Quantitative and Qualitative Disclosures About Market Risk.
−Removed: As of December 31, 2019, we had cash, cash equivalents and marketable securities of $82.0 million, consisting of cash, money market accounts, corporate bonds, commercial paper and U.S.
−Removed: government debt securities.
+Added: As of December 31, 2020, we had cash, cash equivalents and marketable securities of $126.9 million, consisting of cash, money market accounts, corporate bonds, commercial paper and United States government debt securities.
The primary objectives of our investment activities are to preserve principal, provide liquidity and maximize income without significantly increasing risk.
−Removed: Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S.
−Removed: interest rates.
−Removed: If market interest rates were to increase immediately and uniformly by 50 basis points, from levels as of December 31, 2019, the net fair value of our interest sensitive marketable securities would hypothetically decline by less than $0.1 million.
−Removed: As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the U.S.
+Added: Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of United States interest rates.
+Added: If market interest rates were to increase immediately and uniformly by 50 basis points, from levels as of December 31, 2020, the net fair value of our interest sensitive marketable securities would hypothetically decline by $0.1 million.
+Added: As we incur research expenses in foreign countries, we face exposure to movements in foreign currency exchange rates, primarily the Euro, British Pound and Australian dollar against the United States dollar.
Historically, foreign currency fluctuations have not had a material impact on our consolidated financial statements.
−Removed: Financial Statement s and Supplementary Data.
−Removed: INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Report of Independent Registered Public Accounting Firm
−Removed: Consolidated Balance Sheets
−Removed: Consolidated Statements of Operations and Comprehensive Loss
−Removed: Consolidated Statements of Convertible Preferred Shares and Stockholders’ Equity
−Removed: Consolidated Statements of Cash Flows
−Removed: Notes to Consolidated Financial Statements
−Removed: Report of Independent Registered Public Accounting Firm
−Removed: To the Board of Directors and Stockholders of Spero Therapeutics, Inc.
−Removed: Opinion on the Financial Statements
−Removed: We have audited the accompanying consolidated balance sheets of Spero Therapeutics, Inc.
−Removed: and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive loss, of convertible preferred shares and stockholders' equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).
−Removed: In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
−Removed: Substantial Doubt About the Company’s Ability to Continue as a Going Concern
−Removed: The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.
−Removed: As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring losses since inception and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern.
−Removed: Management's plans in regard to these matters are also described in Note 1.
−Removed: The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
−Removed: Change in Accounting Principle
−Removed: As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.
−Removed: Basis for Opinion
−Removed: These consolidated financial statements are the responsibility of the Company’s management.
−Removed: Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.
−Removed: We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
−Removed: federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
−Removed: We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.
−Removed: Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
−Removed: The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
−Removed: As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.
−Removed: Accordingly, we express no such opinion.
−Removed: Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
−Removed: Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
−Removed: Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
−Removed: We believe that our audits provide a reasonable basis for our opinion.
−Removed: /s/ PricewaterhouseCoopers LLP
−Removed: Boston, Massachusetts
−Removed: March 16, 2020
−Removed: We have served as the Company's auditor since 2016.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: CONSOLIDATED BALANCE SHEETS
−Removed: (In thousands, except unit, share and per share amounts)
−Removed: Current assets:
−Removed: Cash and cash equivalents
−Removed: Marketable securities
−Removed: Other receivables
−Removed: Tax incentive receivable, current
−Removed: Prepaid expenses and other current assets
−Removed: Total current assets
−Removed: Property and equipment, net
−Removed: Tax incentive receivable
−Removed: Operating lease right of use assets
−Removed: Liabilities and Stockholders' Equity
−Removed: Current liabilities:
−Removed: Accounts payable
−Removed: Accrued expenses and other current liabilities
−Removed: Derivative liabilities
−Removed: Deferred rent
−Removed: Operating lease liabilities
−Removed: Total current liabilities
−Removed: Deferred rent, net of current portion
−Removed: Non-current operating lease liabilities
−Removed: Other long-term liabilities
−Removed: Total liabilities
−Removed: Commitments and contingencies (Note 12)
−Removed: Stockholders' equity:
−Removed: Preferred stock, $0.001 par value;
−Removed: 10,000,000 shares authorized, 2,720 shares issued and outstanding as of December 31, 2019 and 3,220 shares issued and outstanding as of December 31, 2018
−Removed: Common stock, $0.001 par value;
−Removed: 60,000,000 shares authorized as of December 31, 2019 and December 31, 2018;19,190,695 shares issued and outstanding as of December 31, 2019 and 17,205,962 shares issued and outstanding as of December 31, 2018
−Removed: Additional paid-in capital
−Removed: Accumulated deficit
−Removed: Accumulated other comprehensive gain (loss)
−Removed: Total Spero Therapeutics, Inc.
−Removed: stockholders' equity
−Removed: Non-controlling interests
−Removed: Total stockholders' equity
−Removed: Total liabilities and stockholders' equity
−Removed: The accompanying notes are an integral part of these consolidated financial statements.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
−Removed: (In thousands, except share and per share data)
−Removed: Year Ended December 31,
−Removed: Grant revenue
−Removed: Collaboration revenue
−Removed: Total revenues
−Removed: Operating expenses:
−Removed: Research and development
−Removed: General and administrative
−Removed: Total operating expenses
−Removed: Loss from operations
−Removed: Other income (expense):
−Removed: Gain on settlement of derivative liability
−Removed: Interest income
−Removed: Other income (expense), net
−Removed: Total other income (expense), net
−Removed: Net loss per share attributable to common stockholders, basic and diluted
−Removed: Weighted average common shares outstanding, basic and diluted:
−Removed: Comprehensive loss:
−Removed: Other comprehensive gain (loss):
−Removed: Unrealized gain (loss) on marketable securities
−Removed: Reclassification adjustment for gains included in net loss
−Removed: Net unrealized gains (losses) on securities
−Removed: Total comprehensive loss
−Removed: The accompanying notes are an integral part of these consolidated financial statements.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED SHARES AND
−Removed: STOCKHOLDERS’ EQUITY
−Removed: (In thousands, except unit and share amounts)
−Removed: Series A and B
−Removed: Spero Therapeutics, Inc.
−Removed: Convertible Preferred Stock
−Removed: Other Comprehensive
−Removed: Stockholders'
−Removed: Stockholders'
−Removed: Income (Loss)
−Removed: Equity (Deficit)
−Removed: Balances at December 31, 2017
−Removed: Issuance of common stock upon the exercise of stock options
−Removed: Issuance of common and Series A preferred stock in public offering, net of issuance costs of $996
−Removed: Issuance of Series B preferred stock in exchange for common stock
−Removed: Share-based compensation expense
−Removed: Unrealized loss on available-for-sale securities
−Removed: Balances at December 31, 2018
−Removed: Issuance of common stock upon the exercise of stock options
−Removed: Issuance of common stock, net of issuance costs of $474
−Removed: Conversion of convertible preferred stock to common stock
−Removed: Share-based compensation expense
−Removed: Purchase of non-controlling interest in Spero Gyrase, Inc.
−Removed: Unrealized gain on available-for-sale securities
−Removed: Balances at December 31, 2019
−Removed: The accompanying notes are an integral part of these consolidated financial statements.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: CONSOLIDATED STATEMENTS OF CASH FLOWS
−Removed: (In thousands)
−Removed: Year Ended December 31,
−Removed: Cash flows from operating activities:
−Removed: Adjustments to reconcile net loss to net cash used in operating activities:
−Removed: Depreciation and amortization
−Removed: Non-cash lease cost
−Removed: Loss on disposal of fixed assets
−Removed: Gain on settlement of derivative liability
−Removed: Share-based compensation
−Removed: Realized (gain) loss on investments
−Removed: Unrealized foreign currency transaction (gain) loss
−Removed: Accretion of discount on marketable securities
−Removed: Changes in operating assets and liabilities:
−Removed: Other receivables
−Removed: Prepaid expenses and other current assets
−Removed: Tax incentive receivables
−Removed: Accounts payable
−Removed: Accrued expenses and other current liabilities
−Removed: Deferred rent
−Removed: Other long-term liabilities
−Removed: Net cash used in operating activities
−Removed: Cash flows from investing activities:
−Removed: Purchases of marketable securities
−Removed: Proceeds from maturities of marketable securities
−Removed: Purchases of property and equipment
−Removed: Net cash provided by (used in) investing activities
−Removed: Cash flows from financing activities:
−Removed: Proceeds from the issuance of common stock, net of commissions
−Removed: Payment of offering costs related to 2018 registration statement and at-the-market-facility
−Removed: Proceeds from 2018 equity offering
−Removed: Payment of offering costs related to 2018 equity offering
−Removed: Proceeds from stock option exercises
−Removed: Net cash provided by financing activities
−Removed: Net increase (decrease) in cash and cash equivalents
−Removed: Cash, cash equivalents and restricted cash at beginning of period
−Removed: Cash, cash equivalents and restricted cash at end of period
−Removed: Supplemental disclosure of non-cash investing and financing activities:
−Removed: Purchases of property and equipment included in accounts payable and accrued expenses
−Removed: The accompanying notes are an integral part of these consolidated financial statements.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Nature of the Business and Basis of Presentation
−Removed: Spero Therapeutics, Inc., together with its consolidated subsidiaries (the “Company” or “Spero”), is a multi-asset, clinical-stage biopharmaceutical company focused on identifying, developing and commercializing treatments in high unmet need areas involving multi-drug resistant (“MDR”) bacterial infections.
−Removed: The Company’s most advanced product candidate, tebipenem HBr, is designed to be the first broad-spectrum oral carbapenem-class antibiotic for use in adults to treat MDR Gram-negative infections.
−Removed: Treatment with effective orally administrable antibiotics may prevent hospitalizations for serious infections and enable earlier, more convenient and cost-effective treatment of patients after hospitalization.
−Removed: The Company is also developing SPR720, a novel oral antibiotic designed for the treatment of non-tuberculous mycobacterial (“NTM”) disease, a rare, orphan disease caused by pulmonary non-tuberculous mycobacterial infections.
−Removed: In addition, the Company also has a platform technology known as its Potentiator Platform that includes an intravenous, or IV, administered product candidate, SPR206, which is being developed to treat MDR Gram-negative infections in the hospital.
−Removed: The Company was formed as Spero Therapeutics, LLC in December 2013 under the laws of the State of Delaware.
−Removed: On June 30, 2017, through a series of transactions, Spero Therapeutics, LLC merged with and into Spero Therapeutics, Inc.
−Removed: (formerly known as Spero OpCo, Inc.), a Delaware corporation.
−Removed: As part of the transactions, holders of preferred units and common units of Spero Therapeutics, LLC exchanged their units for shares of Spero Therapeutics, Inc.
−Removed: on a one-for-one basis.
−Removed: These transactions are collectively referred to as the Reorganization.
−Removed: Upon completion of the Reorganization, the historical consolidated financial statements of Spero Therapeutics, LLC became the historical consolidated financial statements of Spero Therapeutics, Inc.
−Removed: because the Reorganization was accounted for as a reorganization of entities under common control.
−Removed: On December 3, 2018, the Company filed a universal shelf registration statement on Form S-3 (Registration No.
−Removed: 333-228661) with the SEC, which was declared effective on December 11, 2018, and pursuant to which it registered for sale up to $200.0 million of any combination of its common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that we may determine, including up to $50.0 million of our common stock available for issuance pursuant to an at-the-market offering program sales agreement that it entered into with Cantor Fitzgerald & Co., or Cantor.
−Removed: Under the sales agreement, Cantor may sell the shares by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act.
−Removed: The accompanying consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its consolidated subsidiaries.
−Removed: All intercompany accounts and transactions have been eliminated in consolidation.
−Removed: In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40) , the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.
−Removed: Based on the Company’s current operating plan and existing cash, cash equivalents and market securities, the Company has determined that there is substantial doubt regarding its ability to continue as a going concern.
−Removed: The Company will require additional funding to fund the development of its product candidates through regulatory approval and commercialization, and to support its continued operations.
−Removed: The Company will seek additional funding through public or private financings, debt financing, collaboration agreements or government grants.
−Removed: There is no assurance that the Company will be successful in obtaining sufficient funding on acceptable terms, if at all, and it could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could materially adversely affect its business prospects or its ability to continue operations .
−Removed: Since inception, the Company has funded its operations with proceeds from sales of preferred units (including bridge units, which converted into preferred units), payments received in connection with a concluded collaboration agreement and funding from government contracts, and most recently, with proceeds from the Company’s initial public offering (“IPO”) completed in November 2017.
−Removed: The Company has incurred recurring losses since inception, including net losses attributable to Spero Therapeutics, Inc.
−Removed: of $60.9 million and $41.7 million for the years ended December 31, 2019 and 2018, respectively.
−Removed: In addition, as of December 31, 2019, the Company had an accumulated deficit of $199.4 million.
−Removed: The Company expects to continue to generate operating losses for the foreseeable future.
−Removed: The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
−Removed: Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Summary of Significant Accounting Policies
−Removed: Use of Estimates
−Removed: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods.
−Removed: Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual for research and development expenses, the valuation of share-based awards and the valuation of derivative liabilities.
−Removed: The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances.
−Removed: Management evaluates its estimates on an ongoing basis, as there are changes in circumstances, facts and experience.
−Removed: Actual results may differ from those estimates or assumptions.
−Removed: Consolidation
−Removed: The Company consolidates entities in which it has a controlling financial interest.
−Removed: The Company evaluates each of its subsidiaries to determine whether the entity represents a variable interest entity (“VIE”), for which consolidation should be evaluated under the VIE model, or, alternatively, if the entity is a voting interest entity, for which consolidation should be evaluated using the voting interest model.
−Removed: The Company has concluded that none of its subsidiaries is a VIE and has consolidated each subsidiary under the voting interest model because it has majority voting control of each subsidiary.
−Removed: Ownership interests in the Company’s subsidiaries that are held by entities other than the Company are reported as non-controlling interests in the consolidated balance sheets.
−Removed: Losses attributed to non-controlling interests and to the Company are reported separately in the consolidated statements of operations and comprehensive loss.
−Removed: As of December 31, 2018, the Company consolidated its non-controlling interest in Spero Gyrase, Inc.
−Removed: In December 2019, the Company repurchased 100% of the minority investor’s outstanding shares in Spero Gyrase, Inc.
−Removed: for $0.001 per share, and as a result, as of December 31, 2019, the Company no longer reported a non-controlling interest.
−Removed: Concentrations of Credit Risk and of Significant Suppliers
−Removed: Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents.
−Removed: The Company maintains most of its cash and cash equivalents at one accredited financial institution.
−Removed: The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
−Removed: The Company is dependent on third-party manufacturers to supply products for research and development activities in its programs.
−Removed: In particular, the Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for the active pharmaceutical ingredients and formulated drugs related to these programs.
−Removed: These programs could be adversely affected by a significant interruption in the supply of active pharmaceutical ingredients and formulated drugs.
−Removed: Deferred Offering Costs
−Removed: The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.
−Removed: After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction of additional paid-in capital generated as a result of the offering.
−Removed: Should the planned equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations and comprehensive loss.
−Removed: Cash Equivalents
−Removed: The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Marketable Securities
−Removed: Marketable securities consist of investments with original maturities greater than 90 days.
−Removed: The Company considers its investment portfolio to be available-for-sale.
−Removed: Accordingly, these investments are recorded at fair value, which is based on quoted market prices.
−Removed: Investments with maturities beyond one year are generally classified as short-term, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.
−Removed: Unrealized gains and losses are reported as a component of accumulated other comprehensive income (loss) in stockholders’ equity.
−Removed: Realized gains and losses and declines in value judged to be other than temporary are included as a component of other income (expense), net based on the specific identification method.
−Removed: When determining whether a decline in value is other than temporary, the Company considers various factors, including whether the Company has the intent to sell the security, and whether it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis.
−Removed: Property and Equipment
−Removed: Property and equipment are stated at cost less accumulated depreciation and amortization.
−Removed: Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows:
−Removed: Estimated Useful Life
−Removed: Laboratory equipment
−Removed: Computer software and equipment
−Removed: Office furniture and equipment
−Removed: Manufacturing equipment
−Removed: Leasehold improvements
−Removed: Shorter of life of lease or 5 years
−Removed: Costs for capital assets not yet placed into service are capitalized as construction in progress and are depreciated in accordance with the above guidelines once placed into service.
−Removed: 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 loss from operations.
−Removed: Expenditures for repairs and maintenance are charged to expense as incurred.
−Removed: Effective January 1, 2019, the Company adopted ASC Topic 842, Leases (“ASC 842”), using the modified retrospective approach and utilizing the effective date as its date of initial application, for which prior periods are presented in accordance with the previous guidance in ASC 840, Leases (“ASC 840”) .
−Removed: At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement.
−Removed: Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.
−Removed: The Company has elected not to recognize on the balance sheet leases with terms of one year or less.
−Removed: As of December 31, 2019, the Company’s short term leases with terms of one year or less were not material.
−Removed: Options to renew a lease are not included in the Company’s initial lease term assessment unless there is reasonable certainty that the Company will renew.
−Removed: The Company monitors its plans to renew its material leases on a quarterly basis.
−Removed: Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term.
−Removed: Certain adjustments to the right-of-use asset may be required for items such as incentives received.
−Removed: The interest rate implicit in lease contracts is typically not readily determinable.
−Removed: As a result, the Company utilizes its incremental borrowing rate (“IBR”), which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, and in a similar economic environment.
−Removed: Since the Company does not have any debt and has not been rated by any major credit rating agency, the Company’s IBR was estimated by developing a synthetic credit rating for the Company.
−Removed: In transitioning to ASC 842, the Company utilized the remaining lease term of its leases in determining the appropriate incremental borrowing rates.
−Removed: In accordance with ASC 842, components of a lease should be split into three categories:
−Removed: lease components (e.g., land, building, etc.), non-lease components (e.g., common area maintenance, consumables, etc.), and non-components (e.g., property taxes, insurance, etc.).
−Removed: The fixed and in-substance fixed contract consideration (including any consideration related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Although separation of lease and non-lease components is required, certain practical expedients are available.
−Removed: Entities may elect the practical expedient to not separate lease and non-lease components.
−Removed: In making this election, entities would account for each lease component and the related non-lease component together as a single component.
−Removed: For new and amended leases beginning in 2019 and after, the Company has elected to account for the lease and non-lease components together as a single lease component.
−Removed: Other assets consist of long-term prepayments and deposits.
−Removed: Impairment of Long-Lived Assets
−Removed: Long-lived assets consist of property and equipment.
−Removed: 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.
−Removed: Factors that the Company considers 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.
−Removed: If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value.
−Removed: 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.
−Removed: 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.
−Removed: Fair Value Measurements
−Removed: Certain assets and liabilities are carried at fair value under GAAP.
−Removed: 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.
−Removed: Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
−Removed: Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
−Removed: Level 1—Quoted prices in active markets for identical assets or liabilities.
−Removed: 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.
−Removed: 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.
−Removed: The Company’s cash equivalents and derivative liabilities are carried at fair value, determined according to the fair value hierarchy described above (see Note 3).
−Removed: The carrying values of the Company’s accounts payable and accrued expenses approximate their fair values due to the short-term nature of these liabilities.
−Removed: Derivative Liabilities
−Removed: In connection with certain equity financings, licensing transactions and research collaborations, the Company has identified certain embedded and freestanding derivatives, which are recorded as liabilities on the Company’s consolidated balance sheet and are remeasured to fair value at each reporting date until the derivative is settled.
−Removed: Changes in the fair value of the derivative liabilities are recognized as other income (expense) in the consolidated statement of operations and comprehensive loss.
−Removed: Segment Information
−Removed: The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.
−Removed: The Company’s singular focus is on identifying, developing and commercializing novel treatments for MDR bacterial infections.
−Removed: All of the Company’s tangible assets are held in the United States.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Collaboration Agreements
−Removed: For collaboration agreements with a third party, to determine the appropriate statement of operations classification of the recognized funding, the Company first assesses whether the collaboration arrangement is within the scope of the accounting guidance for collaboration arrangements.
−Removed: If it is, the Company evaluates the collaborative arrangement for proper classification in the statement of operations based on the nature of the underlying activity and the Company assesses the payments to and from the collaborative partner.
−Removed: If the payments to and from the collaborative partner are not within the scope of other authoritative accounting guidance, the Company bases the statement of operations classification for the payments received on a reasonable, rational analogy to authoritative accounting guidance, applied in a consistent manner.
−Removed: Conversely, if the collaboration arrangement is not within the scope of accounting guidance for collaboration arrangements, the Company assesses whether the collaboration arrangement represents a vendor/customer relationship.
−Removed: If the collaborative arrangement does not represent a vendor/customer relationship, the Company then classifies the funding payments received in the statement of operations and comprehensive loss as a reduction of the related expense that is incurred.
−Removed: In June 2019, the Company entered into a collaboration agreement with the Bill and Melinda Gates Medical Research Institute (the “Gates MRI”) and concluded that the agreement is within the scope of the accounting guidance for collaboration arrangements (see Note 14).
−Removed: Due to the cost-funded nature of the payments and the Company’s assessment that it does not have a vendor/customer relationship with the Gates MRI, the Company will recognize the funding received under the agreement as a reduction to the research and development expenses incurred, as the related expenses are incurred.
−Removed: Government Tax Incentives
−Removed: For available government tax incentives that the Company may earn without regard to the existence of taxable income and that require the Company to forego tax deductions or the use of future tax credits and net operating loss carryforwards, the Company classifies the funding recognized as a reduction of the related qualifying research and development expenses incurred.
−Removed: Since the fourth quarter of 2016, the Company’s operating subsidiary in Australia has met the eligibility requirements to receive a 43.5% tax incentive for qualifying research and development activities (see Note 15).
−Removed: The Company recognizes these incentives as a reduction of research and development expenses in the consolidated statements of operations and comprehensive loss in the same period that the related qualifying expenses are incurred.
−Removed: Reductions of research and development expense recognized upon incurring qualifying expenses in advance of receipt of tax incentive payments are recorded in the consolidated balance sheet as tax incentive receivables.
−Removed: Research and Development Costs
−Removed: Research and development costs are expensed as incurred.
−Removed: Research and development expenses are comprised of costs incurred in performing research and development activities, including personnel salaries, share-based compensation and benefits, allocated facilities costs, depreciation, manufacturing expenses, costs related to the Company’s government contract and grant arrangements, and external costs of outside vendors engaged to conduct preclinical development activities, clinical trials as well as the cost of licensing technology.
−Removed: Upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred.
−Removed: Advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.
−Removed: The prepaid amounts are expensed as the related goods are delivered or the services are performed.
−Removed: Clinical Trial and other Research Contract Costs and Accruals
−Removed: The Company has entered into various research and development contracts with clinical research organizations and other companies both inside and outside of the United States.
−Removed: These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred.
−Removed: There may be instances in which payments made to these vendors exceed the level of service provided and will result in a prepayment of the expense.
−Removed: The Company records accruals for estimated ongoing research and clinical trial costs based on the services received and efforts expended pursuant to multiple contracts with these vendors.
−Removed: When evaluating the adequacy of the accrued liabilities, the Company analyzes the progress of the studies or trials, including the phase or completion of events, invoices received and contracted costs.
−Removed: Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period.
−Removed: Actual results could differ from the Company’s estimates.
−Removed: The Company’s historical accrual estimates have not been materially different from the actual costs.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.
−Removed: Amounts incurred are classified as general and administrative expenses.
−Removed: Share-Based Compensation
−Removed: The Company measures all share-based awards granted to employees and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model.
−Removed: Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award.
−Removed: The Company has historically issued awards with only service-based vesting conditions.
−Removed: In March 2019, the Company also granted awards with vesting tied to certain performance conditions.
−Removed: The Company records the expense for awards with service-based conditions using the straight-line method over the requisite service period, net of any actual forfeitures.
−Removed: The Company classifies share-based compensation expense in its consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
−Removed: Comprehensive Loss
−Removed: Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with shareholders.
−Removed: For the years ended December 31, 2019 and 2018, these changes related to unrealized gains and losses on the Company’s available-for-sale marketable securities.
−Removed: There were no reclassifications out of comprehensive loss for the year ended December 31, 2018.
−Removed: The Company accounts 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 the Company’s tax returns.
−Removed: Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
−Removed: Changes in deferred tax assets and liabilities are recorded in the provision for income taxes.
−Removed: The Company assesses 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 expense.
−Removed: Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
−Removed: The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized.
−Removed: First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities.
−Removed: If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements.
−Removed: The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement.
−Removed: The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.
−Removed: Recently Issued Accounting Pronouncements
−Removed: In February 2016, the FASB issued ASU No.
−Removed: 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors), and will replace the existing guidance in ASC840, Leases.
−Removed: The FASB subsequently issued amendments to ASU 2016-02, which have the same effective date and transition date of January 1, 2019:
−Removed: 2018-10, Codification Improvements to Topic 842, Leases, which amends certain narrow aspects of the guidance issued in ASU 2016-02;
−Removed: and (ii) ASU 2018-11, Leases (Topic 842):
−Removed: Targeted Improvements, which allows for a transition approach to initially apply ASU 2016-02 at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption as well as an additional practical expedient for lessors to not separate non-lease components from the associated lease component.
−Removed: ASU 2016-02 requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee.
−Removed: This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.
−Removed: A lessee is also required to record a right-of-use, or ROU, asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.
−Removed: Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases under ASC 840.
−Removed: The guidance is effective for public entities for annual reporting periods beginning after December 15, 2018 and for interim periods within those fiscal years, and early adoption is permitted.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The Company elected to adopt ASU 2016-02 effective January 1, 2019 using the modified retrospective approach with no restatement of prior periods.
−Removed: This standard provides a number of optional practical expedients in transition.
−Removed: The Company applied the package of practical expedients to leases that commenced prior to the effective date whereby it elected to not reassess the following:
−Removed: (i) whether any expired or existing contracts contain leases;
−Removed: (ii) the lease classification for any expired or existing leases;
−Removed: and (iii) initial direct costs for any existing leases.
−Removed: The Company elected the short-term lease recognition exemption for all leases that qualified, and a right-of-use asset or lease liability was not recognized for short term leases.
−Removed: The adoption of ASU 2016-02 resulted in the recognition of operating lease liabilities of $5.2 million and right-of-use assets of $6.1 million on the Company’s condensed consolidated balance sheet as of January 1, 2019.
−Removed: These and corresponding liabilities relate to existing facility operating leases and an embedded financing lease for manufacturing equipment.
−Removed: Other than the recognition of these right-of-use assets and liabilities, the adoption of ASU 2016-02 did not have a material impact on the Company’s consolidated statements of operations and comprehensive loss or consolidated statements of cash flows.
−Removed: No cumulative effect adjustment was recognized upon transition.
−Removed: In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I.
−Removed: Accounting for Certain Financial Instruments with Down Round Features II.
−Removed: Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception .
−Removed: Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features.
−Removed: Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments.
−Removed: ASU 2017-11 is required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years.
−Removed: The Company adopted the ASU effective January 1, 2019.
−Removed: The adoption of ASU 2017-11 did not have a material impact on the Company’s consolidated financial statements.
−Removed: In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which sets forth amendments to simplify the accounting for share-based payment awards to nonemployees by aligning the measurement and classification guidance, with certain exceptions, to that for share-based payment awards to employees.
−Removed: The amendments expand the scope of the accounting standard for share-based payment awards to include share-based payment awards granted to non-employees in exchange for goods or services used or consumed in an entity’s own operations and supersedes the guidance related to equity-based payments to non-employees.
−Removed: The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year.
−Removed: The adoption of this standard did not have a material impact to its consolidated statement of operations, as awards to non-employees are not material.
−Removed: Fair Value of Financial Assets and Liabilities
−Removed: The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):
−Removed: Fair Value Measurements at December 31, 2019 Using:
−Removed: Cash equivalents:
−Removed: Money market funds
−Removed: Commercial paper
−Removed: Total cash equivalents
−Removed: Marketable securities:
−Removed: government securities
−Removed: Corporate bonds
−Removed: Commercial paper
−Removed: Total marketable securities
−Removed: Total cash equivalents and marketable securities
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Fair Value Measurements at December 31, 2018 Using:
−Removed: Cash equivalents:
−Removed: Money market funds
−Removed: Commercial paper
−Removed: Total cash equivalents
−Removed: Marketable securities:
−Removed: government securities
−Removed: Corporate bonds
−Removed: Commercial paper
−Removed: Total marketable securities
−Removed: Total cash equivalents and marketable securities
−Removed: Derivative liabilities:
−Removed: Anti-dilution rights
−Removed: The tables above do not include cash of $3.0 million and $5.4 million as of December 31, 2019 and 2018, respectively.
−Removed: During the years ended December 31, 2019 and 2018, there were no transfers between Level 1, Level 2 and Level 3.
−Removed: Marketable Securities
−Removed: The Company’s marketable securities are classified as Level 2 assets under the fair value hierarchy as these assets were primarily determined from independent pricing sources, which generally derive security prices from recently reported trades for identical or similar securities.
−Removed: The following table summarizes the gross unrealized gains and losses of the Company’s marketable securities as of December 31, 2019 (in thousands):
−Removed: December 31, 2019
−Removed: government securities
−Removed: Corporate bonds
−Removed: Commercial paper
−Removed: As of December 31, 2019 and 2018, all of the Company’s marketable securities had remaining contractual maturity dates of one year or less from the consolidated balance sheet date.
−Removed: Anti-Dilution Rights
−Removed: In connection with the issuance of non-controlling interests in certain of the Company’s subsidiaries (see Note 10), specifically Spero Gyrase, Inc., the Company granted anti-dilution rights to the minority investors.
−Removed: The Company classified the anti-dilution rights as a derivative liability on its consolidated balance sheet because they were freestanding instruments that represent a conditional obligation to issue a variable number of shares.
−Removed: The Company remeasured the derivative liability associated with the anti-dilution rights to fair value at each reporting date, and recognized changes in the fair value of the derivative liability as a component of other income (expense) in the consolidated statement of operations and comprehensive loss.
−Removed: The fair value of these derivative liabilities was determined using a discounted cash flow model.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: In March 2016, in connection with the issuance of a non-controlling interest in its subsidiary, Spero Gyrase, Inc.
−Removed: (“Spero Gyrase”), to Biota Pharmaceuticals, Inc.
−Removed: (now Vaxart, Inc.) (“Vaxart”), the Company granted to Vaxart certain anti-dilution rights (see Note 10).
−Removed: The fair value of the derivative liability related to the anti-dilution rights upon issuance in March 2016 was $1.6 million.
−Removed: During 2017, the fair value of the derivative liability decreased by $1.4 million to $0.2 million by June 30, 2017, representing the amounts funded to the entity that could be settled by the issuance of equity.
−Removed: In November 2019, the Company repurchased 100% of the minority investor’s outstanding shares in Spero Gyrase, Inc.
−Removed: at a price per share of $0.001.
−Removed: As a result, as of December 31, 2019, there are no anti-dilution rights outstanding.
−Removed: Property and Equipment, Net
−Removed: Property and equipment, net consisted of the following (in thousands):
−Removed: Computer software and equipment
−Removed: Office furniture and equipment
−Removed: Leasehold improvements
−Removed: Construction-in-progress
−Removed: Manufacturing equipment
−Removed: Accumulated depreciation and amortization
−Removed: Property and equipment additions during the year ended December 31, 2019 primarily related to leasehold improvements previously in construction-in-progress.
−Removed: Property and equipment additions during the year ended December 31, 2018, primarily related to leased manufacturing equipment which was fully paid by the Company, as well as construction-in-progress and leasehold improvements related to the expansion of Company’s leased office space (see Note 5).
−Removed: Depreciation and amortization expense was $0.8 million and $0.4 million for the years ended December 31, 2019 and 2018, respectively.
−Removed: During the year ended December 31, 2019, the Company wrote off $0.2 million of leased manufacturing equipment which the Company determined did not have any further use.
−Removed: During the year ended December 31, 2018, the Company recorded a loss of $0.2 million related to the write-off of laboratory equipment and certain leasehold improvements at its Watertown, Massachusetts laboratory facility.
−Removed: Operating Leases
−Removed: In August 2015, the Company entered into an operating lease agreement with U.S.
−Removed: REIF Central Plaza Massachusetts, LLC (the “Landlord”) with respect to its corporate headquarters located at 675 Massachusetts Avenue, Cambridge, Massachusetts (the “Original Lease”).
−Removed: The term of the Original Lease commenced in January 2016 and was scheduled to expire in December 2020.
−Removed: Under the terms of the Original Lease, the Company provided a security deposit of $0.2 million to the Landlord, which is included in long-term assets in the accompanying condensed consolidated balance sheets.
−Removed: The Original Lease provided for annual rent escalations as well as tenant incentives in the amount of $0.7 million, of which $0.3 million would be reimbursed to the Landlord over the initial term of the Original Lease.
−Removed: In determining its ROU assets as of January 1, 2019, the Company reduced the amount of ROU assets by $0.2 million, which was the remaining balance of lease incentives received from the Landlord as of that date.
−Removed: The lease does not include any restrictions or covenants that had to be accounted for under the lease guidance.
−Removed: On January 17, 2018, the Company entered into an amendment to the Original Lease (the “Amendment”).
−Removed: The Amendment made certain modifications to the Original Lease, including the addition of approximately 7,800 square feet of office space in the same building and an extension of the expiration date of the Original Lease to seven years, or December 2025.
−Removed: The Amendment also provided for $0.4 million from the Landlord for leasehold improvements on the Expansion Premises.
−Removed: In determining its ROU assets as of January 1, 2019, the Company reduced the amount of ROU assets by $0.4 million, which was the remaining balance of lease incentives received from the Landlord as of that date.
−Removed: The lease does not include any restrictions or covenants that had to be accounted for under the lease guidance.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: On December 16, 2019, the Company entered into a second amendment to the Original Lease and the Amendment (the “Second Amendment”).
−Removed: The Second Amendment made certain modifications, including (i) the addition of approximately 7,800 square feet of office space in the same building (the “Expansion Premises”) with a term beginning on June 2020 and expiring on May 2027, and (ii) an extension of the expiration date of the lease through May 2027.
−Removed: Under the Second Amendment, the Company has two consecutive options to extend the Lease Term for an additional period of five years (the “Option Terms”), subject to certain conditions, upon notice to the Landlord.
−Removed: These renewal options were not included in the calculation of the operating lease assets and operating lease liabilities, as the renewal is not reasonably certain.
−Removed: The Second Amendment provides for annual base rent for the Expansion Premises of approximately $0.6 million in the first year of the Lease Term, which increases on an annual basis to approximately $0.7 million in the final year of the Lease Term, and annual base rent during the Option Terms to be calculated based on the Landlord’s good faith determination of 100% of the fair market rate for such Option Terms.
−Removed: The Company is also obligated to pay the Landlord certain costs, taxes and operating expenses, subject to certain exclusions.
−Removed: The Second Amendment also provides for $0.4 million from the Landlord for leasehold improvements on the Expansion Premises.
−Removed: In July 2016, the Company entered into an agreement to lease laboratory space through November 30, 2019 from a sublessor, which required annual lease payments of $0.3 million, subject to certain escalations.
−Removed: For the year ended December 31, 2019, the components of operating lease expense were as follows (in thousands):
−Removed: Operating lease expense
−Removed: Statement of Operations Location
−Removed: Fixed operating lease expense
−Removed: Research and development expense
−Removed: General and administrative expense
−Removed: Variable operating lease expense
−Removed: Research and development expense
−Removed: General and administrative expense
−Removed: Total operating lease expense
−Removed: Supplemental cash flow information related to the Company’s operating leases for the year ended December 31, 2019, was as follows (in thousands):
−Removed: Cash paid for amounts included in the measurement of lease liabilities:
−Removed: Operating cash flows from operating leases
−Removed: Non cash amounts resulting from the measurement of the lease liabilities:
−Removed: Right of use asset and lease obligation recorded upon amendment of lease agreements
−Removed: Embedded Finance Leases
−Removed: As part of our agreement with Meiji Seika Pharma Co.
−Removed: (“Meiji”), the Company paid Meiji approximately $1.6 million during the three months ended December 31, 2018, related to fixed assets which will be used in manufacturing related activities at Meiji.
−Removed: The Company determined this equipment to be an embedded finance lease and has been capitalized as property and equipment in the condensed consolidated balance sheet as of December 31, 2019 and 2018.
−Removed: As this equipment was fully paid in 2018, there is no corresponding lease liability as of December 31, 2019.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: The following table presents the lease balances within the condensed consolidated balance sheet, weighted average remaining lease term, and the weighted average discount rates related to the Company’s operating and finance leases as of December 31, 2019 (in thousands, except for the weighted average remaining lease term, which is in years, and the weighted average discount rate):
−Removed: Lease Assets and Liabilities
−Removed: Classification
−Removed: Operating lease right of use assets
−Removed: Property and equipment, net
−Removed: Total leased assets
−Removed: Operating lease liabilities
−Removed: Non-current operating lease liabilities
−Removed: Total lease liabilities
−Removed: Weighted average remaining lease term
−Removed: Weighted average discount rate
−Removed: The following table presents the maturity of the Company’s operating lease liabilities as of December 31, 2019 (in thousands):
−Removed: Years Ending December 31,
−Removed: Total future minimum lease payments
−Removed: Less imputed interest
−Removed: Total operating lease liabilities
−Removed: The following table summarizes the future minimum payments due for the Company’s operating leases under the prior lease guidance for each of the next five years and total thereafter as of December 31, 2018 (in thousands):
−Removed: Years Ending December 31,
−Removed: Total minimum future lease payments of approximately $4.3 million for a lease that has not commenced as of December 31, 2019 is not included in the table above or in the lease liability in consolidated financial statements, as the Company does not yet have control of the underlying asset.
−Removed: The lease is expected to commence in June 2020 with a lease term of 7 years.
−Removed: Rent expense during the year ended December 31, 2018 was $0.8 million.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Accrued Expenses and Other Current Liabilities
−Removed: Accrued expenses and other current liabilities consisted of the following (in thousands):
−Removed: Accrued external research and development expenses
−Removed: Accrued payroll and related expenses
−Removed: Accrued professional fees
−Removed: Accrued other
−Removed: Convertible Preferred Shares
−Removed: Series A Convertible Preferred Shares
−Removed: The Company’s amended and restated certificate of incorporation authorizes its Board of Directors to issue up to 10,000,000 shares of preferred stock, par value $0.001 per share.
−Removed: As part of the Company’s July 2018 underwritten public offering, 2,220 shares were designated as Series A Convertible Preferred Stock and issued at a price of $12,500 per share.
−Removed: Each share of Series A Convertible Preferred Stock is convertible into 1,000 shares of the Company’s common stock at any time at the option of the holder, provided that the holder will be prohibited from converting the Series A Convertible Preferred Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of the Company’s common stock then issued and outstanding.
−Removed: In the event of the Company’s liquidation, dissolution, or winding up, holders of Series A Convertible Preferred Stock will receive a payment equal to $0.001 per share of Series A Convertible Preferred Stock, plus an additional amount equal to any dividends declared but unpaid on such shares, before any proceeds are distributed to the holders of common stock or any of our securities that by their terms are junior to the Series A Convertible Preferred Stock .
−Removed: The Series A Convertible Preferred Stock has no voting rights, except as required by law and except that the consent of the outstanding Series A Convertible Preferred Stock holders will be required to amend the terms of the Series A Convertible Preferred Stock.
−Removed: The Series A Convertible Preferred Stock does not have any mandatory redemption rights or other redemption rights that would be outside of the Company’s control.
−Removed: As such, the Company has classified the Series A Convertible Preferred Stock within permanent equity in its consolidated balance sheet.
−Removed: Series B Convertible Preferred Shares
−Removed: On November 15, 2018, the Company and Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS, L.P.
−Removed: and MSI BVF SPV LLC (collectively, “BVF”) entered into an Exchange Agreement (the “Exchange Agreement”) pursuant to which BVF agreed to exchange (the “Exchange”) an aggregate of 1,000,000 shares of the Company’s common stock, par value $0.001, owned by BVF for an aggregate of 1,000 shares of the Company’s newly designated Series B Convertible Preferred Stock, par value $0.001 per share.
−Removed: On November 16, 2018, as part of this exchange, 1,000 shares of the Company’s authorized and unissued preferred stock were designated as Series B Convertible Preferred Stock and issued at a price of $7,950 per share.
−Removed: The Series B Preferred Stock has substantially the same terms as the Company’s Series A Convertible Preferred Stock.
−Removed: Each share of Series B Preferred Stock is convertible into 1,000 shares of Common Stock at any time at the option of the holder, provided that the holder will be prohibited from converting the Series B Preferred Stock into shares of Common Stock if, as a result of such conversion, the holder, together with its affiliates, would own more than 9.99% of the total number of shares of Common Stock then issued and outstanding, subject to certain exceptions.
−Removed: In the event of the Company’s liquidation, dissolution, or winding up, holders of Series B Preferred Stock will receive a payment equal to $0.001 per share of Series B Preferred Stock before any proceeds are distributed to the holders of Common Stock and equal to any distributions to the holders of the Series A Convertible Preferred Stock.
−Removed: The Series B Convertible Preferred Stock does not have any mandatory redemption rights or other redemption rights that would be outside of the Company’s control.
−Removed: As such, the Company has classified the Series B Convertible Preferred Stock within permanent equity in its consolidated balance sheet.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: On July 17, 2018, the Company completed an underwritten public offering of its common and preferred stock, which resulted in the sale of 3,780,000 shares of common stock at a price of $12.50 per share, and 2,220 shares of Series A Convertible Preferred Stock at a price of $12,500 per share.
−Removed: Each share of Series A Convertible Preferred Stock sold in the offering is convertible into 1,000 shares of the Company’s common stock.
−Removed: The Company received net proceeds from the offering of approximately $70.5 million after deducting underwriting discounts and commissions but before deducting $1.0 million of offering expenses payable by the Company.
−Removed: On December 3, 2018, the Company filed a universal shelf registration statement on Form S-3 (Registration No.
−Removed: 333-228661) with the SEC, which was declared effective on December 11, 2018, and pursuant to which the Company registered for sale up to $200.0 million of any combination of its common stock, preferred stock, debt securities, warrants, rights and/or units from time to time and at prices and on terms that it may determine, including up to $50.0 million of its common stock available for issuance pursuant to an at-the-market offering program sales agreement that it entered into with Cantor Fitzgerald & Co.
−Removed: Under the sales agreement, Cantor may sell shares of the Company’s common stock by any method permitted by law deemed to be an “at the market” offering as defined in Rule 415 of the Securities Act, subject to the terms of the sales agreement.
−Removed: During the year ended December 31, 2019, the Company sold 475,024 shares of its common stock under the sales agreement at an average price of approximately $12.57 per share for aggregate gross proceeds of approximately $6.0 million and net proceeds of approximately $5.8 million after deducting sales commissions.
−Removed: The Company incurred approximately $0.3 million of costs related to the shelf registration statement and at the market offering.
−Removed: These costs were classified as deferred offering costs on the Company’s balance sheet as of December 31, 2018, and were charged to additional paid-in-capital during the year ended December 31, 2019 upon the issuance of the associated equity.
−Removed: On June 12, 2019, the Company entered into a securities purchase agreement with Novo Holdings A/S (“Novo”) to sell up to an aggregate of $10.0 million of its common stock, $0.001 par value per share, in two closings pursuant to the Company’s effective registration statement on Form S-3 (Registration No.
−Removed: The initial closing occurred on June 14, 2019 and consisted of 465,983 shares of common stock sold at a price of $10.73 per share for gross proceeds of $5.0 million prior to deducting offering expenses.
−Removed: The second closing of approximately $5.0 million occurred on October 18, 2019, pursuant to the terms of the securities purchase agreement.
−Removed: The number of shares sold in the second closing was determined by the volume weighted average trading price (“VWAP”) of the Company’s common stock prior to the date of the second closing, and consisted of 465,116 shares of common stock sold at a price of $10.75 per share for gross proceeds of approximately $5.0 million prior to deducting offering expenses.
−Removed: In June 2019, a holder of the Company’s Series A Convertible Preferred stock elected to convert 500 shares into 500,000 shares of the Company’s common stock, pursuant to such holder’s rights under the certificate of designation for such Series A Convertible Preferred Stock.
−Removed: Share-Based Compensation
−Removed: Incentive Stock Units
−Removed: Prior to the Reorganization, the Company’s operating agreement, as amended and restated, provided for the granting of incentive units to officers, directors, employees, consultants and advisors.
−Removed: Under the terms of the incentive unit grant agreements, such incentive units were subject to a vesting schedule, with 25% of the incentive units vesting following one year of continued employment or service and the balance vesting in equal monthly installments for 36 months beginning on the one-year anniversary of the holder’s employment or service with the Company.
−Removed: Holders of incentive units were entitled to receive distributions in proportion to their ownership percent interest, when and if distributed, that were in excess of the strike price of the award set by the board of directors on the date of grant.
−Removed: The Company determined that the underlying terms of the incentive units and the intended purpose of the awards were more akin to an equity-based compensation award than a performance bonus or profit-sharing arrangement and, therefore, the incentive units were equity-classified awards.
−Removed: The total number of incentive units that could have been issued under the Company’s operating agreement was 573,156 as of December 31, 2016, of which 159,890 units remained available for future issuance as of December 31, 2016.
−Removed: Upon the Reorganization on June 30, 2017 (see Note 1), the Company could no longer issue incentive units.
−Removed: In addition, in June 2017, in connection with the Reorganization, the Company cancelled the then-outstanding 402,857 incentive units.
−Removed: As of December 31, 2017, all of the incentive units were cancelled;
−Removed: however, the Company will continue to recognize compensation costs related to these awards (see below).
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: 2017 Stock Incentive Plan
−Removed: On June 28, 2017, the Company’s stockholders approved the 2017 Stock Incentive Plan (the “2017 Plan”).
−Removed: The 2017 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock grants and stock-based awards.
−Removed: The 2017 Plan is administered by the board of directors, or at the discretion of the board of directors, by a committee of the board.
−Removed: The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or their committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of stock option may not be greater than ten years.
−Removed: The number of shares initially reserved for issuance under the 2017 Plan was 1,785,416 shares of common stock.
−Removed: The shares of common stock underlying any awards that are forfeited, cancelled, repurchased or are otherwise terminated by the Company under the 2017 Plan will be added back to the shares of common stock available for issuance under the 2017 Plan.
−Removed: In July 2017, the Company additionally granted options for the purchase of 1,154,989 shares of common stock at an exercise price of $5.90 per share under the 2017 Plan.
−Removed: The options vest over four years and the fair value of these option grants was $3.96 per share.
−Removed: In July 2017, previous holders of the cancelled incentive units who were still employed by the Company at the time of the Reorganization received stock options under the 2017 Stock Incentive Plan (described below).
−Removed: Such stock options were granted for the same number of shares of common stock as the number of incentive units cancelled, and the stock options were granted on the same vesting terms as the incentive units.
−Removed: All such stock options have an exercise price of $5.90 per share.
−Removed: The Company accounted for the cancellation of the incentive units and the issuance of new awards as a modification of the awards for accounting purposes in the three months ended September 30, 2017.
−Removed: Unrecognized compensation expense related to the original award is being recognized over the remaining service period of the modified award.
−Removed: The incremental fair value of the replacement options, based on the positive difference between the fair value of the modified award and the fair value of the original award immediately before it was modified was not material.
−Removed: On October 18, 2017, the Company’s stockholders approved an amendment to the 2017 Plan, which became effective upon the completion of the Company’s IPO, to increase the total number of shares reserved for issuance under the 2017 Plan from 1,785,416 to 2,696,401.
−Removed: Additionally, the number of shares of common stock that may be issued under the 2017 Plan will automatically increase on each January 1, beginning with the fiscal year ending December 31, 2019 and continuing for each fiscal year until, and including, the fiscal year ending December 31, 2027, equal to the lowest of (i) 607,324 shares of common stock, (ii) 4% of the outstanding shares of common stock on such date and (iii) an amount determined by the Company’s board of directors or compensation committee.
−Removed: As of December 31, 2019, there were 329,457 shares remaining available to be issued under the 2017 Plan.
−Removed: 2019 Equity Incentive Plan
−Removed: On March 11, 2019, the Company adopted the 2019 Inducement Equity Incentive Plan (the “2019 Inducement Plan”) to reserve 331,500 shares of its common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as a material inducement to such individuals’ entry into employment with Spero within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.
−Removed: The terms and conditions of the 2019 Inducement Plan are substantially similar to those of the 2017 Plan.
−Removed: As of December 31, 2019, there were 160,200 shares remaining available to be issued under the 2019 Inducement Plan.
−Removed: As of December 31, 2019, a total of 3,635,225 shares have been authorized and reserved for issuance under all equity plans and 489,657 shares were available for future issuance under such plans.
−Removed: The following table summarizes stock option activity for all of our plans during 2019:
−Removed: of Stock Options
−Removed: Outstanding as of December 31, 2018
−Removed: Forfeited or cancelled
−Removed: Outstanding as of December 31, 2019
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: During 2019, the Company also granted 100,000 options and 50,000 restricted stock units (“RSUs”) containing the same performance-based vesting criteria.
−Removed: The 100,000 options are included in the table above but the 50,000 RSU’s are excluded from the table.
−Removed: These options and RSUs (the “Performance Awards”) are subject to performance-based vesting eligibility and a subsequent partial time-based vesting schedule.
−Removed: Specifically, the Performance Awards are eligible for vesting based on the achievement of performance criteria, each representing a 25% vesting opportunity if achieved within a specified time during the performance period (the “Performance Period”), and relating to (i) the release of tebipenem HBr top-line data;
−Removed: (ii) FDA acceptance of a tebipenem HBr New Drug Application;
−Removed: (iii) non-dilutive financing;
−Removed: and (iv) equity financing.
−Removed: Following the Performance Period, Performance Awards determined to be eligible for vesting as a result of achievement of the performance criteria will vest as follows:
−Removed: (a) 50% of the eligible award will vest immediately, and (b) the remaining eligible award will vest (i) in the case of options, in equal monthly instalments ending two years after the Performance Period expiration, and (ii) in the case of RSUs, on such two year anniversary.
−Removed: No compensation expense was recognized in 2019 associated with performance-based awards as the performance condition is not yet probable of achievement.
−Removed: Recognition of stock-based compensation expense associated with these performance-based stock options and RSUs will commence when the performance condition is considered probable of achievement, using management’s best estimates, which consider the inherent risk and uncertainty regarding the future outcomes of the milestones.
−Removed: Stock Option Valuation
−Removed: The fair value of stock options is estimated using the Black-Scholes option-pricing model.
−Removed: The Company does not have sufficient company-specific historical and implied volatility information and it therefore estimates its expected share volatility based on the historical volatility of a set of publicly traded peer companies.
−Removed: The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded share price.
−Removed: The Company has estimated the expected term of the Company’s stock option awards utilizing the “simplified” method for awards that qualify as “plain-vanilla.” The risk-free interest rate is determined by reference to the U.S.
−Removed: Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.
−Removed: Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
−Removed: The assumptions that the Company used in the Black-Scholes option-pricing model to determine the fair value of stock option awards granted to employees and directors were as follows, presented on a weighted average basis:
−Removed: Year Ended December 31,
−Removed: Risk-free interest rate
−Removed: Expected term (in years)
−Removed: Expected volatility
−Removed: Expected dividend yield
−Removed: The following table summarizes details regarding stock options granted under our equity incentive plans for the year ended December 31, 2019:
−Removed: Exercise Price
−Removed: (in thousands)
−Removed: Outstanding as of December 31, 2018
−Removed: Forfeited or cancelled
−Removed: Outstanding as of December 31, 2019
−Removed: Outstanding as of December 31, 2019 - vested and expected to vest
−Removed: Exercisable at December 31, 2019
−Removed: The weighted average grant-date fair value of stock options granted during the year ended December 31, 2019 was $5.62 per share.
−Removed: The weighted average grant-date fair value of awards granted during the years ended December 31, 2018 was $7.63 per share.
−Removed: The aggregate intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was approximately $0.4 million and $0.3 million, respectively.
−Removed: The Company satisfies stock option exercises with newly issued shares of its common stock.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: As of December 31, 2019, total unrecognized compensation cost related to unvested stock option grants was approximately $7.7 million.
−Removed: This amount is expected to be recognized over a weighted average period of approximately 2.5 years.
−Removed: The Company recorded share-based compensation expense, for both incentive units and stock options in the following expense categories of its consolidated statements of operations and comprehensive loss (in thousands):
−Removed: Year Ended December 31,
−Removed: Research and development expenses
−Removed: General and administrative expenses
−Removed: Non-Controlling Interests
−Removed: In March 2016, the Company entered into an agreement with Aviragen and its affiliates in order to acquire certain intellectual property and know-how related to certain compounds.
−Removed: In connection with the transaction, the Company established Spero Gyrase, a Delaware corporation, and issued to Aviragen 200 common shares of Spero Gyrase with a fair value of $1.1 million, which represented a 20% equity ownership interest in Spero Gyrase.
−Removed: In addition, Spero Gyrase agreed to make future milestone and royalty payments in exchange for the intellectual property.
−Removed: The Company accounted for the acquisition of technology as an asset acquisition because it did not meet the definition of a business.
−Removed: The Company recorded the acquired technology as research and development expense in the consolidated statement of operations and comprehensive loss in the amount of $1.1 million, because the acquired technology had not reached commercial feasibility and had no alternative future use, and recorded a non-controlling interest in Spero Gyrase in a corresponding amount.
−Removed: In November 2019, the Company repurchased 100% of the minority investor’s outstanding shares in Spero Gyrase, Inc.
−Removed: at a price per share of $0.001.
−Removed: As a result, as of December 31, 2019, the Company no longer reports a non-controlling interest.
−Removed: As of December 31, 2018, the Company’s only remaining non-controlling interest related to Spero Gyrase, Inc., which totaled $0.4 million.
−Removed: Prior to the Reorganization (see Note 1), the Company’s former parent company, Spero Therapeutics, LLC, was treated as a partnership for federal income tax purposes and, therefore, its owners, and not itself, were subject to U.S.
−Removed: federal or state income taxation on the income of Spero Therapeutics, LLC.
−Removed: Prior to the Reorganization, all of Spero Therapeutics, LLC’s directly held subsidiaries (including Spero Therapeutics, Inc.) were treated as corporations for U.S.
−Removed: federal income tax purposes and were subject to taxation in the United States or in other countries.
−Removed: Upon the Reorganization, Spero Therapeutics, Inc.
−Removed: became the parent company for Spero Therapeutics, LLC’s former subsidiaries and these entities continue to be subject to taxation in the United States or in other countries.
−Removed: In each reporting period, the Company’s tax provision includes the effects of consolidating the results of operations of its subsidiaries.
−Removed: During the years ended December 31, 2019 and 2018, the Company recorded no income tax benefits for the net operating losses incurred in each year or interim period due to its uncertainty of realizing a benefit from those items.
−Removed: The domestic and foreign components of loss before income taxes were as follows (in thousands):
−Removed: Year Ended December 31,
−Removed: Loss before income taxes
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: A reconciliation of the U.S.
−Removed: federal statutory income tax rate to the Company’s effective income tax rate is as follows:
−Removed: Year Ended December 31,
−Removed: Federal statutory income tax rate
−Removed: Federal and state research and development tax credit
−Removed: State taxes, net of federal benefit
−Removed: Foreign rate differential
−Removed: Nondeductible items
−Removed: Increase in deferred tax asset valuation allowance
−Removed: Effective income tax rate
−Removed: Net deferred tax assets as of December 31, 2019 and 2018 consisted of the following (in thousands):
−Removed: Net operating loss carryforwards
−Removed: Research and development tax credit carryforwards
−Removed: Total deferred tax assets
−Removed: Valuation allowance
−Removed: Net deferred tax assets
−Removed: As of December 31, 2019, the Company had U.S.
−Removed: federal and state net operating loss carryforwards of $156.8 million and $157.8 million, respectively, which may be available to offset future income tax liabilities.
−Removed: The federal NOLs of $73.0 million will expire at various dates from 2033 to 2037 and approximately $83.8 million can be carried forward indefinitely.
−Removed: The state NOLs begin to expire in 2033 and will expire at various dates through 2039.
−Removed: In addition, as of December 31, 2019, the Company had foreign net operating loss carryforwards of $7.7 million, which may be available to offset future income tax liabilities and do not expire.
−Removed: As of December 31, 2019, the Company also had federal and state research and development tax credit carryforwards of $4.1 million and $1.1 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2033 and 2028, respectively.
−Removed: Utilization of the U.S.
−Removed: net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future.
−Removed: These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.
−Removed: In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.
−Removed: The Company has not conducted a 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.
−Removed: If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, 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.
−Removed: Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.
−Removed: Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.
−Removed: The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.
−Removed: Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets.
−Removed: Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2019 and 2018.
−Removed: Management reevaluates the positive and negative evidence at each reporting period.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2019 and 2018 related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards, and were as follows (in thousands):
−Removed: Valuation allowance as of beginning of year
−Removed: Decreases recorded as benefit to income tax provision
−Removed: Increases recorded to income tax provision
−Removed: Valuation allowance as of end of year
−Removed: The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2019 or 2018.
−Removed: The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.
−Removed: As of December 31, 2019 or 2018, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statement of operations and comprehensive loss.
−Removed: The Company has not, as yet, conducted a study of its research and development credit carryforwards.
−Removed: This study may result in an adjustment to the Company’s research and development credit carryforwards;
−Removed: however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position.
−Removed: A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.
−Removed: Prior to the Reorganization, the Company filed separate U.S.
−Removed: income tax returns return for each of its subsidiaries.
−Removed: As a result of the Reorganization, the Company will file U.S.
−Removed: income tax returns as a U.S.
−Removed: consolidated group.
−Removed: In Massachusetts, the Company files income tax returns as a combined group except for its Massachusetts Securities Corporation subsidiary, which is a separate income tax filing.
−Removed: The statute of limitations for assessment by the Internal Revenue Service and Massachusetts tax authorities remains open for all years since 2015.
−Removed: To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state authorities to the extent utilized in a future period.
−Removed: No federal or state tax audits are currently in process.
−Removed: On December 22, 2017, President Trump signed into law the “the Tax Cuts and Jobs Act” (“TCJA”).
−Removed: The TCJA includes a number of changes to existing tax law, including, among other things, a permanent reduction in the federal corporate income tax rate from a top marginal rate of 34% down to a flat rate of 21%, effective as of January 1, 2018, as well as limitation of the deduction for net operating losses to 80% of annual taxable income and elimination of net operating loss carrybacks, in each case, for losses arising in taxable years beginning after December 31, 2017 (though any such net operating losses may be carried forward indefinitely).
−Removed: As a result of the TCJA, the Company was required to revalue deferred tax assets and liabilities existing as of December 31, 2017 from the 34% federal rate in effect through the end of 2017, to the new 21%.
−Removed: This revaluation resulted in a reduction to the Company’s deferred tax asset of $9.4 million.
−Removed: This amount was offset by a corresponding reduction in the valuation allowance.
−Removed: There was no impact to the Company’s consolidated statements of operations and comprehensive loss as a result of the reduction in rates.
−Removed: The other provisions of the TCJA did not have a material impact on the Company’s consolidated financial statements.
−Removed: Commitments and Contingencies
−Removed: License Agreements
−Removed: The Company has entered into license agreements with various parties under which it is obligated to make contingent and non-contingent payments (see Note 14).
−Removed: Operating Leases
−Removed: The Company has entered into an operating lease agreement with U.S.
−Removed: REIF Central Plaza Massachusetts, LLC with respect to its corporate headquarters located at 675 Massachusetts Avenue, Cambridge, Massachusetts (see Note 5).
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Indemnification Agreements
−Removed: In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties.
−Removed: In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers.
−Removed: The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited.
−Removed: To date, the Company has not incurred any material costs as a result of such indemnifications.
−Removed: The Company does not believe that the outcome of any claims under indemnification arrangements will have a material effect on its financial position, results of operations or cash flows, and it has not accrued any liabilities related to such obligations in its consolidated financial statements as of December 31, 2019 or 2018.
−Removed: Legal Proceedings
−Removed: The Company is not currently party to any material legal proceedings.
−Removed: At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies.
−Removed: The Company expenses as incurred the costs related to such legal proceedings.
−Removed: Government Contracts
−Removed: In July 2018, the Company was awarded a contract from BARDA of up to $44.2 million to develop tebipenem HBr for the treatment of complicated urinary tract infections (“cUTIs”) caused by antibiotic resistant Gram-negative bacteria and for assessment against biodefense pathogens.
−Removed: The award committed initial funding of $15.7 million over a three-year base period from July 1, 2018 to June 30, 2021 for cUTI development activities.
−Removed: In May 2019, the contract was modified to include additional funding of $2.5 million for SPR 994, increasing the amount of initial committed funding from $15.7 million to $18.1 million and increasing the overall potential award to $46.8 million.
−Removed: In January 2020, BARDA exercised its first contract option for additional committed funding of $15.9 million, increasing the total committed funding to $34.1 million.
−Removed: The balance of the award is subject to BARDA exercising a second option which would entail funding of $12.7 million and is exercisable by BARDA subject to, among other things, satisfactory progress and results from the biodefense studies described below.
−Removed: As part of an inter-agency collaboration between BARDA and the Defense Threat Reduction Agency (“DTRA”), a series of studies to assess the efficacy of tebipenem HBr in the treatment of infections caused by biodefense threats such as anthrax, plague and melioidosis will be conducted by the U.S.
−Removed: Army Medical Research Institute of Infectious Diseases (“USAMRIID”) under the direction of Spero.
−Removed: Because the FDA requires data from a human pneumonic disease as supportive of use of an antibiotic to treat a biothreat infection, the scope of the BARDA award includes the assessment of tebipenem HBr levels in the lung of healthy volunteers as well as a proof of concept clinical trial in pneumonia patients.
−Removed: During the years ended December 31, 2019 and 2018, the Company recorded $12.1 million and $1.4 million of revenue under this agreement, respectively.
−Removed: Department of Defense
−Removed: On July 1, 2019, the Company received a $5.9 million award from the DoD Congressionally Directed Medical Research Programs (“CDMRP”) Joint Warfighter Medical Research Program.
−Removed: The funding will support the further clinical development of SPR206.
−Removed: The award commits non-dilutive funding of $5.9 million over a four-year period to cover the costs of select Phase 1 pharmacology studies, a 28-day GLP non-human primate toxicology study, and microbiological surveillance studies that would be required for a potential New Drug Application, or NDA, submission with the U.S.
−Removed: Food and Drug Administration for SPR206.
−Removed: During the year ended December 31, 2019, the Company recorded less than $0.1 million in revenue under this agreement.
−Removed: In September 2016, the Company was awarded a cooperative agreement with the DoD to further develop anti-infective agents to combat Gram-negative bacteria.
−Removed: The agreement is structured as a single, two-year $1.5 million award.
−Removed: The Company is eligible for the full funding from the DoD, and there are no options to be exercised at a later date.
−Removed: The DoD funding supports next-generation potentiator discovery and screening of SPR741 partners.
−Removed: The Company recognizes revenue under this agreement as qualifying expenses are incurred.
−Removed: During the years ended December 31, 2019 and 2018, the Company recorded $0.2 million and $0.3 million in revenue under this agreement, respectively.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: In February 2017, the Company was awarded a grant from NIAID to conduct additional preclinical studies of SPR720, the Company’s novel oral bacterial gyrase inhibitor, for the treatment of non-tuberculous mycobacterial infections.
−Removed: The award is structured as a 12-month $0.6 million base period and $0.4 million option period.
−Removed: In February 2018 NIAID exercised the $0.4 million 12-month option period.
−Removed: In January 2019, the period of performance for this award was extended for an additional 12-month period.
−Removed: During the years ended December 31, 2019 and 2018, the Company recorded $0.1 million and $0.5 million of revenue under this agreement, respectively.
−Removed: In June 2016, the Company entered into agreements with Pro Bono Bio PLC (“PBB”), a corporation organized under the laws of England, and certain of its affiliates, including PBB Distributions Limited and Cantab Anti-Infectives Limited (“CAI”), in order to acquire certain intellectual property and government funding arrangements relating to SPR206.
−Removed: Under these agreements, CAI agreed to submit a request to NIAID to assign the then CAI-held NIAID contract to Spero, which was finalized in December 2017.
−Removed: The NIAID contract provides for development funding of up to $6.5 million over a base period and three option periods.
−Removed: As of December 31, 2018, funding for the base period and the first two option periods totaling $5.9 million have been committed.
−Removed: Spero shall pay PBB a percentage of funds received from NIAID up to a maximum of $1.3 million, of which $0.3 million was paid upfront to PBB as part of the agreement.
−Removed: During the years ended December 31, 2019 and 2018, the Company recorded $1.0 million and $1.4 million in revenue under this agreement, respectively.
−Removed: In April 2017, the Company was awarded a grant from CARB-X, a public-private partnership funded by BARDA within the U.S.
−Removed: Department of Health and Human Services to be used to screen, identify and complete Phase 1 trials with at least one partner compound for SPR741.
−Removed: The award committed to funding of $1.5 million over a 12-month period.
−Removed: On March 12, 2018, CARB-X committed an additional $0.4 million related to the first option for a period from December 1, 2017 to March 31, 2018.
−Removed: There will be no additional options exercised under the CARB-X award.
−Removed: The Company recognized zero and $0.5 million of revenue in the years ended December 31, 2019 and 2018, respectively, under this agreement.
−Removed: Collaboration and License Agreements
−Removed: The Company has certain obligations under license agreements with third parties that include annual maintenance fees and payments that are contingent upon achieving various development, regulatory and commercial milestones.
−Removed: Pursuant to these license agreements, the Company is required to make milestone payments if certain development, regulatory and commercial milestones are achieved, and may have certain additional research funding obligations.
−Removed: Also, pursuant to the terms of each of these license agreements, when and if commercial sales of a product commence, the Company will pay royalties to its licensors on net sales of the respective products.
−Removed: Vaxart (formerly Aviragen) Agreement
−Removed: Under the Company’s agreement with Vaxart for certain intellectual property and know-how relating to developing a gyrase inhibitor to develop therapies for Gram-negative infections, the Company was obligated to make milestone payments of up to an aggregate of $12.0 million upon the achievement of specified clinical, regulatory and commercial milestones and to pay royalties of low single-digit percentages based on net sales of products the Company acquired under the agreement.
−Removed: In November 2019, the Company and Vaxart entered into a stock repurchase agreement which terminated all of the Company’s obligations to Vaxart.
−Removed: Cantab License Agreement
−Removed: Under the Cantab Agreements, the Company is obligated to make milestone payments of up to $5.8 million upon the achievement of specified clinical and regulatory milestones and a payment of £5.0 million ($6.6 million and $6.7 million as of December 31, 2019 and 2018, respectively)) upon the achievement of a specified commercial milestone.
−Removed: In addition, the Company has agreed to pay to PBB royalties, on a product-by-product and country-by-country basis, of a low single-digit percentage based on net sales of products licensed under the agreement.
−Removed: During the year ended December 31, 2018, the Company recorded $0.2 million in research and development expense related to the achievement of regulatory milestones for SPR206.
−Removed: The Cantab Agreements continue indefinitely, with royalty payment obligations thereunder continuing on a product-by-product and country-by-country basis until the later of ten years after the first commercial sale of such product in such country or the expiration in such country of the last to expire valid claim of any of the applicable patents.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Vertex License Agreement
−Removed: In May 2016, the Company entered into an agreement with Vertex Pharmaceuticals Incorporated (“Vertex”) whereby Vertex granted the Company certain know-how and a sublicense to research, develop, manufacture and sell products for a proprietary compound, as well as a transfer of materials.
−Removed: In exchange for the know-how, sublicense and materials, Spero paid Vertex an upfront, one-time, nonrefundable, non-creditable fee of $0.5 million, which was recognized as research and development expense.
−Removed: As part of the agreement, the Company is obligated to make future milestone payments of up to $81.1 million upon the achievement of specified clinical, regulatory and commercial milestones and to pay Vertex tiered royalties, on a product-by-product and country-by-country basis, of a mid single-digit to low double-digit percentage based on net sales of products licensed under the agreement.
−Removed: During the year ended December 31, 2018, the Company recorded $0.2 million in research and development expense related to the achievement of regulatory milestones for SPR720.
−Removed: The agreement continues in effect until the expiration of all payment obligations thereunder, with royalty payment obligations continuing on a product-by-product and country-by-country basis until the later of ten years after the first commercial sale of such product in such country or the date of expiration in such country of the last to expire applicable patent.
−Removed: Further, Vertex has the right to terminate the agreement if provided with notification from the Company of intent to cease all development or if no material development or commercialization efforts occur for one year.
−Removed: Meiji License Agreement
−Removed: In June 2017, the Company entered into agreements with Meiji Seika Pharma Co.
−Removed: (“Meiji”), a Japanese corporation, whereby Meiji granted to the Company certain know-how and a license to research, develop, manufacture and sell products for a proprietary compound in the licensed territory.
−Removed: In exchange for the know-how and license, the Company paid Meiji an upfront, one-time, nonrefundable, non-creditable fee of $0.6 million, which was recognized as research and development expense.
−Removed: As part of the agreement, the Company is obligated to make milestone payments of up to $3.0 million upon the achievement of specified clinical and regulatory milestones, to pay royalties, on a product-by-product and country-by-country basis, of a low single-digit percentage based on net sales of products licensed under the agreement and to pay Meiji a low double-digit percentage of any sublicense fees received by the Company up to $7.5 million.
−Removed: In October 2017, the Company paid a $1.0 million milestone payment to Meiji upon the enrollment of the first patient in the Company’s Phase 1 clinical trial of tebipenem HBr.
−Removed: The payment was recorded as research and development expense in the statement of operations and comprehensive loss for the year ended December 31, 2017.
−Removed: During the three months ended December 31, 2018, the Company paid Meiji $1.6 million related to fixed assets which will be used in manufacturing related activities at Meiji.
−Removed: This equipment has been capitalized as property and equipment in the consolidated balance sheet as of December 31, 2018.
−Removed: The agreement continues in effect until the expiration of all payment obligations thereunder (including royalty payments and licensee revenue) on a product-by-product and country-by-country basis, unless earlier terminated by the parties.
−Removed: Pursuant to the terms of the agreement, in addition to each party’s right to terminate the agreement upon the other party’s material breach (if not cured within a specified period after receipt of notice) or insolvency, the Company also has unilateral termination rights (i) in the event that the Company abandons the development and commercialization of tebipenem HBr for efficacy, safety, legal or business factors, and (ii) under certain circumstances arising out of the head license with a global pharmaceutical company.
−Removed: Northern License Agreement
−Removed: In June 2017, in connection with the repurchase of all of the outstanding shares of Spero Potentiator, the Company amended its license agreement with Northern such that the Company agreed to pay Northern up to $7.0 million upon the achievement of specified clinical, regulatory and other milestones, including a total payment of $2.5 million upon the closing of an initial public offering.
−Removed: In addition, under an exchange agreement the Company entered into with Northern, the Company is obligated to make a payment to Northern of $0.1 million upon the closing of an initial public offering.
−Removed: The agreement had a perpetual term and no express termination rights.
−Removed: Upon the closing of the Company’s IPO in November 2017, the Company paid $2.6 million to Northern in connection with both the license and exchange agreements.
−Removed: This payment was recorded as research and development expense in the Company’s statement of operations and comprehensive loss for the year ended December 31, 2017.
−Removed: The Company and Northern terminated the agreement effective January 1, 2020.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Everest Medicines License Agreement
−Removed: On January 4, 2019, the Company, through its wholly owned subsidiary New Pharma License Holdings Limited (“NPLH”), entered into a license agreement (the “Everest License Agreement”), with Everest Medicines II Limited.
−Removed: Under the terms of the Everest License Agreement, the Company granted Everest an exclusive license to develop, manufacture and commercialize SPR206 or products that contain SPR206 (the “Licensed Products”), in Greater China (which includes Mainland China, Hong Kong and Macau), South Korea and certain Southeast Asian countries (the “Territory”).
−Removed: The Company retained development, manufacturing and commercialization rights with respect to SPR206 and Licensed Products in the rest of the world and also retained the right to develop or manufacture SPR206 and Licensed Products in the Territory for use outside the Territory.
−Removed: In addition to the license grant with respect to SPR206, the Company, through its wholly owned subsidiary, Spero Potentiator, Inc., a Delaware corporation, granted Everest a 12-month exclusive option to negotiate with it for an exclusive license to develop, manufacture and commercialize SPR741 in the Territory.
−Removed: Under the terms of the Everest License Agreement, the Company received an upfront payment of $3.0 million, comprised of a $2.0 million payment to license SPR206 and $1.0 million for the exclusive option to negotiate a license to develop SPR741.
−Removed: The Company will receive a milestone payment of $2.0 million upon completion and delivery of the results of a clinical study and future milestones of up to $1.5 million if the Company chooses to complete a future clinical study.
−Removed: The Company may also receive up to an additional $55.0 million in milestone payments upon Everest’s achievement of certain developmental, regulatory and sales milestone events related to SPR206, which achievement cannot be guaranteed.
−Removed: The Company is also entitled to receive high single-digit to low double-digit royalties on net sales, if any, of Licensed Products in the Territory following regulatory approval of SPR206.
−Removed: Everest has the right to sublicense to affiliates and third parties in the Territory.
−Removed: Everest is responsible for all costs related to developing, obtaining regulatory approval of and commercializing SPR206 and Licensed Products in the Territory, and is obligated to use commercially reasonable efforts to develop, manufacture and commercialize Licensed Products, including to achieve certain specified diligence milestones within agreed-upon periods.
−Removed: A joint development committee will be established between the Company and Everest to coordinate and review the development, manufacturing and commercialization plans with respect to Licensed Products in the Territory.
−Removed: Unless earlier terminated due to certain material breaches of the contract, or otherwise, the Everest License Agreement will expire on a jurisdiction-by-jurisdiction and Licensed Product-by-Licensed Product basis until the latest to occur of expiration of the last valid claim under a licensed patent in such jurisdiction, the expiration of regulatory exclusivity in such jurisdiction or ten years after the first commercial sale of such Licensed Product in such jurisdiction.
−Removed: The Everest License Agreement may be terminated in its entirety by Everest upon 90 or 180 days’ prior written notice, depending on the stage of development of the initial Licensed Product.
−Removed: Accounting Analysis and Revenue Recognition
−Removed: The Company determined the Everest License Agreement to be under the scope of ASC 606.
−Removed: Accordingly, in determining the appropriate amount of revenue to be recognized, the Company performed the following steps:
−Removed: (i) identified the promised goods or services in the contract;
−Removed: (ii) determined whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract;
−Removed: (iii) measured the transaction price, including the constraint on variable consideration;
−Removed: (iv) allocated the transaction price to the identified performance obligations in proportion to their SSP;
−Removed: and (v) recognized revenue when each performance obligation was deemed to be satisfied.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Based on that evaluation, the Company identified three performance obligations, as presented below.
−Removed: The transaction price to be allocated to the identified performance obligations was determined to be $5.0 million consisting of:
−Removed: (i) the license upfront fee of $2.0 million, (ii) the $1.0 million exclusive option to negotiate a license to develop SPR741, and (iii) research and development services related to an upcoming milestone of $2.0 million that is deemed to be probable to be achieved.
−Removed: The additional clinical study that is at the Company’s discretion to perform is considered a marketing offering and therefore not included in the assessment at contract inception.
−Removed: The Company determined that the license was distinct from the exclusive option for SPR 741 and the research and development services.
−Removed: The following table shows the performance obligations, along with their SSP and the transaction price allocated to those obligations (in thousands):
−Removed: Performance Obligations
−Removed: Recognition Method
−Removed: License and know-how transfer (1)
−Removed: Fully satisfied;
−Removed: recognized upon delivery of the license
−Removed: Exclusive option on SPR741
−Removed: Recognized in Q4 2019 upon the return of the IP rights to Northern
−Removed: Research and development services (2)
−Removed: Recognized over time as services are delivered through the expected completion date of Q2 2020
−Removed: The standalone selling price for the license and know-how transfer was determined using the residual approach, corroborated by internal cost estimates.
−Removed: The standalone selling price for the research and development services was estimated using management’s best estimate of the cost of obtaining these services at arm’s length from a third-party provider and using internal full time equivalent costs to support the development services.
−Removed: During the year ended December 31, 2019, the Company recognized $4.7 million of revenue related to this agreement.
−Removed: As of December 31, 2019, the aggregate amount of the transaction price allocated to performance obligations that are partially unsatisfied was $0.3 million.
−Removed: The Company has a contract asset of $1.7 million, which is included in prepaid expenses and other current assets in the condensed consolidated balance sheet as of December 31, 2019.
−Removed: In June 2019, the Company entered into a collaboration with Gates MRI to develop SPR720 for the treatment of lung infections caused by Mycobacterium tuberculosis (“Mtb”).
−Removed: In furtherance of the Gates MRI’s charitable purposes, the Company also granted to Gates MRI a no-cost, exclusive license to develop, manufacture and commercialize SPR720 for the treatment of tuberculosis (“TB”) in low- and middle- income countries.
−Removed: The Gates MRI is responsible for formulating and funding its own research plan for the development of SPR720 for TB.
−Removed: As such, Gates MRI will conduct and fund preclinical and clinical studies for the development of SPR720 against TB.
−Removed: In addition, Gates MRI and the Company will jointly design and manage certain collaborative research activities, which the Company will perform and which will be funded by the Gates MRI.
−Removed: Due to the cost-funded nature of the payments and the Company’s assessment that it does not have a vendor/customer relationship with the Gates MRI, the Company will recognize the funding received under the agreement as a reduction to the research and development expenses incurred, as the related expenses are incurred.
−Removed: During the twelve months ended December 31, 2019, the Company recorded $1.7 million as a reduction to research and development expense related to activities funded by Gates MRI.
−Removed: Australia Research and Development Tax Incentive
−Removed: The Australian government has established a research and development tax incentive to encourage industry investment in research and development, which is available to companies incorporated under Australian law that have core research and development activities.
−Removed: In September 2016, the Company established Spero Potentiator Australia Pty Limited to carry out certain research and development activities.
−Removed: As this subsidiary meets the eligibility requirements of the Australian tax law, it is eligible to receive a 43.5% tax incentive for qualified research and development activities.
−Removed: For the years ended December 31, 2019 and 2018, $0.4 million and $1.2 million, respectively, was recorded as a reduction to research and development expenses in the consolidated statements of operations and comprehensive loss associated with this tax incentive, representing 43.5% of the Company’s qualified research and development spending in Australia.
−Removed: The refund is denominated in Australian dollars and, therefore, the receivable is re-measured to U.S.
−Removed: dollars as of each reporting date.
−Removed: As of December 31, 2019 and 2018, the Company’s tax incentive receivables from the Australian government totaled $0.8 million and $1.1 million, respectively.
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: Net Loss per Share
−Removed: Basic and diluted net loss per share attributable to common stockholders of Spero Therapeutics, Inc.
−Removed: was calculated as follows (in thousands, except share and per share amounts):
−Removed: Year Ended December 31,
−Removed: Weighted average common shares outstanding, basic and diluted
−Removed: Net loss per share, basic and diluted
−Removed: Per Note 19 to the Financial Statements, the Company announced a rights offering in February 2020 that settled on March 5, 2020.
−Removed: The rights offering contained a bonus element, whereby the exercise price at issuance was less than the fair value of the stock on the date of settlement.
−Removed: When a bonus element exists, the Company is required to reflect the impact of the bonus element retroactively on basic and diluted EPS for the periods ending December 31, 2019 and 2018.
−Removed: It was determined that the bonus element related to the rights offering in 2020 had no impact on basic or diluted EPS for the periods ending December 31, 2019 and 2018.
−Removed: The Company excluded potentially dilutive securities from the computation of diluted net loss per share as the effect would be to reduce the net loss per share.
−Removed: Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders of Spero Therapeutics, Inc.
−Removed: The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
−Removed: Year Ended December 31,
−Removed: Options to purchase common stock
−Removed: Unvested restricted stock units
−Removed: Series A convertible preferred stock (as converted to common shares)
−Removed: Series B convertible preferred stock (as converted to common shares)
−Removed: Retirement Plan
−Removed: The Company has a defined-contribution plan under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”).
−Removed: The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis.
−Removed: As currently established, the Company is not required to make any contributions to the 401(k) Plan.
−Removed: In 2019, the Company began to make matching contributions to the 401(k) Plan.
−Removed: The Company did not make any matching contributions during the years ended December 31, 2018.
−Removed: Quarterly Financial Data (unaudited)
−Removed: September 30,
−Removed: Grant revenue
−Removed: Collaboration revenue
−Removed: Operating expenses
−Removed: Net loss per share attributable to common shareholders per share, basic and diluted
−Removed: Weighted average shares outstanding, basic and diluted:
−Removed: SPERO THERAPEUTICS, INC.
−Removed: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
−Removed: September 30,
−Removed: Grant revenue
−Removed: Operating expenses
−Removed: Net loss per share attributable to common shareholders per share, basic and diluted
−Removed: Weighted average shares outstanding, basic and diluted:
−Removed: Subsequent Events
−Removed: On February 11, 2020, the Company announced a rights offering pursuant to which it distributed to holders of its common stock and Series A Preferred Stock and Series B Preferred Stock, at no charge, non-transferable subscription rights to purchase shares of Spero common stock and Series C Convertible Preferred Stock (“Series C Preferred Stock”), with an aggregate offering value of $30.0 million.
−Removed: For each share of common stock (including shares of common stock issuable upon conversion of the Company’s outstanding shares of Series A Preferred Stock and Series B Preferred Stock) owned by holders of record as of 5:00 p.m., New York time, on February 10, 2020, such holders received 0.152 rights to purchase shares of Spero common stock (subject to the aggregate offering threshold and certain ownership limitations).
−Removed: Each whole right allowed holders to subscribe for one share of common stock at the subscription price equal to $9.00 per whole share (or an equivalent number of shares of Series C Preferred Stock).
−Removed: The total number of subscription rights issued to each stockholder was rounded down to the nearest whole number.
−Removed: Any participant in the rights offering that, following exercise of such participant’s subscription right, would be or become a holder of greater than 9.99% of the outstanding number of shares of the Company’s common stock following the offering may elect to instead purchase Series C Preferred Stock at a purchase price of $9,000 per share (ratably adjusted for fractional shares), and any such holder so electing would have a right to purchase one one-thousandth of a share of Series C Preferred Stock for each share of common stock it had a right to purchase under the subscription rights.
−Removed: Each share of Series C Preferred Stock is convertible into 1,000 shares of Spero common stock at the election of the holder, subject to beneficial ownership conversion limits applicable to the Series C Preferred Stock.
−Removed: The Series C Preferred Stock generally have no voting rights, except as required by law, and participate pari passu (on an as-converted basis) with any distribution of proceeds to holders of common stock and Series A Preferred Stock and Series B Preferred Stock, in the event of the Company’s liquidation, dissolution or winding up or the payment of a dividend on the common stock.
−Removed: At the closing of the rights offering on March 5, 2020, a total of 1,046,249 shares of the Company’s common stock and 2,287 shares of Series C Preferred Stock were issued for aggregate gross proceeds of $30.0 million.
−Removed: Changes in and Disagreements with Accou ntants on Accounting and Financial Disclosure.
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.