Viridian Therapeutics, Inc.\DE 10-Q

ITEM 1. FINANCIAL STATEMENTS MIRAGEN THERAPEUTICS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share data) (unaudited) June 30, 2020 December 31, 2019 Assets Current assets: Cash and cash equivalents $ 30,582 $ 24,846 Short-term investments — 1,999 Accounts receivable 248 108 Prepaid expenses and other current assets 1,691 2,786 Total current assets 32,521 29,739 Property and equipment, net 379 523 Operating lease right-of-use asset, net 584 — Other assets 1 — Total assets $ 33,485 $ 30,262 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 286 $ 1,096 Accrued liabilities 3,020 5,108 Current portion of notes payable 3,417 3,976 Total current liabilities 6,723 10,180 Notes payable, net of current portion 5,380 4,328 Other liabilities 211 — Total liabilities 12,314 14,508 Commitments and contingencies Stockholders’ equity: Common stock, $ 0.01 par value; 100,000,000 shares authorized; 53,077,348 and 34,861,876 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively 531 349 Additional paid-in capital 203,291 183,574 Accumulated deficit ( 182,651 ) ( 168,169 ) Total stockholders’ equity 21,171 15,754 Total liabilities and stockholders’ equity $ 33,485 $ 30,262 See accompanying notes to these condensed consolidated financial statements. 3 Table of Contents MIRAGEN THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 Revenue: Collaboration revenue $ — $ 2,498 $ 681 $ 2,846 Grant revenue 168 16 315 40 Total revenue 168 2,514 996 2,886 Operating expenses: Research and development 3,836 8,599 9,939 17,350 General and administrative 2,706 2,857 5,429 6,214 Total operating expenses 6,542 11,456 15,368 23,564 Loss from operations ( 6,374 ) ( 8,942 ) ( 14,372 ) ( 20,678 ) Other income (expense): Interest and other income 33 275 128 614 Interest and other expense ( 94 ) ( 229 ) ( 235 ) ( 461 ) Net loss ( 6,435 ) ( 8,896 ) ( 14,479 ) ( 20,525 ) Change in unrealized gain on investments — 9 — 14 Comprehensive loss $ ( 6,435 ) $ ( 8,887 ) $ ( 14,479 ) $ ( 20,511 ) Net loss $ ( 6,435 ) $ ( 8,896 ) $ ( 14,479 ) $ ( 20,525 ) Net loss per share, basic and diluted $ ( 0.12 ) $ ( 0.29 ) $ ( 0.29 ) $ ( 0.66 ) Weighted-average shares used to compute basic and diluted net loss per share 53,077,348 30,983,918 49,276,843 30,935,272 See accompanying notes to these condensed consolidated financial statements. 4 Table of Contents MIRAGEN THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share data) (unaudited) Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2019 34,861,876 $ 349 $ 183,574 $ — $ ( 168,169 ) $ 15,754 Adjustment from adoption of ASC 842 — — — — ( 3 ) ( 3 ) Issuance of common stock and warrants in a public offering, net of issuance costs 15,000,000 150 13,731 — — 13,881 Issuance of common stock pursuant to a 2019 stock purchase agreement, net of issuance costs 2,200,000 22 4,027 — — 4,049 Issuance of common stock under the 2017 ATM, net of issuance costs 975,063 10 660 — — 670 Shares issued for cash upon the exercise of stock options under an equity incentive plan 17,238 — 13 — — 13 Issuance of common stock for cash under employee stock purchase plan 23,171 — 16 — — 16 Share-based compensation expense — — 664 — — 664 Net loss — — — — ( 8,044 ) ( 8,044 ) Balance at March 31, 2020 53,077,348 531 202,685 — ( 176,216 ) 27,000 Issuance costs related to public offering — — ( 17 ) — — ( 17 ) Share-based compensation expense — — 623 — — 623 Net loss — — — — ( 6,435 ) ( 6,435 ) Balance at June 30, 2020 53,077,348 $ 531 $ 203,291 $ — $ ( 182,651 ) $ 21,171 Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Gain (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2018 30,839,463 $ 308 $ 177,335 $ ( 3 ) $ ( 126,296 ) $ 51,344 Issuance of common stock under the 2017 ATM, net of issuance costs 47,589 1 133 — — 134 Issuance of common stock for cash under employee stock purchase plan 34,167 — 84 — — 84 Share-based compensation expense — — 1,018 — — 1,018 Change in unrealized gain on investments — — — 5 — 5 Net loss — — — — ( 11,629 ) ( 11,629 ) Balance at March 31, 2019 30,921,219 309 178,570 2 ( 137,925 ) 40,956 Issuance of common stock under the 2017 ATM, net of issuance costs 96,652 1 277 — — 278 Shares issued for cash upon the exercise of stock options under an equity incentive plan 19,492 — 15 — — 15 Share-based compensation expense — — 1,075 — — 1,075 Change in unrealized gain on investments — — — 9 — 9 Net loss — — — — ( 8,896 ) ( 8,896 ) Balance as of June 30, 2019 31,037,363 $ 310 $ 179,937 $ 11 $ ( 146,821 ) $ 33,437 See accompanying notes to these condensed consolidated financial statements. 5 Table of Contents MIRAGEN THERAPEUTICS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited, in thousands) Six Months Ended June 30, 2020 2019 Cash flows from operating activities: Net loss $ ( 14,479 ) $ ( 20,525 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based compensation expense 1,287 2,093 Amortization of financing issuance costs 281 — Depreciation and amortization 132 144 Other 131 ( 139 ) Changes in operating assets and liabilities: Accounts receivable ( 140 ) ( 301 ) Prepaid expenses and other assets 762 ( 944 ) Accounts payable ( 810 ) 661 Accrued and other liabilities ( 2,412 ) 28 Net cash used in operating activities ( 15,248 ) ( 18,983 ) Cash flows from investing activities: Maturities of short-term investments 2,000 39,000 Proceeds from sale of property and equipment 1 — Purchases of short-term investments — ( 28,726 ) Purchases of property and equipment — ( 69 ) Net cash provided by investing activities 2,001 10,205 Cash flows from financing activities: Proceeds from the sale of common stock and warrants 19,754 426 Payment of issuance costs associated with the sale of common stock ( 1,193 ) ( 13 ) Proceeds from issuance of notes payable 1,726 — Payments of principal on notes payable ( 1,333 ) ( 333 ) Proceeds from stock purchases under employee stock purchase plan 16 84 Proceeds from the exercise of stock options 13 15 Net cash provided by financing activities 18,983 179 Net increase (decrease) in cash and cash equivalents 5,736 ( 8,599 ) Cash and cash equivalents at beginning of period 24,846 32,606 Cash and cash equivalents at end of period $ 30,582 $ 24,007 Supplemental disclosure of cash flow information Cash paid for interest $ 145 $ 277 Supplemental disclosure of non-cash investing and financing activities Amortization of public offering costs $ 30 $ 1 Unpaid common stock issuance costs included in current liabilities $ 19 $ — Change in unrealized gain on investments $ — $ 14 See accompanying notes to these condensed consolidated financial statements. 6 Table of Contents MIRAGEN THERAPEUTICS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. DESCRIPTION OF BUSINESS Miragen Therapeutics, Inc., a Delaware corporation (the “Company” or “miRagen”), is a clinical-stage biopharmaceutical company discovering and developing proprietary RNA-targeted therapies with a specific focus on microRNAs and their role in diseases where there is a high unmet medical need. The Company has three clinical stage product candidates: cobomarsen, remlarsen, and MRG-110. The Company is developing cobomarsen for the treatment of patients with certain cancers that have elevated microRNA-155, including cutaneous T-cell lymphoma and adult T-cell leukemia/lymphoma. Cobomarsen is an inhibitor of microRNA-155, which is found at abnormally high levels in malignant cells of several blood cancers. The Company is also developing remlarsen and MRG-229 for the treatment of patients with pathological fibrosis. Both remlarsen and MRG-229 are replacements for microRNA-29 (“miR-29”), which is found at abnormally low levels in a number of pathological fibrotic conditions, including cutaneous, cardiac, renal, hepatic, pulmonary and ocular fibrosis, as well as in systemic sclerosis. Remlarsen is a product candidate for local administration in cutaneous fibrosis and ocular fibrosis, while MRG-229 is the Company’s lead preclinical state compound for the potential systemic treatment of pulmonary, renal, and hepatic fibrosis. Finally, MRG-110, an inhibitor of microRNA-92, is the Company’s product candidate for the treatment of heart failure, wound healing, and other ischemic disease. The Company believes its experience in microRNA biology and chemistry, drug discovery, bioinformatics, translational medicine, and drug development allows it to identify and develop microRNA-targeted drugs that are designed to regulate gene pathways to return diseased tissues to a healthy state. The Company believes its drug discovery and development strategy will enable it to progress its product candidates from preclinical discovery to confirmation of mechanism of action in humans quickly and efficiently. The elements of this strategy include identification of mechanistic biomarkers, in early-stage clinical trials to assess target engagement in humans, as well as monitoring outcomes in these early-stage clinical trials to help guide later clinical development. Liquidity The Company has funded its operations to date principally through proceeds received from the sale of the Company’s common stock (“Common Stock”) and other equity securities, debt financings, up-front milestones, and reimbursements received under a prior license and collaboration agreement. Since its inception and through June 30, 2020, the Company has generated an accumulated deficit of $ 182.7 million. As of June 30, 2020, the Company had approximately $ 30.6 million in cash and cash equivalents. Based on its current operating plans, management believes that the Company’s cash and cash equivalents will be sufficient to fund the Company’s operations into the third quarter of 2021. In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. This outbreak is causing major disruptions to businesses and markets worldwide as the virus spreads. The Company cannot predict what the long-term effects of this pandemic and the resulting economic disruptions may have on the Company’s liquidity and results of operations. The extent of the effect of the COVID-19 pandemic on the Company’s liquidity and results of operations will depend on a number future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. The COVID-19 pandemic may make it more difficult for the Company to enroll patients in any future clinical trials or cause the Company to further delay enrollment or announcement of results from its ongoing clinical trials. The economic uncertainty surrounding the COVID-19 pandemic may also dramatically reduce the Company’s ability to secure debt or equity financing necessary to support the Company’s operations. The Company is unable to currently estimate the financial effect of the pandemic. If the pandemic continues to be a severe worldwide crisis, it could have a material adverse effect on the Company’s business, results of operations, financial condition, and cash flows. The Company has no products approved for commercial sale, has not generated any revenue from product sales, and cannot guarantee when or if it will generate any revenue from product sales. Since its inception and through June 30, 2020, the Company has generated an accumulated deficit of $ 182.7 million. Substantially all of the Company’s operating losses resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with its operations. The Company expects to incur significant expenses and operating losses for at least the next several years as it continues the clinical development of, and seeks regulatory approval for, its product candidates. It is expected that operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval. 7 Table of Contents The Company will continue to require additional capital beyond its current cash runway guidance of into the third quarter of 2021 to continue its operations. The amount and timing of future funding requirements will depend on many factors, including the pace and results of the Company’s clinical development efforts, equity financings, entering into license and collaboration agreements, and issuing debt or other financing vehicles. The Company’s ability to secure additional capital is dependent upon a number of factors, some of which are outside of the Company’s control, including success in developing its technology and drug product candidates, operational performance, and market conditions, including resulting from the ongoing COVID-19 pandemic. Failure to raise capital as and when needed, on favorable terms or at all, would have a negative impact on the Company’s financial condition and its ability to develop its product candidates. Changing circumstances may cause the Company to consume capital significantly faster or slower than currently anticipated. If the Company is unable to acquire additional capital or resources, it will be required to modify its operational plans. The estimates included herein are based on assumptions that may prove to be wrong, and the Company could exhaust its available financial resources sooner than currently anticipated. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and follow the requirements of the Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair statement of the Company’s financial information. These interim results are not necessarily indicative of the results to be expected for the year ending December 31, 2020, or for any other interim period, or for any other future year. The balance sheet as of December 31, 2019 has been derived from audited consolidated financial statements at that date but does not include all the information required by U.S. GAAP for complete financial statements. All intercompany balances and transactions have been eliminated in consolidation. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2019, filed with the SEC on March 13, 2020. The Company’s management performed an evaluation of its activities through the date of filing of these financial statements and concluded that there are no subsequent events requiring disclosure, other than as disclosed. Going Concern At each reporting period, the Company evaluates whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern. The Company’s evaluation entails, among other things, analyzing the results of the Company’s clinical development efforts, license and collaboration agreements as well as the entity’s current financial condition including conditional and unconditional obligations anticipated within a year, and related liquidity sources at the date the financial statements are issued. This is reflected in the Company’s prospective operating budgets and forecasts and compared to the current cash and cash equivalent balance. Use of Estimates The Company’s condensed consolidated financial statements are prepared in accordance with U.S. GAAP, which requires it to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Although these estimates are based on the Company’s knowledge of current events and actions it may take in the future, actual results may ultimately differ from these estimates and assumptions. 8 Table of Contents Revenue Recognition The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). The Company enters into collaboration agreements and certain other agreements that are within the scope of ASC 606, under which the Company licenses, may license, or grants an option to license rights to certain of the Company’s product candidates and performs research and development services in connection with such agreements. The terms of these agreements typically include payment of one or more of the following: non-refundable, up-front fees; reimbursement of research and development costs; developmental, clinical, regulatory, and commercial sales milestone payments; and royalties on net sales of licensed products. In accordance with ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine the appropriate amount of revenue to be recognized, for agreements within the scope of ASC 606, the Company performs the following five steps: (i) identification of the goods or services within the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct within the terms of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the identified performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company only applies the five-step model to contracts when it is probable that the Company will collect consideration it is entitled to in exchange for the goods or services it transfers to the customer. The promised goods or services in the Company’s agreements typically consist of a license, or option to license, rights to the Company’s intellectual property or research and development services. Performance obligations are promises in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, the Company considers factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own or whether the required expertise is readily available, and whether the goods or services are integral or dependent to other goods or services in the contract. The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each agreement that includes variable consideration, the Company evaluates the amount of potential payment and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected value method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration that is included in the transaction price may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period. The Company’s contracts often include development and regulatory milestone payments that are assessed under the most likely amount method and constrained if it is probable that a significant revenue reversal would occur. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At the end of each reporting period, the Company re-evaluates the probability of achievement of such development and clinical milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect collaboration and other research and development revenue in the period of adjustment. For agreements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of the Company’s collaboration or strategic alliance agreements. The Company allocates the transaction price based on the estimated standalone selling price. The Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. The Company utilizes key assumptions to determine the stand-alone selling price, which may include other 9 Table of Contents comparable transactions, pricing considered in negotiating the transaction, and the estimated costs. Variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts the Company would expect to receive for the satisfaction of each performance obligation. The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services. For performance obligations which consist of licenses and other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. The Company receives payments from its customers based on billing schedules established in each contract. Up-front payments and fees are recorded as deferred revenue upon receipt or when due until the Company performs its obligations under these arrangements. Amounts are recorded as accounts receivable when the Company’s right to consideration is unconditional. Research and Development Research and development costs are expensed as incurred in performing research and development activities. The costs include employee-related expense including salaries, benefits, share-based compensation, restructuring charges, fees for acquiring and maintaining licenses under third-party license agreements, consulting fees, market research, costs of research and development activities conducted by third parties on the Company’s behalf, costs to manufacture or have manufactured clinical trial materials, laboratory supplies, depreciation, and facilities and overhead costs. The Company records research and development expense in the period in which the Company receives or takes ownership of the applicable goods or when the applicable services are performed. In circumstances where amounts have been paid in excess of costs incurred, the Company records a prepaid expense. The Company records up-front and milestone payments to acquire and retain contractual rights to licensed technology as research and development expenses when incurred if there is uncertainty in the Company receiving future economic benefit from the acquired contractual rights. The Company considers future economic benefits from acquired contractual rights to licensed technology to be uncertain until such a drug candidate is approved for sale by the U.S. Food and Drug Administration or when other significant risk factors are abated. Clinical Trial and Preclinical Study Accruals The Company makes estimates of accrued expenses as of each balance sheet date in its condensed consolidated financial statements based on certain facts and circumstances at that time. The Company’s accrued expenses for clinical trials and preclinical studies are based on estimates of costs incurred for services provided by clinical research organizations, manufacturing organizations, and other providers. Payments under the Company’s agreements with external service providers depend on a number of factors, such as site initiation, patient screening, enrollment, delivery of reports, and other events. In accruing for these activities, the Company obtains information from various sources and estimates the level of effort or expense allocated to each period. Adjustments to the Company’s research and development expenses may be necessary in future periods as its estimates change. Restructuring and Other Charges The Company accounts for exit or disposal activities in accordance with FASB ASC Topic 420, Exit or Disposal Cost Obligations ( “ ASC 420 ” ). A business restructuring is defined as an exit or disposal activity that includes, but is not limited to, a program that is planned and controlled by management and materially changes either the scope of a business or the manner in which that business is conducted. Business restructuring charges include (i) one-time termination benefits related to employee separations, (ii) contract termination costs, and (iii) other related costs associated with exit or disposal activities including. In 2020 and 2019, t he Company implemented two phases of a restructuring plan to streamline the organization, reduce costs, and direct resources to advance the Company’s primary operating goals. The Company recognizes and measures a liability for one-time termination benefits, for which no future service is required, once the plan of termination meets all of the following criteria for an established communication date: (i) management commits to a plan of termination, (ii) the plan identifies the number of employees to be terminated and their job classifications or functions, locations and the expected completion date, (iii) the plan establishes the terms of the benefit arrangement, and (iv) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. For one-time termination benefits for 10 Table of Contents which future service is required, a liability is measured at the communication date based on its value as of the termination date and recognized ratably over the future service period. The Company recognizes and measures a liability for other related costs in the period in which the liability is incurred. Share-Based Compensation The Company accounts for share-based compensation expense related to stock options granted to employees and members of its board of directors under its 2008 Equity Incentive Plan (the “2008 Plan”) and under its 2016 Equity Incentive Plan (the “2016 Plan”) by estimating the fair value of each stock option or award on the date of grant using the Black-Scholes option pricing model. The Company recognizes share-based compensation expense on a straight-line basis over the vesting term. Prior to 2019, the Company determined the value of Common Stock options issued to non-employees (other than members of its board of directors) using the Black-Scholes option pricing model and adjusting the value of such awards to current fair value each reporting period until the awards were vested or a performance commitment had otherwise been reached. After adoption of Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock Compensation (Topic 718) , on January 1, 2019, non-employee stock options are valued at the award’s inception using grant-date fair value, in the same manner of stock options granted to employees. Any outstanding and partially vested non-employee stock option shares were remeasured on January 1, 2019. The adoption of this standard had an immaterial impact on the Company’s condensed consolidated financial statements. Cash and Cash Equivalents All highly-liquid investments that have maturities of 90 days or less at the date of purchase are classified as cash equivalents. Cash equivalents are reported at cost, which approximates fair value due to the short maturities of these instruments. Investments The Company has designated its investments as available-for-sale securities and accounts for them at their respective fair values. The securities are classified as short-term or long-term based on the nature of the securities and their availability to meet current operating requirements. Securities that are readily available for use in current operations are classified as short-term available-for-sale securities and are reported as a component of current assets in the accompanying condensed consolidated balance sheets. Securities that are classified as available-for-sale are measured at fair value, including accrued interest, with temporary unrealized gains and losses reported as a component of stockholders’ equity until their disposition. The Company reviews available-for-sale securities at the end of each period to determine whether they remain available-for-sale based on its then current intent. The cost of securities sold is based on the specific identification method. The securities are subject to a periodic impairment review. An impairment charge would occur when a decline in the fair value of the investments below the cost basis is judged to be other-than-temporary. As of June 30, 2020, the Company did not have any balances associated with available-for-sale securities. As of December 31, 2019, the Company’s short-term available-for-sale securities had an amortized cost of $ 2.0 million, fair value of $ 2.0 million, and no associated unrealized gain or loss. The Company had no long-term investments as of June 30, 2020 or December 31, 2019. Fair Value Measurements The following tables present information about the Company’s financial assets and liabilities that have been measured at fair value and indicate the fair value of the hierarchy of the valuation inputs utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. Fair value determined by Level 2 inputs utilize observable inputs other than Level 1 prices, such as quoted prices, for similar assets or liabilities, quoted market prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability . 11 Table of Contents June 30, 2020 December 31, 2019 Level 1 Level 3 Level 1 Level 3 (in thousands) Assets: Money market funds (included in cash and cash equivalents) $ 30,918 $ — $ 25,263 $ — U.S. treasury securities (included in short-term investments) — — 1,999 — Total assets $ 30,918 $ — $ 27,262 $ — Liabilities: Common Stock warrants (included in accrued and other liabilities) $ — $ 100 $ — $ 100 Fair Value of Financial Instruments Certain of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate their fair value due to the short-term nature of their maturities, such as cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses. The carrying amount of the Company’s note payable approximates its fair value (a Level 2 fair value measurement), reflecting interest rates currently available to the Company. The Company accounts for warrants to purchase its stock pursuant to ASC Topic 470, Debt , and ASC Topic 480, Distinguishing Liabilities from Equity , and classifies warrants for Common Stock as liabilities or equity. The warrants classified as liabilities are reported at their estimated fair value and any changes in fair value are reflected in interest and other expense. The warrants classified as equity are reported at their estimated fair value with no subsequent remeasurement. The Company’s outstanding warrants are discussed in more detail in Note 10. Warrants . Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, which include short-term investments that have maturities of less than three months. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts. The Company invests its excess cash primarily in deposits and money market funds held with one financial institution. Property and Equipment The Company carries its property and equipment at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally three to five years . Leasehold improvements are amortized over the shorter of the life of the lease (including any renewal periods that are deemed to be reasonably assured) or the estimated useful life of the assets. Construction in progress is not depreciated until placed in service. Repairs and maintenance costs are expensed as incurred and expenditures for major improvements are capitalized. Operating Lease Right-of-Use Asset The Company determines if an arrangement is, or contains, a lease at contract inception and during modifications or renewal of existing leases. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company’s existing operating lease assets and liabilities were recognized upon the date of transition to ASC 842, on January 1, 2020. Going forward the Company’s operating lease assets and liabilities will be recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. The lease payments used to determine the Company’s operating lease assets may include lease incentives, stated rent increases, and escalation clauses and are recognized in the Company’s operating lease assets in the Company’s condensed consolidated balance sheets. The Company’s operating leases are reflected in operating lease right-of-use asset and operating lease liability within accrued and other liabilities in the Company’s condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease. Refer to Note 8. 12 Table of Contents Commitments and Contingencies - Lease Obligations Payable for additional information related to the Company’s operating leases. Impairment of Long-Lived Assets The Company assesses the carrying amount of its property and equipment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. No impairment charges were recorded during the three and six months ended June 30, 2020 and 2019. Net Loss per Share Basic net loss per share is calculated by dividing the net loss by the weighted average number of shares of Common Stock outstanding during the period without consideration of Common Stock equivalents. Since the Company was in a loss position for all periods presented, diluted net loss per share is the same as basic net loss per share for all periods, as the inclusion of all potential common shares outstanding is antidilutive. Comprehensive Loss Comprehensive loss is comprised of net loss and adjustments for the change in unrealized gains and losses on investments. Unrealized accumulated comprehensive gains or losses are reflected as a separate component in the condensed consolidated statements of stockholders’ equity. The Company had no realized or unrealized gains or losses during the three and six months ended June 30, 2020. The Company had unrealized gains of $ 9 thousand and $ 14 thousand during the three and six months ended June 30, 2019, respectively, and no realized gains or losses during the same corresponding periods. Income Taxes The Company accounts for income taxes by using an asset and liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is recorded to the extent it is more likely than not that a deferred tax asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. The Company’s significant deferred tax assets are for net operating loss carryforwards, tax credits, accruals and reserves, and capitalized start-up costs. The Company has provided a valuation allowance for its entire net deferred tax assets since inception as, due to its history of operating losses, the Company has concluded that it is more likely than not that its deferred tax assets will not be realized. The Company has no unrecognized tax benefits. The Company classifies interest and penalties arising from the underpayment of income taxes in the condensed consolidated statements of operations and comprehensive loss as general and administrative expenses. No such expenses have been recognized during the three and six months ended June 30, 2020 and 2019. The legislation informally titled the Tax Cuts and Jobs Act of 2017 (“Tax Act”) was signed into law on December 22, 2017. The Tax Act includes significant changes to the U.S. corporate income tax system, including: (i) a federal corporate rate reduction from 35% to 21%; (ii) limitations on the deductibility of interest expense and executive compensation; (iii) elimination of the corporate alternative minimum tax (“AMT”) and a change in how existing AMT credits can be realized; (iv) change in the rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; (v) reduction of the orphan drug credit from 50% to 25%; and (vi) transition of U.S. international taxation from a worldwide tax system to a territorial tax system. Under the Tax Act as modified by the recently enacted Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), federal NOLs incurred in tax years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five tax years preceding such loss, and NOLs arising in tax years beginning after December 31, 2020 may not be carried back. Because we have had no taxable income in prior years, we do not anticipate carrying back any of our net operating losses. Moreover, federal net operating losses generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs may be limited to 80% of current year taxable income for tax years beginning after January 1, 2021. Neither the Tax Act nor the CARES Act have had a material impact on the Company’s condensed consolidated financial statements primarily due to the valuation allowance recorded against its net deferred tax assets. 13 Table of Contents Segment Information The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein. All equipment, leasehold improvements, and other fixed assets are physically located within the United States and all agreements with the Company’s partners are denominated in U.S. dollars, except where noted. Recent Accounting Pronouncements – Adopted Leases In February 2016, the FASB issued ASU No. 2016-02 , Leases (Topic 842), and subsequent amendments to the initial guidance: ASU No. 2017-13, ASU No. 2018-10, and ASU No. 2018-11 (collectively, “ASC 842”). The Company adopted ASC 842 on January 1, 2020, using the optional transition method permitted by ASU No. 2018-11 in which an immaterial prior-period cumulative adjustment was recorded at January 1, 2020. The Company’s building operating lease commitments are subject to the new standard, which resulted in an operating lease liability of $ 0.4 million and a right-of-use asset of $ 0.4 million, with no material effect on the Company’s condensed consolidated statements of operations and comprehensive loss. 3. RESTRUCTURING PLAN In August 2019, the Company began implementing two phases of a cost restructuring plan to streamline the organization, reduce costs, and direct resources to advance cobomarsen and miR-29 mimics, including remlarsen and MRG-229, while reducing investments in new discovery research. The restructuring plan identified approximately 44 positions for elimination, or approximately 50 % of the Company’s then total workforce. The eliminated positions were primarily related to research and development and corresponding project, general, and administrative support. From the inception of the restructuring plan in August 2019 and through June 30, 2020, the Company had recorded cumulative restructuring expense of $ 2.3 million and expects to incur approximately $ 0.1 million in additional restructuring expense, primarily related to retention, during the remainder of 2020. The Company recorded $ 0.1 million and $ 0.2 million in restructuring charges during the three and six months ended June 30, 2020, respectively, which was primarily related to retention transactions and recorded in research and development expenses on the condensed consolidated statements of operations and comprehensive loss. No restructuring charges were recorded during the three and six months ended June 30, 2019. The following table summarizes the Company’s accrued restructuring liability balance and associated activity (in thousands): December 31, 2019 Additions Adjustments Cash Payments June 30, 2020 Retention $ 935 $ 192 $ 37 $ ( 972 ) $ 192 Severance and severance-related expenses 580 16 2 ( 413 ) 185 Total restructuring liability $ 1,515 $ 208 $ 39 $ ( 1,385 ) $ 377 4. STRATEGIC ALLIANCE AND COLLABORATION WITH SERVIER In 2011, the Company entered into a license and collaboration agreement (the “Servier Collaboration Agreement”) with Les Laboratoires Servier and Institut de Recherches Servier (collectively, “Servier”) for the research, development, and commercialization of RNA-targeting therapeutics in cardiovascular disease. Under the Servier Collaboration Agreement, the Company granted Servier an exclusive license to research, develop, manufacture, and commercialize RNA-targeting therapeutics for certain microRNA targets in the cardiovascular field. In August 2019, Servier terminated the Servier Collaboration Agreement effective in February 2020. During the period from receipt of notice from Servier in August 2019 and termination in February 2020, the Company completed certain activities under its development plan with Servier, which included finalizing the two Phase 1 clinical trials of MRG-110. The activities for which the Company is eligible for reimbursement under the Servier Collaboration Agreement are considered a research and development performance obligation and revenue are recognized in accordance with ASC 606 through the termination date. 14 Table of Contents Accounting Analysis The Company evaluated the Servier Collaboration Agreement in accordance with the provisions in ASC 606. The Company has accounted for amendments to the Servier Collaboration Agreement as modifications to the original contract and not as separate contracts. The Company combined the amendments with the original agreement due to the modifications not resulting in increased promised goods or services that were distinct, and the price of the contract did not increase by an amount of consideration that reflects the Company’s standalone selling prices. The Company identified several performance obligations under the Servier Collaboration Agreement and allocated the transaction price to these performance obligations based on the relative estimated standalone selling prices of each performance obligation or, in the case of certain variable consideration, to one or more performance obligations. Research and development activities are priced generally at the standard labor rates for the respective activity and transfer of materials are generally priced at cost. Milestone payments are individually negotiated and because of the unique nature of each milestone, there are no comparable transactions to compare to; therefore, the negotiated amounts of the milestones in the agreement are the standalone selling price. Amounts incurred and billable, but not billed to Servier, for research and related intellectual property activities totaled $ 0.3 million as of December 31, 2019, which are included in prepaid expenses and other current assets in the Company’s condensed consolidated balance sheets. No amounts were incurred and billable, but not billed to Servier, for research and related intellectual property activities as of June 30, 2020. As of June 30, 2020 and December 31, 2019, the Company had no accounts receivable balances outstanding for Servier research and related intellectual property activities. Collaboration revenue under the Servier Collaboration Agreement consisted of the following: Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 (in thousands) Research and development reimbursable costs $ — $ 2,498 $ 681 $ 2,846 5. PROPERTY AND EQUIPMENT Property and equipment, net, consisted of the following: June 30, 2020 December 31, 2019 (in thousands) Lab equipment $ 2,507 $ 2,507 Leasehold improvements 741 741 Computer hardware and software 400 457 Furniture and fixtures 166 166 Property and equipment, gross 3,814 3,871 Less: accumulated depreciation and amortization ( 3,435 ) ( 3,348 ) Property and equipment, net $ 379 $ 523 During the three and six months ended June 30, 2020 and 2019, depreciation and amortization expense was $ 0.1 million. Depreciation and amortization expense is recorded primarily in research and development expense on the condensed consolidated statements of operations and comprehensive loss. 15 Table of Contents 6. ACCRUED LIABILITIES Accrued liabilities consisted of the following: June 30, 2020 December 31, 2019 (in thousands) Accrued outsourced clinical trials and preclinical studies $ 959 $ 2,259 Accrued employee compensation and related taxes 686 508 Operating lease liability 397 — Restructuring liability 377 1,515 Accrued legal fees and expenses 311 284 Accrued other professional service fees 105 254 Value of liability-classified stock purchase warrants 100 100 Deferred and accrued facility lease obligations — 66 Other accrued liabilities 85 122 Total accrued liabilities $ 3,020 $ 5,108 7. NOTES PAYABLE 2017 Silicon Valley Bank Loan Agreement In November 2017, the Company entered into a loan and security agreement with Silicon Valley Bank (the “2017 SVB Loan Agreement”). Upon entry into the 2017 SVB Loan Agreement, the Company borrowed $ 10.0 million with a 30 -month payment period following an 18 -month interest-only payment period ending in November 2021. In April 2020, the 2017 Loan Agreement was amended to extend the interest-only payment period and extended maturity date by an additional six months. Amounts outstanding bear interest at the prime rate ( 3.25 % and 4.75 % at June 30, 2020 and December 31, 2019, respectively), with a final payment fee equal to $ 0.9 million due upon maturity. As of June 30, 2020, no additional amounts are available under the 2017 SVB Loan Agreement. The Company may elect to prepay prior to maturity all or any portion of the outstanding principal amounts under the 2017 SVB Loan Agreement, subject to a prepayment charge, depending on the date of prepayment or upon the occurrence of an event of default in which the Company’s obligations to repay the outstanding principal is accelerated. The Company’s obligations under the 2017 SVB Loan Agreement are secured by a first-priority security interest, right, and title in all business assets, excluding the Company’s intellectual property, which is subject to a negative pledge. The 2017 SVB Loan Agreement includes customary representations, warranties, and covenants (affirmative and negative), including restrictive covenants that limit the Company’s ability to: encumber or dispose of the collateral securing the loan; change the business of the Company; transfer a material portion of the Company’s assets; acquire other businesses; and merge or consolidate with or into any other business organization; incur additional indebtedness; declare or pay any cash dividend or make a cash distribution on any class of stock or other equity interest; enter into specified material transactions with Company affiliates; make non-ordinary course payments or enter into any amendment regarding subordinated debt of the Company; or become an “investment company” under the Investment Company Act of 1940, as amended; in each case subject to specified exceptions. The 2017 SVB Loan Agreement also includes standard events of default, including payment defaults; breaches of covenants following any applicable cure period; material breaches of representations or warranties; the occurrence of a material adverse change (as defined in the 2017 SVB Loan Agreement); events relating to bankruptcy or insolvency; breaches of material third-party agreements; the occurrence of an unsatisfied material judgment against the Company; and specified governmental actions against the Company, including specified actions by the U.S. Food and Drug Administration. Upon the occurrence of an event of default, Silicon Valley Bank may declare all outstanding obligations immediately due and payable, including a prepayment charge, and take such other actions as are set forth in the 2017 SVB Loan Agreement. Upon the occurrence of an event of default, at the Silicon Valley Bank’s discretion, interest on the 2017 SVB Loan Agreement will accrue at 5.0 % above the rate that is otherwise applicable thereto until the earlier of the repayment of the Company’s obligations under the 2017 SVB Loan Agreement or the cure of such event of default. 16 Table of Contents Amounts outstanding under the 2017 SVB Loan Agreement were as follows (in thousands): June 30, 2020 December 31, 2019 Principal amount outstanding $ 6,333 $ 7,667 Unamortized debt discount ( 21 ) ( 32 ) Accreted final payment fee 759 669 Total note payable 7,071 8,304 Less: current maturities ( 2,650 ) ( 3,976 ) Note payable, net of current portion $ 4,421 $ 4,328 Future annual minimum principal payments under the 2017 SVB Loan Agreement as of June 30, 2020 for the respective calendar years are as follows (in thousands): 2020 $ 666 2021 4,000 2022 1,667 Total $ 6,333 Paycheck Protection Program Loan In April 2020, the Company received approximately $ 1.7 million in loan funding under the Paycheck Protection Program (the “PPP”), established pursuant to the CARES Act and administered by the U.S. Small Business Administration (the “SBA”). The unsecured loan (the “PPP Loan”) is evidenced by a promissory note of the Company (the “Note”) in the principal amount of approximately $ 1.7 million, to Silicon Valley Bank (the “Bank”), the lender. Under the terms of the Note and the PPP Loan, interest accrues on the outstanding principal at the rate of 1.0 % per annum. The term of the Note is two years , though it may be payable sooner in connection with an event of default under the Note. To the extent the loan amount is not forgiven under the PPP, the Company is obligated to make equal monthly payments of principal and interest. Payments of principal and interest on the PPP Loan will be deferred for the first six months of the PPP Loan term. The CARES Act and the PPP provide a mechanism for forgiveness of up to the full amount borrowed. Under the PPP, the Company may apply for and be granted forgiveness for all or part of the PPP Loan. The amount of loan proceeds eligible for forgiveness is based on a formula that takes into account a number of factors, including the amount of loan proceeds used by the Company during the eight-week period after the loan origination for certain purposes, including payroll costs, interest on certain mortgage obligations, rent payments on certain leases, and certain qualified utility payments, provided that at least 75% of the loan amount is used for eligible payroll costs. Subject to the other requirements and limitations on loan forgiveness, only loan proceeds spent on payroll and other eligible costs during the covered eight-week period will qualify for forgiveness. The Company intends to use the PPP Loan for qualifying and other related expenses. The Company can provide no assurance that it will obtain forgiveness of the PPP Loan in whole or in part. The Note may be prepaid in part or in full, at any time, without penalty. The Note provides for certain customary events of default, including (i) the Company’s failure to make a payment when due under the Note, (ii) the Company’s failure to do anything required by the Note or any other loan document, (iii) if the Company defaults on any other loan with the Bank, (iv) the Company’s failure to preserve, or account to the Bank’s satisfaction for, any of the collateral or its proceeds, (v) the Company’s failure, or anyone acting on behalf of the Company’s failure, to disclose any material fact to the Bank or the SBA, (vi) if the Company makes, or anyone acting on behalf of the Company makes, a materially false or misleading representation to the Bank or the SBA, (vii) the Company’s default on any loan or agreement with another creditor, if the Bank believes the default may materially affect the Company’s ability to pay the Note, (viii) the Company’s failure to pay any taxes when due, (ix) if the Company becomes the subject of a proceeding under any bankruptcy or insolvency law, (x) if the Company has a receiver or liquidator appointed for any part of the Company’s business or property, (xi) if the Company makes an assignment for the benefit of creditors, (xii) if the Company has any adverse change in financial condition or business operation that the Bank believes may materially affect the Company’s ability to pay the Note, (xiii) if the Company reorganizes, merges, consolidates, or otherwise changes ownership or business structure without the Bank’s prior written consent, or (xiv) if the Company becomes the subject of a civil or criminal action that the Bank believes may materially affect the Company’s ability to pay the Note. Upon the occurrence of an event of default, the Bank has customary remedies and may, among other things, 17 Table of Contents require immediate payment of all amounts owed under the Note, collect all amounts owing from the Company, and file suit and obtain judgment against the Company. Amounts outstanding under the PPP Loan were as follows (in thousands): June 30, 2020 Principal amount outstanding $ 1,726 Less: current maturities ( 767 ) Note payable, net of current portion $ 959 Future annual minimum principal payments under the PPP Loan as of June 30, 2020 for the respective calendar years are as follows (in thousands): 2020 $ 192 2021 1,150 2022 384 Total $ 1,726 8. COMMITMENTS AND CONTINGENCIES Subcontract Agreement with Yale University The Company is party to a subcontract agreement that began in October 2014 and a subaward agreement that began in March 2015 (the “Yale Agreements”) with Yale University (“Yale”), which were subsequently amended. Under the Yale Agreements, the Company is providing specified services regarding the development of a proprietary compound that targets miR-29 in the indication of idiopathic pulmonary fibrosis. Yale entered into the Yale Agreements in connection with a grant that Yale received from the National Institutes of Health (“NIH”) for the development of a miR-29 mimic as a potential therapy for pulmonary fibrosis. In consideration of the Company’s services under the Yale Agreements, Yale has agreed to reimburse the Company up to a specified amount over five years , subject to the availability of funds under the grant and continued eligibility. Under the terms of the Yale Agreements, the Company retains all rights to any and all intellectual property developed solely by the Company in connection with the Yale Agreements. Yale has also agreed to provide the Company with an exclusive option to negotiate in good faith for an exclusive, royalty-bearing license from Yale for any intellectual property developed by Yale or jointly by the parties under the Yale Agreements. Yale is responsible for filing, prosecuting, and maintaining foreign and domestic patent applications and patents on all inventions jointly developed by the parties under the Yale Agreements. Through June 30, 2020, the Company has received $ 1.0 million under the Yale Agreements. The Yale Agreements terminate automatically on the date that Yale delivers its final research report to the NIH under the terms of the grant underlying the Yale Agreements. Each party may also terminate the Yale Agreements upon a specified number of days’ notice in the event that the NIH’s grant funding is reduced or terminated or upon material breach by the other party. Lease Obligation Payable The Company is party to a multi-year, noncancelable lease agreement that began in December 2010 for its current office and lab space. The lease agreement includes rent escalation clauses through the lease term and a Company option to extend the lease term for up to two terms of three years each. Minimum base lease payments under the lease agreement, including the impact of tenant improvement allowances, are recognized on a straight-line basis over the full term of the lease. The lease term was amended in April 2020, which extended the lease term. As of June 30, 2020, the lease was scheduled to mature on December 31, 2021. Upon adoption, the Company recognized a right-of-use asset and corresponding lease liability for the lease agreement of $ 0.4 million as of January 1, 2020, by calculating the present value of lease payments, discounted at 6 %, the Company’s estimated incremental borrowing rate, over the 12 months expected remaining term. As a result of the transition to ASC 842, the Company recorded an immaterial prior-period adjustment, as a cumulative-effect adjustment, at January 1, 2020. In April 2020, 18 Table of Contents when the lease was amended, the Company accounted for the amendment as a lease modification in accordance with ASC 842, which resulted in an immaterial adjustment to the right-of-use asset and corresponding lease liability. The interest rate implicit in the lease contract is not readily determinable and as such, the Company’s uses an incremental borrowing rate, based on prior borrowing rates, at the implementation date. This is an internally developed rate that would be incurred to borrow, with similar collateral, over the term of the lease. Amortization of the operating lease right-of-use asset, and corresponding reduction of operating lease obligation, amounted to $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2020, respectively, and was included in operating expense in the condensed consolidated statement of operations and comprehensive loss. During the three and six months ended June 30, 2019, lease rental expense, and the corresponding cash outflow, was approximately $ 0.1 million and $ 0.2 million, respectively. As of June 30, 2020, the remaining lease term was 1.5 years. Future minimum payments as of June 30, 2020 were approximately $ 0.6 million through December 31, 2021. As of June 30, 2020, the Company’s operating lease obligations were reflected as operating lease liabilities of $ 0.4 million as accrued liabilities and $ 0.2 million as other liabilities in the Company’s condensed consolidated balance sheets. The Company is also required to pay for operating expenses related to the leased space, which were $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2020 and 2019, respectively. The operating expenses are incurred separately and were not included in the present value of lease payments. 9. CAPITAL STOCK Common Stock The Company is authorized to issue 105,000,000 shares of its stock, of which 100,000,000 shares have been designated as Common Stock and 5,000,000 shares have been designated as preferred stock with a par value of $ 0.01 per share. The number of authorized shares of Common Stock may be increased or decreased by the affirmative vote of the holders of a majority of the Company’s stock who are entitled to vote. Each share of Common Stock is entitled to one vote. The holders of Common Stock are entitled to receive dividends when and as declared or paid by its board of directors. Common Stock Purchase Agreement - Aspire Capital Fund, LLC In December 2019, the Company entered into a common stock purchase agreement (“the Aspire Stock Purchase Agreement”), with Aspire Capital Fund, LLC (“Aspire Capital”), which provides that, subject to the terms, conditions, and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $ 20.0 million of shares of Common Stock over the 30 -month term of the Aspire Stock Purchase Agreement. Upon execution of the Aspire Stock Purchase Agreement, the Company sold to Aspire Capital 1,598,465 shares of Common Stock at $ 0.63 per share for proceeds of $ 1.0 million (the “Initial Purchase Shares”). As consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement and the Initial Purchase Shares, the Company issued to 959,079 shares of Common Stock to Aspire Capital as a non-refundable commitment fee, for a total issuance of 2,557,544 shares. In January 2020, the Company sold to Aspire Capital 2,200,000 shares of Common Stock at a weighted-average price of $ 1.84 per share for proceeds of $ 4.1 million. In July 2020, the Company sold to Aspire Capital an additional 3,532,806 shares of Common Stock at a weighted-average price of $ 1.25 for proceeds of $ 4.4 million. As of August 5, 2020, the Company may sell an additional $ 10.5 million of shares of Common Stock to Aspire Capital. Under the Aspire Stock Purchase Agreement, the Company has the right, in its sole discretion, on any trading day selected by it, and within certain specified limitations, to present Aspire Capital with a purchase notice, directing Aspire Capital (as principal) to purchase up to 200,000 shares of Common Stock per business day at a per share price equal to the lesser of (i) the lowest sale price of Common Stock on the purchase date or (ii) the average of the three lowest closing sale prices for the Common Stock during the 10 consecutive business days ending on the business day immediately preceding the purchase date. The Company also has the right to require Aspire Capital to purchase up to an additional 30 % of the trading volume of the shares for the next business day at a purchase price (the “VWAP Purchase Price”), equal to the lesser of: (i) the closing sale price of the shares on the purchase date, or (ii) ninety-seven percent ( 97 %) of the next business day’s volume weighted average price (each such purchase, a “VWAP Purchase”). The Company shall have the right, in its sole discretion, to determine a maximum number of shares and set a minimum market price threshold for each VWAP Purchase. The Company can only require a VWAP Purchase if the Company has also submitted a regular purchase on the notice date for the VWAP Purchase. There are no limits on the number of VWAP purchases that the Company may require. 19 Table of Contents The Aspire Stock Purchase Agreement may be terminated by the Company at any time, at the Company’s discretion, without any cost to the Company. There are no limitations on use of proceeds, financial or business covenants, restrictions on future financings, rights of first refusal, participation rights, penalties, or liquidated damages in the Aspire Stock Purchase Agreement. Common Stock Purchase Agreement - The Leukemia & Lymphoma Society, Inc. In August 2018, the Company and The Leukemia & Lymphoma Society, Inc. (“LLS”) entered into a Common Stock Purchase Agreement (the “LLS Stock Purchase Agreement”), which was subsequently assigned to LLS TAP Miragen, LLC (“LLS TAP”) pursuant to an Assignment and Assumption Agreement, effective October 28, 2019 (the “Assignment Agreement”), for the sale of up to $ 5.0 million of shares of Common Stock to LLS and its affiliates in a private placement (the “Offering”). Under the terms of the LLS Stock Purchase Agreement, the Company may raise up to approximately $ 5.0 million in gross proceeds by selling shares of Common Stock to LLS and its affiliates in up to five separate closings. The initial closing of the Offering was held on August 6, 2018. At the initial closing, the Company issued 150,987 shares of Common Stock at a price per share equal to $ 6.62 . On October 31, 2019, the Company issued an additional 606,364 shares of Common Stock to LLS TAP at a price per share of approximately $ 0.82 . The Company has received aggregate net proceeds of approximately $ 1.4 million after expenses incurred in connection with the Offering. The price per share of Common Stock to be sold in any subsequent closing will be equal to the average of the volume weighted-average prices of a share of Common Stock on the Nasdaq Capital Market for the three trading days beginning with the first trading day after the date of achievement of the relevant milestone for each such closing. Each closing is subject to the Company’s achievement of specified operational milestones under the LLS Stock Purchase Agreement and other customary closing conditions, provided, however, that each such closing must be completed prior to December 31, 2021. Based on the modifications to its Phase 2 clinical trial of cobomarsen in CTCL in December 2019, the Company does not anticipate it will achieve any of the remaining milestones under the LLS Stock Purchase Agreement. Common Stock Sales Agreement In March 2017, the Company entered into a Common Stock Sales Agreement (the “ATM Agreement”) with Cowen and Company, LLC (“Cowen”) under which the Company may offer and sell, from time to time at its sole discretion, shares of its Common Stock having an aggregate offering price of up to $ 50.0 million through Cowen as its sales agent in an “at the market” offering. Cowen may sell the 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 of 1933, as amended, including without limitation sales made by means of ordinary brokers’ transactions on The Nasdaq Capital Market or otherwise at market prices prevailing at the time of sale, in block transactions, or as otherwise directed by the Company. Cowen will use commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions from the Company (including any price, time, or size limits or other customary parameters or conditions the Company may impose). The Company will pay Cowen a commission equal to 3.0 % of the gross sales proceeds of any Common Stock sold through Cowen under the ATM Agreement. The Company also has provided Cowen with customary indemnification rights. The Company is not obligated to make any sales of Common Stock under the ATM Agreement. The offering of shares of Common Stock pursuant to the ATM Agreement will terminate upon the earlier of: (i) the sale of all Common Stock subject to the ATM Agreement or (ii) termination of the ATM Agreement in accordance with its terms. During the six months ended June 30, 2020, the Company sold, pursuant to the terms of the ATM Agreement, 975,063 shares of Common Stock, at a weighted average price of $ 0.72 per share, for aggregate net proceeds of approximately $ 0.7 million, including commissions to Cowen as sales agent. Since March 2017 and through June 30, 2020, the Company sold, pursuant to the terms of the ATM Agreement, an aggregate of 2,846,449 shares of Common Stock, at a weighted average price of $ 4.25 per share, for aggregate net proceeds of approximately $ 11.6 million, including initial expenses for executing the “at the market offering” and commissions to Cowen as sales agent. Common Stock Public Offering In February 2020, the Company entered into an underwriting agreement with Oppenheimer & Co. Inc. (“Oppenheimer”) as the underwriter relating to a public offering of Common Stock, pursuant to which Oppenheimer purchased 15,000,000 shares of Common Stock and warrants to purchase 7,500,000 shares of Common Stock. Each whole warrant has an exercise price of $ 1.10 per share and expires on the fifth anniversary of the date of issuance. The shares of common stock and warrants were sold together as a fixed combination, each consisting of one share of Common Stock and one-half warrant, with each whole warrant 20 Table of Contents exercisable to purchase one whole share of Common Stock but were issued separately and were immediately separable upon issuance. The combined price to the public in the offering for each share of Common Stock and accompanying half warrant was $ 1.00 , which resulted in approximately $ 13.9 million of net proceeds to the Company after deducting underwriting commissions and discounts and other estimated offering expenses payable by the Company and excluding the proceeds, if any, from the exercise of the warrants. Series Preferred As of June 30, 2020, the Company had no shares of preferred stock outstanding and had not designated any class or series of preferred stock. Under the Company’s amended and restated certificate of incorporation, the Company’s board of directors has the authority to designate and issue up to 5,000,000 shares of preferred stock, at its discretion, in one or more classes or series and to fix the powers, preferences and rights, and the qualifications, limitations, or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, and liquidation preferences, without further vote or action by the Company’s stockholders. 10. WARRANTS Upon the issuance of warrants to purchase shares of common stock, the Company evaluates the terms of the warrant issue to determine the appropriate accounting and classification of the warrant issue pursuant to FASB ASC Topic 480, Distinguishing Liabilities from Equity , FASB ASC Topic 505, Equity , FASB ASC 815, Derivatives and Hedging, and ASC 718, Compensation - Stock Compensation . Warrants are classified as liabilities when the Company may be required to settle a warrant exercise in cash and classified as equity when the Company settles a warrant exercise in shares of its common stock. Liability-classified warrants are valued at fair value at the date of issue and at each reporting date pursuant to FASB ASC 820, Fair Value Measurement , and are reflected as a warrant liability on the Company’s condensed consolidated balance sheets with the change in the warrant liability during each reporting period reflected as a gain (loss) from change in fair value of warrant liability in the condensed consolidated statement of operations and comprehensive loss. Number of Underlying Shares (1) Weighted Average Exercise Price at June 30, 2020 Remaining Contractual Life at June 30, 2020 (No. Years) June 30, 2020 December 31, 2019 Liability-classified warrants Issued April 2017 11,718 11,718 $ 8.53 4.83 Equity-classified warrants Issued February 2020 (2) 7,500,000 — $ 1.10 4.61 Issued November 2017 24,097 24,097 $ 7.15 4.38 Acquired February 2017 — 10,707 $ — — Subtotal 7,524,097 34,804 $ 1.12 Total warrants 7,535,815 46,522 $ 1.13 ____________________ (1) If the Company subdivides (by any stock split, stock dividend, recapitalization or otherwise) its outstanding shares of its common stock into a smaller number of shares, the warrant exercise price is proportionately reduced and the number of shares under outstanding warrants is proportionately increased. Additionally, if the Company combines (by combination, reverse stock split or otherwise) its outstanding shares of common stock into a smaller number of shares, the warrant exercise price is proportionately increased and the number of shares under outstanding warrants is proportionately decreased. (2) Subject to specified conditions, the Company may voluntarily reduce the warrant exercise price of the warrants issued in February 2020. 21 Table of Contents A summary of the Company’s warrant activity during the six months ended June 30, 2020 is as follows: Common Stock Warrants Number Weighted Average Exercise Price Outstanding at December 31, 2019 46,522 $ 17.93 Granted 7,500,000 $ 1.10 Expired ( 10,707 ) $ 52.50 Outstanding at June 30, 2020 7,535,815 $ 1.13 Liability-Classified Warrants Unless the warrant contract specifies otherwise, the Company uses the Black-Scholes option pricing model to determine the fair value of its warrants at the date of issue and outstanding at each reporting date. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds commensurate with the term of the warrants. Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the warrants. Where appropriate, the Company uses the historical volatility of peer entities, due to the lack of sufficient historical data of its stock price. In connection with the 2017 merger, the Company exchanged warrants issued in 2015 for new warrants to purchase 11,718 shares of its Common Stock. These warrants have an exercise price of $ 8.53 per share and expire ten years from the date of issuance. The fair value of the warrants issued in April 2015, was determined by the redemption amount of $ 0.1 million, or $ 8.53 per share, as stated in the warrant contract. Equity-Classified Warrants In connection with the Company’s public offering of its Common Stock and warrants that closed in February 2020, the Company issued warrants to purchase 7,500,000 shares of its common stock at a price of $ 1.10 per share that expire five years from the date of issuance. The terms of the warrants include certain provisions related to fundamental transactions, a cashless exercise provision in the event registered shares are not available, and do not include any mandatory redemption provisions. Therefore, the warrants have been classified as equity with no subsequent remeasurement as long as the warrants continue to be classified as equity. In connection with the 2017 merger, the Company assumed 13,534 outstanding warrants to purchase shares of Common Stock at an exercise price of $ 52.50 per share. In June 2019, 2,827 of these warrants expired. The remaining 10,707 warrants expired on February 17, 2020. At issuance, the warrants were classified as equity and recorded at fair value with no subsequent remeasurement. In connection with a debt financing in 2017, the Company issued detachable warrants to purchase up to 24,097 shares of the Company’s Common Stock at an exercise price of $ 7.15 per share that expire seven years from the date of issuance. At issuance, the warrants were classified as equity and recorded at fair value with no subsequent remeasurement. 11. SHARE-BASED COMPENSATION Equity Incentive Plans As of June 30, 2020, there were 1,063,002 options outstanding and no remaining equity awards available for future issuances under the 2008 Plan. All awards granted under the 2008 Plan that, after February 13, 2017, expire or terminate for any reason prior to exercise or settlement, are forfeited, or are reacquired, withheld, or not issued to satisfy a tax withholding obligation or to satisfy the exercise price of a stock award, will become available for grant under the 2016 Plan in accordance with its terms. The 2016 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, other stock awards, and performance awards that may be settled in cash, stock, or other property. All employees and non-employee directors are eligible to participate in the 2016 Plan and may receive all types of awards other than incentive stock options. Incentive stock options may be granted under the 2016 Plan only to employees (including officers) and employees of the Company’s affiliates. 22 Table of Contents The aggregate number of shares of Common Stock that may be issued under the 2016 Plan will not exceed 4,182,404 shares, which number is the sum of: (i) 1,681,294 shares, plus (ii) the number of shares subject to outstanding stock awards that were granted under the 2008 Plan, that, from and after February 13, 2017, expire or terminate for any reason prior to exercise or settlement, are forfeited because of the failure to meet a contingency or condition required to vest such shares, or are reacquired, withheld, or not issued to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award, if any, as such shares become available from time to time, plus (iii) shares from automatic increases to the share reserve, as described in more detail below. In accordance with the 2016 Plan, the share reserve will automatically increase on January 1 of each year, for a period of not more than ten years , commencing on January 1 of the year following the year in which the effective date of the 2016 Plan occurs, and ending on (and including) January 1, 2026, in an amount equal to 4 % of the shares of Common Stock outstanding on December 31 of the preceding calendar year; however, the board of directors or compensation committee may act prior to January 1 of a given year to provide that there will be no January 1 increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the automatic increase. On January 1, 2020, the share reserve automatically increased by 1,394,475 shares. Cumulative increases to the share reserve through January 1, 2020 consisted of 3,530,773 shares. As of June 30, 2020, there were outstanding stock options to purchase 4,095,970 shares of Common Stock and 1,541,083 shares of Common Stock available for issuance pursuant to the terms under the 2016 Plan. Options granted under the 2008 Plan and the 2016 Plan have an exercise price equal to the market value of the Common Stock at the date of grant and expire ten years from the date of grant. Generally, options vest 25 % on the first anniversary of the vesting commencement date and 75 % ratably in equal monthly installments over the remaining 36 months. The Company has also granted options that vest in equal monthly or quarterly amounts over periods up to 48 months. A summary of Common Stock option activity is as follows: Number of Options (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2019 3,497 $ 5.19 5.91 $ — Granted 2,505 $ 0.89 Exercised ( 17 ) $ 0.76 Forfeited or expired ( 826 ) $ 4.84 Outstanding at June 30, 2020 5,159 $ 3.17 6.86 $ 633,352 Vested or expected to vest at June 30, 2020 5,159 $ 3.17 6.86 $ 633,352 Exercisable as of June 30, 2020 2,328 $ 4.70 5.28 $ 34,819 Vested as of June 30, 2020 2,328 $ 4.70 5.28 $ 34,819 Fair Value Assumptions The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted under its equity compensation plans. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility, and expected lives of the options. Because the Company has a limited history of stock purchase and sale activity, expected volatility is based on historical data from public companies that are similar to the Company in size and nature of operations. The Company will continue to use similar entity volatility information until its historical volatility is relevant to measure expected volatility for option grants. The Company accounts for forfeitures as they occur. The risk-free rate for periods within the contractual life of each option is based on the U.S. Treasury yield curve in effect at the time of the grant for a period commensurate with the expected term of the grant. The expected term (without regard to forfeitures) for options granted represents the period of time that options granted are expected to be outstanding and is derived from the contractual terms of the options granted and expected option-exercise behaviors. The fair value of the underlying Common Stock is based on the closing price of the Common Stock on The Nasdaq Capital Market at the date of grant. 23 Table of Contents Stock Options Granted The weighted-average grant-date fair value of options granted to the Company’s employees and members of its board of directors during the six months ended June 30, 2020 and 2019 was $ 0.65 and $ 2.33 , respectively. The fair value was determined by the Black-Scholes option pricing model using the following weighted-average assumptions: Six Months Ended June 30, 2020 2019 Expected term, in years 4.82 6.36 Expected volatility 99.3 % 98.8 % Risk-free interest rate 0.8 % 2.5 % Expected dividend yield — % — % Weighted-average exercise price $ 0.89 $ 2.99 Employee Stock Purchase Plan The 2016 Employee Stock Purchase Plan (“ESPP”) allows qualified employees to purchase shares of Common Stock at a price equal to 85 % of the lower of: (i) the closing price at the beginning of the offering period or (ii) the closing price at the end of the offering period. The Company expects that a new 6 -month offering period will begin each August 22 and February 22. As of June 30, 2020, the Company had 947,793 shares available for issuance and 145,061 cumulative shares had been issued under the ESPP. Share-Based Compensation Expense Share-based compensation related to all equity awards issued pursuant to the 2008 Plan and 2016 Plan and for estimated shares to be issued under the ESPP for the purchase periods active during each respective period is included in the condensed consolidated statements of operations and comprehensive loss as follows: Six Months Ended June 30, 2020 2019 (in thousands) Research and development $ 357 $ 809 General and administrative 930 1,284 Total share-based compensation expense $ 1,287 $ 2,093 As of June 30, 2020, the Company had $ 3.9 million of total unrecognized employee and non-employee share-based compensation costs, which the Company expects to recognize over a weighted-average remaining period of 2.36 years. 12. NET LOSS PER SHARE Basic net loss per share is computed by dividing the net loss available to common stockholders by the weighted-average number of Common Stock outstanding. Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is increased to include the number of additional shares of Common Stock that would have been outstanding if the potential shares of Common Stock had been issued and if the additional shares of Common Stock were dilutive. Diluted net loss per share is the same as basic net loss per share of Common Stock, as the effects of potentially dilutive securities are antidilutive. 24 Table of Contents Potentially dilutive securities include the following: June 30, 2020 2019 (in thousands) Options to purchase Common Stock 5,159 4,494 Warrants to purchase Common Stock 7,536 47 Total 12,695 4,541 25 Table of Contents FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q, or this Quarterly Report, contains forward-looking statements that involve substantial risks and uncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report, other than statements of historical fact, including statements regarding our strategy, future operations, future financial position, liquidity, future revenue, projected expenses, results of operations, expectations concerning the timing and our ability to report data from ongoing and planned non-clinical studies and clinical trials, prospects, plans and objectives of management are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect,” “predict,” “potential,” “opportunity,” “goals,” or “should,” and similar expressions are intended to identify forward-looking statements. Such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors. Unless otherwise mentioned or unless the context requires otherwise, all references in this Quarterly Report, to “miRagen,” “company,” “we,” “us” and “our” or similar references refer to Miragen Therapeutics, Inc., and our consolidated subsidiaries. We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report, and under a similar heading in any other periodic or current report we may file with the Securities and Exchange Commission, or SEC, in the future. You are advised to consult any further disclosures we make on related subjects in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our website. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Quarterly Report, may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement. 26 Table of Contents