sbph-10q_20180930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2018

OR

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

For the transition period from                      to                     

Commission File Number: 001-37718

 

Spring Bank Pharmaceuticals, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

52-2386345

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

35 Parkwood Drive, Suite 210

Hopkinton, MA

01748

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (508) 473-5993

 

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

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

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

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

  

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

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

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

As of October 25, 2018, the registrant had 16,433,768 shares of common stock, $0.0001 par value per share, outstanding.

The registrant qualifies as a smaller reporting company. The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant based upon the closing price of common stock of $11.85 per share as of June 29, 2018, the last trading day of the registrant’s second fiscal quarter, was approximately $128,839,682.

 

 

 


 

Spring Bank Pharmaceuticals, Inc.

 

INDEX

 

 

 

 

 

PART I. FINANCIAL INFORMATION

Page    

 

Item 1.

Consolidated Financial Statements (Unaudited)

 

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Operations and Comprehensive Loss

4

 

Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Consolidated Financial Statements

6

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 6.

Exhibits

33

Exhibit Index

34

Signatures

35

 

 

 

i


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, projected costs, prospects, plans and objectives of management, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “design,” “expect,” “seek,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions.

These forward-looking statements include, but are not limited to, statements about:

 

our ongoing and planned preclinical studies and clinical trials;

 

preclinical study data and clinical trial data and the timing of results of our ongoing clinical studies and/or trials;

 

our plans to seek and enter into clinical trial collaborations and other broader collaborations; and

 

our estimates regarding prospects, strategies, expenses, operating capital requirements, results of operations and needs for additional financing.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Factors that could cause actual results or events to differ materially from the forward-looking statements that we make include, but are not limited to, the following:

Our business currently depends substantially on the success of clinical trials for inarigivir soproxil, which we refer to as inarigivir, which is still under development. If we are unable to obtain regulatory approval for, or successfully commercialize, inarigivir, our business will be materially harmed.

We are very early in our development efforts and our product candidates may not be successful in later stage clinical trials.  Results obtained in our preclinical studies and clinical trials to date are not necessarily indicative of results to be obtained in future clinical trials.  As a result, our product candidates may never be approved as marketable therapeutics.

We will need additional funding to complete the development of our product candidates and before we can expect to become profitable from the sales of our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

We rely, and expect to continue to rely, on third parties to conduct our clinical trials and to manufacture our product candidates for preclinical and clinical testing. These third parties may not perform satisfactorily, which could delay our product development activities.

If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents which are sufficient to protect our product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

We may not be able to retain key executives or to attract, retain and motivate key personnel. If we are unable to retain such key personnel, it could have a material adverse impact on our business and prospects.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. You should also read carefully the factors described in the section “Risk Factors” of this Quarterly Report on Form 10-Q and “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised, however, to consult any further disclosures we make on related subjects in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, press releases, and our website. Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated events.

2


 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements.

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

ASSETS

 

(unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

     Cash and cash equivalents

 

$

23,637

 

 

$

23,649

 

     Marketable securities

 

 

29,868

 

 

 

26,906

 

     Prepaid expenses and other current assets

 

 

1,029

 

 

 

580

 

Total current assets

 

 

54,534

 

 

 

51,135

 

     Marketable securities, long-term

 

 

17,827

 

 

 

 

     Property and equipment, net

 

 

2,391

 

 

 

687

 

     Restricted cash

 

 

234

 

 

 

484

 

     Other assets

 

 

81

 

 

 

35

 

Total

 

$

75,067

 

 

$

52,341

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

     Accounts payable

 

$

1,374

 

 

$

1,700

 

     Accrued expenses and other current liabilities

 

 

3,740

 

 

 

2,734

 

Total current liabilities

 

 

5,114

 

 

 

4,434

 

     Warrant liabilities

 

 

9,291

 

 

 

13,128

 

     Other long-term liabilities

 

 

130

 

 

 

31

 

Total liabilities

 

 

14,535

 

 

 

17,593

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value—authorized, 10,000,000 shares at September 30, 2018

     and December 31, 2017; no shares issued or outstanding at September 30, 2018 and

     December 31, 2017

 

 

 

 

 

 

Common stock, $0.0001 par value—authorized, 200,000,000 shares at September 30, 2018

     and December 31, 2017; 16,431,171 and 12,961,993 shares issued and outstanding

     at September 30, 2018 and December 31, 2017, respectively

 

 

2

 

 

 

1

 

Additional paid-in capital

 

 

157,209

 

 

 

113,984

 

Accumulated deficit

 

 

(96,643

)

 

 

(79,214

)

Other comprehensive loss

 

 

(36

)

 

 

(23

)

Total stockholders’ equity

 

 

60,532

 

 

 

34,748

 

Total

 

$

75,067

 

 

$

52,341

 

 

See accompanying notes to consolidated financial statements.

 

 

3


 

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In Thousands, Except Share and Per Share Data)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

5,656

 

 

$

3,221

 

 

$

15,188

 

 

$

9,152

 

General and administrative

 

 

2,059

 

 

 

1,968

 

 

 

6,681

 

 

 

5,811

 

Total operating expenses

 

 

7,715

 

 

 

5,189

 

 

 

21,869

 

 

 

14,963

 

Loss from operations

 

 

(7,715

)

 

 

(5,189

)

 

 

(21,869

)

 

 

(14,963

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

271

 

 

 

141

 

 

 

603

 

 

 

220

 

Change in fair value of warrant liabilities

 

 

(1,336

)

 

 

(5,780

)

 

 

3,837

 

 

 

(11,474

)

Net loss

 

 

(8,780

)

 

 

(10,828

)

 

 

(17,429

)

 

 

(26,217

)

Unrealized loss on marketable securities

 

 

(14

)

 

 

(10

)

 

 

(13

)

 

 

(7

)

Comprehensive loss

 

$

(8,794

)

 

$

(10,838

)

 

$

(17,442

)

 

$

(26,224

)

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.59

)

 

$

(0.85

)

 

$

(1.27

)

 

$

(2.48

)

Diluted

 

$

(0.59

)

 

$

(0.85

)

 

$

(1.39

)

 

$

(2.48

)

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,841,197

 

 

 

12,696,986

 

 

 

13,677,375

 

 

 

10,555,461

 

Diluted

 

 

14,841,197

 

 

 

12,696,986

 

 

 

15,311,152

 

 

 

10,555,461

 

 

See accompanying notes to consolidated financial statements.

 

 

4


 

SPRING BANK PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In Thousands)

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(17,429

)

 

$

(26,217

)

Adjustments for:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

193

 

 

 

115

 

Loss on the disposal of property and equipment

 

 

16

 

 

 

 

Change in fair value of warrant liabilities

 

 

(3,837

)

 

 

11,474

 

Non-cash investment income (expense)

 

 

361

 

 

 

(50

)

Non-cash stock-based compensation

 

 

2,062

 

 

 

1,483

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(449

)

 

 

(10

)

Other assets

 

 

(46

)

 

 

 

Accounts payable

 

 

(326

)

 

 

254

 

Accrued expenses and other liabilities

 

 

1,098

 

 

 

311

 

Net cash used in operating activities

 

 

(18,357

)

 

 

(12,640

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of marketable securities

 

 

28,837

 

 

 

14,605

 

Purchases of marketable securities

 

 

(50,000

)

 

 

(34,397

)

Purchases of property and equipment

 

 

(1,916

)

 

 

(127

)

Proceeds from the sale of property and equipment

 

 

3

 

 

 

 

Net cash used in investing activities

 

 

(23,076

)

 

 

(19,919

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock in connection with at-the-market offering,

     net of issuance costs paid of $140

 

 

3,212

 

 

 

 

Proceeds from the issuance of common stock, net of issuance costs paid of $2,618 in

     2018 and $2,928 in 2017

 

 

37,959

 

 

 

39,572

 

Proceeds from exercise of stock options

 

 

 

 

 

92

 

Cash provided by financing activities

 

 

41,171

 

 

 

39,664

 

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

 

 

(262

)

 

 

7,105

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

24,133

 

 

 

10,684

 

Cash, cash equivalents and restricted cash, end of period

 

$

23,871

 

 

$

17,789

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for taxes

 

$

3

 

 

$

1

 

Cash paid for interest, net

 

$

 

 

$

 

 

See accompanying notes to consolidated financial statements.

 

 

5


 

Spring Bank Pharmaceuticals, Inc.

Notes to Consolidated Financial Statements

 

 

1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Spring Bank Pharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company engaged in the discovery and development of a novel class of therapeutics using a proprietary small molecule nucleotide platform. The Company is developing its most advanced product candidate, inarigivir soproxil (“inarigivir”), for the treatment of chronic hepatitis B virus. Since inception in 2002 and prior to its initial public offering (“IPO”) in May 2016, the Company built its technology platform and product candidate pipeline, supported by grants and through private financings. In September 2015, the Company formed a wholly owned subsidiary, Sperovie Biosciences, Inc., and in December 2016, the Company formed a wholly owned subsidiary, SBP Securities Corporation.

 

The Company’s success is dependent upon its ability to successfully complete clinical development and obtain regulatory approval of its product candidates, successfully commercialize approved products, generate revenue, and, ultimately, attain profitable operations. The Company’s operations to date have been primarily limited to the development of inarigivir, SB 11285, SB 9225 and the Company’s other product candidates.

Basis of Presentation and Liquidity

The accompanying consolidated financial statements have been prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”).

The accompanying interim financial statements as of September 30, 2018 and for the three and nine months ended September 30, 2018 and 2017, and related interim information contained within the notes to the financial statements, are unaudited. In management’s opinion, the unaudited interim consolidated financial statements have been prepared on the same basis as the Company’s audited financial statements and include all adjustments (including normal recurring adjustments) necessary for the fair presentation of the Company’s financial position as of September 30, 2018, results of operations for the three and nine months ended September 30, 2018 and 2017, and its cash flows for the nine months ended September 30, 2018 and 2017. These interim financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the Securities and Exchange Commission (“SEC”) on February 20, 2018. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results expected for the full fiscal year or any interim period.

As of September 30, 2018, the Company had an accumulated deficit of $96.6 million and $71.3 million in cash, cash equivalents and marketable securities.

The Company expects to continue to incur significant and increasing losses for the foreseeable future. The Company anticipates that its expenses will increase significantly as it continues to develop inarigivir, SB 11285, SB 9225 and its other product candidates.  The Company does not have any committed external source of funds. As a result, the Company will need additional financing to support its continuing operations. Adequate additional funds may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect common stockholder rights. If the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish valuable rights to its technologies, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to the Company.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Sperovie Biosciences, Inc. and SBP Securities Corporation. Sperovie Biosciences, Inc. had operations consisting mainly of legal fees associated with intellectual property activities as of September 30, 2018. SBP Securities Corporation had assets primarily related to investments in marketable securities and operations consisting primarily of interest income as of September 30, 2018. All intercompany balances and transactions have been eliminated in consolidation.

6


 

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. Significant estimates relied upon in preparing the accompanying financial statements related to the fair value of common stock and warrant liabilities, accounting for stock-based compensation, income taxes, useful lives of long-lived assets, and accounting for certain accruals. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results may differ from these estimates.

Cash, Cash Equivalents

Cash equivalents are stated at fair value and include short-term, highly liquid investments with remaining maturities of 90 days or less at the date of purchase. Included in cash and cash equivalents as of September 30, 2018 are money market fund investments of $22.1 million. As of December 31, 2017, included in cash and cash equivalents are money market fund investments of $21.3 million, which are reported at fair value (Note 5).

 

Restricted Cash

As of September 30, 2018, restricted cash consists of approximately $234,000, which is held as a security deposit required in conjunction with a lease agreement entered into in October 2017. As of December 31, 2017, restricted cash consisted of approximately $484,000, of which $250,000 is held as collateral for the Company’s credit card program and $234,000 is held as a security deposit required in conjunction with a lease agreement entered into in October 2017.

Concentration of Credit Risk

Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities. Substantially all of the Company’s cash is held at financial institutions that management believes to be of high credit quality. Deposits with these financial institutions may exceed the amount of insurance provided on such deposits; however, these deposits may be redeemed upon demand and, therefore, bear minimal risk.

Investments in Marketable Securities

The Company invests excess cash balances in short-term and long-term marketable securities. The Company classifies investments in marketable securities as either held-to-maturity or available-for-sale based on facts and circumstances present at the time of purchase. At each balance sheet date presented, all investments in securities are classified as available-for-sale. The Company reports available-for-sale investments at fair value at each balance sheet date and includes any unrealized holding gains and losses (the adjustment to fair value) in accumulated other comprehensive income (loss), a component of stockholders’ equity. Realized gains and losses are determined using the specific identification method and are included in other income (expense). If any adjustment to fair value reflects a decline in the value of the investment, the Company considers all available evidence to evaluate the extent to which the decline is “other than temporary,” including the intention to sell and, if so, marks the investment to market through a charge to the Company’s consolidated statements of operations and comprehensive loss.

Property and Equipment, Net

Property and equipment are recorded at cost. Costs associated with maintenance and repairs are expensed as incurred. Depreciation is provided using the straight-line method over the estimated useful lives:

 

Asset Category

 

Useful Life

Equipment

 

5-7 years

Furniture and fixtures

 

5 years

Leasehold improvements

 

Lesser of 10 years or the remaining

term of the respective lease

 

Impairment of Long-Lived Assets

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the

7


 

assets to their undiscounted expected future cash flows. If the undiscounted cash flows are insufficient to recover the carrying value, an impairment loss is recorded for the difference between the carrying value and fair value of the asset. Through September 30, 2018, no such impairment has occurred.

Deferred Rent

The Company’s operating leases include rent escalation payment terms and other incentives received from landlords. Deferred rent represents the difference between actual operating lease payments due and straight-line rent expense over the term of the lease, which is recorded in accrued expenses and other current liabilities. The Company had deferred aggregate rent for its office and laboratory space located in Hopkinton, Massachusetts of $141,000 as of September 30, 2018. The Company had deferred aggregate rent for its previously leased research and development facility in Milford, Massachusetts and its former headquarters in Hopkinton, Massachusetts of $35,000 as of December 31, 2017. As of September 30, 2018, the Company had no deferred rent for its previously leased research and development facility in Milford, Massachusetts and its former headquarters in Hopkinton, Massachusetts.

Research and Development Costs

Research and development expenses consist primarily of costs incurred for the Company’s research activities, including discovery efforts, and the development of product candidates, which include:

 

expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on the Company’s behalf as well as contract manufacturing organizations, or CMOs, that manufacture drug products for use in the Company’s preclinical and clinical trials;

 

salaries, benefits and other related costs, including stock-based compensation expense, for personnel in the Company’s research and development functions;

 

costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

 

the cost of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

 

costs related to compliance with regulatory requirements; and

 

facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

The Company expenses research and development costs as incurred. The Company recognizes external development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its vendors and its clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in the Company’s consolidated financial statements as prepaid or accrued research and development expenses.

Warrants

The Company reviews the terms of all warrants issued and classifies the warrants as a component of permanent equity if they are freestanding financial instruments that are legally detachable and separately exercisable, contingently exercisable, do not embody an obligation for the Company to repurchase its own shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the warrants must require physical settlement and may not provide any guarantee of value or return. Warrants that meet these criteria are initially recorded at their grant date fair value and are not subsequently remeasured. Warrants that do not meet this criteria are classified as liabilities and remeasured to their fair value at each reporting period.

Stock-Based Compensation

The Company accounts for all stock-based payment awards granted to employees and nonemployees using a fair value method. The Company’s stock-based payments include stock options and grants of common stock, including common stock subject to vesting. The measurement date for employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the employees’ requisite service period, which is generally the vesting period, on a straight-line basis. The Company adopted ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, effective July 1, 2018, which aligns the accounting treatment of nonemployee awards with employee awards. Stock-based compensation expense is classified in the accompanying consolidated statements of operations and comprehensive loss based on the department to which the related services are provided.

8


 

Financial Instruments

The Company’s financial instruments consist of cash equivalents, marketable securities, accounts payable and liability classified warrants. The carrying amounts of cash and cash equivalents and accounts payable approximate their fair value due to the short-term nature of those financial instruments. The fair value of the marketable securities and liability classified warrants are remeasured to fair value each reporting period as described in Note 5.

Fair Value Measurements

The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a hierarchy of inputs used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The Company’s assets and liabilities measured at fair value on a recurring basis include cash equivalents, marketable securities and warrant liabilities.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period, determined using the treasury-stock method and the as if-converted method, for convertible securities, if inclusion of these instruments is dilutive. For the three months ended September 30, 2018, both methods are equivalent. For the nine months ended September 30, 2018, diluted net loss per share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants and the change in the fair value of the warrant liability. For the three and nine months ended September 30, 2017, both methods are equivalent. Basic and diluted net loss per share is described further in Note 2.

Income Taxes

Deferred tax assets and liabilities are determined based upon the differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities and for loss and credit carryforwards using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

The Company assesses its income tax positions and records tax benefits based upon management’s evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more likely than not that a tax benefit will be sustained, the Company records the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the consolidated financial statements. The Company classifies interest and penalties associated with such uncertain tax positions as a component of interest expense. As of September 30, 2018 and December 31, 2017, the Company has not identified any material uncertain tax positions.

9


 

Guarantees and Indemnifications

As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity.

The Company leases office and laboratory space in Hopkinton, Massachusetts and previously leased research and development space in Milford, Massachusetts under non-cancelable operating leases. The Company has standard indemnification arrangements under these leases that require it to indemnify the landlords against liability for injury, loss, accident, or damage from any claims, actions, proceedings, or costs resulting from certain acts, breaches, violations, or nonperformance under the Company’s lease.

Through September 30, 2018, the Company had not experienced any losses related to these indemnification obligations and no material claims were outstanding. The Company does not expect significant claims related to these indemnification obligations, and consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.

Segment Information

Operating segments are identified as components of an enterprise about which separate and discrete financial information is available for evaluation by the chief operating decision maker, the Company’s chief executive officer, in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment and does not track expenses on a program-by-program basis.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards, or IFRS. This standard removes inconsistencies and limitations between U.S. GAAP and IFRS in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets, provides more useful information to users of financial statements through improved disclosure requirements, and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. Entities can transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. This update is effective for annual periods beginning after December 15, 2017, including interim periods within that reporting period and early application is not permitted. The Company adopted this standard as of January 1, 2018; however, until the Company expects material revenue to be recognized, the adoption of this standard is not expected to have an impact on the Company’s consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends ASC Subtopic 825-10, Financial Instruments - Overall, and includes updates on certain aspects of recognition, measurement, presentation and disclosure of financial instruments and applies to all entities that hold financial assets or owe financial liabilities. The new standard is effective for the Company for the annual period beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard as of January 1, 2018; however, the adoption of this standard did not impact the Company’s consolidated financial statements.

In September 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which amends ASC Topic 230, Statement of Cash Flows, and includes provisions intended to reduce diversity in practice and provides guidance on eight specific statements of cash flows classification issues. The new standard is effective for the Company for the annual period ending after December 15, 2017, and for annual and interim periods thereafter, with early adoption permitted. The Company adopted this standard as of January 1, 2018; however, the adoption of this standard did not impact the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes the current leasing guidance and upon adoption, will require lessees to recognize right-of-use assets and lease liabilities on the balance sheet for all leases with terms longer than twelve months. Based on certain criteria, leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. For leases with a term of twelve months or less, a lessee is permitted to make an accounting policy election by class of underlying assets not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The new standard is effective for the Company for the annual period beginning after December 15, 2018 and early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard may have on its consolidated financial statements.

10


 

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features and II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down round features. Part II simply replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within Accounting Standards Codification (ASC) Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. This ASU is effective for public companies for the annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of this standard may have on its consolidated financial statements.

In June 2018, the FASB issued ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which amends ASC Topic 718, Compensation – Stock Compensation, and includes provisions intended to provide simplification of several aspects of accounting for nonemployee share-based payment transactions. The new standard is effective for the Company for the annual period beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than the Company’s adoption date of Topic 606. The Company elected early adoption of this standard as of July 1, 2018. The adoption of this standard has resulted in a de minimis impact on the Company’s consolidated financial statements.

 

2. NET LOSS PER SHARE

The following table summarizes the computation of basic and diluted net loss per share of the Company for such periods (in thousands, except share and per share data):

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net loss

 

$

(8,780

)

 

$

(10,828

)

 

$

(17,429

)

 

$

(26,217

)

Less: decrease in change in fair value of warrant liabilities

 

 

 

 

 

 

 

 

(3,837

)

 

 

 

Net loss available to common shareholders

 

$

(8,780

)

 

$

(10,828

)

 

$

(21,266

)

 

$

(26,217

)

Weighted-average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,841,197

 

 

 

12,696,986

 

 

 

13,677,375

 

 

 

10,555,461

 

Effect of dilutive securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock warrants

 

 

 

 

 

 

 

 

1,633,777

 

 

 

 

Dilutive potential common shares

 

 

14,841,197

 

 

 

12,696,986

 

 

 

15,311,152

 

 

 

10,555,461

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.59

)

 

$

(0.85

)

 

$

(1.27

)

 

$

(2.48

)

Diluted

 

$

(0.59

)

 

$

(0.85

)

 

$

(1.39

)

 

$

(2.48

)

 

For the three months ended September 30, 2018, the diluted net loss per common share is the same as basic net loss per common share. For the nine months ended September 30, 2018, the diluted net loss per common share amounts were calculated based on the dilutive effect of the total number of shares of common stock related to the November 2016 Private Placement warrants of 1,633,777 shares and the change in the fair value of the warrant liability of $3.8 million. For the three and nine months ended September 30, 2017, the diluted net loss per common share is the same as basic net loss per common share.

The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact due to the losses reported:

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Common stock warrants

 

 

1,662,124

 

 

 

1,798,084

 

 

 

28,347

 

 

 

1,798,084

 

Stock options

 

 

1,349,565

 

 

 

977,565

 

 

 

1,349,565

 

 

 

977,565

 

 

 

11


 

3. INVESTMENTS

 

Cash in excess of the Company’s immediate requirements is invested in accordance with the Company’s investment policy that primarily seeks to maintain adequate liquidity and preserve capital.

 

The following table summarizes the Company’s investments, by category, as of September 30, 2018 and December 31, 2017 (in thousands):

 

 

September 30,

 

 

December 31,

 

Investments - Current:

 

2018

 

 

2017

 

Debt securities - available for sale

 

$

29,868

 

 

$

26,906

 

Total

 

$

29,868

 

 

$

26,906

 

 

 

 

 

 

 

 

 

 

Investments - Noncurrent:

 

 

 

 

 

 

 

 

Debt securities - available for sale

 

$

17,827

 

 

$

 

Total

 

$

17,827

 

 

$

 

 

A summary of the Company’s available-for-sale classified investments as of September 30, 2018 and December 31, 2017 consisted of the following (in thousands):

 

 

At September 30, 2018

 

 

 

Cost

Basis

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Investments - Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

9,998

 

 

$

 

 

$

(10

)

 

$

9,988

 

United States treasury securities

 

 

19,896

 

 

 

 

 

 

(16

)

 

 

19,880

 

Total

 

$

29,894

 

 

$

 

 

$

(26

)

 

$

29,868

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments - Noncurrent:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

6,028

 

 

$

 

 

$

(3

)

 

$

6,025

 

United States treasury securities

 

 

11,809

 

 

 

 

 

 

(7

)

 

 

11,802

 

Total

 

$

17,837

 

 

$

 

 

$

(10

)

 

$

17,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2017

 

 

 

Cost

Basis

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

Investments - Current:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

$

9,584

 

 

$

 

 

$

 

 

$

9,584

 

Corporate bonds

 

 

15,347

 

 

 

 

 

 

(23

)

 

 

15,324

 

United States treasury securities

 

 

1,998

 

 

 

 

 

 

 

 

 

1,998

 

Total

 

$

26,929

 

 

$

 

 

$

(23

)

 

$

26,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The amortized cost and fair value of the Company’s available-for-sale investments, by contract maturity, as of September 30, 2018 consisted of the following (in thousands):

 

 

Amortized Cost

 

 

Fair Value

 

Due in one year or less

 

$

29,894

 

 

$

29,868

 

Due after one year through two years

 

 

17,837

 

 

 

17,827

 

Total

 

$

47,731

 

 

$

47,695

 

 


12


 

4. PROPERTY AND EQUIPMENT, NET

Property and equipment as of September 30, 2018 and December 31, 2017 consisted of the following (in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Equipment

 

$

1,154

 

 

$

727

 

Furniture and fixtures

 

 

384

 

 

 

292

 

Leasehold improvements

 

 

1,356

 

 

 

153

 

Total property and equipment

 

 

2,894

 

 

 

1,172

 

Less: accumulated depreciation and amortization

 

 

(503

)

 

 

(485

)

Property and equipment, net

 

$

2,391

 

 

$

687

 

 

Depreciation expense for the three and nine months ended September 30, 2018 was $107,000 and $193,000, respectively. Depreciation expense for the three and nine months ended September 30, 2017 was $39,000 and $115,000, respectively.

 

5. FAIR VALUE MEASUREMENTS

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

The Company classified its money market funds and United States treasury securities within Level 1 because their fair values are based on their quoted market prices. The Company classified its commercial paper and corporate bonds within Level 2 because their fair values are determined using alternative pricing sources or models that utilized market observable inputs.

A summary of the assets and liabilities that are measured at fair value as of September 30, 2018 and December 31, 2017 is as follows (in thousands):

 

 

 

 

 

 

Fair Value Measurement at

September 30, 2018

 

Assets:

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical

Assets

(Level 1)

 

 

Significant

other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Money market funds (1)

 

$

22,074

 

 

$

22,074

 

 

$

 

 

$

 

Fixed income securities

 

 

47,695

 

 

 

31,682

 

 

 

16,013

 

 

 

 

Total

 

$

69,769

 

 

$

53,756

 

 

$

16,013

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

9,291

 

 

$

 

 

$

 

 

$

9,291

 

Total

 

$

9,291

 

 

$

 

 

$

 

 

$

9,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurement at

December 31, 2017

 

Assets:

 

Carrying

Value

 

 

Quoted Prices in

Active Markets

for Identical

Assets

(Level 1)

 

 

Significant

other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

Money market funds (1)

 

$

21,265

 

 

$

21,265

 

 

$

 

 

$

 

Fixed income securities

 

 

26,906

 

 

 

 

 

 

26,906

 

 

 

 

Total

 

$

48,171

 

 

$

21,265

 

 

$

26,906

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liabilities

 

$

13,128

 

 

$

 

 

$

 

 

$

13,128

 

Total

 

$

13,128

 

 

$

 

 

$

 

 

$

13,128

 

 

(1)

Money market funds are included within cash and cash equivalents in the accompanying consolidated balance sheets and are recognized at fair value.

13


 

The following table reflects the change in the Company’s Level 3 liabilities, which consists of the warrants issued in a private placement in November 2016 (see Note 7), for the period ended September 30, 2018 (in thousands):

 

 

November Private

Placement Warrants

 

Balance at December 31, 2016

 

$

6,333

 

     Change in fair value

 

 

6,795

 

Balance at December 31, 2017

 

 

13,128

 

     Change in fair value

 

 

(3,837

)

Balance at September 30, 2018

 

$

9,291

 

 

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses as of September 30, 2018 and December 31, 2017 consisted of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Clinical

 

$

1,852

 

 

$

1,093

 

Compensation and benefits

 

 

928

 

 

 

1,024

 

Accounting and legal

 

 

262

 

 

 

453

 

Other

 

 

698

 

 

 

164

 

Total accrued expenses and other current liabilities

 

$

3,740

 

 

$

2,734

 

 

 

 

7. STOCKHOLDERS’ EQUITY

Common and Preferred Stock

In June 2017, the Company issued and sold in an underwritten public offering an aggregate of 3,269,219 shares of its common stock at $13.00 per share, which included 384,604 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering. The offering resulted in $39.6 million of net proceeds to the Company, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

 

In August 2017, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), pursuant to which the Company may offer and sell, from time to time through Cantor, shares of the Company’s common stock having an aggregate offering price of up to $50.0 million. The Company will pay Cantor a commission rate equal to 3.0% of the aggregate gross proceeds from each sale. During the three months ended September 30, 2018, the Company did not sell any shares under the Sales Agreement.  During the nine months ended September 30, 2018, the Company sold an aggregate of  217,329 shares of its common stock pursuant to the Sales Agreement at a weighted-average selling price of $15.42 per share, which resulted in $3.2 million of net proceeds to the Company.  During the year ended December 31, 2017, the Company sold an aggregate of 252,443 shares of its common stock pursuant to the Sales Agreement at a weighted-average selling price of $15.55 per share, which resulted in $3.7 million of net proceeds to the Company. 

 

In August 2018, the Company issued and sold in an underwritten public offering an aggregate of 3,246,079 shares of our common stock at $12.50 per share, which included 246,079 shares pursuant to the exercise of an option to purchase additional shares granted to the underwriters in connection with the offering. The offering resulted in $38.0 million of net proceeds, after deducting underwriting discounts and commissions and other offering expenses payable by the Company.

Warrants

In connection with the amendment and restatement of a license agreement with BioHEP in February 2016, the Company issued a warrant to purchase 125,000 shares of the Company’s common stock to BioHEP (the “BioHEP Warrant”). The BioHEP Warrant had an exercise price of $16.00 per share and expired unexercised on August 1, 2018. The Company evaluated the terms of the warrant and concluded that it should be equity-classified. The fair value of the warrant, $0.8 million, was estimated on the issuance date using a Black-Scholes pricing model based on the following assumptions: an expected term of two and a half years, expected stock price volatility of 71%, a risk-free rate of 1.01%, and a dividend yield of 0%. The fair value was expensed as research and development costs.     

In connection with the Company’s IPO, the Company issued to the sole book-running manager for the IPO a warrant to purchase 27,600 shares of common stock in May 2016 and a warrant to purchase 747 shares of common stock in June 2016 (together, the “IPO Warrants”). The IPO Warrants are exercisable at an exercise price of $15.00 per share and expire on May 5, 2021. The Company

14


 

evaluated the terms of the IPO Warrants and concluded that they should be equity-classified. The fair value of the May 2016 IPO Warrants was estimated on the applicable issuance dates using a Black-Scholes pricing model based on the following assumptions: an expected term of 4.99 years; expected stock price volatility of 87%; a risk-free rate of 1.20%; and a dividend yield of 0%. The fair value of the June 2016 IPO Warrants was estimated on the applicable issuance dates using a Black-Scholes pricing model based on the following assumptions: an expected term of 4.92 years; expected stock price volatility of 87%; a risk-free rate of 1.23%; and a dividend yield of 0%. The aggregate fair value of the IPO Warrants was approximately $218,000.

The Company received approximately $5.3 million in proceeds upon the exercise of warrants to purchase 641,743 shares of its common stock, which were exercised in connection with the closing of the IPO. Upon the closing of the Company’s IPO, all of the outstanding and unexercised warrants, except the BioHEP warrant and the IPO Warrants, terminated in accordance with their original terms.

In November 2016, the Company entered into a definitive agreement with respect to the private placement of 1,644,737 shares of common stock and warrants to purchase 1,644,737 shares of common stock (the “November 2016 Private Placement Warrants”) to a group of accredited investors. These investors paid $9.12 for each share of common stock and warrant to purchase one share of common stock. The November 2016 Private Placement Warrants are exercisable at an exercise price of $10.79 per share and expire on November 23, 2021. The Company evaluated the terms of these warrants and concluded that they are liability-classified. In November 2016, the Company recorded the fair value of these warrants of approximately $8.3 million using a Black-Scholes pricing model. The Company must recognize any change in the value of the warrant liability each reporting period in the statement of operations. As of September 30, 2018 and December 31, 2017, the fair value of the November 2016 Private Placement Warrants was approximately $9.3 million and $13.1 million, respectively (see Note 5).

A summary of the Black-Scholes pricing model assumptions used to record the fair value of the warrants is as follows:

 

 

September 30, 2018

 

 

December 31, 2017

 

Risk-free interest rate

 

 

2.9

%

 

 

2.0

%

Expected term (in years)

 

 

3.1

 

 

 

3.9

 

Expected volatility

 

 

61.3

%

 

 

73.1

%

Expected dividend yield

 

 

0

%

 

 

0

%

 

The following table summarizes the warrant activity for the year ended December 31, 2017 and for the nine months ended September 30, 2018:

 

 

Warrants

 

Outstanding at December 31, 2016

 

 

1,798,084

 

     Grants

 

 

 

     Exercises

 

 

(10,960

)

     Expirations/cancellations

 

 

 

Outstanding at December 31, 2017

 

 

1,787,124

 

     Grants

 

 

 

     Exercises

 

 

 

     Expirations/cancellations

 

 

(125,000

)

Outstanding at September 30, 2018

 

 

1,662,124

 

 

2014 Stock Incentive Plan

In April 2014, the Company’s Board of Directors approved the 2014 Stock Incentive Plan (the “2014 Plan”) and authorized 750,000 shares of common stock to be issued under the 2014 Plan. The Company’s 2014 Plan provides for the issuance of common stock, stock options and other stock-based awards to employees, officers, directors, consultants, and advisors. The Company’s 2015 Stock Incentive Plan (the “2015 Plan”) became effective immediately prior to the closing of the Company’s IPO on May 11, 2016. Upon the effectiveness of the 2015 Plan, 116,863 shares of common stock that remained available for grant under the 2014 Plan became available for grant under the 2015 Plan, and no further awards were available to be issued under the 2014 Plan.

 

2015 Stock Incentive Plan and Amended and Restated 2015 Stock Incentive Plan

The Board initially adopted the 2015 Plan in December 2015, subject to stockholder approval. The 2015 Plan become effective upon the closing of the Company’s IPO on May 11, 2016 after approval by the Company’s stockholders. The 2015 Plan provides for the issuance of common stock, stock options and other stock-based awards to employees, officers, directors, consultants and advisors of the Company.

15


 

On June 18, 2018, upon receipt of stockholder approval at the Company’s 2018 annual meeting, the 2015 Plan was amended and restated in its entirety increasing the authorized number of shares of common stock reserved for issuance by 800,000 shares (together with the 2014 Plan, the 2015 Plan, the “Stock Incentive Plans”). The Board approved the Amended and Restated 2015 Plan on March 9, 2018. Pursuant to the Amended and Restated 2015 Plan, the number of shares authorized for issuance is the sum of 1,550,000 shares of common stock, plus the number of shares equal to the sum of (i) 116,863 shares of common stock, which was the number of shares reserved for issuance under the 2014 Plan that remained available for grant under the 2014 Plan immediately prior to the closing of the Company’s IPO, and (ii) the number of shares of common stock subject to outstanding awards under the 2014 Plan that expire, terminate or are otherwise surrendered, cancelled or forfeited after the closing of the Company’s IPO, provided that such number of shares of common stock shall not exceed 608,137 shares.

The exercise price of stock options cannot be less than the fair value of the common stock on the date of grant. Stock options awarded under the Stock Incentive Plans expire 10 years after the grant date, unless the Board sets a shorter term. As of September 30, 2018, the Company had 942,765 shares available for issuance under the Amended and Restated 2015 Plan.

The following table summarizes the option activity under the Stock Incentive Plans for the year ended December 31, 2017 and the nine months ended September 30, 2018:

 

 

Options

 

 

Weighted-Average

Exercise Price

Per Share

 

 

Aggregate

Intrinsic

Value

 

Options outstanding at December 31, 2016

 

 

704,315

 

 

$

11.82

 

 

$

 

     Granted

 

 

297,500

 

 

 

8.45

 

 

 

 

     Exercised

 

 

(10,000

)

 

 

9.28

 

 

 

11,228

 

     Cancelled

 

 

(3,250

)

 

 

12.44

 

 

 

 

Outstanding at December 31, 2017

 

 

988,565

 

 

 

10.83

 

 

 

2,617,859

 

     Granted

 

 

311,000

 

 

 

12.28

 

 

 

 

     Exercised

 

 

 

 

 

 

 

 

 

     Cancelled