NOTES TO CONDENSED FINANCIAL STATEMENTS
(unaudited)
1.
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Organization and Summary of Significant Accounting Policies
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The Company
We are a pharmaceutical company developing therapeutics
utilizing our proprietary long-term drug delivery platform, ProNeura™, for the treatment of select chronic diseases for which steady
state delivery of a drug has the potential to provide an efficacy and/or safety benefit. ProNeura consists of a small, solid implant
made from a mixture of ethylene-vinyl acetate, or EVA, and a drug substance. The resulting product is a solid matrix that is designed
to be administered subdermally, in a brief, outpatient procedure and is removed in a similar manner at the end of the treatment period.
These procedures may be performed by trained health care providers, or HCPs, including licensed and surgically qualified physicians,
nurse practitioners, and physician’s assistants in a HCP’s office or other clinical setting.
Our first product based on our ProNeura technology
was the Probuphine® (buprenorphine) implant, which has been approved in the United States, Canada and the European Union,
or EU, for the maintenance treatment of opioid use disorder in clinically stable patients taking 8 mg or less a day of oral buprenorphine.
While Probuphine continues to be commercialized in Canada and the EU by other companies who have either licensed or acquired the rights
from Titan, we discontinued commercialization of the product in the U.S. during Q4 2020 following disappointing revenues during the prior
quarters. The disappointing commercial performance of Probuphine was multifactorial in origin, as previously enumerated in our Form 10-K
for the fiscal year ended December 31, 2020. Discontinuation of our commercial operations has allowed us to focus our limited resources
on important product development programs and transition back to a product development company. We operate in only one business segment,
the development of pharmaceutical products.
All share and per share amounts contained in
this report on Form 10-Q give retroactive effect to the reverse split effected by the board of directors, or Board, in November 2020
at a ratio of one share for every thirty shares then outstanding.
The accompanying financial statements have been
prepared assuming we will continue as a going concern.
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information
and footnotes required by GAAP for complete financial statement presentation. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three months
ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021, or any
future interim periods.
The balance sheet as of December 31, 2020 is
derived from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP for
complete financial statements. These unaudited condensed financial statements should be read in conjunction with the audited financial
statements and footnotes thereto included in the Titan Pharmaceuticals, Inc. Annual Report on Form 10-K for the year ended December 31,
2020, as filed with the Securities and Exchange Commission (“SEC”).
The preparation of condensed financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed financial
statements and accompanying notes. Actual results could differ from those estimates. The accompanying condensed financial statements have
been prepared assuming we will continue as a going concern.
As of March 31, 2021, we had cash and cash equivalents
of $11.6 million, which we believe is sufficient to fund our planned operations into the first quarter of 2022. We will require additional
funds to finance our operations. We are exploring several financing alternatives; however, there can be no assurance that our efforts
to obtain the funding required to continue our operations will be successful and there is substantial doubt about our ability to continue
as a going concern.
Discontinued Operations
In October 2020, we announced our decision to
discontinue selling Probuphine in the U.S. and wind down our commercialization activities, and to pursue a plan that will enable us to
focus on our current, early-stage ProNeura-based product development programs.
The accompanying financial statements have been
recast for all periods presented to reflect the assets, liabilities, revenue and expenses related to our U.S. commercialization activities
as discontinued operations (see Note 9). The accompanying financial statements are generally presented in conformity with our historical
format. We believe this format provides comparability with the previously filed financial statements.
Going Concern Assessment
We assess going concern uncertainty in our condensed
financial statements to determine if we have sufficient cash on hand and working capital, including available borrowings on loans, to
operate for a period of at least one year from the date the condensed financial statements are issued or available to be issued, which
is referred to as the “look-forward period” as defined by Accounting Standard Update (“ASU”) No. 2014-15. As
part of this assessment, based on conditions that are known and reasonably knowable to us, we will consider various scenarios, forecasts,
projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs,
and its ability to delay or curtail expenditures or programs, if necessary, among other factors. Based on this assessment, as necessary
or applicable, we make certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures
to the extent we deem probable that those implementations can be achieved and we have the proper authority to execute them within the
look-forward period in accordance with ASU No. 2014-15.
Based upon the above assessment, we concluded
that, at the date of filing the condensed financial statements in this Quarterly Report on Form 10-Q for the three months ended March
31, 2021, we did not have sufficient cash to fund our operations for the next 12 months without securing additional funds and, therefore,
there is substantial doubt about our ability to continue as a going concern within 12 months after the date the condensed financial statements
were issued. Additionally, we have suffered recurring losses from operations and have an accumulated deficit that raises substantial doubt
about our ability to continue as a going concern.
Use of Estimates
The preparation of financial statements in conformity
with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Inventories
Inventories are recorded at the lower of cost
or net realizable value. Cost is based on the first in, first out method. We regularly review inventory quantities on hand and write down
to its net realizable value any inventory that we believe to be impaired. The determination of net realizable value requires judgment
including consideration of many factors, such as estimates of future product demand, product net selling prices, current and future market
conditions and potential product obsolescence, among others. The components of inventories are as follows:
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As of
|
|
|
|
March 31, 2021
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|
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December 31, 2020
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|
Raw materials and supplies
|
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60
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|
|
|
170
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Finished goods
|
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158
|
|
|
|
158
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|
|
|
$
|
218
|
|
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$
|
328
|
|
The approximately $158,000 of finished goods
inventory at March 31, 2021 included materials held for sale to Molteni and Knight.
Revenue Recognition
We generate revenue principally from collaborative
research and development arrangements, sales or licenses of technology, government grants, sales of Probuphine materials to Molteni and
Knight, and prior to the discontinued operations, the sale of Probuphine in the U.S. Consideration received for revenue arrangements
with multiple components is allocated among the separate performance obligations based upon their relative estimated standalone selling
price.
In determining the appropriate amount of revenue
to be recognized as we fulfill our obligations under our agreements, we perform the following steps for our revenue recognition: (i) identification
of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations,
including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint
on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices;
and (v) recognition of revenue when (or as) we satisfy each performance obligation.
Net Product Revenue
Prior to the discontinuation
of our commercialization activities relating to Probuphine in the U.S., we recognized revenue from product sales when control of the
product transfers, generally upon shipment or delivery to our customers, which include distributors. As customary in the pharmaceutical
industry, our gross product revenue was subject to a variety of deductions in the forms of variable consideration, such as rebates, chargebacks,
returns and discounts, in order to arrive at reported net product revenue. This variable consideration was estimated using the most-likely
amount method, which is the single most-likely outcome under a contract and was typically at stated contractual rates. The actual outcome
of this variable consideration could materially differ from our estimates. From time to time, we would adjust our estimates of this variable
consideration when trends or significant events indicated that a change in estimate is appropriate to reflect the actual experience.
Additionally, we continued to assess the estimates of our variable consideration as we continued to accumulate additional historical
data.
Returns – Consistent
with the provisions of ASC 606, we estimated returns at the inception of each transaction, based on multiple considerations, including
historical sales, historical experience of actual customer returns, levels of inventory in our distribution channel, expiration dates
of purchased products and significant market changes which could impact future expected returns to the extent that we would not reverse
any receivables, revenues, or contract assets already recognized under the agreement. During the year ended December 31, 2019, we
entered into agreements with large national specialty pharmacies with a distribution channel different from that of our existing customers
and, therefore, the related reserves had unique considerations. We continued to evaluate the activities with these specialty pharmacies
and updated the related reserves accordingly.
Rebates – Our provision
for rebates was estimated based on our customers’ contracted rebate programs and our historical experience of rebates paid.
Discounts –
The provision was estimated based upon invoice billings, utilizing historical customer payment experience.
Performance Obligations
A performance obligation
is a promise in a contract to transfer distinct goods or services to the customer. Our performance obligations include commercialization
license rights, development services and services associated with the regulatory approval process.
We have optional additional
items in contracts, which are accounted for as separate contracts when the customer elects such options. Arrangements that include a promise
for future commercial product supply and optional research and development services at the customer’s discretion are generally considered
as options. We assess if these options provide a material right to the customer and, if so, such material rights are accounted for as
separate performance obligations. If we are entitled to additional payments when the customer exercises these options, any additional
payments are recorded in revenue when the customer obtains control of the goods or services.
Transaction Price
We have both fixed and
variable considerations. Non-refundable upfront payments are considered fixed, while milestone payments are identified as variable
consideration when determining the transaction price. Funding of research and development activities is considered variable until such
costs are reimbursed at which point they are considered fixed. We allocate the total transaction price to each performance obligation
based on the relative estimated standalone selling prices of the promised goods or services for each performance obligation.
At the inception of each
arrangement that includes milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate
the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal
would not occur, the value of the associated milestone is included in the transaction price. Milestone payments that are not within our
control, such as approvals from regulators, are not considered probable of being achieved until those approvals are received.
For arrangements that
include sales-based royalties or earn-out payments, including milestone payments based on the level of sales, and the license or purchase
agreement is deemed to be the predominant item to which the royalties or earn-out payments relate, we recognize revenue at the later of
(a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty or earn-out payment
has been allocated has been satisfied (or partially satisfied).
Allocation of Consideration
As part of the accounting
for these arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price of each performance
obligation identified in the contract. Estimated selling prices for license rights are calculated using the residual approach. For
all other performance obligations, we use a cost-plus margin approach.
Timing of Recognition
Significant management
judgment is required to determine the level of effort required under an arrangement and the period over which we expect to complete our
performance obligations under an arrangement. We estimate the performance period or measure of progress at the inception of the arrangement
and re-evaluate it each reporting period. This re-evaluation may shorten or lengthen the period over which revenue is recognized. Changes
to these estimates are recorded on a cumulative catch up basis. If we cannot reasonably estimate when our performance obligations either
are completed or become inconsequential, then revenue recognition is deferred until we can reasonably make such estimates. Revenue is
then recognized over the remaining estimated period of performance using the cumulative catch-up method. Revenue is recognized
for licenses or sales of functional intellectual property at the point in time the customer can use and benefit from the license. For
performance obligations that are services, revenue is recognized over time proportionate to the costs that we have incurred to perform
the services using the cost-to-cost input method.
Research and Development Costs and Related Accrual
Research and development expenses include internal
and external costs. Internal costs include salaries and employment related expenses, facility costs, administrative expenses and allocations
of corporate costs. External expenses consist of costs associated with outsourced contract research organization (“CRO”)
activities, sponsored research studies, product registration, patent application and prosecution, and investigator sponsored trials.
When we are conducting clinical trials, we record accruals for estimated ongoing clinical trial costs. Clinical trial costs represent
costs incurred by CROs and clinical sites. These costs are recorded as a component of research and development expenses. Under the agreements,
progress payments are typically made to investigators, clinical sites and CROs. The progress of the clinical trials, including levels
of patient enrollment, invoices received and contracted costs, is analyzed when evaluating the adequacy of accrued liabilities. Significant
judgments and estimates must be made and used in determining the accrued balance in any accounting period. Actual results could differ
from those estimates under different assumptions. Revisions are charged to expense in the period in which the facts that give rise to
the revision become known.
Leases
In February 2016, the Financial Accounting
Standards Board (the “FASB”) issued Accounting Standard Update, or ASU, No. 2016-02, Leases (Topic 842), to enhance the
transparency and comparability of financial reporting related to leasing arrangements. We adopted the standard effective January 1,
2019.
We determine whether the arrangement is or contains
a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized at the present value of the future lease
payments at commencement date. The interest rate implicit in lease contracts is typically not readily determinable, and therefore, we
utilize our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal
to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such
as initial direct costs paid or incentives received.
Lease expense is recognized over the expected
term on a straight-line basis. Operating leases are recognized on our balance sheet as right-of-use assets, operating lease liabilities
current and operating lease liabilities non-current. We no longer recognize deferred rent on our balance sheet.
The following table presents maturities of our
operating lease:
2021
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$
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78
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Total minimum lease payments (base rent)
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78
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Less: imputed interest
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(2
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)
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Total operating lease liabilities
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$
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76
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Recent Accounting Pronouncements
Accounting Standards Adopted
In August 2018, the FASB issued ASU 2018-13, Fair
Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates,
adds and modifies certain disclosure requirements for fair value measurements as part of the FASB's disclosure framework project. We adopted
ASU 2018-13 effective January 1, 2020 with no material impact to our financial statements and related disclosures.
Accounting Standards Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses, which requires an organization to measure all expected
credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable
forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss
estimates. The amendments in this ASU are effective for us in our interim period ending March 31, 2023. We are currently assessing
the impact of the adoption of Topic 326 on our financial statements and disclosures.
In March 2020, the FASB issued ASU 2020-04, Reference
Rate Reform, which provides companies with optional guidance, including expedients and exceptions for applying GAAP to contracts and
other transactions affected by reference rate reform, such as the London Interbank Offered Rate (LIBOR). This new standard was effective
upon issuance and generally can be applied to applicable contract modifications through December 31, 2022. We are evaluating the effects
that the adoption of this guidance will have on our financial statements and disclosures.
In August 2020, the FASB issued ASU No. 2020-06,
Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies the accounting for convertible instruments.
ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally,
among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own
equity. The guidance also requires entities to use the if converted method for all convertible instruments in the diluted earnings per
share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain
liability-classified share-based payment awards. This guidance is effective beginning after December 15, 2023 and must be applied using
either a modified or full retrospective approach. Early adoption is permitted. We are currently evaluating the impact this guidance will
have on our financial statements and related disclosures.
Subsequent Events
We have evaluated events that have occurred after
March 31, 2021 and through the date that our condensed financial statements are issued.
Fair Value Measurements
Financial instruments, including receivables,
accounts payable and accrued liabilities are carried at cost, approximate their fair values due to the short-term nature of these instruments.
Our investments in money market funds are classified within Level 1 of the fair value hierarchy. Our derivative liability is classified
within level 3 of the fair value hierarchy because the fair value is calculated using significant judgment based on our own assumptions
in the valuation of this liability.
At March 31, 2021 and December
31, 2020, the fair value of our investments in money market funds were approximately $10.7 million and $5.1 million, respectively, which
are included within our cash and cash equivalents in our condensed balance sheets.
There were no warrant liabilities at March 31,
2021. The following table presents a roll forward of the fair value of our warrant liability, the fair value of which is determined by
Level 3 inputs for the three month period ended March 31, 2020 (in thousands):
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March
31, 2020
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Fair value, beginning of period
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$
|
320
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Issuance of warrants
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1,654
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Change in fair value(1)
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923
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Reclassification of warrants to additional paid-in capital
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|
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(2,897
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)
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Fair value, end of period
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$
|
—
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|
(1) Recognized as non-cash loss on changes
in fair value of warrants in the statement of operations and comprehensive loss.
The following table summarizes option activity:
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Options
(in thousands)
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Weighted
Average
Exercise
Price per
share
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Weighted
Average
Remaining
Option
Term
(in years)
|
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|
Aggregate
Intrinsic
Value
(in thousands)
|
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Outstanding at December 31, 2020
|
|
|
28
|
|
|
$
|
242.70
|
|
|
|
6.35
|
|
|
$
|
—
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Granted
|
|
|
670
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|
|
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4.02
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|
|
|
|
|
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Forfeited or expired
|
|
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(1
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)
|
|
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74.92
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2021
|
|
|
697
|
|
|
$
|
13.46
|
|
|
|
9.72
|
|
|
$
|
—
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|
Exercisable at March 31, 2021
|
|
|
26
|
|
|
$
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254.22
|
|
|
|
5.97
|
|
|
$
|
—
|
|
Approximately 670,000 options to purchase common
shares were granted during the three month period ended March 31, 2021.
The following table summarizes the stock-based
compensation expense recorded for awards under our stock option plans (in thousands):
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Three Months Ended
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
120
|
|
|
$
|
—
|
|
Selling, general and administrative
|
|
|
128
|
|
|
|
(84
|
)
|
Total stock-based compensation expense
|
|
$
|
248
|
|
|
$
|
(84
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)
|
We use the Black-Scholes-Merton option-pricing
model with the following assumptions to estimate the fair value of our stock options:
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Three Months Ended
March 31,
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|
|
|
2021
|
|
|
2020
|
|
Weighted-average risk-free interest rate
|
|
|
0.54
|
%
|
|
|
—
|
%
|
Expected dividend payments
|
|
|
—
|
|
|
|
—
|
|
Expected holding period (years)(1)
|
|
|
5.5
|
|
|
|
—
|
|
Weighted-average volatility factor(2)
|
|
|
113.9
|
|
|
|
—
|
|
Estimated forfeiture rates for options granted(3)
|
|
|
29.6
|
%
|
|
|
—
|
%
|
____________________
(1)
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Expected holding period is based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and the expectations of future employee behavior.
|
(2)
|
Weighted average volatility is based on the historical volatility of our common stock.
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(3)
|
Estimated forfeiture rates are based on historical data.
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As of March 31, 2021, there was approximately
$1.3 million of total unrecognized compensation expense related to non-vested stock options. This expense is expected to be recognized
over a weighted-average period of approximately 1.6 years.
The table below presents common shares underlying
stock options, warrants and convertible loans that are excluded from the calculation of the weighted average number of common shares outstanding
used for the calculation of diluted net loss per common share. These are excluded from the calculation due to their anti-dilutive effect:
|
|
Three months ended
March 31,
|
|
(in thousands)
|
|
2021
|
|
|
2020
|
|
Weighted-average anti-dilutive common shares resulting from options
|
|
|
399
|
|
|
|
34
|
|
Weighted-average anti-dilutive common shares resulting from warrants
|
|
|
719
|
|
|
|
279
|
|
Weighted-average anti-dilutive common shares resulting from convertible loans
|
|
|
—
|
|
|
|
109
|
|
Total
|
|
|
1,118
|
|
|
|
422
|
|
4.
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Molteni Purchase Agreement
|
On March 21, 2018, we entered into a purchase
agreement (“Molteni Purchase Agreement”) with L. Molteni & C. Dei Frattelli Alitti Società Di Esercizio S.P.A.
(“Molteni”) pursuant to which Molteni acquired the European intellectual property related to Probuphine and gained the exclusive
right to commercialize the Probuphine product supplied by us, to be marketed under the tradename Sixmo, in the EU, as well as certain
countries of the Commonwealth of Independent States, the Middle East and North Africa.
Following certain amendments to the Molteni Purchase
Agreement in August 2018 and September 2019, in October 2020, we entered into a Debt Settlement and Release Agreement (“DSRA Agreement”)
with Molteni and Horizon Technology Finance Corporation (“Horizon”), the holders of our outstanding secured debt, to settle
such obligations for $1.6 million in cash, the transfer of certain Probuphine assets to Molteni, including all of our manufacturing equipment,
and the termination of our rights to future payments under the Molteni Purchase Agreement. The DSRA Agreement, provided for the release
to us of the remaining collateral.
5.
|
JT Pharmaceuticals Asset Purchase Agreement
|
In October 2020, in connection with our decision
to discontinue our commercial operations, we entered into an Asset Purchase Agreement (the “JT Agreement”) with JT Pharmaceuticals,
Inc. (“JT Pharma”) to acquire JT Pharma’s kappa opioid agonist peptide, TP-2021 (formerly JT-09) for use in combination
with our ProNeura long-term, continuous drug delivery technology, for the treatment of chronic pruritus and other medical conditions.
Under the terms of the JT Agreement, JT Pharma received a $15,000 closing payment and is entitled to receive future milestone payments,
payable in cash or in stock, based on the achievement of regulatory milestones, and single-digit percentage earn-out payments on net
sales of the product if successfully developed and approved for commercialization. To date, none of these events have occurred and no
contingent consideration, milestone or earn-out payments have been recognized.
6.
|
Commitments and Contingencies
|
Minimum payments
Our manufacturing agreement, as amended, with
DPT, our contract manufacture, provides for a minimum manufacturing fee of $1.0 million. In the event we do not have DPT manufacture sufficient
quantities of product to exceed the minimum manufacturing fee, DPT is able to invoice us for the amount of the shortfall.
Legal Proceedings
A legal proceeding has been initiated
by a former employee alleging wrongful termination, retaliation, infliction of emotional distress, negligent supervision, hiring and
retention and slander. An independent investigation into this individual’s allegations of whistleblower retaliation, while still
an employee, was conducted utilizing an outside investigator and concluded that such allegations were not substantiated. We intend to
vigorously defend the lawsuit; however, in light of our cash position, there can be no assurance that the defense and/or settlement of
this matter will not have a material adverse impact on our business.
Horizon and Molteni Loans
In March 2018, we entered into an Amended
and Restated Venture Loan and Security Agreement (the “Loan Agreement”) with Horizon and Molteni pursuant to which Horizon
assigned approximately $2.4 million of the $4.0 million outstanding principal balance of its loan to us to Molteni and Molteni was appointed
as the collateral agent and assumed majority and administrative control of the loan. Under the Loan Agreement, Molteni had the right to
convert its portion of the debt into shares of our common stock at a conversion price of $216.00 per share and was required to effect
this conversion of debt to equity upon completion of an equity financing meeting specified criteria. In connection with the Loan Agreement,
we issued warrants to purchase an aggregate of 223 shares of our common stock with an exercise price per share of $216.00 to Horizon.
In September 2019, we entered into
an amendment to the Loan Agreement pursuant to which the interest-only payment and forbearance periods were extended by one year to December
31, 2020 and the maturity date was extended by one year to June 1, 2022. In connection with the amendment to the Loan Agreement, the final
payments to the lenders were increased by an aggregate of approximately $0.3 million (exclusive of a restructuring fee payable to Horizon)
and the conversion provisions related to Molteni’s portion of the loan amount were revised to eliminate the mandatory conversion
feature, to reduce the conversion price to $6.75 and to cap the number of shares issuable upon conversion to 114,093.
In October 2020, we entered into the DSRA
Agreement with Molteni and Horizon to settle our obligations for $1.6 million in cash, the transfer of certain Probuphine assets to Molteni,
including all of our manufacturing equipment, and the termination of our rights to future payments under the Purchase Agreement with Molteni.
Paycheck Protection Program Loan
On April 20, 2020, we received an approximately
$654,000 loan (“PPP Loan”) pursuant to the Paycheck Protection Program of the CARES Act. The proceeds of the PPP Loan are
to be used to retain workers and maintain payroll and make mortgage interest, lease and utility payments. The PPP Loan matures in April
2022 with an annual interest rate of 1.0%. The PPP Loan originally had a six month deferral of payments period which was extended to
sixteen months during the third quarter of 2020 and may be prepaid at any time without penalty. All other terms remained the same. Forgiveness
of the loan, when requested, is not automatic and is only available for principal that is used for the limited purposes that expressly
qualify for forgiveness under SBA requirements. A loan forgiveness application was submitted in December 2020. Approximately $0.6 million
of the PPP loan is included in current portion of long-term debt and approximately $0.1 million is included in long- term debt on our
balance sheet at March 31, 2021.
Our common stock
outstanding as of March 31, 2021 and December 31, 2020 was 9,864,068 shares and 7,139,068 shares, respectively.
Annual Meeting of Stockholders
In January 2021, our stockholders approved
an amendment to the 2015 Omnibus Equity Incentive plan to increase the number of authorized shares to 1,000,000 shares.
January 2021 Offering
In January 2021, we completed an offering
with several accredited institutional investors pursuant to which we issued 2,725,000 shares of our common stock in a registered direct
offering and warrants to purchase 2,725,000 shares of our common stock with an exercise price of $3.55 per share in a concurrent private
placement. The warrants were exercisable immediately and will expire in July 2026. The net cash proceeds from this offering were
approximately $8.9 million after deduction of underwriting fees and other offering expenses.
January 2020
Offering
In January 2020, we completed a financing
with several institutional investors pursuant to which we issued 290,000 shares of our common stock in a registered direct offering and
warrants to purchase 290,000 shares of our common stock with an exercise price of $7.50 per share in a concurrent private placement (the
“January 2020 Warrants”) pursuant to which we received net cash proceeds of approximately $1.9 million, after deduction of
underwriting fees and other offering expenses. The January 2020 Warrants became exercisable in September 2020 following receipt of stockholder
approval of an increase in our authorized shares of common stock and they expire in July 2025. Financing costs of approximately $0.2 million
allocated to the January 2020 warrant liability were expensed and included in other income (expense) in the statements of operations and
comprehensive loss.
9.
|
Discontinued Operations
|
The components of loss from discontinued operations
as reported in our statements of operations were as follows:
|
|
Three months ended March 31,
|
|
|
|
2020
|
|
(In thousands, except per share data)
|
|
|
|
|
Revenue:
|
|
|
|
|
Product revenue
|
|
$
|
210
|
|
|
|
|
|
|
Costs and expenses:
|
|
|
|
|
Cost of goods sold
|
|
|
171
|
|
Research and development
|
|
|
465
|
|
Selling, general and administrative
|
|
|
1,825
|
|
Total costs and expenses
|
|
|
2,461
|
|
Loss from discontinued operations
|
|
|
(2,251
|
)
|
Other expense
|
|
|
—
|
|
Net loss from discontinued operations
|
|
$
|
(2,251
|
)
|
Basic and diluted net loss per common share from discontinued operations
|
|
$
|
(0.82
|
)
|
Weighted average shares used in computing basic and diluted net loss per common share
|
|
|
2,755
|
|
The following table presents information related
to assets and liabilities reported as discontinued operations in our balance sheet:
|
|
March 31,
2021
|
|
|
December 31,
2020
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
$
|
128
|
|
|
$
|
181
|
|
Discontinued operations – current assets
|
|
$
|
128
|
|
|
$
|
181
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,518
|
|
|
$
|
1,515
|
|
Accrued clinical trials expenses
|
|
|
9
|
|
|
|
80
|
|
Accrued sales allowances
|
|
|
57
|
|
|
|
61
|
|
Other accrued liabilities
|
|
|
309
|
|
|
|
304
|
|
Discontinued operations – current liabilities
|
|
$
|
1,893
|
|
|
$
|
1,960
|
|
During the three months ended March 31, 2020 we
recognized non-cash stock-based compensation expenses of approximately $24,000 which is included in discontinued operations.