Stockholders' Equity | 8. Stockholders’ Equity Common Stock The total number of shares of common stock of Viracta outstanding as of September 30, 2021 and December 31, 2020 was 37,281,226 and 905,987 , respectively. Concurrent Financing On February 24 2021, immediately prior to the closing of the Merger, the Company completed the February 2021 private placement offering of an aggregate of 12,012,369 shares of common stock for gross proceeds of $ 65.0 million and incurred fees and other offering costs of approximately $ 2.7 million. Sales Agreement On May 28, 2021, the Company entered into an Open Market Sale Agreement SM (the “Sale Agreement”) with Jefferies LLC (the “Sales Agent”), under which the Company may offer and sell up to $ 50.0 million shares (the “Shares”) of its common stock, par value $ 0.0001 per share (“Common Stock”), from time to time through the Sales Agent. The sales and issuances, if any, of the Shares by the Company under the Sale Agreement will be pursuant to the Company’s registration statement on Form S-3 (the “Registration Statement”), filed with the SEC on May 28, 2021 and declared effective by the SEC on June 4, 2021. Sales, if any, of the Shares pursuant to the Sale Agreement may be made in negotiated transactions or transactions that are deemed to be “at the market offerings” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, including sales made directly on The Nasdaq Stock Market, or sales made into any other existing trading market for the Common Stock. The Sales Agent is not required to sell any specific amount of securities, but will act as the Company’s sales agent using commercially reasonable efforts to sell the Shares from time to time, consistent with its normal trading and sales practices, applicable state and federal laws, rules and regulations and the rules of The Nasdaq Stock Market, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). As of September 30, 2021, the Company has incurred legal and accounting costs of $ 0.1 million related to the Sales Agreement. As of September 30, 2021, no shares had been issued pursuant to the Sales Agreement. Convertible Preferred Stock In connection with the Merger, all of the outstanding shares of Private Viracta’s convertible preferred stock were converted into 18,811,552 shares of the Company’s common stock. As of December 31, 2020, Private Viracta’s convertible preferred stock was classified as temporary equity on the accompanying condensed consolidated balance sheets in accordance with authoritative guidance for the classification and measurement of potentially redeemable securities whose redemption is based upon certain change in control events outside of Private Viracta’s control, including liquidations, sale or transfer of control of Private Viracta. Private Viracta did not adjust the carrying values of the convertible preferred stock to the liquidation preferences of such shares because the occurrence of any such change of control event was not deemed probable. With the Merger, the Company obtained 10,000,000 shares of authorized preferred stock available for future issuance in one or more series. Upon issuance, the Company can determine the rights, preferences, privileges and restrictions thereof. These rights, preference and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock. There were 10,248 shares of this preferred stock outstanding as of September 30, 2021 , of which 1,915 shares were Series E Stock and 8,333 shares were Series F Stock. The Series E Stock and Series F Stock are non-voting Series E and Series F Convertible Preferred Stock at a stated price of $ 500 and $ 600 per share, respectively. Each share of non-voting Series E Stock and Series F Stock is convertible at a conversion ratio equal to the stated price divided by the conversion price, which is $ 17.50 per share and $ 21.00 per share, respectively, provided that conversion will be prohibited if, as a result, the holder and its affiliates would own more than 9.98 % of the total number of shares of common stock then outstanding. In the event of the Company’s liquidation, dissolution, or winding up, holders of Series E and Series F Stock will receive a payment equal to $ 0.0001 per share of Series E and Series F Stock before any proceeds are distributed to the holders of Common Stock. Shares of Series E and Series F Stock will generally have no voting rights, except as required by law and except that the consent of holders of a majority of this outstanding Series E Stock will be required to amend the terms of the Series E and Series F Stock. Shares of the Series E and Series F Stock will not be entitled to receive any dividends, unless and until specifically declared by the Company’s board of directors, and will rank: senior to all of the Company’s Common Stock; senior to any class or series of the Company’s capital stock hereafter created specifically ranking by its terms junior to the Series E and Series F Stock; on parity with any class or series of the Company’s capital stock hereafter created specifically ranking by its terms on parity with the Series E and Series F Stock; and junior to any class or series of the Company’s capital stock hereafter created specifically ranking by its terms senior to the Series E and Series F Stock; in each case, as to distributions of assets upon the Company’s liquidation, dissolution or winding up whether voluntarily or involuntarily. Warrants Concurrent with the issuance of convertible promissory notes in 2018, the Company issued to the note investors warrants to purchase 250,323 shares of Viracta Common Stock (the “Common Warrants”). The Common Warrants’ exercise price is $ 0.09 per share. Unless previously exercised, the Common Warrants will expire on the seven-year anniversary of the date of issuance. As of September 30, 2021 , 163,240 shares of Viracta Common Stock had been issued upon the exercise of Common Warrants (including net exercises) and Common Warrants to purchase 86,209 shares of Viracta Common Stock remain unexercised. These shares have been included in the weighted average shares outstanding for both basic and diluted earnings per share for the three and nine months ended September 30, 2021 and 2020 as their exercise price is for nominal consideration. In July 2020, the Company issued warrants exercisable for 206,440 shares of Series E preferred stock, at an exercise price of $ 0.6055 per share, to Silicon Valley Bank in conjunction with the Company’s entry into the SVB Loan Agreement (the “Lender Warrants”). Upon completion of the Merger, the Lender Warrants became exercisable for 23,100 shares of common stock at an exercise price of $ 5.42 per share. The Lender Warrants will expire on July 30, 2030. Common Stock Reserved for Future Issuance Common stock reserved for future issuance are as follows in common equivalent shares: September 30, 2021 December 31, 2020 Conversion of preferred stock 292,799 18,811,552 Common stock warrants 109,309 193,266 Preferred stock warrants — 23,100 Stock options issued and outstanding for all plans 4,009,763 1,127,840 RSUs outstanding 852,186 — Authorized for future option grants 1,247,752 1,108,809 Common stock authorized for the ESPP 60,948 — Total 6,572,757 21,264,567 Equity Incentive Plans In January 2017, the Company adopted the Viracta Therapeutics, Inc. 2016 Equity Incentive Plan (the “2016 Plan”), which permitted stock option and restricted stock unit grants to employees, members of the board of directors, and outside consultants. The Plan allowed for grants of incentive stock options with exercise prices of at least 100 % of the fair market value of Viracta’s common stock, nonqualified options with exercise prices of at least 85 % of the fair market value of the Company’s common stock, restricted stock, and restricted stock units. All stock options granted under the 2016 Plan have a ten-year life and generally vest over zero to four years . In connection with the closing of the Merger, no further awards will be made under the 2016 Plan but the 2016 Plan will continue to govern the terms and conditions of the outstanding awards previously granted under the 2016 Plan. At the time of the close of the Merger, the Company adopted the Viracta Therapeutics, Inc. 2021 Equity Incentive Plan (the “2021 Plan”), which also permits stock options and restricted stock unit grants to employees, members of the board of directors, and outside consultants. The maximum number of shares of the Company’s common stock available for issuance under the 2021 Plan equals the sum of (a) 2,628,571 shares; (b) any shares of common stock of the Company which are subject to awards under the Sunesis 2011 Equity Incentive Plan (the “Sunesis 2011 Plan”) or the 2016 Plan as of the effective date of the 2021 Plan which become available for issuance under the 2021 Plan after such date in accordance with its terms; and (c) an annual increase on the first day of each calendar year beginning with January 1 of the calendar year following the effectiveness of the 2021 Plan and ending with the last January 1 during the initial ten year term of the 2021 Plan. This annual increase would be equal to the lesser of (i) 3,771,428 shares, (ii) five percent of the number of shares of the Company’s common stock outstanding (on an as-converted basis) on the final day of the immediately preceding calendar year, and (iii) such number of shares of the Company’s common stock as determined by the Company’s board of directors. The 2021 Plan allows for grants of incentive stock options with exercise prices of at least 100 % of the fair market value of Viracta’s common stock, nonqualified options with exercise prices of at least 100 % of the fair market value of the Company’s common stock, restricted stock, and restricted stock units. All stock options granted to date have a ten-year life and generally vest over zero to four years. Additionally, in connection with the closing of the Merger, no further awards will be made under the Sunesis 2011 Plan. As of September 30, 2021, 94,871 fully vested options remain outstanding under the Sunesis 2011 Plan with a weighted average exercise price of $ 33.54 per share. The compensation cost that has been included in the accompanying condensed consolidated statements of operations for all share-based compensation arrangements is detailed as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Research and development $ 668 $ 58 $ 1,411 $ 115 General and administrative 1,036 42 2,323 140 Total $ 1,704 $ 100 $ 3,734 $ 255 On June 30, 2021, the Company adopted the 2021 Inducement Equity Incentive Plan (the “2021 Inducement Plan”) and reserved 1,000,000 shares for future grant under the 2021 Inducement Plan. As of September 30, 2021, there were 715,000 shares available for issuance under the 2021 Inducement Plan. Stock Options The Company recorded share-based compensation of $ 1.5 million and $ 0.1 million for the three months ended September 30, 2021 and 2020 , respectively, and $ 3.2 million and $ 0.3 million for the nine months ended September 30, 2021 and 2020 respectively. Fair value is determined on the date of grant for options. Compensation expense is recognized over the vesting period based on the fair value of the options. The fair value of stock options is estimated using the Black-Scholes model with the assumptions disclosed in the following table (no grants were made during the nine months ended September 30, 2020): Nine Months Ended September 30, 2021 Risk free interest rate 0.66 % - 1.24 % Expected option term 5.8 - 6.3 years Expected volatility of common stock 84.91 % - 90.20 % Expected dividend yield 0 % The expected term of stock options is based on the simplified method, which is an average of the contractual term of the option and its vesting period. The expected volatility of stock options is based upon the historical volatility of a number of publicly traded companies in similar stages of clinical development. The risk-free interest rate is based on the average yield of U.S. Treasury Bills appropriate for the expected term of the stock option grants. The Company has not historically paid cash dividends and does not anticipate declaring dividends in the future. As of September 30, 2021 , unrecognized compensation expense related to unvested options granted totaled $ 18.9 million. The expense is expected to be recognized over a weighted-average period of 3.2 years. A summary of the stock option activity under the 2016 Plan and the 2021 Plan during the period ended September 30, 2021 is presented below (in thousands except for per share and weighted average term): Number of Weighted Weighted Outstanding at December 31, 2020 1,128 $ 1.08 8.5 Granted 3,087 $ 8.96 Exercised ( 265 ) $ 0.99 Cancelled ( 35 ) $ 3.37 Outstanding at September 30, 2021 3,915 $ 7.28 9.2 Outstanding at September 30, 2021 (Sunesis 2011 Plan) 95 $ 33.54 3.0 Restricted Stock Units The Company recorded share-based compens ation of $ 0.2 million an d $ 0 for the three months ended September 30, 2021 and 2020, respectively, an d $ 0.5 million and $ 0 f or the nine months ended September 30, 2021 and 2020, respectively. For RSU equity awards, grant date fair value is estimated using the closing stock price on the date of grant. Compensation expense is recognized over the vesting period based on the fair value of the RSUs. A summary of the restricted stock unit activity under the plans during the period ended September 30, 2021 is presented below (in thousands except for per share and weighted average term): RSUs Weighted Weighted Outstanding at December 31, 2020 — $ — — Granted 852 4.22 Vested — — Cancelled — — Outstanding at September 30, 2021 852 $ 4.22 3.6 As of September 30, 2021 , unrecognized compensation expense related to unvested RSUs totaled $ 3.1 million. The expense is expected to be recognized over a weighted-average period of 3.6 years. Employee Stock Purchase Plan The Company adopted the 2011 Employee Stock Purchase Plan (the “2011 ESPP”) as part of the Merger. The 2011 ESPP permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. Eligible employees can purchase shares of the Company’s common stock at 85 % of the lower of the fair market value of the common stock at (i) the beginning of a 12-month offering period, or (ii) at the end of one of the two related 6-month purchase periods. No participant in the 2011 ESPP may be issued or transferred shares of common stock value at more than $ 25,000 per calendar year. As of September 30, 2021 , there were 60,948 shares available for future issuance under the ESPP. |