Notes to Unaudited
Condensed Consolidated Financial Statements
Three Months Ended March 31, 2016
Business
Corbus Pharmaceuticals Holdings, Inc. (“CPHI” or “the Company”) is a clinical stage pharmaceutical company, focused on the development and commercialization of novel therapeutics to treat rare, chronic, and serious inflammatory and fibrotic diseases. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. The Company’s business is subject to significant risks and uncertainties and the Company will be dependent on raising substantial additional capital before it becomes profitable and it may never achieve profitability.
In the opinion of management of the Company, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the consolidated financial position of the Company as of March 31, 2016 and the results of its operations and cash flows for the three months ended March 31, 2016 and 2015. The December 31, 2015 condensed consolidated balance sheet was derived from audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015, filed on March 28, 2016. The results of operations for such interim periods are not necessarily indicative of the operating results for the full fiscal year.
2.
|
LIQUIDITY AND GOING CONCERN
|
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred recurring losses since inception and as of March 31, 2016, had an accumulated deficit of $16,170,055. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, development of its product candidates and its preclinical and clinical programs, strategic alliances and the development of its administrative organization. The Company expects the current cash on hand of $9,687,805 together with the milestone payments from the Cystic Fibrosis Foundation Therapeutics, Inc. (“CFFT”) (See Note 13), which the Company expects to receive during 2016 if the Company achieves certain milestones, to be sufficient to meet its operating and capital requirements into the fourth quarter of 2016 based on planned expenditures. Should the Company be unable to raise sufficient additional capital, the Company may undertake cost-cutting measures including delaying or discontinuing certain clinical activities. The Company will need to raise significant additional capital to fund the clinical trials for Resunab. The Company may seek to sell common or preferred equity or convertible debt securities, enter into a credit facility or another form of third-party funding, or seek other debt financing. The sale of equity and convertible debt securities may result in dilution to the Company’s stockholders and certain of those securities may have rights senior to those of the Company’s common shares. If the Company raises additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict the Company’s operations. Any other third-party funding arrangement could require the Company to relinquish valuable rights.
The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of the Company’s clinical development programs. Funding may not be available when needed, at all, or on terms acceptable to the Company. Lack of necessary funds may require the Company, among other things, to delay, scale back or eliminate some or all of the Company’s planned clinical trials. These factors among others create a substantial doubt about the Company’s ability to continue as a going concern. There have been no adjustments made to these consolidated financial statements as a result of these uncertainties.
5
3.
|
SIGNIFICANT ACCOUNTING POLICIES
|
A summary of the significant accounting policies followed by the Company in the preparation of the financial statements is as follows:
Use of Estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and changes in estimates may occur. The most significant estimates are related to stock based compensation and the accrual of research and clinical obligations.
Prior to the registration of its common stock and the subsequent public listing of the common stock, the Company had granted stock options at exercise prices not less than the fair value of its common stock as determined by the board of directors, with input from management. The Company’s board of directors determined the estimated fair value of the common stock based on a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector and the historic prices at which the Company sold shares of preferred stock.
Cash and Cash Equivalents
The Company considers only those investments which are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents. Marketable investments are those with original maturities in excess of three months. At March 31, 2016 and December 31, 2015, cash equivalents were comprised of money market funds. The Company had no marketable investments at March 31, 2016 and December 31, 2015. Cash and cash equivalents consist of the following:
|
|
March 31
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Cash
|
|
$
|
87,461
|
|
|
$
|
255,943
|
|
Money market funds
|
|
|
9,600,344
|
|
|
|
12,082,332
|
|
|
|
$
|
9,687,805
|
|
|
$
|
12,338,275
|
|
Restricted Cash
Restricted cash as of March 31, 2016 and December 31, 2015 was $36,375 due to a stand-by letter of credit issued in favor of a landlord (See Note 5).
Financial Instruments
The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents and accounts payable approximate fair value based on the short-term nature of these instruments. The carrying values of loans payable approximate their fair value due to their market terms.
Property and Equipment
The estimated life for the Company’s property and equipment is as follows: three years for computer hardware and software and three to five years for office furniture and equipment. The Company’s leasehold improvements and assets under capital lease are amortized over the life of the respective leases. See Note 4 for details of property and equipment and Note 5 for operating and capital lease commitments.
Research and Development Expenses and Collaborative Research Agreements
Costs incurred for research and development are expensed as incurred.
For the development award received from the CFFT during 2015 (See Note 13), the Company is recognizing amounts received as revenue under this collaborative research agreement in accordance with
the milestone method, under which payments are recognized as revenue in their entirety when a related milestone is achieved.
6
Accruals for Research and Development Expenses and Clinical Trials
As part of the process of preparing its financial statements, the Company is required to estimate its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. The Company’s objective is to reflect the appropriate expenses in its financial statements by matching those expenses with the period in which services are performed and efforts are expended. The Company accounts for these expenses according to the timing of various aspects of the expenses. The Company determines accrual estimates through financial models taking into account discussion with applicable personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in it reporting amounts that are too high or too low for any particular period. For the three months ended March 31, 2016 and 2015, there were no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trials.
Concentrations of Credit Risk
The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements. The Company may from time to time have cash in banks in excess of Federal Deposit Insurance Corporation insurance limits.
Segment Information
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision making group, in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as principally one operating segment, which is developing and commercializing therapeutics to treat rare life-threating, inflammatory fibrotic diseases. As of March 31, 2016 and December 31, 2015, all of the Company’s assets were located in the United States.
Income Taxes
For federal and state income taxes, deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and the tax basis of assets and liabilities. Deferred income taxes are based upon prescribed rates and enacted laws applicable to periods in which differences are expected to reverse. A valuation allowance is recorded to reduce a net deferred tax benefit when it is more likely than not that the tax benefit from the deferred tax assets will not be realized. Accordingly, given the cumulative losses since inception, the Company has provided a valuation allowance equal to 100% of the tax benefit in order to eliminate the deferred tax assets amounts. Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority.
Tax positions not deemed to meet a more-likely-than-not threshold, as well as accrued interest and penalties, if any, would be recorded as a tax expense in the current year. There were no uncertain tax positions that require accrual or disclosure to the financial statements as of March 31, 2016 or December 31, 2015.
Impairment of Long-lived Assets
The Company continually monitors events and changes in circumstances that could indicate that carrying amounts of long-lived assets may not be recoverable. An impairment loss is recognized when expected cash flows are less than an asset’s carrying value. Accordingly, when indicators of impairment are present, the Company evaluates the carrying value of such assets in relation to the operating performance and future undiscounted cash flows of the underlying assets. The Company’s policy is to record an impairment loss when it is determined that the carrying value of the asset may not be recoverable. No impairment charges were recorded for the three months ended March 31, 2016 and 2015.
7
Share-based Payments
The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the statement of operations over the service period based on a measurement of fair value for each stock-based award. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Stock options granted to non-employee consultants are revalued at the end of each reporting period until vested and the changes in their fair value are recorded as adjustments to expense over the related vesting period.
Net Loss Per Common Share
Basic net loss per share of the Company’s common stock has been computed by dividing net loss by the weighted average number of shares outstanding during the period. Diluted net loss per share of the Company’s common stock has been computed by dividing net loss for the period by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, warrants and convertible securities. In a net loss period, options, warrants and convertible securities are anti-dilutive and therefore excluded from diluted loss per share calculations. The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2016 and 2015:
|
|
Three Months Ended March 31
|
|
|
|
2016
|
|
|
2015
|
|
Basic and diluted net loss per share of common stock:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,892,241
|
)
|
|
$
|
(1,535,718
|
)
|
Net loss applicable to common stockholders
|
|
$
|
(2,892,241
|
)
|
|
$
|
(1,535,718
|
)
|
Weighted average shares of common stock outstanding
|
|
|
37,605,210
|
|
|
|
25,871,796
|
|
Net loss per share of common stock-basic and diluted
|
|
$
|
(0.08
|
)
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
The following potentially dilutive securities outstanding at March 31, 2016 and 2015 have been excluded from the computation of dilutive weighted average shares outstanding as the inclusion would be anti-dilutive.
|
|
March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Warrants
|
|
|
1,967,375
|
|
|
|
13,647,848
|
|
Stock options
|
|
|
5,152,685
|
|
|
|
3,698,848
|
|
Total
|
|
|
7,120,060
|
|
|
|
17,346,696
|
|
Recent Accounting Pronouncements
Accounting for Share-Based Payments
In June 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-12,
Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force)
("ASU 2014-12"). ASU 2014-12 clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity's satisfaction of a performance target until it becomes probable that the performance target will be met. There are no new disclosures required under ASU 2014-12. ASU 2014-12 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2015. The Company’s adoption of ASU 2014-12 in the first quarter of 2016 had no impact on its financial position, results of operations, cash flows, or disclosures.
8
Reporting of Going-Concern Uncertainties
In August 2014, the FASB issued ASU No. 2014-15,
Presentation of Financial Statements—Going Concern
(“ASU 2014-15”)
,
which states management should evaluate whether there are conditions or events, considered in the aggregate, that raise a substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. Management’s evaluation should be based on relevant conditions and events that are known and likely to occur at the date that the financial statements are issued. ASU 2014-15 will be effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter, however, early application is permitted. Management does not expect the adoption of ASU 2014-15 to have a material impact on the Company’s consolidated financial statements, although there may be additional disclosures upon adoption.
Accounting for Leases
In February 2016, the FASB issued ASU
2016-02,
Leases (Topic 842)
(“ASU 2016-02”)
.
Under ASU 2016-02, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, ASU 2016-02 will require both types of leases to be recognized on the balance sheet. ASU 2016-02 will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early application permitted. Management has not yet determined the effects that the adoption of ASU 2016-02 may have on the Company’s financial position, results of operations, cash flows, or disclosures.
Employee Share-Based Payment Accounting
On March 30, 2016, the FASB issued ASU
2016-09,
Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting
(“ASU 2016-09”)
.
ASU 2016-09 simplifies several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. ASU 2016-09 will take effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early application permitted. Management does not expect the adoption of ASU 2016-09 to have a material impact on the Company’s consolidated financial statements, although there may be additional disclosures upon adoption.
4
.
|
PROPERTY AND EQUIPMENT
|
Property and equipment consisted of the following:
|
|
March 31,
|
|
|
December
31,
|
|
|
|
2016
|
|
|
2015
|
|
Computer hardware and software
|
|
$
|
46,156
|
|
|
$
|
40,202
|
|
Office furniture and equipment
|
|
|
150,106
|
|
|
|
35,209
|
|
Leasehold improvements
|
|
|
138,129
|
|
|
|
19,310
|
|
Construction in progress
|
|
|
—
|
|
|
|
83,765
|
|
Property and equipment, gross
|
|
|
334,391
|
|
|
|
178,486
|
|
Less: accumulated depreciation
|
|
|
(37,857
|
)
|
|
|
(54,348
|
)
|
Property and equipment, net
|
|
$
|
296,534
|
|
|
$
|
124,138
|
|
Depreciation expense was $17,285 and $5,371 for the three months ended March 31, 2016 and 2015, respectively.
On December 30, 2015, we entered into a lease agreement for a copier machine. The cost of the machine was approximately $12,000 and is included in office furniture and equipment category in the table above. The machine was placed in service in January 2016 and is amortized over the life of the lease. The lease is for a three-year term and includes a bargain purchase option at the end of the term. See Note 5 for details of this capital lease commitment.
At December 31, 2015, construction in progress consisted of purchased property and equipment not placed in service until the Company’s occupation of its new office space in January 2016 (See Note 5).
9
5
.
|
COMMITMENTS AND CONTINGENCIES
|
Operating Lease Commitment
On May 30, 2014, the Company entered into a commercial lease for 2,387 square feet of office space in Norwood, MA. The lease commenced on July 1, 2014, had a three-year term, and required a standby letter of credit of $13,728 payable in favor of the landlord. In August 2015, the lease was amended for the relocation of the Company into 6,326 square feet of office space within the existing building. In January 2016, the Company began occupying the space under this lease amendment, which is for a five-year term. The amendment also required an increase in the standby letter of credit to $36,375 (See Note 3).
Pursuant to the terms of the Company’s non-cancelable lease agreements in effect at March 31, 2016, the future minimum rent commitments are as follows:
2016 (remainder of year)
|
|
$
|
109,124
|
|
2017
|
|
|
148,398
|
|
2018
|
|
|
151,561
|
|
2019
|
|
|
154,723
|
|
2020
|
|
|
157,886
|
|
2021
|
|
|
13,179
|
|
Total
|
|
$
|
734,871
|
|
Total rent expense for the three months ended March 31, 2016 and 2015 was $36,546 and $13,725, respectively.
Capital Lease Commitment
On December 30, 2015, the Company entered into a capital lease agreement for a copier machine. The machine was placed in service in January 2016. The lease is for a three-year term and includes a bargain purchase option at the end of the term. In the accompanying balance sheet as of March 31, 2016, the current portion of this capital lease obligation is classified in accrued expenses and the long-term portion of the capital lease obligation is classified in other long-term liabilities. Pursuant to the terms of this capital lease agreement, the future minimum capital lease commitments are as follows as of March 31, 2016:
2016 (remainder of year)
|
|
$
|
3,178
|
|
2017
|
|
|
4,237
|
|
2018
|
|
|
4,237
|
|
2019
|
|
|
353
|
|
Total
|
|
$
|
12,005
|
|
In October 2014, the Company entered into a loan agreement with a financing company for $192,000. The terms of the loan stipulated equal monthly payments of principal and interest payments of $24,293 over an eight-month period. Interest accrued on this loan at annual rate of 3.25%. This loan was fully repaid as of September 30, 2015.
In November 2015, the Company entered into a loan agreement with a financing company for $207,750. The terms of the loan stipulate equal monthly payments of principal and interest payments of $23,397 over a nine-month period. Interest accrues on this loan at an annual rate of 3.25%.
For three months ended March 31, 2016 and 2015, interest expense related to these loan agreements totaled $1,130 and $979, respectively.
Notes payable consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Notes payable
|
|
$
|
92,958
|
|
|
$
|
162,019
|
|
Less: current portion
|
|
|
(92,958
|
)
|
|
|
(162,019
|
)
|
Long term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
10
Accrued expenses consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Accrued clinical operations and trials costs
|
|
$
|
1,028,181
|
|
|
$
|
365,188
|
|
Accrued product development costs
|
|
|
141,756
|
|
|
|
152,018
|
|
Accrued audit fees
|
|
|
60,000
|
|
|
|
16,500
|
|
Accrued other
|
|
|
68,051
|
|
|
|
28,573
|
|
Total
|
|
$
|
1,297,988
|
|
|
$
|
562,279
|
|
In May 2015, the Company received $1,250,000 upon signing the CFFT award agreement and in the fourth quarter of 2015, the Company received $1,250,000 from CFFT upon the achievement of a milestone for dosing the first patient (See Note 3 and Note 13). The Company recorded these amounts as deferred revenue and is amortizing the deferred revenue and recognizing revenue on a straight-line basis over the performance period for the development program, which is expected to conclude during the first quarter of 2017. For the three months ended March 31, 2016 and 2015, the Company recorded revenue of $396,598 and $0, respectively. Deferred revenue consisted of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
Deferred revenue
|
|
|
1,455,020
|
|
|
$
|
1,851,618
|
|
Less: current portion
|
|
|
(1,455,020
|
)
|
|
|
(1,591,358
|
)
|
Long-term portion
|
|
$
|
—
|
|
|
$
|
260,260
|
|
The Company has authorized 150,000,000 shares of common stock, $0.0001 par value per share, of which 37,605,827 shares and 37,605,134 shares were issued and outstanding as of March 31, 2016 and December 31, 2015, respectively.
During the three months ended March 31, 2016, the Company issued 693 shares of common stock upon the cashless exercise of a warrant.
In April 2014, the Company adopted the Corbus Pharmaceuticals Holdings, Inc. 2014 Equity Incentive Plan (the “2014 Plan”). Pursuant to the 2014 Plan, the Company’s Board of Directors may grant incentive and nonqualified stock options and restricted stock to employees, officers, directors, consultants and advisors. Pursuant to the terms of an annual evergreen provision in the 2014 Plan, the number of shares of common stock available for issuance under the 2014 Plan shall be subject to an automatic annual increase on January 1st of each year equal to the greater of (i) seven percent (7%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, or, (ii) the difference
between (x) twenty percent (20%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year, and (y) the total number of shares of common stock reserved under the 2014 Plan on December 31st of such preceding calendar year or a lesser number of shares of common stock determined by the Company’s Board of Directors
.
In accordance with the terms of the 2014 Plan, effective as of January 1, 2016,
the Board of Directors approved an increase in the number of shares of common stock available for issuance under the 2014 Plan in an amount of 1,250,000 shares, such amount being less than seven percent (7%) of the outstanding shares of common stock on December 31, 2015. As of March 31, 2016, there was a total of 9,916,017 shares reserved for issuance under the 2014 Plan and there were 4,624,513 shares available for future grants. Options issued under the 2014 Plan are exercisable for up to ten years from the date of issuance.
Share-based Compensation
For stock options issued and outstanding for the three months ended March 31, 2016 and 2015, respectively, the Company recorded non-cash, stock-based compensation expense of $311,238 and $301,958, respectively, net of estimated forfeitures.
11
The fair value of each option award is estimated on the date of grant using th
e Black-Scholes option pricing model that uses the assumptions noted in the following table. Due to its limited operating history and limited number of sales of its common stock, the Company estimated its volatility in consideration of a number of factors,
including the volatility of comparable public companies and, commencing in 2015, the Company also included the volatility of its own common stock. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financ
ial statements, to estimate option exercises and employee terminations within the valuation model. The expected term of options granted to employees under the 2014 Plan, all of which qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, is base
d on the average of the 6.25 years. For non-employee options, the expected term is the contractual term. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option.
The assumptions used principally in determining the fair value of options granted were as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2016
|
|
|
2015
|
|
Risk free interest rate
|
|
|
1.81
|
%
|
|
|
1.86
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected term in years
|
|
6.28
|
|
|
9.87
|
|
Expected volatility
|
|
|
88.3
|
%
|
|
|
101.5
|
%
|
Estimated forfeiture rate
|
|
|
5
|
%
|
|
|
0.34
|
%
|
A summary of option activity for the three months ended March 31, 2016 and is presented below:
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Contractual
|
|
|
Average
|
|
|
|
|
|
|
|
Average
|
|
|
Term in
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Exercise Price
|
|
|
Years
|
|
|
Value
|
|
Outstanding at December 31, 2015
|
|
|
3,982,065
|
|
|
$
|
1.03
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,195,000
|
|
|
$
|
1.40
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(24,380
|
)
|
|
$
|
2.55
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2016
|
|
|
5,152,685
|
|
|
$
|
1.11
|
|
|
|
8.31
|
|
|
$
|
3,920,264
|
|
Vested at March 31, 2016
|
|
|
2,142,468
|
|
|
$
|
0.90
|
|
|
|
7.44
|
|
|
$
|
2,130,712
|
|
The weighted average grant-date fair value of options granted during the three months ended March 31, 2016 was $1.40 per share. As of March 31, 2016, there was approximately $2,128,624 of total unrecognized compensation expense, related to non-vested share-based option compensation arrangements. The unrecognized compensation expense is estimated to be recognized over a period of 3.09 years.
At March 31, 2016, there were warrants outstanding to purchase 1,967,375 shares of common stock with a weighted average exercise price of $0.97 and a weighted average remaining life of 3.1 years. During the three months ended March 31, 2016, a warrant to purchase 1,875 shares of common stock was exercised on a cashless basis resulting in the issuance of 693 shares. During the three months ended March 31, 2015, warrants to purchase 62,129 shares of common stock were exercised. There were no warrants issued or cancelled during the three months ended March 31, 2016 and 2015.
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2
.
|
RELATED PARTY TRANSACTIONS
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In connection with the formation of Corbus Pharmaceutical Holdings, Inc. in December 2013, certain affiliates of Aegis Capital Corp. (the “Placement Agent”) and certain other parties not affiliated with us or the Placement Agent subscribed for an aggregate of 6,000,000 shares of common stock for which they paid an aggregate of $120,000 ($0.02 per share), including David Hochman, one of our directors who purchased 450,000 shares and whose family trust purchased 90,000 shares of common stock.
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Following the Initial Closing of the 2014 Private Placemen
t, which took place on April 11, 2014, the Placement Agent had a right to appoint one member of the Company’s board of directors for a two-year term (the “Aegis Nominee”). David Hochman was appointed as the Aegis Nominee.
On March 21, 2014, the Company entered into a consulting agreement with Orchestra Medical Ventures, LLC (“Orchestra”), of which David Hochman is Managing Partner. The agreement provided that Orchestra would render a variety of consulting and advisory services relating principally to identifying and evaluating strategic relationships, licensing opportunities, and business strategies. Orchestra was compensated at the rate of $5,000 per month for twelve months, payable quarterly in advance. For the three months ended March 31, 2015, the Company paid Orchestra $15,000. The consulting agreement expired on April 11, 2015 and the Company is not obligated to make future payments.
As of March 31, 2015, one of the members of the Company’s scientific advisory board was considered an affiliate of the Company as he owned more than 10% of the Company’s common stock at that date. This individual’s ownership of the Company’s common stock was less than 10% as of March 31, 2016
Cystic Fibrosis Development Award
On April 20, 2015, the Company entered into an award agreement with the CFFT, a non-profit drug discovery and development affiliate of the Cystic Fibrosis Foundation, pursuant to which it received a development award (the “Award”) for up to $5 million in funding. The funding from the Award is supporting a first-in-patient Phase 2 clinical trial of the Company’s oral anti-inflammatory drug Resunab in adults with cystic fibrosis (“CF”). Upon the execution of the Award agreement, the Company received a payment of $1,250,000 in May 2015 from the CFFT (See Notes 3 and 8). In the fourth quarter of 2015, the Company received a second payment of $1,250,000 from the CFFT upon the achievement of a milestone for dosing the first patient. In 2015, the Company recorded these amounts received from the CFFT totaling $2,500,000 as deferred revenue. The Company is amortizing these amounts on a straight-line basis over the expected duration of the performance period of the development program under the award, which is expected to conclude in the first quarter of 2017. The remaining $2,500,000 under the Award will be paid to the Company incrementally upon the achievement of certain milestones related to the progress of the Phase 2 CF clinical trial, as set forth in the Award agreement.
Pursuant to the terms of the Award agreement, the Company is obligated to make royalty payments to CFFT contingent upon commercialization of Resunab in the Field of Use (as defined in the Award agreement) including a royalty payment equal to five times the amount the Company receives under the Award agreement, up to $25 million, payable in three equal annual installments following the first commercial sale of Resunab, the first of which is due within 90 days following the first commercial sale of Resunab. The Company is also obligated to make a royalty payment to CFFT equal to the amount the Company receives under the Award agreement, up to $5 million, due in the first calendar year in which the aggregate cumulative net sales of Resunab in the Field of Use exceed $500 million. Lastly, the Company is obligated to make royalty payment(s) to CFFT of up to approximately $15 million if the Company transfers, sells or licenses Resunab in the Field of Use other than for certain clinical or development purposes, or if the Company enters into a change of control transaction, with such payment(s) to be credited against the royalty payments due upon commercialization. The Field of Use is defined in the Award as the treatment in humans of CF, asbestosis, bronchiectasis, byssinosis, chronic bronchitis/COPD hypersensitivity pneumonitis, pneumoconiosis, primary ciliary dyskinesis, sarcoidosis and silicosis. Either CFFT or the Company may terminate the agreement for cause, which includes the Company’s material failure to achieve certain commercialization and development milestones. The Company’s payment obligations survive the termination of the Award agreement.
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