utilize Amplity’s commercial execution expertise and resources for sales force, remote engagement, training, market access and select operations services.   Amplity is deferring a portion of its direct service costs in the first two years (2021 and 2022), which we will repay over three years starting in 2023.  Amplity has the potential to earn a performance-based success fee in the 2023-2025 time frame by exceeding certain revenue targets.

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On March 2, 2017,In February 2021, we announced that the U.S. Foodentered into an Exclusive License and Drug Administration (FDA) requiredCollaboration Agreement (the Hansoh Agreement) with Hansoh (Shanghai) Health Technology Co., Ltd., and Jiangsu Hansoh Pharmaceutical Group Company Limited(collectively, Hansoh), pursuant to which Hansoh obtains an exclusive license from us to hold the initiation of any new clinical studies with the IV formulation of SCY-078 following three thrombotic events observed in healthy volunteers receiving IV SCY-078 in a Phase 1 study. Based on previous discussions with the FDA, we areresearch, develop and commercialize ibrexafungerp in the process of gatheringGreater China region, including mainland China, Hong Kong, Macau, and Taiwan. Under the required data that will enable us to submit a complete response supporting our request to lift the clinical hold on the IV formulation of SCY-078. Upon liftingterms of the clinical hold, we planHansoh Agreement, Hansoh shall be responsible for the development, regulatory approval and commercialization of ibrexafungerp in Greater China. We received a $10.0 million upfront payment in the first quarter of 2021 and will also be eligible to test the intended IV dose regimen first in healthy volunteers before initiating our planned Phase 2 study for treatment of patients with invasive Candida infections. We anticipate the commencement of this Phase 2 study to occur in 2018. Despite our confidence in our plan, there can be no assurance that the FDA will lift the clinical holdreceive development and allow initiation of any new clinical studies with the IV formulation of SCY-078 or agree with our trial design to permit us to commence these studies. Given the multiple steps required and uncertainty around outcomes, anticipated timing for initiation of a Phase 2 study is a prediction basedcommercial milestones, plus low double-digit royalties on our existing operating plan.  The clinical hold does not apply to the oral formulation of SCY-078, therefore ongoing and future clinical development using the oral formulation of SCY-078 are not affected by this regulatory action.net product sales.

Liquidity

We have operated as a public entity since we completed our initial public offering (IPO) in May 2014, which we refer to as our IPO.2014. We also completed a follow-on public offering of our common stock in April 2015 and a public offeringofferings of our common stock and warrants in June 2016.2016, March 2018, December 2019, and December 2020.  As of September 30, 2017,March 31, 2021, we had received an aggregate of $113.4$253.2 million in net proceeds from the issuance of our common stock and warrants in these threesix offerings.  Our principal source of liquidity is cash and cash equivalents, and short-term investments, which totaled $47.7$92.0 million as of September 30, 2017.March 31, 2021, and availability to issue up to $19.4 million of our common stock under our common stock purchase agreement with Aspire Capital.   We recently received $20.0 million under our Term Loan and could potentially be eligible to receive up to an additional $40.0 million, subject to certain terms and conditions.

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We have incurred net losses since our inception, including the year ended December 31, 2016,2020, and the ninethree months ended September 30, 2017.March 31, 2021.  As of September 30, 2017,March 31, 2021, our accumulated deficit was $197.7$331.3 million. We anticipate that we will continue to incur losses for at least the next several years.  We expect that ourwe will continue to incur significant research and development expenses will continue to increaseexpense as we continue to execute our research and drug development strategy. Westrategy, but that our research and development expenses will decrease primarily given the completion of the VANISH Phase 3 registration program and the completion of enrollment in the CANDLE Phase 3 study.  Consistent with our operating plan, we also expect that we will continue to incur significant selling, general and administrative expenses to support our public reporting company operations, and that our selling, general and administrative expenses will increase to support a potential commercial launch for the VVC indication and our ongoing operations. As a result, we will need additional capital to fund our operations, which we may obtain through one or more of equity offerings, debt financings, or other non-dilutive third-party funding (e.g., grants)grants, and New Jersey Technology Business Tax Certificate Transfer (NOL) Program), strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our Form S-3 shelf registration statement filedregistrations, and the common stock purchase agreement with the SEC on October 30, 2015 and declared effective on November 16, 2015, including the related at-the-market facility entered into on April 11, 2016 with Cantor Fitzgerald & Co., or Cantor.

We are an emerging growth company.  Under the Jumpstart Our Business Startups Act of 2012, or JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time that those standards apply to private companies. We have irrevocably elected not to adopt this exemption from new or revised accounting standards, and therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”Aspire Capital.

Collaborations and Licensing Agreements

We are party to a number of licensing and collaboration agreements with partners in human health, including: (1) Merck, a pharmaceutical company, under which we exclusively licensed the rights to SCY-078ibrexafungerp in the field of human health, and agreed to pay Merck milestones upon the occurrence of specified events as well as tiered royalties based on worldwide sales of SCY-078ibrexafungerp when and if it is approved (in 2014, Merck assigned to us the patents to us related to SCY-078ibrexafungerp that it had exclusively licensed to us and, as contemplated by the agreement, we will continue to pay milestones and royalties); (2) Hansoh, a pharmaceutical company, which we exclusively provide a license from us to research, develop and commercialize ibrexafungerp in the Greater China region, including mainland China, Hong Kong, Macau, and Taiwan, under which we are entitled to receive development and commercial milestones and royalties (3) R-Pharm, CJSC, or "R-Pharm," a leading supplier of hospital drugs in Russia, granting it exclusive rights in the field of human health to develop and commercialize SCY-078ibrexafungerp in Russia and several smaller non-core markets, under which we are entitled to receive potential milestones and royalties and reimbursement for certain development costs incurred by us; (3)(4) Waterstone, an international pharmaceutical business, granting Waterstone exclusive worldwide rights to development and commercialization of SCY-635 for the treatment of viral diseases in humans, under which we are entitled to receive potential milestones and royalties; and (4)(5) Cypralis Limited, or "Cypralis," a life sciences company, transferring to it certain cyclophilin inhibitor assets of ours, under which we are eligible to receive milestone payments upon the successful progression of certain Cypralis clinical candidates into later stage clinical studies and royalties payable upon product commercialization.

Components of Operating Results

Revenue

Revenue primarily consists of the continued amortization of a non-refundable upfront payment received under our collaboration arrangementlicense agreement with R-Pharm.  The R-Pharm arrangement and our revenue recognition policy is described within Note 2 to our unaudited interim financial statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.Hansoh.

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Research and Development Expense

Research and development expense consists of expenses incurred while performing research and development activities to discover, develop, or improve potential product candidates we seek to develop. This includes conducting preclinical studies and clinical trials, manufacturing and other development efforts, and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development expense primarily consists of:

costs related to executing preclinical and clinical trials, including related drug formulation, manufacturing and other development;

costs related to executing preclinical and clinical trials, including development milestones, drug formulation, manufacturing and other development;

salaries and personnel-related costs, including benefits and any stock-based compensation for personnel in research and development functions;

salaries and personnel-related costs, including benefits and any stock-based compensation, for personnel in research and development functions;

fees paid to consultants and other third parties who support our product candidate development and intellectual property protection;

fees paid to consultants and other third parties who support our product candidate development and intellectual property protection;

other costs in seeking regulatory approval of our products; and

other costs in seeking regulatory approval of our products; and

allocated overhead.

allocated overhead.

Our SCY-078ibrexafungerp project was the only significant research and development project during the periods presented.  We planexpect to increase ourcontinue to incur significant research and development expense for the foreseeable future as we continue our effort to develop SCY-078ibrexafungerp, and to potentially develop our other product candidates, subject to the availability of additional funding.

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The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates.

Selling, General and Administrative Expense

Selling, general and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any stock-based compensation. This includes personnel in executive, finance, human resources, business development, marketing, and administrative support functions. Other expenses include facility-related costs not otherwise allocated to research and development expense, professional fees for accounting, auditing, tax and legal services, consulting costs for general and administrative purposes, information systems maintenance and marketing efforts.

Other Expense (Income)

All of our other expense (income) recognized in the three and nine months ended September 30, 2017,March 31, 2021 and 2020, consists of interest income, amortization of debt issuance costs and discount, interest income, interest expense, other income, the warrant liabilities fair value adjustment, the derivative liabilities fair value adjustment, and the warrant liability fair value adjustment.loss recognized for the extinguishment of debt.

Income Tax Expense

All of our income tax expense recognized in the three months ended March 31, 2021 consists of tax withholding expense associated with the upfront payment received from Hansoh.

Results of Operations for the Three Months Ended September 30, 2017March 31, 2021 and 20162020

The following table summarizes our results of operations for the three months ended September 30, 2017March 31, 2021 and 2016,2020, together with the changes in those items in dollars and percentage (dollars in thousands):

 

Three Months Ended September 30,

 

 

 

Three Months Ended March 31,

 

 

 

2017

 

 

2016

 

 

Period-to-Period Change

 

 

 

2021

 

 

2020

 

 

Period-to-Period Change

 

 

Revenue

 

$

64

 

 

$

64

 

 

$

 

 

 

 

%

 

$

12,050

 

 

$

 

 

$

12,050

 

 

 

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development, net

 

 

4,459

 

 

 

4,890

 

 

 

(431

)

 

 

(8.8

)

%

Research and development

 

 

6,948

 

 

 

9,866

 

 

 

(2,918

)

 

 

(29.6

)

%

Selling, general and administrative

 

 

2,004

 

 

 

1,880

 

 

 

124

 

 

 

6.6

 

%

 

 

6,696

 

 

 

2,613

 

 

 

4,083

 

 

 

156.3

 

%

Total operating expenses

 

 

6,463

 

 

 

6,770

 

 

 

(307

)

 

 

(4.5

)

%

 

 

13,644

 

 

 

12,479

 

 

 

1,165

 

 

 

9.3

 

%

Loss from operations

 

 

(6,399

)

 

 

(6,706

)

 

 

307

 

 

 

(4.6

)

%

 

 

(1,594

)

 

 

(12,479

)

 

 

10,885

 

 

 

(87.2

)

%

Other expense (income):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

100

 

 

 

 

 

 

100

 

 

 

 

 

Loss on extinguishment of debt

 

 

2,725

 

 

 

 

 

 

2,725

 

 

 

 

%

Amortization of debt issuance costs and discount

 

 

256

 

 

 

278

 

 

 

(22

)

 

 

(7.9

)

%

Interest income

 

 

(109

)

 

 

(48

)

 

 

(61

)

 

 

127.1

 

%

 

 

(7

)

 

 

(147

)

 

 

140

 

 

 

(95.2

)

%

Interest expense

 

 

373

 

 

 

 

 

 

373

 

 

 

 

 

 

 

214

 

 

 

210

 

 

 

4

 

 

 

1.9

 

%

Warrant liability fair value adjustment

 

 

1,638

 

 

 

4,570

 

 

 

(2,932

)

 

 

(64.2

)

%

Total other expense

 

 

2,002

 

 

 

4,522

 

 

 

(2,520

)

 

 

(55.7

)

%

Other income

 

 

 

 

 

(350

)

 

 

350

 

 

 

(100.0

)

%

Warrant liabilities fair value adjustment

 

 

(1,296

)

 

 

(4,768

)

 

 

3,472

 

 

 

(72.8

)

%

Derivative liabilities fair value adjustment

 

 

90

 

 

 

(700

)

 

 

790

 

 

 

(112.9

)

%

Total other expense (income):

 

 

1,982

 

 

 

(5,477

)

 

 

7,459

 

 

 

(136.2

)

%

Loss before taxes

 

 

(3,576

)

 

 

(7,002

)

 

 

3,426

 

 

 

(48.9

)

%

Income tax expense

 

 

1,100

 

 

 

 

 

 

1,100

 

 

 

 

%

Net loss

 

$

(8,401

)

 

$

(11,228

)

 

$

2,827

 

 

 

(25.2

)

%

 

$

(4,676

)

 

$

(7,002

)

 

$

2,326

 

 

 

(33.2

)

%

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Table of Contents

Revenue. ForRevenue in the three months ended September 30, 2017, revenue remained consistent when compared to the three months ended September 30, 2016. Revenue in both periods consisted of the continued amortizationMarch 31, 2021, consists primarily of a non-refundable upfront payment received under our collaboration arrangementlicense agreement with R-Pharm.Hansoh.  

Research and Development.For the three months ended September 30, 2017,March 31, 2021, research and development expenses decreased to $4.5$6.9 million from $4.9$9.9 million for the three months ended September 30, 2016. March 31, 2020.  The decrease of $0.4$2.9 million, or 8.8%30%, for the three months ended September 30, 2017March 31, 2021, was primarily driven by a decrease of $0.3$2.1 million in both clinical development expense, a decrease of $0.9 million in chemistry, manufacturing, and preclinical developmentcontrols (CMC) expense, and a $0.2decrease of $0.5 million in preclinical expense, offset in part by an increase in salary related costs of $0.3 million and a net increase in other research and development expenses.  expense of $0.3 million.

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The $0.3$2.9 million decrease in preclinicalclinical development expense for the three months ended September 30, 2017,March 31, 2021, was primarily driven by a decrease of $0.9 million and $0.7 million in expense associated with two drug-drug interaction clinical studies and the expense recognized for certain toxicology studiesVANISH Phase 3 program, respectively, that were both substantially initiatedcomplete at the beginning of the current quarter.  Additionally, we incurred a decrease of $0.4 million and completed$0.3 million in expense associated with the prior comparable quarter in 2016.SCYNERGIA study and a Phase 1 study to support the submission of the NDA for the treatment of vaginal yeast infections, respectively.  The $0.3$0.9 million decrease in clinical developmentCMC for the three months ended September 30, 2017,March 31, 2021, was primarily driven by reduced clinical activities associated with the IV formulation of SCY-078 and thea $1.2 million expense recognized for our two completed Phase 2 and drug-drug interaction studies that were all ongoing in the prior comparable period and completed in 2016, offset in part by the expense recognized forduring the three months ended September 30, 2017March 31, 2020 for drug product shipped in the DOVEperiod.  The $0.5 million decrease in preclinical expenses was primarily driven by a $0.5 million decrease in certain pharmacokinetic and FURI studies.preclinical expenses incurred during the prior comparable quarter.  The increase in salary related costs of $0.3 million was primarily due to the increased employee headcount in comparison to the prior comparable quarter.

Selling, General & Administrative. For the three months ended September 30, 2017,March 31, 2021, selling, general and administrative expenses increased to $2.0$6.7 million from $1.9$2.6 million for the three months ended September 30, 2016.March 31, 2020. The increase of $0.1$4.1 million, or 6.6%156%, for the three months ended September 30, 2017March 31, 2021 was primarily driven by a $1.7 million increase in commercial related expense, an increase of $0.1$1.0 million in stock-based compensation, a decreasebusiness development expense, an increase of $0.1$0.5 million in professional services,expense associated with increased information technology costs, and a $0.1an increase of $0.3 million net increase in other selling, general and administrative expenses.salary related costs.  

Loss on Extinguishment of Debt.  For the three months ended March 31, 2021, we recognized $2.7 million in loss on extinguishment of debt associated with the January 2021 conversation of our remaining April 2020 convertible notes.

Amortization of Debt Issuance Costs and DiscountDuringFor both the three months ended September 30, 2017,March 31, 2021 and 2020, we recognized $0.1$0.3 million in amortization of debt issuance costs and discount.  The 2021 and 2020 debt discount comprised issuance costs customary closing and finaldiscount for both April 2020 Notes and March 2019 Notes primarily consisted of an allocated portion of advisory fees and the fair value of the warrants issued in conjunction with the Loan and Security Agreement (the "Loan Agreement") with Solar Capital Ltd. (“Solar”), in its capacity as administrative and collateral agent and as lender, entered into in September 2016.other issuance costs.

Interest IncomeDuringFor the three months ended September 30, 2017,March 31, 2021 and 2020, we recognized $7,000 and $0.1 million, respectively, in interest income associated withincome.  The decrease was primarily due to the maturity of all our short-term investments.investments during 2020.

Interest ExpenseDuringFor both the three months ended September 30, 2017,March 31, 2021 and 2020, we recognized $0.2 million in interest expense.  The interest expense recognized in both periods is primarily associated with the April 2020 and March 2019 convertible notes.  

Other Income. For the three months ended March 31, 2020, we recognized $0.4 million in interest expenseother income associated with the Loan Agreement with Solar.certain research and development tax credits.

Warrant LiabilityLiabilities Fair Value Adjustment.

On June 21, 2016, we sold an aggregate of 9,375,000 shares of common stock and warrants to purchase up to 4,218,750 shares of our common stock at a public offering price of $2.40 per share of common stock sold. We accounted for these warrants as a liability instrument measured at their fair value. The fair values of these warrants have been determined using the Black-Scholes valuation model ("Black-Scholes"). The warrants are subject to remeasurement at each balance sheet date, using Black-Scholes, with any changes in the fair value of the outstanding warrants recognized in the accompanying statements of operation.  For the three months ended September 30, 2017,March 31, 2021 and 2020, we recognized a $1.6gains of $1.3 million lossand $4.8 million, respectively, in the fair value adjustment related to the warrant liability primarily due to the increase in our stock price during the quarter.

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Results of Operations for the Nine Months Ended September 30, 2017 and 2016

The following table summarizes our results of operations for the nine months ended September 30, 2017 and 2016, together with the changes in those items in dollars and percentage (dollars in thousands):

 

 

Nine Months Ended September 30,

 

 

 

 

2017

 

 

2016

 

 

Period-to-Period Change

 

 

Revenue

 

$

193

 

 

$

193

 

 

$

 

 

 

 

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development, net

 

 

12,927

 

 

 

16,293

 

 

 

(3,366

)

 

 

(20.7

)

%

Selling, general and administrative

 

 

6,425

 

 

 

6,086

 

 

 

339

 

 

 

5.6

 

%

Total operating expenses

 

 

19,352

 

 

 

22,379

 

 

 

(3,027

)

 

 

(13.5

)

%

Loss from operations

 

 

(19,159

)

 

 

(22,186

)

 

 

3,027

 

 

 

(13.6

)

%

Other (income) expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of debt discount

 

 

300

 

 

 

 

 

 

300

 

 

 

 

 

Interest income

 

 

(261

)

 

 

(115

)

 

 

(146

)

 

 

127.0

 

%

Interest expense

 

 

1,081

 

 

 

 

 

 

1,081

 

 

 

 

 

Warrant liability fair value adjustment

 

 

(2,809

)

 

 

4,469

 

 

 

(7,278

)

 

 

(162.9

)

%

Total other (income) expense

 

 

(1,689

)

 

 

4,354

 

 

 

(6,043

)

 

 

(138.8

)

%

Net loss

 

$

(17,470

)

 

$

(26,540

)

 

 

9,070

 

 

 

(34.2

)

%

Revenue. For the nine months ended September 30, 2017, revenue remained consistent when compared to the nine months ended September 30, 2016.  Revenue in both periods consisted of the continued amortization of a non-refundable upfront payment received under our collaboration arrangement with R-Pharm.

Research and Development. For the nine months ended September 30, 2017, research and development expenses decreased to $12.9 million from $16.3 million for the nine months ended September 30, 2016. The decrease of $3.4 million, or 20.7%, was primarily driven by a decrease of $2.4 million in clinical development, a decrease of $1.5 million in chemistry, manufacturing, and controls (CMC), and a $0.5 million net increase in other research and development expenses.  The $2.4 million decrease in clinical development for the nine months ended September 30, 2017, was primarily driven by reduced clinical activities associated with the IV formulation of SCY-078 and the expense recognized for our two completed Phase 2 and drug-drug interaction studies that were all ongoing in the prior comparable period and completed in 2016, offset in part by the expense recognized for the nine months ended September 30, 2017 for the DOVE and FURI studies.  The $1.5 million decrease in CMC expense for the nine months ended September 30, 2017, is primarily driven by a decrease in our SCY-078 manufacturing costs after a new manufacturer was engaged by us in the second half of 2016.

Selling, General & Administrative. For the nine months ended September 30, 2017, selling, general and administrative expenses increased to $6.4 million from $6.1 million for the nine months ended September 30, 2016.  The increase of $0.3 million, or 5.6%, for the nine months ended September 30, 2017 was primarily driven by an increase of $0.5 million in business development related activities and a $0.2 million increase in stock-based compensation, offset by a decrease of $0.4 million in consulting services recognized in the prior comparable period associated with the transition from our former corporate headquarters.

Amortization of Debt Discount. During the nine months ended September 30, 2017, we recognized $0.3 million in amortization of debt discount.  The debt discount comprised issuance costs, customary closing and final fees, and the fair value of the warrants issued in conjunction with the Loan Agreement with Solar Capital Ltd. (“Solar”), in its capacity as administrative and collateral agent and as lender, entered into in September 2016.

Interest Income. During the nine months ended September 30, 2017, we recognized $0.3 million in interest income associated with short-term investments.

Interest Expense. During the nine months ended September 30, 2017, we recognized $1.1 million in interest expense associated with the Loan Agreement with Solar.

Warrant Liability Fair Value Adjustment. On September 21, 2016, we sold an aggregate of 9,375,000 shares of common stock and warrants to purchase up to 4,218,750 shares of our common stock at a public offering price of $2.40 per share of common stock sold. We accounted for these warrants as a liability instrument measured at their fair value. The fair values of these warrants have been determined using the Black-Scholes valuation model ("Black-Scholes"). The warrants are subject to remeasurement at each balance sheet date, using Black-Scholes, with any changes in the fair value of the outstanding warrants recognized in the accompanying statements of operation. For the nine months ended September 30, 2017, we recognized a $2.8 million gain in the fair value adjustment related to the warrant liabilityliabilities primarily due to the decrease in our stock price during the period.quarter.  

22


TableDerivative Liabilities Fair Value Adjustment.  For the three months ended March 31, 2021 and 2020, we recognized a loss of Contents$0.1 million and a gain of $0.7 million, respectively, in the fair value adjustment related to the derivative liabilities primarily due to the increase and decrease, respectively, in our stock price during the quarter.  

Income Tax Expense.  For the three months ended March 31, 2021, we recognized $1.1 million of tax withholding expense primarily associated with the upfront payment received from Hansoh.

Liquidity and Capital Resources

Sources of Liquidity

Through September 30, 2017,March 31, 2021, we have primarily funded our operations from net proceeds from debt and equity issuances and through revenue from development services. As of September 30, 2017,March 31, 2021, we had cash and cash equivalents and short-term investments of approximately $47.7$92.0 million, compared to $58.6cash and cash equivalents of $93.0 million as of December 31, 2016.2020. The decrease in our cash and cash equivalents and short-term investments was primarily due to our increase in selling, general and administrative expenses to support a potential commercial launch of ibrexafungerp for the treatment of vaginal yeast infections and the continued development costs associated with our lead product candidate, SCY-078.ibrexafungerp, offset in part by a $10.0 million cash receipt from Hansoh.  We have incurred annual net losses since our inception, includingand we incurred a net loss during the ninethree months ended September 30, 2017.March 31, 2021.  As of September 30, 2017,March 31, 2021, our accumulated deficit was $197.7$331.3 million.

We anticipateexpect that we will continue to incur losses for at least the next several years. Weforeseeable future.  Consistent with our operating plan, we expect our research and development expenses to increasedecrease primarily given the completion of the VANISH Phase 3 registration program and the completion of enrollment in our CANDLE study and we will continue to incurexpect our selling, general and administrative expenses to increase to support a potential commercial launch for the treatment of VVC and our ongoing operations. As a result, we willmay need additional capital to fund our operations, which we may obtain through one or more of

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equity offerings, debt financings, or other non-dilutive third-party funding (e.g., grants)grants, and New Jersey Technology Business Tax Certificate Transfer (NOL) Program), strategic alliances and licensing or collaboration arrangements. We may offer shares of our common stock pursuant to our Form S-3 shelf registration statement filed withregistrations, and the SEC on October 30, 2015 and declared effective on November 16, 2015, including the related at-market-facilitycommon stock purchase agreement entered into on April 11, 201610, 2020 with Cantor.  During the nine months ended September 30, 2017, we received net proceeds of $8.6 million ($3.6 million in the third quarter) under our at-the-market facility.Aspire Capital.  

Cash Flows

The following table sets forth the significant sources and uses of cash for the ninethree months ended September 30, 2017March 31, 2021 and 20162020 (in thousands):

 

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2016

 

Cash and cash equivalents, January 1

 

$

35,656

 

 

$

46,985

 

Net cash used in operating activities

 

 

(19,398

)

 

 

(24,799

)

Net cash used in investing activities

 

 

(16,183

)

 

 

(28,098

)

Net cash provided by financing activities

 

 

8,674

 

 

 

35,721

 

Net decrease in cash and cash equivalents

 

 

(26,907

)

 

 

(17,176

)

Cash and cash equivalents, September 30

 

$

8,749

 

 

$

29,809

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash, cash equivalents, and restricted cash, January 1

 

$

93,314

 

 

$

42,193

 

Net cash used in operating activities

 

 

(759

)

 

 

(14,057

)

Net cash used in investing activities

 

 

(200

)

 

 

(7,762

)

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, March 31

 

$

92,284

 

 

$

20,526

 

Operating Activities

The $5.4$13.3 million decrease in net cash used in operating activities for the ninethree months ended September 30, 2017,March 31, 2021, as compared to the ninethree months ended September 30, 2016,March 31, 2020, was primarily due to decreasesthe cash receipt of $10.0 million from Hansoh during the current quarter which offset our increase in selling, general and administrative expenses to support a potential commercial launch of ibrexafungerp for the treatment of vaginal yeast infections and the continued development costs associated with SCY-078 development efforts. Weibrexafungerp.  Consistent with our operating plan, we expect that our research and development expenses will increase as we pursue our SCY-078 development efforts describeddecrease primarily given the completion of the VANISH Phase 3 registration program and the completion of enrollment in the "Overview" section aboveCANDLE Phase 3 study and we expect we will continue to incurour selling, general and administrative expenses to increase to support a potential commercial launch for the treatment of vaginal yeast infections and our ongoing operations.

Net cash used in operating activities of $19.4$0.8 million for the ninethree months ended September 30, 2017,March 31, 2021, primarily consisted of the $17.5$4.7 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $1.3 million, the loss on change in fair value of the derivative liabilities of $0.1 million, stock-based compensation expense of $0.4 million, amortization of debt issuance costs and discount of $0.3 million, and the loss on extinguishment of debt of $2.7 million, plus a net favorable change in operating assets and liabilities of $1.7 million. The net favorable change in operating assets and liabilities was primarily due to a decrease in accounts payable, accrued expenses, and other of $0.1 million and offset in part by a decrease in prepaid expenses, deferred costs, and other of $1.7 million.  The $0.1 million decrease in accounts payable, accrued expenses, and other was primarily due to the increase in accounts payable of $1.9 million as of March 31, 2021, offset in part by the decrease of $1.8 million in accrued employee bonus compensation as a result of the payment of the 2020 related employee bonus compensation in 2021 and a $0.2 million decrease in accrued research and development expenses.  The decrease in prepaid expense, deferred cost, and other of $1.7 million was primarily due to the collection of a $2.9 million receivable in February 2021 offset by a $1.0 million other receivable recognized for the three months ended March 31, 2021.

Net cash used in operating activities of $14.1 million for the three months ended March 31, 2020, primarily consisted of the $7.0 million net loss adjusted for non-cash charges that included the gain on change in fair value of the warrant liabilities of $4.8 million, the gain on change in fair value of the derivative liability of $2.8$0.7 million, and stock-based compensation expense of $1.2$0.4 million, plus a net unfavorable change in operating assets and liabilities of $0.8$2.3 million. The net unfavorable change in operating assets and liabilities included an increase in accounts payable and accrued expenses of $0.1 million and an increase in prepaid expenses, other assets, and deferred costs of $0.7 million. The increase in prepaid expenses, other assets, and deferred costs iswas primarily due to a $0.6 million increasedecrease in long term prepaid SCY-078 development services.

Net cash used in operating activitiesaccounts payable, accrued expenses, and other of $24.8 million for the nine months ended September 30, 2016, primarily consisted of the $26.5 million net loss adjusted for non-cash charges that included the write off of deferred offering costs of $0.1 million, the loss on change in fair value of the warrant liability of $4.5$4.1 million and stock-based compensation expense of $0.9 million, plus a net unfavorable changeoffset in operating assets and liabilities of $3.8 million. The net unfavorable change in operating assets and liabilities includedpart by a decrease in accrued but unpaid severanceprepaid expenses, deferred costs, and retention costsother of $2.6$1.7 million.  The $4.1 million plus an increasedecrease in prepaidaccounts payable, accrued expenses, and other assets of $0.9 million. The decrease in accrued but unpaid severance and retention costs was primarily due to payments made for remaining obligations.the decrease of $1.4 million in accrued employee bonus compensation as a result of the payment of the 2019 related employee bonus compensation during the three months ended March 31, 2020 and the decrease in accounts payable of $2.0 million as of March 31, 2020.  The increasedecrease in prepaid expensesexpense, deferred cost, and other assets isof $1.7 million was primarily due to (i) a $0.2$1.2 million increasedecrease in prepaid SCY-078 development services, (ii) a $0.6 million increase in the receivable balance due from R-Pharm for reimbursable research and development expenditures and (iii) a $0.1 million increase in prepaid insurance. Subsequent to September 30, 2016, $0.8 million ofcosts associated with drug product shipped during the receivable balance due from R-Pharm was collected.period.

Investing Activities

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Net cash used in investing activities of $16.2$0.2 million for the ninethree months ended September 30, 2017March 31, 2021 consisted primarilysolely of purchases of intangible assets.  Net cash used in investing activities of $7.8 million for the three months ended March 31, 2020 consisted of purchases and maturities of short-term investments of $61.6$14.2 million and $45.4$6.5 million, respectively.  

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Table of Contents

Financing Activities

Net cash used in investingfinancing activities of $0.1 million for the ninethree months ended September 30, 2016March 31, 2021, consisted primarily of purchases of investments of $35.5 million offset by the maturities of investments of $6.9 million and $0.5$0.1 million in proceeds from the releasepayments of an escrow receivable.

Financing Activitiesoffering costs and underwriting discounts and commissions associated with our December 2020 public offering.

Net cash provided by financing activities of $8.7$0.2 million for the ninethree months ended September 30, 2017,March 31, 2020, consisted primarily of gross proceeds from common stock issued under the Shelf Registrationour at-the-market facility of $8.9 million, partially offset by related underwriting discounts and commissions and offering expenses totaling $0.3$0.2 million.

Net cash provided by financing activities of $35.7 million for the nine months ended September 30, 2016, consisted of gross proceeds from common stock and warrants issued under the Shelf Registration of $23.1 million, partially offset by related underwriting discounts and commissions and offering expenses totaling $1.8 million and net proceeds of $14.4 million from our Loan Agreement.

Future Funding Requirements

ToAs disclosed in Note 1 to our unaudited condensed consolidated financial statements, to date, we have not generated any revenue from product sales. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize SCY-078.ibrexafungerp. In addition, we expect ourto incur significant expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, product candidates. We anticipate that we will need substantial additional funding in connection with our continuing future operations.

Based upon our existing operating plan, (and accounting for the planned activities intended to address FDA questions and potentially lift the clinical hold on the IV formulation of SCY-078, including the cost of an additional Phase 1 study), we believe that our existing cash and cash equivalents, the sale of a portion of our New Jersey NOLs, and short-term investmentsthe anticipated sales of Brexafemme will enable us to fund our operating expenses and capital expenditure requirements into 2023.These funds will also be sufficient to enable us to commercially launch Brexafemme for the second quartertreatment of 2019. Wevaginal yeast infections, if approved, and complete the development activities for the CANDLE study.  However, we are currentlycontinually evaluating our operating plan and assessing the potentialoptimal cash utilization impact offor our updated SCY-078ibrexafungerp development strategy. We have based our estimates on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of product candidates, we are unable to estimate the amounts of increased capital outlays and operating expendituresexpenses necessary to complete the development of product candidates.

Our future capital requirements will depend on many factors, including:

the progress, and costs, of the clinical development of SCY-078;

the progress, and costs, of the clinical development of ibrexafungerp;

the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;

the outcome, costs and timing of seeking and obtaining FDA and any other regulatory approvals;

the ability of product candidates to progress through clinical development successfully;

the ability of product candidates to progress through clinical development successfully;

our need to expand our research and development activities;

our need to expand our research and development activities;

the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities;

the costs associated with securing, establishing and maintaining commercialization and manufacturing capabilities;

our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

our need and ability to hire additional management and scientific and medical personnel;

our need and ability to hire additional management and scientific and medical personnel;

the costs associated with our securities litigation and the outcome of that litigation

our need to implement additional, as well as to enhance existing, internal systems and infrastructure, including financial and reporting processes and systems and the associated compliance costs; and

our need to implement additional, as well as to enhance existing, internal systems and infrastructure, including financial and reporting processes and systems; and

the economic and other terms, timing and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future.

the economic and other terms, timing and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future.

Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of net proceeds from equity offerings, debt financings or other non-dilutive third-party funding (e.g., grants)grants, and New Jersey Technology Business Tax Certificate Transfer (NOL) Program), strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities as we did in April 2015, and June 2016, March 2018, December 2019, and December 2020, as well as through our common stock purchase agreement with Aspire Capital, the ownership interests of our common stockholders will

24


Table of Contents

be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through sales of assets, other third-party funding, strategic alliances and licensing or collaboration arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.

Contractual Obligations, Commitments and Contingencies23


Table of Contents

Our commitments and contingencies, including payment obligations under license agreements that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones, have been described within Notes 6 and 7 to our unaudited interim financial statements in Part 1 of this Quarterly Report on Form 10-Q and have not changed materially since December 31, 2016.

Off-Balance Sheet Arrangements

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our interim condensed consolidated financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements, as well as the reported revenues and expenses during the reported periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies, significant judgments, and estimates are described within Note 2 to our unaudited interim condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.10-Q as well as Note 2 and Item 7 to our Annual Report on Form 10-K for the year ended December 31, 2020.  

Item 3.

Quantitative and Qualitative Disclosure about Market RiskRisk.

This item is not applicable to smaller reporting companies.

Item 4.

Controls and ProceduresProcedures.

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

As of September 30, 2017,March 31, 2021, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of September 30, 2017,March 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

During the quarter ended September 30, 2017,March 31, 2021, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Securities Exchange Act of 1934, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

The information called for by this item is incorporated herein by reference to Note 7 of Notes to the Financial Statements contained elsewhere in this report under the caption Legal Proceeding.

Item 1A.

Risk FactorsFactors.

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2016.  There have been no material changes2020.  

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

On May 13, 2021, we entered into a Loan Agreement with Hercules, as administrative agent and collateral agent (in such capacity, the Agent) and a lender, and Silicon Valley Bank, as a lender (SVB, and collectively with Hercules in such capacity, the Lenders) for an aggregate principal amount of up to $60.0 million.

In connection with the entry into the Loan Agreement, we issued to each of Hercules and SVB a warrant (collectively, the Warrants) to purchase shares of our risk factors since our Annual Report on Form 10-Kcommon stock (the Shares).  The number of Shares that may be purchased equals: for the year ended December 31, 2016.Warrant issued to Hercules, 0.02666 multiplied by the aggregate amount of term loan advances, divided by the exercise price of the Warrant; and for the Warrant issued to SVB, 0.01333 multiplied by the aggregate amount of term loan advances, divided by the exercise price of the Warrant.  Accordingly, the number of Shares for which each Warrant is exercisable will increase as the term loan is funded. The Warrants will be exercisable for a period of seven years from the date of issuance at a per-share exercise price equal to $7.04, subject to certain adjustments as specified in the Warrant.

The issuance of the Warrants by us to the Lenders was made in reliance on the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended, as they were issued to two accredited investors.

Item 6.

ExhibitsExhibits.

 

Exhibit

Number

 

Description of Document

2.1

Asset Purchase Agreement, dated July 17, 2015, between the Company and Accuratus Lab Services, Inc. (Filed with the SEC as Exhibit 10.1 to our current report on Form 8-K, filed with the SEC on July 23, 2015, SEC File No. 001-36365, and incorporated by reference here).

 

 

 

3.1

 

Amended and Restated Certificate of Incorporation (Filed with the SEC as Exhibit 3.1 to our current report on Form 8-K, filed with the SEC on May 12, 2014, SEC File No. 001-36365, and incorporated by reference here).

 

 

 

3.2

 

Certificate of Amendment of Amended and Restated Certificate of Incorporation of SCYNEXIS, Inc. (Filed with the SEC as Exhibit 3.2 to our Form 10-Q, filed with the SEC on August 7, 2019, SEC File No. 001-36365, and incorporated by reference here).

3.3

Certificate of Amendment of Amended and Restated Certificate of Incorporation of SCYNEXIS, Inc. (Filed with the SEC as Exhibit 3.1 to our Form 8-K, filed with the SEC on July 16, 2020, SEC File No. 001-36365, and incorporated by reference here).

3.4

Amended and Restated By-Laws (Filed with the SEC as Exhibit 3.4 to our Registration Statement on Form S-1, filed with the SEC on February 27, 2014, SEC File No. 333-194192, and incorporated by reference here).

 

 

 

4.1

 

Reference is made to Exhibits 3.1 and 3.2.

4.2

Fifth Amended and Restated Investor Rights Agreement, dated December 11, 2013 (Filed with the SEC as Exhibit 10.21 to our Registration Statement on Form S-1, filed with the SEC on February 27, 2014, SEC File No. 333-194192), and incorporated by reference here).through 3.3.

 

 

 

10.1

 

Amendment to the Development,Exclusive License and SupplyCollaboration Agreement, dated August 1st, 2013, made as of February 11, 2021, by and between SCYNEXIS, Inc., Hansoh (Shanghai) Health Technology Co., Ltd. and R-Pharm, CJSC.Jiangsu Hansoh Pharmaceutical Group Company Limited

 

 

 

10.2

 

AdditionalMaster Services Agreement, No. 2 to the Development, Licenseeffective as of February 4, 2021, by and Supply Agreement, dated August 1st, 2013, between SCYNEXIS, Inc. and R-Pharm, CJSC.

10.3

Additional Agreement No. 3 to the Development, License and Supply Agreement, dated August 1st, 2013, between SCYNEXIS,Amplity, Inc. and R-Pharm, CJSC.

 

 

 

31.1

 

Certification of Chief Executive Officer pursuant to Rule 13-a-14(a) or Rule 15(d)-14(a) of the Exchange ActAct.

 

 

 

31.2

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Exchange ActAct.

 

 

 

32.1

 

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 13a-14(b) or 15d-14(b) of the Exchange ActAct.

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

101.SCH

 

XBRL Taxonomy Schema Linkbase Document

 

 

 

101.CAL

 

XBRL Taxonomy Calculation Linkbase Document

 

 

 

101.DEF

 

XBRL Taxonomy Definition Linkbase Document

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101.LAB

 

XBRL Taxonomy Labels Linkbase Document

 

 

 

101.PRE

 

XBRL Taxonomy Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

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SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

SCYNEXIS, INC.

 

 

 

By:

 

/s/ Marco Taglietti, M.D.

 

 

Marco Taglietti, M.D.

 

 

Chief Executive Officer

(Principal Executive Officer)

 

 

 

Date:

 

November 7, 2017May 16, 2021

 

 

 

By:

 

/s/ Eric Francois

 

 

Eric Francois

 

 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

 

Date:

 

November 7, 2017May 16, 2021

 

 

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