STOKE THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition and consolidated results of operations together with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should carefully read the sections entitled "Risk Factors" and "Special Note Regarding Forward-Looking Statements" to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.
Overview
We are dedicated to addressing the underlying causes of severe diseases by upregulating protein expression with RNA-based medicines. Using our proprietary TANGO (Targeted Augmentation of Nuclear Gene Output) approach, we are developing antisense oligonucleotides ("ASOs") to selectively restore protein levels. Our first compound, STK-001, is in clinical testing for the treatment of Dravet syndrome, a severe and progressive genetic epilepsy. Dravet syndrome is characterized by frequent, prolonged and refractory seizures beginning within the first year of life. The disease is classified as a developmental and epileptic encephalopathy due to the developmental delays and cognitive impairment associated with it.
Dravet syndrome is one of many diseases caused by a haploinsufficiency, in which a loss of approximately 50% of normal protein levels leads to disease. We are also pursuing treatment for a second haploinsufficient disease, autosomal dominant optic atrophy ("ADOA"), the most common inherited optic nerve disorder. Our initial focus is haploinsufficiencies and diseases of the central nervous system and the eye, although proof of concept has been demonstrated in other organs, tissues, and systems, supporting our belief in the broad potential for our proprietary approach.
TANGO is based on the pioneering work conducted on pre-mRNA splicing and ASOs in
the laboratory of one of our co-founders,
We were incorporated in
On
In
In
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and received
As of
Since inception, we have had operating losses, the majority of which are
attributable to research and development activities. Our net losses were
Our primary use of cash is to fund operating expenses, which consist primarily
of research and development expenditures, and to a lesser extent, general and
administrative expenditures. Cash used to fund operating expenses is impacted by
the timing of when we pay these expenses, as reflected in the change in our
outstanding accounts payable and accrued expenses. We expect to continue to
incur net losses for the foreseeable future, and we expect our research and
development expenses, general and administrative expenses, and capital
expenditures will continue to increase. In particular, we expect our expenses
and losses to increase as we continue our development of, and seek regulatory
approvals for, our product candidates, and begin to commercialize any approved
products, as well as hire additional personnel, develop commercial
infrastructure, pay fees to outside consultants, lawyers and accountants, and
incur increased costs associated with being a public company such as expenses
related to services associated with maintaining compliance with Nasdaq listing
rules and
Based upon our current operating plan, we believe that our cash, cash
equivalents, marketable securities, and restricted cash of
License and Collaboration Agreement with Acadia Pharmaceuticals Inc.
In
Pursuant to the terms of the agreement, we received an upfront payment of
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Business Update Regarding COVID-19
We continue to monitor the impact of the COVID-19 pandemic in an effort to
mitigate interruptions to our clinical programs, research efforts and other
business activities and to monitor the safety and well-being of our employees,
patients and communities, as well as its impact on the
For additional information on the various risks posed by the COVID-19 pandemic, please read Item 1A. Risk Factors included in this annual report.
Financial Operations Overview
Revenue
We currently do not have any products approved for sale and have not generated
any product revenue since inception through
In
Pursuant to the terms of the agreement, we received an upfront payment of
See Note 8-License and Collaboration Agreement with Acadia Pharmaceuticals, Inc. of the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
Operating expenses
Certain operating expenses related to the prior period have been reclassed to conform to current period presentation.
Research and development
Research and development expenses consist primarily of costs incurred for the development of our discovery work and preclinical programs, which include:
• personnel costs, which include salaries, benefits and stock-based
compensation expense;
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• expenses incurred under agreements with consultants, third-party contract
organizations that conduct research and development activities on our
behalf, costs related to production of preclinical material and laboratory
and vendor expenses related to the execution of preclinical studies;
• scientific consulting, collaboration and licensing fees;
• laboratory supplies; and
• facilities costs, depreciation and other expenses related to internal
research and development activities.
We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying and developing product candidates. Our direct research and development expenses are tracked on a program-by-program basis from the point a program becomes a clinical candidate for us and consists primarily of external costs, such as fees paid to consultants, central laboratories and contractors in connection with our preclinical activities. We do not allocate employee costs, costs associated with our technology or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are currently deployed across multiple product development programs and, as such, are not separately classified. We use internal resources to manage our development activities and our employees work across multiple development programs and, therefore, we do not track their costs by program.
The table below summarizes our research and development expenses incurred by
development program:
Year ended December 31,
2022 2021
(in thousands)
STK-001 $ 25,327 $ 18,778
STK-002 9,087 3,436
SYNGAP1 405 148
MECP2 745 243Non-program specific and unallocated research
and development expenses 42,273 31,563
Total research and development expenses
We expense all research and development costs in the periods in which they are incurred. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.
We expect that our expenses will increase substantially in connection with our planned discovery work, preclinical and clinical development activities in the near term and our planned clinical trials in the future. At this time, we cannot reasonably estimate the costs for completing the preclinical and clinical development of any of our other product candidates. We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance into later stages of development and we conduct clinical trials. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.
Because of the numerous risks and uncertainties associated with product development, we cannot determine with certainty the duration and completion costs of the current or future preclinical studies and clinical trials or if, when, or to what extent we will generate revenues from the commercialization and sale of our product candidates. We may never succeed in achieving regulatory approval for our product candidates. The duration, costs and timing of preclinical studies and clinical trials and development of our product candidates will depend on a variety of factors, including:
• successful completion of preclinical studies and investigational new
drug-enabling studies;
• successful enrollment in, and completion of, clinical trials;
• receipt of regulatory approvals from applicable regulatory authorities;
• furthering our commercial manufacturing capabilities and arrangements with
third-party manufacturers;
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• obtaining and maintaining patent and trade secret protection
and non-patent exclusivity;
• launching commercial sales of our product candidates, if and when
approved, whether alone or in collaboration with others;
• acceptance of our product candidates, if and when approved, by patients,
the medical community and third-party payors;
• effectively competing with other therapies and treatment options;
• a continued acceptable safety profile following approval;
• enforcing and defending intellectual property and proprietary rights and
claims; and
• achieving desirable medicinal properties for the intended indications.
A change in the outcome of any of these factors could mean a significant change in the costs and timing associated with the development of our current and future preclinical and clinical product candidates. For example, if the FDA, or another regulatory authority were to require us to conduct clinical trials beyond those that we currently anticipate will be required for the completion of clinical development, or if we experience significant delays in execution of or enrollment in any of our preclinical studies or clinical trials, we could be required to expend significant additional financial resources and time on the completion of preclinical and clinical development. We expect our research and development expenses to increase for the foreseeable future as we continue the development of product candidates.
General and administrative expenses
General and administrative expenses consist primarily of personnel costs, costs
related to maintenance and filing of intellectual property, expenses for outside
professional services, including legal, human resources, information technology,
audit and accounting services, and facilities and other expenses. Personnel
costs consist of salaries, benefits and stock-based compensation expense. We
expect our general and administrative expenses to increase over the next several
years to support our continued research and development activities,
manufacturing activities, increased costs of operating as a public company and
the potential commercialization of our product candidates. These increases are
anticipated to include increased costs related to the hiring of additional
personnel, developing commercial infrastructure, fees to outside consultants,
lawyers and accountants, and increased costs associated with being a public
company such as expenses related to services associated with maintaining
compliance with Nasdaq listing rules and
Other income (expense)
Our other income (expense), includes (i) interest income earned on cash reserves in our operating money market fund, investment accounts and on our marketable securities investments and (ii) other items of income (expense), net.
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Results of Operations for the Years Ended
The following table sets forth our results of operations:
Year ended December 31,
2022 2021
(in thousands)
Consolidated statements of operations and
comprehensive loss: Revenue$ 12,405 $ - Operating expenses: Research and development 77,837 54,168 General and administrative 38,924 31,897 Total operating expenses 116,761 86,065 Loss from operations (104,356 ) (86,065 ) Other income (expense): Interest income (expense), net 3,122 120 Other income (expense), net 167 140 Total other income (expense) 3,289 260 Net loss (101,067 ) (85,805 ) Net loss per share-basic and diluted$ (2.60 ) $ (2.34 )
Weighted average common shares outstanding-basic and diluted
38,897,442 36,739,269
Comprehensive loss:
Net loss $ (101,067 ) $ (85,805 )
Other comprehensive loss:
Unrealized loss on marketable securities (1,007 ) (168 )
Total other comprehensive loss $ (1,007 ) $ (168 )
Comprehensive loss $ (102,074 ) $ (85,973 ) Research and development expenses
Research and development expenses were$77.8 million for the year endedDecember 31, 2022 as compared to$54.2 million for the year endedDecember 31, 2021 , an increase of$23.6 million . The table below summarizes our research and development expenses: Year Ended December 31, 2022 2021 STK-001$ 25,327 $ 18,778 STK-002 9,087 3,436 SYNGAP1 405 148 MECP2 745 243 Personnel-related expenses 29,028 22,603 Third-party services 3,409 990 Scientific consulting 794 579
Facilities and other research and
development expenses 9,042 7,391
Total research and development expenses
The increase in research and development expenses were primarily attributable to
an increase of
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General and administrative expenses
General and administrative expenses were
The increases in general and administrative expenses were primarily attributable
to an increase of
Other income (expense)
The change in our other income (expense) for the year ended
Liquidity and Capital Resources
Since our inception through
We have incurred losses since our inception in
Our product candidates may never achieve commercialization and we anticipate that we will continue to incur losses for the foreseeable future. We expect that our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. As a result, until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, costs relating to the build-out of our headquarters and manufacturing facility, license payments or milestone obligations that may arise, laboratory and related supplies, clinical costs, manufacturing costs, legal and other regulatory expenses and general overhead costs.
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Based upon our current operating plan, we believe that our cash, cash
equivalents, marketable securities, and restricted cash of
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
• the scope, progress, results and costs of researching and developing our
lead product candidates or any future product candidates, and conducting
nonclinical studies and clinical trials;
• the timing of, and the costs involved in, obtaining regulatory approvals or
clearances for our lead product candidates or any future product
candidates;
• the number and characteristics of any additional product candidates we
develop or acquire;
• the timing of any cash milestone payments if we successfully achieve
certain predetermined milestones;
• the cost of manufacturing our lead product candidates or any future product
candidates and any products we successfully commercialize, including costs
associated with building-out our manufacturing capabilities;
• our ability to establish and maintain strategic collaborations, licensing
or other arrangements and the financial terms of any such agreements that
we may enter into;
• the expenses needed to attract and retain skilled personnel;
• the costs associated with being a public company; and
• the timing, receipt and amount of sales of any future approved or cleared
products, if any.
Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.
Cash flows
The following table summarizes our cash flows:
Year ended December 31,
2022 2021
(in thousands)
Net cash (used in) provided by:
Operating activities $ (31,866 ) $ (66,907 )
Investing activities (45,882 ) (76,426 )
Financing activities 46,409 1,284
Net decrease in cash, cash equivalents and restricted cash
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Operating activities
During the year ended
During the year ended
Investing activities
Our investing activities during the year ended
Our investing activities during the year ended
Financing activities
Our financing activities during year ended
Our financing activities during the year ended
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of
Payments Due by Period
Less Than 1 to 3 4 to 5 More than
Total 1 Year Years Years 5 Years
(in thousands)
Operating lease obligations $ 5,313 $ 2,532 $ 2,781 $ - $ -
Total $ 5,313 $ 2,532 $ 2,781 $ - $ -
In
In
In
In
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space beginning on
Commitments
Our commitments primarily consist of obligations under our agreements with CSHL
and the
Additionally, we have entered into agreements with third-party contract manufacturers for the manufacture and processing of certain of our product candidates for preclinical testing purposes, and we have entered and will enter into other contracts in the normal course of business with contract research organizations for clinical trials and other vendors for other services and products for operating purposes. These agreements generally provide for termination or cancellation, other than for costs already incurred.
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
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 consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles, or GAAP. The preparation of these 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 the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our 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. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are the most critical in order to fully understand and evaluate our financial condition and results of operations.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC 606"). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five-step analysis: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step analysis to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer. As part of the accounting for these arrangements, we must use significant judgment to determine: (a) the number of performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above; and (c) the timing of satisfaction of performance obligations as a measure of progress in step (v) above.
For contracts determined to be within the scope of ASC 606, we assess whether the goods or services promised within each contract are distinct to identify those that are performance obligations. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct
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provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer, and (ii) the entity's promise to transfer the good or service to the customer is separately identifiable from other promises in the contract. In assessing whether a promise or performance obligation is distinct from the other promises, we consider factors such as the research, development, manufacturing and commercialization capabilities of the customer and the availability of the associated expertise in the general marketplace. In addition, we consider whether the customer can benefit from a promise for its intended purpose without the receipt of the remaining promise, whether the value of the promise is dependent on the unsatisfied promise, whether there are other vendors that could provide the remaining promise, and whether it is separately identifiable from the remaining promise. For licenses that are combined with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue.
The licenses of our intellectual property granted to Acadia were not determined to be distinct from the other promises or performance obligations, i.e., research and development services, identified in the arrangement. Accordingly, such licenses are therefore combined with research and development services in the arrangement. Payments or reimbursements resulting from our research and development efforts are recognized as the services are performed and presented on a gross basis because we are the principal for such efforts.
The transaction price (the amount of consideration we expect to be entitled to from a customer in exchange for the promised good or services) is determined and allocated to the identified performance obligations in proportion to their standalone selling prices ("SSP") on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied.
We use significant judgment to determine whether milestone payments or other variable consideration, except for royalties, should be included in the transaction price. The transaction price is allocated to each performance obligation based on the relative standalone selling prices of each performance obligation in the contract, and we recognize revenue based on those amounts when, or as, the performance obligations under the contract are satisfied. Any variable consideration is constrained, and therefore, the cumulative revenue associated with this consideration is not recognized until it is deemed not to be at significant risk of reversal.
We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation(s) when (or as) each performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Amounts received prior to being recognized as revenue are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion.
Customer options: If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. We evaluate the customer options for material rights, that is, the option to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. We allocate the transaction price to material rights based on the standalone selling price. As a practical alternative to estimating the standalone selling price when the goods or services are both (i) similar to the original goods and services in the contract and (ii) provided in accordance with the terms of the original contract, we allocate the total amount of consideration expected to be received from the customer to the total goods or services expected to be provided to the customer. Amounts allocated to any material right are not recognized as revenue until the option is exercised and the performance obligation is satisfied.
No such material rights were identified in the arrangement with Acadia. If such material rights were identified, then we would allocate the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized or begin to be recognized as revenue until, at the earliest, the option is exercised.
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Milestone payments: At the inception of each arrangement that includes milestone payments, we evaluate whether a significant reversal of cumulative revenue provided in conjunction with achieving the milestones is probable and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant reversal of cumulative revenue would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of us or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. For other milestones, we evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant reversal of cumulative revenue would not occur. At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
Accrued research and development expenses
As part of the process of preparing financial statements, we are required to estimate and accrue research and development expenses. This process involves the following:
• communicating with our applicable personnel to identify services that have
been performed on our behalf and estimating the level of service performed
and the associated cost incurred for the service when we have not yet been
invoiced or otherwise notified of actual cost;
• estimating and accruing expenses in our consolidated financial statements
as of each balance sheet date based on facts and circumstances known to us
at the time; and
• periodically confirming the accuracy of our estimates with selected
service providers and making adjustments, if necessary.
Examples of estimated research and development expenses that we accrue include:
• fees paid to investigative sites in connection with clinical studies;
• fees paid to contract manufacturing organizations in connection with
non-clinical development, preclinical research, and the production of
clinical study materials; and
• professional service fees for consulting and related services.
We base our expense accruals related to non-clinical development, preclinical studies, and clinical trials on our estimates of the services received and efforts expended pursuant to contracts with organizations/consultants that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts may depend on many factors, such as the successful enrollment of patients, site initiation, and the completion of clinical study milestones.
Our service providers invoice us monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur, or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates. To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.
Stock-Based Compensation
Stock options
We recognize compensation costs related to share-based awards granted to employees and directors, including stock options, based on the estimated fair value of the awards on the date of grant. We estimate the grant date fair value, and the resulting stock-based compensation, using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.
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The Black-Scholes option-pricing model requires the use of subjective assumptions to determine the fair value of stock-based awards. These assumptions include:
• Fair value of common stock-Historically, for all periods prior to our
initial public offering, the fair value of the shares of common stock
underlying our share-based awards was estimated on each grant date by our
board of directors. To determine the fair value of our common stock
underlying option grants, our board of directors considered, among other
things, valuations of our common stock prepared by an unrelated
third-party valuation firm in accordance with the guidance provided by the
American Institute of Certified Public Accountants Practice Guide ,
Valuation of Privately-Held-Company Equity Securities Issued as
Compensation, or the Practice Aid. Since becoming a public company we have
used our stock price to determine fair value of our common stock.
• Expected term-The expected term represents the period that stock-based
awards are expected to be outstanding. The expected term for option grants
is determined using the simplified method. The simplified method deems the
expected term to be the midpoint between the vesting date and the
contractual life of the stock-based awards.
• Expected volatility- We completed our IPO in June 2019 and accordingly, we
lack sufficient company-specific historical and implied volatility
information for our shares traded in the public markets. Therefore, we
estimate our expected share price volatility based on a blend of our
historical volatility and the historical volatility of publicly traded
peer companies and expect to continue to do so until such time as we have
adequate historical data regarding the volatility of our own traded share
price. The comparable companies were chosen based on their similar size,
stage in the life cycle or area of specialty.
• Risk-free interest rate-The risk-free interest rate is based on the U.S.
Treasury zero coupon issues in effect at the time of grant for periods
corresponding with the expected term of option.
• Expected dividend-We have never paid dividends on our common stock and
have no plans to pay dividends on our common stock. Therefore, we used an
expected dividend yield of zero.
The following table presents the weighted-average assumptions used to estimate the fair value of share-based awards granted:
Year ended December 31,
2022 2021
Risk-free interest rate 1.82-4.15% 0.78-1.51%
Expected dividend yield 0% 0%
Expected life 5.5-6.25 years 5.5-6.25 years
Expected volatility 70-71% 70-73%
We will continue to use judgment in evaluating the assumptions utilized for our share-based compensation expense calculations on a prospective basis. In addition to the assumptions used in the Black-Scholes option-pricing model, the amount of stock-based compensation expense we recognize in our consolidated financial statements includes actual stock option forfeitures.
Other Information
Net operating loss carryforwards
As of
In accordance with ASC 740, Accounting for Income Taxes, management of the
Company has evaluated the positive and negative evidence bearing upon the
realizability of its deferred tax assets, which are comprised principally of net
operating loss carryforwards. Management has determined that it is more likely
than not that the Company will not recognize the benefits of federal and state
deferred tax assets and, as a result, a full valuation allowance of
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million was established at
Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the Code) due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. The Company has not conducted a formal study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined for purposes of Section 382 and 383 of the Code, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards may be subject to an annual limitation under Section 382 and 383 of the Code, which is determined by first multiplying the value of the Company's stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.
We apply ASC 740 related to accounting for uncertainty in income taxes. The
Company's reserves related to income taxes are based on a determination of
whether, and how much of, a tax benefit taken by the Company in its tax filings
or positions is more likely than not to be realized following resolution of any
potential contingencies present related to the tax benefit. At
Emerging Growth Company and Smaller Reporting Company Status
We are an "emerging growth company," as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.
We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We will remain an emerging growth company until the earliest of (i) the last day
of our first fiscal year (a) following the fifth anniversary of the completion
of our IPO, (b) in which we have total annual gross revenues of at least
We are also a "smaller reporting company," meaning that the market value of our
stock held by non-affiliates was less than
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Recently Issued Accounting Pronouncements
In
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