SEC Filing - Graybug Vision, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-39538

GRAYBUG VISION, INC.

(Exact name of Registrant as specified in its Charter)

Delaware

452120079

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

275 Shoreline Drive, Suite 450

Redwood City, CA 94065

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (650) 487-2800

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		GRAY		The Nasdaq Global Market

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐ NO ☒

The number of shares of the Registrant’s common stock outstanding as of May 10, 2021 was 21,055,944.

Table of Contents

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020 (See Note 2)	4
	Condensed Statements of Operations for the Three Months Ended March 31, 2021 and 2020 (unaudited)	5
	Condensed Statements of Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020 (unaudited)	6
	Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity for the Three Months Ended March 31, 2021 and 2020 (unaudited)	7
	Condensed Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020 (unaudited)	8
	Notes to the Condensed Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	68
SIGNATURES		69

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Graybug” and the “Company” refer to Graybug Vision, Inc. This report contains references to trademarks belonging to other entities, which are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of present and historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective products, planned preclinical studies and clinical trials, regulatory approvals, research and development costs, and timing and likelihood of success, as well as plans and objectives of management for future operations, may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to us. Such statements are subject to a number of known and unknown risks, uncertainties and assumptions, and actual results may differ materially from those expressed or implied in the forward-looking statements due to various factors, including, but not limited to, those identified in Part I. Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II. Item 1A “Risk Factors.” These risks and uncertainties include, but are not limited to:

•

our ongoing clinical trial of GB-102 and our planned clinical trials of GB-401;

•

our ability to identify and secure partner funding of further clinical trials of GB-102;

•

the success, cost and timing of our development activities, preclinical studies and clinical trials;

•

the translation of our preclinical results and data and early clinical trial results into future clinical trials in humans;

•

the effects of the ongoing COVID-19 pandemic, and the corresponding responses of businesses and governments, on our business and financial results;

•

the timing or likelihood of regulatory filings and approvals;

•

our ability to receive the required regulatory approvals to market and sell our products in the United States and other countries;

•

our ability to develop sales and marketing capabilities;

•

the rate and degree of market acceptance of any products we are able to commercialize;

•

the effects of increased competition as well as innovations by new and existing competitors in our market;

•

our ability to obtain funding for our operations;

•

our ability to establish and maintain collaborations;

•

our ability to effectively manage our anticipated growth;

•

our ability to maintain, protect and enhance our intellectual property rights and proprietary technologies;

•

our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;

•

costs associated with defending intellectual property infringement, product liability and other claims;

•

regulatory developments in the United States and other foreign countries;

•

our ability to attract and retain qualified employees;

•

our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act; and

•

statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and stock performance.

You should read this Quarterly Report on Form 10-Q and the documents that we reference herein completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GRAYBUG VISION, INC.

Condensed Balance Sheets

(in thousands)

	March 31, 2021			December 31, 2020
	(unaudited)			(See Note 2)
Assets
Current assets:
Cash and cash equivalents	$	10,589		$	33,418
Short-term investments		75,099			61,615
Prepaid expenses and other current assets		3,133			4,207
Total current assets		88,821			99,240
Property and equipment, net		2,002			1,946
Prepaid expenses and other non-current assets		29			608
Total assets	$	90,852		$	101,794
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,956		$	2,513
Accrued research and development		2,097			1,356
Other current liabilities		2,225			3,128
Total current liabilities		6,278			6,997
Deferred rent, long term portion		12			11
Total liabilities		6,290			7,008
Commitments and contingencies (Note 5)
Stockholders’ Equity:
Preferred stock		—			—
Common stock		2			2
Additional paid-in capital		229,376			228,155
Accumulated deficit		(144,816	)		(133,367	)
Accumulated other comprehensive loss		—			(4	)
Total stockholders’ equity		84,562			94,786
Total liabilities and stockholders’ equity	$	90,852		$	101,794

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Condensed Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Operating expenses:
Research and development	$	6,448		$	6,085
General and administrative		5,040			1,711
Total operating expenses		11,488			7,796
Loss from operations		(11,488	)		(7,796	)
Interest income	39			108
Change in fair value of preferred stock tranche obligation		—			(106	)
Net loss		(11,449	)		(7,794	)
Cumulative dividends on convertible preferred stock		—			(1,299	)
Net loss attributable to common stockholders	$	(11,449	)	$	(9,093	)
Net loss per common share—basic and diluted	$	(0.54	)	$	(6.61	)
Weighted-average number of shares outstanding used in computing net loss per common share—basic and diluted		21,020,378			1,375,177

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Condensed Statements of Comprehensive Loss

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Net loss	$	(11,449	)	$	(7,794	)
Unrealized gain (loss) on available-for-sale securities, net of tax		4			(3	)
Comprehensive loss	$	(11,445	)	$	(7,797	)

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(in thousands, except share amounts)

(Unaudited)

	Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance—December 31, 2020		—	$	—		20,979,265	$	2	$	228,155	$	(133,367	)	$	(4	)	$	94,786
Stock issued on exercise of stock options		—		—		76,679		—		92		—			—			92
Stock-based compensation expense		—		—		—		—		1,129		—			—			1,129
Net loss		—		—		—		—		—		(11,449	)		—			(11,449	)
Unrealized gain on available-for-sale securities, net of tax		—		—		—		—		—		—			4			4
Balance—March 31, 2021		—	$	—		21,055,944	$	2	$	229,376	$	(144,816	)	$	—		$	84,562

	Convertible Preferred Stock				Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Deficit			Income (Loss)			Deficit
Balance—December 31, 2019		117,809,883	$	131,363		1,371,467	$	—	$	2,879	$	(105,836	)	$	3		$	(102,954	)
Stock issued on exercise of stock options		—		—		5,446		—		11		—			—			11
Stock-based compensation expense		—		—		—		—		226		—			—			226
Net loss		—		—		—		—		—		(7,794	)		—			(7,794	)
Unrealized loss on available-for-sale securities, net of tax		—		—		—		—		—		—			(3	)		(3	)
Balance—March 31, 2020		117,809,883	$	131,363		1,376,913	$	—	$	3,116	$	(113,630	)	$	—		$	(110,514	)

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Condensed Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Operating activities:
Net loss	$	(11,449	)	$	(7,794	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		1,129			226
Depreciation		118			93
Change in fair value of preferred stock tranche obligation		—			106
Accretion of premium and discounts on short-term investments		40			(16	)
Changes in operating assets and liabilities:
Prepaid expenses and other current and non-current assets		1,654			201
Accounts payable		(508	)		(380	)
Accrued research and development		741			(1,425	)
Other current and non-current liabilities		(989	)		(1,722	)
Net cash used in operating activities		(9,264	)		(10,711	)
Investing activities:
Purchases of property and equipment		(136	)		(147	)
Purchases of short-term investments		(21,521	)		—
Maturity of short-term investments		8,000			17,000
Net cash (used in) provided by investing activities		(13,657	)		16,853
Financing activities:
Proceeds from exercise of stock options		92			11
Payment of offering costs		—			(851	)
Net cash provided by (used in) financing activities		92			(840	)
Net (decrease) increase in cash and cash equivalents		(22,829	)		5,302
Cash and cash equivalents at beginning of period		33,418			15,870
Cash and cash equivalents at end of period	$	10,589		$	21,172
Supplemental disclosure of noncash items:
Deferred offering costs included in accounts payable and other current liabilities	$	—		$	500
Property and equipment purchases included in accounts payable and other current liabilities	$	87		$	7

See accompanying notes to unaudited condensed financial statements.

GRAYBUG VISION, INC.

Notes to Condensed Financial Statements

(Unaudited)

1. Organization

Graybug Vision, Inc., the Company or Graybug, is a clinical-stage biopharmaceutical company developing medicines for the treatment of diseases of the retina and optic nerve. The Company presently devotes substantially all of its resources to conducting research and development and raising capital. The Company was founded in May 2011 and maintains facilities in Redwood City, California and Baltimore, Maryland.

The Company is subject to risks common to clinical stage companies in the biopharmaceutical industry, including dependence on the clinical success of its product candidates, ability to obtain regulatory approvals of its product candidates, compliance with regulatory requirements, the need for substantial additional financing and protection of its proprietary technology.

Initial Public Offering

On September 29, 2020, the Company completed its initial public offering, or IPO, and issued and sold an aggregate of 6,468,750 shares of common stock (inclusive of 843,750 shares issued and sold pursuant to the exercise of the underwriters’ option to purchase additional shares on October 22, 2020) at a price of $16.00 per share for net proceeds of $92.0 million, after deducting underwriting discounts, commissions and offering expenses. Prior to the completion of the IPO, all 117,809,883 shares of convertible preferred stock then outstanding were converted into 13,085,913 shares of common stock.

Reverse Stock Split

On September 18, 2020, the Company effected a 9.0058:1 reverse stock split of its issued and outstanding common stock. Upon the effectiveness of the reverse stock split, (i) all shares of outstanding common stock were adjusted; (ii) the conversion prices of the convertible preferred stock were adjusted; (iii) the number of shares of common stock for which each outstanding option and warrant to purchase common stock is exercisable were adjusted; and (iv) the exercise price of each outstanding option and warrant to purchase common stock was adjusted. All of the outstanding common stock share numbers (including shares of common stock subject to the Company’s options, warrants and as-converted for the outstanding convertible preferred stock), share prices, exercise prices and per share amounts contained in the condensed financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented. The par value per share and the authorized number of shares of common stock were not adjusted as a result of the reverse stock split.

Going Concern Considerations

The Company incurred losses from operations and had negative cash flows from operating activities for the three months ended March 31, 2021, and the Company’s accumulated deficit at March 31, 2021 was $144.8 million. The Company’s current operating plan indicates it will continue to incur losses from operations and generate negative cash flows from operating activities, given ongoing expenditures related to extensive research and development and the Company’s lack of revenue-generating activities at this point in the Company’s life cycle. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Based upon the Company’s current operating plan, the Company believes its existing cash, cash equivalents and short-term investments will enable the Company to fund its operating expenses and capital expenditure requirements in excess of 12 months from the issuance date of these financial statements. The Company bases this estimate on assumptions that may prove to be wrong, and it could utilize the available capital resources sooner than it currently expects. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations and ultimately achieve profitable operations. The Company bases the sufficiency of its existing cash, cash equivalents and short-term investments to fund its operations on the current period re-forecast of the Company’s projected cash burn rate following the Company’s decision to pause its Phase 3 clinical trial for GB-102.

In March 2021, the Company determined not to proceed with the significant investment required to initiate two Phase 3 clinical trials for GB-102 in late 2021. As a result, management now believes that the Company’s current cash, cash equivalents and short-term investments are adequate to meet its needs for the next 12 months from issuance, and the Company will seek to raise additional funds in order to further advance its research and development programs, operate its business and meet its obligations as they come due. The Company is pursuing financing alternatives, similar to what the Company has previously executed, which include equity financing. Such sources of capital may not, however, be available to the Company in the necessary time frame, in the amounts that the Company requires, on terms that are acceptable to the Company, or at all. If the Company is unable to raise the necessary funds when needed or reduce spending on currently planned activities, it may not be able to continue the development of its products or the Company could be required to delay, scale back, or eliminate some or all of its research and development programs and other operations and will materially harm its business, financial position and results of operations.

COVID-19 Pandemic

The impact of the worldwide spread of a novel strain of coronavirus (“COVID-19”) has been unprecedented and unpredictable, but based on the Company’s current assessment, the Company does not expect any material impact on its long-term strategic plans, operations and its liquidity due to the worldwide spread of COVID-19. However, the Company is continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world and its assessment of the impact of COVID-19 may change.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements contained in this Quarterly Report on Form 10-Q have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission, or SEC, and, therefore, certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been omitted.

In the opinion of management, the information reflects all adjustments necessary to make the results of operations for the interim periods a fair statement of such operations. All such adjustments are of a normal recurring nature. Interim results are not necessarily indicative of results for the full year. The condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date, but does not include all information and footnotes required by GAAP for complete financial statements. These unaudited condensed financial statements should be read in conjunction with the Company’s audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 5, 2021.

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates its estimates, including those related to accrued research and development expenses, other long-lived assets, stock-based compensation and the valuation of deferred tax assets.

The Company bases its estimates using historical experience, Company forecasts and future plans, current economic conditions, and information from third-party professionals that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and recorded amounts of expenses that are not readily apparent from other sources, and adjusts those estimates and assumptions when facts and circumstances dictate.

Related Party Transactions

In August 2019, the Company engaged a consulting firm managed by the then-acting chief financial officer of the Company for professional services related to finance and other administrative functions. For the three months ended March 31, 2020, the costs incurred under this arrangement totaled $327,000. These costs were recorded as general and administrative expense in the accompanying condensed statements of operations. The Company terminated its relationship with this entity in September 2020.

3. Fair Value Measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

•

Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

•

Level 2: Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

•

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

	March 31, 2021
	Level 1		Level 2		Level 3		Total
Current assets:
Cash equivalents:
Money market funds	$	9,810		—		—	$	9,810
Total cash equivalents		9,810		—		—		9,810
Short-term investments:
Corporate debt securities		—		9,034		—		9,034
Commercial paper		—		64,044		—		64,044
U.S. Treasury notes		—		2,021		—		2,021
Total short-term investments		—		75,099		—		75,099
Total assets measured at fair value	$	9,810	$	75,099	$	—	$	84,909

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Current assets:
Cash equivalents:
Money market funds	$	15,677	$	—	$	—	$	15,677
Corporate debt securities		—		2,500		—		2,500
Commercial paper		—		13,499		—		13,499
Total cash equivalents		15,677		15,999		—		31,676
Short-term investments:
Corporate debt securities		—		11,588		—		11,588
Commercial paper		—		50,027		—		50,027
Total short-term investments		—		61,615		—		61,615
Total assets measured at fair value	$	15,677	$	77,614	$	—	$	93,291

The following tables present information as to cost, unrealized gains and losses and fair value determination of the Company’s financial assets measured at fair value on a recurring basis (in thousands):

	March 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
Current assets:
Cash equivalents:
Money market funds	$	9,810	$	—	$	—		$	9,810
Total cash equivalents		9,810		—		—			9,810
Short-term investments:
Corporate debt securities		9,037		—		(3	)		9,034
Commercial paper		64,041		5		(2	)		64,044
U.S. Treasury notes		2,021		—		—			2,021
Total short-term investments		75,099		5		(5	)		75,099
Total assets measured at fair value	$	84,909	$	5	$	(5	)	$	84,909

	December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses			Aggregate Fair Value
Current assets:
Cash equivalents:
Money market funds	$	15,677	$	—	$	—		$	15,677
Corporate debt securities		2,502		—		(2	)		2,500
Commercial paper		13,498		1		—			13,499
Total cash equivalents		31,677		1		(2	)		31,676
Short-term investments:
Corporate debt securities		11,588		1		(1	)		11,588
Commercial paper		50,030		2		(5	)		50,027
Total short-term investments		61,618		3		(6	)		61,615
Total assets measured at fair value	$	93,295	$	4	$	(8	)	$	93,291

Money market funds are highly liquid investments which are actively traded. The pricing information on the Company’s money market funds are based on quoted prices in active markets for identical securities. This approach results in the classification of these securities as Level 1 of the fair value hierarchy.

The fair value of short-term investments is determined from market pricing and other observable market inputs for similar securities obtained from various third-party data providers. The pricing services utilize industry-standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities; issuer credit spreads; benchmark securities; prepayment/default projections based on historical data; and other observable inputs. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.

As of March 31, 2021 and December 31, 2020, the contractual maturities of all available-for-sale investments were less than 12 months. The Company periodically reviews the available-for-sale investments for other-than-temporary impairment loss. All investments with unrealized losses have been in a loss position for less than 12 months. As a result, the Company did not recognize any other-than-temporary impairment losses as of March 31, 2021 and December 31, 2020.

There were no transfers between Levels 1, 2 or 3 for the periods presented.

4. Balance Sheet Components

Other Current Liabilities

Other current liabilities consisted of the following (in thousands):

	March 31, 2021		December 31, 2020
Salaries and benefits	$	1,281	$	2,302
Professional services		450		425
Deferred rent		19		27
Other		475		374
Total other current liabilities	$	2,225	$	3,128

5. Commitments and Contingencies

The Company enters into contracts in the normal course of business with contract research organizations, or CROs, for clinical trials and contract manufacturing organizations, or CMOs, for clinical supply manufacturing and with vendors for equipment, preclinical research studies, research supplies and other services and products for operating purposes. As of March 31, 2021, these commitments were approximately $3.1 million due within three to 12 months. These contracts generally provide for termination on notice of 60 to 90 days. During the three months ended March 31, 2021, the Company terminated several contracts with its equipment vendors and CMOs. The termination of these contracts resulted in the cancelation of commitments totaling $3.7 million that were disclosed as of December 31, 2020. From this amount, the Company recognized $2.2 million in expenses in the Company’s statement of operations for the write-off of $1.3 million in equipment deposits and $900,000 in other commitments and cancellation fees. As of March 31, 2021, $561,000 in unpaid cancellation and other related costs are classified as accrued research and development on the balance sheet.

Operating Lease Agreements

The Company leases a facility in Redwood City, California, under an operating lease with a term through August 2021 and in Baltimore, Maryland, under an operating lease with a term through June 2023. Rent expense for the three months ended March 31, 2021 and 2020 was $189,000 and $176,000, respectively. Future minimum lease payments under the Company’s non–cancelable operating leases as of March 31, 2021 were as follows (in thousands):

Year ended December 31:
2021 (remaining nine months)	$	462
2022		403
2023		205
Total future minimum lease payments	$	1,070

Guarantees and Indemnifications

In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. As of March 31, 2021, the Company did not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.

6. Preferred Stock Tranche Obligation

In July 2019, the Company authorized the sale of up to 61,773,000 shares of its Series C Convertible Preferred Stock, or Series C, at a price of $1.4693 per share, or Series C Financing. In July and August 2019, the Company issued 37,432,787 shares of Series C for aggregate gross proceeds of $55.0 million. In connection with this financing, certain purchasers of the Series C had the option to purchase up to an additional 17,014,902 shares of Series C at a price per share of $1.4693 for a period of up to 30 days after the Company notified them of the three-month readout from the Phase 2a clinical trial of GB-102 in patients with macular edema secondary to diabetic macular edema and retinal vein occlusion, or the Preferred Stock Tranche Obligation. The Company concluded that the Preferred Stock Tranche Obligation met the definition of a freestanding financial instrument, as the rights were legally detachable and separately exercisable from the Series C. Therefore, the Company allocated the proceeds received from the issuance of shares under the Series C Preferred Stock Purchase Agreement between the Preferred Stock Tranche Obligation and the Series C. The fair value of the Preferred Stock Tranche Obligation of $2.2 million on issuance was allocated from the $55.0 million proceeds of the Series C Financing and classified as a current liability on the balance sheet as the Series C would become redeemable upon a deemed liquidation event, the occurrence of which was not within the Company’s control. The Preferred Stock Tranche Obligation was remeasured at fair value at each reporting period using an option pricing valuation methodology. For the three months ended March 31, 2020, the Company recognized a loss on change in fair value of preferred stock tranche obligation of $106,000.

In September 2020, the board of directors and the Series C investors amended the Series C stock purchase agreement such that the Preferred Stock Tranche Obligation was no longer exercisable and expired upon the effectiveness of the Company’s IPO registration statement. As a result, the liability for the Preferred Stock Tranche Obligation was permanently eliminated as of September 24, 2020. Due to the low probability of the Preferred Stock Tranche Obligation being settled, the fair value immediately prior to the IPO was immaterial.

7. Stock-Based Compensation

2020 Equity Incentive Plan

In August 2020, the Company’s board of directors and stockholders adopted the Company’s 2020 Equity Incentive Plan, or the 2020 Plan, that became effective in connection with the IPO, and serves as the successor to the Company’s 2015 Stock Incentive Plan, or the 2015 Plan. The Company’s 2020 Plan authorizes the award of stock options, restricted stock units, or RSUs, restricted stock awards, or RSAs, stock appreciation rights, or SARs, performance awards and stock bonus awards. In March 2021, the Company increased the aggregate number of shares reserved for issuance by an additional 1,048,963 shares pursuant to the 2020 Plan. As of March 31, 2021, there were 2,762,909 shares available for issuance under the 2020 Plan.

2020 Employee Stock Purchase Plan

In August 2020 the Company’s board of directors and stockholders adopted the Company’s 2020 Employee Stock Purchase Plan, or the ESPP, that became effective in connection with the IPO, in order to enable eligible employees to purchase shares of the Company’s common stock with accumulated payroll deductions. As of March 31, 2021, there were 210,000 shares available for issuance under the ESPP. There have been no employee withholdings for the purchase of shares under the plan as of March 31, 2021.

Restricted Stock Units

During the year ended December 31, 2020, the Company issued 80,000 RSUs under the 2020 Plan. The weighted-average grant-date fair value per share of the RSUs was $16.50. As of March 31, 2021, none of the RSUs had vested or forfeited.

Stock-Based Compensation Expense

Stock-based compensation expense recognized for options and RSUs granted was as follows (in thousands):

	Three Months Ended March 31,
	2021		2020
Research and development	$	257	$	75
General and administrative		872		151
Total stock-based compensation expense	$	1,129	$	226

As of March 31, 2021, the total unrecognized stock-based compensation expense related to outstanding unvested stock awards that are expected to vest was $13.4 million, which the Company expects to recognize over an estimated weighted-average term of 3.3 years.

8. Income Taxes

The Company did not record a provision or benefit for income taxes during the three months ended March 31, 2021 and 2020. As of March 31, 2021 and 2020, respectively, the Company continues to maintain a full valuation allowance against all of its deferred tax assets in light of its history of cumulative net losses.

9. Net Loss Per Share Attributable to Common Stockholders

Basic and diluted net loss per common share is calculated as follows (in thousands except share and per share amounts):

	Three Months Ended March 31,
	2021			2020
Net loss	$	(11,449	)	$	(7,794	)
Cumulative dividends on convertible preferred stock		—			(1,299	)
Net loss attributable to common stockholders	$	(11,449	)	$	(9,093	)
Net loss per common share—basic and diluted	$	(0.54	)	$	(6.61	)
Weighted-average number of shares used in computing net loss per common share—basic and diluted		21,020,378			1,375,177

The following outstanding potentially dilutive shares have been excluded from the calculation of diluted net loss per share due to their anti-dilutive effect:

	As of March 31,
	2021		2020
Convertible preferred stock		—		117,809,883
Stock options to purchase common stock		2,651,635		2,092,479
Restricted stock units		80,000		—
Warrants to purchase common stock		27,759		27,759

Under the Series C Financing, up to 17,014,902 shares of convertible preferred stock could have been contingently issued upon achievement of certain development milestones. However, in September 2020, the board of directors and the Series C investors

amended the Series C stock purchase agreement such that the Preferred Stock Tranche Obligation was no longer exercisable and expired upon the effectiveness of the Company’s IPO registration statement.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission, or SEC, on March 5, 2021, or the Annual Report. In addition to historical financial information, this discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties. You should carefully read the sections entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company focused on developing transformative medicines for the treatment of diseases of the retina and optic nerve. Our novel proprietary technologies are designed to release drugs in ocular tissue at a controlled rate for up to 12 months in order to improve patient compliance, reduce healthcare burdens and, ultimately, deliver better clinical outcomes. Our lead product candidate, GB-102, is an intravitreal injection of a microparticle depot formulation of sunitinib, a potent inhibitor of neovasc