| Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements include those of the company and its subsidiaries,
Cerevel Therapeutics Inc., Cerevel Therapeutics LLC and Cerevel MA
Securities Corporation, after elimination of all intercompany
accounts and transactions. The accompanying unaudited condensed
consolidated financial statements and notes hereto have been
prepared in conformity with the rules and regulations of the
Securities and Exchange Commission (SEC) for interim financial
reporting and, therefore, omit or condense certain footnotes and
other information normally included in financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) as set forth in the
Financial Accounting Standards Board’s (FASB) accounting
standards codification. Any reference in these notes to applicable
guidance is meant to refer to the authoritative GAAP as found in
the Accounting Standards Codification (ASC) and Accounting
Standards Update (ASU) of the FASB.
In the opinion of management, all adjustments necessary for a fair
statement of the financial information, which are of a normal and
recurring nature, have been made for the interim periods reported.
Results of operations for the three months ended March 31,
2021 and 2020, are not necessarily indicative of the results for
the entire fiscal year or any other period. The condensed
consolidated financial statements for the three months ended
March 31, 2021 and 2020, have been prepared on the same basis
as and should be read in conjunction with the audited consolidated
financial statements and notes included in our Annual Report.
As a result of the Business Combination Transaction, the shares and
corresponding capital amounts and loss per share related to Old
Cerevel’s outstanding redeemable convertible preferred stock,
redeemable convertible common stock and common stock prior to the
Business Combination Transaction have been retroactively restated
to reflect the Exchange Ratio established in the Business
Combination Agreement. For additional information on the Business
Combination Transaction and the Exchange Ratio, please read Note
3, Business Combination
Use of Estimates
The preparation of condensed consolidated financial statements in
conformity with GAAP requires us to make estimates, judgments and
assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at
the date of the condensed consolidated financial statements, and
the reported amounts of expenses during the reporting periods.
Significant estimates and assumptions made in the accompanying
condensed consolidated financial statements include, but are not
limited to, the fair value of the Equity Commitment and Share
Purchase Option, the fair value of stock options, the
recoverability of our net deferred tax assets and the related
valuation allowance and the accrual for research and development
expense. The impact on accounting estimates and judgments on our
financial condition and results of operations due to COVID-19
Restricted Cash
In connection with our entering into the lease agreement for our
headquarters in Cambridge, MA, in July 2019 we were required to
provide a security deposit in the form of a letter of credit. We
have classified this amount as restricted cash within our
consolidated balance sheet as of March 31, 2021 and
December 31, 2020.
Common Stock Warrants and Derivative Financial
Instruments
We review any common stock purchase warrants and other freestanding
derivative financial instruments at each balance sheet date and
account for them based on an assessment of the specific terms of
the instrument and applicable authoritative guidance in accordance
with ASC 480, Distinguishing Liabilities from Equity (ASC 480).
Our assessment considers whether the warrants are freestanding
financial instruments pursuant to ASC 480, whether the warrants
meet the definition of a liability pursuant to ASC 480, and whether
the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the
company’s own common stock and whether the warrant holders
could potentially require “net cash settlement” in a
circumstance outside of the company’s control, among other
conditions for equity classification. This assessment, which
requires the use of professional judgment, is conducted at the time
of warrant issuance and as of each subsequent quarterly period end
date while the warrants are outstanding.
We classify freestanding derivative financial instruments that are
indexed in our own stock as:
a)
Equity if they (i) require physical settlement or
net-share net-cash net-share
b)
Assets or liabilities if they (i) require
net-cash net-cash net-share
We assess classification of our common stock warrants and other
freestanding derivatives at each reporting date to determine
whether a change in classification is required. Warrants to
purchase an aggregate of 5,149,666 shares were issued by ARYA as
part of the units sold in its IPO in June 2020. We determined that
our 4,983,314 outstanding public warrants satisfied the criteria
for classification as equity instruments as of March 31, 2021,
and December 31, 2020, respectively.
We determined our 166,333 private placement warrants were
immaterial as of December 31, 2020. In certain circumstances,
the identity of the holder may result in different settlement
amounts, and therefore our private placement warrants are not
considered indexed in our own stock in the manner contemplated by
ASC Section 815-40-15.
Emerging Growth Company Status
We are an “emerging growth company” (EGC), as defined
in the Jumpstart Our Business Startups Act (JOBS Act) and we may
choose to take advantage of certain exemptions from various
reporting requirements that are applicable to other public
companies that are not EGCs. We may take advantage of these
exemptions until the company is no longer an EGC under
Section 107 of the JOBS Act, which provides that an EGC can
take advantage of the extended transition period afforded by the
JOBS Act for complying with new or revised accounting standards. We
have elected to use the extended transition period for complying
with new or revised accounting standards and as a result of this
election, our consolidated financial statements may not be
comparable to companies that comply with public company effective
dates. We may take advantage of these exemptions until we no longer
qualify as an EGC.
For additional information related to our other significant
accounting policies, please read Note 4, Summary of Significant
Accounting Policies,
Recent Accounting Guidance
From time to time, new accounting pronouncements are issued by the
FASB or other standard setting bodies and adopted by the company as
of the specified effective date. Unless otherwise discussed, the
company believes that the impact of recently issued standards that
are not yet effective will not have a material impact on our
financial position or results of operations upon adoption.
Collaborative Arrangements
In November 2018, the FASB issued ASU No. 2018-18, Collaborative
Arrangements (Topic 808): Clarifying the Interaction between Topic
808 and Topic 606
Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial
Instruments—Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Statements (ASU 2016-13). available-for-sale available-for-sale
Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes
(Topic 740)—Simplifying the Accounting for Income Taxes | 4. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies
followed in the preparation of these financial statements.
Basis of Presentation
The accompanying consolidated financial statements include those of
the company and its subsidiaries, Cerevel Therapeutics Inc.,
Cerevel Therapeutics LLC and Cerevel MA Securities Corporation,
after elimination of all intercompany accounts and transactions.
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally
accepted in the United States of America (U.S. GAAP). Any reference
in these notes to applicable guidance is meant to refer to the
authoritative United States generally accepted accounting
principles as found in the Accounting Standards Codification
(“ASC”) and Accounting Standards Update
(“ASU”) of the Financial Accounting Standards Board
(“FASB”).
As a result of the Business Combination Transaction, the shares and
corresponding capital amounts and loss per share related to Old
Cerevel’s outstanding redeemable convertible preferred stock,
redeemable convertible common stock and common stock prior to the
Business Combination Transaction have been retroactively restated
to reflect the Exchange Ratio establish in the Business Combination
Agreement.
For additional information on the Business Combination Transaction
and the Exchange Ratio, please read Note 3, Business
Combination
Segment Information
Operating segments are defined as components of an entity for which
separate financial information is available and that is regularly
reviewed by the Chief Operating Decision Maker (CODM) in deciding
how to allocate resources to an individual segment and in assessing
performance. Our CODM is our Chairperson of the Board of Directors
and Chief Executive Officer. We have determined that we operate as
a single operating segment and have one reportable segment. All of
our long-lived assets are held in the United States.
Use of Estimates
The preparation of financial statements in conformity with U.S.
GAAP requires us to make estimates, judgments and assumptions that
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements, and the reported amounts of
expenses during the reporting periods. Significant estimates and
assumptions made in the accompanying consolidated financial
statements include, but are not limited to, the fair value of
preferred and common stock, the fair value of the Equity
Commitment, the fair value of the Share Purchase Option, the fair
value of stock options, the recoverability of the Company’s
net deferred tax assets and the related valuation allowance and our
accruals for research and development expense. We evaluate our
estimates and assumptions on an ongoing basis using historical
experience and other factors and adjust those estimates and
assumptions when facts and circumstances change. Actual results
could differ materially from those estimates.
Cash and Cash Equivalents
We consider all short-term, highly liquid investments with original
maturities of 90 days or less at the date of purchase to be cash
equivalents. As of December 31, 2020 and 2019, our cash
equivalents consist primarily of amounts invested in money market
accounts.
Restricted Cash
In connection with our entering into the lease agreement for our
headquarters in Cambridge, MA, in July 2019 we were required to
provide a security deposit in the form of a letter of credit. We
have classified this amount as restricted cash within our
consolidated balance sheet as of December 31, 2020 and 2019.
Restricted cash was classified as a non-current
A reconciliation of the cash, cash equivalents and restricted cash
reported within our consolidated balance sheets that sum to the
total of the amounts shown in the consolidated statements of cash
flows is as follows:
(In thousands) As of December 31, 2020 As of December 31, 2019
Cash and cash equivalents $
383,623 $
79,551
Restricted cash 4,200 4,131
Total cash, cash equivalents and restricted cash $ 387,823 $ 83,682
Concentration of Credit Risk
Financial instruments that potentially expose us to concentrations
of credit risk consist primarily of cash, cash equivalents and
restricted cash. All of our cash deposits are maintained at a
large, creditworthy financial institution. Our deposits at times
may significantly exceed federally insured limits. We do not
believe that we are subject to unusual credit risk beyond the
normal credit risk associated with commercial banking
relationships. We do not have any significant off-balance
Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation and amortization, subject to review for impairment
whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Purchased
assets that are not yet in service are recorded to construction-in-process
Depreciation and amortization expense is recognized using the
straight-line method over the following estimated useful lives:
Asset Category
Estimated Useful Life
Computer equipment and software 3 years
Furniture and fixtures 5 years
Laboratory equipment 5 years
Leasehold improvements Shorter of useful life or
remaining lease term
Costs of major additions and improvements are capitalized and
amortized on a straight-line basis over the shorter of the lease
term or the estimated useful life of the asset. Upon retirement or
sale, the cost of assets disposed of and the related accumulated
depreciation and amortization are removed from the accounts and any
resulting gain or loss is included in the determination of net
income or loss. The cost of normal, recurring, or periodic repairs
and maintenance activities are expensed as incurred.
Impairment of Long-Lived Assets
Our long-lived assets consist primarily of property and equipment.
Long-lived assets to be held and used are tested for recoverability
whenever events or changes in business circumstances indicate that
the carrying amount of the assets may not be fully recoverable.
Factors that we consider in deciding when to perform an impairment
review include significant underperformance of the business in
relation to expectations, significant negative industry or economic
trends, and significant changes or planned changes in the use of
the assets. If an impairment review is performed to evaluate a
long-lived asset group for recoverability, we compare forecasts of
undiscounted cash flows expected to result from the use and
eventual disposition of the long-lived asset group to its carrying
value. An impairment loss would be recognized when estimated
undiscounted future cash flows expected to result from the use of
an asset group are less than its carrying amount. The impairment
loss would be based on the excess of the carrying value of the
impaired asset group over its fair value, determined based on
discounted cash flows. To date, we have not recorded any impairment
losses on long-lived assets.
Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic
842), right-of-use right-of-use
We determine if an arrangement is a lease at contract inception.
Operating lease assets represent our right to use an underlying
asset for the lease term and operating lease liabilities represent
our obligation to make lease payments arising from the lease.
Operating lease assets and liabilities are recognized at the
commencement date of the lease based upon the present value of
lease payments over the lease term. When determining the lease
term, we include options to extend or terminate the lease when it
is reasonably certain that we will exercise that option. We use the
implicit rate when readily determinable and use our incremental
borrowing rate when the implicit rate is not readily determinable
based upon the information available at the commencement date of
the respective leases in determining the present value of the lease
payments. Our incremental borrowing rate is determined using a
secured borrowing rate for the same currency and term as the
associated lease.
The lease payments used to determine our operating lease assets may
include lease incentives, stated rent increases and escalation
clauses linked to rates of inflation when determinable and are
recognized in our operating lease assets in our consolidated
balance sheets.
Our operating leases are reflected in operating lease assets and
operating lease liabilities, current portion and operating lease
liabilities, net of current portion in our consolidated balance
sheets. Lease expense for minimum lease payments is recognized on a
straight-line basis over the lease term and included in operating
expenses in our consolidated statements of operations and
comprehensive loss.
For additional information on the adoption of the new leasing
standards, please read Note 10, Leases
Fair Value Measurements
Certain of our assets and liabilities are carried at fair value
under GAAP. Fair value is defined as the exchange price that would
be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants
on the measurement date. Financial assets and liabilities carried
at fair value are to be classified and disclosed in one of the
following three categories:
Level 1 Quoted prices in active markets for identical
assets or liabilities.
Level 2 Observable inputs (other than Level 1 quoted
prices), such as quoted prices in active markets for similar assets
or liabilities, quoted prices in markets that are not active for
identical or similar assets or liabilities, or other inputs that
are observable or can be corroborated by observable market
data.
Level 3 Unobservable inputs that are supported by little
or no market activity and that are significant to determining the
fair value of the assets or liabilities, including pricing models,
discounted cash flow methodologies, and similar techniques.
To the extent that the valuation is based on models or inputs that
are less observable or unobservable in the market, the
determination of fair value requires more judgment. Accordingly,
the degree of judgment exercised by us in determining fair value is
greatest for instruments categorized in Level 3. A financial
instrument’s level within the fair value hierarchy is based
on the lowest level of any input that is significant to the fair
value measurement.
The carrying amounts reflected in our consolidated balance sheets
for cash and cash equivalents, prepaid expenses and other current
assets, accounts payable, and accrued expenses approximate their
fair values, due to their short-term nature. We believe that the
carrying value of the Equity Commitment and Share Purchase Option
approximated their fair value based on Level 3 inputs
throughout 2020 until these instruments were terminated upon
closing of the Business Combination Transaction.
Fair Value of Equity Commitment and Share Purchase
Option
The Equity Commitment and Share Purchase Option were free-standing
financial instruments that may have required us to transfer equity
upon settlement or exercise, respectively, and were recorded at
fair value on the Formation Transaction Date. The fair value of
each financial instrument on the Formation Transaction Date was
allocated to the Series A-1 A-2
We revalued these financial instruments each reporting period until
the Equity Commitment and Share Purchase Option were terminated
upon completion of the Business Combination Transaction. Changes in
fair value of the Equity Commitment and Share Purchase Option were
recognized as a component of other income (expense), net in our
consolidated statements of operations and comprehensive loss
through their termination upon closing of the Business Combination
Transaction. We classified the fair value of the remaining Equity
Commitment and the Share Purchase Option as an asset or a liability
in our consolidated balance sheets.
Changes in the fair value of these instruments resulted from
changes to one or multiple inputs, including adjustments to the
discount rates, expected volatility and dividend yield as well as
changes in the amount and timing of the anticipated future funding
required in settlement of the Equity Commitment and upon exercise
of the Share Purchase Option and the fair value of our preferred
and common shares expected to be exchanged for that additional
funding. Immediately prior to the closing of the Business
Combination Transaction, these financial instruments were adjusted
to their final fair value of zero and were terminated upon
Closing.
For additional information on the Business Combination Transaction,
please read Note 3, Business Combination Equity Commitment and Share
Purchase Option
Offering Costs
We capitalize certain underwriting, legal, professional accounting
and other third-party fees that are directly associated
with in-process equity additional paid-in capital the in-process equity
Revenues
Revenue is recognized when persuasive evidence of an arrangement
exists, delivery has occurred and title has passed, the price is
fixed or determinable, and collectability is reasonably
assured. We are a clinical stage company and have
had no revenues to date.
Research and Development Expense
Research and development expenses include costs incurred in
connection with the preclinical and clinical development of our
product candidates including employee-related expenses, consisting
of salaries, benefits and equity-based compensation for personnel
engaged in our research and development activities, fees paid to
other entities that conduct certain research and development
activities on our behalf, as well as certain indirect costs
incurred in support of overall research and development activities
including facilities, depreciation and technology expenses.
Payments we make for research and development services prior to the
services being rendered are recorded as prepaid assets in our
consolidated balance sheets and are expensed as the services are
provided. We estimate and accrue the value of goods and services
received from CROs and other third parties each reporting period
based on estimates of the level of services performed and progress
in the period when we have not received an invoice from such
organizations. When evaluating the adequacy of the accrued
liabilities, we analyze progress of the studies or clinical trials,
including the phase or completion of events, invoices received and
contracted costs. Significant judgments and estimates are made in
determining the accrued balances at the end of any reporting
period. We reassess and adjust our accruals as actual costs become
known or as additional information becomes available. Our
historical accrual estimates have not been materially different
from the actual costs.
Patent Costs
All patent-related costs incurred in connection with filing and
prosecuting patent applications are recorded as general and
administrative expenses in our accompanying statement of operations
and comprehensive loss.
Equity-Based Compensation
We determine the fair value of each award issued under our
equity-based compensation plan on the date of grant. We recognize
compensation expense for service-based awards on a straight-line
basis over the requisite service period which generally
approximates the vesting term. For service-based awards with
performance or market conditions, we recognize compensation expense
on a straight-line basis over the requisite service period for each
separate vesting portion of the award, with the amount of
compensation expense recognized at any date at least equaling the
portion of the grant-date fair value of the award that is vested at
that date. Equity-based compensation expense for awards with
performance conditions are recognized to the extent we determine
that the condition is considered probable to be met. We reassess
the probability of achieving these performance conditions each
reporting period until the date such conditions are settled.
Cumulative adjustments are recorded each period to reflect the
estimated outcome of the performance condition.
We elected to account prospectively for forfeitures as they occur
rather than apply an estimated forfeiture rate to equity-based
compensation expense. We classify equity-based compensation expense
in our consolidated statements of operations and comprehensive loss
in the same manner in which the award recipient’s salary and
related costs are classified or in which the award
recipient’s service payments are classified, as
applicable.
Determination of the Fair Value – Preferred and Common
Stock
Prior to the completion of the Business Combination Transaction,
given the absence of an active market for our common stock, we were
required to estimate the fair value of the company’s common
stock at the time of each grant of an equity-based award. We
utilized various valuation methodologies in accordance with the
framework of the American Institute of Certified Public
Accountants’ Technical Practice Aid, Valuation of
Privately-Held-Company Equity Securities Issued as Compensation, to
estimate the fair value of our common stock. Each valuation
methodology includes estimates and assumptions that require
judgment. These estimates and assumptions included a number of
objective and subjective factors in determining the value of our
common stock at each grant date, including the following
factors:
•
prices paid for our convertible preferred stock and
common stock, and the rights, preferences, and privileges
associated with our convertible preferred stock and common
stock;
•
the progress of our research and development efforts,
including the status of preclinical studies and planned clinical
trials for our investigational medicines;
•
our stage of development and projected growth;
•
the fact that the grants of equity-based awards
involved illiquid securities in a private company;
•
the likelihood of achieving a liquidity event for the
common stock underlying the equity-based awards, such as an initial
public offering (IPO), given prevailing market conditions;
•
the analysis of IPOs and the market performance of
similar companies in the biotechnology and pharmaceutical
industries;
•
the valuation of publicly traded companies in the life
sciences and biotechnology sectors; and
•
any external market conditions affecting the
biotechnology industry, and trends within the biotechnology
industry.
We used a hybrid methodology that combines both an income approach
and a market approach to estimate the business enterprise value and
our total equity value to calculate the fair value of our preferred
stock and common stock during 2019 and throughout 2020, until
completion of the Business Combination Transaction. A
probability-weighted discounted cash flow analysis was first
prepared reflecting multiple scenarios for future outcomes
associated with the acquired product candidates in order to
estimate the cash flows associated with estimated liquidity events
(i.e., an IPO). We also used a PWERM to determine the fair value of
pre-IPO
Subsequent to the closing of the Business Combination Transaction,
our board of directors determines the fair value of each share of
common stock underlying stock-based awards based on the closing
price of our common stock as reported by Nasdaq on the date of
grant.
We believe our methodologies are reasonable based upon our internal
peer company analyses and further supported by transactions
involving our preferred stock. If different assumptions had been
made, equity-based compensation expense, consolidated net loss and
consolidated net loss per share could have been significantly
different.
Determination of Fair Value – Stock Option Awards
Subsequent to the closing of the Business Combination Transaction,
we estimate the fair value of our stock option awards using the
Black Scholes method utilizing the “simplified method,”
for determining the expected life of the award, which is based on
the mid-point between “at-the-money.”
Prior to the closing of the Business Combination Transaction, we
estimated the fair value of the stock option awards on the date of
grant using the option pricing method, which is a variant of an
income approach. The option pricing method was used given that a
portion of the option awards have an exercise price that is
considered to be “deeply out of the money,” The option
pricing method incorporated the probability of the performance and
market conditions being met and adjustments to the estimated life
and value of the options to reflect the necessary growth in the
common share value for such shares to become exercisable. Given
that the common stock represented a non-marketable
As there was no public market for our common stock prior to the
closing of the Business Combination Transaction, we determined the
volatility for options granted based on an analysis of reported
data for a peer group of companies. The expected volatility of
granted options were determined using a weighted-average of the
historical volatility measures of this peer group of companies. The
expected life of options for these awards were determined by
probability-weighting the calculated expected life of the option at
each month the option was eligible to be at- in-the-money
In June 2018, the FASB issued an ASU No. 2018-07 Compensation—Stock Compensation (Topic 718): Improvements
to Nonemployee Share-Based Payment Accounting Compensation—Stock
Compensation non-employee non-employee
For additional information on the assumptions used in determining
the grant date fair value of equity-based awards granted, as well
as a summary of the equity-based award activity under our
equity-based compensation plans for the years ended
December 31, 2020 and 2019, please read Note 12,
Equity-Based Compensation
Common Stock Warrants and Derivative Financial
Instruments
We review any common stock purchase warrants and other freestanding
derivative financial instruments at each balance sheet date and
account for them based on an assessment of the specific terms of
the instrument and applicable authoritative guidance in accordance
with ASC 480, Distinguishing Liabilities from
Equity (ASC 480)
The assessment considers whether the warrants are freestanding
financial instruments pursuant to ASC 480, whether the warrants
meet the definition of a liability pursuant to ASC 480, and whether
the warrants meet all of the requirements for equity classification
under ASC 815, including whether the warrants are indexed to the
Company’s own common stock and whether the warrant holders
could potentially require “net cash settlement” in a
circumstance outside of the Company’s control, among other
conditions for equity classification. This assessment, which
requires the use of professional judgment, is conducted at the time
of warrant issuance and as of each subsequent quarterly period end
date while the warrants are outstanding.
We classify freestanding derivative financial instruments that are
indexed in our own stock as:
a)
Equity if they (i) require physical settlement or
net-share net-cash net-share
b)
Assets or liabilities if they (i) require
net-cash net-cash net-share
We assess classification of our common stock warrants and other
freestanding derivatives at each reporting date to determine
whether a change in classification is required. Warrants to
purchase an aggregate of 5,149,666 shares were issued by ARYA as
part of the units sold in its IPO in June 2020. We determined that
our 4,983,314 outstanding public common stock purchase warrants
satisfied the criteria for classification as equity instruments at
December 31, 2020. Our 166,333 private placement warrants were
determined to be immaterial as of December 31, 2020. For
additional information related to our warrants, please read Note
11, Stockholders’ Equity
Income Taxes
We account for income taxes using the asset and liability method,
which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been recognized in the consolidated financial statements or in
our tax returns. Deferred tax assets and liabilities are determined
based on the difference between the financial statement carrying
amounts and the tax basis of existing assets and liabilities and
for loss and credit carryforwards using enacted tax rates in effect
in the years in which the differences are expected to reverse.
Changes in deferred tax assets and liabilities are recorded in the
provision for income taxes.
We assess the likelihood that its deferred tax assets will be
recovered from future taxable income and, to the extent it
believes, based upon the weight of available evidence, that it is
more likely than not that all or a portion of the deferred tax
assets will not be realized, a valuation allowance is established
through a charge to income tax benefit (provision), net. Potential
for recovery of deferred tax assets is evaluated by estimating the
future taxable profits expected and considering prudent and
feasible tax planning strategies.
We account for uncertain tax positions recognized in the
consolidated financial statements by prescribing a more-likely-than-not
Comprehensive Loss
Comprehensive loss is comprised of two components: net loss and
other comprehensive loss, which includes other changes in
stockholders’ deficit that result from transactions and
economic events other than those with stockholders. There were no
items qualifying as other comprehensive loss; accordingly,
comprehensive loss equaled total net loss for the years ended
December 31, 2020 and 2019.
Net Loss per Share
We calculate earnings per share in accordance with
ASC 260, Earnings per Share . The two-class two-class
Basic net loss per share is calculated by dividing the net loss
attributable to common stockholders by the weighted-average number
of shares of common stock outstanding during the period, without
consideration for common stock equivalents.
Diluted net loss per share is calculated by adjusting the net loss
of the company for cumulative preferred stock dividends. Diluted
net loss per share is calculated by adjusting the weighted average
shares outstanding for the dilutive effect of common stock
equivalents outstanding for the period. For purposes of the
dilutive net loss per share applicable to common stockholders
calculation, warrants, stock options and unvested restricted stock
are considered to be common stock equivalents but are excluded from
the calculation of diluted net loss per share applicable to common
stockholders, as their effect would be anti-dilutive due to the
fact that we were in a net loss position for the periods presented;
therefore, basic and diluted net loss per share applicable to
common stockholders were the same for the period presented.
Subsequent Event Considerations
We consider events or transactions that occur after the balance
sheet date but prior to the issuance of the consolidated financial
statements to provide additional evidence for certain estimates or
to identify matters that require additional disclosure. Subsequent
events have been evaluated as required. For additional information
on our evaluation of subsequent events, please read Note 19,
Subsequent Events,
Emerging Growth Company Status
We are an “emerging growth company” (EGC), as defined
in the Jumpstart Our Business Startups Act (JOBS Act) and we may
choose to take advantage of certain exemptions from various
reporting requirements that are applicable to other public
companies that are not EGCs. We may take advantage of these
exemptions until the company is no longer an EGC under
Section 107 of the JOBS Act, which provides that an EGC can
take advantage of the extended transition period afforded by the
JOBS Act for complying with new or revised accounting standards. We
have elected to use the extended transition period for complying
with new or revised accounting standards and as a result of this
election, our consolidated financial statements may not be
comparable to companies that comply with public company effective
dates. We may take advantage of these exemptions until we no longer
qualify as an EGC. |
