Stockholders' Equity

9 Months Ended

Sep. 30, 2021

Share-based Payment Arrangement [Abstract]

Stockholders' Equity

Stockholders’ Equity

Common Stock

As of September 30, 2021, there were 87,047,832 shares of common stock outstanding. Each share of common stock is entitled to one vote. The holders of the common stock are also entitled to receive dividends whenever funds are legally available and when declared by our Board of Directors.

2019 Equity Incentive Plan

On June 15, 2019, the Company's board of directors approved, and on August 1, 2019 the Company's stockholders approved, the Company's 2019 Equity Incentive Plan (the "2019 Plan"). The 2019 Plan is intended as the successor to and continuation of the Company's 2012 Equity Incentive Plan. The number of shares authorized for issuance under the 2019 Plan may be increased by (a) the shares subject to outstanding stock awards granted under the Company’s 2009 Equity Incentive Plan (the “2009 Plan”) and the Company’s 2012 Equity Incentive Plan (together the with 2009 Plan, the “Prior Plans”) that on or after the effective date of the 2019 Plan (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of the failure to meet a contingency or condition required to vest such shares or otherwise return to the Company, or (iii) 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. No further grants will be made under the Prior Plans. In addition, on January 22, 2020, an additional 4,166,860 shares of common stock became available for issuance under the 2019 Plan pursuant to the Milestone Closing (defined below) of the May 2019 SPA (defined below). Further, on January 1st of each year, for a period of not more than ten years, beginning on January 1, 2021 and continuing through January 1, 2029, the number of shares authorized for issuance under the 2019 Plan will increase by 5.0% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by our Board of Directors. As of September 30, 2021, 853,111 shares of common stock were available for new equity award grants under the 2019 Plan and 10,172,886 shares of common stock are reserved for issuance pursuant to equity awards outstanding as of September 30, 2021.

Private Placements of Common Stock, Non-Voting Preferred Stock and Warrants

On May 3, 2019, we entered into a securities purchase agreement (the "May 2019 SPA") with certain institutional and other accredited investors, including certain directors, executive officers and employees of the Company (the “Purchasers”), pursuant to which we agreed to sell and issue shares of our common stock, shares of our newly designated non-voting convertible preferred stock, and warrants to purchase common stock, in up to two closings, in a private placement transaction (the “Private Placement”).

At an initial closing under the May 2019 SPA that occurred on May 7, 2019 (the “Initial Closing”), we sold and issued to the Purchasers (i) 9,730,534 shares of common stock and accompanying warrants to purchase up to an aggregate of 9,730,534 shares of common stock at a combined purchase price of $1.205 per share, and (ii) 415,898 shares of non-voting Class A-1 convertible preferred stock, in lieu of shares of common stock, at a price of $10.80 per share, and accompanying warrants to purchase an aggregate of 4,158,980 shares of common stock at a price of $0.125 for each share of common stock underlying such warrants. Total gross proceeds from the Initial Closing were approximately $16.7 million, which does not include any proceeds that may be received upon exercise of the warrants. Each share of non-voting Class A-1 convertible preferred stock is convertible into 10 shares of Common Stock, subject to certain beneficial ownership conversion limitations. The warrants are exercisable for a period of five years following the date of issuance and have an exercise price of $1.08 per share, subject to proportional adjustments in the event of stock splits or combinations or similar events. The warrants are exercisable on a net exercise "cashless" basis. An aggregate of 526,083 shares of common stock and warrants to purchase up to 526,083 shares of common stock were purchased for $0.6 million by certain directors and executive officers of the Company under the Initial Closing.

Pursuant to the May 2019 SPA, in the event our Board of Directors unanimously resolved to recommence our Phase 1 multiple ascending dose clinical trial of our RGLS4326 product candidate for the treatment of ADPKD (the “Phase 1 Trial”) based on correspondence from the U.S. Food and Drug Administration’s Division of Cardiovascular and Renal Products, and thereafter but on or before December 31, 2019, we made a public announcement of our plan to recommence the Phase 1 Trial (the “Public Announcement”), we would sell and the Purchasers would purchase, at a second closing under the May 2019 SPA (“Milestone Closing”), shares of our non-voting convertible preferred stock and accompanying warrants to purchase shares of Common Stock (collectively, "Milestone Securities"). On December 15, 2019, the Company's Board of Directors unanimously resolved to recommence the Phase 1 Trial based on correspondence from the U.S. Food & Drug Administration’s Division of Cardiovascular and Renal Products and on December 16, 2019, we made the related Public Announcement, triggering the Milestone Closing, which occurred on December 24, 2019. At the Milestone Closing, we sold and issued to the Purchasers 3,288,390 shares of non-voting Class A-2 convertible preferred stock and accompanying warrants to purchase an aggregate of 32,883,900 shares of common stock for an aggregate purchase price of approximately $26.0 million. Net proceeds to the Company from the Milestone Closing were approximately $24.6 million. Each share of non-voting Class A-2 convertible preferred stock is convertible into 10 shares of Common Stock, subject to certain beneficial ownership conversion limitations. The warrants will be exercisable for a period of five years following the date of issuance and have an exercise price of $0.666 per share, subject to proportional adjustments in the event of stock splits or combinations or similar events. The warrants are exercisable on a net exercise “cashless” basis. An aggregate of 121,581 shares of Class A-2 convertible preferred stock and warrants to purchase up to 1,215,810 shares of common stock were purchased for approximately $1.0 million by certain directors and executive officers of the Company under the Milestone Closing.

We evaluated the non-voting Class A-1 convertible preferred stock and common stock warrants sold in the Initial Closing and the Class A-2 convertible preferred stock and common stock warrants sold in the Milestone Closing under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and determined permanent equity treatment was appropriate for these freestanding financial instruments. The Initial Closing and Milestone Closing did not include any embedded features that required bifurcation. The non-voting Class A-2 convertible preferred stock and warrants issuable under the Milestone Closing were not subject to accounting recognition until the Milestone Closing occurred, as the terms of the Milestone Closing did not provide a right or an obligation on either the Company nor the Purchasers.

On December 1, 2020, we entered into a Securities Purchase Agreement (the "December 2020 SPA") with certain institutional and other accredited investors, including certain directors, executive officers and employees of the Company (the “2020 Purchasers”), pursuant to which we agreed to sell and issue shares of our common stock, shares of newly designated non-voting convertible preferred stock and warrants to purchase common stock (the “2020 PIPE”).

At the closing under the December 2020 SPA that occurred on December 4, 2020 (the “2020 Closing”), we sold and issued to the 2020 Purchasers (i) 24,341,607 shares of common stock and accompanying warrants to purchase up to an aggregate of 18,256,204 shares of common stock at a combined purchase price of $0.7464 per share, and (ii) 272,970 shares of non-voting Class A-3 convertible preferred stock, in lieu of shares of common stock, at a price of $6.22 per share, and accompanying warrants to purchase an aggregate of 2,047,276 shares of common stock at a price of $0.125 for each share of common stock underlying such warrants. Total gross proceeds from the 2020 Closing were approximately $19.4 million, which does not include any proceeds that may be received upon exercise of the warrants. Each share of non-voting Class A-3 convertible preferred stock is convertible into 10 shares of common stock, subject to certain beneficial ownership conversion limitations. The warrants are exercisable for a period of five years following the date of issuance and have an exercise price of $0.7464 per share, subject to proportional adjustments in the event of stock splits or combinations or similar events. The warrants are exercisable on a net exercise "cashless" basis. An aggregate of 833,208 shares of common stock and warrants to purchase up to 624,906 shares of common stock were purchased for $0.6 million by certain directors and executive officers of the Company at the 2020 Closing.

We evaluated the non-voting Class A-3 convertible preferred stock and common stock warrants sold in the 2020 PIPE under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, and determined permanent equity treatment was appropriate for these freestanding financial instruments and there were no embedded features that required bifurcation.

The following table summarizes preferred stock conversions and warrant exercises (and the related impact on common stock) under the 2019 SPA and 2020 SPA for the three and nine months ended September 30, 2021 and 2020 (in thousands):

	Class A-1 Convertible Preferred Stock	Class A-2 Convertible Preferred Stock	Class A-3 Convertible Preferred Stock	Warrants	Common Stock
Balance at December 31, 2020	257	1,416	259	66,038	—
Conversions/Exercises	—	(78)	—	(3,920)	3,199
Balance at March 31, 2021	257	1,338	259	62,118
Conversions/Exercises	—	(7)	—	(250)	326
Balance at June 30, 2021	257	1,331	259	61,868
Conversions/Exercises	—	—	—	—	—
Balance at September 30, 2021	257	1,331	259	61,868
Balance at December 31, 2019	416	3,288	—	46,774	—
Conversions/Exercises	—	(656)	—	—	6,567
Balance at March 31, 2020	416	2,632	—	46,774
Conversions/Exercises	(159)	(671)	—	—	8,296
Balance at June 30, 2020	257	1,961	—	46,774
Conversions/Exercises	—	(322)	—	—	3,217
Balance at September 30, 2020	257	1,639	—	46,774

ATM Offering

On December 12, 2018, we entered into a Common Stock Sales Agreement (the “Stock Sales Agreement”) with H.C. Wainwright & Co., LLC (“HCW”), pursuant to which we may sell and issue shares of our common stock from time to time through HCW, as our sales agent (the “ATM Offering”). We have no obligation to sell any shares of common stock in the ATM Offering, and may at any time suspend offers under the Stock Sales Agreement or terminate the Stock Sales Agreement. Subject to the terms and conditions of the Stock Sales Agreement, HCW will use its commercially reasonable efforts to sell shares of our common stock from time to time based upon our instructions (including any price, time or size limits or other parameters or conditions that we may impose, subject to certain restrictions). We pay HCW a commission of 3.0% of the gross sales price of any shares sold under the Stock Sales Agreement. No shares were sold under the ATM Offering during the three months ended September 30, 2021. A total of 16,017,131 shares were sold and settled for proceeds of $20.5 million (net of $0.8 million in offering costs) under the ATM Offering during the nine months ended September 30, 2021. No shares were sold under the ATM Offering during the three and nine months ended September 30, 2020. On August 10, 2021, we increased the amount of common stock available for sale in ATM Offerings under the Stock Sales Agreement to $50.0 million. At September 30, 2021, approximately $50.0 million remained available for sale in the ATM Offering.

Shares Reserved for Future Issuance

The following shares of common stock were reserved for future issuance as of September 30, 2021 (in thousands):

Class A-1 convertible preferred stock outstanding (as-converted)	2,567
Class A-2 convertible preferred stock outstanding (as-converted)	13,308
Class A-3 convertible preferred stock outstanding (as-converted)	2,587
2019 PIPE Initial Closing warrants	12,778
2019 PIPE Milestone Closing warrants	30,595
2020 PIPE warrants	18,495
Common stock options outstanding	9,727
RSUs outstanding	446
Common stock available for future grant under 2019 Equity Incentive Plan	853
Employee Stock Purchase Plan	260
Total common shares reserved for future issuance	91,616

The following table summarizes our stock option and RSU (together Stock Awards) activity under all equity incentive plans for the nine months ended September 30, 2021 (shares in thousands): 

	Number of options	Weighted average exercise price		Number of RSUs	Weighted average grant date fair value
Stock Awards outstanding at December 31, 2020	6,813	$	1.10	34	$	1.50
Granted	3,143	$	1.47	446	$	0.95
Exercised (options) or Vested (RSUs)	(28)	$	0.96	(34)	$	1.50
Canceled/forfeited/expired	(201)	$	1.22	—	$	1.50
Stock Awards outstanding at September 30, 2021	9,727	$	1.22	446	$	0.95

Stock-Based Compensation

The following table summarizes the weighted average assumptions used to estimate the fair value of stock options and performance stock awards granted to employees under our 2012 Equity Incentive Plan, 2015 Inducement Plan, 2019 Equity Incentive Plan and the shares purchasable under our Employee Stock Purchase Plan during the periods presented:

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Stock options
Risk-free interest rate	0.9	%	0.4	%	1.0	%	1.1	%
Volatility	96.0	%	95.3	%	95.8	%	95.4	%
Dividend yield	—		—		—		—
Expected term (years)	6.1		6.1		6.1		6.1
Performance stock options
Risk-free interest rate	—		—		1.0	%	1.4	%
Volatility	—		—		95.7	%	95.4	%
Dividend yield	—		—		—		—
Expected term (years)	0		0		6.1		6.1
Employee stock purchase plan shares
Risk-free interest rate	0.1	%	0.3	%	0.1	%	0.7	%
Volatility	103.1	%	94.9	%	104.4	%	98.2	%
Dividend yield	—		—		—		—
Expected term (years)	0.5		0.5		0.5		0.5

The following table summarizes the allocation of our stock-based compensation expense for all stock awards during the periods presented (in thousands): 

	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Research and development	$	277	$	255	$	687	$	571
General and administrative	530		437		1,565		1,573
Total	$	807	$	692	$	2,252	$	2,144