What changed in this filing

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Item 1. Financial Statements

2021-08-05 compared with 2021-05-07 · 125 added, 75 removed, 406 unchanged (33% of the section changed)

27 unchanged sentences

Preferred stock, $ 0.00001 par value;

10,000,000 shares authorized and no shares issued or outstanding at March 31, 2021 and December 31, 2020

10,000,000 shares authorized and no shares issued or outstanding at June 30, 2021 and December 31, 2020

Common stock, $ 0.00001 par value;

100,000,000 shares authorized at March 31, 2021 and December 31, 2020;

52,081,729 and 45,109,314 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

100,000,000 shares authorized at June 30, 2021 and December 31, 2020;

61,204,987 and 45,109,314 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid‑in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Contract research

8 unchanged sentences

Loss from operations

Other income (expense), net

Other expense, net

Loss from continuing operations

21 unchanged sentences

Balance at March 31, 2021

Issuance of common stock in connection with exercise of stock options and vesting of restricted stock units

Issuance of common stock in connection with public offering, net of offering costs of $ 8,899

Unrealized gain on marketable securities

Foreign currency translation adjustment

Stock-based compensation expense

Balance at June 30, 2021

Comprehensive

8 unchanged sentences

Balance at March 31, 2020

Vesting of restricted stock units

Unrealized loss on marketable securities

Foreign currency translation adjustment

Stock-based compensation expense

Balance at June 30, 2020

The accompanying notes are an integral part of these condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities :

15 unchanged sentences

Cash flows from financing activities:

Proceeds from issuance of common stock in connection with public offering, net of issuance costs

Proceeds from issuance of common stock in connection with public offerings, net of issuance costs

Proceeds from debt financing (including warrants), net of issuance costs

3 unchanged sentences

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

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

Cash, cash equivalents and restricted cash at beginning of period

17 unchanged sentences

The Company’s condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business.

As of March 31, 2021, the Company had cash, cash equivalents and marketable securities of $ 142.7 million and an accumulated deficit of $ 533.3 million.

As of June 30, 2021, the Company had cash, cash equivalents and marketable securities of $ 266.2 million and an accumulated deficit of $ 551.5 million.

Since inception, the Company has incurred net losses and negative cash flows from its operations.

13 unchanged sentences

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, the condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2021 and 2020, and the condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of March 31, 2021, the results of its operations and comprehensive loss for the three months ended March 31, 2021 and 2020, its changes in stockholders’ equity for the three months ended March 31, 2021 and 2020 and its cash flows for the three months ended March 31, 2021 and 2020.

The accompanying condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2021 and 2020, the condensed consolidated statement of stockholders’ equity for the three and six months ended June 30, 2021 and 2020, and the condensed consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements contained in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 25, 2021 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2021, the results of its operations and comprehensive loss for the three and six months ended June 30, 2021 and 2020, its changes in stockholders’ equity for the three and six months ended June 30, 2021 and 2020 and its cash flows for the six months ended June 30, 2021 and 2020.

The condensed consolidated balance sheet data as of December 31, 2020 was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States (“GAAP”).

The financial data and other information disclosed in these notes related to the three months ended March 31, 2021 and 2020 are unaudited.

The results for the three months ended March 31, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2021 and 2020 are unaudited.

The results for the three and six months ended June 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period.

The unaudited interim financial statements of the Company included herein have been prepared, pursuant to the rules and regulations of the SEC.

19 unchanged sentences

Contingent Consideration

The Company initially recorded a contingent consideration liability at fair value on the date of acquisition related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs including the achievement of the development, regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments.

The Company initially recorded a contingent consideration liability at fair value on the date of acquisition related to future potential payments resulting from the acquisition of Confluence based upon significant unobservable inputs including the achievement of development, regulatory and commercial milestones, as well as estimated future sales levels and the discount rates applied to calculate the present value of the potential payments.

Significant judgement was involved in determining the appropriateness of these assumptions.

7 unchanged sentences

The discount rate ranged between 5.7 % and 8.0 % depending on the year of each potential payment.

Recently Issued Accounting Pronouncements

Fair Value of Financial Assets and Liabilities

The following tables present information about the fair value measurements of the Company’s financial assets and liabilities which are measured at fair value on a recurring and non-recurring basis, and indicate the level of the fair value hierarchy utilized to determine such fair values:

March 31, 2021

June 30, 2021

(In thousands)

9 unchanged sentences

Total liabilities

As of March 31, 2021 and December 31, 2020, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs.

As of June 30, 2021 and December 31, 2020, the Company’s cash equivalents consisted of a money market fund, which was valued based upon Level 1 inputs.

The Company’s cash equivalents as of December 31, 2020 also included commercial paper, which was valued based upon Level 2 inputs.

The Company’s marketable securities as of March 31, 2021 and December 31, 2020 consisted of commercial paper and asset-backed and U.S.

The Company’s marketable securities as of June 30, 2021 and December 31, 2020 consisted of commercial paper and asset-backed and U.S.

government agency debt securities, which were valued based upon Level 2 inputs.

The Company’s marketable securities as of March 31, 2021 also included corporate debt securities, which were valued based upon Level 2 inputs.

The Company’s marketable securities as of June 30, 2021 also included corporate debt securities, which were valued based upon Level 2 inputs.

In determining the fair value of its Level 2 investments, the Company relied on quoted prices for identical securities in markets that are not active.

2 unchanged sentences

The Company evaluates whether adjustments to third-party pricing are necessary and, historically, the Company has not made adjustments to quoted prices obtained from the third-party pricing service.

During the three months ended March 31, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3.

The increase in contingent consideration of $ 16.4 million during the three months ended March 31, 2021 resulted from updates to the Company’s probability of achieving regulatory milestones and commencing commercialization and estimated future sales level assumptions as a result of the completion of a Phase 2a clinical trial of ATI-450 in subjects with moderate to severe rheumatoid arthritis and the inclusion of estimated future sales related to hidradenitis suppurativa and psoriatic arthritis which are additional planned indications for ATI-450.

As of March 31, 2021 and December 31, 2020, the fair value of the Company’s available for sale marketable securities by type of security was as follows:

March 31, 2021

During the six months ended June 30, 2021 and 2020, there were no transfers between Level 1, Level 2 and Level 3.

The increase in contingent consideration of $ 21.2 million during the six months ended June 30, 2021 resulted from updates to the Company’s probability of achieving regulatory milestones and commencing commercialization and estimated future sales level assumptions as a result of the completion of a Phase 2a clinical trial of ATI-450 in subjects with moderate to severe rheumatoid arthritis and the inclusion of estimated future sales of ATI-450 for the potential treatment of hidradenitis suppurativa and psoriatic arthritis, which are additional planned indications for ATI-450, as well as a result of the completion of a Phase 2a clinical trial of ATI-1777 in subjects with moderate to severe atopic dermatitis.

As of June 30, 2021 and December 31, 2020, the fair value of the Company’s available for sale marketable securities by type of security was as follows:

June 30, 2021

(In thousands)

22 unchanged sentences

Property and equipment, net

Depreciation expense was $ 0.2 million and $ 0.3 million for the three months ended March 31, 2021 and 2020, respectively.

Depreciation expense was $ 0.2 million and $ 0.3 million for the three months ended June 30, 2021 and 2020, respectively, and $ 0.4 million and $ 0.6 million for the six months ended June 30, 2021 and 2020, respectively.

Intangible Assets

5 unchanged sentences

Total intangible assets

As of March 31, 2021, estimated future amortization expense is as follows:

As of June 30, 2021, estimated future amortization expense was as follows:

(In thousands)

4 unchanged sentences

Research and development expenses

Litigation settlements (see Note 17)

Total accrued expenses

1 unchanged sentence

In March 2020, the Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”).

The Loan and Security Agreement provides for $ 11.0 million in term loans, of which the Company borrowed the entire amount on March 30, 2020.

The Loan and Security Agreement is secured by substantially all of the assets of the Company other than intellectual property.

The Loan and Security Agreement provided for $ 11.0 million in term loans, of which the Company borrowed the entire amount on March 30, 2020.

In connection with the Loan and Security Agreement, the Company issued to SVB a warrant to purchase up to 460,251 shares of common stock (the “Warrant”) (see Note 8).

The proceeds of the Loan and Security Agreement were allocated to the term loan and Warrant using a relative fair value approach.

The term loan repayment schedule provides for interest only payments beginning April 1, 2020 and continuing through March 1, 2022, followed by 24 consecutive equal monthly installments of principal, plus monthly payments of accrued interest, starting on April 1, 2022 and continuing through the maturity date of March 1, 2024.

All outstanding principal and accrued and unpaid interest will be due and payable on the maturity date.

The Loan and Security Agreement provides for an annual interest rate equal to the greater of (i) the prime rate then in effect as reported in The Wall Street Journal plus 2 % and (ii) 6.75 %.

The Loan and Security Agreement includes a final payment fee equal to 5 % of the original principal amount borrowed.

The Company has the option to prepay the outstanding balance of the term loans in full, subject to a prepayment premium of (i) 3 % of the original principal amount borrowed for any prepayment on or prior to the first anniversary of March 30, 2020, (ii) 2 % of the original principal amount borrowed for any prepayment after the first anniversary and on or before the second anniversary of March 30, 2020 or (iii) 1 % of the original principal amount borrowed for any prepayment after the second anniversary of March 30, 2020 but before March 1, 2024.

As of March 31, 2021 and December 31, 2020 the outstanding principal balance on the SVB Loan and Security Agreement was $ 11.0 million.

As of June 30, 2021 and December 31, 2020 the outstanding principal balance on the Loan and Security Agreement was $ 11.0 million.

In July 2021, the Company repaid in full the $ 11.0 million that was outstanding under the Loan and Security Agreement, together with all accrued and unpaid interest and fees as of the payoff date, for a total payment of $ 11.7 million (see Note 18).

The term loan repayment schedule provided for interest only payments beginning April 1, 2020 and continuing through March 1, 2022, followed by 24 consecutive equal monthly installments of principal, plus monthly payments of accrued interest, starting on April 1, 2022 and continuing through the maturity date of March 1, 2024.

The Loan and Security Agreement provided for an annual interest rate equal to the greater of (i) the prime rate then in effect as reported in The Wall Street Journal plus 2 % and (ii) 6.75 %.

The Loan and Security Agreement included a final payment fee equal to 5 % of the original principal amount borrowed.

The Company had the option to prepay the outstanding balance of the term loans in full, subject to a prepayment premium of (i) 3 % of the original principal amount borrowed for any prepayment on or prior to the first anniversary of March 30, 2020, (ii) 2 % of the original principal amount borrowed for any prepayment after the first anniversary and on or before the second anniversary of March 30, 2020 or (iii) 1 % of the original principal amount borrowed for any prepayment after the second anniversary of March 30, 2020 but before March 1, 2024.

Stockholders’ Equity

Preferred Stock

As of March 31, 2021 and December 31, 2020, the Company’s amended and restated certificate of incorporation authorized the Company to issue 10,000,000 shares of undesignated preferred stock.

There were no shares of preferred stock outstanding as of March 31, 2021 or December 31, 2020.

As of March 31, 2021 and December 31, 2020, the Company’s amended and restated certificate of incorporation authorized the Company to issue 100,000,000 shares of $ 0.00001 par value common stock.

As of June 30, 2021 and December 31, 2020, the Company’s amended and restated certificate of incorporation authorized the Company to issue 10,000,000 shares of undesignated preferred stock.

There were no shares of preferred stock outstanding as of June 30, 2021 or December 31, 2020.

As of June 30, 2021 and December 31, 2020, the Company’s amended and restated certificate of incorporation authorized the Company to issue 100,000,000 shares of $ 0.00001 par value common stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to any preferential dividend rights of any series of preferred stock that may be outstanding.

No dividends have been declared through March 31, 2021.

No dividends have been declared through June 30, 2021.

The Warrant issued to SVB in March 2020 had an initial exercise price of $ 0.956 per share, subject to adjustment as provided in the Warrant.

13 unchanged sentences

As a result, the net offering proceeds received by the Company, after deducting underwriting discounts, commissions and offering expenses, were $ 103.3 million.

June 2021 Public Offering

In June 2021, the Company closed a public offering in which it sold 8,098,592 shares of common stock at a price to the public of $ 17.75 per share, for aggregate gross proceeds of $ 143.8 million.

The Company paid underwriting discounts and commissions of $ 8.6 million, and also incurred expenses of $ 0.3 million in connection with the offering.

As a result, the net offering proceeds received by the Company, after deducting underwriting discounts, commissions and offering expenses, were $ 134.9 million.

Stock-Based Awards

3 unchanged sentences

Beginning at the time the 2015 Plan became effective, no further grants may be made under the Company’s 2012 Equity Compensation Plan, as amended and restated (the “2012 Plan”).

The 2015 Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit (“RSU”) awards, performance stock awards, cash-based awards and other stock-based awards.

stock-based awards.

The number of shares initially reserved for issuance under the 2015 Plan was 1,643,872 shares of common stock.

2 unchanged sentences

As of January 1, 2021, the number of shares of common stock that may be issued under the 2015 Plan was increased by 1,804,372 shares.

As of March 31, 2021,

2,937,121 shares remained available for grant under the 2015 Plan.

The Company had 2,725,405 stock options and 2,385,853 RSUs outstanding as of March 31, 2021 under the 2015 Plan.

As of June 30, 2021, 2,799,230 shares remained available for grant under the 2015 Plan.

The Company had 2,833,405 stock options and 1,476,308 RSUs outstanding as of June 30, 2021 under the 2015 Plan.

2017 Inducement Plan

1 unchanged sentence

The 2017 Inducement Plan is a non-stockholder approved stock plan adopted pursuant to the “inducement exception” provided under Nasdaq listing rules.

The Company had 439,500 stock options and 25,758 RSUs outstanding as of March 31, 2021 under the 2017 Inducement Plan.

The Company had 421,075 stock options and 22,408 RSUs outstanding as of June 30, 2021 under the 2017 Inducement Plan.

All shares of common stock that were eligible for issuance under the 2017 Inducement Plan after October 1, 2018, including any shares underlying any awards that expire or are otherwise terminated, reacquired to satisfy tax withholding obligations, settled in cash or repurchased by the Company in the future that would have been eligible for re-issuance under the 2017 Inducement Plan, were retired.

1 unchanged sentence

Upon the 2015 Plan becoming effective, no further grants can be made under the 2012 Plan.

The Company granted stock options to purchase a total of 1,140,524 shares under the 2012 Plan, of which 549,561 were outstanding as of March 31, 2021.

The Company granted stock options to purchase a total of 1,140,524 shares under the 2012 Plan, of which 484,145 were outstanding as of June 30, 2021.

Stock options granted under the 2012 Plan expire after ten years .

Stock Option Valuation

The weighted average assumptions the Company used to estimate the fair value of stock options granted during the three months ended March 31, 2021 and 2020 were as follows:

Three Months Ended

The weighted average assumptions the Company used to estimate the fair value of stock options granted during the six months ended June 30, 2021 and 2020 were as follows:

Six Months Ended

Risk-free interest rate

5 unchanged sentences

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2021:

The following table summarizes stock option activity for the six months ended June 30, 2021:

(In thousands, except share and per share data and years)

1 unchanged sentence

Forfeited and cancelled

Outstanding as of March 31, 2021

Options vested and expected to vest as of March 31, 2021

Options exercisable as of March 31, 2021

The weighted average grant date fair value of stock options granted during the three months ended March 31, 2021 was $ 16.15 per share.

Outstanding as of June 30, 2021

Options vested and expected to vest as of June 30, 2021

Options exercisable as of June 30, 2021

The weighted average grant date fair value of stock options granted during the six months ended June 30, 2021 was $ 15.96 per share.

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2021:

The following table summarizes RSU activity for the six months ended June 30, 2021:

(In thousands, except share and per share data)

Outstanding as of December 31, 2020

( 1,314,214 )

Forfeited and cancelled

Outstanding as of March 31, 2021

Outstanding as of June 30, 2021

Stock-Based Compensation

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands)

3 unchanged sentences

Total stock-based compensation expense

As of March 31, 2021, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $ 17.1 million and $ 17.8 million, respectively, each of which is expected to be recognized over a weighted average period of 3.4 years.

As of June 30, 2021, the Company had unrecognized stock-based compensation expense for stock options and RSUs of $ 16.7 million and $ 16.7 million, respectively, which is expected to be recognized over a weighted average period of 3.1 years and 3.2 years, respectively.

Net Loss per Share

1 unchanged sentence

Three Months Ended

Six Months Ended

(In thousands, except for share and per share data)

3 unchanged sentences

Therefore, the weighted average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same.

The following table presents potential shares of common stock excluded from the calculation

of diluted net loss per share for the three months ended March 31, 2021 and 2020.

All share amounts presented in the table below represent the total number outstanding as of March 31, 2021 and 2020.

The following table presents potential shares of common stock excluded from the calculation of diluted net loss per share for the three and six months ended June 30, 2021 and 2020.

All share amounts presented in the table below represent the total number outstanding as of June 30, 2021 and 2020.

Options to purchase common stock

18 unchanged sentences

Total operating lease liabilities

Amortization expense related to operating lease right-of-use assets and accretion of operating lease liabilities totaled $ 0.3 million for each of the three months ended March 31, 2021 and 2020.

Amortization expense related to operating lease right-of-use assets and accretion of operating lease liabilities totaled $ 0.3 million for each of the three months ended June 30, 2021 and 2020 and $ 0.5 million for each of the six months ended June 30, 2021 and 2020.

Finance Leases

9 unchanged sentences

Reasons was not involved in the negotiation or execution of the agreement, but may be deemed to have an interest in the ongoing transactions based on his employment as an executive officer of Mallinckrodt plc.

During the three months ended March 31, 2021 and 2020, the Company invoiced Mallinckrodt for $ 20 thousand and $ 0.2 million, respectively, under the master services agreement.

As of March 31, 2021 and December 31, 2020, the Company had $ 20 thousand and $ 24 thousand, respectively, of outstanding accounts receivable balances from Mallinckrodt.

During the six months ended June 30, 2021 and 2020, the Company invoiced Mallinckrodt for $ 24 thousand and $ 0.3 million, respectively, under the master services agreement.

As of June 30, 2021 and December 31, 2020, the Company had $ 0 and $ 24 thousand, respectively, of outstanding accounts receivable balances from Mallinckrodt.

Reasons had no financial interest in these transactions.

3 unchanged sentences

EPI Health agreed to pay the Company a high single-digit royalty calculated as a percentage of net sales on a country-by-country basis until the date that the patent rights related to RHOFADE have expired or, if later, ten years from the date of the first commercial sale of RHOFADE in such country.

The Company recorded royalty income under the asset purchase agreement of $ 0.2 million during each of the three months ended March 31, 2021 and 2020.

The Company recorded royalty income under the asset purchase agreement of $ 0.4 million during each of the six months ended June 30, 2021 and 2020.

Royalty income is included in other revenue on the condensed consolidated statements of operations and comprehensive loss.

EPI Health has also agreed to pay the Company potential sales milestone payments of up to $ 20.0 million in the aggregate upon the achievement of specified levels of net sales of products covered by the asset purchase agreement, and 25 % of any upfront, license, milestone, maintenance or fixed payment received by EPI Health in connection with any license or sublicense of the assets transferred in the disposition in any territory outside of the United States, subject to specified exceptions.

EPI Health in connection with any license or sublicense of the assets transferred in the disposition in any territory outside of the United States, subject to specified exceptions.

Agreement and Plan of Merger – Confluence

4 unchanged sentences

In addition to the payments described above, if the Company sells, licenses or transfers any of the intellectual property acquired from Confluence pursuant to the Confluence Agreement to a third party, the Company will be obligated to pay the former Confluence equity holders a portion of any consideration received from such sale, license or transfer in specified circumstances.

The Company did not record a federal or state income tax benefit for losses incurred during each of the three months ended March 31, 2021 and 2020.

As of June 30, 2021 and December 31, 2020, the balance of the Company’s contingent consideration liability was $ 25.3 million and $ 4.1 million, respectively (see Note 3).

The Company did not record a federal or state income tax benefit for losses incurred during each of the three and six months ended June 30, 2021 and 2020.

The Company concluded that it is more likely than not that its deferred tax assets will not be realized which resulted in recording a full valuation allowance during those periods.

12 unchanged sentences

The Company does not report balance sheet information by segment since it is not reviewed by the chief operating decision maker, and all of the Company’s tangible assets are held in the United States.

The Company’s results of operations by segment for the three months ended March 31, 2021 and 2020 are summarized in the tables below:

The Company’s results of operations by segment for the three and six months ended June 30, 2021 and 2020 are summarized in the tables below:

(In thousands)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021

Total revenue

5 unchanged sentences

(In thousands)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020

Total revenue

2 unchanged sentences

General and administrative

Loss from operations

Loss from discontinued operations

(In thousands)

Six Months Ended June 30, 2021

Total revenue

Cost of revenue

Research and development

General and administrative

Revaluation of contingent consideration

Loss from operations

(In thousands)

Six Months Ended June 30, 2020

Total revenue

Cost of revenue

Research and development

General and administrative

Revaluation of contingent consideration

Loss from operations

Loss from discontinued operations

Intersegment Revenue

Revenue for the contract research segment included $ 1.7 million and $ 2.2 million for services performed on behalf of the therapeutics segment for the three months ended March 31, 2021 and 2020, respectively.

Revenue for the contract research segment included $ 1.9 million and $ 1.8 million for services performed on behalf of the therapeutics segment for the three months ended June 30, 2021 and 2020, respectively and $ 3.5 million and $ 4.0 million for the six months ended June 30, 2021 and 2020, respectively.

All intersegment revenue has been eliminated in the Company’s condensed consolidated statement of operations.

14 unchanged sentences

The defendants filed an answer to the remaining aspects of the consolidated amended complaint on April 19, 2021.

The Company and the other defendants dispute plaintiffs’ claims in the Consolidated Securities Action.

At this time, the Company cannot reasonably predict the outcome or potential loss, if any, that could result from this matter.

In June 2021, the defendants and the plaintiffs agreed to settle the Consolidated Securities Action.

The parties signed and filed a settlement agreement in July 2021.

The settlement agreement is subject to preliminary approval by the U.S.

District Court for the Southern District of New York, notice to the putative class, and subsequent final approval by the court.

The Company accrued a liability of $ 2.65 million as of June 30, 2021 for its estimated financial obligation.

The Company expects its financial obligation to be within the limits of its insurance coverage and accordingly recorded a receivable for an insurance recovery equal to the settlement amount.

The insurance recovery receivable and the litigation settlement liability are recorded in prepaid expenses and other current assets and accrued expenses, respectively, in the condensed consolidated balance sheet.

Stockholder Derivative Action

9 unchanged sentences

Derivative Litigation (the “Consolidated Derivative Action”) and directed that future derivative cases filed in or transferred to the court arising out of substantially the same transactions or events be similarly consolidated.

Thereafter, on January 11, 2020, the court stayed – subject to certain conditions – all deadlines in the Consolidated Derivative Action pending resolution of the defendants’ anticipated motion to dismiss the Consolidated Securities Action.

The stay expired on April 27, 2021, but may be reinstated pending further developments in the

Consolidated Securities Action.

No further proceedings have yet occurred or been scheduled in the Consolidated Derivative Action.

At this time, the Company cannot reasonably predict the outcome or potential loss, if any, that could result from this matter.

Thereafter, on January 11, 2020, the court stayed – subject to certain conditions – all deadlines in the Consolidated Derivative Action pending resolution of the defendants’ then-anticipated motion to dismiss the Consolidated Securities Action.

On May 18, 2021, the court extended the stay – subject to certain conditions – until the resolution of a motion for summary judgment in the Consolidated Securities Action, which defendants in that action intended to file had the parties to the Consolidated Securities Action not reached an agreement to settle.

In June 2021, the defendants and the plaintiffs agreed to settle the Consolidated Derivative Action.

The agreed terms provide for the Company to implement certain policies and for attorneys’ fees to be paid to plaintiff’s counsel.

The parties signed and filed a settlement agreement in July 2021.

The settlement agreement is subject to preliminary approval by the U.S.

District Court for the Southern District of New York, notice to the Company’s stockholders, and subsequent final approval by the court.

The Company accrued a liability of $ 425 thousand as of June 30, 2021 for its estimated financial obligation.

The Company expects its financial obligation to be within the limits of its insurance coverage and accordingly recorded a receivable for an insurance recovery equal to the settlement amount.

Product Liability Lawsuit

4 unchanged sentences

The Company filed a motion to dismiss the amended complaint on March 15, 2021.

Briefing on the Company’s motion to dismiss has not been completed.

The Company disputes plaintiff’s claims and intends to defend the matter vigorously.

At this time, the Company cannot reasonably predict the outcome or potential loss, if any, that could result from this matter.

The Company’s motion to dismiss was granted on July 9, 2021.

The Court dismissed the majority of claims against the Company with prejudice.

All remaining claims against the Company were dismissed without prejudice.

Subsequent Event

Repayment of the Term Loan Facility with SVB

In July 2021, the Company repaid in full the $ 11.0 million borrowed under the Loan and Security Agreement with SVB (see Note 7).

In addition, the Company paid (i) accrued and unpaid interest as of the payoff date of $ 45 thousand, (ii) a final payment fee of $ 550 thousand and (iii) a prepayment fee of $ 120 thousand.

Following this repayment, all of the Company’s obligations under the Loan and Security Agreement are deemed to be terminated, except as set forth in the agreement.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements