UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the Quarterly Period Ended September 30, 2020March 31, 2021

or

For the Transition Period from                     to                     

Commission File Number: 001-33004

Acer Therapeutics Inc.

(Exact name of registrant as specified in its charter)

(844) 902-6100

Registrant’s telephone number, including area code

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.

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 NovemberMay 1, 2020,2021, there were 12,285,00514,310,244 shares of the issuer’s Common Stock outstanding.

ACER THERAPEUTICS INC.

For the three and nine months ended September 30, 2020March 31, 2021

INDEX

PART I - FINANCIALFINANCIAL INFORMATION

ACER THERAPEUTICS INC.

CONDENSED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

ACER THERAPEUTICS INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2021 AND 2020 AND 2019

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

ACER THERAPEUTICS INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2021 AND 2020 AND 2019

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

ACER THERAPEUTICS INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINETHREE MONTHS ENDED SEPTEMBER 30,MARCH 31, 2021 AND 2020 AND 2019

(Unaudited)

The accompanying notes are an integral part of these unaudited condensed financial statements.

ACER THERAPEUTICS INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

Business

Acer Therapeutics Inc., a Delaware corporation (the “Company”), is a pharmaceutical company focused on the acquisition, development, and commercialization of therapies for serious rare and life-threatening diseases with significant unmet medical needs. The Company’s pipeline includes four programs: emetine hydrochloride (“emetine”) for the treatment of patients with COVID-19; ACER-001 (a taste-masked, immediate release formulation of sodium(sodium phenylbutyrate) for the treatment of various inborn errors of metabolism, including urea cycle disorders (“UCD”UCDs”) and Maple Syrup Urine Disease (“MSUD”); EDSIVO™ (celiprolol) for the treatment of vascular Ehlers-Danlos syndrome (“vEDS”) in patients with a confirmed type III collagen (COL3A1) mutation; and osanetantACER-801 (osanetant) for the treatment of induced vasomotor symptomsVasomotor Symptoms (“iVMS”).; and ACER-2820 (emetine), a host-directed therapy against a variety of infectious diseases, including COVID-19. The Company’s product candidates are believed to present a comparatively de-risked profile,programs, as evidenced by having one or more of athe following: favorable safety profile, clinical proof-of-concept data, mechanistic differentiation, and/or accelerated paths for development through specific programs and procedures established by the United States (“U.S.”) Food and Drug Administration (“FDA”).

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, and raising capital. The Company has generated revenue related to the collaboration and license agreement (the “Collaboration Agreement”) with Relief Therapeutics Holding AG (“Relief”) as described below, but has not generated any product revenue to date and may never generate any product revenue in the future.

Liquidity 

The Company had an accumulated deficit of $92.9$100.6 million and cash and cash equivalents of $6.2$15.9 million as of September 30, 2020.March 31, 2021. Net cash provided by operating activities was $3.0 million for the three months ended March 31, 2021, as compared to net cash used in operating activities was $13.1 million and $25.5of $5.1 million for the ninethree months ended September 30, 2020 and 2019, respectively.March 31, 2020.

On November 9, 2018, the Company entered into a sales agreement with Roth Capital Partners, LLC, and on March 18, 2020, an amended and restated sales agreement was entered into with JonesTrading Institutional Services LLC and Roth Capital Partners, LLC. The agreement provides a facility for the offer and sale of shares of common stock from time to time having an aggregate offering price of up to $50$50.0 million depending upon market demand, in transactions deemed to be an at-the-market (“ATM”) offering. Any such sales would be effected pursuant to the Company’s registration statement on Form S-3 (File No. 333-228319), declared effective by the SEC on November 21, 2018. The Company has no obligation to sell any shares of common stock pursuant to the agreement and may at any time suspend sales pursuant to the agreement. Each party may terminate the agreement at any time without liability. During the ninethree months ended September 30, 2020,March 31, 2021, during multiple trading days, the Company sold an aggregate of 1,418,551877,107 shares of common stock at an average gross sale price of $4.2664$3.1692 per share, resulting in gross proceeds of $6.1$2.8 million. Proceeds during the three months ended March 31, 2021, net of $0.3$0.2 million of fees and offering costs, were $5.8$2.6 million. See Note 10, “Subsequent Events,” regarding subsequent events related to the ATM.

On April 30, 2020, the Company entered into a purchase agreement and registration rights agreement pursuant to which Lincoln Park Capital Fund, LLC (“Lincoln Park”) has committed to purchase up to $15.0 million of the Company’s common stock. Under the terms and subject to the conditions of the purchase agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $15.0 million of the Company’s common stock. Such sales of common stock by the Company will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on June 8, 2020. The number of shares the Company may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may be increased up to 100,000 shares, depending upon the market price of the Company’s common stock at the time of sale and subject to a maximum limit of $1.0 million per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale as computed under the purchase agreement. In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the purchase agreement. The Company issued 148,148 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the purchase agreement. The $0.4 million fair value of the commitment fee shares was recorded to Generalgeneral and administrative expense along with other costs incurred in connection with entering into the purchase agreement. As of September 30, 2020,During the three months ended March 31, 2021, the Company had not sold any200,000 shares of common stock tounder its purchase agreement with Lincoln Park. See Note 10, “Subsequent Events,” regarding subsequent events related to the purchase agreement.Park at a weighted average price of $2.47 per share, resulting in proceeds of $0.5 million.

On July 24, 2020, the Company entered into a securities purchase agreement for the sale and issuance of an aggregate of 244,998 shares of the Company’s common stock, for an aggregate purchase price of $0.9 million, in a private placement transaction

(“ (“Private Placement”) with certain directors, officers, and employees at a price per share of $3.50. The shares of common stock issued

in the Private Placement constitute “restricted securities” under the federal securities laws and arewere subject to a minimum six-month holding period.

On March 19, 2021, the Company entered into the Collaboration Agreement with Relief providing for the development and commercialization of ACER-001 for the treatment of various inborn errors of metabolism, including for the treatment of UCDs and MSUD. The Collaboration Agreement is the culmination of the option agreement (the “Option Agreement”, together the “Agreements”) previously entered into between the Company and Relief on January 25, 2021. Pursuant to the Agreements, the Company received from Relief an upfront non-refundable payment of $1.0 million and a reimbursement payment of $14.0 million. Under the terms of the Collaboration Agreement, Relief will also pay the Company up to $20.0 million in U.S. development and commercial launch costs for the UCDs and MSUD indications (the “Development Payments”), although the final $10.0 million of the Development Payments is subject to a New Drug Application (“NDA”) for ACER-001 in a UCD having been accepted for review by the FDA. The Company could also receive a total of $6.0 million in milestones based on the first European marketing approvals of ACER-001 for UCDs and MSUD. The terms of the Agreements are further described below in the Revenue Recognition section of Note 2, Significant Accounting Policies. 

The Company’s existing cash and cash equivalents available at September 30, 2020, combinedMarch 31, 2021, plus up to $20.0 million of Development Payments per the Collaboration Agreement with the funds raised subsequent to September 30, 2020 via the ATM and equity line,Relief, are expected to fund operationsits currently anticipated operating and capital requirements into the first quarter of 2021 and enable it to advance emetine toward Investigational New Drug Application (“IND”) submission, continue to advance ACER-001 toward New Drug Application (“NDA”) submission, submit a plan with respect to EDSIVO^TM and obtain FDA feedback on whether the Company’s proposed plan will provide sufficient confirmatory evidence, advance osanetant toward IND submission, and provide for other working capital purposes,mid-2022, excluding support for a planned emetine Phase 2/3osanetant clinical trial, whichtrial. Of the $20.0 million of Development Payments from Relief, receipt of the final $10.0 million is also subject to ongoing discussions withan NDA for ACER-001 in a UCD having been accepted for review by the FDA.

Management expects to continue to finance operations through the issuance of additional equity or debt securities, non-dilutive funding, and/or through strategic collaborations. Any transactions which occur may contain covenants that restrict the ability of management to operate the business and any securities issued may have rights, preferences, or privileges senior to the Company’s common stock and may dilute the ownership of current stockholders of the Company.

Going Concern

The accompanying financial statements have been prepared in conformity with GAAP,accounting principles generally accepted in the U.S. (“GAAP”), which contemplate continuation of the Company as a going concern. The Company has not established a source of commercial product revenues and, as such, has been dependent on funding operations through the sale of equity securities.securities and through a collaboration agreement. Since inception, the Company has experienced significant losses and incurred negative cash flows from operations. The Company has an accumulated deficit of $92.9$100.6 million as of September 30, 2020March 31, 2021 and expects to incur further losses overfor the next several yearsforeseeable future as it develops its business. The Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy, including its planned product development efforts and potential precommercial activities.

As of September 30, 2020,March 31, 2021, the Company had cash and cash equivalents of $6.2$15.9 million and current liabilities of $4.5 million.$34.0 million, which include $20.7 million associated with deferred collaboration funding, as well as a $9.8 million liability related to the securities class action and stockholder derivative actions settlements and legal costs, for which the Company has also recorded a receivable from its insurance carriers. The Company’s cash and cash equivalents available at September 30, 2020, combinedMarch 31, 2021, plus up to $20.0 million of Development Payments per the Collaboration Agreement with the funds raised subsequent to September 30, 2020 via the ATM and equity line,Relief, are expected to fund operationsits currently anticipated operating and capital requirements into the first quarter of 2021,mid-2022, excluding support for a planned emetine Phase 2/3osanetant clinical trial, which is also subject to ongoing discussions with the FDA.trial.

The Company will need to raise additional capital to fund continued operations in 2021.the second half of 2022 because neither FDA approval of ACER-001 nor subsequent product revenues are assured. The Company may not be successful in its efforts to raise additional funds or achieve profitable operations. The Company continues to explore potential opportunities and alternatives to obtain the additional resources that will be necessary to support its ongoing operations through and beyond the next 12 months,mid-2022, including raising additional capital through either private or public equity or debt financing or non-dilutive funding, as well as using its ATM facility and/or its $15.0 million equity line facility entered into on April 30, 2020 with Lincoln Park, which is subject to certain limitations and conditions. The Company has no commitments for any additional financing, except for the agreement with Lincoln Park.Park and the Collaboration Agreement with Relief. Any amounts raised will be used for further development of its product candidates, precommercial activities, potential acquisitions of additional product candidates, and for other working capital purposes.

If the Company is unable to obtain additional funding to support its current or proposed activities and operations, it may not be able to continue its operations as proposed, which may require it to suspend or terminate any ongoing development activities, modify its business plan, curtail various aspects of its operations, cease operations, or seek relief under applicable bankruptcy laws. In such event, the Company’s stockholders may lose a substantial portion or even all of their investment.

These factors individually and collectively raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the date these financial statements are available, or November 10, 2020.concern. The accompanying unaudited condensed financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.

Merger and Reincorporation

On September 19, 2017, the Company (then a Texas corporation known as Opexa Therapeutics, Inc.) completed its business combination with Acer Therapeutics Inc., a Delaware corporation (“Private Acer”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 30, 2017, by and among the Company, Opexa Merger Sub, Inc. (“Merger Sub”) and Private Acer, pursuant to which Merger Sub merged with and into Private Acer, with Private Acer surviving as a wholly-owned subsidiary of the Company (the “Merger”). Immediately following the Merger, the Company changed its name to “Acer Therapeutics Inc.” pursuant to amendments to its certificate of formation filed with the Texas Secretary of State on September 19, 2017. Following the completion of the Merger, the business conducted by the Company became primarily the

business conducted by Private Acer. For accounting and financial reporting purposes, Private Acer was considered to have acquired the Company in the Merger.

On May 15, 2018, the Company changed its state of incorporation from the State of Texas to the State of Delaware pursuant to a plan of conversion, dated May 15, 2018. Immediately following the reincorporation, the holding company structure was eliminated by merging wholly-owned subsidiary Private Acer with and into the Company. The Company was the surviving corporation in connection with the subsidiary merger.

Basis of Presentation

The accompanying unaudited condensed financial statements are unaudited and have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. The unaudited condensed financial statements have been prepared on the same basis as the audited annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position, results of operations, stockholders’ equity and cash flows for the periods presented. The results of operations for the three and nine months ended September 30, 2020March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 20202021 or for any other future annual or interim period. The condensed balance sheet as of December 31, 2019,2020, included herein, was derived from the audited financial statements as of that date but does not include all disclosures required by GAAP. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The Company’s significant accounting policies are described in Note 2, “Significant Accounting Policies,” in its Annual Report on Form 10-K for the year ended December 31, 2019.2020.

Revenue Recognition

The Company’s revenues consist of activities in connection with a collaboration agreement, including a license of intellectual property. The Company evaluates the collaboration agreement to determine if for parts of the arrangement, the other party is a customer, and then determines the units of account within the collaborative arrangement utilizing the guidance in ASC 606 to determine which promised goods or services are distinct. In order for a promised good or service to be considered “distinct” under ASC 606, the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If the other party to the collaborative arrangement is not a customer for part of any distinct unit of account, and there is no other authoritative guidance which can be applied to a distinct unit of account, then the Company will recognize, measure and present the units of account based on analogy to authoritative guidance, or if no appropriate analogy exists, then based on a reasonable, rational, and consistently applied accounting policy election.

For any units of account, that fall within the scope of ASC 606, where the other party is a customer, the Company evaluates the separate performance obligation(s) under each contract, determines the transaction price, allocates the transaction price to each performance obligation considering the estimated stand-alone selling prices of the services and recognizes revenue upon the satisfaction of such obligations at a point in time or over time dependent on the satisfaction of one of the following criteria: (1) the customer simultaneously receives and consumes the economic benefits provided by the vendor’s performance (2) the vendor creates or enhances an asset controlled by the customer (3) the vendor’s performance does not create an asset for which the vendor has an alternative use, and the vendor has an enforceable right to payment for performance completed to date.

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Revenue for a sales-based or usage-based royalty promised in exchange for a license of intellectual property is recognized only when (or as) the later of the following events occurs: (i) the subsequent sale or usage occurs, or (ii) the performance obligation to which some or all of the sales-based or usage-based royalty has been allocated has been satisfied (or partially satisfied).

On January 25, 2021, the Company entered into the Option Agreement with Relief pursuant to which the Company granted Relief an exclusive option (the “Exclusivity Option”) to pursue a potential collaboration and license arrangement with the Company for the development, regulatory approval and commercialization of ACER-001 for the treatment of various inborn errors of

metabolism, including urea cycle disorders UCDs and MSUD. The Option Agreement provided a period of time up to June 30, 2021 for the parties to perform additional due diligence and to work toward negotiation and execution of a definitive agreement with respect to the potential collaboration for ACER‑001. In consideration for the grant of the Exclusivity Option, (i) the Company received from Relief an upfront nonrefundable payment of $1.0 million, (ii) Relief provided to the Company a 12-month secured loan in the principal amount of $4.0 million, as evidenced by a Promissory Note (the “Note”) issued by the Company to Relief and (iii) the Company granted to Relief a security interest in all of its assets to secure performance of the Note, as evidenced by a Security Agreement (the “Security Agreement”). The Note was repayable in one lump sum within 12 months from issuance and bore interest at a rate equal to 6% per annum. If a definitive agreement with respect to the potential collaboration had not been executed by the parties on or before June 30, 2021, the Exclusivity Option would terminate and the Note would have been repayable by the Company upon maturity.

On March 19, 2021, the Company entered into the Collaboration Agreement with Relief providing for the development and commercialization of ACER-001 for the treatment of various inborn errors of metabolism, including for the treatment of UCDs and MSUD. The Company received the $10.0 million cash payment from Relief ($14.0 million “Reimbursement Payment,” but offset by repayment of the $4.0 million outstanding balance of the Note, plus interest earned through the date of the Collaboration Agreement, from Relief to the Company). Under the terms of the Collaboration Agreement, Relief will also pay the Company up to an additional $20.0 million for U.S. development and commercial launch costs for the UCDs and MSUD indications (the “Development Payments”), the First Development Payment of $10.0 million is payable in two equal installments of $5.0 million each on or before April 30, 2021, which has been paid by Relief to Acer, and June 30, 2021. The Second Development Payment of $10.0 million is subject to an NDA for ACER-001 for a UCD having been accepted for review by the FDA. Further, the Company retained development and commercialization rights in the U.S., Canada, Brazil, Turkey and Japan (“Acer Territories”). The companies will split net profits from the Acer Territories 60%:40% in favor of Relief. Relief also licensed the rights for the rest of the world, where the Company will receive from Relief a 15% royalty on all revenues received in Relief’s territories. The Company could also receive a total of $6.0 million in milestone payments based on the first European (EU) marketing approvals for UCDs and MSUD.  

The Company assessed these agreements in accordance with the authoritative literature and concluded that they meet the definition of a collaborative arrangement per ASC 808. For certain parts of the collaborative arrangement, the Company concluded that Relief represented a customer while for other parts of the agreement Relief did not represent a customer. The units of account of the collaborative arrangement where Relief does not represent a customer are outside of the scope of ASC 606. The Company also determined that the development and commercialization services and Relief’s right to 60% profit in Acer Territory is within the scope of ASC 730, with regard to funded research and development arrangements. Since ASC 808 does not provide recognition and measurement guidance for collaborative arrangements, the Company applied the principles of ASC 606 for those units of account where Relief is a customer and ASC 730-20 for the funded research and development activities.

The Company concluded the promised goods and services contained in the Collaboration Agreement, represented two distinct units of account consisting of a license in Relief Territory, and a bundled obligation for the development and commercialization of ACER-001 in Acer Territories and the payment of 60% net profit from that territory (together, the “Services”). The stand-alone selling price was estimated for each distinct unit of account.

The Company determined that the transaction price at the outset of the Collaboration Agreement would amount to $25.0 million, including the Option Fee of $1.0 million, the Reimbursement Payment of $14.0 million, and the first Development Payment of $10.0 million. The Company concluded that consistent with the evaluation of variable consideration, using the most likely amount approach, the second Development Payment as well as the milestone payments for EU marketing approvals, should be fully constrained until the contingency associated with each payment has been resolved and the Company’s NDA is accepted for review by the FDA, and Relief receives EU marketing approval, respectively.

The license revenue was recognized at the point where the Company determined control was transferred to the customer. The combined unit of account for the Services will be recognized over the service period through the anticipated date of first commercial sale of the ACER-001 approved product in the U.S. The Company also determined that the Services would be satisfied over time as measured using an input method of costs incurred by the Company toward the identified development and commercialization services agreed to between the parties up to the point of first commercial sale of the ACER-001 product. Consistent with the presentation guidance in ASC 730, the Company determined that the amount attributed to the Services each period will be recognized as contra-expense against the research and development expense and the general and administrative expense as they relate to activities governed by the Collaboration Agreement.

The Company recognizes as receivable under the Collaboration Agreement consideration, which is deemed unconditional, or when only the passage of time is required before payment of that consideration is due. Amounts receivable under the Collaboration Agreement plus payments received from Relief, net of the amount recorded as revenue, are reported as deferred collaboration funding.

At March 31, 2021, the amount of deferred collaboration funding associated with unsatisfied obligations under the Collaboration Agreement amounted to $20.7 million. The Company expects to recognize this deferred collaboration funding as it performs the Services up to the date of first commercial sale in Acer Territory. This represented $15.0 million received from Relief and $10.0 million outstanding as accounts receivable, offset by $4.0 million recognized as revenue and $0.3 million recorded as an offset to research and development expense in the period. The $10.0 million receivable under the Collaboration Agreement related to the first Development Payment, which is due in two equal installments of $5.0 million on or before April 30, 2021 and June 30, 2021, respectively.

Cash and Cash Equivalents and Fair Value of Financial Instruments

The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.

The Company follows the provisions of ASC Topic 820, Fair Value Measurement, which establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The Company considers its investments in money market funds of $5.7$15.4 million and $11.6$5.3 million as of September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively, included in cash and cash equivalents, to be Level 1, which are based on unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable, and accruedloans payable recorded in other current liabilities and other non-current liabilities approximates their carrying value, based upon their short-term maturities or prevailing interest rates.

The Company recognized a $4.0 million non-cash reduction in a secured loan from Relief during the period, since the Reimbursement Payment from Relief was received net of the amount of principal and interest due in connection with the secured loan.

Goodwill

Goodwill represents the excess of the purchase price (consideration paid plus net liabilities assumed) of an acquired business over the fair value of the underlying net tangible and intangible assets. The Company evaluates the recoverability of goodwill according to ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350), which it adopted in the fourth quarter of 2018, annually, or more frequently if events or changes in circumstances indicate that the carrying value of goodwill might be impaired. The Company may opt to perform a qualitative assessment or a quantitative impairment test to determine whether goodwill is impaired. The Company’s goodwill is allocated to a single reporting unit. If the Company were to determine based on a qualitative assessment that it was more likely than not that the fair value of the reporting unit was less than its carrying value, a quantitative impairment test would then be performed. The quantitative impairment test compares the fair value of the reporting unit with its carrying amount, including goodwill. If the estimated fair value of the reporting unit is less than its carrying amount, a goodwill impairment would be recognized for the difference. The COVID-19 pandemic involving a respiratory illness caused by a novel coronavirus affected the worldwide economy and triggered decline in the stock markets. The Company considered potential triggering events related to COVID-19 and concluded that there was not a triggering event that would require the Company to perform further impairment analysis.

Stock-Based Compensation

The Company records stock-based payments at fair value. The measurement date for compensation expense related to awards is generally the date of the grant. The fair value of awards is recognized as an expense in the condensed statement of operations over the requisite service period, which is generally the vesting period. The fair value of options is calculated using the Black-Scholes option pricing model. This option valuation model requires the use of assumptions including, among others, the volatility of stock price, the expected term of the option, and the risk-free interest rate. The risk-free interest rate is based on a U.S. Treasury instrument whose term is consistent with the expected life of the stock options. Due to the lack of volatility data for the Company’s common stock, the expected volatility is based on the historical volatilities of a representative group of peer companies.

The following assumptions were used to estimate the fair value of stock options granted during the ninethree months ended September 30,March 31, 2021 and 2020 and 2019 using the Black-Scholes option pricing model:

Use of Estimates

The Company’s accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of assets and liabilities at the date of the condensed financial statements and reported amounts of revenues and expenses during the reporting period. Estimates having relatively higher significance include revenue recognition, determination of stand-alone selling price, stock-based compensation, contract manufacturing accruals, and income taxes. Actual results could differ from those estimates and changes in estimates may occur.

Income Taxes

The Company recorded no income tax expense or benefit during the three and nine months ended September 30,March 31, 2021 and 2020, and 2019, due to a full valuation allowance recognized against its net deferred tax assets. The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted in the U.S. on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The Company is required to recognize the effects of tax law changes in the period of enactment. The enactment of the CARES Act did not result in material adjustments for the income tax provision for the three and nine months ended September 30, 2020March 31, 2021 or to the Company’s assessment of the realizability of deferred tax assets as the carry back of net operating losses was used as a source of income. There were no other effects to the Company’s tax provision as a result of the CARES Act as of September 30, 2020.March 31, 2021.

Basic and Diluted Net Loss per Common Share

Basic and diluted net loss per common share is computed by dividing net loss in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of stock-based awards, were not included in the calculation of the diluted loss per share because to do so would be anti-dilutive.

RecentRecently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by removing, in certain cases, the need for models that required separate accounting for embedded conversion features and also amends the guidance for the derivatives scope exceptions for contracts in an entity’s own equity. This ASU also requires expanded disclosures, including additional information related to the terms and features of convertible instruments and information about events or conditions that cause conversion contingencies to be met or conversion terms to be significantly changed. The amendmentsCompany adopted ASU No. 2020-06 in the first quarter of this ASU are effective for fiscal years beginning after December 15, 2021 and must be applied using either2021. There was no impact on the Company’s financial statements as a modified or full retrospective approach. Early adoption is permitted for interim or annual reporting periods beginning after December 15, 2020. The Company is currently evaluating the impactresult of the adoption of this ASU on its financial statements.guidance.

Property and equipment consisted of the following at September 30, 2020March 31, 2021 and December 31, 2019:2020:

Accrued expenses consisted of the following at September 30, 2020March 31, 2021 and December 31, 2019:2020:

On March 6, 2018, the Company entered into a lease agreement (the “Newton Lease”), commencing on October 1, 2018, for certain premises which consist of 2,760 square feet of office space located in Newton, Massachusetts (the “Newton Premises”) to serve as its corporate headquarters. On March 5, 2019, the Company entered into a lease agreement to amend the Newton Lease and to lease an additional 1,600 square feet of office space, commencing on June 1, 2019, located in Newton, Massachusetts (the “Additional Newton Premises”) to serve as additional space for its corporate headquarters. The term of the leases for the Newton Premises and the Additional Newton Premises expires on May 31, 2022. In addition, the Company is required to share in certain taxes and operating expenses of the Newton Premises and the Additional Newton Premises.

The Company entered into a Triple Net Lease (the “Bend Lease”) effective April 1, 2018 for certain premises consisting of 2,288 square feet of office space located in Bend, Oregon (the “Bend Premises”) to serve as a satellite facility. On April 23, 2019, the Company entered into a lease agreement to amend the Bend Lease and to lease an additional 1,389 square feet of office space, commencing on May 1, 2019, located in Bend, Oregon (the “Additional Bend Premises”). The term of the lease for the Bend Premises and the Additional Bend Premises expires on March 31, 2022 (the “Bend Term”). The Company has an option to extend the Bend Term for up to two additional periods of three years and a right of first refusal to lease an additional suite in the same building.

The leases for the Newton Premises, the Additional Newton Premises, the Bend Premises, and the Additional Bend Premises are classified as operating leases. In the first quarter of 2019, the Company adopted ASU 2016-02 and recorded a non-cash transaction to recognize a right-of-use asset of $0.4 million in other non-current assets, as well as a lease liability of $0.2 million in other current liabilities and $0.2 million in other non-current liabilities. Since the adoption of ASU 2016-02, the Company has recognized additional right-of-use assets totaling $0.3 million as well as additional lease liabilities totaling $0.1 million in other current liabilities and $0.2 million in other non-current liabilities in conjunction with the commencement of the leases for the Additional Newton Premises and the Additional Bend Premises. The Company’s lease liability represents the net present value of future lease payments utilizing a discount rate of 8%, for each of the three months ended March 31, 2021 and 2020, which corresponds to the Company’s incremental borrowing rate. As of September 30, 2020,March 31, 2021, the weighted average remaining lease term was 1.71.2 years. For the three and nine months ended September 30, 2020, the Company recorded expense of $0.1 million and $0.2 million, respectively, related to the leases. For each of the three and nine months ended September 30, 2019,March 31, 2021 and 2020, the Company recorded expense of $0.1 million related to the leases. During each of the three and nine months ended September 30,March 31, 2021 and 2020, the

Company made cash payments of $0.1 million and $0.2 million, respectively, for amounts included in the measurement of lease liabilities. During each of the three and nine months ended September 30, 2019, the Company made cash payments of $0.1 million. The Company is therefore reporting a right-of-use asset of $0.4$0.3 million in Other non-current assets and lease liabilities totaling $0.4$0.3 million in Other current liabilities and Other non-current liabilities as of September 30, 2020.March 31, 2021.

The following table reconciles the undiscounted lease liabilities to the total lease liabilities recognized on the unaudited condensed balance sheet as of September 30, 2020:March 31, 2021:

Future minimum

The Company’s lease payments at December 31, 2019 wereliabilities are reported on the balance sheets as follows:

License Agreements

In April 2014, Private Acerthe Company obtained exclusive rights to intellectual property relating to ACER-001 and preclinical and clinical data, through a license agreement with Baylor College of Medicine (“BCM”). Under the terms of the agreement, as amended, the Company has worldwide exclusive rights to develop, manufacture, use, sell and import licensed products as defined in the agreement. The license agreement requires the Company to make certain upfront and annual payments to BCM, as well as reimburse certain legal costs, make payments upon achievement of defined milestones, and pay royalties in the low single-digit percent range on net sales of any developed product over the royalty term.

In August 2016, Private Acerthe Company signed an agreement with Assistance Publique—Hôpitaux de Paris, Hôpital Européen Georges Pompidou (“AP-HP”) (via its Department of Clinical Research and Development) granting the Company the exclusive worldwide rights to access and use data from a randomized, controlled clinical study of celiprolol. The Company used this pivotal clinical data to support an NDA regulatory filing for EDSIVO^TM for the treatment of vEDS. The agreement requires the Company to make certain upfront payments to AP-HP, as well as reimburse certain costs and make payment of royalties in the low single-digit percent range on net sales of celiprolol over the royalty term.

In September 2018, the Company entered into a License Agreement for Development and Exploitation with AP-HP to acquire the exclusive worldwide intellectual property rights to three European patent applications relating to certain uses of celiprolol including (i) the optimal dose of celiprolol in treating vEDS patients, (ii) the use of celiprolol during pregnancy and (iii) the use of celiprolol to treat kyphoscoliotic Ehlers-Danlos syndrome (type VI). Pursuant to the agreement, the Company will reimburse AP-HP for certain costs and will pay annual maintenance fee payments. Subject to a minimum royalty amount, the Company will also pay royalty payments on annual net sales of celiprolol during the royalty term in the low single digit percent range, depending upon whether there is a valid claim of a licensed patent. Under the agreement, the Company will control and pay the costs of ongoing patent prosecution and maintenance for the licensed applications. The Company may terminate the agreement in its sole discretion upon written notice to AP-HP, and AP-HP may terminate the agreement in the event the Company fails to make the required payments after notice and opportunity to cure. Additionally, the agreement will terminate if the Company terminates clinical development, marketing approval is withdrawn by the health or regulatory authorities in all countries, the Company ceases to do business or there is a procedure of winding-up by court decision against the Company. The Company subsequently filed three U.S. patent applications on this subject matter in October 2018.

In December 2018, the Company entered into an exclusive license agreement with Sanofi granting the Company worldwide rights to osanetant, a clinical-stage, selective, non-peptide tachykinin NK3 receptor antagonist. The agreement required the Company to make a certain upfront payment to Sanofi, make payments upon achievement of defined development and sales milestones and pay royalties on net sales of osanetant over the royalty term. The Company plans to initially pursue development of osanetant as a potential treatment for iVMS.

On March 19, 2021, the Company entered into the Collaboration Agreement with Relief providing for the development and commercialization of ACER-001 for the treatment of various inborn errors of metabolism, including for the treatment of UCDs and MSUD. The Collaboration Agreement is the culmination of the Option Agreement previously entered into between the Company and Relief on January 25, 2021, which provided Relief with an exclusive period of time up to June 30, 2021 for the parties to enter into a mutually acceptable definitive agreement with respect to the potential collaboration and license arrangements. In consideration for the grant of the exclusivity option, (i) the Company received from Relief an upfront non-refundable payment of $1.0 million, (ii) Relief provided to the Company a 12-month secured loan in the principal amount of $4.0 million with interest at a rate equal to 6% per annum, as evidenced by a promissory note the Company issued to Relief, and (iii) the Company granted Relief a security interest in all of its assets to secure performance of the promissory note, as evidenced by a security agreement. Upon signing the Collaboration Agreement, the Company received an approximately $10.0 million cash payment from Relief (the $14.0 million (“Reimbursement Payment”), offset by repayment of the $4.0 million outstanding balance of the prior loan, plus interest, from Relief to the Company). Under the terms of the Collaboration Agreement, Relief will also pay the Company Development Payments of up to $20.0 million in U.S. development and commercial launch costs for the UCDs and MSUD indications, although the final $10.0 million of the Development Payments is subject to an NDA for ACER-001 in a UCD having been accepted for review by the FDA. Further, the Company retained development and commercialization rights in the U.S., Canada, Brazil, Turkey and Japan. The companies will split net profits from the Company’s territories 60%:40% in favor of Relief. Relief also licensed the rights for the

rest of the world, where the Company will receive from Relief a 15% royalty on all revenues received by Relief in Relief’s territories. The Company could also receive a total of $6.0 million in milestones based on the first European marketing approvals of ACER-001 for UCDs and MSUD. In connection with cancellation of the $4.0 million promissory note executed by the Company in favor of Relief on January 25, 2021, Relief released its security interest in all of the Company’s assets. 

Paycheck Protection Program (“PPP”) Loan

On April 11, 2020, the Company was advised that its principal bank, JPMorgan Chase Bank, N.A., had approved a $0.6 million loan under the PPP pursuant to the CARES Act that was signed into law on March 27, 2020.

As a U.S. small business, the Company has qualified for the PPP, which allows businesses and nonprofits with fewer than 500 employees to obtain loans of up to $10 million to incent companies to maintain their workers as they manage the business disruptions caused by the COVID-19 pandemic.

The loan, evidenced by a promissory note to JPMorgan Chase Bank, N.A. as lender, has a term of two years, is unsecured, and is guaranteed by the Small Business Administration. The loan bears interest at a fixed rate of one percent per annum, with the first six months of interest and principal deferred. Some or all of the loan may be forgiven if at least 75% of the loan proceeds are used by the Company to cover payroll costs, including benefits, and if the Company maintains its employment and compensation within certain parameters during the period following the loan origination date and complies with other relevant conditions. On June 5, 2020, the Payroll Protection Flexibility Act of 2020 was signed into law, adjusting certain terms of the loans issued under the PPP, including extending the initial deferral period from six to up to ten months, reducing from 75% to 60% the portion of loan proceeds required to be used to cover payroll costs, and allowing borrowers to elect a 24-week rather than an eight-week period related to employment and compensation provisions.

There can be no assurance that this PPP loan can be forgiven. The Company recordedis reporting the liability associated with the loan as $0.5 million in Other current liabilities and $38 thousand in Other non-current liabilities and accounts for the loan according to ASC 470.

Litigation

From time to time, the Company may become involved in litigation or proceedings relating to claims arising out of its operations.

Piper vs. Acer Therapeutics Inc.

On September 27, 2017, Piper Sandler & Co. (“Piper”) filed a lawsuit against the Company, Piper Sandler & Co. v. Acer Therapeutics Inc., Index No. 656055/2017, in the Supreme Court of the State of New York, County of New York. The complaint alleges that the Company breached its obligations to Piper pursuant to an August 30, 2016 engagement letter between the parties and an April 28, 2017 addendum thereto by failing to pay Piper (i) a fee of $1.1 million in connection with the financing which closed on September 19, 2017 for aggregate consideration of $15.7 million and (ii) $0.1 million in reimbursement for expenses incurred by Piper pursuant to the engagement letter. On November 10, 2017,The parties have reached a mutually satisfactory resolution of this dispute and the Company filed an answer and counterclaim in the lawsuit, denying Piper’s breach of contract allegation, asserting several defenses, and bringing several counterclaims, including claims for breach of contract and breachproposed settlement is pending approval of the duty of good faith and fair dealing. Piper filed a reply to the counterclaims denying the essential allegations, and fact discovery has largely concluded. On February 22, 2019, Piper filed a motion for summary judgment. On March 26, 2020, the Court denied Piper’s motion in part, as to Piper’s claim and the Company’s counterclaim for damages, and granted in part, as to certain counterclaims by the Company. Discovery is ongoing in the case. Pursuant to the Court’s directive, the parties have submitted a joint request for a pre-trial conference, which has not yet been scheduled.Court. The Company has not recorded a liability as of September 30, 2020March 31, 2021 because a potential loss is not probable or reasonably estimable given the status of the proceedings.

The Securities Class Action and Stockholder Derivative Actions

On July 1, 2019, plaintiff Tyler Sell filed a putative class action lawsuit, Sell v. Acer Therapeutics Inc. et alal., No. 1:19-cv-06137GHW, against the Company, Chris Schelling and Harry Palmin, in the U.S. District Court for the Southern District of New York. The Complaint alleges that the Company violated federal securities laws by allegedly making material false and misleading statements regarding the likelihood of FDA approval for the EDSIVO^TM NDA. With the selection of a lead plaintiff, the case is now captioned Skiadas v. Acer Therapeutics Inc. et al. The Lead Plaintiff filed a Second Amended Complaint on February 28, 2020 and the Company moved to dismiss the Second Amended Complaint on May 1, 2020. On June 16, 2020, the Court granted in part and denied in part the Company’s motion to dismiss. The Company filed its answer to the Second Amended Complaint on August 7, 2020, and the Court held an initial conference on August 17, 2020. TheAfter obtaining leave from the Court to do so, the Lead Plaintiff filed his Third Amended Complaint on February 4, 2021. Subsequent to March 31, 2021, the parties have reached an agreement in principle to settle this action for a payment of $8.4 million, which is subject to written documentation and Court approval. Payment of the settlement will be made by the Company’s insurance carriers. As of March 31, 2021, the Company has not recordedrecognized $8.4 million for the proposed settlement as a liability asloss in other current liabilities and also recognized a receivable from its insurance carrier of September 30, 2020 because a potential loss is not probable or reasonably estimable given the preliminary nature of the proceedings.an equal amount in prepaid expenses and other current assets.

The Stockholders’ Derivative Actions

On August 12, 2019, a stockholder’sstockholder derivative action, Gress v. Aselage et al., No. 1:19-cv-01505-MN, was filed in the U.S. District Court for the District of Delaware against certain of the Company’s present and former officers and directors, asserting damages resulting from the alleged breach of their fiduciary duties, based on the same facts at issue in the Skiadas case. On March 17, 2020, a second stockholder’sstockholder derivative action, Giroux v. Amello et al., No. 1:20-cv-10537-GAO, was filed in the U.S. District Court for the District of Massachusetts against certain of the Company’s present and former officers and directors, asserting claims based on the same facts at issue in the Skiadas and Gress cases. The parties in the Gress and Giroux cases have entered stipulations to stay the cases and the parties will meet and confer to propose case schedules to the Court in each of the respective cases. On June 23, 2020, a third stockholder’sstockholder derivative action, King v. Schelling, et al., No. 1:20-cv-04779-GHW, was filed in the U.S. District Court for the Southern District of New York against certain of the Company’s present and former officers and directors that arises from the same facts underlying the Skiadas, Gress, and Giroux cases. The parties have agreed to extend the deadline to respond to the Derivative Complaint to December 10, 2020. On July 6, 2020, a fourth stockholder derivative action, Diaz v. Amelloet al., No. 1:20-cv-00909-MN,was filed in the U.S. District Court for the District of Delaware. By Stipulation and Order dated August 7, 2020, the Gress and Diaz cases were consolidated under the caption In re Acer Therapeutics Inc. Derivative Litigation, Lead Case No. 1:19-cv-01505-MN. TheAs disclosed in a Current Report on Form 8-K filed by the Company on March 25, 2021, the parties have reached an agreement to settle all of the derivative cases. At a hearing held on May 12, 2021 in the District Court of Massachusetts, the Court administering the matter, the settlement was approved. Payment of the settlement amount of $0.5 million, plus legal fees and costs in excess of the retention (deductible) amount, will be made by the Company’s insurance carriers. As of March 31, 2021, the Company has not recorded in prepaid expenses and other current assets a $1.5 million receivable from its insurance carriers and has recorded in other current liabilities an offsetting liability as of September 30, 2020 because a potential loss is not probable or reasonably estimable given the preliminary nature of the proceedings.same amount for payment of the settlement of the stockholder derivative actions and for costs related to both the derivative and class action cases.

At-the-Market Facility

On November 9, 2018, the Company entered into a sales agreement with Roth Capital Partners, LLC, and on March 18, 2020, the Company entered into an amended and restated sales agreement with JonesTrading Institutional Services LLC and Roth Capital Partners, LLC. The agreement provides a facility for the offer and sale of shares of common stock from time to time having an aggregate offering price of up to $50$50.0 million depending upon market demand, in transactions deemed to be an “at-the-market” (“ATM”) offering. Any such sales would be effected pursuant to the Company’s registration statement on Form S-3 (File No. 333-228319), declared effective by the SEC on November 21, 2018. The Company has no obligation to sell any shares of common stock pursuant to the agreement and may at any time suspend sales pursuant to the agreement. Each party may terminate the agreement at any time without liability. As of September 30, 2020,During the three months March 31, 2021, the Company had sold an aggregate of 1,418,551877,107 shares of common stock through the ATM at an average gross sale price of $4.2664$3.1692 per share, for gross proceeds of $6.1$2.8 million. Proceeds for the three months ended March 31, 2021, net of $0.2 million and, net of fees and offering costs, of $0.3 million, net proceeds of $5.8were $2.6 million.

Private Placement

On July 24, 2020, the Company entered into a securities purchase agreement for the sale and issuance of an aggregate of 244,998 shares of the Company’s common stock, for an aggregate purchase price of $0.9 million, in a Private Placement with certain directors, officers, and employees at a price per share of $3.50. The shares of common stock issued in the Private Placement constitute “restricted securities” under the federal securities laws and are subject to a minimum six-month holding period.

Common Stock Purchase Agreement

On April 30, 2020, the Company entered into a purchase agreement and a registration rights agreement pursuant to which Lincoln Park has committed to purchase up to $15.0 million of the Company’s common stock. Under the terms and subject to the conditions of the purchase agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $15.0 million of the Company’s common stock. Such sales of common stock by the Company will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on June 8, 2020. The number of shares the Company may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may be increased up to 100,000 shares, depending upon the market price of the Company’s common stock at the time of sale and subject to a maximum limit of $1.0 million per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale as computed under the purchase agreement. In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the purchase agreement. As of September 30, 2020, the Company has not sold any shares of common stock under the purchase agreement. See Note 10, “Subsequent Events”, regarding subsequent events related to the purchase agreement.

Under applicable rules of the Nasdaq Capital Market, in no event may the Company issue or sell to Lincoln Park under the purchase agreement more than 19.99% of the shares of the Company’s common stock outstanding immediately prior to the execution of the purchase agreement, unless (i) the Company obtains stockholder approval to issue shares of common stock in excess of the

Exchange Cap or (ii) the average price of all applicable sales of common stock to Lincoln Park under the purchase agreement equals or exceeds $2.1668, such that issuances and sales of the common stock to Lincoln Park under the purchase agreement would be exempt

from the issuance limitation under applicable Nasdaq rules. The Company determined that the right to sell additional shares represents a freestanding put option under ASC 815 Derivatives and Hedging, but has a fair value of zero, and therefore no additional accounting was required.

Lincoln Park has no right to require the Company to sell any shares of common stock to Lincoln Park, but Lincoln Park is obligated to make purchases as the Company directs, subject to certain conditions. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if doing so would result in Lincoln Park beneficially owning more than 9.99% of its common stock.

Actual sales of shares of common stock to Lincoln Park under the purchase agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the common stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.

The proceeds under the purchase agreement to the Company will depend on the frequency and prices at which the Company sells shares of its stock to Lincoln Park. The Company issued 148,148 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the purchase agreement. The $0.4 million fair value of the commitment fee shares was recorded to General and administrative expense along with other costs incurred in connection with entering into the purchase agreement.

During the three months ended March 31, 2021, the Company sold 200,000 shares of common stock under its purchase agreement with Lincoln Park at a weighted average price of $2.47 per share, resulting in proceeds of $0.5 million.

2018 Stock Incentive Plan

The Company’s 2018 Stock Incentive Plan (the “2018 Plan”), adopted on May 14, 2018, provides for the grant of up to 500,000 shares of common stock as stock options, restricted stock, stock appreciation rights, restricted stock units, performance-based awards and cash-based awards that may be settled in cash, stock or other property to employees, executive officers, directors, and consultants.

In addition to the 500,000 shares, the total number of shares reserved for issuance under the 2018 Plan also consists of the sum of the number of shares subject to outstanding awards under the Company’s 2010 Stock Incentive Plan, as amended and restated (the “2010 Plan”), and the 2013 Stock Incentive Plan, as amended (the “2013 Plan”), as of the effective date of the 2018 Plan that are subsequently forfeited or terminated for any reason prior to being exercised or settled, plus the number of shares subject to vesting restrictions under the 2010 Plan and the 2013 Plan on the effective date of the 2018 Plan that are subsequently forfeited, plus the number of shares reserved but not issued or subject to outstanding grants under the 2010 Plan and the 2013 Plan as of the effective date of the 2018 Plan, up to a maximum of 635,170 shares in aggregate. In addition, the number of shares authorized for issuance under the 2018 Plan is automatically increased (the “evergreen provision”) on the first day of each fiscal year beginning on January 1, 2019, and ending on (and including) January 1, 2028, in an amount equal to the lesser of (i) 4% of the outstanding shares of common stock on the last day of the immediately preceding fiscal year, or (ii) another amount (including zero) determined by the Company’s Board of Directors. Any shares subject to awards granted under the 2018 Plan that are forfeited or terminated before being exercised or settled, or are not delivered to the participant because such award is settled in cash, will again become available for issuance under the 2018 Plan. Shares withheld to satisfy the grant, exercise price or tax withholding obligation related to an award will again become available for issuance under the 2018 Plan.

The 2018 Plan is administered by the Company’s Board of Directors, which may in turn delegate authority to administer the plan to a committee such as the Compensation Committee, referred to herein as the 2018 Plan administrator. Subject to the terms of the 2018 Plan, the 2018 Plan administrator will determine recipients, the number of shares or amount of cash subject to awards to be granted, whether an option is to be an incentive stock options or non-incentive stock options and the terms and conditions of the stock awards, including the period of their exercisability and vesting. Subject to the limitations set forth below, the 2018 Plan administrator will also determine the exercise price of options granted under the 2018 Plan. The 2018 Plan expressly provides that, without the approval of the stockholders, the 2018 Plan administrator does not have the authority to reduce the exercise price of any outstanding stock options or stock appreciation rights under the 2018 Plan (except in connection with certain corporate transactions, such as stock splits, certain dividends, recapitalizations, reorganizations, mergers, spin-offs and the like), or cancel any outstanding underwater stock options or stock appreciation rights in exchange for cash or new stock awards under the 2018 Plan.

Option awards are generally granted with an exercise price equal to the fair value of the common stock at the date of grant and have contractual terms of 10 years. Stock options granted to executive officers and employees generally vest either 1) over a four-year period, with 25% vesting on the one-year anniversary of the grant date and the remaining 75% vesting quarterly over the remaining three years, assuming continued service, and with vesting acceleration in full immediately prior to a change in control, or 2) for certain stock options granted on September 18, 2019, 50% vest on each of January 1, 2021 and January 1, 2022, assuming continued service, and with vesting acceleration in full immediately prior to a change in control. Restricted stock units generally vest and are settled upon the first anniversary of the grant date. At September 30, 2020, after the authorization onOn January 1, 2021 and 2020, of529,325 and 403,807 additional shares, respectively, were

authorized according to the evergreen provision, 525,265provision. As of March 31, 2021, 705,278 shares of common stock remained available for the grant of future awards under the 2018 Plan.

2013 Stock Incentive Plan

The Company’s 2013 Plan provided for the issuance of up to 165,000 shares of common stock as incentive or non-qualified stock options and/or restricted common stock to employees, officers, directors, consultants and advisers. Option awards were generally granted with an exercise price equal to the fair value of the common stock at the date of grant and had contractual terms of 10 years. At September 30, 2020,March 31, 2021, all shares available under the 2013 Plan were subject to outstanding equity awards, and no new awards may be granted under the 2013 Plan.

2010 Stock Incentive Plan

The Company’s 2010 Plan, as amended and restated, provided for the grant of up to 470,170 shares of common stock as incentive or non-qualified stock options, stock appreciation rights, restricted stock units and/or restricted common stock to employees, officers, directors, consultants and advisers. Option awards were generally granted with an exercise price equal to the fair value of the common stock at the date of grant and had contractual terms of 10 years. At September 30, 2020,March 31, 2021, all shares available under the 2010 Plan were subject to outstanding equity awards, and no new awards may be granted under the 2010 Plan. 

Stock Plan Activity

A summary of option activity under the 2018 Plan, 2013 Plan, and 2010 Plan for the ninethree months ended September 30, 2020,March 31, 2021, is as follows:

A summary of restricted stock unit activity under the 2018 Plan for the nine months ended September 30, 2020, is as follows:

At September 30, 2020,March 31, 2021, there was $3.5$3.7 million of unrecognized compensation expense related to the stock-based compensation arrangements granted under all plans. The average remaining vesting period for options was 1.62.4 years. The weighted average grant date fair value of options granted during the ninethree months ended September 30, 2020March 31, 2021 was $2.03.$2.89. The amount of stock-based compensation expense recorded to research and development expenses and to general and administrative expenses is detailed in table below:

Basic net loss per share is computed by dividing the net loss in each period by the weighted-average number of common shares outstanding during such period. Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had

been issued and if the additional common shares were dilutive. For the periods presented, common stock equivalents, consisting of stock-based awards, were not included in the calculation of the diluted loss per share because to do so would be anti-dilutive.

As of September 30,March 31, 2021 and 2020, and 2019, the number of shares of common stock underlying potentially dilutive securities are comprised of:

In June 2019, the Company received a Complete Response Letter from the FDA regarding its NDA for EDSIVO^TM (celiprolol) for the treatment of vEDS. The Complete Response Letter stated that it will be necessary to conduct an adequate and well-controlled trial to determine whether celiprolol reduces the risk of clinical events in patients with vEDS. In order to reduce operating expenses and conserve cash resources, in June 2019, the Company initiated a corporate restructuring, which included a reduction of approximately 60% of its full-time workforce of 48 employees and halted precommercial activities of EDSIVO^TM. In the second quarter of 2019, the Company recorded a one-time severance-related charge of $1.5 million associated with the workforce reduction in the quarter ended June 30, 2019, of which $1.0 million was included in general and administrative expenses and $0.5 million was included in research and development expenses. As of December 31, 2019, the Company had no remaining liability related to the one-time severance-related charge.

10. SUBSEQUENT EVENTS

Subsequent to September 30, 2020, during multiple trading days through October 8, 2020, the Company sold an aggregate of 72,274 shares of common stock under its ATM facility at an average gross sale price of $3.1456 per share, resulting in proceeds of $0.2 million.

Subsequent to September 30, 2020, through October 26, 2020, the Company sold 300,000 shares of common stock under its purchase agreement with Lincoln Park at a weighted average price of $2.77 per share, resulting in proceeds of $0.8 million.

The following discussion and analysis of our financial condition is as of September 30, 2020.March 31, 2021. Our results of operations and cash flows should be read in conjunction with our unaudited condensed financial statements and notes thereto included elsewhere in this report and the audited financial statements and the notes thereto included in our Form 10-K for the year ended December 31, 2019.2020.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements contained in this report, other than statements of historical fact, constitute “forward-looking statements.” The words “expects,” “believes,” “hopes,” “anticipates,” “estimates,” “may,” “could,” “intends,” “exploring,” “evaluating,” “progressing,” “proceeding” and similar expressions are intended to identify forward-looking statements.

These forward-looking statements do not constitute guarantees of future performance. Investors are cautioned that statements which are not strictly historical statements, including, without limitation, statements regarding current or future financial payments, costs, returns, royalties, performance and position, plans and objectives for future operations, plans and objectives for product development, plans and objectives for present and future clinical trials and results of such trials, plans and objectives for regulatory approval, litigation, intellectual property, product development, manufacturing plans and performance, management’s initiatives and strategies, and the development of our product candidates, including emetine hydrochloride (“emetine”)ACER-001 (sodium phenylbutyrate), ACER-001, EDSIVO™ (celiprolol), ACER-801 (osanetant), and osanetant,ACER-2820 (emetine), constitute forward-looking statements. Such forward-looking statements are subject to a number of risks and uncertainties that could affect our ability to successfully implement our business strategy and cause actual results to differ materially from those anticipated. TheseYou should carefully consider all of the information in this report and, in particular, the following principal risks and uncertainties include, but are not limited to, those risks described inall of the summary below, as well as those risks which areother specific factors further discussed in Item 1A of this report, “Risk Factors,” before deciding whether to invest in this report:our company:

Summary Risk Factors