10-Q 1 nviv-20190630x10q.htm 10-Q nviv_Current_Folio_10Q

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549


FORM 10-Q


 

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

 

For the quarterly period ended June 30, 2019

 

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: 001-37350


InVivo Therapeutics Holdings Corp.

(Exact name of registrant as specified in its charter)


 

Nevada

 

36-4528166

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification Number)

 

 

 

One Kendall Square, Suite B14402

 

 

Cambridge, MA

 

02139

(Address of principal executive offices)

 

(Zip code)

(617) 863-5500

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)


 

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

 

 

 

 

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 par value per share

NVIV

The Nasdaq Capital Market

 

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 if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒   No  ☐

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

Large accelerated filer  ☐

    

Accelerated filer  ☐

 

 

 

Non-accelerated filer  ☒

 

Smaller reporting company  ☒

 

 

 

Emerging growth company  ☐

 

As of August 5, 2019, 9,311,820 shares of the registrant’s Common Stock,  $0.00001 par value, were issued and outstanding.

 

 

 

 

INVIVO THERAPEUTICS HOLDINGS CORP.

Quarterly Report on Form 10-Q for the Quarter Ended June 30,  2019

 

TABLE OF CONTENTS

 

 

 

 

 

     

Page

PART I 

 

 

 

 

 

FINANCIAL INFORMATION 

 

 

 

 

 

1. Financial Statements (Unaudited) 

 

3

 

Consolidated Balance Sheets as of June 30, 2019, and December 31, 2018

 

3

 

Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2019 and 2018

 

4

 

Consolidated Statements of Changes in Stockholders’ Equity for the Three Months and Six Months Ended June 30, 2019 and 2018

 

5

 

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018

 

7

 

Notes to Consolidated Financial Statements

 

8

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

 

22

3. Quantitative and Qualitative Disclosures about Market Risk 

 

29

4. Controls and Procedures 

 

29

 

 

 

PART II 

 

 

 

 

 

OTHER INFORMATION 

 

 

 

 

 

1A. Risk Factors 

 

32

5. Other Information 

 

55

6. Exhibits 

 

56

 

 

2

PART I — FINANCIAL INFORMATION

 

 

Item 1.Financial Statements.

 

InVivo Therapeutics Holdings Corp.

Consolidated Balance Sheets

(In thousands, except share and per-share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

As of

 

 

    

June 30, 

    

December 31, 

 

 

 

2019

 

2018

 

ASSETS:

 

 

    

 

 

    

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

9,898

 

$

16,660

 

Restricted cash

 

 

 4

 

 

 4

 

Prepaid expenses and other current assets

 

 

1,007

 

 

461

 

Total current assets

 

 

10,909

 

 

17,125

 

Property, equipment and leasehold improvements, net

 

 

79

 

 

100

 

Restricted cash - non current

 

 

110

 

 

110

 

Operating lease right-of-use assets

 

 

1,345

 

 

 —

 

Other assets

 

 

1,165

 

 

1,042

 

Total assets

 

$

13,608

 

$

18,377

 

LIABILITIES AND STOCKHOLDERS’ EQUITY:

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

785

 

$

815

 

Loan payable, current portion

 

 

 —

 

 

100

 

Operating lease liabilities

 

 

279

 

 

 —

 

Accrued expenses

 

 

842

 

 

1,290

 

Total current liabilities

 

 

1,906

 

 

2,205

 

Other liabilities

 

 

63

 

 

61

 

Operating lease liabilities - non current

 

 

1,171

 

 

 —

 

Total liabilities

 

 

3,140

 

 

2,266

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock, $0.00001 par value, authorized 25,000,000 shares; 9,311,820 shares issued and outstanding at June 30, 2019; 9,309,255 shares issued and outstanding at December 31, 2018

 

 

 1

 

 

 1

 

Additional paid-in capital

 

 

223,576

 

 

223,440

 

Accumulated deficit

 

 

(213,109)

 

 

(207,330)

 

Total stockholders’ equity

 

 

10,468

 

 

16,111

 

Total liabilities and stockholders’ equity

 

$

13,608

 

$

18,377

 

 

See notes to the unaudited consolidated financial statements.

 

 

 

 

3

InVivo Therapeutics Holdings Corp.

Consolidated Statements of Operations

(In thousands, except share and per-share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

 

 

June 30, 

 

June 30, 

 

 

    

2019

    

2018

    

2019

    

2018

    

Operating expenses:

 

 

    

 

 

    

 

 

    

 

 

    

 

Research and development

 

$

1,716

 

$

1,026

 

$

2,826

 

$

2,424

 

General and administrative

 

 

1,532

 

 

1,786

 

 

3,200

 

 

5,220

 

Total operating expenses

 

 

3,248

 

 

2,812

 

 

6,026

 

 

7,644

 

Operating loss

 

 

(3,248)

 

 

(2,812)

 

 

(6,026)

 

 

(7,644)

 

Other income / (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income / (expense), net

 

 

72

 

 

33

 

 

171

 

 

51

 

Other income / (expense), net

 

 

32

 

 

26

 

 

76

 

 

68

 

Derivatives loss

 

 

 —

 

 

(10,186)

 

 

 —

 

 

(10,198)

 

Other income / (expense), net

 

 

104

 

 

(10,127)

 

 

247

 

 

(10,079)

 

Net loss

 

$

(3,144)

 

$

(12,939)

 

$

(5,779)

 

$

(17,723)

 

Net loss per share, basic and diluted

 

$

(0.34)

 

$

(7.48)

 

$

(0.62)

 

$

(11.20)

 

Weighted average number of common shares outstanding, basic and diluted

 

 

9,311,353

 

 

1,729,248

 

 

9,310,903

 

 

1,581,924

 

 

 

See notes to the unaudited consolidated financial statements.

 

 

 

 

4

InVivo Therapeutics Holdings Corp.

Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share and per-share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Month Period Ended June 30, 2018

 

 

 

 

 

 

 

Additional

 

 

 

 

Total

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount    

    

Capital

    

Deficit

    

Equity 

Balance as of March 31, 2018

 

1,562,284

 

$

 1

 

$

197,013

 

$

(188,691)

 

$

8,323

Share-based compensation expense

 

 —

 

 

 —

 

 

150

 

 

 —

 

 

150

Fair value of derivative warrant liability reclassified to additional paid-in capital

 

 —

 

 

 —

 

 

 1

 

 

 —

 

 

 1

Issuance of common stock upon exercise of warrants

 

1,050,918

 

 

 —

 

 

1,900

 

 

 —

 

 

1,900

Issuance of common stock in public offering

 

1,461,732

 

 

 —

 

 

656

 

 

 —

 

 

656

Fractional shares issued due to reverse stock split

 

2,733

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(12,939)

 

 

(12,939)

Balance as of June 30, 2018

 

4,077,667

 

$

 1

 

$

199,720

 

$

(201,630)

 

$

(1,909)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Month Period Ended June 30, 2019

 

 

 

 

 

 

 

Additional

 

 

 

 

Total

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount 

    

Capital    

    

 Deficit   

    

    Equity

Balance as of March 31, 2019

 

9,311,070

 

$

 1

 

$

223,508

 

$

(209,965)

 

$

13,544

Share-based compensation expense

 

 —

 

 

 —

 

 

68

 

 

 —

 

 

68

Issuance of common stock upon vesting of restricted stock units

 

750

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(3,144)

 

 

(3,144)

Balance as of June 30, 2019

 

9,311,820

 

$

 1

 

$

223,576

 

$

(213,109)

 

$

10,468

 

 

See notes to the unaudited consolidated financial statements.

 

 

5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Month Period Ended June 30, 2018

 

 

 

 

 

 

 

Additional

 

 

 

 

Total

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Equity 

Balance as of December 31, 2017

 

1,370,992

 

$

 1

 

$

194,016

 

$

(183,907)

 

$

10,110

Share-based compensation expense

 

 —

 

 

 —

 

 

456

 

 

 —

 

 

456

Fair value of derivative warrant liability reclassified to additional paid-in capital

 

 —

 

 

 —

 

 

 1

 

 

 —

 

 

 1

Issuance of common stock upon exercise of warrants

 

1,050,918

 

 

 —

 

 

1,900

 

 

 —

 

 

1,900

Issuance of common stock in public offering

 

1,652,396

 

 

 —

 

 

3,338

 

 

 —

 

 

3,338

Issuance of common stock under ESPP

 

188

 

 

 —

 

 

 3

 

 

 —

 

 

 3

Fractional shares issued due to reverse stock split

 

2,733

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock to 401(k) plan

 

440

 

 

 —

 

 

 6

 

 

 —

 

 

 6

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(17,723)

 

 

(17,723)

Balance at June 30, 2018

 

4,077,667

 

$

 1

 

$

199,720

 

$

(201,630)

 

$

(1,909)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Month Period Ended June 30, 2019

 

 

 

 

 

 

 

Additional

 

 

 

 

Total

 

 

Common Stock

 

Paid-in

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

 Deficit   

    

Equity     

Balance as of December 31, 2018

 

9,309,255

 

$

 1

 

$

223,440

 

$

(207,330)

 

$

16,111

Share-based compensation expense

 

 —

 

 

 —

 

 

135

 

 

 —

 

 

135

Issuance of common stock upon vesting of restricted stock units

 

1,500

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Issuance of common stock under ESPP

 

1,065

 

 

 —

 

 

 1

 

 

 —

 

 

 1

Net loss

 

 —

 

 

 —

 

 

 —

 

 

(5,779)

 

 

(5,779)

Balance at June 30, 2019

 

9,311,820

 

$

 1

 

$

223,576

 

$

(213,109)

 

$

10,468

 

 

See notes to the unaudited consolidated financial statements.

 

 

6

 

 

InVivo Therapeutics Holdings Corp.

Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

 

 

 

June 30, 

 

 

    

2019

    

2018

 

Cash flows from operating activities:

 

 

    

 

 

    

 

Net loss

 

$

(5,779)

 

$

(17,723)

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

32

 

 

58

 

Amortization of operating lease right-of-use assets

 

 

131

 

 

 —

 

Loss on impairment of fixed assets

 

 

 —

 

 

48

 

Derivatives loss

 

 

 —

 

 

10,198

 

Gain on lease assignment

 

 

 —

 

 

(603)

 

Non-cash interest expense

 

 

 1

 

 

 2

 

Common stock issued to 401(k) plan

 

 

 —

 

 

 6

 

Share-based compensation expense

 

 

135

 

 

456

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(696)

 

 

(706)

 

Accounts payable

 

 

(30)

 

 

(74)

 

Operating lease liability

 

 

(9)

 

 

 —

 

Accrued expenses and other liabilities

 

 

(448)

 

 

1,566

 

Net cash used in operating activities

 

 

(6,663)

 

 

(6,772)

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

 —

 

 

(65)

 

Net cash used in investing activities

 

 

 —

 

 

(65)

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from issuance of stock under ESPP

 

 

 1

 

 

 3

 

Proceeds from exercise of warrants

 

 

 —

 

 

10

 

Repayment of loan payable

 

 

(100)

 

 

(522)

 

Repurchase of warrants

 

 

 —

 

 

(14)

 

Proceeds from issuance of common stock and warrants, net of commissions and issuance costs

 

 

 —

 

 

16,511

 

Net cash (used in) provided by financing activities

 

 

(99)

 

 

15,988

 

Decrease in cash and cash equivalents and restricted cash

 

 

(6,762)

 

 

9,151

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

16,774

 

 

13,271

 

Cash, cash equivalents and restricted cash at end of period

 

$

10,012

 

$

22,422

 

Supplemental disclosure of cash flow information and non-cash investing and financing activities:

 

 

 

 

 

 

 

Cash paid for interest

 

$

 1

 

$

25

 

Right-of-use assets and lease liability recorded upon adoption of ASC 842

 

$

1,475

 

$

 —

 

Non-cash issuance of common stock for warrants

 

$

 —

 

$

287

 

 

See notes to the unaudited consolidated financial statements.

 

 

7

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

 

1.NATURE OF OPERATIONS AND GOING CONCERN, BASIS OF PRESENTATION AND RECENT ACCOUNTING PRONOUNCEMENTS

 

Business

 

InVivo Therapeutics Holdings Corp., including its subsidiary, (the “Company”) is a pioneering biomaterials and biotechnology company with a focus on the treatment of spinal cord injuries (“SCIs”). The Company’s proprietary technologies incorporate intellectual property that is licensed under an exclusive, worldwide license from Boston Children’s Hospital (BCH) and the Massachusetts Institute of Technology (MIT), as well as intellectual property that has been developed internally in collaboration with its advisors and partners.

 

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets, and raising capital. The Company has historically financed its operations primarily through the sale of equity-related securities. At June 30, 2019, the Company had cash and cash equivalents of $9.9 million. The Company has not achieved profitability and may not be able to realize sufficient revenue to achieve or sustain profitability in the future. The Company does not expect to be profitable in the next several years, but rather expects to incur additional operating losses. The Company has limited liquidity and capital resources and must obtain significant additional capital resources in order to sustain its product development efforts, for acquisition of technologies and intellectual property rights, for preclinical and clinical testing of its anticipated products, pursuit of regulatory approvals, acquisition of capital equipment, laboratory and office facilities, establishment of production capabilities, for selling, general and administrative expenses, and other working capital requirements. The Company expects that it will need additional capital to fund its operations, which it may raise through a combination of equity offerings, debt financings, other third party funding, marketing and distribution arrangements, and other collaborations, strategic alliances, and licensing arrangements.

 

Going Concern

 

The Company’s consolidated financial statements as of June 30, 2019 were prepared under the assumption that the Company will continue as a going concern. At June 30, 2019, the Company had cash and cash equivalents of $9.9 million. Given the Company’s development plans, the Company estimates cash resources will be sufficient to fund its operations into the first quarter of 2020. This estimate is based on assumptions that may prove to be wrong; expenses could prove to be significantly higher, leading to a more rapid consumption of the Company’s existing resources.

 

The Company’s ability to continue as a going concern depends on its ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and, ultimately, to generate revenue. If the Company is unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value at which those assets are carried on its unaudited consolidated financial statements, and it is likely that investors will lose all or part of their investment. If the Company seeks additional financing to fund its business activities in the future and there remains substantial doubt about its ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding to the Company on commercially reasonable terms or at all. Based on these factors, as of June 30, 2019, management determined that there is substantial doubt regarding the Company’s ability to continue as a going concern.

 

Reverse Stock Split

 

On April 16, 2018, the Company effected a reverse stock split of its common stock, par value $0.00001 per share (the “Common Stock”), at a ratio of 1-for-25. As a result of the reverse stock split, (i) every 25 shares of the issued and outstanding Common Stock were automatically converted into 1 newly issued and outstanding share of Common Stock, without any change in the par value per share; (ii) shares of Common Stock underlying outstanding stock options and other equity instruments convertible into Common Stock were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the

8

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

terms of the agreements governing such securities, and (iii) the number of authorized shares of Common Stock outstanding was proportionally decreased.

 

All of the Company’s historical share and per share information related to issued and outstanding Common Stock and outstanding options and warrants exercisable for Common Stock in these consolidated financial statements were adjusted, on a retroactive basis, to reflect this 1-for-25 reverse stock split.

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States (“GAAP”) consistent with those applied in, and should be read in conjunction with, the Company’s audited consolidated financial statements and related footnotes for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K as filed with the United States Securities and Exchange Commission (“SEC”) on April 1, 2019. The unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair presentation of the Company’s financial position as of June 30, 2019 and its results of operations and cash flows for the interim period presented, and are not necessarily indicative of results for subsequent interim periods or for the full year. The interim consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements, as allowed by the relevant SEC rules and regulations; however, the Company believes that its disclosures are adequate to ensure that the information presented is not misleading.

 

Recently Adopted Accounting Standards

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The guidance in this ASU supersedes the leasing guidance in Topic 840, Leases. Under the new guidance, lessees are required to recognize lease assets and lease liabilities on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance leases or operating leases, with classification affecting the pattern of expense recognition in the statement of operations. In January, July and December 2018, the FASB issued ASU No’s. 2018-01, 2018-10, 2018-11, 2018-20 and 2019-01, which were targeted improvements to ASU No. 2016-02 (collectively, with ASU No. 2016-02, “ASC 842”) and provided entities with an additional (and optional) transition method to adopt the new lease standard, and provided clarifications to address potential narrow-scope implementation issues. The Company adopted ASU 2016- 02 effective January 1, 2019 and elected the optional transition method for adoption. The Company also took advantage of the transition package of practical expedients permitted within ASU 2016-02, which among other things, allowed it to carryforward historical lease classifications. The Company also elected to keep leases with an initial term of 12 months or less off of the balance sheet as a policy election and will recognize those lease payments in the consolidated statements of operations on a straight-line basis over the lease term. As of the adoption date, the Company identified 1 operating lease arrangement in which it is a lessee.  The adoption of this standard resulted in the recognition of operating lease liabilities and right-of-use assets of $1.5 million and $1.5 million, respectively, on the Company’s balance sheet as of January 1, 2019. The adoption of the standard did not have a material effect on the Company’s consolidated statements of operations or statements of cash flows.

 

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting which is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. The amendment is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606). The Company adopted ASU 2018-07 on January 1, 2019 and it did not have a material effect on the Company’s financial position, results of operations or disclosures.

 

9

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements which clarifies, corrects errors in, and makes improvements to several Codification Topics, including to:

 

·

Clarify when excess tax benefits should be recognized for share-based compensation awards

 

·

Remove inconsistent guidance in income tax accounting for business combinations

 

·

Clarify the circumstances when derivatives may be offset

 

·

Clarify the measurement of liability or equity-classified financial instruments when an identical asset is held as an asset

 

·

Allow portfolios of financial instruments and nonfinancial instruments accounted for as derivatives to use the portfolio exception to valuation

 

The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in this ASU do not require transition guidance and are effective upon issuance of this ASU. However, many of the amendments in this ASU do have transition guidance with effective dates for annual periods beginning after December 15, 2018. The Company adopted ASU 2018-09 on January 1, 2019, and it did not have a material effect on the Company’s financial position, results of operations or disclosures.

 

In August 2018, the FASB issued ASU No. 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement which improves the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. The Company does not expect the adoption of this ASU to have a material effect on its consolidated financial statements.

 

 

 

 

 

2.CASH AND CASH EQUIVALENTS

 

At June 30, 2019 and December 31, 2018, cash equivalents were comprised of money market funds and other short-term investments.

 

From time to time, the Company may have cash balances in financial institutions in excess of insurance limits. The Company has not experienced any losses related to these balances. The Company considers only those investments that are highly liquid, readily convertible to cash, and that mature within 3 months from date of purchase to be cash equivalents. Management believes it is not exposed to significant credit risk.

 

Cash and cash equivalents consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

(In thousands)

    

2019

    

2018

 

Cash

 

$

(8)

 

$

(83)

 

Money market funds

 

 

9,906

 

 

16,743

 

Total cash and cash equivalents

 

$

9,898

 

$

16,660

 

 

 

 

10

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

3.RESTRICTED CASH

 

Restricted cash as of both June 30, 2019 and December 31, 2018 was $114 thousand. Restricted cash as of June 30, 2019 and December 31, 2018 included a $50 thousand security deposit related to the Company’s credit card account, $4 thousand related to 401(k) reserve account and a $60 thousand standby letter of credit in favor of a landlord (see Note 5).

 

4.FAIR VALUES OF ASSETS AND LIABILITIES

 

The Company groups its assets and liabilities generally measured at fair value into three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

 

Level 1 — Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

 

Level 2 — Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 — Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

 

Assets and liabilities measured at fair value on a recurring basis are summarized below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2018

 

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair Value

 

Cash equivalents

 

$

16,743

 

$

 —

 

$

 —

 

$

16,743

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At June 30, 2019

 

(In thousands)

    

Level 1

    

Level 2

    

Level 3

    

Fair Value

 

Cash equivalents

 

$

9,906

 

$

 —

 

$

 —

 

$

9,906

 

 

 

5.COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

On November 30, 2011, the Company entered into a commercial lease for 26,342 square feet of office, laboratory, and manufacturing space in Cambridge, Massachusetts (as amended on September 17, 2012 and October 31, 2017, the “Cambridge Lease”). The term of the Cambridge Lease was 6 years and 3 months, with one 5-year extension option. On August 21, 2017, the Company exercised its option for the 5-year extension on the Cambridge Lease. The 5-year renewal lease term was set to commence on November 1, 2018 and end on October 31, 2023. The terms of the Cambridge Lease required a standby letter of credit in the amount of $311 thousand.

 

On June 13, 2017, the Company entered into a new short-term lease, to sub-lease 5,233 square feet of its facility (the “Moderna Sublease”). The lease term was from July 1, 2017 through October 26, 2018. On June 19, 2017, the Company received a $55 thousand security deposit under the terms of the Moderna Sublease. In connection with the Moderna Sublease, the Company received sublease income of $30 thousand and $112 thousand for the three-

11

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InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

and six month periods ended June 30, 2018 respectively, which was recorded as an offset to rent expense. In conjunction with the assignment of the Cambridge Lease on May 3, 2018 further described below, this security deposit was transferred to the third party that assumed the lease. The Company did not record any sublease income associated with the Moderna Sublease during the three or six months period ended June 30, 2019.

 

On May 3, 2018, the Company assigned the Cambridge Lease to a third party who assumed all of the Company’s remaining rights and obligations under the Cambridge Lease including the Moderna Sublease. On the same date as the lease assignment, the Company entered into a sublease for 5,104 square feet of space, originally part of the Cambridge Lease, from the third party to which the Company assigned the Cambridge Lease (the “Current Cambridge Lease”). The Current Cambridge Lease commenced on May 3, 2018 and expires October 31, 2023 and contains rent holiday and rent escalation clauses. The Current Cambridge Lease does not contain any renewal options.

 

In connection with the assignment of the Cambridge Lease and the entry into the Current Cambridge Lease, the $311 thousand standby letter of credit was terminated, and a new standby letter of credit was established for $40 thousand. On November 1, 2018, the standby letter of credit was increased to $60 thousand. The $55 thousand security deposit under the Moderna Sublease was transferred to the third party and $603 thousand of deferred rent was removed from the consolidated balance sheets as of June 30, 2018. The resulting gain was recorded within the consolidated statement of operations and comprehensive loss during the second quarter of 2018. The Company also wrote off certain furniture, fixtures and equipment (including laboratory equipment) and recorded an impairment charge of $48 thousand for the six months ended June 30, 2018.

 

Under the Current Cambridge Lease, the Company will be required to pay its proportionate share of certain operating costs and property taxes applicable to the leased premises in excess of new base year amounts. These costs are considered to be variable lease payments and are not included in the determination of the lease’s right-of-use asset or lease liability. 

 

The Company identified and assessed the following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:

 

·

As the Company’s Current Cambridge Lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has estimated its incremental borrowing rate based on electing the remaining lease term as of the adoption date.

·

Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the combined lease component.

·

The expected lease terms include noncancelable lease periods.

 

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InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

The elements of lease expense are as follows:

 

 

 

 

 

 

 

Lease cost (In thousands)

Three Months Ended June 30, 2019

    

Six Months Ended June 30, 2019

Operating lease cost

$

91

 

$

182

Short-term lease cost

 

 6

 

 

12

Total lease cost

$

97

 

$

194

 

 

 

 

 

 

 

 

 

 

 

 

Other information (In thousands)

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities:

 

 

 

 

 

Operating cash flows from short term leases

$

(6)

 

$

(12)

Operating cash flows from operating leases

 

(60)

 

 

(60)

Total cash paid for leases

$

(66)

 

$

(72)

Right-of-use assets obtained in exchange for operating lease liabilities

 

 -

 

 

 -

Weighted-average remaining lease term - operating leases

 

4.3 Years

 

 

4.3 Years

Weighted-average discount rate - operating leases

 

7.0%

 

 

7.0%

 

Maturities of lease liabilities due under the Company’s Current Cambridge Lease as of June 30, 2019 is as follows:

 

 

 

 

 

 

 

Leases (In thousands)

 

 

    

As of June 30, 2019

2019 (excluding the 6 months ended June 30, 2019)

 

 

 

$

183

2020

 

 

 

 

375

2021

 

 

 

 

386

2022

 

 

 

 

398

2023

 

 

 

 

339

Thereafter

 

 

 

 

 —

Total lease payments

 

 

 

 

1,681

Less: imputed interest

 

 

 

 

(231)

Present value of lease liabilities

 

 

 

$

1,450

 

 

 

 

 

 

 

 

 

 

Leases (In thousands)

 

 

    

 

Classification

    

As of June 30, 2019

Assets

 

 

 

 

 

 

 

 

Lease asset

 

 

 

 

Operating

 

$

1,345

Total lease assets

 

 

 

 

 

 

$

1,345

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Current

 

 

 

 

Operating

 

$

279

Non Current

 

 

 

 

Operating

 

 

1,171

Total lease liabilities

 

 

 

 

 

 

$

1,450

 

Under ASC Topic 840, Leases (“ASC 840”) the Company recognized rent expense on a straight-line basis over the term of the lease and recorded the difference between the amount charged to expense and the rent paid as prepaid rent or deferred rent liability. As of December 31, 2018, the amount of prepaid rent was $17 thousand and this amount was subsequently reversed upon adoption of ASU No. 2016-02 on January 1, 2019.

 

Under ASC 840, rent expense related to the Company’s real estate lease charged to operations for the three month period ended June 30, 2018 was $224 thousand, and did not include the one-time gain on termination of the Cambridge Lease of $603 thousand that was recorded to the consolidated statement of operations during the second quarter of 2018. 

 

13

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

Under ASC 840, rent expense related to the Company’s real estate lease charged to operations for the six month period ended June 30, 2018 was $640 thousand, and did not include the one-time gain on termination of the Cambridge Lease of $603 thousand that was recorded to the consolidated statement of operations during the second quarter of 2018.

 

As of December 31, 2018, minimum future lease payments under non-cancellable leases were as follows:

 

 

 

 

 

(In thousands) Year Ended December 31,

    

    

 

2019

 

$

243

2020

 

 

375

2021

 

 

386

2022

 

 

398

2023

 

 

339

Total

 

$

1,741

 

 

6.       ACCRUED EXPENSES

 

Accrued expenses consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

(In thousands)

    

2019

    

2018

 

Severance and restructuring

 

$

 -

 

$

517

 

Compensation

 

 

578

 

 

489

 

Clinical

 

 

116

 

 

73

 

Legal

 

 

41

 

 

35

 

Other accrued expenses

 

 

107

 

 

176

 

    Total accrued expenses

 

$

842

 

$

1,290

 

 

 

7.LOAN PAYABLE

 

In October 2012, the Company entered into a loan agreement with the Massachusetts Development Finance Agency (“MassDev”). The loan agreement provided the Company with a $2.0 million line of credit from the Commonwealth of Massachusetts’ Emerging Technology Fund, with $200 thousand designated to be used for working capital purposes and the remainder to be used for the purchase of capital equipment. The annual interest rate on the loan was fixed at 6.5% with interest-only payments for the first 30 months, commencing on November 1, 2012, and then equal installments of interest and principal over the next 54 months, until the final maturity of the loan in March 2019. Commencing on May 1, 2015, equal monthly payments of $41 thousand were due until loan maturity.

 

In May 2018, in order to obtain the consent of MassDev for facility changes, including the assignment of the Cambridge Lease, and the sale of certain assets, the Company paid down $300 thousand of principal on the MassDev loan. During the six month period ended June 30, 2019, the Company made principal loan payments of $100 thousand. As of June 30, 2019, there was no outstanding loan payable balance.

 

In October 2012, as part of the agreement, the Company issued MassDev a warrant for the purchase of 362 shares of the Company’s Common Stock of which 243 shares remain outstanding at June 30, 2019. The warrant has a 7-year term and is exercisable at $166 per share. The fair value of the warrant was determined to be $32 thousand and was amortized through interest expense over the life of the note. Amortization related to this loan for the three and six month periods ended June 30, 2018 was $1 thousand and $2 thousand,  respectively. The Company did not record any amortization expense during the three months ended June 30, 2019. During the six month period ended June 30, 2019,  the Company recorded $1 thousand in amortization expense. This amortization expense was included in interest expense in the Company’s consolidated statements of operations.

 

14

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InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

The equipment line of credit was secured by substantially all the assets of the Company, excluding intellectual property. The Company did not record any interest expense during the three months ended June 30, 2019. Interest expense related to this loan for the three month period ended June 30, 2018 was $12 thousand. Interest expense related to this loan for the six month periods ended June 30, 2019 and 2018 was $1 thousand and $26 thousand, respectively.

 

8.COMMON STOCK

 

In May 2018, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of shares of authorized Common Stock from 4,000,000 to 25,000,000 shares.  As of June 30, 2019, and December 31, 2018, 9,311,820 and 9,309,255 shares were issued and outstanding respectively.

 

In June 2018, the Company closed an underwritten public offering of an aggregate of 1,378,400 Common Units, at an offering price of $2.00 each, each comprised of 1 share of the Company’s Common Stock and 1 Series A warrant to purchase 1 share of Common Stock. The public offering also included 6,242,811 pre-funded units at an offering price of $1.99 each, each comprised of 1 pre-funded Series B Warrant, and 1 Series A warrant to purchase 1 share of Common Stock. Each Series A warrant has an exercise price of $2.00 per share, is exercisable immediately and expires 5 years from the date of issuance. Each Series B warrant had an exercise price of $0.01 per share, was exercisable immediately and would have expired 20 years from the date of issuance (see Note 11). The net proceeds to the Company, after deducting the underwriting discounts and commissions and other offering expenses, were $13.5 million (see Note 11). In September 2018, the Company entered into an Amendment to the Warrant Agency Agreement and Warrants (the “Ladenburg Warrant Amendment”) with Continental Stock Transfer & Trust Company (“Continental”) that amended the Warrant Agency Agreement, by and between the Company and Continental, as Warrant Agent, dated June 25, 2018, the Series A Common Stock Purchase Warrant, and the Series B Pre-Funded Common Stock Purchase Warrant, both dated June 25, 2018 (the Series A and Series B Warrant, collectively the “2018 Warrants”). The Ladenburg Warrant Amendment added a provision to each of the warrants that allowed the Company or a successor entity whose stock is not listed on a trading market to, in connection with a Fundamental Transaction (as such term is defined in the 2018 Warrants) that is not within the Company’s control, purchase the warrant from the holder, at the holder’s option, by paying the same form of consideration in the same proportion that is offered to the holders of the Company’s Common Stock in connection with the Fundamental Transaction, including cash, stock, any combination thereof and any choice of consideration thereof, in an amount equal to the Black-Scholes Value of the remaining unexercised portion of the Warrant on the consummation date of the Fundamental Transaction. The 2018 Warrants were initially classified as liabilities, as a result of the amendment, the Company reassessed the warrant classification and concluded that the warrants qualified for equity classification. The fair value of the amended 2018 Warrants was re-measured immediately prior to the date of the Ladenburg Warrant Amendment with changes in fair value recorded as a loss of $764 thousand in the Company’s consolidated statement of operations, and $14.7 million was reclassified to equity. During the three and six months ended June 30, 2018, the Company issued an aggregate of 1,050,918 shares of Common Stock upon the exercise of Series B warrants for aggregate proceeds of $10 thousand and reclassified $1.9 million from derivative warrant liability to additional paid in capital. During the three and six months ended June 30, 2019, the Company did not issue any shares as a result of warrant exercise activity. There are no outstanding Series B warrants as of either June 30, 2019 or December 31, 2018.

 

In January 2018, the Company entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “RRA”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), under which it had the right to sell up to $15 million, in shares of our Common Stock, to Lincoln Park over a 24 month period, subject to certain limitations and conditions set forth in the Purchase Agreement and RRA. On May 30, 2018, the Company’s stockholders approved to increase the issuance and sale by the Company to Lincoln Park, including the Company’s prior issuances and sales of shares of Common Stock to Lincoln Park since January 2018, of up to 1,200,000 shares of Common Stock. In accordance with the terms of the Purchase Agreement, at the time the Company signed the Purchase Agreement and the RRA, it issued 17,192 shares to Lincoln Park as consideration for its commitment to purchase shares of the Company’s Common Stock under the Purchase Agreement and recorded $627 thousand in deferred offering costs of which the full amount was capitalized into additional paid-in

15

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

capital as of June 30, 2018. During the three months ended June 30, 2018, the Company sold an aggregate of 83,330 shares to Lincoln Park, for aggregate proceeds of $370 thousand net of issuance costs. During the six months ended June 30, 2018, the Company sold an aggregate of 256,804 shares to Lincoln Park, for aggregate proceeds of $3.1 million net of issuance costs. During the three and six months ended June 30, 2019,  the Company did not sell any shares to Lincoln Park. In May 2019, the Company terminated the Purchase Agreement with Lincoln Park.

 

In May 2018, the Company’s Board of Directors approved to increase the number of shares of Common Stock reserved under the 401(k) Plan by 4,000 shares, bringing the aggregate number of shares of Common Stock eligible for distribution pursuant to the 401(k) Plan as of that date to 4,100 shares. In the second quarter of 2018 the Company revised its 401(k)-matching policy to move from share matching to cash-based matching. During the three months ended June 30, 2018, the Company did not issue shares in 401(k) matching. During the six months ended June 30, 2018, the Company issued an aggregate of 440 shares of Common Stock with a fair value of $6 thousand to the Company’s 401(k) plan as a matching contribution. During the six months ended June 30, 2019, the Company contributed $31 thousand in cash as a matching contributions to employee 401(k) accounts.

 

During the three months ended June 30, 2019 and 2018, the Company did not issue any shares under the Company’s Employee Stock Purchase Plan (the “ESPP”). In January 2019, 1,065 shares that were purchased in the offering period commencing on July 1, 2018 and ending on December 31, 2018 were issued under the ESPP. During the six months ended June 30, 2018, the Company issued an aggregate of 188 shares of common stock under the Company’s ESPP and received cash proceeds of approximately $3 thousand.

 

During the three months ended June 30, 2019, the Company issued an aggregate of 750 shares of Common Stock upon vesting of restricted stock units. During the six months ended June 30, 2019,  the Company issued an aggregate of 1,500 shares of Common Stock upon vesting of restricted stock units.

 

During the three and six months ended June 30, 2018, as part of the adjustment to reflect the Company’s 1-for-25 reverse stock split on its Common Stock on April 16, 2018, the Company issued 2,733 shares of Common Stock to account for the fractional roundup of shareholders.

 

9.STOCK-BASED COMPENSATION

 

In 2007, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”). The 2007 Plan provided that the Company’s Board of Directors (or committees and/or executive officers delegated by the Board of Directors) could grant incentive and nonqualified stock options to the Company’s employees, officers, directors, consultants and advisors.

 

On October 26, 2010, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2010 Equity Incentive Plan (as subsequently amended, the “2010 Plan”). The 2010 Plan provided for grants of incentive stock options to employees, and nonqualified stock options and restricted Common Stock to employees, consultants, and non-employee directors of the Company.

 

In April 2015, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the 2015 Equity Incentive Plan (the “2015 Plan”). The 2015 Plan provides for grants of incentive stock options to employees, and nonqualified stock options, restricted Common Stock, restricted stock units, and stock appreciation rights to employees, consultants, and non-employee directors of the Company.

 

Upon approval of the 2015 Plan by the Company’s shareholders on June 16, 2015, the 2010 Plan was terminated and no additional shares or share awards have been subsequently granted under the 2010 Plan. As of June 30, 2019, the total number of shares available to be issued under the 2015 Plan was 206,675 shares, consisting of 160,000 shares initially authorized under the 2015 Plan shares plus the 12,894 shares that remained

16

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

available for grant under the 2010 Plan at the time of its termination adjusted for cumulative cancellations, forfeitures and issuances from the 2010 Plan and 2015 Plan.

 

Options issued under the 2007 Plan, 2010 Plan, and 2015 Plan (collectively, the “Plans”) are exercisable for up to 10 years from the date of issuance.

 

In March 2015, the Company’s Board of Directors adopted, and the Company’s shareholders subsequently approved, the ESPP. The ESPP allows employees to buy company stock twice per year through after-tax payroll deductions at a discount from market. The Company’s Board of Directors initially authorized 7,500 shares for issuance under the ESPP. Commencing on the first day of the year ended December 31, 2016 and on the first day of each year thereafter during the term of the ESPP, the number of shares of Common Stock reserved for issuance shall be increased by the lesser of (i) 1% of the Company’s outstanding shares of Common Stock on such date, (ii) 2,000 shares, or (iii) a lesser amount determined by the Board of Directors. Under the terms of the ESPP, in no event shall the aggregate number of shares reserved for issuance during the term of the ESPP exceed 50,000 shares. As of both June 30, 2019 and December 31, 2018, there were 7,923 shares reserved for issuance under the ESPP.

 

In January 2019, 1,065 shares that were purchased in the offering period commencing on July 1, 2018 and ending on December 31, 2018 were issued under the ESPP. The ESPP is considered a compensatory plan with the related compensation cost recognized over each 6  month offering period. None of the Company’s employees participated in the ESPP plan in the current offering period and consequently no compensation expense was recorded in each of three and six months periods ended June 30, 2019. The compensation expense related to the ESPP for each of the three and six month periods ended June 30, 2018 was $1 thousand and was included in share-based compensation expense.

 

Stock-based compensation

 

For the three month periods ended June 30, 2019 and 2018, the Company recorded stock-based compensation expense of $68 thousand and $150 thousand, respectively, inclusive of the expense related to the ESPP.

 

For the six month periods ended June 30, 2019 and 2018, the Company recorded stock-based compensation expense of $135 thousand and $456 thousand, respectively, inclusive of the expense related to the ESPP

 

The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The expected term of options granted under the Plans, all of which qualify as “plain vanilla,” is based on the average of the contractual term (10 years) and the vesting period (generally, 48 months). For non-employee options, the expected term is the contractual term. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option.

 

The assumptions used principally in determining the fair value of options granted were as follows:

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

 

 

    

2019

 

2018

 

 

Risk-free interest rate

    

2.55%

 

2.45 - 2.88%

 

 

Expected dividend yield

 

0%

 

0%

 

 

Expected term (employee grants)

 

6 Years

 

5.62 Years

 

 

Expected volatility

 

105%

 

104%

 

 

 

17

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

Stock options

 

A summary of option activity as of June 30, 2019 and changes for the six-month period then ended are presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

Options

    

Shares

    

Price

    

Term in Years

    

Value

 

Outstanding at December 31, 2018

 

54,849

 

$

100.83

 

7.32

 

$

 —

 

Granted

 

90,000

 

$

1.53

 

 

 

 

 

 

Expired

 

(2,500)

 

$

231.00

 

 

 

 

 

 

Cancelled/Forfeited

 

(17,459)

 

$

40.12

 

 

 

 

 

 

Outstanding at June 30, 2019

 

124,890

 

$

35.15

 

8.67

 

$

 —

 

Vested and Exercisable at June 30, 2019

 

27,278

 

$

136.27

 

6.01

 

$

 —

 

 

The weighted average grant-date fair value of options granted during the six months ended June 30, 2019 was $1.25 per share. The total fair value of options that vested in the three months ended June 30, 2019 was $33 thousand. The total fair value of options that vested in the six months ended June 30, 2019 was $69 thousand. For the three month period ended June 30, 2019, the Company recorded stock-based compensation expense of $43 thousand related to stock options. For the six month period ended June 30, 2019, the Company recorded stock-based compensation expense of $84 thousand related to stock options. As of June 30, 2019, total unrecognized compensation expense related to non-vested share-based option compensation arrangements amounted to $262 thousand and is estimated to be recognized over a period of 1.97 years.

 

Restricted Stock Units

 

The following table summarizes the restricted stock unit (“RSU”) activity under the 2015 Plan during the six month period ended June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

    

Number of Grants

    

Grant Date Fair Value

Unvested balance at December 31, 2018

 

10,250

 

$

23.13

Granted

 

 —

 

$

 —

Vested/Released

 

(1,500)

 

$

22.00

Forfeited

 

 —

 

$

 —

Unvested balance at June 30, 2019

 

8,750

 

$

23.22

 

For the three month period ended June 30, 2019, the Company recorded stock-based compensation expense of $25 thousand related to the time-based RSUs. For the six-month period ended June 30, 2019, the Company recorded stock-based compensation expense of $51 thousand related to the time-based RSUs. As of June 30, 2019, total unrecognized compensation expense related to non-vested RSUs amounted to $172 thousand which the Company expects to recognize over a remaining weighted-average of 2.36 years.

 

18

Table of Contents

InVivo Therapeutics Holdings Corp.

Notes to Consolidated Financial Statements for the Quarter Ended June 30, 2019 (Unaudited)

(Continued)

 

10.     WARRANTS

 

The following table presents information about warrants to purchase Common Stock issued and outstanding at June 30, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

Number of

    

Exercise

    

 

 

Year Issued

 

Classification

 

Warrants

 

Price

 

Date of Expiration

 

2012

 

Equity

 

243

 

$

166.00

 

10/5/2019

 

2014

 

Equity

 

307

 

$

11.75

 

5/9/2021

 

2016

 

Equity

 

85,869

 

$

250.00

 

3/18/2021

 

2018

 

Equity

 

7,586,711

 

$

2.00

 

6/25/2023

 

Total

 

 

 

7,673,130

 

 

 

 

 

 

Weighted average exercise price

 

 

 

 

 

$

4.78

 

 

 

Weighted average life in years

 

 

 

 

 

 

 

 

3.96

 

 

In May 2014, the Company issued warrants in a public offering (the “2014 Warrants”). At inception, the 2014 and 2018 Warrants had provisions that precluded equity classification. Upon amendment, the Company assessed whether the warrants required accounting as derivatives and determined that the warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with FASB Accounting Standards Codification Topic 815, Derivatives and Hedging. As such, the Company concluded that the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and accordingly are classified in stockholders’ equity. See below for a further description of the warrant amendments.

 

Warrant Cancellation

 

During the year ended December 31, 2018, the Company entered into warrant cancellation agreements with certain holders of the 2014 Warrants to cancel and terminate such warrants for total cash consideration of $14 thousand. As of June 30, 2019, the sole remaining 2014 Warrant was exercisable for an aggregate of 307 shares of Common Stock.

 

Warrant Amendment