What changed in this filing

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Item 1. Financial Statements

2020-08-06 compared with 2020-05-11 · 208 added, 162 removed, 495 unchanged (43% of the section changed)

6 unchanged sentences

Marketable securities

Accounts receivable (including amounts from related parties of

$ 6,404 and $ 1,050 as of March 31, 2020 and December 31, 2019, respectively)

Investment in equity securities

Accounts receivable (including amounts from related parties of $ 0 and

$ 1,050 as of June 30, 2020 and December 31, 2019, respectively) (1)

Prepaid expenses and other current assets

18 unchanged sentences

Preferred stock, $ 0.001 par value — 10,000,000 shares authorized

as of March 31, 2020 and December 31, 2019;

as of June 30, 2020 and December 31, 2019;

0 shares issued and

outstanding as of March 31, 2020 and December 31, 2019

outstanding as of June 30, 2020 and December 31, 2019

Common stock, $ 0.001 par value — 300,000,000 shares authorized

as of March 31, 2020 and December 31, 2019;

as of June 30, 2020 and December 31, 2019;

35,878,928 and

23,098,969 shares issued and outstanding as of

March 31, 2020 and December 31, 2019, respectively

June 30, 2020 and December 31, 2019, respectively

Additional paid-in-capital

3 unchanged sentences

Total Liabilities and Stockholders’ Equity

Merck was a related party until the closing of the Company’s public offering on May 14, 2020.

Vaxcyte (formerly SutroVax) was a related party until the closing of its initial public offering on June 16, 2020.

See accompanying notes to unaudited interim condensed financial statements.

3 unchanged sentences

Three Months Ended

Six Months Ended

Revenues (including amounts from related

parties of $ 2,813 during the three

months ended March 31, 2020, and

$ 4,916 during the three months

ended March 31, 2019)

parties of $ 0 and $ 2,813 during the three and six

months ended June 30, 2020, respectively, and $ 5,497

and $ 10,413 during the three and six months ended

June 30, 2019, respectively) (1) (2)

Operating expenses

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Interest income

Interest and other income (expense), net

Net loss per share

Weighted-average shares used in computing

net loss per share

Unrealized gain on equity securities

Interest and other expense, net

Net income (loss)

Net income (loss) per share, basic (3)

Net income (loss) per share, diluted (3)

Includes $ 0 and $ 2.8 million, respectively, for the three months and six months ended June 30, 2020 of related party revenue from Merck.

Merck was a related party until the closing of the Company’s public offering on May 14, 2020.

Includes $ 0 and $ 36,000 , respectively, for the three months and six months ended June 30, 2020 of related party revenue from Vaxcyte (formerly SutroVax).

Vaxcyte was a related party until the closing of its initial public offering on June 16, 2020.

See Notes 2 and 10 for an explanation of the calculations of our basic and diluted net income (loss) per share, basic and diluted and the weighted-average number of shares used in the computation of the per share amounts.

See accompanying notes to unaudited interim condensed financial statements.

Sutro Biopharma, Inc.

Condensed Statements of Comprehensive Loss

Condensed Statements of Comprehensive Income (Loss)

(In thousands)

Three Months Ended

Six Months Ended

Net income (loss)

Other comprehensive income:

Unrealized (loss)/gain on available-for-sale securities

Comprehensive loss

Unrealized gain on available-for-sale securities

Comprehensive income (loss)

See accompanying notes to unaudited interim condensed financial statements.

16 unchanged sentences

Balances at March 31, 2020

Exercise of common stock options

Vesting of restricted stock units

Stock-based compensation expense

Issuance of common stock in connection with

public offering, net of issuance costs of $ 6,626

Net unrealized gain on available-for- sale securities

Balances at June 30, 2020

Preferred Stock

11 unchanged sentences

Balances at March 31, 2019

Exercise of common stock options

Stock-based compensation expense

Net unrealized gain on available-for- sale securities

Balances at June 30, 2019

See accompanying notes to unaudited interim condensed financial statements.

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Operating activities

Adjustments to reconcile net loss to net cash (used in) provided by

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in

operating activities:

Depreciation and amortization

Accretion of discount on marketable securities

Amortization of premium (accretion of discount) on marketable securities

Stock-based compensation

Recognition of expense (income) on derivative liability

Unrealized gain on equity securities

Remeasurement of liability awards

Changes in operating assets and liabilities:

11 unchanged sentences

Sales of marketable securities

Purchases of equipment

Net cash provided by (used in) investing activities

Purchases of equipment and leasehold improvements

Net cash used in investing activities

Financing activities

Proceeds from public offering, net of issuance costs

Proceeds from debt refinancing

9 unchanged sentences

Supplemental disclosure of non-cash investing and financing information:

Purchase of property and equipment included in accounts payable

Purchases of equipment included in accounts payable

Embedded interest associated with program fees

Warrants issued to lenders as part of debt discount

Warrants issued to lenders

See accompanying notes to unaudited interim condensed financial statements.

7 unchanged sentences

The Company operates in one business segment, the development of biopharmaceutical products.

May 2020 Public Offering

On May 14, 2020, the Company closed a public offering of 12,650,000 shares of its common stock at a public offering price of $ 7.75 per share, which included the exercise in full of the underwriters’ option to purchase 1,650,000 shares of common stock.

The gross proceeds from this offering were approximately $ 98.0 million, before deducting approximately $ 6.6 million of underwriting discounts and commissions and other offering expenses, resulting in net proceeds of approximately $ 91.4 M to the Company.

Vaxcyte Equity Ownership

In June 2020, Vaxcyte, formerly known as SutroVax, Inc, closed its initial public offering (“IPO”) of its common stock at a price per share of $ 16.00 .

As of June 30, 2020, the Company held 1,634,005 shares of Vaxcyte common stock, which are subject to a lock-up agreement that expires in December 2020 .

The Vaxcyte common stock held by the Company will be measured at fair value at each reporting period based on the closing price of Vaxcyte’s common stock on the last trading day of each reporting period, adjusted for a discount for lack of marketability (DLOM) due to the lock-up agreement, with any unrealized gains and losses recorded in the Company’s statements of operations.

As of June 30, 2020, the estimated fair value of the Vaxcyte common stock held by the Company was $ 49.1 million.

The Company recognized an unrealized gain related to Vaxcyte common stock of $ 48.9 million for the three and six months ended June 30, 2020, of which $ 49.1 million was from the estimated fair value of Vaxcyte common stock, offset by a $ 0.2 million adjustment related to a revaluation of a prior preferred stock warrant converted to common stock.

See Note 2—“Investment in Equity Securities,” Note 3—“Fair Value Disclosures,” Note 4 — “Cash and Marketable Securities”, and Note 7—“Related Party Transactions”.

The Company has incurred significant losses and has negative cash flows from operations.

As of March 31, 2020, the Company had an accumulated deficit of $ 215.3 million.

Management expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities and costs to operate as a public company.

As of March 31, 2020, the Company had unrestricted cash, cash equivalents and marketable securities of $ 129.6 million, which are available to fund future operations.

As of June 30, 2020, the Company had an accumulated deficit of $ 185.5 million.

Management expects to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities and costs to operate as a public company.

As of June 30, 2020, the Company had unrestricted cash, cash equivalents and marketable securities of $ 207.0 million, which are available to fund future operations.

The Company believes that its unrestricted cash, cash equivalents and marketable securities as of June 30, 2020 will be sufficient for the Company to continue for at least one year from the issuance date of its unaudited interim condensed financial statements.

The Company will need to raise additional capital to support the completion of its research and development activities and its operations.

The Company believes that its unrestricted cash, cash equivalents and marketable securities as of March 31, 2020 will be sufficient for the Company to continue for at least one year from the issuance date of its unaudited interim condensed financial statements.

Summary of Significant Accounting Policies

1 unchanged sentence

The accompanying interim condensed financial statements of the Company are unaudited.

These interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

These interim condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of

America ( “ U.S.

GAAP ” ) and the applicable rules and regulations of the Securities and Exchange Commission ( “ SEC ” ) for interim financial information.

6 unchanged sentences

The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances.

The amounts of assets and liabilities reported in the Company’s balance sheets and the amount of expenses and income reported for each of the periods presented are affected by estimates and assumptions, which are used for, but are not limited to, determining research and development periods under multiple element arrangements, stock-based compensation expense, fair value of redeemable convertible preferred stock warrant liabilities (prior to closing of the Company’s IPO), income taxes and certain accrued liabilities.

An estimated DLOM to determine the fair value of the Company’s investment in equity securities and related liabilities was also used due to the existence of a lock-up agreement that expires in December 2020.

The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company’s business, results of operations and financial condition, including revenue, expenses, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international customers and markets.

2 unchanged sentences

The accompanying unaudited interim condensed financial statements have been prepared on the same basis as the audited financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature considered necessary to state fairly the Company's financial position, results of operations, comprehensive income (loss), and cash flows for the interim periods.

The interim results for the three months ended March 3 1 , 20 20 are not necessarily indicative of the results that may be expected for the year ending December 31, 20 20 , or for any other future annual or interim period.

The interim results for the three and six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020, or for any other future annual or interim period.

The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's audited financial statements included in the Annual Report on Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, for the year ended December 31, 2019.

8 unchanged sentences

This resulted in a decrease in the measure of proportional performance for the first target program and an increase in the measure of proportional performance for the second target program.

These adjustments collectively decreased revenues by $ 5.1 million, increased net loss by $ 5.1 million and increased the Company’s basic and diluted net loss per share by $ 0.22 for the quarter ended March 31, 2020.

These adjustments collectively decreased the Company’s revenues by $ 3.6 million, net income by $ 3.6 million and basic and diluted net income per share by $ 0.14 and $ 0.13 , respectively, for the six months ended June 30, 2020.

Adoption of New Accounting Principles

In December 2019, as part of its initiative to reduce complexity in the accounting standards, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

ASU 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes.

The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

The Company early adopted ASU 2019-12 on January 1, 2020, and this adoption had no material impact on the Company’s financial position or results of operations.

In August 2018, the FASB issued ASU 2018-13 (Topic 820), Fair Value Measurement:

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, reducing certain disclosures concerning the fair value hierarchy.

The guidance is effective for the Company in annual periods beginning after December 15, 2019, and interim periods within those annual periods.

The adoption of this guidance does not have a material impact on the Company’s condensed financial statements.

The guidance was effective for the Company effective January 1, 2020 and did not have a material impact on the Company’s financial statements.

Recently Issued Accounting Pronouncements

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Early adoption is permitted.

The Company is currently assessing the impact that the adoption of ASU 2016-13 will have on its condensed financial statements and related disclosures.

In November 2018, the FASB issued ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 (ASU 2018-18).

ASU 2018-18 clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the counterparty is a customer for a distinct good or service.

For units of account that are in the scope of Topic 606, all of the guidance in Topic 606 should be applied, including the guidance on recognition, measurement, presentation and disclosure.

ASU 2018-18 also adds a reference in ASC Topic 808, Collaborative Arrangements (Topic 808) to the unit of account guidance in Topic 606 and requires that it be applied only to assess whether transactions in a collaborative arrangement are in the scope of Topic 606.

ASU 2018-18 will preclude entities from presenting amounts related to transactions with a counterparty in a collaborative arrangement that is not a customer as revenue from contracts with customers.

For public entities, ASU

2018-18 is effective for fiscal years beginning after December 15, 2019 , including all interim periods within those year s .

As a result of the Company having elected the extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act, ASU 2018-18 is effective for the Company for fiscal year s beginning after December 15, 2020, including all interim periods within those years .

Early adoption is permitted.

The Company has not yet determined the effects of this ASU on its condensed financial statements .

The Company is currently assessing the impact that the adoption of ASU 2016-13 will have on its financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02 (Topic 842), Leases (“ASC 842”).

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Under ASU 2018-11, entities have the option of initially applying ASC 842 at the adoption date, rather than at the beginning of the earliest period presented, and recognizing the cumulative effect of applying the new standard as an adjustment to beginning retained earnings in the year of adoption while continuing to present all prior periods under previous lease accounting guidance.

The Company is currently evaluating the impact of adopting this guidance on the Company’s condensed financial statements.

The Company is currently evaluating the impact of adopting this guidance on the Company’s financial statements.

The Company currently expects that its operating lease commitments will be subject to the new standard and recognized as right-of-use assets and operating lease liabilities upon adoption of this standard, which will increase the total assets and total liabilities that it reports relative to such amounts presented prior to adoption.

6 unchanged sentences

statements of cash flows

Investments in Equity Securities

Subsequent to the closing of the Vaxcyte IPO in June 2020 (see Note 1), the fair value of Vaxcyte’s common stock became readily determinable.

As a result, beginning June 2020, the Company accounted for its investment in Vaxcyte’s common stock at an estimated fair value.

At each reporting period, the equity securities will be remeasured to fair value with any unrealized gains or losses being recorded through the statements of operations.

Fair Value Measurements

7 unchanged sentences

The estimated fair value of the Company’s outstanding loan approximates the carrying amount, as the loan bears a floating rate that approximates the market interest rate.

The Company’s investments in equity securities are classified as Level 2 within the fair value hierarchy while subject to a lock-up agreement that expires in December 2020.

As a result of the lock up, and upon the closing of Vaxcyte IPO, the Company has applied an estimated DLOM of 5.4 %, which is a Level 2 input.

Revenue Recognition

26 unchanged sentences

When the Company updates the transaction price for milestone and contingent payments, the Company allocates the changes in the total transaction price to each performance obligation in the agreement on the same basis as the initial allocation.

Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment, which may result in

recognizing revenue for previously satisfied performance obligations in such period.

Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment, which may result in recognizing revenue for previously satisfied performance obligations in such period.

The Company’s collaborators generally pay milestones and contingent payments subsequent to achievement of the triggering event.

7 unchanged sentences

The following table sets forth the fair value of the Company’s financial assets and liabilities measured on a recurring basis by level within the fair value hierarchy:

March 31, 2020

June 30, 2020

(in thousands)

2 unchanged sentences

Corporate debt securities

Equity securities

Asset-backed securities

8 unchanged sentences

Where applicable, the Company uses quoted market prices in active markets for identical assets to determine fair value.

This pricing methodology applies to Level 1 investments, which are composed of money market funds.

This pricing methodology applies to Level 1 investments, which are comprised of money market funds.

If quoted prices in active markets for identical assets are not available, then the Company uses quoted prices for similar assets or inputs other than quoted prices that are observable, either directly or indirectly.

2 unchanged sentences

These assets are valued using market prices when available, adjusting for accretion of the purchase price to face value at maturity.

The Company’s equity securities represent Vaxcyte common stock shares and are classified as Level 2 while subject to certain restrictions on sale.

These assets are valued using market prices with a DLOM being applied, which is a Level 2 input.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

3 unchanged sentences

Cash equivalents and marketable securities consisted of the following:

March 31, 2020

June 30, 2020

(in thousands)

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Total marketable securities

As of March 31, 2020 and December 31, 2019, $ 14.2 million and $ 15.6 million, respectively, of marketable securities had maturities of more than one year and are classified as long-term assets.

There were $ 48.5 million and $ 4.5 million of investments in an unrealized loss position of $ 153,000 and $ 3,000 as of March 31, 2020 and December 31, 2019, respectively.

During the three months ended March 31, 2020 and 2019 the Company did no t record any other-than-temporary impairment charges on its available-for-sale securities.

As of June 30, 2020 and December 31, 2019, $ 5.6 million and $ 15.6 million, respectively, of marketable securities had maturities of more than one year and are classified as long-term assets.

There were $ 25.0 million and $ 4.5 million of investments in an unrealized loss position of $ 4,000 and $ 3,000 as of June 30, 2020 and December 31, 2019, respectively.

During the three and six months ended June 30, 2020 and 2019, the Company did no t record any other-than-temporary impairment charges on its available-for-sale securities.

Based upon the Company’s impairment review, the Company determined that the unrealized losses were not attributed to credit risk but were primarily associated with changes in interest rates.

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Three Months Ended

Six Months Ended

(in thousands)

Bristol Myers Squibb Company ("BMS") (1)

Merck Sharp & Dohme Corporation (“Merck”)—related party

Merck Sharp & Dohme Corporation (“Merck”) (2)

Merck KGaA, Darmstadt, Germany (operating in the United

States and Canada under the name “EMD Serono”)

SutroVax—related party

Total revenue

In January 2019, BMS announced the entry into a definitive agreement to acquire Celgene and the transaction was completed in November 2019.

The following table presents the changes in the Company’s deferred revenue balance from collaboration agreements during the three months ended March 31, 2020:

Three Months Ended

March 31, 2020

Merck was a related party until the closing of the Company’s public offering on May 14, 2020.

Vaxcyte was a related party until the closing of its initial public offering on June 16, 2020.

The following table presents the changes in the Company’s deferred revenue balance from collaboration agreements during the six months ended June 30, 2020:

Six Months Ended

June 30, 2020

(in thousands)

2 unchanged sentences

Recognition of revenue in current period

Deferred revenue—March 31, 2020

Deferred revenue—June 30, 2020

The Company’s balance of deferred revenue contains the transaction price from collaboration agreements allocated to performance obligations which are partially unsatisfied, including the $ 5.0 million received from Merck to extend the research term of the collaboration’s first cytokine-derivative program by one year , which payment was earned in March 2020 and received in April 2020, and a $ 2.3 million upfront fee billed to BMS in consideration for the Company’s performance of certain development and manufacturing services, which amount may be recognized as revenue in future periods, upon completion of the earning process for such collaboration activities.

The Company expects to recognize approximately $ 23.5 million of deferred revenue over the next twelve months .

There have been no material changes to the Company’s collaboration agreements in the three months ended March 31, 2020, except as described below.

There have been no material changes to the Company’s collaboration agreements in the six months ended June 30, 2020, except as described below.

Collaborations with Celgene

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In March 2015, the Company received a $ 15.0 million contingent payment (“March 2015 payment”) from Celgene that provided Celgene a right to access certain of the Company’s technology for use in conjunction with certain Celgene intellectual property.

In June 2016, the Company received a $ 25.0 million milestone (“June 2016 payment”) upon

completion of certain preclinical activities.

In June 2016, the Company received a $ 25.0 million milestone (“June 2016 payment”) upon completion of certain preclinical activities.

Additionally, in June 2016, the Company earned a $ 10.0 million substantive milestone for certain manufacturing accomplishments.

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Revenue related to such performance obligation will be recognized by the Company over the estimated period during which it will perform its JSC services.

The Company determined that the portion of the transaction price to be allocated to the third performance obligation, which provided Celgene with an option to acquire worldwide development and commercialization rights to a

second collaboration program, was $ 12.3 million.

Although Celgene decided not to exercise th is option, the Company still has the continuing performance obligation to provide Celgene access to the Company’s technology.

Although Celgene decided not to exercise this option, the Company still has the continuing performance obligation to provide Celgene access to the Company’s technology.

As such, the Company’s revenue related to such performance obligation will continue to be recognized over the period from August 2017 through September 2020, the estimated term of the use of the technology.

Upon the adoption of ASC 606 on January 1, 2019, the Company recorded a $ 4.5 million adjustment to decrease its deferred revenue for performance obligations that were satisfied in prior periods, with the corresponding adjustment being a reduction to the Company’s accumulated deficit.

For the three months ended March 31, 2020 and 2019, the Company recognized $ 1.0 million and $ 0.9 million, respectively, of revenue associated with the Company’s ongoing performance related to partially unsatisfied performance obligations, and $ 0.1 million and $ 0.2 million, respectively, from research and development services.

As of March 31, 2020 and December 31, 2019, there was $ 2.0 million and $ 3.0 million, respectively, of deferred revenue related to payments received by the Company under the Celgene Agreement.

For the three and six months ended June 30, 2020, the Company recognized $ 1.0 million and $ 2.0 million, respectively, of revenue associated with the Company’s ongoing performance related to partially unsatisfied performance obligations, and $ 0.3 million and $ 0.4 million, respectively, from research and development services.

For the three and six months ended June 30, 2019, the Company recognized $ 1.0 million and $ 1.9 million, respectively, of revenue associated with the Company’s ongoing performance related to partially unsatisfied performance obligations, and $ 0.1 million and $ 0.3 million, respectively, from research and development services.

As of June 30, 2020 and December 31, 2019, there was $ 3.3 million and $ 3.0 million, respectively, of deferred revenue related to payments received by the Company under the Celgene Agreement.

2018 Celgene Master Services Agreement

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Accordingly, the Company will recognize revenue upon the performance of such services.

For the three months ended March 31, 2020 and 2019, the Company earned $ 0.9 million and $ 0.5 million, respectively, under the 2018 Celgene Master Services Agreement.

2018 Merck Agreement – Related Party

For the three and six months ended June 30, 2020, the Company earned $ 0.3 million and $ 1.2 million, respectively, under the 2018 Celgene Master Services Agreement.

For the three and six months ended June 30, 2019, the Company earned $ 0.5 million and $ 1.0 million, respectively, under the 2018 Celgene Master Services Agreement.

2018 Merck Agreement

In July 2018, the Company entered into the 2018 Merck Agreement with Merck to jointly develop up to three research programs focusing on cytokine derivatives for cancer and autoimmune disorders.

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The transaction price of $60.0 million was allocated among the performance obligations using the Company’s best estimate of SSP for each of the associated performance obligations.

Based on its estimated SSP, relative to the estimated total SSP values of all identified performance obligations, the portion of the transaction price allocated to the first performance obligation was $ 7.3 million.

Based on its estimated SSP, relative to the estimated total SSP values of all identified performance obligations, the portion of the transaction price allocated to the first performance

obligation was $ 7.3 million.

It was determined that such performance obligation was satisfied as of the effective date of the 2018 Merck Agreement, and accordingly revenue associated with this performance obligation would, pursuant to ASC 606, have been recorded on the effective date of the Merck Agreement.

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Recognition of the $4.9 million as revenue will begin upon commencement of the third program or upon the determination that the contingent third target program is no longer a performance obligation.

Additionally, under ASC 606, the Company determined there was a financing component associated with the $ 60.0 million upfront payment, and has calculated total interest expense of $ 7.4 million as of March 31, 2020 on the unearned revenue portion beyond one year from the effective date of the agreement, which amount is expected to be recognized as revenue over the estimated service period for the first and second target programs.

Additionally, under ASC 606, the Company determined there was a financing component associated with the $ 60.0 million upfront payment, and has calculated total interest expense of $ 7.4 million as of June 30, 2020 on the unearned revenue portion beyond one year from the effective date of the agreement, which amount is expected to be recognized as revenue over the estimated service period for the first and second target programs.

Upon adoption of ASC 606 on January 1, 2019, the Company recorded a $ 6.3 million adjustment to decrease its deferred revenue for performance obligations that were satisfied in prior periods, with the corresponding adjustment being a reduction to the Company’s accumulated deficit.

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As it pertains to the JSC performance obligation, the incremental transaction price allocation was immaterial.

As a result of the change in transaction price, the Company recorded a $ 2.0 million cumulative catch-up in revenue in the three months ended March 31, 2020.

During the three months ended March 31, 2020 and 2019, the Company recognized revenue of $ 0.9 million and $ 3.0 million, respectively, associated with the Company’s ongoing performance related to the partially unsatisfied performance obligations, $ 0.6 million and $ 0.9 million, respectively, related to the interest component described above, and $ 1.3 million and $ 0.8 million, respectively, for FTE funding provided by Merck.

As of March 31, 2020 and December 31, 2019, there was $ 20.9 million and $ 31.9 million, respectively, of deferred revenue related to the transaction price under the 2018 Merck Agreement.

As of March 31, 2020 and December 31, 2019, the Company had $ 6.4 million and $ 1.0 million, respectively, of receivables from Merck related to the 2018 Merck Agreement, which are included in accounts receivable on the balance sheet.

As a result of the change in transaction price, the Company recorded a $ 2.0 million cumulative catch-up in revenue in the quarter ended March 31, 2020.

During the three and six months ended June 30, 2020, the Company recognized revenue of $ 5.2 million and $ 6.1 million, respectively, associated with the Company’s ongoing performance related to the partially unsatisfied performance obligations, $ 0.5 million and $ 1.1 million, respectively, related to the interest component described above, and $ 1.2 million and $ 2.5 million, respectively, for FTE funding provided by Merck.

During the three and six months ended June 30, 2019, the Company recognized revenue of $ 3.7 million and $ 6.7 million, respectively, associated with the Company’s ongoing performance related to the partially unsatisfied performance obligations, $ 0.8 million and $ 1.7 million, respectively, related to the interest component described above, and $ 0.9 million and $ 1.7 million, respectively, for FTE funding provided by Merck.

As of June 30, 2020 and December 31, 2019, there was $ 30.8 million and $ 31.9 million, respectively, of deferred revenue related to the transaction price under the 2018 Merck Agreement.

The Company is also eligible to receive aggregate milestone payments of up to $ 1.6 billion, assuming the development and sale of all therapeutic candidates and all possible indications identified under the collaboration.

7 unchanged sentences

Upon signing the Collaboration Agreement, the Company received an upfront, nonrefundable, non-creditable payment totaling $ 10.0 million.

Upon signing the MDA Agreement, the Company received an additional upfront, nonrefundable

payment totaling $ 10.0 million and will receive financial support for research and development services to be provided by the Company, based on an agreed-upon level of FTE personnel effort and related reimbursement rate.

Upon signing the MDA Agreement, the Company received an additional upfront, nonrefundable payment totaling $ 10.0 million and will receive financial support for research and development services to be provided by the Company, based on an agreed-upon level of FTE personnel effort and related reimbursement rate.

The Company is eligible to receive up to $ 52.5 million for each product developed under the MDA Agreement, primarily from pre-commercial contingent payments.

7 unchanged sentences

The Company recorded a $ 0.6 million adjustment to increase its deferred revenue for performance obligations that were unsatisfied in prior periods, with the corresponding adjustment being an increase to the Company’s accumulated deficit.

For the three months ended March 31, 2020, the Company earned $ 2.0 million from a supply agreement entered into in Q2 2019.

For the three months ended March 31, 2019, the Company recognized $ 1.3 million of revenue associated with the Company’s ongoing performance related to partially unsatisfied performance obligations.

For the three and six months ended June 30, 2020, the Company earned $ 0.3 million and $ 2.3 million, respectively, from a supply agreement, and $ 0.5 million and $ 0.8 million, respectively, from research and development services.

For the three and six months ended June 30, 2019, the Company earned $ 1.5 million and $ 1.5 million, respectively, from a supply agreement, $ 0.9 million and $ 1.7 million, respectively, from research and development services, and $ 1.0 million and $ 2.3 million, respectively, associated with the Company’s ongoing performance related to partially unsatisfied performance obligations.

Such ongoing performance obligations were fully satisfied in Q3 2019.

For the three months ended March 31, 2020 and 2019, the Company earned $ 0.3 million and $ 0.8 million, respectively, from research and development services.

As of March 31, 2020 and December 31, 2019, there was zero and $ 0.8 million, respectively, of deferred revenue related to payments received by the Company under the MDA Agreement.

SutroVax, Inc.

Supply Agreement – Related Party

In May 2018, the Company entered into a Supply Agreement (the “Supply Agreement”) with SutroVax, Inc., (“SutroVax”), wherein SutroVax engaged the Company to supply extracts and custom reagents, as requested by SutroVax.

As of June 30, 2020 and December 31, 2019, there was zero and $ 0.8 million, respectively, of deferred revenue related to payments received by the Company under the MDA Agreement.

Vaxcyte, Inc.

Supply Agreement

In May 2018, the Company entered into a Supply Agreement (the “Supply Agreement”) with Vaxcyte, wherein Vaxcyte engaged the Company to supply extracts and custom reagents, as requested by Vaxcyte.

The pricing is based on an agreed upon cost plus arrangement.

For the three months ended March 31, 2020 and 2019, the Company recognized revenue of $ 36,000 and $ 0.3 million, respectively, under the Supply Agreement.

As of March 31, 2020 and December 31, 2019, the Company had $ 49,000 and $ 14,000 in accounts receivables, respectively, from SutroVax related to the Supply Agreement, which is included in accounts receivable on the balance sheet.

As the Company has a right to consideration from SutroVax in an amount that corresponds directly with the value of the Company’s supplied extracts and custom reagents, the Company’s sales of extracts and custom reagents in discrete unit form are recognized as revenue at the time when such supplies are shipped to SutroVax, in line with the “right to invoice” practical expedient in ASC 606.

For the three and six months ended June 30, 2020, the Company recognized revenue of $ 0.1 million under the Supply Agreement.

For the three and six months ended June 30, 2019, the Company recognized revenue of zero and $ 0.3 million, respectively, under the Supply Agreement.

As the Company has a right to consideration from Vaxcyte in an amount that corresponds directly with the value of the Company’s supplied extracts and custom reagents, the Company’s sales of extracts and custom reagents in discrete

unit form are recognized as revenue at the time when such supplies are shipped to Vaxcyte , in line with the “right to invoice” practical expedient in ASC 606.

The Company has not received any returns to date and believes that returns of its products will continue to be minimal.

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In consideration for the funding to the Company under the LLS Agreement, the Company may be required in the future to make payments to LLS, contingent upon reaching certain pre-specified late-stage clinical development, regulatory and commercialization milestones and should the Company enter into certain transactions relating to STRO-001 with a third party, which payments in the aggregate could total up to a maximum of $ 19.5 million, assuming receipt by the Company from LLS of the entire $ 6.0 million in clinical development funding for STRO-001.

As of March 31, 2020, no events have occurred that would require such payments to LLS.

The LLS Agreement terminates upon the earlier of (a) fulfillment of all payment obligations by both parties or (b) 12 years after

the effective date.

As of June 30, 2020, no events have occurred that would require such payments to LLS.

The LLS Agreement terminates upon the earlier of (a) fulfillment of all payment obligations by both parties or (b) 12 years after the effective date.

LLS may terminate the LLS Agreement at any time with 60 days’ prior written notice.

Either the Company or LLS has the right to terminate the LLS Agreement based on the other party’s uncured material breach.

The Company concluded that the contingent payments were an embedded derivative and recorded a related liability of approximately $ 0.1 million as a part of other noncurrent liabilities as of both March 31, 2020 and December 31, 2019, with the corresponding amount recorded in the statements of operations as interest and other income (expense), net.

The Company concluded that the contingent payments were an embedded derivative and recorded a related liability of approximately $ 0.1 million as a part of other noncurrent liabilities as of both June 30, 2020 and December 31, 2019, with the corresponding amount recorded in the statements of operations as interest and other expense, net.

The value of the embedded derivative was estimated based on the probability-adjusted and discounted value of future payments.

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The debt discount is being amortized to interest expense over the expected repayment period of the loan using the effective-interest method.

As of March 31, 2020, the Company has classified all the outstanding debt balance of $ 25.0 million as non-current, which reflects the scheduled repayment terms under the Loan and Security Agreement.

As of March 31, 2020 and December 31, 2019, total interest expense accrued was $ 0.2 million and $ 0.4 million, respectively.

During the three months ended March 31, 2020 and 2019, the Company recorded interest expense related to loans outstanding of $ 0.2 million and $ 0.4 million, respectively, with average interest rates of 8.09 % and 8.90 %, respectively, and interest related to the accretion of debt discount of $ 86,000 and $ 42,000 , respectively.

As of June 30, 2020, the Company has classified the outstanding debt balance of $ 25.0 million as non-current, which reflects the scheduled repayment terms under the Loan and Security Agreement.

As of June 30, 2020 and December 31, 2019, accrued interest expense was $ 0.2 million and $ 0.4 million, respectively.

During the three and six months ended June 30, 2020, the Company recorded interest expense related to loans outstanding of $ 0.6 million and $ 1.0 million, respectively, with average interest rates of 8.07 % and 8.08 %, respectively, and interest related to the accretion of debt discount of $ 0.1 million and $ 0.2 million, respectively.

During the three and six months ended June 30, 2019, the Company recorded interest expense related to loans outstanding of $ 0.3 million and $ 0.6 million, respectively, with average interest rates of 8.87 % and 8.88 %, respectively, and interest related to the accretion of debt discount of $ 85,000 and $ 175,000 , respectively.

Related-Party Transactions

Related party transactions with Merck, which owned 11.7 % and 11.8 % of the Company’s outstanding equity interest, as of March 31, 2020 and December 31, 2019, respectively, are described in Note 5.

Investment in SutroVax, Inc.

In December 2013, the Company and Johnson & Johnson Innovation, through the Johnson & Johnson Development Corporation, provided initial co-funding for a new company, SutroVax.

SutroVax leverages the Company’s proprietary integrated cell-free protein synthesis platform, XpressCF®, to develop novel vaccines for a broad range of disease targets.

The Company had $ 49,000 and $ 14,000 in receivables due from SutroVax as of March 31, 2020 and December 31, 2019, respectively, which were included in accounts receivable on the condensed balance sheet.

As of March 30, 2020 and December 31, 2019, the Company held a common stock ownership interest in SutroVax of 4.1 % and 5.6 %, respectively, on a fully-diluted basis, with a carrying value of zero and was accounted for under the cost method.

SutroVax qualifies as a variable interest entity.

However, the Company maintains only shared power to direct the activities that most significantly impact the performance of SutroVax.

Therefore, the Company is not considered the primary beneficiary and consolidation is not required.

See Note 5, SutroVax, Inc.

Supply Agreement for discussion of the supply arrangement entered into with SutroVax in May 2018 and related revenue recognized for the three months ended March 31, 2020 and 2019.

Upon the Company’s public offering on May 14, 2020, Merck’s ownership of the Company’s outstanding equity interest decreased to less than 10 %.

As a result, starting May 14, 2020, the Company ceased to reflect balances and transactions associated with Merck as being with a related party in its financial statements.

Transactions with Merck for the three months and six months ended June 30, 2020 and June 30, 2019 are described in Note 5.

As discussed in Note 1, Vaxcyte closed its IPO of its common stock on June 16, 2020, resulting in the Company’s ownership of Vaxcyte’s outstanding equity interest to less than 4.0 %.

As a result, starting on June 16, 2020, the Company ceased to reflect any balances and transactions associated with Vaxcyte being a related party on its financial statements.

Transactions with Vaxcyte for the three months and six months ended June 30, 2020 and 2019 are described in Note 5.

Stockholders’ Equity

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Common stock options issued and outstanding

Common stock awards issued and outstanding

Restricted common stock units issued and outstanding

Remaining shares reserved for issuance under 2004

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Effective October 30, 2018, the Company had 10,000,000 shares of preferred stock authorized with a par value of $ 0.001 .

No shares of preferred stock were outstanding as of March 31, 2020 and December 31, 2019.

No shares of preferred stock were outstanding as of June 30, 2020 and December 31, 2019.

During the period from 2008 to 2012, the Company issued various warrants for the purchase of redeemable convertible preferred stock in connection with debt financings and the issuance of redeemable convertible preferred stock.

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If there was a subsequent convertible preferred stock or other senior equity securities financing with a per share price less than the Series D-2 redeemable convertible preferred per share price, then the warrant would automatically convert to a warrant to purchase such class of shares, based on the per share price of such equity.

Given that the price per share of the Series E redeemable convertible preferred stock described above was less than the price per share of the Series D-2 redeemable convertible preferred stock, the 2017 Warrant converted into a warrant to purchase a total of 1,682,871 shares of Series E redeemable convertible preferred stock at an exercise price of $ 0.2674 per share.

Given that the price per share of the Series E redeemable convertible preferred stock was less than the price per share of the Series D-2 redeemable convertible preferred stock, the 2017 Warrant converted into a warrant to purchase a total of 1,682,871 shares of Series E redeemable convertible preferred stock at an exercise price of $ 0.2674 per share.

The warrant is exercisable from the original date of issuance and has a 10 -year term.

The Company adjusted the warrant liability for changes in fair value until the completion of its IPO on October 1, 2018, at which time certain convertible preferred stock warrants were converted into warrants for the purchase of common stock and the related convertible preferred stock warrant liability was reclassified to additional paid-in capital and others expired.

On October 1, 2018, 1,232,220 shares of the Series C redeemable convertible preferred warrants were canceled, and the remaining 687,928 shares were converted to 25,454 shares of warrants to purchase common stock on a 1-for-0.0370 basis.

All Series E redeemable convertible preferred warrants were converted to 46,359 shares of warrants to purchase common stock on a 1-for-0.0275 basis.

On October 1, 2018, 1,232,220 shares of the Series C redeemable convertible preferred warrants were canceled, and the remaining 687,928 shares were converted on a 1-for-0.0370 basis to warrants to purchase 25,454 shares of common stock.

All Series E redeemable convertible preferred warrants were converted on a 1-for-0.0275 basis to warrants to purchase 46,359 shares of common stock.

In February 2020, in connection with entering into the Loan and Security Agreement, the Company issued to Oxford and SVB the 2020 Warrants, which are exercisable for 54,171 shares and 27,086 shares, respectively, of the Company’s common stock.

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The terms of the 2004 Plan and applicable award agreements will continue to govern any outstanding awards thereunder.

In addition to the shares of common stock reserved for future issuance under the 2004 Plan that were added to the 2018 Plan upon its effective date, the Company has initially reserved 2,300,000 shares of common stock for issuance under the 2018 Plan.

In addition to the shares of common stock reserved for future issuance under the 2004 Plan that were added to the 2018 Plan upon its effective date, the Company initially reserved 2,300,000 shares of common stock for issuance under the 2018 Plan.

In addition, the number of shares of common stock reserved for issuance under the 2018 Plan will automatically increase on the first day of January for a period of up to ten years , commencing on January 1, 2019, in an amount equal to 5 % of the total number of shares of the Company’s capital stock outstanding on the last day of the preceding year, or a lesser number of shares determined by the Company’s board of directors.

As a result, common stock reserved for issuance under the 2018 Plan was increased by 1,154,948 shares on January 1, 2020.

As of March 31, 2020, the Company had 2,144,785 shares available for grant under the 2018 Plan.

As of June 30, 2020, the Company had 1,970,938 shares available for grant under the 2018 Plan.

The following table summarizes option activity under the Company’s 2004 Plan and 2018 Plan:

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Canceled and forfeited

Stock options outstanding at March 31, 2020

Stock options exercisable at March 31, 2020

Stock options outstanding at June 30, 2020

Stock options exercisable at June 30, 2020

The aggregate intrinsic value was calculated as the difference between the exercise prices of the underlying stock option awards and the estimated fair value of the Company’s common stock on the date of exercise.

For the three months ended March 31, 2020 and 2019, the aggregate intrinsic value of stock options exercised was $ 76,000 and $ 46,000 , respectively, determined at the date of the option exercise.

For the three and six months ended June 30, 2020, the aggregate intrinsic value of stock options exercised was $ 5,000 and $ 81,000 , respectively, determined at the date of the option exercise.

For the three and six months ended June 30, 2019, the aggregate intrinsic value of stock options exercised was $ 9,000 and $ 55,000 , respectively, determined at the date of the option exercise.

Employee Stock Options Valuation

For determining stock-based compensation expense, the fair-value-based measurement of each employee stock option was estimated as of the date of grant using the Black-Scholes option-pricing model with assumptions as follows:

Three Months Ended

Six Months Ended

Expected term (in years)

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Expected dividend

Using the Black-Scholes option-valuation model, the weighted-average estimated grant-date fair value of employee stock options granted during the three months ended March 31, 2020 and 2019 was $ 4.94 and $ 5.86 per share, respectively.

Using the Black-Scholes option-valuation model, the weighted-average estimated grant-date fair value of employee stock options granted during the three and six months ended June 30, 2020 was $ 5.60 and $ 5.03 per share, respectively, and during the three and six months ended June 30, 2019 was $ 6.79 and $ 6.97 per share, respectively.

Restricted Stock Units

During the three months ended March 31, 2020, the Company granted 478,000 shares of restricted common stock, or RSUs, to certain employees.

These RSUs will become fully vested over four years in March 2024 .

A summary of the status and activity of non-vested RSUs at March 31, 2020 is as follows:

During the six months ended June 30, 2020, the Company granted 497,250 shares of restricted common stock units, or RSUs, to certain employees.

These RSUs will become fully vested over four years in May 2024 .

A summary of the status and activity of non-vested RSUs at June 30, 2020 is as follows:

Non-vested December 31, 2019

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Canceled and forfeited

Non-vested March 31, 2020

Non-vested June 30, 2020

2018 Employee Stock Purchase Plan

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The fair value of the ESPP shares is estimated using the Black-Scholes option pricing model.

For the three months ended March 31, 2020, the fair value of ESPP shares was estimated using the following assumptions:

Three Months Ended

March 31, 2020

March 31, 2019

For the six months ended June 30 , 2020, the fair value of ESPP shares was estimated using the following assumptions:

Six Months Ended

Expected term (in years)

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Expected dividend

As of March 31, 2020, 206,404 shares had been purchased and 483,066 shares were available for future issuance under the ESPP.

As of June 30 , 2020, 206,404 shares had been purchased and 483,066 shares were available for future issuance under the ESPP.

Stock-Based Compensation Expense

The Company believes that the fair value of the stock options, RSUs and ESPP shares is more reliably measurable than the fair value of services received.

The Company recorded $ 1.9 million and $ 1.7 million, respectively, of stock-based compensation expense related to the stock options granted under the Company’s Equity Incentive Plans for the three months ended March 31, 2020 and 2019.

The Company recorded $ 0.6 million and $ 0.5 million, respectively, of stock-based compensation expense related to the RSUs for the three months ended March 31, 2020 and 2019.

The Company recorded $ 0.1 million and $ 0.1 million, respectively, of stock-based compensation expense related to the ESPP for the three months ended March 31, 2020 and 2019.

As of March 31, 2020, unrecognized stock-based compensation expense related to the unvested stock options and RSUs granted was $ 21.3 million and $ 6.9 million, respectively.

The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.8 years and 3.0 years, respectively.

As of March 31, 2020, there is $ 0.3 million of unrecognized stock-based compensation expense related to the ESPP.

As of March 31, 2019, unrecognized stock-based compensation expense related to the unvested stock options and RSUs granted was $ 22.5 million and $ 5.5 million, respectively.

The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of 3.4 years and 2.7 years, respectively.

As of March 31, 2019, there is no unrecognized stock-based compensation expense related to the ESPP.

Total stock-based compensation expense recognized was as follows:

Three Months Ended

Six Months Ended

(in thousands)

Research and development

General and administrative

(in thousands)

Research and development expense:

Stock options

Restricted stock units

General and administrative expense:

Stock options

Restricted stock units

As of June 30 , 2020, unrecognized stock-based compensation expense related to the unvested stock options and RSUs granted was $ 20.1 million and $ 6.2 million, respectively.

The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of 2.6 years and 2.8 years, respectively.

As of June 30 , 2020, there is $ 0.1 million of unrecognized stock-based compensation expense related to the ESPP.

As of June 30, 2019, unrecognized stock-based compensation expense related to the unvested stock options and RSUs granted was $ 21.4 million and $ 1.5 million, respectively.

The remaining unrecognized compensation cost is expected to be recognized over a weighted-average period of 3.1 years and 2.4 years, respectively.

As of June 30, 2019, there is no unrecognized stock-based compensation expense related to the ESPP.

Non-Employee Stock-Based Compensation Expense

The fair value of options granted to non-employees was estimated using the Black-Scholes method.

The stock-based compensation expense related to non-employees for the three months ended March 31, 2020 and 2019 was immaterial.

The stock-based compensation expense related to non-employees for the three and six months ended June 30, 2020 and 2019 was immaterial.

Call Option Plan

In February 2017, the Company adopted a 2017 Call Option Plan to grant selected employees, officers, directors and consultants (collectively, the “Participants”) options to purchase shares of the common stock of SutroVax, an unconsolidated investee of the Company.

As of March 31, 2020, the Company has reserved 450,000 shares of SutroVax common stock for issuance under the program, under which call options covering 420,000 and 30,000 shares were granted in February 2017 and August 2019, respectively.

In February 2017, the Company adopted a Call Option Plan to grant selected employees, officers, directors and consultants (collectively, the “Participants”) options to purchase shares of the common stock of Vaxcyte.

As of June 30, 2020, the Company has reserved 266,740 shares of Vaxcyte common stock for issuance under the program, under which call options covering 248,960 and 17,780 shares were granted in February 2017 and August 2019, respectively.

The call options granted in February 2017 vest 25 % on each of January 1, 2017, 2018, 2019, and 2020, and expire one year from the vesting date.

The call options granted in August 2019 vest 25 % on each of January 1, 2019, 2020, 2021, and 2022, and expire one year from the vesting date.

Using the Black-Scholes option-valuation model, the call options are measured at fair value on grant date and at each reporting period prior to their vesting, with cost recognized over the requisite service period as compensation cost.

Any changes in the fair value subsequent to the vesting date are recognized in other income (expense) in the statements of operations.

The call options were measured at fair value on grant date and at each reporting period prior to their vesting, with cost recognized over the requisite service period as compensation cost.

Any changes in the fair value subsequent to the vesting date are recognized in interest and other expense, net in the statements of operations.

Call options covering 248,960 and 17,780 shares have been granted with an exercise price of $ 1.28 per share and $ 2.04 per share, respectively.

As related to the 420,000 call options granted in February 2017, as of March 31, 2020, all 420,000 of such options had vested, of which 315,000 were exercised and 105,000 were outstanding.

As of December 31, 2019, 315,000 of such options had vested and were exercised and the remaining 105,000 were outstanding and unvested.

As related to the 30,000 call options granted in August 2019, as of March 31, 2020, 15,000 of such options had vested, of which 7,500 were exercised and 7,500 remained outstanding, and 15,000 were unvested.

As of December 31, 2019, 7,500 of such options had vested and were exercised and the remaining 22,500 were outstanding and unvested.

The amounts recognized as compensation expense related to the 2017 Call Option Plan for the three months ended March 31, 2020 and 2019 were $ 138,000 and $ 18,000 , respectively.

The amounts recognized as other income (expense) related to the 2017 Call Option Plan for the three months ended March 31, 2020 and 2019 were $ 193,000 and $ 4,000 , respectively.

Net Loss Per Share

A summary of the status of the call options at June 30, 2020 and at December 31, 2019 is as follows:

Options vested and exercised

Options vested and outstanding

Options unvested and outstanding

Total options granted

The amounts recognized as compensation expense related to the Call Option Plan for the three and six months ended June 30, 2020 were $ 64,000 and $ 68,000 , respectively.

The amounts recognized as compensation expense related to the Call Option Plan for the three and six months ended June 30, 2019 were $ 17,000 and $ 35,000 , respectively.

The amounts recognized as other expense related to the remeasurement of the vested call options for the three and six months ended June 30, 2020 were $ 1.8 million and $ 2.0 million, respectively.

The amounts recognized as other expense related to the remeasurement of the vested call options for the three and six months ended June 30, 2019 were $ 3,000 and 7,000 , respectively.

As of June 30, 2020 and December 31, 2019, liability attributable to the Call Option Plan was $ 2.1 million and $ 76,000 , respectively.

Net Income (Loss) Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share.

Three Months Ended

Net loss, basic and diluted

Shares issued in computing net loss per share, basic and

Net loss per share, basic and diluted

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods ended March 31, 2020 and 2019, because including them would have been antidilutive:

As of March 31,

Common stock options and restricted stock awards

issued and outstanding

Six Months Ended

Net income (loss), basic and diluted

Weighted-average shares used to compute basic EPS

Dilutive effect of common stock options

Dilutive effect of restricted stock units

Dilutive effect of warrants to purchase common stock

Weighted-average shares used to compute diluted EPS

Net income (loss) earnings per share:

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods ended June 30, 2019, because including them would have been antidilutive:

As of June 30,

Common stock options issued and outstanding

Restricted stock units issued and outstanding

Warrants to purchase common stock

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

What changed 10-Q

Item 1. Financial Statements