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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

OR

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

COMMISSION FILE NUMBER 001-36279

CARA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware

75-3175693

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4 Stamford Plaza

107 Elm Street, 9th Floor

Stamford, Connecticut

06902

(Address of registrant’s principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (203) 406-3700

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

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.001 per share

CARA

The Nasdaq Stock Market LLC

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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

 

  

Accelerated Filer

Non-Accelerated Filer

 

  

Smaller Reporting Company

Emerging Growth Company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No.

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of August 5, 2021 was: 50,089,936.

Table of Contents

CARA THERAPEUTICS, INC.

INDEX TO FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021

PART I –FINANCIAL INFORMATION

PAGE

NUMBER

Item 1.

Financial Statements (Unaudited):

Condensed Balance Sheets as of June 30, 2021 and December 31, 2020

1

Condensed Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020

2

Condensed Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2021 and 2020

3

Condensed Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020

4

Notes to Condensed Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

32

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

54

Item 4.

Controls and Procedures

55

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

56

Item 1A.

Risk Factors

56

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

56

Item 3.

Defaults Upon Senior Securities

56

Item 4.

Mine Safety Disclosures

56

Item 5.

Other Information

56

Item 6.

Exhibits

57

SIGNATURES

58

Table of Contents

PART I

FINANCIAL INFORMATION

Item 1.Financial Statements.

CARA THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(amounts in thousands, excluding share and per share data)

(unaudited)

    

June 30, 2021

    

December 31, 2020

Assets

 

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

22,335

$

31,683

Marketable securities

 

132,841

 

149,242

Income tax receivable

 

697

 

1,507

Other receivables

 

305

 

557

Prepaid expenses

 

8,295

 

12,076

Total current assets

 

164,473

 

195,065

Operating lease right-of-use assets

3,641

4,279

Marketable securities, non-current

 

52,216

 

70,565

Property and equipment, net

 

716

 

840

Restricted cash

 

408

 

408

Total assets

$

221,454

$

271,157

Liabilities and stockholders’ equity

 

 

  

Current liabilities:

 

 

  

Accounts payable and accrued expenses

$

13,493

$

16,881

Operating lease liabilities, current

 

1,677

 

1,602

Total current liabilities

 

15,170

 

18,483

Operating lease liabilities, non-current

2,818

3,673

Commitments and contingencies (Note 15)

 

 

Stockholders’ equity:

 

 

  

Preferred stock; $0.001 par value; 5,000,000 shares authorized at June 30, 2021 and December 31, 2020, zero shares issued and outstanding at June 30, 2021 and December 31, 2020

 

 

Common stock; $0.001 par value; 100,000,000 shares authorized at June 30, 2021 and December 31, 2020, 50,088,161 shares and 49,872,213 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

50

 

50

Additional paid-in capital

 

649,784

 

641,195

Accumulated deficit

 

(446,363)

 

(392,317)

Accumulated other comprehensive (loss) income

 

(5)

 

73

Total stockholders’ equity

 

203,466

 

249,001

Total liabilities and stockholders’ equity

$

221,454

$

271,157

See Notes to Condensed Financial Statements.

1

Table of Contents

CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(amounts in thousands, excluding share and per share data)

(unaudited)

Three Months Ended

Six Months Ended

    

June 30, 2021

    

June 30, 2020

    

June 30, 2021

    

June 30, 2020

    

Revenue:

License and milestone fees

$

$

5,099

$

1,192

$

13,120

Collaborative revenue

 

 

 

706

 

Clinical compound revenue

 

 

535

 

37

 

607

Total revenue

 

 

5,634

 

1,935

 

13,727

Operating expenses:

 

  

 

  

 

  

 

  

Research and development

 

25,225

 

26,108

 

44,356

 

59,644

General and administrative

 

5,651

 

5,410

 

12,016

 

9,968

Total operating expenses

 

30,876

 

31,518

 

56,372

 

69,612

Operating loss

 

(30,876)

 

(25,884)

 

(54,437)

 

(55,885)

Other income, net

 

131

 

634

 

391

 

1,591

Loss before benefit from income taxes

 

(30,745)

 

(25,250)

 

(54,046)

 

(54,294)

Benefit from income taxes

 

 

182

 

 

304

Net Loss

$

(30,745)

$

(25,068)

$

(54,046)

$

(53,990)

Net Loss per share:

 

 

  

 

  

 

  

Basic and Diluted

$

(0.61)

$

(0.54)

$

(1.08)

$

(1.15)

Weighted average shares:

 

 

 

  

 

Basic and Diluted

 

50,059,984

 

46,799,703

 

49,989,379

 

46,762,327

Other comprehensive income (loss), net of tax of $0:

 

  

 

 

  

 

  

Change in unrealized gains (losses) on available-for-sale marketable securities

 

(17)

 

703

 

(78)

 

465

Total comprehensive loss

$

(30,762)

$

(24,365)

$

(54,124)

$

(53,525)

See Notes to Condensed Financial Statements.

2

Table of Contents

CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands except share and per share data)

(unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

Balance at December 31, 2019

46,720,225

$

47

$

587,223

$

(400,727)

$

170

$

186,713

Stock-based compensation expense

 

 

 

2,846

 

 

 

2,846

Shares issued upon exercise of stock options

 

7,500

 

 

75

 

 

 

75

Net loss

 

 

 

 

(28,922)

 

 

(28,922)

Other comprehensive loss

 

 

 

 

 

(238)

 

(238)

Balance at March 31, 2020

46,727,725

$

47

$

590,144

$

(429,649)

$

(68)

$

160,474

Stock-based compensation expense

 

 

2,993

 

 

 

2,993

Shares issued upon exercise of stock options

16,846

 

 

201

 

 

 

201

Shares issued upon vesting of restricted stock units

119,834

1,625

1,625

Net loss

 

 

 

(25,068)

 

 

(25,068)

Other comprehensive income

 

 

 

 

703

 

703

Balance at June 30, 2020

46,864,405

$

47

$

594,963

$

(454,717)

$

635

$

140,928

Accumulated

Additional

Other

Total

Common Stock

Paid-In

Accumulated

Comprehensive

Stockholders’

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income (Loss)

    

Equity

Balance at December 31, 2020

49,872,213

$

50

$

641,195

$

(392,317)

$

73

$

249,001

Stock-based compensation expense

 

 

 

2,744

 

 

 

2,744

Shares issued upon exercise of stock options

 

45,035

 

 

688

 

 

 

688

Shares issued upon vesting of restricted stock units

109,419

1,388

1,388

Net loss

 

 

 

 

(23,301)

 

 

(23,301)

Other comprehensive loss

 

 

 

 

 

(61)

 

(61)

Balance at March 31, 2021

50,026,667

$

50

$

646,015

$

(415,618)

$

12

$

230,459

Stock-based compensation expense

 

 

3,376

 

 

 

3,376

Shares issued upon exercise of stock options

25,494

 

 

293

 

 

 

293

Shares issued upon vesting of restricted stock units

36,000

 

 

100

 

 

 

100

Net loss

 

 

 

(30,745)

 

 

(30,745)

Other comprehensive loss

 

 

 

 

(17)

 

(17)

Balance at June 30, 2021

50,088,161

$

50

$

649,784

$

(446,363)

$

(5)

$

203,466

See Notes to Condensed Financial Statements.

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CARA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

Six Months Ended

    

June 30, 2021

    

June 30, 2020

    

Operating activities

 

  

 

  

Net loss

$

(54,046)

$

(53,990)

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

 

  

 

Stock-based compensation expense

 

7,608

 

7,465

Depreciation and amortization

 

124

 

96

Amortization expense component of lease expense

 

638

 

325

Amortization/(accretion) of available-for-sale marketable securities, net

384

(34)

Realized gain on sale of available-for-sale marketable securities

 

(39)

 

(60)

Realized gain on sale of property and equipment

 

(70)

 

Deferred revenue

 

 

(12,494)

Changes in operating assets and liabilities:

 

 

Income tax receivable

 

810

 

(304)

Other receivables

 

252

 

485

Prepaid expenses

 

3,781

 

(1,261)

Accounts payable and accrued expenses

 

(3,388)

 

(5,713)

Operating lease liabilities

(780)

(470)

Net cash used in operating activities

 

(44,726)

 

(65,955)

Investing activities

 

  

 

  

Proceeds from maturities of available-for-sale marketable securities

 

80,470

 

97,645

Proceeds from redemptions of available-for-sale marketable securities, at par

8,600

17,035

Proceeds from sale of available-for-sale marketable securities

 

9,029

 

10,677

Purchases of available-for-sale marketable securities

 

(63,772)

 

(21,016)

Proceeds from sale of property and equipment

 

70

 

Net cash provided by investing activities

 

34,397

 

104,341

Financing activities

 

  

 

  

Proceeds from the exercise of stock options

 

981

 

276

Net cash provided by financing activities

 

981

 

276

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(9,348)

 

38,662

Cash, cash equivalents and restricted cash at beginning of period

 

32,091

 

18,713

Cash, cash equivalents and restricted cash at end of period

$

22,743

$

57,375

See Notes to Condensed Financial Statements.

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Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

1. Business

Cara Therapeutics, Inc., or the Company, is a clinical-stage biopharmaceutical corporation formed on July 2, 2004. The Company is focused on developing and commercializing new chemical entities designed to alleviate pruritus by selectively targeting peripheral kappa opioid receptors. The Company’s primary activities to date have been organizing and staffing the Company, developing its product candidates and raising capital.

As of June 30, 2021, the Company had raised aggregate net proceeds of approximately $519,600 from several rounds of equity financing, including its initial public offering, or IPO, which closed in February 2014 and four follow-on public offerings of common stock, which closed in July 2019, July 2018, April 2017 and August 2015, respectively, and the issuance of convertible preferred stock and debt prior to the IPO. The Company had also earned approximately $203,800 under its license agreements for CR845/difelikefalin, primarily with Vifor (International) Ltd., or Vifor, Vifor Fresenius Medical Care Renal Pharma Ltd., or VFMCRP, Maruishi Pharmaceutical Co. Ltd., or Maruishi, and Chong Kun Dang Pharmaceutical Corp., or CKDP, and an earlier product candidate for which development efforts ceased in 2007. Additionally, in October 2020, the Company received net proceeds of $38,449 from the issuance and sale of 2,939,552 shares of the Company’s common stock to Vifor in connection with the Company’s license agreement with Vifor. Furthermore, in May 2018, the Company received net proceeds of $14,556 from the issuance and sale of 1,174,827 shares of the Company’s common stock to Vifor in connection with the Company’s license agreement with VFMCRP (see Note 10, Collaboration and Licensing Agreements).

As of June 30, 2021, the Company had unrestricted cash and cash equivalents and marketable securities of $207,392 and an accumulated deficit of $446,363. The Company has incurred substantial net losses and negative cash flows from operating activities in nearly every fiscal period since inception and expects this trend to continue for the foreseeable future. The Company recognized net losses of $30,745 and $25,068 for the three months ended June 30, 2021 and 2020, respectively, and $54,046 and $53,990 for the six months ended June 30, 2021 and 2020, respectively, and had net cash used in operating activities of $44,726 and $65,955 for the six months ended June 30, 2021 and 2020, respectively.

The Company is subject to risks common to other life science companies including, but not limited to, uncertainty of product development and commercialization, lack of marketing and sales history, development by its competitors of new technological innovations, dependence on key personnel, market acceptance of products, product liability, protection of proprietary technology, ability to raise additional financing, and compliance with Food and Drug Administration, or FDA, and other government regulations. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate recurring product revenue or achieve profitability.

2. Basis of Presentation

The unaudited interim condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission, or SEC. Accordingly, they do not include all information and disclosures necessary for a presentation of the Company’s financial position, results of operations and cash flows in conformity with generally accepted accounting principles in the United States of America, or GAAP. In the opinion of management, these unaudited interim financial statements reflect all adjustments, consisting primarily of normal recurring accruals, necessary for a fair presentation of results for the periods presented. The results of operations for interim periods are not necessarily indicative of the results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by SEC rules and regulations; however, the Company believes that the disclosures are adequate to make the information presented not misleading. The condensed balance sheet data as of December 31, 2020 were derived from audited financial statements, but do not include all disclosures required by GAAP. These unaudited interim

5

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

condensed financial statements should be read in conjunction with the audited financial statements and accompanying notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, as of the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. The more significant estimates include the fair value of marketable securities that are classified as level 2 of the fair value hierarchy, the periods over which certain revenues will be recognized, including licensing and collaborative revenue recognized from non-refundable up-front and milestone payments, the determination of prepaid research and development, or R&D, clinical costs and accrued research projects, the amount of non-cash compensation costs related to share-based payments to employees and non-employees and the periods over which those costs are expensed, the incremental borrowing rate used in lease calculations and the likelihood of realization of deferred tax assets.

The ongoing COVID-19 pandemic has interrupted business operations across the globe. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these condensed financial statements, the Company is not aware of any specific event or circumstance that would require the Company to update its estimates, assumptions and judgments or revise the reported amounts of assets and liabilities or the disclosure of contingent assets and liabilities. These estimates, however, may change as new events occur and additional information is obtained, and are recognized in the condensed financial statements as soon as they become known.

Actual results could differ materially from the Company’s estimates and assumptions.

Significant Accounting Policies

There have been no material changes to the significant accounting policies previously disclosed in Note 2 to the Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, except for the recent adoption of new accounting pronouncements as disclosed below.

Accounting Pronouncements Recently Adopted

In December 2019, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2019-12, Income Taxes (Topic 740), or ASU 2019-12, which removes specific exceptions to the general principles in Topic 740. ASU 2019-12 eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss. ASU 2019-12 also simplifies the accounting for income taxes for: (i) franchise taxes that are partially based on income; (ii) transactions with a government that result in a step up in the tax basis of goodwill; (iii) separate financial statements of legal entities that are not subject to tax; and (iv) enacted changes in tax laws in interim periods. The amendments in ASU 2019-12 are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The amendments in ASU 2019-12 related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all

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Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. The Company adopted ASU 2019-12 on January 1, 2021 and it did not have a material effect on its results of operations, financial position, and cash flows due to the full valuation allowance recorded.

3. Available-for-Sale Marketable Securities

As of June 30, 2021 and December 31, 2020, the Company’s available-for-sale marketable securities consisted of debt securities issued by the U.S. Treasury, U.S. government-sponsored entities and investment grade institutions as well as municipal bonds.

The following tables summarize the Company’s available-for-sale marketable securities by major type of security as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

Gross Unrealized

Estimated Fair

Type of Security

    

Amortized Cost

    

Gains

    

Losses

    

Value

U.S. Treasury securities

$

10,106

$

3

$

$

10,109

U.S. government agency obligations

 

14,572

 

5

 

(10)

 

14,567

Corporate bonds

 

44,850

 

15

 

(31)

 

44,834

Commercial paper

99,705

13

(1)

99,717

Municipal bonds

 

15,829

 

17

 

(16)

 

15,830

Total available-for-sale marketable securities

$

185,062

$

53

$

(58)

$

185,057

As of December 31, 2020

Gross Unrealized

Estimated Fair

Type of Security

    

Amortized Cost

    

Gains

    

Losses

    

Value

U.S. Treasury securities

$

20,710

$

41

$

(1)

$

20,750

U.S. government agency obligations

 

22,125

 

4

 

(1)

 

22,128

Corporate bonds

 

49,080

 

61

 

(23)

 

49,118

Commercial paper

 

116,139

 

5

 

(17)

 

116,127

Municipal bonds

11,680

12

(8)

11,684

Total available-for-sale marketable securities

$

219,734

$

123

$

(50)

$

219,807

The following tables summarize the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities by investment category and disaggregated by the length of time that individual debt securities have been in a continuous unrealized loss position as of June 30, 2021 and December 31, 2020:

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Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

As of June 30, 2021

Less than 12 Months

12 Months or Greater

Total

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair 

Unrealized

    

 Value

    

Losses

    

Value

    

Losses

    

Value

    

Losses

U.S. government agency obligations

$

6,990

$

(10)

$

$

$

6,990

$

(10)

Corporate bonds

 

30,166

 

(31)

 

 

 

30,166

 

(31)

Commercial paper

9,492

(1)

9,492

(1)

Municipal bonds

6,404

(16)

6,404

(16)

Total

$

53,052

$

(58)

$

$

$

53,052

$

(58)

As of December 31, 2020

Less than 12 Months

12 Months or Greater

Total

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

    

 Value

    

Losses

    

 Value

    

Losses

    

 Value

    

Losses

U.S. Treasury securities

$

12,682

$

(1)

$

$

$

12,682

$

(1)

U.S. government agency obligations

2,500

(1)

2,500

(1)

Corporate bonds

 

23,553

 

(23)

 

 

 

23,553

 

(23)

Commercial paper

 

68,897

 

(17)

 

 

 

68,897

 

(17)

Municipal bonds

 

6,259

 

(8)

 

 

 

6,259

 

(8)

Total

$

113,891

$

(50)

$

$

$

113,891

$

(50)

As of June 30, 2021 and December 31, 2020, no allowance for credit losses were recognized on the Company’s available-for-sale debt securities as no portion of the unrealized losses associated with those securities were due to credit losses. The information that the Company considered in reaching the conclusion that an allowance for credit losses was not necessary is as follows:

As of June 30, 2021 and December 31, 2020, the Company held a total of 24 out of 59 positions and 30 out of 59 positions, respectively, that were in an unrealized loss position, none of which had been in an unrealized loss position for 12 months or greater. Unrealized losses individually and in aggregate were not considered to be material for each respective period. Based on the Company’s review of these securities, the Company believes that the cost basis of its available-for-sale marketable securities is recoverable.

U.S. government agency obligations. The unrealized losses on the Company’s investments in direct obligations of U.S. government agencies were due to changes in interest rates and non-credit related factors. The contractual terms of these investments do not permit the issuer to repay principal at a price less than the amortized cost bases of the investments, which is equivalent to the par value on the maturity date. The Company expects to recover the entire amortized cost bases of these securities on the maturity date. The Company does not intend to sell these investments, and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost bases. The Company held 2 out of 4 positions for its U.S. government agency obligations that were in unrealized loss positions as of June 30, 2021.

Corporate bonds, commercial paper, and municipal bonds. The unrealized losses on the Company’s investments in corporate bonds, commercial paper and municipal bonds were due to changes in interest rates and non-credit related factors. The credit ratings of these investments in the Company’s portfolio have not been downgraded below investment

8

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

grade status. The contractual terms of these investments do not permit the issuer to repay principal at a price less than the amortized cost bases of the investments, which is equivalent to the par value on the maturity date. The Company expects to recover the entire amortized cost bases of these securities on the maturity date. The Company does not intend to sell these investments, and it is not more likely than not that the Company will be required to sell these investments, before recovery of their amortized cost bases. The Company held 13 out of 18 positions for its corporate bonds, 3 out of 23 positions for its commercial paper, and 6 out of 11 positions for its municipal bonds, that were in unrealized loss positions as of June 30, 2021.

The Company classifies its marketable debt securities based on their contractual maturity dates. As of June 30, 2021, the Company’s marketable debt securities mature at various dates through May 2024. The amortized cost and fair values of marketable debt securities by contractual maturity were as follows.

As of June 30, 2021

As of December 31, 2020

Contractual maturity

    

Amortized Cost

    

Fair Value

    

Amortized Cost

    

Fair Value

Less than one year

$

132,817

$

132,841

$

149,164

$

149,242

One year to three years

 

52,245

 

52,216

 

70,570

 

70,565

Total

$

185,062

$

185,057

$

219,734

$

219,807

All available-for-sale marketable securities are classified as Marketable securities, current or Marketable securities, non-current depending on the contractual maturity date of the individual available-for-sale security. Other income, net includes interest and dividends, accretion/amortization of discounts/premiums, realized gains and losses on sales of securities and credit loss expense due to declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method.

During the three and six months ended June 30, 2021, the Company sold certain shares of its available-for-sale debt securities with a total fair value of $1,000 and $9,029, respectively, which resulted in no realized gains or losses for the three months ended June 30, 2021, and $39 of realized gains for the six months ended June 30, 2021, respectively. During the three and six months ended June 30, 2020, the Company sold certain shares of its available-for-sale debt securities with a total fair value of $10,677, which resulted in realized gains of $60 during the three and six months ended June 30, 2020.

As of June 30, 2021 and December 31, 2020, accrued interest receivables on our available-for-sale debt securities were $305 and $311, respectively.

9

Table of Contents

CARA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

(unaudited)

4. Accumulated Other Comprehensive Income (Loss)

The following table summarizes the changes in accumulated other comprehensive income (loss), net of tax, from unrealized gains (losses) on available-for-sale marketable securities, the Company’s only component of accumulated other comprehensive income (loss), for the six months ended June 30, 2021 and June 30, 2020.

    

Total Accumulated

Other Comprehensive 

Income (Loss)

Balance, December 31, 2020

$

73

Other comprehensive loss before reclassifications

 

(39)

Amount reclassified from accumulated other comprehensive income

 

(39)

Net current period other comprehensive loss

 

(78)

Balance, June 30, 2021

$

(5)

Balance, December 31, 2019

$

170

Other comprehensive income before reclassifications

 

525

Amount reclassified from accumulated other comprehensive income

 

(60)

Net current period other comprehensive income

 

465

Balance, June 30, 2020

$

635

Amounts reclassified out of accumulated other comprehensive income (loss) into net loss are determined by specific identification. The reclassifications out of accumulated other comprehensive income (loss) and into net loss were as follows:

Three Months Ended

Six Months Ended

Affected Line Item in the 

Component of Accumulated Other

June 30, 

June 30, 

Condensed Statements of

Comprehensive Income (Loss)

    

2021

    

2020

    

2021

    

2020

    

Comprehensive Income (Loss)

Unrealized gains (losses) on available-for-sale marketable securities:

 

  

 

  

 

  

 

  

 

  

Realized gains on sales of securities

$

$

60

$

39

$

60

Other income, net

Income tax effect