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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
Amendment
No. 1
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACTOF 1934
For
the fiscal year ended December 31, 2021
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: 001-38022
MATINAS
BIOPHARMA HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
No.
46-3011414 |
(State
or other jurisdiction of
incorporation
or organization) |
|
(I.R.S.
Employer
Identification
No.) |
1545
Route 206 South, Suite
302
Bedminster,
New Jersey 07921
(Address
of principal executive offices) (Zip Code)
908-484-8805
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of Each Class |
|
Trading
Symbol |
|
Name
of Each Exchange on Which Registered |
Common
Stock, par value $0.0001 |
|
MTNB |
|
NYSE
American |
Securities
registered pursuant to Section 12(g) of the Act: None.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or 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 Act). Yes ☐ No
☒
The
aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which
the common equity was sold on June 30, 2021 was approximately $160.0
million.
As
of March 4, 2022, there were 216,864,526
shares of the registrant’s common stock, $0.0001 par
value, outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
None.
Explanatory
Note
This
Amendment No. 1 (the “Amendment”) to the Annual Report on Form 10-K of Matinas BioPharma Holdings Corp. (the “Company”)
for the fiscal year ended December 31, 2021, originally filed with the Securities and Exchange Commission (the “SEC”) on
March 8, 2022 (the “Original Filing”), is being filed solely to correct an administrative error in the content of Item 8,
Financial Statements and Supplementary Data in the Original Filing (“Item 8”). Item 8 incorrectly identified EisnerAmper
LLP’s PCAOB ID as 247. The correct PCAOB ID for EisnerAmper LLP is 274.
Except
as described above, no other information included in the Original Filing is being amended or updated by this Amendment, and this Amendment
does not purport to reflect any information or events subsequent to the Original Filing.
Pursuant
to Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Amendment also contains new
certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, which are attached hereto.
MATINAS
BIOPHARMA HOLDINGS, INC.
Annual
Report on Form 10-K
Amendment
No. 1
Fiscal
Year Ended December 31, 2021
Table
of Contents
Item
8. |
Financial
Statements And Supplementary Data |
Our
financial statements, together with the independent registered public accounting firm report thereon, are incorporated by reference from
the applicable information set forth in Part IV Item 15, “Exhibits, Financial Statement Schedules” of this Annual Report
on Form 10-K which includes the report of EisnerAmper LLP (PCAOB ID: 274).
Part
IV
Item
15. |
Exhibits
And Financial Statement Schedules |
* |
Filed
herewith. |
** |
Furnished
herewith. |
*** |
Previously
Filed
|
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Act, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the city of Bedminster, State of New Jersey on March 11, 2022.
|
MATINAS
BIOPHARMA HOLDINGS, INC. |
|
|
|
|
By: |
/s/
Jerome D. Jabbour |
|
Name: |
Jerome
D. Jabbour |
|
Title: |
Chief
Executive Officer |
|
|
|
|
By: |
/s/
Keith A. Kucinski |
|
Name: |
Keith
A. Kucinski |
|
Title: |
Chief
Financial Officer |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Person |
|
Capacity |
|
Date |
|
|
|
|
|
/s/
Jerome D. Jabbour |
|
Chief
Executive Officer and Director |
|
March
11, 2022 |
Jerome
D. Jabbour |
|
(Principal
Executive Officer) |
|
|
|
|
|
|
|
/s/
Keith A. Kucinski |
|
Chief
Financial Officer |
|
March
11, 2022 |
Keith
A. Kucinski |
|
(Principal
Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/
Herbert Conrad |
|
Chairman
of the Board |
|
March
11, 2022 |
Herbert
Conrad |
|
|
|
|
|
|
|
|
|
/s/
Kathryn Corzo |
|
Director |
|
March
11, 2022 |
Kathryn
Corzo |
|
|
|
|
|
|
|
|
|
/s/
Eric Ende |
|
Director |
|
March
11, 2022 |
Eric
Ende |
|
|
|
|
|
|
|
|
|
/s/
Natasha Giordano |
|
Director |
|
March
11, 2022 |
Natasha
Giordano |
|
|
|
|
|
|
|
|
|
/s/
James S. Scibetta |
|
Director |
|
March
11, 2022 |
James
S. Scibetta |
|
|
|
|
|
|
|
|
|
/s/
Matthew A. Wikler |
|
Director |
|
March
11, 2022 |
Matthew
A. Wikler |
|
|
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
Matinas
BioPharma Holdings, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Matinas BioPharma Holdings, Inc. and Subsidiaries as of December 31, 2021
and 2020 and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash
flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “financial
statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the
Company as of December 31, 2021, and the results of their operations and their cash flows for each of the years in the two-year period
ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matter
The
critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit
matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Accruals
for research and development expenses
As
disclosed in the consolidated statements of operations, for the year ended December 31, 2021, the Company incurred significant research
and development (“R&D”) expenses, which amounted to approximately $14.6 million. At December 31, 2021, the Company had
accrued $1.3 million for R&D expenses on the consolidated balance sheet. A large amount of the Company’s R&D expenses are
service fees paid to contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”).
The R&D activities with these CROs and CMOs are documented in contractual agreements and are typically performed over an extended
period, and there may be several milestones of the services in one agreement. Therefore, the allocation of the service expenses based
on the progress of the R&D projects and the milestones completed for the appropriate financial reporting period involved judgement
and estimation.
We
identified management’s estimate of accruals for R&D expenses as a critical audit matter due to the significance of these expenses
to the financial statements and the subjectivity involved in estimating the progress of the R&D projects and service fees accrued
for the completion of milestones by the CROs and CMOs. As a result, auditor judgement and additional testing were required to perform
procedures and evaluate audit evidence related to the accruals for R&D expenses.
Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated
financial statements. Our audit procedures related to the accruals for R&D expenses included the following, among others, (i) we
obtained an understanding of management’s process and evaluated the design of controls related to the accrual process for R&D
expenses; (ii) we read selected research agreements to evaluate whether the progress and the completion of milestones reported by the
representatives of the CROs and CMOs and the corresponding service fees are based on the respective contractual terms, (iii) we sent
confirmations to CROs and CMOs, on a sample basis, to confirm the amount of the total R&D service fees incurred for the year and
the amounts of outstanding payables under the terms of the contracts, and (iv) we selected projects from the open contract list at year
end and made inquiries of the Company research personnel regarding the project status, and we also inspected invoices received subsequent
to year-end and additional documents and correspondence with the CROs and CMOs, supporting management’s estimate of R&D expenditures.
/s/
EisnerAmper LLP
We
have served as the Company’s auditor since 2011.
EISNERAMPER
LLP
Iselin,
New Jersey
March
8, 2022
Matinas
BioPharma Holdings, Inc.
Consolidated
Balance Sheets
The
accompanying notes are an integral part of these consolidated financial statements.
Matinas
BioPharma Holdings, Inc.
Consolidated
Statements of Operations and Comprehensive Loss
The
accompanying notes are an integral part of these consolidated financial statements.
Matinas
BioPharma Holdings, Inc.
Consolidated
Statements of Changes in Stockholders’ Equity
The
accompanying notes are an integral part of these consolidated financial statements.
Matinas
BioPharma Holdings, Inc.
Consolidated
Statements of Cash Flows
The
accompanying notes are an integral part of these consolidated financial statements.
Note
1 – Description of Business
Matinas
BioPharma Holdings Inc. (“Holdings”) is a Delaware corporation formed in 2013. Holdings is the parent company of Matinas
BioPharma, Inc. (“BioPharma”), and Matinas BioPharma Nanotechnologies, Inc. (“Nanotechnologies,” formerly known
as Aquarius Biotechnologies, Inc.), its operating subsidiaries (“Nanotechnologies”, and together with “Holdings”
and “BioPharma” or “the Company”). The Company is a clinical-stage biopharmaceutical company with a focus on
identifying and developing novel pharmaceutical products.
Note
2 – Liquidity and Plan of Operations
The
Company has experienced net losses and negative cash flows from operations each period since its inception. Through December 31, 2021,
the Company had an accumulated deficit of approximately $131.6
million. The Company’s net loss for the
years ended December 31, 2021 and 2020 were approximately $23.3
million and $22.4
million, respectively.
The
Company has been engaged in developing LYPDISO (formerly MAT9001) as well as its lipid nanocrystal (“LNC”) platform delivery
technology and a pipeline of associated product candidates, including MAT2203 and MAT2501, since 2011. To date, the Company has not obtained
regulatory approval for any of its product candidates nor generated any revenue from product sales, and the Company expects to incur
significant expenses to complete development of its product candidates. The Company may never be able to obtain regulatory approval for
the marketing of any of its product candidates in any indication in the United States or internationally and there can be no assurance
that the Company will generate revenues or ever achieve profitability.
Assuming
the Company obtains Food and Drug Administration (“FDA”) approval for one or more of its product candidates, the Company
expects that its expenses will continue to increase once the Company reaches commercial launch. The Company also expects that its research
and development expenses will continue to increase as it moves forward with additional clinical studies for its current product candidates
and development of additional product candidates. As a result, the Company expects to continue to incur substantial losses for the foreseeable
future, and that these losses will be increasing.
To
continue to fund operations, during January 2021, the Company sold 3,023,147
shares of common stock under its At-The-Market
Sales Agreement with BTIG, LLC, generating gross proceeds of approximately $5.8
million and net proceeds of approximately $5.6
million. In addition, on January 14, 2020, the
Company completed an underwritten public offering of 32,600,000
shares of common stock, generating gross cash
proceeds of approximately $50.0
million and net proceeds of approximately $46.7
million. (See Note 12 – Stockholders’
Equity).
As
of December 31, 2021, the Company had cash and cash equivalents of approximately $21.0
million, marketable securities of approximately
$28.6 million
and restricted cash of approximately $0.3 million.
The Company believes the cash and cash equivalents and marketable securities on hand are sufficient to fund planned operations through
2023.
Note
3 – Summary of Significant Accounting Policies
Basis
of presentation and principles of consolidation
The
accompanying audited consolidated financial statements include the consolidated accounts of Holdings and its wholly owned subsidiaries,
BioPharma, and Nanotechnologies. The accompanying consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company and
its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
COVID-19
In
March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued
to spread, and any related adverse public health developments, has adversely affected workforces, economics, and financial markets globally,
potentially leading to an economic downturn.
The
Company has been actively monitoring the COVID-19 pandemic and its impact globally. The financial results for the year ended December
31, 2021 were not significantly impacted by COVID-19. However, the Company cannot predict the impact of the progression of the COVID-19
pandemic on future results or the Company’s ability to raise capital due to a variety of factors, including but not limited to
the continued good health of Company employees, the ability of suppliers to continue to operate and deliver, the ability of the Company
to maintain operations, any further government and/or public actions taken in response to the pandemic and ultimately the length of the
pandemic.
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 and liabilities at the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those estimates.
Significant
items subject to such estimates and assumptions include, but are not limited to, the Company’s research and development expenses,
the assessment of the impairment of goodwill and intangible assets, level 3 fair value measurement of financial instruments, income tax
valuations, the determination of stock-based compensation and contingent consideration.
Segment
and geographic information
Operating
segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief
operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views
its operations and manages its business in one
operating and reporting segment.
Cash,
cash equivalents and restricted cash
The
Company considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash
and cash equivalents and all investments with maturities of greater than three months from date of purchase are classified as marketable
securities. Cash and cash equivalents consisted of cash in bank checking and savings accounts, money market funds and short-term U.S.
treasury bonds that mature within three months of settlement date. The Company presents restricted cash with cash and cash equivalents
in the Consolidated Statements of Cash Flows. Restricted cash represents funds the Company is required to set aside to cover building
operating leases and other purposes. For a complete disclosure of the Company’s cash, cash equivalents and restricted cash, see
Note 4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities.
Marketable
Securities
Marketable
securities, all of which are available-for-sale, consist of U.S. treasury bonds, U.S. government notes, corporate debt securities and
state and municipal bonds. Marketable securities are carried at fair value, with unrealized gains and losses reported as accumulated
other comprehensive (loss)/income, except for losses from impairments which are determined to be other-than-temporary. Realized gains
and losses and declines in value judged to be other-than-temporary are included in the determination of net loss and are included in
other income, net. Fair values are based on quoted market prices at the reporting date. Interest and dividends on available-for-sale
securities are included in other income, net. For a complete disclosure of the Company’s marketable securities, see Note 4 –
Cash, Cash Equivalents, Restricted Cash and Marketable Securities.
Concentration
of credit risk
The
Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents,
restricted cash and marketable securities. The Company’s investment policy is to invest only in institutions that meet high credit
quality standards and establishes limits on the amount and time to maturity of investments with any individual counterparty. Balances
are maintained at U.S. financial institutions and are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to
regulatory limits. The Company has not experienced any credit losses associated with its balances in such accounts.
Leasehold
improvements and equipment
Equipment
and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation on equipment is computed using
the straight-line method over the estimated useful lives of the assets, which range from three
to ten
years. Capitalized costs associated with leasehold
improvements are amortized on a straight-line basis over the lesser of the estimated useful life of the asset or the remaining term of
the lease.
Goodwill
and other intangible assets
Goodwill
is recorded when consideration paid for an acquired entity exceeds the fair value of the net assets acquired. Goodwill is not amortized
but rather is assessed for impairment at least annually on a reporting unit basis, or more frequently when events and circumstances indicate
the goodwill may be impaired. U.S. GAAP provides that the Company has the option to perform a qualitative assessment to determine whether
it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If the Company determine this is
the case, the Company can perform further analysis to identify and measure the amount of goodwill impairment loss to be recognized, if
any.
A
reporting unit is an operating segment, or one level below an operating segment. Historically, the Company has conducted its business
in a single operating segment and reporting unit. For the years ended December 31, 2021 and 2020, the Company assessed goodwill impairment
by performing a qualitative test for its reporting unit. As part of the qualitative review, the Company considered its cash position
and its ability to obtain additional financing in the near term to meet its operational and strategic goals and substantiate the value
of its business. Based on the results of the Company’s assessment, it was determined that it is more-likely-than-not that the fair
value of the reporting unit is greater than its carrying amount. There were no
impairments of goodwill during the years ended
December 31, 2021 and 2020. If a nonrecurring fair value measurement for a goodwill impairment was required, sufficient information will
be provided to permit reconciliation of the fair value of the asset categorized within the fair value hierarchy as level 3 to the amounts
presented in the statement of financial position.
Indefinite
lived intangible assets are composed of in-process research and development (“IPR&D”) and represent projects acquired
in a business combination that have not reached technological feasibility or that lack regulatory approval at the time of acquisition.
These IPR&D assets are reviewed for impairment annually, or sooner if events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable, and upon establishment of technological feasibility or regulatory approval. An impairment
loss, if any, is calculated by comparing the fair value of the asset to its carrying value. If the asset’s carrying value exceeds
its fair value, an impairment loss is recorded for the difference and its carrying value is reduced accordingly. Similar to the impairment
test for goodwill, the Company may perform a qualitative approach for testing indefinite-lived intangible assets for impairment. The
Company used the qualitative approach and concluded that it was more-likely-than-not that its indefinite-lived assets were not impaired
during the years ended December 31, 2021 and 2020.
Leases
The
Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 842, “Leases”,
establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance
sheet for all leases with a term longer than 12 months. Leases will be classified as either finance or operating, with classification
affecting the pattern and classification of expense recognition in the income statement. Lessor accounting under the new standard is
substantially unchanged. Additional qualitative and quantitative disclosures are also required.
Preferred
stock dividends
Subject
to provisions detailed more fully in Note 12, Stockholders’ Equity, shares of Series B Preferred Stock earned dividends at rates
of 10%,
15%
and 20%
once per year on the first, second and third
anniversary, respectively, of June 19, 2018. The dividends were paid when earned to the holders of the Series B Preferred Stock in the
form of shares of the Company’s common stock.
Income
taxes
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates.
The
Company adopted the provisions of Accounting Standard Codification 740-10 and has analyzed its filing positions in 2021 and 2020 in jurisdictions
where it may be obligated to file returns. The Company believes that its income tax filing position and deductions will be sustained
on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves
for uncertain income tax positions have been recorded. The Company’s policy is to recognize interest and/or penalties related to
income tax matters in income tax expense. The Company had no
accrual for interest or penalties as of December
31, 2021.
Since
the Company incurred net operating losses in every tax year since inception, the 2014 through 2020 income tax returns are subject to
examination and adjustments by the IRS for at least three years following the year in which the tax attributes are utilized.
Fair
Value Measurements
As
defined in ASC 820 “Fair Value Measurement”, fair value measurements should be disclosed separately by three levels of the
fair value hierarchy. For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable
inputs (quoted prices in active markets) and minimized the use of unobservable inputs (the Company’s assumptions) when developing
fair value measurements, in accordance with the established fair value hierarchy. For a complete disclosure of the Company’s fair
value measurements, see Note 5 – Fair Value Measurements.
Stock-based
compensation
Stock-based
compensation to employees consist of stock option grants and restricted shares that are recognized in the consolidated statement of operations
based on their fair values at the date of grant.
The
Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50, Equity-Based
Payments to Non-Employees based upon the fair-value of the underlying instrument. The equity instruments, consisting of stock options
granted to consultants, are valued using the Black-Scholes valuation model. The Company calculates the fair value of option grants utilizing
the Black-Scholes pricing model and estimates the fair value of restricted stock based upon the estimated fair value or the common stock.
The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately
expected to vest. The Company accounts for forfeitures as they occur. The term “forfeitures” is distinct from “cancellations”
or “expirations” and represents only the unvested portion of the surrendered stock option or warrant.
The
resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis
over the requisite service period of the award.
Basic
and diluted net loss per common share
Net
loss per share information is determined using the two-class method, which includes the weighted-average number of shares of common stock
outstanding during the period and other securities that participate in dividends (a “participating security”). The Company
considered its Preferred Stock to be participating securities because they included rights to participate in dividends with the common
stock.
Under
the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net income attributable
to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The net loss attributable
to common stockholders is calculated by adjusting the net loss of the Company for the accretion on the Preferred Stock. Net losses are
not allocated to preferred stockholders as they do not have an obligation to share in the Company’s net losses. In periods with
net income attributable to common stockholders, the Company would allocate net income first to preferred stockholders based on dividend
rights under the Company’s certificate of incorporation and then to preferred and common stockholders based on ownership interests.
Diluted net loss per share attributable to common stockholders is computed using the more dilutive of (1) the two-class method or (2)
the if-converted method.
During
the years ended December 31, 2021 and 2020, diluted earnings per common share is the same as basic earnings per common share because,
as the Company incurred a net loss during each period presented, the potentially dilutive securities from the assumed exercise of all
outstanding stock options, warrants and conversion of preferred stock, would have an anti-dilutive effect. The reconciliation of the
diluted shares as of December 31, 2021 and 2020 are as follows (in thousands):
Schedule
of Anti-dilutive Securities
| |
As
of December 31, | |
| |
2021 | | |
2020 | |
Stock
options | |
| 28,184 | | |
| 22,551 | |
Preferred
Stock and accrued dividend upon conversion | |
| - | | |
| 8,722 | |
Warrants | |
| 988 | | |
| 1,328 | |
Total | |
| 29,172 | | |
| 32,601 | |
Revenue
recognition
Pursuant
to Topic 606, the Company recognizes revenue to depict the transfer of promised goods or services to a customer in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle,
Topic 606 outlines a five-step process for recognizing revenue from customer contracts that includes i) identification of the contract
with a customer, ii) identification of the performance obligations in the contract, iii) determining the transaction price, iv) allocating
the transaction price to the separate performance obligations in the contract, and v) recognizing revenue associated with performance
obligations as they are satisfied.
At
contract inception, the Company assesses the goods or services promised within each contract and assess whether each promised good or
service is distinct and determine those that are performance obligations. The Company then recognizes as revenue the amount of the transaction
price that is allocated to the respective performance obligation when the performance obligation is satisfied.
For
the years ended December 31, 2020, the Company’s revenues primarily consist of a research grant to provide research and development
services to the Cystic Fibrosis Foundation (“CFF”). The grant contract has a single performance obligation that is recognized
over time as the services are performed. There are no contract assets or liabilities associated with this grant. The Company had approximately
$125
thousand of CFF research grant revenue for the
year ended December 31, 2020.
On
December 12, 2019, the Company entered into a feasibility study agreement (the “Agreement”) with Genentech, Inc. (“Genentech”).
This feasibility study will involve the development of oral formulations using the Company’s LNC platform delivery technology,
which enables the development of a wide range of difficult-to-deliver molecules. Under the terms of the Agreement, Genentech paid the
Company a total of $100
thousand for three molecules, or approximately
$33
thousand per molecule, which will be recognized
upon the Company fulfilling its obligations for each molecule under the Agreement. The Agreement has a single performance obligation
that is recognized over time as the services are performed. There are no contract assets or liabilities associated with this Agreement.
As certain Agreement performance obligations in this agreement were completed, disaggregation of revenue is not required. As of December
31, 2021, the Company completed the first and second of the three molecules and the Company recognized approximately $33
thousand of Genentech revenue for the years ended
December 31, 2021 and 2020, respectively. The Company is scheduled to complete the remaining molecule during 2022.
Collaboration
Agreements
The
Company assess whether its collaboration agreements are subject to ASC Topic 808, Collaborative Arrangements (Topic 808) based
on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed
to significant risks and rewards. To the extent that the arrangement falls within the scope of Topic 808, the Company will apply by analogy
the unit of account guidance under Topic 606 to identify distinct performance obligations, and then determine whether a customer relationship
exists for each distinct performance obligation. If the Company determines a performance obligation within the arrangement is with a
customer, the Company applies the guidance in Topic 606. If a portion of a distinct bundle of goods or services within an arrangement
is not with a customer, then the unit of account is not within the scope of Topic 606, and the recognition and measurement of that unit
of account shall be based on analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational,
and consistently applied accounting policy election.
The
terms of such arrangements typically include payments to the Company for one or more of the following: up-front fees; development and
regulatory payments; product supply services; research and development cost reimbursements; profit-sharing arrangements; and royalties
on certain products if they are successfully commercialized. As part of the accounting for these arrangements, the Company develops assumptions
that require judgment to determine the standalone selling price for each performance obligation identified in the contract. These key
assumptions may include forecasted revenues, clinical development timelines and costs, reimbursement rates for personnel costs, discount
rates and probabilities of technical and regulatory success.
Up-front
License Fees: If the license to the Company’s intellectual property is determined to be distinct from the other performance
obligations identified in the arrangement, the Company would recognize revenues from nonrefundable up-front fees allocated to the license
when the license is transferred to the licensee and the licensee is able to use and benefit from the license, which generally would occur
at or near the inception of the contract. For licenses that are bundled with other promises, the Company would utilize judgment to assess
the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or
at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenues from nonrefundable
up-front fees. The Company will evaluate the measure of progress at the end of each reporting period and, if necessary, adjust the measure
of performance and related revenue recognition.
Research
and Development Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company
will evaluate whether the milestones are considered probable of being reached 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 associated milestone
value is included in the transaction price. Milestone payments that are not within the Company’s or the licensee’s control,
such as regulatory approvals, are not considered probable of being achieved until uncertainty associated with the approvals has been
resolved. The transaction price is then allocated to each performance obligation, on a relative standalone selling price basis, for which
the Company will recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent
reporting period, the Company re-evaluates the probability of achieving such development and regulatory milestones and any related variable
consideration constraint, and if necessary, adjust the Company’s estimate of the overall transaction price. Any such adjustments
are recorded on a cumulative catch-up basis.
Research
and Development Cost Reimbursements: The Company’s collaboration arrangements may include promises of future clinical development
and drug safety services, as well as participation on certain joint committees. When such services are provided to a customer or partner,
and they are distinct from the licenses provided to the Company’s collaboration partners, these promises are accounted for as a
separate performance obligation which the Company estimates using internal development costs incurred and projections through the term
of the arrangements. The Company records revenues for these services as the performance obligations are satisfied over time based on
measure of progress. However, if the Company concludes that its collaboration partner is not a customer for those collaborative research
and development activities, it presents such payments as a reduction of research and development expenses.
Research
and Development Arrangement: Under the terms of our research and development agreement with the CFF Agreement, the Company did not
account for this arrangement in accordance with Topic 606. However, the Company has determined that it is a partner under a collaboration
agreement as it shares in the risks and rewards that would be received if the product is successful and commercialized. Therefore the
funds received under the terms of this agreement will be recorded as reimbursements of research and development costs and reduce the
research and development expenses in the Company’s Statements of Operations and Comprehensive Income/(Loss). The Company records
the reimbursements for certain materials and other research and development costs associated with the agreement when it is probable that
a significant reversal in the amount of cumulative costs have been recognized. As of December 31, 2021 and 2020, the Company recognized
approximately $2.2
million and $0.1
million, respectively, of reimbursed research
and development costs associated with the CFF Agreement. For a complete disclosure of the CFF Agreement, see Note 9 – Collaboration
Agreements, License and other Research and Development Agreements.
Research
and development expenses
Research
and development expenses primarily consist of costs associated with the preclinical and clinical development of our product candidate
portfolio, including the following:
● |
external
research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”)
and other vendors and contract manufacturing organizations (“CMOs”) for the production of drug substance and drug product;
and |
|
|
● |
employee-related
expenses, including salaries, benefits and share-based compensation expense. |
Research
and development expenses also include costs of acquired product licenses and related technology rights where there is no alternative
future use, costs of prototypes used in research and development, consultant fees and amounts paid to certain of our collaborative partners.
All
research and development expenses are charged to operations as incurred in accordance with FASB ASC Topic 730, Research and Development.
The Company accounts for non-refundable advance payments for goods and services that will be used in future research and development
activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made.
Accrued
Research and Development Expenses
As
part of the process of preparing the Company’s financial statements, the Company is required to estimate its accrued expenses.
This process involves reviewing quotations and contracts, identifying services that have been performed on the Company’s behalf
and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced
or otherwise notified of the actual cost. Certain of the Company’s service providers invoice the Company monthly in arrears for
services performed or when contractual milestones are met. The Company makes estimates of its accrued expenses as of each balance sheet
date in its financial statements based on facts and circumstances known to the Company at that time. The Company periodically confirms
the accuracy of its estimates with the service providers and adjust if necessary. The significant estimates in the Company’s accrued
research and development expenses are related to expenses incurred with respect to CROs, CMOs and other vendors in connection with research
and development and manufacturing activities.
The
Company bases its expense related to CROs and CMOs on its estimates of the services received and efforts expended pursuant to quotations
and contracts with such vendors that conduct research and development and manufacturing activities on its behalf. The financial terms
of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances
in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the applicable
research and development or manufacturing expense. In accruing service fees, the Company estimates the time period over which services
will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level
of effort varies from its estimate, the Company adjust the accrual or prepaid expense accordingly. Although the Company does not expect
its estimates to be materially different from amounts actually incurred, the Company’s understanding of the status and timing of
services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that
are too high or too low in any particular period. There have been no material changes in estimates for the periods presented.
Patent
expenses
Legal
fees and other direct costs incurred in obtaining and protecting patents are also expensed as incurred and are included in general and
administrative expenses in the consolidated statements of operations.
Other
comprehensive income/(loss)
Other
comprehensive income/(loss) consists of net gains/(losses) and unrealized losses on marketable securities available-for-sale and is presented
in the Consolidated Statements of Operations.
Recently
adopted accounting pronouncements
In
December 2019, the FASB Issued Accounting Standard Update 2019-12, “Income Taxes, (Topic 740): Simplifying the Accounting for Income
Taxes”. This standard removes certain exceptions to the general principles and improves consistent application of and simplify
GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard is effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2020. The Company adopted the new standard effective January 1, 2021
with no material impact on the Company’s consolidated financial statements.
Note
4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities
The
Company considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash
and cash equivalents and all investments with maturities of greater than three months from date of purchase are classified as marketable
securities. Cash and cash equivalents consisted of cash in bank checking and savings accounts, money market funds and short-term U.S.
treasury bonds that mature within three months of settlement date.
Cash,
Cash Equivalents and Restricted Cash
The
Company presents restricted cash with cash and cash equivalents in the Consolidated Statements of Cash Flows. Restricted cash represents
funds the Company is required to set aside to cover building operating leases and other purposes.
The
following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to
the total of the amounts in the Consolidated Statements of Cash Flows as of December 31, 2021, December 31, 2020 and December 31, 2019
(in thousands):
Schedule
of Cash, Cash Equivalents and Restricted Cash
| |
December
31, 2021 | | |
December
31, 2020 | | |
December
31, 2019 | |
Cash
and cash equivalents | |
$ | 21,030 | | |
$ | 12,432 | | |
$ | 22,170 | |
Restricted
cash included in current/long term assets | |
| 250 | | |
| 336 | | |
| 586 | |
Cash,
cash equivalents and restricted cash in the statements of cash flows | |
$ | 21,280 | | |
$ | 12,768 | | |
$ | 22,756 | |
Marketable
Securities
The
Company has classified its investments in marketable securities as available-for-sale and as a current asset. The Company’s investments
in marketable securities are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’
equity. Unrealized gains and losses are classified as other comprehensive (loss)/income and costs are determined on a specific identification
basis. Realized gains and losses from our marketable securities are recorded in other income, net. For the years ended December 31, 2021
and 2020, the Company recorded unrealized (losses)/gains of approximately ($374)
thousand and $238
thousand, respectively, and reclassed approximately
$0 and
$9 thousand
to net realized loss from operations from the sale of certain securities during 2021 and 2020, respectively. As of December 31, 2021
and 2020, the Company had net accumulated unrealized losses of approximately $145
thousand and net accumulated unrealized gains
of approximately $228
thousand, respectively.
The
following tables summarizes the Company’s marketable securities for the year ended December 31, 2021 consisted of the following
(in thousands):
Summary
of Marketable Securities
| |
Amortized
Cost | | |
Unrealized
Gain | | |
Unrealized
(Loss) | | |
Fair
Value | |
| |
Amortized
Cost | | |
Unrealized
Gain | | |
Unrealized
(Loss) | | |
Fair
Value | |
U.S.
Government Notes | |
$ | 19,395 | | |
$ | 2 | | |
$ | (120 | ) | |
$ | 19,277 | |
Corporate
Debt Securities | |
| 9,092 | | |
| — | | |
| (27 | ) | |
| 9,065 | |
State
and Municipal Bonds | |
| 250 | | |
| — | | |
| — | | |
| 250 | |
Total
marketable securities | |
$ | 28,737 | | |
$ | 2 | | |
$ | (147 | ) | |
$ | 28,592 | |
Maturities
of debt securities classified as available-for-sale were as follows at December 31, 2021 (in thousands):
Schedule
of Maturities of Debt Securities Available-for-sale
| |
Fair
Value | | |
Net
Carrying Amount | |
Due
within one year | |
$ | 8,257 | | |
$ | 8,310 | |
Due
after one year through five years | |
| 20,335 | | |
| 20,402 | |
| |
$ | 28,592 | | |
$ | 28,712 | |
The
Company determined that the unrealized (losses) and gains are deemed to be temporary as of December 31, 2021 and 2020. Unrealized (losses)
and gains generally are the result of increases in the risk premiums required by market participants rather than an adverse change in
cash flows for a fundamental weakness in the credit quality of the issuer or underlying assets. The Company has the ability and intent
to hold these investments until maturity. The Company does not consider the investment in marketable securities to be other-than-temporarily
impaired at December 31, 2021 and 2020.
Note
5 - Fair Value Measurements
The
Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs
to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions
market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable
inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each
level within the hierarchy is described below:
● |
Level
1 – Quoted prices for identical assets or liabilities in active markets. |
|
|
● |
Level
2 – Quoted prices for identical or similar assets and liabilities in markets that are not active; or other model-derived valuations
whose inputs are directly or indirectly observable or whose significant value drivers are observable. |
|
|
● |
Level
3 – Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable
and for which assumptions are used based on management estimates. |
The
Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible as well as considers counterparty credit risk in its assessment of fair value.
The
carrying amounts of certain cash and cash equivalents, current portion of restricted cash, marketable securities, prepaid expenses and
other current assets, accounts payable, current portion of lease liability and accrued expenses approximate fair value due to the short-term
nature of these instruments.
A
summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows (in thousands):
Schedule
of Fair Value Measurement of Assets and Liabilities
| |
| | |
Fair
Value Hierarchy | |
December
31, 2021 | |
Total | | |
(Level
1) | | |
(Level
2) | | |
(Level
3) | |
Assets | |
| | | |
| | | |
| | | |
| | |
Marketable
Securities: | |
| | | |
| | | |
| | | |
| | |
U.S.
Government Notes | |
$ | 19,277 | | |
$ | — | | |
$ | 19,277 | | |
$ | — | |
Corporate
Debt Securities | |
| 9,065 | | |
| — | | |
| 9,065 | | |
| — | |
State
and Municipal Bonds | |
| 250 | | |
| — | | |
| 250 | | |
| — | |
Total | |
$ | 28,592 | | |
$ | — | | |
$ | 28,592 | | |
$ | — | |
| |
| | |
Fair
Value Hierarchy | |
December
31, 2020 | |
Total | | |
(Level
1) | | |
(Level
2) | | |
(Level
3) | |
Assets | |
| | | |
| | | |
| | | |
| | |
Marketable
Securities: | |
| | | |
| | | |
| | | |
| | |
U.S.
Treasury Bonds | |
$ | 18,429 | | |
$ | 18,429 | | |
$ | — | | |
$ | — | |
U.S.
Government Notes | |
| 22,230 | | |
| — | | |
| 22,230 | | |
| — | |
Corporate
Debt Securities | |
| 4,306 | | |
| — | | |
| 4,306 | | |
| — | |
State
and Municipal Bonds | |
| 1,282 | | |
| — | | |
| 1,282 | | |
| — | |
Total | |
$ | 46,247 | | |
$ | 18,429 | | |
$ | 27,818 | | |
$ | — | |
U.S.
treasury bonds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices for identical
assets in active markets. Marketable securities consisting of U.S. government notes, corporate debt securities and state and municipal
bonds are classified as Level 2 and are valued using quoted market prices in markets that are not active.
Note
6 – Leasehold Improvements and Equipment
Leasehold
improvements and equipment, summarized by major category, consist of the following for the years ended December 31, 2021 and 2020 (in
thousands):
Schedule
of Leasehold Improvements and Equipment
| |
December
30, 2021 | | |
December
31, 2020 | |
Equipment | |
$ | 1,640 | | |
$ | 1,443 | |
Leasehold
improvements | |
| 935 | | |
| 878 | |
Total | |
| 2,575 | | |
| 2,321 | |
Less:
accumulated depreciation and amortization | |
| 1,037 | | |
| 797 | |
Leasehold
improvements and equipment, net | |
$ | 1,538 | | |
$ | 1,524 | |
Depreciation
and amortization expense for the years ended December 31, 2021 and 2020 was approximately $244
thousand and $231
thousand, respectively. During the years ended
December 31, 2021 and 2020, the Company purchased equipment and leasehold improvements of approximately $260
thousand and $6
thousand, respectively. During the year ended
December 31, 2021, the Company recorded an asset write-off of approximately $6
thousand, including $4
thousand of related accumulated depreciation.
The Company had no
asset write-offs during the year ended December
31, 2020.
Note
7 – Accrued Expenses and Other Liabilities
Accrued
expenses and other liabilities, summarized by major category, consist of the following for years ended December 31, 2021 and 2020 (in
thousands):
Schedule
of Accrued Expenses
| |
|
2021 |
|
|
|
2020 | |
| |
As
of December 31, | |
| |
2021 | | |
2020 | |
Payroll
and incentives | |
$ | 1,343 | | |
$ | 1,094 | |
General
and administrative expenses | |
| 195 | | |
| 280 | |
Research
and development expenses | |
| 381 | | |
| 778 | |
Deferred revenue and other deferred liabilities * | |
| 932 | | |
| 643 | |
Total | |
$ | 2,851 | | |
$ | 2,795 | |
* |
At
December 31, 2021, the balance included approximately $899 thousand related to the CFF Agreement’s deferred liability and approximately
$33 thousand is deferred revenue related to the Genentech feasibility study agreement. At December 31, 2020, the balance included
approximately $577 thousand related to the CFF Agreement’s deferred liability and approximately $67 thousand of deferred revenue
related to the Genentech feasibility study agreement. |
Note
8 – Leases
The
Company has various lease agreements with terms up to 10
years, including leases of office space, a laboratory
and manufacturing facility, and various equipment. Some
leases include purchase, termination or extension options for one or more years. These
options are included in the lease term when it is reasonably certain that the option will be exercised.
Operating
lease obligations
On
November 1, 2013, the Company entered into a 7-year
lease for office space in Bedminster, New Jersey which commenced in June 2014 at a monthly rent of approximately $13,000,
increasing to approximately $14,000
per month toward the end of the term.
On
September 23, 2020, the Company entered into an amendment to the Bedminster lease. Pursuant to the amendment, the Company leased an additional
3,034 rentable
square feet (“Expansion Premises”). The amendment became effective upon delivery to the Company of the Expansion Premises,
which occurred on August 1, 2021, and extends the term of the lease for seven
years from such date. There is no renewal option,
no security deposit, no residual value or significant restrictions or covenants other than those customary in such arrangements. Except
as expressly provided, all other terms, covenants, conditions and agreements as set forth in the lease will remain unchanged and in full
force and effect.
On
December 15, 2016, the Company entered into a 10-year,
3-month lease to consolidate our locations while
expanding our laboratory and manufacturing facilities. The lease began August 2017. The monthly rent will start at approximately $43,000
increasing to approximately $64,000
in the final year. To obtain the laboratory and
facility site, the Company was obligated to provide an initial security deposit of $586,000.
This deposit was subsequently reduced and is currently $200,000
at December 31, 2021.
The
assets and liabilities from operating and finance leases are recognized at the lease commencement date based on the present value of
remaining lease payments over the lease term using the Company’s incremental borrowing rates or implicit rates, when readily determinable.
Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
The
Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount
rate based on its incremental borrowing rate, which is determined using the average of borrowing rates explicitly stated in the Company’s
finance leases.
The
Company incurred lease expense for its operating leases of approximately $852
thousand and $814
thousand for the years ended December 31, 2021
and 2020. The Company incurred amortization expense on its operating lease right-of-use assets of approximately $501
thousand and $485
thousand for the years ended December 31, 2021
and 2020, respectively.
Finance
Leases
The
Company incurred interest expense on its finance leases of approximately $3
thousand and $7
thousand for the years ended December 31, 2021
and 2020, respectively. The Company incurred amortization expense on its finance lease right-of-use assets of approximately $36
thousand and $59
thousand for the years ended December 31, 2021
and 2020, respectively.
The
following table presents information about the amount and timing of liabilities arising from the Company’s operating leases and
finance leases as of December 31, 2021 (in thousands):
Schedule
of Maturity of Operating and Finance Leases Liabilities
Maturity
of Lease Liabilities | |
Operating
Lease Liabilities | | |
Finance
Lease Liabilities | |
2022 | |
$ | 883 | | |
$ | 22 | |
2023 | |
| 922 | | |
| 2 | |
2024 | |
| 962 | | |
| - | |
2025 | |
| 1,004 | | |
| - | |
2026 | |
| 1,046 | | |
| - | |
Thereafter | |
| 1,112 | | |
| - | |
Total
undiscounted operating lease payments | |
$ | 5,929 | | |
$ | 24 | |
Less:
Imputed interest | |
| 1,250 | | |
| - | |
Present
value of operating lease liabilities | |
$ | 4,679 | | |
$ | 24 | |
| |
| | | |
| | |
Weighted
average remaining lease term in years | |
| 6.1 | | |
| 0.9 | |
Weighted
average discount rate | |
| 7.8 | % | |
| 7.8 | % |
The
following table presents information about the amount and timing of liabilities arising from the Company’s operating and finance
leases as of December 31, 2020 (in thousands):
Maturity
of Lease Liabilities | |
Operating
Lease Liabilities | | |
Finance
Lease Liabilities | |
2021 | |
$ | 685 | | |
$ | 34 | |
2022 | |
| 645 | | |
| 19 | |
2023 | |
| 677 | | |
| 2 | |
2024 | |
| 710 | | |
| - | |
2025 | |
| 745 | | |
| - | |
Thereafter | |
| 1,458 | | |
| - | |
Total
undiscounted operating lease payments | |
$ | 4,920 | | |
$ | 55 | |
Less:
Imputed interest | |
| 1,224 | | |
| - | |
Present
value of operating lease liabilities | |
$ | 3,696 | | |
$ | 55 | |
| |
| | | |
| | |
Weighted
average remaining lease term in years | |
| 6.7 | | |
| 1.7 | |
Weighted
average discount rate | |
| 8.4 | % | |
| 8.1 | % |
Note
9 - Collaboration Agreements, License and Other Research and Development Agreements
Cystic
Fibrosis Foundation Therapeutics Development Award
On
November 19, 2020, the Company entered into an award agreement (the “Agreement”) with CFF, pursuant to which it received
a Therapeutics Development Award of up to $4.2
million (the “Award”) (of which $484,249
had been previously received) to support the
preclinical development (the “Development Program”) of the Company’s MAT2501 product candidate (the “Product”),
a LNC oral formulation of the broad-spectrum aminoglycoside amikacin, for the treatment of pulmonary non-tubercular mycobacteria infections
and other pulmonary diseases (the “Field”). On November 19, 2021, the Company and CFF entered into an Amendment to the Agreement
which added an additional milestone payment in the amount of $321
thousand. The milestone payment was invoiced
and the payment was received in the fourth quarter of 2021.
The
first payment under the Agreement, in the amount of $650
thousand, became due upon execution of the Agreement.
The Company invoiced the CFF in November 2020 and payment was subsequently received in February 2021. During 2021, the Company invoiced
and received $2.5
million related to Agreement and the related
deferred liability balance of $899
thousand is included in accrued expense and other
current liabilities. The remainder of the Award will be paid to the Company upon the achievement of certain milestones related to the
development program and progress of the Development Program, as set forth in the Agreement.
If
the Company ceases to use commercially reasonable efforts directed to the development of MAT2501 in the Field, (an “Interruption”)
and fails to resume the development of the Product after receiving from CFF notice of an Interruption, then the Company must either repay
the amount of the Award actually received by the Company, or grant to CFF (1) an exclusive (even as to the Company), worldwide, perpetual,
sublicensable license under technology developed under the Agreement that covers the Product for use in treating infections in CF patients
(the “CF Field”), and (2) a non-exclusive, worldwide license under certain background intellectual property covering the
Product, to the extent necessary to commercialize the Product in the CF Field.
Pursuant
to the terms of the Agreement, the Company is obligated to make royalty payments to CFF contingent upon commercialization of the Product
in the Field up to a maximum of five (5) times the Award or approximately $21.2
million (the “Royalty Cap”), payable
in three equal annual installments following the first commercial sale of the Product, the first of which is due within 90 days following
the first commercial sale of the Product. The Company may also be obligated to make a payment to CFF if the Company transfers, sells
or licenses the Product in the CF Field, or if the Company enters into a change of control transaction which will be applied against
the Royalty Cap. In addition, the Company is also obligated to make up the two royalty payments of CFF of the approximately $4.2
million each, due in the calendar years in which
specific net sales milestones are achieved.
The
term of the Agreement commenced on November 19, 2020 and expires on the earlier of the date on which the Company has paid CFF all of
the fixed royalty payments set forth therein, the effective date of any license granted to CFF following an Interruption, or upon earlier
termination of the Agreement. Either CFF or the Company may terminate the agreement for cause, which includes the Company’s material
failure to achieve certain development milestones. The Company’s payment obligations survive the termination of the Agreement.
The
Company concluded that the CFF award is in the scope of ASC 808. Accordingly, as discussed in Note 3, the award amounts received from
CFF upon achievement of certain milestones are recognized as credits to research and development expenses in the period the Development
Program’s expenses are incurred. During the years ended December 31, 2021 and 2020, the Company recognized $2.2
million and $0.1
million, respectively, as credits to research
and development expenses related to the CFF award. In addition, the Company concluded under the guidance in ASC 730 that it does not
have an obligation to repay funds received once related research and development expenses are incurred.
Genentech
Feasibility Study Agreement
On
December 12, 2019, the Company entered into a feasibility study agreement (the “Agreement”) with Genentech, Inc. (“Genentech”).
This feasibility study agreement will involve the development of oral formulations using the Company’s LNC platform delivery technology,
which enables the development of a wide range of difficult-to-deliver molecules. Under the terms of the Agreement, Genentech
shall pay to the Company a total of $100.0 thousand for three molecules, or approximately $33 thousand per molecule, which will be recognized
upon the Company fulfilling its obligations for each molecule under the Agreement. On
December 13, 2019, per Genentech’s request, the Company billed Genentech for the total $100
thousand and recorded the upfront consideration
as deferred revenue, which is recorded in accrued expenses on the consolidated balance sheets, and will recognize it over the term of
the contract performance obligation period. As of December 31, 2021, the Company completed the first and second of the three molecules
and the Company recognized approximately $33
thousand of Genentech revenue for the years ended
December 31, 2021 and 2020, respectively. The Company is scheduled to complete the remaining molecule during 2022.
Other
Research and development agreements
The
Company has financial obligations resulting from Cooperative Research and Development Agreements (“CRADAs”) entered into
with the with the National Institute of Allergy and Infectious Diseases (“NIH”) as follows:
● |
On
February 19, 2016, the Company agreed to provide funds in the amount of $200,000
per year under a CRADA to support NIH investigators
in the conduct of clinical research to investigate the safety, efficacy, and pharmacokinetics of LNC platform drug products in patients
with fungal, bacterial, or viral infections. The initial term of the CRADA was three years. On April 16, 2019, the Company renewed
the CRADA for an additional three
years with an annual funding commitment of
$200,000. |
|
|
● |
On
April 2, 2019, the Company agreed to provide funds in the amount of $157,405
per year under a CRADA to support NIH investigators
in the conduct of clinical research to investigate the safety, efficacy, and pharmacokinetics of LNC platform drug products in patients
with fungal, bacterial, or viral infections. The term of the CRADA is three years. |
License
agreement
Through
the acquisition of Aquarius, the Company acquired a license from Rutgers University, The State University of New Jersey (successor in
interest to the University of Medicine and Dentistry of New Jersey) for the LNC platform delivery technology. The Second Amended and
Restated Exclusive License Agreement provides for, among other things, the payment of (1) royalties on a tiered basis between low single
digits and the mid-single digits of net sales of products using such licensed technology, (2) a one-time sales milestone fee of $100,000
when and if sales of products using the licensed
technology reach the specified sales threshold and (3) an annual license fee of $50,000
over the term of the license agreement.
Note
10 – Commitments
Royalty
payment rights
On
September 12, 2016 the Company conducted a final closing of a private placement offering to accredited investors of shares of the Company’s
Series A Preferred Stock. As part of this offer, the investors received royalty payment rights if and when the Company generates sales
of its MAT2203 or MAT2501 product candidates. Pursuant to the terms of the Series A Certificate of Designation, the Company may be required
to pay royalties of up to $35
million per year. If and when the Company obtains
FDA or the European Medicines Agency (“EMA”) approval of MAT2203 and/or MAT2501, which the Company does not expect to occur
before 2023, if ever, and/or if the Company generates sales of such products, or the Company receives any proceeds from the licensing
or other disposition of MAT2203 or MAT2501, the Company is required to pay to the holders of the Series A Preferred Stock, subject to
certain vesting requirements, in the aggregate, a royalty (the “Royalty Payment Rights”) equal to (i) 4.5% of Net Sales (as
defined in the Series A Certificate of Designation), subject in all cases to a cap of $25 million per calendar year, and (ii) 7.5% of
Licensing Proceeds (as defined in the Series A Certificate of Designation), subject in all cases to a cap of $10 million per calendar
year. The
Royalty Payment Rights will expire when the patents covering the applicable product expire, which is currently expected to be in 2033.
Employment
agreements
The
Company also has employment agreements with certain employees which require the funding of a specific level of payments, if certain events,
such as a change in control, termination without cause or retirement, occur.
Other
normal business operating agreements
In
addition, in the course of normal business operations, the Company enters into agreements with contract service providers to assist in
the performance of research & development and manufacturing activities. Expenditures to these third parties represent significant
costs in clinical development and may require upfront payments and long-term commitments of cash. Subject to required notice periods
and obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time.
Note
11 – Income Taxes
The
Company utilizes the liability method of accounting for deferred income taxes. Under this method, deferred tax liabilities and assets
are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets
and liabilities. A valuation allowance is established against deferred tax assets when, based on the weight of available evidence, it
is more likely than not that some or all of the deferred tax assets will not be realized. The Company’s policy is to record interest
and penalties on uncertain tax positions as income tax expense. As of December 31, 2021 and 2020, the Company does not believe any material
uncertain tax positions were present. Accordingly, interest and penalties have not been accrued due to an uncertain tax position.
The
components of the income tax provision are as follows (in thousands):
Schedule
of Income Tax Provision
| |
| | | |
| | |
| |
| Year
Ended December 31, | |
| |
| 2021 | | |
| 2020 | |
Current
expense (benefit): | |
| | | |
| | |
Federal | |
$ | - | | |
$ | - | |
State | |
| - | | |
| - | |
Foreign | |
| - | | |
| - | |
Total
current expense (benefit): | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Deferred
expense (benefit): | |
| | | |
| | |
Federal | |
$ | - | | |
$ | - | |
State | |
| - | | |
| - | |
Foreign | |
| - | | |
| - | |
Total
deferred expense (benefit): | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Total
income tax expense (benefit): | |
$ | - | | |
$ | - | |
Deferred
income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. A reconciliation of the statutory U.S. federal rate to the Company’s effective
tax rate is as follows:
Schedule
of Effective Income Tax Rate Reconciliation
| |
| | |
| |
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | |
Income
at US Statutory Rate | |
| 21.00 | % | |
| 21.00 | % |
State
Taxes, net of Federal benefit | |
| 1.97 | % | |
| 2.95 | % |
Permanent
Differences | |
| (0.82 | )% | |
| (1.28 | )% |
Tax
Credits | |
| 2.16 | % | |
| 0.75 | % |
Valuation
Allowance | |
| (25.21 | )% | |
| (24.53 | )% |
Discrete
items | |
| 0.91 | % | |
| 1.11 | % |
Effective
income tax rate | |
| 0.00 | % | |
| 0.00 | % |
The
Company has no current income taxes payable other than certain state minimum taxes which are included in general and administrative expenses.
Significant
components of the Company’s deferred tax assets (liabilities) for 2021 and 2020 consist of the following (in thousands):
Schedule
of Deferred Tax Assets and Liabilities
| |
| | |
| |
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | |
Share-based
Compensation | |
$ | 3,575 | | |
$ | 3,220 | |
Depreciation
and Amortization | |
| 166 | | |
| (119 | ) |
Accrued
Liability | |
| 377 | | |
| 307 | |
Net
Operating Loss Carry-forwards | |
| 24,076 | | |
| 19,927 | |
R&D
Credit Carryforwards | |
| 3,207 | | |
| 2,264 | |
Other | |
| (1 | ) | |
| (10 | ) |
IPR&D | |
| (848 | ) | |
| (848 | ) |
ROU
Asset | |
| (1,186 | ) | |
| (921 | ) |
ROU
Liability | |
| 1,315 | | |
| 1,045 | |
Total
Deferred tax assets | |
$ | 30,681 | | |
$ | 24,865 | |
Valuation
allowance | |
| (31,023 | ) | |
| (25,206 | ) |
Net
deferred tax asset (liability) | |
$ | (341 | ) | |
$ | (341 | ) |
On
March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal
Revenue Code. The changes include but are not limited to: allowing companies to carryback certain net operating losses, and increasing
the amount of net operating loss carryforwards that corporations can use to offset taxable income. The tax law changes in the Act did
not have a material impact on the Company’s income tax provision.
In
assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of
taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible, and
is impacted by the Company’s ability to carryforward losses to years in which the Company has taxable income. Due to the Company’s
history of losses and lack of other positive evidence to support taxable income, the Company has recorded a valuation allowance against
those deferred tax assets that are not expected to be realized. The valuation allowances were approximately $31.0
million, $25.2
million and $19.7
million as of December 31, 2021, 2020 and 2019,
respectively, representing increases of approximately $5.8
million and $5.5
million for the years ending December 31, 2021
and 2020, respectively.
As
of December 31, 2021, the Company had Federal net operating loss carryforwards of approximately $38.1
million which will begin to expire in 2032.
In addition, the Company has federal net operating loss carryforwards of approximately $63.3
million which have an indefinite carryforward
period. The Company also had federal and state research and development tax credit carryforwards of approximately $3.2
million. The federal net operating loss and tax
credit carryforwards will expire at various dates beginning in 2033, if not utilized. The difference between the statutory tax rate and
the effective tax rate is primarily attributable to the valuation allowance offsetting deferred tax assets.
Utilization
of the net operating losses and general business tax credits carryforwards may be subject to a substantial limitation under Sections
382 and 383 of the Internal Revenue Code of 1986 due to changes in ownership of the Company that have occurred previously or that could
occur in the future. These ownership changes may limit the amount of net operating losses and general business tax credits carryforwards
that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section
382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more
than 50 percentage points over a three-year period. The Company has not completed a study to determine whether it had undergone an ownership
change since the Company’s inception
Sale
of net operating losses (NOLs)
The
Company recognized approximately $1.3
million and $1.1
million for the years ended December 31, 2021
and 2020, respectively, in connection with the sale of certain State of New Jersey Net Operating Losses (“NOL”) and Research
and Development (“R&D”) tax credits to a third party under the New Jersey Technology Business Tax Certificate Transfer
Program. In addition,
the Tax Cuts and Jobs Act, signed into law on December 22, 2017 imposes significant additional limitations on the deductibility of interest
and limits NOL deductions to 80% of net taxable income for losses arising in taxable years beginning after December 31, 2017.
This NOL limitation was suspended for years 2018 through 2020 as a result of the CARES Act.
Note
12 – Stockholders’ Equity
At-The-Market
Equity Offering
On
July 2, 2020, the Company entered into an At-The-Market (“ATM”) Sales Agreement (the “Sales Agreement”) with
BTIG, LLC (“BTIG”), pursuant to which the Company may offer and sell, from time to time, through BTIG, as sales agent and/or
principal, shares of its common stock having an aggregate offering price of up to $50,000,000,
subject to certain limitations on the amount of common stock that may be offered and sold by the Company set forth in the Sales Agreement.
BTIG will be paid a 3%
commission on the gross proceeds from each sale. The Company may terminate the Sales Agreement at any time; BTIG may terminate the Sales
Agreement in certain limited circumstances. During 2021, BTIG sold 3,023,147
shares of the Company’s common stock generating
gross proceeds of approximately $5.8
million and net proceeds of approximately $5.6
million, after deducting BTIG’s commission
on gross proceeds. During 2020, the Company did not sell any shares of its common stock under the ATM Sales Agreement.
Common
Stock
On
September 3, 2021, the Company issued 1,500,000
unregistered shares of its common stock pursuant
to the Agreement and Plan of Merger by and among the Company, Saffron Merger Sub, Inc., Aquarius Biotechnologies Inc. (“Aquarius”),
and J Carl Craft, as holder representative, dated January 19, 2015, as subsequently amended on September 3, 2021 (the “Aquarius
Merger Agreement”), to the holders of Aquarius Biotechnologies Inc., as defined in the Aquarius Merger Agreement. The shares were
issued in place of certain milestone payments previously included under the Aquarius Merger Agreement upon the achievement of specified
development milestones. The Company recorded a $1.2
million research and development expense related
to the issuance of the 1,500,000
shares based on the closing price of the Company’s
common stock of $0.80
on the date of issuance.
On
January 14, 2020, the Company closed on an underwritten public offering of 32,260,000
shares of its common stock at a purchase price
of $1.55
per share. The Company generated gross proceeds
of approximately $50.0
million and net proceeds of approximately $46.7
million, after deducting underwriting discounts
and commissions and other estimated offering expenses. In addition, the Company granted the underwriters a 30-day option to purchase
up to approximately 4.8 million additional shares of its common stock on the same terms and conditions. No additional shares of the Company’s
common stock were sold pursuant to this option.
Preferred
Stock
In
accordance with the Certificate of Incorporation, the Company is authorized to issue 10,000,000
preferred shares at a par value of $0.001.
In connection with a private placement of Series A Preferred Stock, on July 26, 2016, the Company filed the Series A Certificate of Designation
with the Secretary of the State of Delaware to designate the preferences, rights and limitations of the Series A Preferred Stock. Pursuant
to the Series A Certificate of Designation, the Company designated 1,600,000
shares of the Company’s previously undesignated
preferred shares as Series A Preferred Stock. In connection with a public offering of Series B Preferred Stock, on June 19, 2018, the
Company filed the Series B Certificate of Designation with the Secretary of the State of Delaware to designate the preferences, rights
and limitations of the Series B Preferred Stock. Pursuant to the Series B Certificate of Designation, the Company designated 8,000
shares of the Company’s previously undesignated
preferred shares as Series B Preferred Stock.
Series
B Preferred Stock
During
2021 and prior to June 19, 2021, 143
shares of Series B Preferred Stock were converted
by shareholders resulting in the issuance of 286,000
shares of common stock. On June 19, 2021, all
4,218
remaining shares of Series B Preferred Stock
were automatically converted into 2,000
shares of the Company’s common stock resulting
in the issuance of 8,436,000
shares of common stock. As of December 31, 2021
and December 31, 2020, there were 0
and 4,361
shares of Series B Preferred stock outstanding,
respectively.
Conversion:
Prior
to the automatic conversion of Series B Preferred Stock on June 19, 2021, and subject to certain ownership limitations, each share of
Series B Preferred Stock was convertible into shares of the Company’s common stock at any time at the option of the holder at an
initial conversion price of $0.50
per share subject to adjustment for reverse splits,
stock combinations and similar changes as provided in the Certificate of Designation. Based on the conversion price and number of shares
outstanding on June 19, 2021, the Series B Preferred Stock were converted into 8,436,000
shares of common stock.
Dividends:
Subject
to certain ownership limitations, holders of the Series B Preferred Stock received dividends paid in the Company’s common stock
as follows: (i)
a number of shares of common stock equal to 10% of the shares of common stock underlying the Series B Preferred Stock then held by such
holder on June 19, 2019, (ii) a number of shares of common stock equal to 15% of the shares of common stock underlying the Series B Preferred
Stock then held by such holder on June 19, 2020 and (iii) a number of shares of common stock equal to 20% of the shares of common stock
underlying the Series B Preferred Stock then held by such holder on June 19, 2021. Based on an accounting of the holders of record of
Series B Preferred Stock on June 19, 2021 and 2020, the Company made dividend payments totaling 1,687,200
and
1,365,600
shares
of common stock, respectively.
Warrants
All
warrants issued by the Company are exercisable immediately upon issuance and have a five-year term. The warrants may be exercised at
any time in whole or in part upon payment of the applicable exercise price until expiration. No fractional shares will be issued upon
the exercise of the warrants. The exercise price and the number of shares purchasable upon the exercise of the warrants are subject to
adjustment upon the occurrence of certain events, which include stock dividends, stock splits, combinations and reclassifications of
the Company’s capital stock or other similar changes to the equity structure of the Company. The warrants do not have a redemption
feature. They may be exercised on a cashless basis at the holder’s option.
The
warrants are classified as equity instruments.
As
of December 31, 2021, the Company had outstanding warrants to purchase an aggregate of 988,000
shares of common stock at exercise prices ranging
from $0.50
to $0.75
per share, and with expiration dates between
December 31, 2022 and June 21, 2023. A summary of warrants outstanding as of December 31, 2021 and 2020 is presented below, all of which
are fully vested (in thousands):
Summary
of Shareholders Equity Warrants Outstanding
| |
Shares | |
Outstanding
at December 31, 2019 | |
| 5,397 | |
Issued | |
| - | |
Exercised | |
| (2,549 | ) |
Tendered | |
| - | |
Expired | |
| (1,493 | ) |
Outstanding at December
31, 2020 | |
| 1,328 | * |
Outstanding
at January 01, 2021 | |
| | |
Issued | |
| - | |
Exercised | |
| (320 | )** |
Tendered | |
| - | |
Expired | |
| (20 | ) |
Outstanding
at December 31, 2021 | |
| 988 | *** |
* |
Weighted
average exercise price for outstanding warrants is $0.55. |
** |
Converted
into approximately 115 thousand shares of common stock. |
*** |
Weighted
average exercise price for outstanding warrants is $0.56. |
Note
13 – Accumulated Other Comprehensive (Loss)/Income
The
following table summarizes the changes in accumulated other comprehensive (loss)/income by components during the years ended December
31, 2021 and 2020 (in thousands):
Schedule
of Components of Accumulated Other Comprehensive (Loss)/Income
|
|
Net
Unrealized (Losses)/Gains on Available-for-Sale Securities |
|
|
Accumulated
Other Comprehensive (Loss)/Gain |
|
Balance,
December 31, 2019 |
|
$ |
(1 |
)
|
|
$ |
(1 |
) |
Net
unrealized gain on securities available-for-sale |
|
|
237 |
|
|
|
237 |
|
Reclassification
of realized gain on securities available-for-sale to net loss |
|
|
(8 |
)
|
|
|
(8 |
) |
Net
current period other comprehensive gain |
|
|
229 |
|
|
|
229 |
|
Balance,
December 31, 2020 |
|
$ |
228 |
|
|
$ |
228 |
|
Net
unrealized loss on securities available-for-sale |
|
|
(373 |
) |
|
|
(373 |
) |
Net
current period other comprehensive loss |
|
|
(374 |
)
|
|
|
(374 |
)
|
Balance,
December 31, 2021 |
|
$ |
(146 |
)
|
|
$ |
(146 |
)
|
All
components of accumulated other comprehensive (loss)/income are net of tax.
Note
14 – Stock-based Compensation
The
Company’s Amended and Restated 2013 Equity Compensation Plan (the “Plan”) provides for the granting of incentive stock
options, nonqualified stock options, restricted stock units, performance units, and stock purchase rights. Options under the Plan may
be granted
at prices not less than 100% of the fair value of the shares on
the date of grant as determined by the Compensation Committee of the Board of Directors. The Compensation Committee determines the period
over which the options become exercisable subject to certain restrictions as defined in the Plan, with the current outstanding options
generally vesting over three
or four
years. The
term of the options is no longer than ten years.
As of December 31, 2021, the Company had 36,952,460
shares of common stock authorized for issuance
under the Plan.
With
the approval of the Board of Directors and a majority of shareholders, effective May 8, 2014, the Plan was amended and restated. The
amendment provides for an automatic increase in the number of shares of common stock available for issuance under the Plan each January
(with Board approval), commencing January
1, 2015 in an amount up to four percent (4%)
of the total number of shares of common stock outstanding on the preceding December 31st.
The
Company recognized stock-based compensation expense (options and restricted share grants) in its consolidated statements of operations
as follows (in thousands):
Schedule
of Recognized Stock-Based Compensation
| |
Year
Ended December 31, | |
| |
2021 | | |
2020 | |
Research
and Development | |
$ | 1,870 | | |
$ | 1,897 | |
General
and Administrative | |
| 2,422 | | |
| 2,668 | |
Total | |
$ | 4,292 | | |
$ | 4,565 | |
The
following table contains information about the Company’s stock plan at December 31, 2020:
Schedule
of Equity Compensation Plan by Arrangements
|
|
Awards
Reserved for Issuance |
|
|
Awards
Issued & Exercised |
|
|
Awards
Available for Grant |
|
2013
Equity Compensation Plan (in thousands) |
|
|
36,952 |
* |
|
|
32,669 |
** |
|
|
4,283 |
|
* |
Increased
by 8,005 thousand on January 1, 2021, representing 4% of the total number of shares of common stock outstanding on December 31, 2020. |
** |
Includes
both stock grants and option grants |
The
following table summarizes the Company’ stock option activity and related information for the period from January 1, 2020 to December
31, 2021 (options in thousands):
Schedule
of Stock Option Activity
| |
Number
of Options | | |
Weighted
Average Exercise Price | | |
Weighted
Average Contractual Term in Years | |
Outstanding
at December 31, 2019 | |
| 17,529 | | |
$ | 1.11 | | |
| 6.2 | |
Granted | |
| 6,501 | | |
$ | 1.59 | | |
| | |
Exercised | |
| (826 | ) | |
| 0.74 | | |
| | |
Forfeited | |
| (72 | ) | |
$ | 1.11 | | |
| | |
Cancelled | |
| - | | |
| - | | |
| | |
Expired | |
| (581 | ) | |
$ | 1.25 | | |
| | |
Outstanding at December
31, 2020 | |
| 22,551 | | |
$ | 1.26 | | |
| 6.9 | |
| |
| | | |
| | | |
| | |
Granted | |
| 10,976 | | |
$ | 1.11 | | |
| | |
Exercised | |
| (1,077 | ) | |
$ | 0.60 | | |
| | |
Forfeited | |
| (2,824 | ) | |
$ | 1.08 | | |
| | |
Cancelled | |
| - | | |
| - | | |
| | |
Expired | |
| (1,441 | ) | |
$ | 1.98 | | |
| | |
Outstanding
at December 31, 2021 | |
| 28,184 | | |
$ | 1.21 | | |
| 7.2 | |
The
following table summarizes outstanding options at December 31, 2021, by their exercise price (options in thousands):
Summary
of Outstanding Options
Range
of Exercise Prices | |
Number
Outstanding | | |
Weighted
Average Exercise Price Per Share | |
$0.41
- $0.69 | |
| 1,935 | | |
$ | 0.49 | |
$0.74
- $1.12 | |
| 15,940 | | |
$ | 0.93 | |
$1.24
- $1.61 | |
| 6,525 | | |
$ | 1.35 | |
$2.27
- $3.32 | |
| 3,784 | | |
$ | 2.50 | |
| |
| 28,184 | | |
$ | 1.21 | |
As
of December 31, 2021, the number of vested shares underlying outstanding options was 14,625,397
at a weighted average exercise price of $1.20.
The aggregate intrinsic value of in-the-money options outstanding as of December 31, 2021 was $2.5
million. The aggregate intrinsic value is calculated
as the difference between the Company’s closing stock price of $1.01
on December 31, 2021, and the exercise price
of options, multiplied by the number of options. As of December 31, 2021, there was approximately $11.7
million of total unrecognized share-based compensation.
Such costs are expected to be recognized over a weighted average period of approximately 2.9
years.
All
outstanding options expire ten years from date of grant. Options granted to employees prior to 2018 vest in equal monthly installments
over three years. Beginning in 2018, options granted to employees vest over four years, with 25% of the shares vesting on the first annual
anniversary of grant and the remaining shares vesting in 36 equal monthly installments over the following 3 years. A portion of options
granted to consultants vests over four years, with the remaining vesting being based upon the achievement of certain performance milestones,
which are tied to either financing or drug development initiatives.
During
the years ended December 31, 2021 and 2020, the Company granted restricted stock awards for 31,769
and 379,385
shares of common stock, respectively. These awards
are typically granted to members of the Board of Directors as payment in lieu of cash fees or as payment to a vendor pursuant to a consulting
agreement. The Company values restricted stock awards at the fair market value on the date of grant. The Company recorded the value of
these restricted awards as general and administrative expense of approximately $100
thousand and $292
thousand in the consolidated statement of operations
for the years ended December 31, 2021 and 2020, respectively.
The
Company recognizes compensation expense for stock option awards and restricted stock awards on a straight-line basis over the applicable
service period of the award. The service period is generally the vesting period, with the exception of awards granted subject to a vendor’s
consulting agreement, whereby the award vesting period and the service period defined pursuant to the terms of the consulting agreement
may be different. Beginning January 1, 2020, stock options issued to consultants are recorded at fair value on the date of grant and
the award is recognized as an expense on a straight-line basis over the requisite service period. The following weighted-average assumptions
were used to calculate share-based compensation for the comparative periods presented:
Schedule
of Stock Option Awards and Restricted Stock Awards
|
|
For
the Year Ended December 31, |
|
|
|
2021 |
|
|
2020 |
|
Volatility |
|
98.4%
-101.6 |
% |
|
100.5%
- 107.4 |
% |
Risk-free
interest rate |
|
|
0.47%
- 1.28 |
% |
|
|
0.34%
- 1.74 |
% |
Dividend
yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
Expected
life |
|
|
6.0
years |
|
|
|
6.0
years |
|
The
Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting
employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin (SAB)
107 to estimated the expected term of share option grants.
The
expected stock price volatility assumption is based the Company’s historical stock price volatility.
Note
15 – Subsequent Events
None
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