slno-10q_20210930.htm
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 September 30, 2021 

or

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: 001-36593

 

SOLENO THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

77-0523891

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

203 Redwood Shores Parkway, Suite 500

Redwood City, California

(Address of principal executive offices)

94065

(Zip Code)

(650) 213-8444

(Registrant’s telephone number, including area code)

 

 

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, $0.001 par value

SLNO

NASDAQ

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  

As of November 5, 2021, there were 79,806,487 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.

 

 


 

SOLENO THERAPEUTICS, INC.

TABLE OF CONTENTS

 

 

Page

PART I—FINANCIAL INFORMATION

3

Item 1. Financial Statements

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations (unaudited)

4

Condensed Consolidated Statements of Stockholders’ Equity (unaudited)

5

Condensed Consolidated Statements of Cash Flows (unaudited)

6

Notes to Condensed Consolidated Financial Statements (unaudited)

7

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

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

20

Item 4. Controls and Procedures

20

PART II—OTHER INFORMATION

21

Item 1. Legal Proceedings

21

Item 1A. Risk Factors

21

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3. Defaults Upon Senior Securities

22

Item 4. Mine Safety Disclosures

22

Item 5. Other Information

22

Item 6. Exhibits

22

EXHIBIT INDEX

23

SIGNATURES

24

 

 

 


 

 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

Soleno Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share and per share data)

 

 

 

September 30,

2021

 

 

December 31,

2020

 

Assets

 

(Unaudited)

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

28,185

 

 

$

49,224

 

Prepaid expenses and other current assets

 

 

702

 

 

 

1,019

 

Total current assets

 

 

28,887

 

 

 

50,243

 

Long-term assets

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

26

 

 

 

19

 

Operating lease right-of-use assets

 

 

489

 

 

 

124

 

Other long-term assets

 

 

40

 

 

 

15

 

Intangible assets, net

 

 

13,123

 

 

 

14,581

 

Total assets

 

$

42,565

 

 

$

64,982

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,858

 

 

$

3,489

 

Accrued compensation

 

 

809

 

 

 

1,005

 

Accrued clinical trial site costs

 

 

3,593

 

 

 

3,789

 

Operating lease liabilities

 

 

290

 

 

 

139

 

Other current liabilities

 

 

492

 

 

 

196

 

Total current liabilities

 

 

9,042

 

 

 

8,618

 

Long-term liabilities

 

 

 

 

 

 

 

 

2018 PIPE Warrant liability

 

 

170

 

 

 

539

 

Contingent liability for Essentialis purchase price

 

 

12,876

 

 

 

10,278

 

Operating lease liabilities, net of current

 

 

274

 

 

 

-

 

Total liabilities

 

 

22,362

 

 

 

19,435

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 250,000,000 shares authorized,

   79,806,487 and 79,615,692 shares issued and outstanding at

   September 30, 2021 and December 31, 2020, respectively.

 

 

80

 

 

 

80

 

Additional paid-in-capital

 

 

230,650

 

 

 

227,912

 

Accumulated deficit

 

 

(210,527

)

 

 

(182,445

)

Total stockholders’ equity

 

 

20,203

 

 

 

45,547

 

Total liabilities and stockholders’ equity

 

$

42,565

 

 

$

64,982

 

 

See accompanying notes to condensed consolidated financial statements

3


 

 

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

(In thousands except share and per share data)

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

$

4,968

 

 

$

4,827

 

 

$

17,719

 

 

$

17,625

 

General and administrative

 

2,767

 

 

 

2,256

 

 

 

8,210

 

 

 

6,507

 

Change in fair value of contingent consideration

 

551

 

 

 

774

 

 

 

2,598

 

 

 

4,200

 

Total operating expenses

 

8,286

 

 

 

7,857

 

 

 

28,527

 

 

 

28,332

 

Operating loss

 

(8,286

)

 

 

(7,857

)

 

 

(28,527

)

 

 

(28,332

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrants liabilities

 

112

 

 

 

(689

)

 

 

369

 

 

 

6,532

 

Interest income

 

34

 

 

 

1

 

 

 

76

 

 

 

13

 

Total other income (expense)

 

146

 

 

 

(688

)

 

 

445

 

 

 

6,545

 

Net loss

$

(8,140

)

 

$

(8,545

)

 

$

(28,082

)

 

$

(21,787

)

Net loss per common share, basic and diluted

$

(0.10

)

 

$

(0.11

)

 

$

(0.35

)

 

$

(0.38

)

Weighted-average common shares outstanding used to calculate basic and diluted net loss per common share

 

79,791,075

 

 

 

79,583,254

 

 

 

79,744,807

 

 

 

56,916,137

 

 

See accompanying notes to condensed consolidated financial statements

4


 

 Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended September 30, 2021 and 2020

(unaudited)

(In thousands except share data)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2021

 

 

79,615,692

 

 

$

80

 

 

$

227,912

 

 

$

(182,445

)

 

$

45,547

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

1,095

 

 

 

 

 

 

 

1,095

 

Issuance of common stock under equity incentive plan, net of tax withholdings

 

 

167,060

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax withholding payments for net share-settled equity awards

 

 

(59,072

)

 

 

 

 

 

 

(120

)

 

 

 

 

 

 

(120

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,954

)

 

 

(8,954

)

Balances at March 31, 2021

 

 

79,723,680

 

 

 

80

 

 

 

228,887

 

 

 

(191,399

)

 

 

37,568

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

857

 

 

 

 

 

 

 

857

 

Issuance of common stock under equity incentive plan, net of tax withholdings

 

 

35,545

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,988

)

 

 

(10,988

)

Balances at June 30, 2021

 

 

79,759,225

 

 

 

80

 

 

 

229,744

 

 

 

(202,387

)

 

 

27,437

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

906

 

 

 

 

 

 

 

906

 

Issuance of common stock under equity incentive plan, net of tax withholdings

 

 

47,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,140

)

 

 

(8,140

)

Balances at September 30, 2021

 

 

79,806,487

 

 

$

80

 

 

$

230,650

 

 

$

(210,527

)

 

$

20,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2020

 

 

44,658,054

 

 

$

45

 

 

$

172,708

 

 

$

(157,806

)

 

$

14,947

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

392

 

 

 

 

 

 

 

392

 

Issuance of common stock under equity incentive plan, net of tax withholdings

 

 

28,757

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,858

)

 

 

(5,858

)

Balances at March 31, 2020

 

 

44,686,811

 

 

 

45

 

 

 

173,100

 

 

 

(163,664

)

 

 

9,481

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

341

 

 

 

 

 

 

 

341

 

Issuance of common stock under equity incentive plan, net of tax withholdings

 

 

24,979

 

 

 

 

 

 

17

 

 

 

 

 

 

 

17

 

Sale of common stock in public offering, net of costs of $3,778

 

 

34,848,484

 

 

 

35

 

 

 

53,687

 

 

 

 

 

 

 

53,722

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,384

)

 

 

(7,384

)

Balances at June 30, 2020

 

 

79,560,274

 

 

 

80

 

 

 

227,145

 

 

 

(171,048

)

 

 

56,177

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

374

 

 

 

 

 

 

 

374

 

Issuance of common stock under equity incentive plan, net of tax withholdings

 

 

33,347

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,545

)

 

 

(8,545

)

Balances at September 30, 2020

 

 

79,593,621

 

 

$

80

 

 

$

227,519

 

 

$

(179,593

)

 

$

48,006

 

 

See accompanying notes to condensed consolidated financial statements

5


 

Soleno Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(28,082

)

 

$

(21,787

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,471

 

 

 

1,466

 

Non-cash lease expense

 

 

220

 

 

 

210

 

Stock-based compensation expense

 

 

2,858

 

 

 

1,107

 

Change in fair value of stock warrants

 

 

(369

)

 

 

(6,532

)

Change in fair value of contingent consideration

 

 

2,598

 

 

 

4,200

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

317

 

 

 

122

 

Other long-term assets

 

 

(40

)

 

 

-

 

Accounts payable

 

 

369

 

 

 

1,215

 

Accrued compensation

 

 

(196

)

 

 

473

 

Accrued clinical trial site costs

 

 

(196

)

 

 

1,400

 

Operating lease liabilities

 

 

(156

)

 

 

(224

)

Other liabilities

 

 

299

 

 

 

(7

)

Net cash used in operating activities

 

 

(20,907

)

 

 

(18,357

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(9

)

 

 

(3

)

Net cash used in investing activities

 

 

(9

)

 

 

(3

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of common stock, net of costs

 

 

-

 

 

 

53,760

 

Tax withholding payments for net share-settled equity awards

 

 

(120

)

 

 

-

 

Proceeds from stock option exercises

 

 

-

 

 

 

17

 

Principal paid on finance lease liabilities

 

 

(3

)

 

 

(13

)

Net cash provided by (used in) financing activities

 

 

(123

)

 

 

53,764

 

Net increase (decrease) in cash and cash equivalents

 

 

(21,039

)

 

 

35,404

 

Cash and cash equivalents, beginning of period

 

 

49,224

 

 

 

20,733

 

Cash and cash equivalents, end of period

 

$

28,185

 

 

$

56,137

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash activities

 

 

 

 

 

 

 

 

Purchase of property and equipment in accounts payable

 

$

-

 

 

$

3

 

Right-of-use assets obtained in exchange for operating lease obligations

 

$

581

 

 

$

-

 

Deferred financing costs included in accounts payable

 

$

-

 

 

$

38

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 


6


 

 

Soleno Therapeutics, Inc.

September 30, 2021

Notes to Condensed Consolidated Financial Statements

(unaudited)

Note 1. Overview

Soleno Therapeutics, Inc. (the Company or Soleno) is focused on the development and commercialization of novel therapeutics for the treatment of rare diseases. Its lead candidate is Diazoxide Choline Extended Release tablets (DCCR), a once-daily oral tablet for the treatment of Prader-Willi Syndrome (PWS). DCCR has received orphan designation for the treatment of PWS in the United States (U.S.) as well as in the European Union (E.U.).

The Company incorporated in the State of Delaware on August 25, 1999, and is located in Redwood City, California. It initially established its operations as Capnia, a diversified healthcare company that developed and commercialized innovative diagnostics, devices and therapeutics addressing unmet medical needs.  During 2017, the Company merged with Essentialis, Inc (Essentialis) and subsequently received stockholder approval to amend its Amended and Restated Certificate of Incorporation to change its name from “Capnia, Inc.” to “Soleno Therapeutics, Inc.” Essentialis was a privately held clinical-stage company focused on the development of breakthrough medicines for the treatment of rare diseases where there is increased mortality and risk of cardiovascular and endocrine complications. After the merger, the Company’s primary focus has been the development and commercialization of novel therapeutics for the treatment of rare diseases and the Company divested all prior business efforts.

Note 2. Going Concern and Management’s Plans

The Company had a net loss of $28.1 million during the nine months ended September 30, 2021 and has an accumulated deficit of $210.5 million at September 30, 2021 resulting from having incurred losses since its inception. The Company had $28.2 million of cash and cash equivalents on hand at September 30, 2021 and used $20.9 million of cash in its operating activities during the nine months ended September 30, 2021.

The accompanying condensed consolidated financial statements have been prepared under the assumption the Company will continue to operate as a going concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts of liabilities that may result from uncertainty related to the Company’s ability to continue as a going concern.

The Company expects to continue incurring losses for the foreseeable future and will be required to raise additional capital to complete its clinical trials, pursue product development initiatives, obtain regulatory approval and penetrate markets for the sale of its products. Management believes that the Company will continue to have access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means, but the Company’s access to such capital resources is uncertain and is not assured. For example, in July 2021, the Company entered into a Controlled Equity Offering Sales Agreement with Cantor Fitzgerald & Co. (Cantor) pursuant to which the Company may offer and sell, from time to time, shares of its common stock through Cantor up to an aggregate purchase price of $25.0 million (the ATM Offering). If the Company is unable to secure additional capital, it may be required to curtail its clinical trials and development of new products and take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. These measures could cause significant delays in the Company’s efforts to complete its clinical trials and commercialize its products, which are critical to the realization of its business plan and the future operations of the Company.

Management believes that the Company does not have sufficient capital resources to sustain operations through at least the next twelve months from the date of this filing. Additionally, in view of the Company’s expectation to incur significant losses for the foreseeable future, the Company will be required to raise additional capital resources in order to fund its operations, although the availability of, and the Company’s access to such resources is not assured. Accordingly, management believes that there is substantial doubt regarding the Company’s ability to continue operating as a going concern through at least the next twelve months from the date of this filing.

Note 3. Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies during the nine months ended September 30, 2021 as compared to the significant accounting policies described in Note 3 of the “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. Below are those policies with current period updates.

7


 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (including those which are normal and recurring) considered necessary for a fair presentation of the interim financial information have been included. When preparing financial statements in conformity with GAAP, the Company must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements. Actual results could differ from those estimates. Additionally, operating results for the three and nine months ended September 30, 2021, are not necessarily indicative of the results that may be expected for any other interim period or for the fiscal year ending December 31, 2021. For further information, refer to the financial statements and footnotes included in the Company’s annual financial statements for the fiscal year ended December 31, 2020, which are included in the Company’s annual report on Form 10-K filed with the SEC on March 3, 2021.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of expenses in the financial statements and accompanying notes. Actual results could differ from those estimates. Key estimates included in the financial statements include the valuation of deferred income tax assets, the valuation of financial instruments, stock-based compensation, accrued costs for services rendered in connection with third-party contractor clinical trial activities, value and life of acquired intangibles, and the valuation of contingent liabilities for the purchase price of assets obtained through acquisition. The contingent liability represents the fair value of the contingent consideration arising from the Company’s acquisition of Essentialis in 2017. As part of the purchase price, the Company is obligated to make cash earn out payments to Essentialis stockholders up to a maximum of $30 million upon the achievement of certain commercial milestones.

Recent Accounting Standards

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date.

During the three and nine months ended September 30, 2021, there have been no recently adopted accounting standards and no new, or existing recently issued, accounting pronouncements that are of significance, or potential significance, that impact the Company’s condensed consolidated interim financial statements.

Note 4. Fair Value of Financial Instruments

The carrying value of the Company’s cash, cash equivalents and accounts payable, approximate fair value due to the short-term nature of these items.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

 

Level I Unadjusted quoted prices in active markets for identical assets or liabilities;

 

Level II Inputs other than quoted prices included within Level I that are observable, unadjusted quoted 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; and

 

Level III Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

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

8


 

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands).

 

 

 

Fair Value Measurements at September 30, 2021

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 PIPE warrant liability

 

$

170

 

 

$

 

 

$

 

 

$

170

 

Essentialis purchase price contingency liability

 

 

12,876

 

 

 

 

 

 

 

 

 

12,876

 

Total common stock warrant and contingent

   consideration liability

 

$

13,046

 

 

$

 

 

$

 

 

$

13,046

 

 

 

 

Fair Value Measurements at December 31, 2020

 

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018 PIPE warrant liability

 

$

539

 

 

$

 

 

$

 

 

$

539

 

Essentialis purchase price contingency liability

 

 

10,278

 

 

 

 

 

 

 

 

 

10,278

 

Total common stock warrant and contingent

   consideration liability

 

$

10,817

 

 

$

 

 

$

 

 

$

10,817

 

 

The Company’s estimated fair value of the 2018 PIPE Warrants was calculated using a Black-Scholes pricing model. The Black-Scholes pricing model requires the input of highly subjective assumptions including the expected stock price volatility, the expected term, the expected dividend yield and the risk-free interest rate. The difference in valuation as a result of using the Black-Scholes pricing model compared to the Monte Carlo simulation model is not significant.

 

The fair value of the Essentialis purchase price contingent liability is estimated using scenario-based methods based upon the Company’s analysis of the likelihood of obtaining specified approvals from the FDA as well as reaching cumulative sales milestones. The Level 3 estimates are based, in part, on subjective assumptions. During the periods presented, the Company has not changed the manner in which it values its Essentialis purchase price contingent liability.

There were no transfers between levels within the hierarchy during the periods presented.

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 liabilities for the nine months ended September 30, 2021 and 2020 (dollars in thousands).

 

 

2018 PIPE Warrants

 

 

Purchase Price

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of

Warrants

 

 

Liability

 

 

Contingent

Liability

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2021

 

 

513,617

 

 

$

539

 

 

$

10,278

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in value of 2018 PIPE Warrants

 

 

 

 

 

(369

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in value of contingent liability

 

 

 

 

 

 

 

 

2,598

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at September 30, 2021

 

 

513,617

 

 

$

170

 

 

$

12,876

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series C Warrants

 

 

2017 PIPE Warrants

 

 

2018 PIPE Warrants

 

 

Purchase Price

 

 

 

Number of

Warrants

 

 

Liability

 

 

Number of