PERSONALIS, INC. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 filed with theSecurities and Exchange Commission (the "SEC") onMarch 25, 2020 (the "Annual Report"). In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. You should review the sections titled "Special Note Regarding Forward-Looking Statements" for a discussion of forward-looking statements and in Part II, Item 1A, "Risk Factors" for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report.
Overview
We are a growing cancer genomics company transforming the development of next-generation therapies by providing more comprehensive molecular data about each patient's cancer and immune response. We designed our NeXT Platform to adapt to the complex and evolving understanding of cancer, providing our biopharmaceutical customers with information on all of the approximately 20,000 human genes, together with the immune system, in contrast to many cancer panels that cover roughly 50 to 500 genes. In parallel with the development of our platform technology, we have also pursued business within the population sequencing market, and we have provided whole genome sequencing services under contract with theU.S. Department of Veterans Affairs (the "VA") Million Veteran Program (the "VA MVP"), which has enabled us to innovate, scale our operational infrastructure, and achieve greater efficiencies in our lab. InSeptember 2020 , we announced receipt of a new task order from the VA MVP with an approximate value of up to$31 million . The cumulative value of task orders received to date from the VA MVP has increased to approximately$175 million . InAugust 2020 , we launched a liquid biopsy assay that analyzes all of the approximately 20,000 human genes versus the more narrowly focused liquid biopsy assays that are currently available. By combining technological innovation, operational scale, and regulatory differentiation, our NeXT Platform is designed to help our customers obtain new insights into the mechanisms of response and resistance to therapy as well as new potential therapeutic targets. Our platform enhances the ability of biopharmaceutical companies to unlock the potential of conducting translational research in the clinic rather than with pre-clinical animal models or cancer cell lines. We also announced inJanuary 2020 a diagnostic based on our NeXT Platform that we envision being used initially by both leading clinical cancer centers as well as biopharmaceutical companies. OnAugust 14, 2020 , we completed a follow-on offering in which we issued and sold 6,578,947 shares of common stock at a public offering price of$19.00 per share. We received net proceeds of$117.5 million after deducting underwriting discounts and commissions. We also incurred$0.4 million of offering expenses, including legal, accounting, printing and other offering-related costs, of which$0.1 million was paid bySeptember 30, 2020 . Our operations have been impacted by the ongoing COVID-19 pandemic. While the state and county reopening and health orders applicable to us allow for continued operation of so-called Essential Businesses, which includes certain critical healthcare operations and services, we have substantially closed our office facilities and limited access to our laboratory facilities, to protect our employees and to comply with the provisions described within the orders. We provided temporary increased pay to certain laboratory personnel in the second quarter for their work during the COVID-19 pandemic. Such increased pay was not provided in the third quarter, but we may decide to resume increased pay in the future. The previous shelter-in-place order and current reopening and health orders have negatively impacted productivity, disrupted our business, and slowed research and development activities due to us limiting access to our laboratory space that would otherwise be used by our research and development group, and, to the extent such orders remain in place, they may continue to cause such effects on our operations. The reopening and health orders may disrupt the ability of our suppliers to fulfill our purchase orders in a timely manner or at all. Additionally, we are aware of increased demand in the market for certain consumables used in COVID-19 test kits. We use such consumables in our operations, and we may face difficulties in acquiring such consumables if our suppliers prioritize orders related to COVID-19. Several of our customers were delayed in sending us samples in the second and third quarters due to the inability to collect or ship samples during the COVID-19 pandemic, and these and additional customers may be disrupted from sending purchase orders and samples to us in the future. Many of our customers, potential customers and potential partners have also put in place policies restricting visitors from other companies, and therefore our sales team and members of management have been unable to meet such parties in person, which may result in reduced acquisition of new customers, fewer orders from existing customers, and fewer potential partnering opportunities. If our laboratory employees were to contract COVID-19, we may significantly curtail our laboratory operations or pause operations altogether until the imminent health risk to our employees subsided. Such disruptions in our operations, and our customers' and suppliers' operations, may continue to adversely affect revenues and operating results. 27 -------------------------------------------------------------------------------- The scope and duration of such impact is highly uncertain. We are unable to predict or quantify the impact of any potential disruption to our supply chain, changes in consumer demand or any other actions that may become necessary as events unfold. In response to this uncertainty, theCOVID-19 Advisory Committee of our board of directors was formed inMarch 2020 and is responsible for advising management on the unique risks to our business, operations, employees, facilities and financial condition related to the COVID-19 pandemic and overseeing our plans and initiatives to respond to and mitigate the risks presented by the pandemic.
Components of Operating Results
Revenues
We derive our revenues primarily from sequencing and data analysis services to support the development of next-generation cancer therapies and to support large-scale genetic research programs. We support our customers by providing high-accuracy, validated genomic sequencing and advanced analytics. Many of these analytics are related to state-of-the-art biomarkers, including those relevant to immuno-oncology therapeutics such as checkpoint inhibitors. Our revenues are primarily generated through contracts with companies in the pharmaceutical industry, healthcare organizations, and government entities. Our ability to increase our revenues will depend on our ability to further penetrate this market. To do this, we are developing a growing set of additional state-of-the-art products, advancing our operational infrastructure, expanding our international presence, building our regulatory credentials, and expanding our targeted marketing efforts. Unlike diagnostic or therapeutic companies, we have not to date sought reimbursement through traditional healthcare payors. We sell through a small direct sales force. We have one reportable segment from the sale of sequencing and data analysis services. Substantially all of our revenues to date have been derived from sales inthe United States . Costs and Expenses Costs of Revenues Costs of revenues consist of production material costs, personnel costs (salaries, bonuses, benefits, and stock-based compensation), costs of consumables, laboratory supplies, depreciation and service maintenance on capitalized equipment, and information technology ("IT") and facility costs. We expect costs of revenues to increase as our revenues grow, and in the short term costs of revenues may outpace revenues growth as we invest in expanding our laboratory capacity, but over time the cost per sample processed is expected to decrease due to economies of scale we may gain as volume increases, automation initiatives, and other cost reductions.
Research and Development Expenses
Research and development expenses consist of costs incurred for the development of our products. These expenses consist primarily of payroll and personnel costs (salaries, bonuses, benefits, and stock-based compensation), costs of consumables, laboratory supplies, depreciation and service maintenance on capitalized equipment, and IT and facilities costs. These expenses also include costs associated with our collaborations, which we expect to increase over time.
We expense our research and development expenses in the period in which they are incurred. We expect to increase our research and development expenses as we continue to develop new products.
Selling, General and Administrative Expenses
Selling expenses consist of personnel costs, customer support expenses, direct marketing expenses, educational and promotional expenses, and market research. Our general and administrative expenses include costs for our executive, accounting, finance, legal, and human resources functions. These expenses consist of personnel costs, audit and legal expenses, consulting costs, and IT and facility costs. We expense all selling, general and administrative expenses as incurred. We expect our selling expenses will continue to increase in absolute dollars, primarily driven by our efforts to expand our commercial capability and to expand our brand awareness and customer base through targeted marketing initiatives with an increased presence both within and outsidethe United States . We also expect general and administrative expenses to increase as we scale our operations. 28
--------------------------------------------------------------------------------
Interest Income
Interest income consists primarily of interest earned on our cash and cash equivalents and short-term investments. Interest income increased significantly beginning in the second half of 2019 as a result of us investing proceeds from the IPO. More recently, interest income has been adversely impacted by recent declines in yields on debt securities. We expect that our interest income will continue to decline in the future as the decline in yields is expected to more than offset the increased investments balances after ourAugust 2020 follow-on offering. Interest Expense Previously, interest expense primarily consisted of cash and non-cash interest costs related to our term loan, convertible promissory notes, revolving loan and security agreement (the "Revolving Loan") withTriplePoint Capital LLC ("TriplePoint"), and growth capital loan (the "Growth Capital Loan") with TriplePoint. After the payoff of our Growth Capital Loan inAugust 2019 , we no longer have any outstanding debt and have not incurred material interest expense from that point forward. Other Income (Expense), Net Other income (expense), net consists primarily of foreign currency exchange gains and losses. In 2019, other income (expense), net also consisted of changes in fair value of convertible preferred stock warrant liability. Due to the conversion of convertible preferred stock warrants to common stock warrants upon our IPO, changes in fair value of such warrants are no longer recorded through income since our IPO. See Note 10 included elsewhere in this Quarterly Report on Form 10-Q for further discussion of this item. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.
Results of Operations
The following sets forth, for the periods presented, our unaudited condensed
consolidated statements of operations (in thousands, except share and per share
data):
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenues $ 19,816 $ 17,153 $ 58,472 $ 47,053
Costs and expenses
Costs of revenues 14,483 11,524 44,428 31,538
Research and development 7,193 5,303 20,048 15,045
Selling, general and administrative 7,793 6,056 22,772 15,692
Total costs and expenses 29,469 22,883 87,248 62,275
Loss from operations (9,653 ) (5,730 ) (28,776 ) (15,222 )
Interest income 117 756 873 1,040
Interest expense - (204 ) (2 ) (1,133 )
Loss on debt extinguishment - (1,704 ) - (1,704 )
Other income (expense), net (4 ) (2 ) 5 (1,415 )
Loss before income taxes (9,540 ) (6,884 ) (27,900 ) (18,434 )
Provision for income taxes (5 ) (1 ) (39 ) (5 )
Net loss $ (9,545 ) $ (6,885 ) $ (27,939 ) $ (18,439 )
Net loss per share, basic and diluted $ (0.27 ) $ (0.22 ) $ (0.85 ) $ (1.35 )
Weighted-average shares outstanding,
basic and diluted 35,460,092 31,133,683 32,845,583 13,613,444
Revenues
The following table shows revenues by customer type (in thousands):
Three Months Ended Nine Months Ended
September 30, Change September 30, Change
2020 2019 2020 2019
VA MVP $ 14,092 $ 12,912 9% $ 43,598 $ 29,791 46%
All other customers 5,724 4,241 35% 14,874 17,262 (14)%
Total revenues $ 19,816 $ 17,153 16% $ 58,472 $ 47,053 24%
29
--------------------------------------------------------------------------------
The following table shows concentration of revenues by customer:
Three Months Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
VA MVP 71% 75% 75% 63%
Pfizer Inc. * 11% * 17%
* Less than 10% of revenues
VA MVP
The increase in revenues from the VA MVP during the third quarter and first nine
months of 2020 was driven by an increase in the volume of samples we tested in
each such period. This increase was driven by a significant rise in the number
of samples we received from the VA MVP since the start of 2019. Our increasingly
automated laboratory has supported this higher level of sample volumes.
All Other Customers
The increase in revenues from all other customers during the third quarter of 2020 was driven primarily by an increase in the volume of samples we tested in the period. The increased sample volumes were primarily from large pharmaceutical customers we are partnering with on retrospective clinical trials. Approximately$0.5 million of the increase in revenues was related to the completion of a research collaboration with a biopharmaceutical customer in the gene therapy space that is not expected to occur in future periods. The decrease in revenues from all other customers during the first nine months of 2020 was driven by a decrease in the volume of samples we tested in the period. This was due to the receipt of relatively large orders for specific projects from pharmaceutical customers in early 2018 that were fulfilled beginning around the second quarter of 2018 through the second quarter of 2019, and did not recur due to transitioning customers from our ACE platform to the ImmunoID NeXT platform. Decreases in revenue recognized from large pharmaceutical companies partnering with us on retrospective clinical trials accounted for most of the decrease, partially offset by$0.65 million of revenues related to the completion of a research collaboration with a biopharmaceutical customer in the gene therapy space that is not expected to occur in future periods. Costs and Expenses Three Months Ended Nine Months Ended September 30, Change September 30, Change 2020 2019 2020 2019 (in thousands) (in thousands) Costs of revenues$ 14,483 $ 11,524 26%$ 44,428 $ 31,538 41% Research and development 7,193 5,303 36% 20,048 15,045 33% Selling, general and administrative 7,793 6,056 29% 22,772 15,692 45% Total costs and expenses$ 29,469 $ 22,883 29%$ 87,248 $ 62,275 40% Costs of Revenues The increase in the third quarter of 2020 was primarily due to the increase in revenues discussed above. The cost components related to the increase in costs of revenues were a$1.7 million increase in production materials; a$0.8 million increase related to personnel-related costs including salaries, bonuses, benefits, and stock-based compensation expense in connection with raising our testing capacity; a$0.3 million increase in depreciation and maintenance due to our additions of laboratory equipment; and a$0.1 million increase in IT and facility costs. The increase in the first nine months of 2020 was primarily due to the increase in revenues discussed above. The cost components related to the increase in costs of revenues were a$9.1 million increase in production materials due primarily to higher VA MVP sample volumes; a$1.9 million increase related to personnel-related costs including salaries, bonuses, benefits, and stock-based compensation expense in connection with raising our testing capacity (including approximately$0.2 million related to temporary increased pay to certain laboratory personnel in the second quarter for their work during the COVID-19 pandemic, which did not repeat in the third quarter); a$0.7 million increase in depreciation and maintenance costs due to our additions of laboratory equipment; a$0.6 million increase in IT and facility costs; a$0.4 million increase in the cost of consumables and laboratory supplies; and a$0.2 million increase in other costs. 30 --------------------------------------------------------------------------------
Research and Development
The increase in the third quarter of 2020 was primarily due to development of new products and lab automation efforts, and consisted of an increase of$1.5 million in personnel-related costs, including salaries, bonuses, benefits, and stock-based compensation expense; a$0.3 million increase in IT and facilities costs; and a$0.1 million increase in laboratory supplies costs. The increase in the first nine months of 2020 was primarily due to development of new products and lab automation efforts, and consisted of an increase of$4.1 million in personnel-related costs, including salaries, bonuses, benefits, and stock-based compensation expense; a$0.6 million increase in IT and facilities costs; and a$0.3 million increase in laboratory supplies costs.
Selling, General and Administrative
The increase in the third quarter of 2020 was primarily due to a$1.6 million increase in personnel-related costs including salaries, bonuses, benefits, and stock-based compensation expense primarily related to increased headcount to support expansion of our commercial team. The increase in the first nine months of 2020 was due to a$4.9 million increase in personnel-related costs including salaries, bonuses, benefits, and stock-based compensation expense primarily related to increased headcount to support expansion of our commercial team; and a$2.2 million increase in professional services primarily related to public company-related costs (including corporate insurance, audit fees, and legal expenses). Interest Income, Interest Expense, Loss on Debt Extinguishment, and Other Income (Expense), Net Three Months Ended September 30, Change Nine Months Ended September 30, Change 2020 2019 2020 2019 (in thousands) (in thousands) Interest income$ 117 $ 756 (85 )%$ 873 $ 1,040 (16 )% Interest expense - (204 ) (2 ) (1,133 ) Loss on debt extinguishment - (1,704 ) - (1,704 ) Other income (expense), net (4 ) (2 ) 5 (1,415 ) Total$ 113 $ (1,154 ) $ 876 $ (3,212 ) Interest Income The decreases in the third quarter and first nine months of 2020 were driven by declines in yields on debt securities beginning around the second quarter of 2020, partially offset by higher average cash and investment balances subsequent to our IPO inJune 2019 and follow-on offering inAugust 2020 .
Interest Expense
The third quarter of 2019 included cash and non-cash interest expense related primarily to the Growth Capital Loan, while the nine-month period endedSeptember 30, 2019 also included cash and non-cash interest expense related to the Revolving Loan, which was paid off in lateMarch 2019 with proceeds from the Growth Capital Loan. Since the repayment of the Growth Capital Loan inAugust 2019 , we have had no outstanding debt and therefore did not incur significant interest expense in 2020. Loss on Debt Extinguishment During the third quarter of 2019, the Company recorded a$1.7 million loss on extinguishment of debt as a result of the repayment of the Growth Capital Loan in its entirety. Other Income (Expense), Net Other expense in the nine months endedSeptember 30, 2019 was primarily comprised of increases in the fair values of warrants for Series B and Series C redeemable convertible preferred stock as a result of increases to the estimated fair value of our equity during the period. Other income in 2020 was primarily comprised of foreign currency remeasurements. 31 --------------------------------------------------------------------------------
Liquidity and Capital Resources
The following tables present selected financial information and statistics as of
and for the nine months ended
As of September 30,
2020 2019
Cash and cash equivalents, and short-term investments
Property and equipment, net 12,735 15,215
Contract liabilities 20,593 33,726
Working capital 187,689 92,909
Nine Months Ended September 30,
2020 2019
Net cash used in operating activities
(20,474 )
Net cash used in investing activities (2,003 )
(46,731 )
Net cash provided by financing activities 120,327 134,477 From our inception throughSeptember 30, 2020 , we have funded our operations primarily from$144.0 million in net proceeds from our IPO inJune 2019 ,$117.5 million in net proceeds from our follow-on offering inAugust 2020 , and$89.6 million from issuance of redeemable convertible preferred stock, as well as cash from operations and debt financing. OnMarch 22, 2019 , we received$20.0 million in gross cash proceeds from the Growth Capital Loan. As ofSeptember 30, 2020 , we had cash and cash equivalents in the amount of$133.2 million and short-term investments in the amount of$72.8 million . We have incurred net losses since our inception. We anticipate that our current cash and cash equivalents and short-term investments, together with cash provided by operating activities, are sufficient to fund our near-term capital and operating needs for at least the next 12 months. We have based these future funding requirements on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. If our available cash balances, net proceeds from the offerings and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements, including because of lower demand for our services or other risks described in this Quarterly Report on Form 10-Q, such as the COVID-19 pandemic, we may seek to sell additional common or preferred equity or convertible debt securities, enter into an additional credit facility or another form of third-party funding or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. Additional capital may not be available on reasonable terms, or at all. OnMarch 22, 2019 , we entered into the Growth Capital Loan with TriplePoint to provide for a$20.0 million growth capital loan facility and drew down the full$20.0 million available under the facility. We used$5.1 million of the Growth Capital Loan to repay, in its entirety, all amounts outstanding under our$10.0 million Revolving Loan with TriplePoint, under which we borrowed$5.0 million inJune 2017 . Borrowings under the Growth Capital Loan bore interest at a floating rate of prime, plus 5.00%, for borrowings up to$15.0 million and the prime rate plus 6.50% for borrowings greater than$15.0 million . Under the Growth Capital Loan, we were required to make monthly interest-only payments throughApril 1, 2020 and 36 equal monthly payments of principal, plus accrued interest, fromApril 1, 2020 throughMarch 1, 2023 , when all unpaid principal and interest was to become due and payable. The Growth Capital Loan allowed voluntary prepayment of all, but not part, of the outstanding principal at any time prior to the maturity date, subject to a prepayment fee of 1.00% of the outstanding balance if prepaid in months one through 12 of the loan term. In addition to the final payment, we paid an amount equal to 2.75% of each principal amount drawn under the Growth Capital Loan. In connection with the Growth Capital Loan, we issued a warrant to purchase 65,502 shares of common stock to TriplePoint at an exercise price of$9.16 per share. We recorded the issuance-date fair value of the warrant of$0.6 million and fees paid to TriplePoint of$0.3 million as a debt discount, which was amortized over the term of the Growth Capital Loan using the effective interest method. Upon issuance, the Growth Capital Loan had an effective interest rate of 15.23% per year. OnAugust 14, 2019 , we paid off the Growth Capital Loan in its entirety. Interest expense for the three and nine months endedSeptember 30, 2019 was$0.3 million and$1.0 million , respectively. The warrant for 65,502 shares was exercised under a net share settlement method for 39,415 shares during the third quarter of 2020.
Our short-term investments portfolio is primarily invested in highly rated securities, with the primary objective of minimizing the potential risk of principal loss. Our investment policy generally requires securities to be investment grade and limits the amount of credit exposure to any one issuer.
32
--------------------------------------------------------------------------------
During the nine months ended
During the nine months ended
During the nine months endedSeptember 30, 2020 , cash used in investing activities was$2.0 million primarily due to$2.4 million acquisitions of property and equipment used for our sequencing and data analysis services, partially offset by$0.4 million in net proceeds from available-for-sale debt securities. Cash provided by financing activities of$120.3 million during the same period consisted of$117.5 million net proceeds from our follow-on offering,$2.3 million proceeds from stock option exercises and$0.6 million proceeds from ESPP purchases, partially offset by$0.1 million payments in offering costs. During the nine months endedSeptember 30, 2019 , cash used in investing activities was$46.7 million , which consisted of$40.2 million purchases of available-for-sale debt securities and$6.5 million acquisitions of property and equipment used for our sequencing and data analysis services. Cash provided by financing activities of$134.5 million during the same period consisted of$144.0 million net proceeds from our IPO,$20.0 million proceeds from the issuance of the Growth Capital Loan, and$0.7 million proceeds from stock option exercises, partially offset by$25.0 million in debt repayments,$3.9 million in payment of costs related to our IPO,$0.8 million in debt extinguishment costs, and$0.5 million in borrowing costs.
Investments in Property and Equipment
Our capital expenditures were$2.4 million during the nine months endedSeptember 30, 2020 , which was primarily related to the acquisition of property and equipment used to support our development initiatives and our sequencing and data analysis services. We expect that our full year 2020 capital expenditures will be lower than prior year capital expenditures at the end of this year.
Debt
We previously entered into various forms of convertible debt and revolving loans to finance our operations prior to our IPO. After our IPO, we paid off all remaining debt and now have zero outstanding debt balances.
Further information regarding our debt issuances can be found in Part I, Item 1 of this Quarterly Report on Form 10-Q in the Notes to Condensed Consolidated Financial Statements in Note 6-Borrowings.
Contractual Obligations
As a smaller reporting company, we are not required to provide this disclosure.
Off-balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements are prepared in accordance withU.S. GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe that the assumptions and estimates associated with revenue recognition, the valuation of common stock warrants and convertible preferred stock warrants, convertible instruments, stock-based compensation, and income taxes have the greatest potential impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates. 33 -------------------------------------------------------------------------------- There have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2019 under the caption "Critical Accounting Policies and Estimates" in Management's Discussion and Analysis of Financial Condition and Results of Operations, set forth in Part II, Item 7, except for a new estimate in connection with a performance-based stock option granted to our Chief Executive Officer in the first quarter of 2020 as described below.
Stock-Based Compensation
Pursuant to our 2019 Equity Incentive Plan (the "2019 Plan"), inMarch 2020 , our board of directors granted our Chief Executive Officer a performance-based stock option ("PSO") to purchase 421,000 shares of our common stock. The PSO is subject to the Chief Executive Officer's continued service to us through the date of vesting and if the performance condition is not met within 10 years from the date of grant, the PSO will be canceled. The shares subject to the PSO will vest in full if our average market capitalization is equal to or greater than$1 billion over a 30 calendar day period. Upon a change in control, the vesting of the shares subject to the PSO will accelerate on a pro rata basis based on the price per share in such change in control transaction multiplied by the price per share at such time divided by$1 billion , with up to 100% of the shares eligible for such accelerated vesting.
We used a Monte Carlo Model to estimate fair value of the award. The assumptions used in calculating the estimated values of the PSO were as follows:
2020
Performance period (in years) 10.00
Derived service period (in years) 4.55
Volatility 63.60%
Risk-free interest rate 1.02%
Dividend yield -%
Estimated fair value (per share) $ 3.31
See Note 2-Summary of Significant Accounting Policies and Note 9-Stock-Based
Compensation in the notes to the condensed consolidated financial statements
included in Part I, Item 1, of this Quarterly Report on Form 10-Q for additional
information.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the Jumpstart Our Business
Startups Act (the "JOBS Act"). Under the JOBS Act, emerging growth companies can
delay adopting new or revised accounting standards issued subsequent to the
enactment of the JOBS Act until such time as those standards apply to private
companies. We have irrevocably elected not to avail ourselves of this exemption
from new or revised accounting standards, and therefore, we will be subject to
the same new or revised accounting standards as other public companies that are
not emerging growth companies.
Recent Accounting Pronouncements
See the section titled "Summary of Significant Accounting Policies-Recent Accounting Pronouncements" in Note 2 to our unaudited condensed consolidated financial statements for additional information.
34--------------------------------------------------------------------------------
© Edgar Online, source
