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The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:
−Removed: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgment.
+Added: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
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net of offering costs
−Removed: Adjustment for fractional shares
Share-based compensation
Balance, December 31, 2020
−Removed: Issuance of common stock and exercise
−Removed: of prefunded warrants for cash,
+Added: Issuance of common stock for cash,
net of offering costs
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The Company is a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of genetically targeted therapies for cardiovascular diseases.
−Removed: The Company’s lead product candidates are rNAPc2 (AB201) as a potential treatment for diseases caused by ribonucleic acid, or RNA, viruses, initially focusing on COVID-19, the disease caused by SARS-CoV-2 virus, and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation (AF) in patients with chronic heart failure (HF).
+Added: The Company’s lead product candidates are rNAPc2 (AB201) as a potential treatment for COVID-19, the disease caused by SARS-CoV-2 virus, and potentially other viral diseases and Gencaro™ (bucindolol hydrochloride) for the treatment of atrial fibrillation (AF) in patients with chronic heart failure (HF).
rNAPc2 is a protein therapeutic in clinical development as a potential treatment for patients hospitalized with COVID-19.
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The Company continues to evaluate the feasibility and potential timing for initiating PRECISION-AF relative to the COVID-19 pandemic and prioritizing the development of rNAPc2.
−Removed: The Company’s other product candidate, AB171, is a thiol-substituted isosorbide mononitrate, which ARCA plans to develop as a genetically-targeted treatment for HF and peripheral arterial disease.
In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.
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The Company devotes substantially all of its efforts towards obtaining regulatory approval and raising capital necessary to fund its operations and it is subject to a number of risks associated with clinical research and development, including dependence on key individuals, the development of and regulatory approval of commercially viable products, the need to raise adequate additional financing necessary to fund the development and commercialization of its products, and competition from larger companies.
−Removed: The Company has not generated revenue to date and has incurred substantial losses and negative cash flows from operations since its inception.
+Added: The Company has no t generated revenue to date and has incurred substantial losses and negative cash flows from operations since its inception.
The Company has historically funded its operations through issuances of common and preferred stock.
−Removed: The Company believes that its current cash and cash equivalents as of December 31, 2020, together with the $23.3 million of net proceeds raised through February 2021 from sales of our common stock, as discussed in Note 7, will be sufficient to fund its operations through the end of fiscal year 2022.
+Added: The Company believes that its current cash and cash equivalents as of December 31, 2021 will be sufficient to fund its operations through the middle of fiscal year 2023.
Conducting a Phase 3 rNAPc2 clinical trial or the Phase 3 PRECISION-AF trial would likely require additional financing.
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the Company’s ability to control costs associated with its operations;
−Removed: general economic and industry conditions affecting the availability and cost of capital, including as a result of the COVID‑19 pandemic;
the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights;
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The carrying amount of other financial instruments, including accounts payable, approximated fair value due to their short maturities.
−Removed: As of December 31, 2020 and 2019, the Company did not have any debt outstanding.
+Added: As of December 31, 2021 and 2020, the Company did no t have any debt outstanding.
(4) Property and Equipment
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Computer software
−Removed: Leasehold improvements
−Removed: Lesser of useful life or life of the lease
Accumulated depreciation and amortization
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Operating Lease
−Removed: On August 1, 2013 the Company entered into a lease agreement for approximately 5,300 square feet of office facilities in Westminster, Colorado which served as the Company’s primary business office from October 1, 2013 until September 30, 2020.
−Removed: Effective February 24, 2020, the lease was renewed for an additional six month term beginning April 1, 2020 and expired on September 30, 2020.
On August 29, 2020 the Company entered into a lease agreement for approximately 5,200 square feet of office facilities in Westminster, Colorado which serves as the Company’s primary business office effective October 1, 2020 (October 2020 Lease).
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The amounts recorded assume the Company will exercise its renewal option.
−Removed: The lease includes real estate taxes and insurance, which is not a lease component and is not included in the lease obligation.
+Added: In June 2021, the Company entered into a sublease agreement for approximately 3,000 square feet of additional office facilities in the Company’s primary business office (2021 Lease).
+Added: The sublease term is 29 months beginning June 2021, with no renewal option.
+Added: The leases include real estate taxes and insurance, which is not a lease component and is not included in the lease obligation.
In addition, common area maintenance charges are based on actual costs incurred and are a non-lease component that is not included in the lease obligation.
−Removed: Future minimum commitments due under the October 2020 Lease agreement as of December 31, 2020 are as follows (in thousands):
+Added: Future minimum commitments due under the October 2020 Lease and 2021 Lease agreements as of December 31, 2021 are as follows (in thousands):
Total remaining lease payments
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The weighted-average discount rate for the operating lease is 7 %.
+Added: Patent Agreement
+Added: In July 2021, the Company entered into a patent assignment agreement (the Agreement) with the University Medical Center of Johannes Gutenberg University Mainz , Germany.
+Added: Under the terms of the Agreement, the Company received exclusive world-wide patent rights relating to the use of rNAPc2 as a potential treatment for COVID-19, and other indications, based on the research and discoveries from Univ.-Prof.
+Added: Wolfram Ruf, the Scientific Director and Alexander von Humboldt Professor at the Center for Thrombosis and Hemostasis (CTH) of the University Medical Center Mainz, and his collaborators.
+Added: The Company has upfront and potential milestone obligations to the University Medical Center Mainz that could total approximately € 1.6 million and royalty obligations in the low single digit range, if rNAPc2 receives regulatory approval and is commercialized.
+Added: The term of the Agreement extends to the date of expiration of the last to expire of any of the assigned patents.
Gencaro License
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At the Market Equity Financing
−Removed: On January 11, 2017, the Company entered into a Capital on Demand TM Sales Agreement (the Sales Agreement) with JonesTrading, pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock, par value $0.001 per share (the Common Stock), having an aggregate offering price of up to $7.3 million.
+Added: On January 11, 2017, the Company entered into a Capital on Demand TM Sales Agreement (the Sales Agreement) with JonesTrading Institutional Services LLC, as agent (JonesTrading), pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s common stock, par value $ 0.001 per share (the Common Stock), having an aggregate offering price of up to $ 7.3 million.
On August 21, 2017, January 25, 2019, March 11, 2019, May 9, 2019, May 20, 2019, June 28, 2019, July 2, 2020 and July 14, 2020, the Company amended its Capital on Demand Sales Agreement.
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The Company will also reimburse JonesTrading for certain specified expenses in connection with entering into and amending the Sales Agreement.
−Removed: Under the amended Sales Agreement, the Company sold an aggregate of 2,214,301 and 820,561 shares of Common Stock pursuant to the terms of such Sales Agreement, as amended, for net proceeds of approximately $14.4 million and $6.9 million during the years ended December 31, 2020 and 2019, respectively, including initial expenses for executing the “at the market offering” and commissions to the placement agent.
+Added: Under the amended Sales Agreement, the Company sold an aggregate of 2,214,301 shares of Common Stock, for net proceeds of approximately $ 14.4 million, during the year ended December 31, 2020, including initial expenses for executing the “at the market offering” and commissions to the placement agent.
+Added: This sales agreement terminated in July 2020.
On July 22, 2020, the Company entered into a new Capital on Demand TM Sales Agreement (the 2020 Sales Agreement) with JonesTrading, pursuant to which the Company may offer and sell, from time to time through JonesTrading, shares of the Company’s Common Stock, having an aggregate offering price of up to $ 54.0 million.
−Removed: As of December 31, 2020, the Company had sold an aggregate of 5,066,279 shares of its Common Stock pursuant to the terms of the 2020 Sales Agreement for net proceeds of approximately $28.9 million, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.
−Removed: From January 1, 2021 through February 22, 2021, the Company sold an aggregate of 4,861,993 shares of its Common Stock pursuant to the terms of the 2020 Sales Agreement.
−Removed: Net proceeds received in the period were approximately $23.3 million, after deducting commissions paid to the placement agent.
−Removed: As of February 22, 2021, the Company had sold all shares available under its current prospectus to the Company’s registration statement on Form S-3 (No.
+Added: During the years ended December 31, 2021 and 2020, respectively, the Company had sold an aggregate of 4,861,993 and 5,066,279 shares of its Common Stock pursuant to the terms of the 2020 Sales Agreement for net proceeds of approximately $ 23.3 million and $ 28.9 million, respectively, after deducting expenses for executing the “at the market offering” and commissions paid to the placement agent.
+Added: In April 2021, the Company amended the 2020 Sales Agreement and the amount available for the offering under its prospectus to the Company’s registration statement on Form S-3 (No.
+Added: The amount available for the offering under the prospectus supplement is subject to the limitation of not selling a total value amount of shares exceeding more than one-third of the Company’s public float in any 12-month period.
Warrants to purchase shares of common stock were granted as part of various financing and business agreements.
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As of December 31, 2021, options to purchase 30 shares with a weighted average exercise price of $ 328.31 per share were outstanding under the 2004 plan.
−Removed: The Company granted options to purchase an aggregate of 500,350 shares of common stock in the year ended December 31, 2020 and granted no options to purchase shares of common stock in the year ended December 31, 2019.
−Removed: The fair values of employee stock
−Removed: options granted in the year ended December 31, 20 20 were estimated at the date of grant using the Black-Scholes model with the following assumptions and had the following estimated weighted average grant date fair value per share:
+Added: The Company granted options to purchase an aggregate of 433,700 and 500,350 shares of common stock in the years ended December 31, 2021 and 2020, respectively.
+Added: The fair values of employee stock options granted in the years ended December 31, 2021 and 2020 were estimated at the date of grant using the Black-Scholes model with the following assumptions and had the following estimated weighted average grant date fair value per share:
Year Ended December 31,
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A limitation in the carryforwards would decrease the carrying amount of the gross amount of the net operating loss carryforwards, with a corresponding decrease in the valuation allowance recorded against these gross deferred tax assets.
−Removed: Income tax benefit for the years ended December 31, 2020 and 2019 primarily were related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015, or PATH Act.
−Removed: As of December 31, 2019, the Company has realized the full amount available under the PATH Act.
+Added: Income tax benefit for the year ended December 31, 2020 primarily was related to the reduction in the recorded valuation allowance as a result of the realization of research and experimentation credit carryforwards under the Protecting Americans from Tax Hikes Act of 2015, or PATH Act.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was enacted.
1 unchanged sentence
The Company has evaluated the impact of the CARES Act and determined that none of the changes would result in a material cash benefit to the Company.
−Removed: Income tax benefit attributable to our loss from operations before income taxes differs from the amounts computed by applying the U.S.
+Added: Income tax benefit attributable to the Company’s loss from operations before income taxes differs from the amounts computed by applying the U.S.
federal statutory income tax rate of 21 % for 2021 and 2020, as a result of the following (in thousands):
16 unchanged sentences
Stock-based compensation
−Removed: Depreciation and amortization
Accrued compensation
5 unchanged sentences
Right-of-use asset
+Added: Depreciation and amortization
Net deferred tax liability
7 unchanged sentences
No interest or penalties were recognized in the financial statements for the years ended December 31, 2021 and 2020.
−Removed: (11) Subsequent Event
−Removed: From January 1, 2021 through February 22, 2021, the Company issued additional Common Stock under the 2020 Sales Agreement, as discussed in Note 7.
−Removed: As of February 22, 2021, the Company has sold all shares available under its current prospectus to the Company’s registration statement on Form S-3 (No.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
1 unchanged sentence
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.