10-Q 1 bind-10q_20160630.htm FORM 10-Q bind-10q_20160630.htm

 

.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

x

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

For the quarterly period ended June 30, 2016

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: 001-36072

 

DNIB Unwind, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

56-2596148

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

c/o Development Specialists, Inc.

333 South Grand Avenue, Suite 4070

Los Angeles, California 90071

(Address of principal executive offices) (Zip Code)

(213) 617-2717

(Registrant’s telephone number, including area code)

325 Vassar Street

Cambridge, MA 02139

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

 

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  x    No  ¨

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

 

 

 

 

 

 

 

 

Large accelerated filer

 

¨

 

Accelerated filer

 

x

 

 

 

 

 

 

 

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

 

Smaller reporting company

 

¨

 

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

On August 11, 2016, the registrant had 20,886,802 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


DNIB UNWIND, INC.

TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

 

1

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015

 

1

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2016 and 2015

 

2

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months ended June 30, 2016 and 2015

 

3

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2016 and 2015

 

4

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

5

 

 

 

 

Item 2.

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

 

14

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

22

 

 

 

 

Item 4.

Controls and Procedures

 

23

 

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

24

 

 

 

 

Item 1A.

Risk Factors

 

25

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

27

 

 

 

 

Item 4.

Mine Safety Disclosures

 

27

 

 

 

 

Item 5.

Other Information

 

27

 

 

 

 

Item 6.

Exhibits

 

27

 

 

 

 

SIGNATURES

 

28

 

 

 


PART I. FINANCIAL INFORMATION

 

 

Item 1. Financial Statements

DNIB UNWIND, INC. AND SUBSIDIARIES

(A DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(in thousands, except share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

6,956

 

 

$

24,654

 

Short-term investments

 

 

 

 

 

12,288

 

Amounts due under collaboration agreements

 

 

4,096

 

 

 

1,377

 

Prepaid expenses and other current assets

 

 

2,780

 

 

 

2,100

 

Total current assets

 

 

13,832

 

 

 

40,419

 

Property and equipment, net

 

 

9,049

 

 

 

9,764

 

Restricted cash and other assets

 

 

559

 

 

 

559

 

Total

 

$

23,440

 

 

$

50,742

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

8,339

 

 

$

5,203

 

Accounts payable

 

 

263

 

 

 

3,793

 

Accrued expenses

 

 

4,353

 

 

 

5,712

 

Current portion of deferred revenue

 

 

3,167

 

 

 

3,302

 

Total current liabilities

 

 

16,122

 

 

 

18,010

 

Long-term liabilities:

 

 

 

 

 

 

 

 

Long-term debt, less current

 

 

 

 

 

9,482

 

Deferred revenue, less current

 

 

1,541

 

 

 

2,691

 

Warrant liability

 

 

140

 

 

 

2,894

 

Other long-term liabilities

 

 

 

 

 

538

 

Total long-term liabilities

 

 

1,681

 

 

 

15,605

 

      Liabilities subject to compromise

 

 

8,989

 

 

 

 

Total liabilities

 

 

26,792

 

 

 

33,615

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value—10,000,000 shares authorized, no shares

   issued and outstanding at June 30, 2016 and December 31, 2015

 

 

 

 

 

 

Common stock, $0.0001 par value—200,000,000 shares authorized, 20,886,802 shares

   issued and outstanding at June 30, 2016, 20,882,339 shares

   issued and outstanding at December 31, 2015

 

 

2

 

 

 

2

 

Additional paid in capital

 

 

195,332

 

 

 

194,325

 

Accumulated deficit

 

 

(195,547

)

 

 

(173,858

)

Accumulated other comprehensive loss

 

 

(3,139

)

 

 

(3,342

)

Total stockholders’ equity

 

 

(3,352

)

 

 

17,127

 

Total

 

$

23,440

 

 

$

50,742

 

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

1


DNIB UNWIND, INC. AND SUBSIDIARIES

(A DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Revenue

 

$

4,483

 

 

$

2,524

 

 

$

6,356

 

 

$

6,908

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,527

 

 

 

8,299

 

 

 

19,764

 

 

 

16,479

 

General and administrative

 

 

2,932

 

 

 

4,370

 

 

 

6,506

 

 

 

9,133

 

Restructuring charges

 

 

800

 

 

 

 

 

 

800

 

 

 

 

Total operating expenses

 

 

12,259

 

 

 

12,669

 

 

 

27,070

 

 

 

25,612

 

Loss from operations

 

 

(7,776

)

 

 

(10,145

)

 

 

(20,714

)

 

 

(18,704

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

1,655

 

 

 

269

 

 

 

2,754

 

 

 

1,189

 

Reorganization items, net

 

 

(2,366

)

 

 

 

 

 

(2,366

)

 

 

 

Interest expense

 

 

(488

)

 

 

(472

)

 

 

(1,310

)

 

 

(862

)

Other income (expense), net

 

 

(51

)

 

 

(124

)

 

 

(53

)

 

 

(408

)

Total other income (expense)

 

 

(1,250

)

 

 

(327

)

 

 

(975

)

 

 

(81

)

Net loss

 

$

(9,026

)

 

$

(10,472

)

 

$

(21,689

)

 

$

(18,785

)

Net loss per share, Basic and diluted

 

$

(0.43

)

 

$

(0.51

)

 

$

(1.04

)

 

$

(0.96

)

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

20,886,802

 

 

 

20,472,672

 

 

 

20,884,462

 

 

 

19,661,932

 

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

2


DNIB UNWIND, INC. AND SUBSIDIARIES

(A DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)

(in thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Net loss

 

$

(9,026

)

 

$

(10,472

)

 

$

(21,689

)

 

$

(18,785

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

70

 

 

 

185

 

 

 

196

 

 

 

28

 

Unrealized gains on investments

 

 

 

 

 

4

 

 

 

7

 

 

 

3

 

Comprehensive loss

 

$

(8,956

)

 

$

(10,283

)

 

$

(21,486

)

 

$

(18,754

)

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

3


DNIB UNWIND, INC. AND SUBSIDIARIES

(A DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(in thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2016

 

 

2015

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(21,689

)

 

$

(18,785

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

1,683

 

 

 

1,010

 

Stock-based compensation

 

 

1,001

 

 

 

1,767

 

Change in fair value of warrant liability

 

 

(2,754

)

 

 

(1,189

)

Amortization of debt discount

 

 

391

 

 

 

121

 

Expense related to issuance costs allocated to warrants

   measured at fair value

 

 

 

 

 

465

 

Other non-cash operating activities, net

 

 

50

 

 

 

165

 

Increase (decrease) in cash and cash equivalents from:

 

 

 

 

 

 

 

Amounts due under collaboration agreements

 

 

(2,719

)

 

 

1,218

 

Prepaid expenses and other current assets

 

 

(674

)

 

 

(1,237

)

Accounts payable, accrued expenses and other long term liabilities

 

 

3,540

 

 

 

(413

)

Deferred revenue

 

 

(1,285

)

 

 

(1,427

)

Net cash used in operating activities

 

 

(22,456

)

 

 

(18,305

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(945

)

 

 

(1,899

)

Proceeds from sales of short-term investments

 

 

8,519

 

 

 

14,691

 

Proceeds from maturities of short-term investments

 

 

10,000

 

 

 

23,023

 

Purchases of short-term investments

 

 

(6,276

)

 

 

(43,168

)

Other investing activities, net

 

 

 

 

 

(38

)

Net cash provided by (used in) investing activities

 

 

11,298

 

 

 

(7,391

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from underwritten public offering, net of underwriting discounts,

   commissions and offering expenses of $1,691

 

 

 

 

 

19,807

 

Proceeds from at-the-market sales agreement

 

 

 

 

 

1,209

 

Payments for initial public offering

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

6

 

 

 

277

 

Borrowings under credit facility

 

 

 

 

 

14,810

 

Repayments of credit facility

 

 

(6,737

)

 

 

(3,274

)

Net cash (used in) provided by financing activities

 

 

(6,731

)

 

 

32,829

 

Effect of exchange rate on cash

 

 

191

 

 

 

16

 

(Decrease) increase in cash and cash equivalents

 

 

(17,698

)

 

 

7,149

 

Cash and cash equivalents—Beginning of year

 

 

24,654

 

 

 

19,348

 

Cash and cash equivalents—End of period

 

$

6,956

 

 

$

26,497

 

Noncash financing activities:

 

 

 

 

 

 

 

 

Fair value of warrants allocated to debt discount

 

$

 

 

$

368

 

Fair value of warrants allocated to warrant liability

 

$

 

 

$

8,548

 

Supplementary cash flow information—Interest paid

 

$

821

 

 

$

665

 

 

The accompanying notes are an integral part of these unaudited Condensed Consolidated Financial Statements.

 

 

4


DNIB UNWIND, INC. AND SUBSIDIARIES

(A DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION

Until August 1, 2016, DNIB Unwind, Inc. (f/k/a BIND Therapeutics, Inc.) developed novel targeted therapeutics, primarily for the treatment of cancer (see Note 2 – Bankruptcy Related Disclosures). As used throughout these consolidated financial statements, the terms “DNIB,” the “Company,” “we,” “us,” and “our” refer to the business of DNIB Unwind, Inc. including our wholly-owned subsidiaries, BIND (RUS) LLC and DNIB Subsidiary Corporation (f/k/a BIND Biosciences Security Corporation). On May 1, 2016 (the “Petition Date”), we filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) (see Note 2 – Bankruptcy Related Disclosures). The Chapter 11 filings constituted an event of default and automatic acceleration under our credit facility with Hercules Technology III, L.P. (“Hercules”) as lender. On August 1, 2016, we sold substantially all of our assets to Pfizer Inc. (“Pfizer”). The Company’s combined disclosure statement and plan of liquidation (the “Plan of Liquidation”), which was filed with the Bankruptcy Court on August 15, 2016, is expected to be approved by the Bankruptcy Court by the end of the third quarter of 2016.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared on the same basis as the audited consolidated financial statements, including the assertion that that the Company will continue as a going concern for a reasonable period of time. In the opinion of our management, the accompanying unaudited Condensed Consolidated Financial Statements contain all adjustments which are necessary to present fairly our financial position as of June 30, 2016, the results of our operations and our comprehensive loss for the three and six months ended June 30, 2016 and 2015, and cash flows for the six months ended June 30, 2016 and 2015. Such adjustments are of a normal and recurring nature. The results for the three and six months ended June 30, 2016 are not indicative of the results for the year ending December 31, 2016, or for any future period.

The going concern assertion assumes that the Company will realize its assets and meet its obligations as they become due in the ordinary course of business. Conditions leading to our filing of a voluntary petition for relief under Chapter 11 of the Bankruptcy Code, together with the other matters disclosed in Note 2 below, give rise to substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited Condensed Consolidated Financial Statements do not include any adjustments that may result from the resolution of this uncertainty.

 

2. BANKRUPTCY RELATED DISCLOSURES

 

Chapter 11 Filing— On the Petition Date, we filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Chapter 11 filing constituted an event of default and automatic acceleration under the agreements governing our credit facility with Hercules as lender. The chapter 11 case (the “DNIB Chapter 11 Case”) has been assigned Case No. 16-11084. Our subsidiary DNIB Subsidiary Corporation also filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court on May 1, 2016 (together with the DNIB Chapter 11 Case, the “Chapter 11 Cases”). Our other subsidiary, BIND (RUS) LLC, did not file a bankruptcy petition.

During the pendency of the Chapter 11 Cases, we intend to continue to operate as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

Section 363 Auction and Asset Sale—On July 1, 2016, we entered into an asset purchase agreement (the “Stalking Horse Agreement”) with Pfizer, pursuant to which Pfizer agreed to acquire substantially all of our assets and assume certain of our liabilities (the “Acquisition”) for an aggregate purchase price of $19.75 million. We filed a motion with the Bankruptcy Court (the “Stalking Horse Motion”) seeking Bankruptcy Court approval of, among other things, the Stalking Horse Agreement (or any other purchase agreement between us and the prevailing bidder at auction), the sale contemplated by the Stalking Horse Agreement (or a sale to the prevailing bidder at auction pursuant to an asset purchase agreement with such prevailing bidder) and procedures to govern the bidding and auction process.

On July 25 and 26, 2016, we held an auction pursuant to Section 363 of the Bankruptcy Code (the “Auction”) at which Pfizer submitted the highest and best offer for the purchase of substantially all of our assets and the assumption of certain of our liabilities. On July 26, 2016, following the Auction, we amended the Stalking Horse Agreement (as amended, the “Sale Agreement”) to, among other things, increase the purchase price of the acquisition to $40 million, increase the number of contracts assigned to Pfizer and

5


include additional liabilities assumed by Pfizer. On July 27, 2016, the Bankruptcy Court, among other things, approved the Sale Agreement and authorized our entry into and performance under the Sale Agreement.

On August 1, 2016, the acquisition closed (the “Closing”), whereby we completed the sale of substantially all of our assets, including without limitation our intellectual property rights relating to our product candidates, and assigned to Pfizer our rights and interests under our collaboration agreements. After deducting the amount of the holdback (as defined in the Sale Agreement), which is being held in escrow pursuant to the terms of the Sale Agreement until December 1, 2016, we received total cash consideration of $38.025 million at the Closing. Our receipt of some portion, or the entire amount of the holdback depends on the claims, if any, asserted by Pfizer against us during the holdback period (as defined in the Sale Agreement). On August 1, 2016, immediately following the Closing, we paid Hercules $9.1 million in full satisfaction of our obligations under our credit facility (including principal, interest and fees), and we paid $5.0 million in satisfaction of certain claims.

We have no remaining operations and are currently in the process of winding up the Company in preparation for liquidation. Our assets, including our cash, are subject to the jurisdiction of the Bankruptcy Court. As of August 15, 2016, we have approximately $28.0 million in cash and cash equivalents and $5.2 million in other assets, consisting of accounts receivable and a security deposit we are entitled to receive (and not including the $1.975 million Holdback held in escrow pursuant to the Sale Agreement).

On the Closing date, our common stock was delisted from The NASDAQ Global Select Market, with suspension of trading occurring at the opening of trading on August 1, 2016.  In addition, concurrently with the Closing, we filed a certificate of amendment to our Restated Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of the State of the State of Delaware (the “Delaware Secretary”) to change the name of the Company from “BIND Therapeutics, Inc. to “DNIB Unwind, Inc.”, in accordance with the terms of the Sale Agreement. The amendment became effective upon filing the Certificate of Amendment with the Delaware Secretary.

Plan of Liquidation—On August 15, 2016, the Company filed its Plan of Liquidation with the Bankruptcy Court. The Plan of Liquidation generally provides for the payment in full of timely filed and undisputed claims held by the Company’s secured and unsecured creditors (“Creditors’ Claims”), with secured creditors’ claims to be paid in full in cash or otherwise as permissible by the Bankruptcy Code, and unsecured creditors’ claims to be paid in full in cash or otherwise as the holders of such claims agree. The Plan of Liquidation further provides for an initial cash distribution, within 90 days of the effective date of the Plan of Liquidation, to the Company’ stockholders of record on August 30, 2016 in the aggregate amount of $8.0 million (the “Initial Distribution”); provided, however, that the Initial Distribution will not be made until the satisfaction in full of Creditors’ Claims and certain other claims entitled to priority under Section 507 of the Bankruptcy Code, and the payment in full of the Company’s professional fees and expenses relating to the Chapter 11 Cases. In addition, pursuant to the Plan of Liquidation, any unpaid fee claims as of the date of the Initial Distribution, as well as expenses relating to the Company’s wind-down activities (“Wind-Down Expenses”) due as of such date, will be paid out of the Initial Distribution amount.  Under the Plan of Liquidation, after the Initial Distribution, no further cash distributions to stockholders of record as of August 30, 2016 will be made unless and until all claims of higher priority under the Bankruptcy Code have been fully satisfied and all objections with respect to such claims have been resolved, and all then-incurred Wind-Down Expenses have been paid. The Plan of Liquidation provides that, following final cash distributions, if any, to such stockholders, the equity interests of the Company’s stockholders will be cancelled. None of our creditors or stockholders has the opportunity to vote on the Plan of Liquidation, however creditors and stockholders may file objections to the Plan of Liquidation with the Bankruptcy Court by September 14, 2016.

A confirmation hearing (the “Hearing”) by the Bankruptcy Court on the Plan of Liquidation has been scheduled for September 21, 2016.  If the Bankruptcy Court enters an order at the conclusion of the Hearing confirming the Plan of Liquidation which thereafter becomes effective, we anticipate that the Initial Distribution will occur in the fourth quarter of 2016.  The anticipated amount of the Initial Distribution is subject to a number of factors including, without limitation: (a) any filed claims against us, which are due on or before August 30, 2016 (with the exception of government claims, which are due on or before October 31, 2016), (b) collection of accounts receivable, (c) the amount of claims against the Holdback (as such term is defined in the Sale Agreement), and (d) payment of our expenses (including without limitation legal, accounting and other administrative fees, and fees relating to the services of our Chief Restructuring Officer). The Company is unable to predict whether any cash distributions will occur in addition to the Initial Distribution, or the amount of any additional cash distribution that stockholders may receive.

On the effective date of the Plan of Liquidation, all assets of the Company will be transferred to the DNIB Liquidating Trust, to be administered by Geoffrey L. Berman, who will become the post-confirmation liquidating trustee, as further described in the Plan of Liquidation.

Financial Reporting Under Reorganization—The Unaudited Condensed Financial Statements have been prepared to reflect the application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, Reorganizations, which is a critical accounting policy. During the pendency of the Chapter 11 Cases, expenses, gains and losses

6


directly associated with reorganization proceeding are reported as Reorganization items, net in the accompanying Unaudited Consolidated Statement of Operations.

Liabilities Subject to Compromise—Liabilities subject to compromise (“LSTC”) in the Chapter 11 proceedings are distinguished from liabilities of non-filing entities, in our case those liabilities of BIND (RUS) LLC, fully secured liabilities not expected to be compromised (our debt with Hercules) and from post-petition liabilities in the accompanying Unaudited Consolidated Statements of Financial Position as of June 30, 2016. Amounts classified as liabilities subject to compromise, reflect the Company’s estimates of pre-petition liabilities and other expected allowed claims to be addressed in the Chapter 11 Cases and may be subject to future adjustment as the Chapter 11 Cases progress. Where there is uncertainty about whether a secured claim will be paid or impaired under the Chapter 11 proceedings, we would classify the entire amount of the claim as a liability as LSTC. The amount of LSTC would represent management’s estimate, where an estimate is determinable, of known or potential pre-petition claims to be addressed in connection with the bankruptcy proceedings. The value of LSTC remain subject to future adjustments, which may result from negotiations; actions of the Bankruptcy Court; disputed claims; rejection of contracts and unexpired leases; or other events. The following table presents LSTC as reported in the Unaudited Condensed Consolidated Balance Sheet as of June 30, 2016 (in thousands):  

 

 

 

June 30, 2016

 

Trade accounts payable and accrued liabilities

 

$

8,989

 

Total liabilities subject to compromise

 

$

8,989

 

 

Pre-Petition Claims—Holders of prepetition claims are required to file proofs of claims by the bar date established by the Bankruptcy Court. A bar date is the date by which certain claims against the Company must be filed if the claimants wish to receive any distribution in the Chapter 11 Cases pursuant to the Plan of Liquidation to be approved by the Bankruptcy Court. The Bankruptcy Court established a bar date of August 30, 2016 for general claims. The government bar date is set at October 31, 2016.

As of August 12, 2016, we have received $7.5 million in scheduled and asserted claims. As of June 30, 2016, none of the claims were reconciled to the amounts carried as liabilities in our balance sheet, however we are in the process of reconciling these claims to the amounts, which may require communication with the claimants to acquire additional information regarding their claims.

Executory Contracts and Unexpired Leases—Under the Bankruptcy Code, we have the right to assume, assume and assign, or reject certain executory contracts and unexpired leases, subject to the approval of the Bankruptcy Court and certain other conditions. Generally, the assumption of an executory contract or unexpired lease requires a debtor to satisfy pre-petition obligations under contracts, which may include payment of pre-petition liabilities in whole or in part. Rejection of an executory contract or unexpired lease is typically treated as a breach occurring as of the moment immediately preceding the Chapter 11 filing. Subject to certain exceptions, this rejection relieves the debtor from performing future obligations under the contract, but entitles the counter party to assert a pre-petition general unsecured claim for damages. Parties to executory contracts or unexpired leases rejected by a debtor may file proofs of claim against the debtor’s estate for rejection damages.

Since the Petition Date, Pfizer has assumed several of our executory contracts, but not all of them. As described in the Plan of Liquidation, the Company has determined to reject any executory contract not assumed by Pfizer.

3. Summary of Significant Accounting Policies

With the exception of the application of ASC 852, Reorganizations, there have been no material changes to the significant accounting policies previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

 

 

4. NET LOSS PER SHARE

Because we have reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share. The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding, because such securities had an antidilutive impact due to the losses reported:

 

 

 

As of  June 30,

 

 

 

2016

 

 

2015

 

Options to purchase common stock

 

 

3,329,812

 

 

 

3,144,970

 

Warrants to purchase common stock

 

 

2,399,117

 

 

 

2,399,117

 

 

 

7


5. REVENUE

Our revenue for the periods presented consists of the following (in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Government grants

 

$

 

 

$

200

 

 

$

 

 

$

200

 

Research and development agreements

 

 

4,483

 

 

 

2,324

 

 

 

6,356

 

 

 

6,708

 

Total

 

$

4,483

 

 

$

2,524

 

 

$

6,356

 

 

$

6,908

 

 

Research and Development and Collaboration Agreements—Revenue recognized for research and development agreements in the three and six months ended June 30, 2016 and 2015 related principally to our agreements with AstraZeneca AB, Pfizer Inc. and our 2014 agreement with F. Hoffmann-La Roche Ltd. Under these agreements, we perform research, development and manufacturing of ACCURINS® incorporating therapeutic payloads and ligands from such pharmaceutical and biotechnology companies’ proprietary product portfolios and provide the resulting data from such work to the pharmaceutical and biotechnology companies in exchange for reimbursement upfront fees, for research and development services, upfront fees and milestones.

AstraZeneca AB—In April 2013, we entered into a license agreement with AstraZeneca. Under the agreement, we granted to AstraZeneca a worldwide license to research, develop, manufacture and commercialize ACCURINS® incorporating a specified AstraZeneca product candidate for any therapeutic use in humans or animals. This license is exclusive with respect to our intellectual property rights that arise under this agreement or the feasibility study that preceded it, and non-exclusive with respect to all of our other intellectual property rights. We and AstraZeneca are each responsible for using commercially reasonable efforts to develop licensed products under a development plan that extends a previously completed feasibility study we conducted for AstraZeneca. AstraZeneca is required to pay for substantially all of our development costs. AstraZeneca is also solely responsible for, and must use commercially reasonable efforts in, obtaining all regulatory approvals for licensed products.

Under the agreement, we received an upfront payment of $4.0 million in 2013. We achieved a $1.0 million development milestone in March 2015. In November 2015, we earned a $4.0 million clinical milestone for dosing of the first patient in AstraZeneca’s ACCURINS® AZD2811 Phase 1 trial, which was recorded as revenue during the year ended December 31, 2015.  

We determined that the deliverables under the agreement include the license, the research and development services and participation in the Joint Steering Committee (“JSC”). The JSC deliverable ends at the same time as the research and development services. Our obligations related to the research and development services are to use commercially reasonable efforts to perform the research and development as set forth in the collaboration plan. We also determined that, pursuant to the accounting guidance governing revenue recognition on multiple element arrangements, the license and undelivered research and development services and participation in the JSC do not have standalone value due to the specialized nature of the research and development services to be provided by us. In addition, while AstraZeneca has the ability to grant sublicenses, it cannot sublicense all or substantially all of its rights under the agreement. The uniqueness of our research and development services and the limited sublicense right are indicators that standalone value is not present in the arrangement. Therefore the deliverables are not separable and, accordingly, the license and undelivered research and development and JSC services are being treated as a single unit of accounting. When multiple deliverables are accounted for as a single unit of accounting, we base our revenue recognition model on the final deliverable, since multiple deliverables are accounted for as a single unit of accounting. Under the agreement, the last deliverable to be completed is the research and development services and participation in the JSC which are expected to be completed in 2017. We are utilizing a proportional performance model to recognize revenue related to the upfront payment, achievement of non-substantive milestones and other research and development services (both internal effort as well as external costs). Revenue is recognized upon achievement for milestones that are determined to be substantive.

During the three months ended June 30, 2016 and 2015, we recognized revenue of $3.1 million and $1.5 million, respectively, and during the six months ended June 30, 2016 and 2015, we recognized revenue of $4.2 million and $5.0 million, respectively, related to the AstraZeneca license agreement.

On August 1, 2016, commensurate with the Closing (see Note 2 – Bankruptcy Related Disclosures), Pfizer was assigned all rights and interests under this license agreement.

Pfizer Inc. —In March 2013, we entered into a research, option and license agreement with Pfizer Inc. pursuant to which we granted to Pfizer two options to obtain an exclusive worldwide license to use, develop, manufacture and commercialize ACCURINS® incorporating two Pfizer compounds, for the treatment, prevention and/or diagnosis of any disease or medical condition in humans, except that the licensed rights exclude some vaccine products and products for the treatment of brain cancer.

8


Under the agreement, we received an upfront payment of $4.0 million and achieved a $1.0 million development milestone in December 2014. In September 2015, we received notification that Pfizer exercised its option to acquire an exclusive license for the development and commercialization of the first compound covered by the agreement. As a result of the option exercise, we received a $2.5 million option exercise fee, which is being recognized on a proportional basis. Pfizer also notified us that that it decided not to continue the development of the second compound covered by the agreement, and therefore would not exercise its option to acquire an exclusive license for the development and commercialization of the second compound.  

While we will continue to conduct chemistry, manufacturing and control activities, Pfizer is responsible for all further development and commercialization activities with respect to the licensed products covered by the option, and Pfizer is also solely responsible for obtaining all regulatory approvals for the applicable licensed products and conducting all communications with regulatory authorities.

Our obligations related to the research and development services are to use commercially reasonable efforts to perform the research and development including the chemistry, manufacturing and control activities as set forth in the collaboration plan. We considered our deliverables a single unit of accounting for revenue recognition purposes. The Pfizer option exercise resulted in a change in accounting estimate for our chemistry, manufacturing and control activities. The performance period is the expected period over which the services of the combined unit are performed, which we now expect will continue into 2018 and include manufacturing through a Phase 1 clinical trial. We are utilizing a proportional performance model to recognize revenue related to the upfront payment, the option fee, achievement of non-substantive milestones and other research and development services (both our internal effort as well as external costs). Revenue is recognized upon achievement for milestones that are determined to be substantive.

During the three months ended June 30, 2016 and 2015, we recognized revenue of $1.4 million and $0.7 million, respectively, and during the six months ended June 30, 2016 and 2015, we recognized revenue of $2.2 million and $1.4 million, respectively, related to the Pfizer research, option and license agreement.

On August 1, 2016, commensurate with the Closing (see Note 2 – Bankruptcy Related Disclosures), Pfizer was assigned all rights and interests under this license agreement.

F. Hoffmann-La Roche Ltd.—In June 2014, we entered into a research agreement with F. Hoffmann-La Roche Ltd. and Hoffmann-La Roche Inc., or Roche, to discover novel nanomedicines using ACCURINS® for the treatment of diseases in therapeutic areas outside of oncology. The research agreement focuses on combining BIND’s ACCURINS® technology with Roche’s proprietary therapeutic payloads and targeting ligands. Under the agreement, Roche paid us an immaterial, non-refundable upfront fee and, additionally, will compensate us for our research and development services up to a specified amount. The upfront fee, which was received by us in July 2014, will be creditable against any such fee negotiated in a future Roche agreement, if any. Therefore, we will not recognize revenue related to the upfront fee during the term of the research agreement. During the three months ended June 30, 2016 and 2015, we recognized revenue of $13 thousand and $116 thousand, respectively, and during the six months ended June 30, 2016 and 2015, we recognized revenue of $15 thousand and $297 thousand, respectively, for reimbursable research and development activities related to the Roche research agreement.

On August 1, 2016, commensurate with the Closing (see Note 2 – Bankruptcy Related Disclosures), Pfizer was assigned all rights and interests under this license agreement.

 

 

6. SHORT-TERM INVESTMENTS

Short-term investments represent holdings of available-for-sale marketable securities in accordance with our investment policy and cash management strategy. Short-term investments mature within 12 months from the balance sheet date. Our investments in marketable securities are recorded at fair value, with any unrealized gains and losses, net of taxes, reported as a component of stockholders’ equity until realized or until a determination is made that an other-than-temporary decline in market value has occurred. The cost of marketable securities sold is determined based on the specific identification method and any realized gains or losses on the sale of investments are reflected as a component of other income (expense), net.

9


The following is a summary of marketable securities (included in short-term investments in the Condensed Consolidated Balance Sheets) as of December 31, 2015 (in thousands):

 

 

 

Amortized

Cost

 

 

Gross Unrealized

Gains

 

 

Gross Unrealized

Losses

 

 

Fair Value

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities(1)

 

$

12,293

 

 

$

 

 

$

(5

)

 

$

12,288

 

Total

 

$

12,293

 

 

$

 

 

$

(5

)

 

$

12,288

 

 

(1)

U.S. government securities consist of U.S. treasuries, U.S. agency securities and U.S. government-sponsored enterprises

The contractual maturities of the marketable securities as of December 31, 2015 are all due within one year. We had no marketable securities as of June 30, 2016. We had no realized gains on our short-term investments for the three and six months ended June 30, 2016 and 2015, respectively. There were no other-than-temporary impairments recognized for the six months ended June 30, 2016 and 2015.

 

 

7. FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value are performed in a manner to maximize the use of observable inputs and minimize the use of unobservable inputs. The accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

Level 1 —Quoted prices in active markets that are accessible at the market date for identical unrestricted assets or liabilities.

Level 2 —Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs for which all significant inputs are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 —Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

We value our marketable securities utilizing third party pricing services. The pricing services use many observable market inputs to determine value, including benchmark yields, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, new issue data, monthly payment information and collateral performance. We validate the prices provided by our third party pricing services by understanding the models used, obtaining market values from other pricing sources, and confirming that those securities trade in active markets.

10


The following table provides the assets carried at fair value measured on a recurring basis as of June 30, 2016, and December 31, 2015 (in thousands):

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

Carrying

Value

 

 

Quoted Prices

in Active

Markets for

Identical Assets

(Level 1)

 

 

Significant

other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

June 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$

(140

)

 

$

 

 

$

 

 

$

(140

)

Total Liabilities

 

$

(140

)

 

$

 

 

$

 

 

$

(140

)

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

13,384

 

 

$

13,384

 

 

$

 

 

$

 

U.S. government securities

 

 

12,288

 

 

 

 

 

 

12,288

 

 

 

 

Total Assets

 

$

25,672

 

 

$

13,384

 

 

$

12,288

 

 

$

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

$

(2,894

)

 

$

 

 

$

 

 

$

(2,894

)

Total Liabilities

 

$

(2,894

)

 

$

 

 

$

 

 

$

(2,894

)

 

(1)

Money market funds are included within cash and cash equivalents and restricted cash in the accompanying Condensed Consolidated Balance Sheets.

Financial instruments, including cash equivalents, restricted cash, amounts due under collaboration agreements, accounts payable, and accrued expenses are carried in the Condensed Consolidated Financial Statements at amounts that approximate fair value at June 30, 2016 and December 31, 2015. Fair values are based on market prices and assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates, reflecting varying degrees of perceived risk.

Included in cash and cash equivalents as of June 30, 2016 and December 31, 2015, are money market fund investments of none and $12.8 million, and U.S. government securities of none and $6.3 million, respectively.

In February 2015, we completed an underwritten public offering of 3,739,130 units at the public offering price of $5.75 per unit. Each unit consisted of one share of our common stock and six-tenths (0.6) of a warrant to purchase one share of our common stock with an exercise price of $6.60 per share. These warrants are subject to revaluation at each balance sheet date, and any changes in fair value are recorded as a component of change in fair value of warrant liability, until the earlier of their exercise or expiration or upon the completion of a liquidation event.

The assumptions used in calculating the fair value of the warrants represent management’s best estimates. The warrants were valued at June 30, 2016 and December 31, 2015 using appropriate valuation models:

 

 

 

As of

 

 

 

June 30, 2016

 

 

December 31, 2015

 

Expected volatility

 

 

98

%

 

 

105

%

Risk-free interest rate

 

 

1.01

%

 

 

1.56

%

Expected dividend yield

 

 

%

 

 

%

Expected term (years)

 

 

3.59

 

 

 

4.10

 

 

11


The following table sets forth a summary of changes in the fair value of our common stock warrant liability, which represented a recurring measurement classified within Level 3 of the fair value hierarchy, wherein fair value was estimated using significant unobservable inputs (in thousands):

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2016

 

 

2015

 

2016

 

 

2015

 

Beginning balance

 

$

1,795

 

 

$

7,628

 

$

2,894

 

 

$

 

Issuance of warrants in connection with

  underwritten public offering

 

 

 

 

 

 

 

 

 

 

8,548

 

Change in fair value of warrant liability

 

 

(1,655

)

 

 

(269

)

 

(2,754

)

 

 

(1,189

)

Ending balance

 

$

140

 

 

$

7,359

 

$

140

 

 

$

7,359

 

 

 We evaluate transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between Level 1, Level 2 or Level 3 during the six months ended June 30, 2016.

 

 

8. ACCRUED EXPENSES

Accrued expenses as of June 30, 2016 and December 31, 2015 consisted of the following (in thousands):

 

 

 

As of

 

 

 

June 30, 2016

 

 

December 31, 2015

 

Accrued compensation and benefits

 

$

338

 

 

$

2,101

 

Deferred rent, current portion

 

 

590

 

 

 

680

 

Accrued clinical trial costs

 

 

547

 

 

 

377

 

Accrued manufacturing costs

 

 

237

 

 

 

539

 

Accrued legal

 

 

1,554

 

 

 

197

 

Other accrued expenses

 

 

1,087

 

 

 

1,818

 

Total accrued expenses

 

$

4,353

 

 

$

5,712

 

 

 

 

9. LONG-TERM DEBT

In June 2013, we entered into an amended and restated credit facility with Hercules as lender, pursuant to which we borrowed an aggregate principal amount of $4.5 million in term loans. In January 2015, we entered into an amendment to the amended and restated credit facility (“New Term Loan”) with Hercules. The January 2015 amendment provided us with a term loan in an amount equal to $15.0 million, a portion of which was used to repay our then-existing term loan with Hercules in the aggregate amount of $3.1 million, and the remainder of which was designated to be used for general corporate purposes. Substantially all our assets serve as collateral for our New Term Loan.

The principal balance of the New Term Loan bears interest at a floating per annum rate equal to 8.35% plus the prime rate less 3.25% (with a minimum rate of 8.35%). The interest rate at June 30, 2016 was 8.6%. The New Term Loan matures on July 2, 2018 (the “Maturity Date”) and we made interest-only payments through the remainder of 2015. Beginning on January 1, 2016, we are paying in equal monthly installments of principal and interest.

In connection with the closing of the amendment in January 2015, we also paid Hercules a facility charge of approximately $0.2 million. Furthermore, on the earliest to occur of (i) the Maturity Date, (ii) the date that we prepay the New Term Loan, or (iii) the date that the New Term Loan becomes due and payable, we agreed to pay Hercules an end of term charge of approximately $0.8 million.

12


In connection with the closing of the amendment in January 2015, the Company and Hercules entered into a Warrant Agreement (the “Warrant”), pursuant to which Hercules, as warrant holder, has the right to purchase 81,227 shares of our common stock at an exercise price of $5.54. The Warrant is exercisable beginning on the date of issuance and expires five years from that date. On the issuance date, the warrants were valued using the Black-Scholes option pricing model with the following assumptions: volatility of 98%, expected term of 3.6 years, risk-free interest rate of 1.01%, and a zero dividend yield. The Warrant fair value of $0.4 million and the facility charge of approximately $0.2 million have been recorded as a debt discount. As of June 30, 2016, we accelerated the amortization of the debt discount and fully amortized the remaining balance due to the notice of default.

On April 26, 2016, the Company received a notice (the “Notice”) from Hercules asserting that an event of default had occurred under the credit facility. The delivery of the Notice followed several weeks of discussions between the Company and Hercules to attempt to restructure the debt outstanding under the credit facility, which did not ultimately result in an agreement. After receipt of the Notice, the Company and Hercules continued to attempt to negotiate a restructuring, however, it was determined that the terms proposed by Hercules, including immediate repayment of a substantial portion of the outstanding principal balance of the credit facility, were not in our best interests. Hercules alleged in the Notice that the Company failed to deliver a control agreement to Hercules with respect to one of our investment accounts in violation of the terms of the credit facility and that such violation constitutes an event of default under the credit facility. In the Notice, Hercules stated that it was accelerating all obligations under the credit facility and demanded immediate payment in full of the outstanding balance of the credit facility, together with accrued interest, attorneys’ fees, late fees and costs of collection, in an amount equal to approximately $14.5 million. The Notice sought payment in full of such amount by April 29, 2016 and stated that, if the outstanding balance is not paid by such date, interest will continue to accrue at the rate of approximately $3,166 per day. In the Notice, Hercules reserved all further rights and remedies under the credit facility and the related security documents. As a result of the foregoing, the entire balance of debt outstanding under the credit facility has been classified as a current liability in the accompanying Condensed Consolidated Balance Sheet as of June 30, 2016.  

On May 19, 2016, the Company reached an agreement with Hercules for the use of cash collateral through July 8, 2016 subject to certain agreed upon terms and conditions. As part of the agreement, which was approved by the Bankruptcy Court, the Company repaid $4.0 million on the existing principal balance of our term loan with Hercules, as an adequate protection action, on May 20, 2016. The Company had $8.3 million in debt outstanding under the credit facility as of June 30, 2016.  Interest expense related to the Hercules term loan in the amount of $0.5 million and $1.3 million was recorded for the three and six months ended June 30, 2016, respectively, of which $0.4 million was accelerated due to the default under the credit facility in the three months ended June 30, 2016. Also, due to the New Term Loan becoming due and payable, the Company fully accrued the end of term charge of $0.8 million to interest expense for the six months ended June 30, 2016.

On August 1, 2016, immediately following the Closing, we paid Hercules $9.1 million in full satisfaction of our obligations under our credit facility (including principal, interest and fees).          

 

 

10. RESTRUCTURING

We implemented a restructuring plan in April 2016, which consisted of a workforce reduction principally designed to streamline operations and reduce our operating expenses, which was the result of a shift in research and development strategy (the “April 2016 Plan”).

As a result of the Chapter 11 Filings, we initiated an additional restructuring plan (the “August 2016 Plan”), which resulted in a workforce reduction of a substantial number of our remaining employees in August 2016 (see Note 2 - Bankruptcy Related Disclosures). As a result of the Section 363 Auction and the Closing of the Acquisition, the August 2016 Plan is now a plan of liquidation.

The following table summarizes the number of employees reduced, the related severance charges and the time period during which payments were substantially completed, or are expected to be completed by, during the fiscal year 2016 (in thousands):

 

 

Workforce Reductions

 

 

 

 

 

Headcount Reductions

 

 

Total

 

 

(Expected) Date Payments Substantially Complete by

April  2016 Plan

 

 

38

 

 

$

800

 

 

Q2 2016

August 2016 Plan

 

 

36

 

 

 

3,425

 

 

Q3 2016

 

Following the completion of the August 2016 Plan, which is expected to occur by the end of the third quarter of 2016, we expect to have no employees.

 

13


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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including without limitation information with respect to our Chapter 11 proceedings; planned restructuring actions; plans to liquidate the Company; anticipated sources of cash; and expectations regarding cash distributions to stockholders in connection with liquidation, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s current expectations. These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed under the caption “Risk Factors” in this Quarterly Report on Form 10-Q. These and other factors could cause actual results to differ materially from those indicated by the forward-looking statements made in this Quarterly Report on Form 10‑Q.

Recent Developments

Chapter 11 Proceedings

On May 1, 2016, DNIB Unwind, Inc. (“DNIB,” the “Company,” “we,” “us,” or “our”) filed a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”). The Chapter 11 filing constituted an event of default and automatic acceleration under the agreements governing our credit facility with Hercules Technology III, L.P. (“Hercules”) as lender. The Chapter 11 case (the “DNIB Chapter 11 Case”) has been assigned Case No. 16-11084. Our subsidiary DNIB Subsidiary Corporation also filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court on May 1, 2016 (together with the DNIB Chapter 11 Case, the “Chapter 11 Cases”). Our other subsidiary, BIND (RUS) LLC, did not file a bankruptcy petition.

During the pendency of the Chapter 11 Cases, we intend to continue to operate as a “debtor-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

On July 1, 2016, we entered into an asset purchase agreement (the “Stalking Horse Agreement”) with Pfizer Inc. (“Pfizer”), pursuant to which Pfizer agreed to acquire substantially all of our assets and assume certain of our liabilities (the “Acquisition”) for an aggregate purchase price of $19.75 million. We filed a motion with the Bankruptcy Court (the “Stalking Horse Motion”) seeking Bankruptcy Court approval of, among other things, the Stalking Horse Agreement (or any other purchase agreement between us and the prevailing bidder at auction), the sale contemplated by the Stalking Horse Agreement (or a sale to the prevailing bidder at auction pursuant to an asset purchase agreement with such prevailing bidder) and procedures to govern the bidding and auction process.

On July 25 and 26, 2016, we held an auction pursuant to Section 363 of the Bankruptcy Code (the “Auction”) at which Pfizer submitted the highest and best offer for the purchase of substantially all of our assets and the assumption of certain of our liabilities. On July 26, 2016, following the Auction, we amended the Stalking Horse Agreement (as amended, the “Sale Agreement”) to, among other things, increase the purchase price of the Acquisition to $40 million, increase the number of contracts assigned to Pfizer and include additional liabilities assumed by Pfizer. On July 27, 2016, the Bankruptcy Court, among other things, approved the Sale Agreement and authorized our entry into and performance under the Sale Agreement.    

On August 1, 2016, the acquisition closed (the “Closing”), whereby we completed the sale of substantially all of our assets, including without limitation our intellectual property rights relating to our product candidates, and assigned to Pfizer our rights and interests under our collaboration agreements. After deducting the amount of the holdback (as defined in the Sale Agreement), which is being held in escrow pursuant to the terms of the Sale Agreement until December 1, 2016, we received total cash consideration of $38.025 million at the Closing. Our receipt of some portion, or the entire amount of the holdback depends on the claims, if any, asserted by Pfizer against us during the holdback period (as defined in the Sale Agreement). On August 1, 2016, immediately following the Closing, we paid Hercules $9.1 million in full satisfaction of our obligations under our credit facility (including principal, interest and fees), and we paid $5.0 million in satisfaction of certain claims.

We have no remaining operations and are currently in the process of winding up the Company in preparation for liquidation. Our assets, including our cash, are subject to the jurisdiction of the Bankruptcy Court. As of August 15, 2016, we have approximately $28.0 million in cash and cash equivalents and $5.2 million in other assets, consisting of accounts receivable and a security deposit we are entitled to receive (and not including the $1.975 million Holdback held in escrow pursuant to the Sale Agreement).

14


On the Closing date, our common stock was delisted from The NASDAQ Global Select Market, with suspension of trading occurring at the opening of trading on August 1, 2016.  In addition, Concurrently with the Closing, we filed a certificate of amendment to our Restated Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of the State of the State of Delaware (the “Delaware Secretary”) to change the name of the Company from “BIND Therapeutics, Inc. to “DNIB Unwind, Inc.”, in accordance with the terms of the Sale Agreement. The amendment became effective upon filing the Certificate of Amendment with the Delaware Secretary.

Plan of Liquidation—On August 15, 2016, the Company filed its Plan of Liquidation with the Bankruptcy Court. The Plan of Liquidation generally provides for the payment in full of timely filed and undisputed claims held by the Company’s secured and unsecured creditors (“Creditors’ Claims”), with secured creditors’ claims to be paid in full in cash or otherwise as permissible by the Bankruptcy Code, and unsecured creditors’ claims to be paid in full in cash or otherwise as the holders of such claims agree. The Plan of Liquidation further provides for an initial cash distribution, within 90 days of the effective date of the Plan of Liquidation, to the Company’ stockholders of record on August 30, 2016 in the aggregate amount of $8.0 million (the “Initial Distribution”); provided, however, that the Initial Distribution will not be made until the satisfaction in full of Creditors’ Claims and certain other claims entitled to priority under Section 507 of the Bankruptcy Code, and the payment in full of the Company’s professional fees and expenses relating to the Chapter 11 Cases. In addition, pursuant to the Plan of Liquidation, any unpaid fee claims as of the date of the Initial Distribution, as well as expenses relating to the Company’s wind-down activities (“Wind-Down Expenses”) due as of such date, will be paid out of the Initial Distribution amount.  Under the Plan of Liquidation, after the Initial Distribution, no further cash distributions to stockholders of record as of August 30, 2016 will be made unless and until all claims of higher priority under the Bankruptcy Code have been fully satisfied and all objections with respect to such claims have been resolved, and all then-incurred Wind-Down Expenses have been paid. The Plan of Liquidation provides that, following final cash distributions, if any, to such stockholders, the equity interests of the Company’s stockholders will be cancelled. None of our creditors or stockholders has the opportunity to vote on the Plan of Liquidation, however creditors and stockholders may file objections to the Plan of Liquidation with the Bankruptcy Court by September 14, 2016.

A confirmation hearing (the “Hearing”) by the Bankruptcy Court on the Plan of Liquidation has been scheduled for September 21, 2016.  If the Bankruptcy Court enters a confirmation order at the conclusion of the Hearing and the Plan of Liquidation becomes effective, we anticipate that the Initial Distribution will occur in the fourth quarter of 2016.  The anticipated amount of the Initial Distribution is subject to a number of factors including, without limitation: (a) any filed claims against us, which are due on or before August 30, 2016 (with the exception of government claims, which are due on or before October 31, 2016), (b) collection of accounts receivable, (c) the amount of claims against the Holdback (as such term is defined in the Sale Agreement), and (d) payment of our expenses (including without limitation legal, accounting and other administrative fees, and fees relating to the services of our Chief Restructuring Officer). The Company is unable to predict whether any cash distributions will occur in addition to the Initial Distribution, or the amount of any additional cash distribution that stockholders may receive.

On the effective date of the Plan of Liquidation, all assets of the Company will be transferred to the DNIB Liquidating Trust, to be administered by Geoffrey L. Berman, the post-confirmation liquidating trustee, as further described in the Plan of Liquidation.

As of August 12, 2016, we have received $7.5 million in scheduled and asserted claims. As of June 30, 2016, none of the claims were reconciled to the amounts carried as liabilities in our balance sheet, however we are in the process of reconciling these claims to the amounts, which may require communication with the claimants to acquire additional information regarding their claims. As of August 12, 2016, we have paid or cured $5.1 million of these reported claims.

 

Restructuring Actions

We implemented a restructuring plan in April 2016, which consisted of a workforce reduction principally designed to streamline operations and reduce our operating expenses, which was the result of a shift in research and development strategy (the “April 2016 Plan”).

As a result of the Chapter 11 Filings, we initiated an additional restructuring plan (the “August 2016 Plan”), which resulted in a workforce reduction of a substantial number of our remaining employees in August 2016 (see Note 2 - Bankruptcy Related Disclosures). As a result of the Section 363 Auction and the Closing of the Acquisition, the August 2016 Plan is now a plan of liquidation.

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The following table summarizes the number of employees reduced, the related severance charges and the time period during which payments were substantially completed, or are expected to be completed by, during the fiscal year 2016 (dollars in thousands):

 

 

Workforce Reductions

 

 

 

 

 

Headcount Reductions

 

 

Total

 

 

(Expected) Date Payments Substantially Complete by

April  2016 Plan

 

 

38

 

 

$

800

 

 

Q2 2016

August 2016 Plan

 

 

36

 

 

 

3,425

 

 

Q3 2016

 

Following the completion of the August 2016 Plan, which is expected to occur by the end of the third quarter of 2016, we expect to have no employees.

Management and Board Changes

On July 24, 2016, our Board of Directors (a) terminated Andrew Hirsch as President, Chief Executive Officer, principal financial officer and principal accounting officer of the Company and (b) appointed Geoffrey L. Berman as Chief Restructuring Officer of the Company, in each case, effective upon the closing of the Acquisition or the sale of substantially all of the Company’s assets to an overbidder. As of August 1, 2016, Geoffrey L. Berman is the sole officer of the Company.

In addition, on July 24, 2016, the Board appointed Geoffrey L. Berman as the sole director of the Company, effective upon entry of an order by the Bankruptcy Court confirming the Company's Plan of Liquidation.  On July 27, 2016, each of the Company’s current directors, Andrew Hirsch, Peter Barton Hutt, Robert Langer, Sc.D., Daniel Lynch, Charles Rowland, Jr., Eric Rowinsky, M.D. and Arthur Tzianabos, Ph.D., resigned as members of the Board and any Board committee or committees on which he serves, effective upon entry of an order by the Bankruptcy Court confirming the Company's Plan of Liquidation.  

The following discussion should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto in Item 1, Part I of this Quarterly Report on Form 10-Q, and the other transactions, events, and trends discussed in “Risk Factors” in Item 1A, Part II of this Quarterly Report on Form 10-Q.

The Condensed Consolidated Financial Statements and following information include the accounts of DNIB UNWIND, Inc. and our wholly owned subsidiaries, BIND (RUS), LLC, a Russian limited liability company, and DNIB Subsidiary Corporation, a Massachusetts securities corporation (f/k/a BIND Biosciences Security Corporation). All intercompany accounts and transactions have been eliminated.

Financial Overview

Revenue

Our revenue consists of collaboration revenue, which may include amounts recognized related to upfront payments for licenses or options to obtain licenses in the future, research and development funding and milestone payments earned under collaboration and license agreements with our collaborators. In addition, we earn revenue under the terms of government contracts which require the performance of certain research and development activities. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the timing and amount of license fees, research and development reimbursements, payments for manufacturing services, and milestone and other payments from collaborations. We do not expect to generate revenue from product sales for at least the next several years. If we or our collaborators fail to complete the development of our drug candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

Research and Development

Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for full-time research and development employees, an allocation of facilities expenses, overhead expenses, manufacturing process-development and scale-up activities, clinical trial and related clinical manufacturing expenses, fees paid to clinical research organizations, or CROs, and investigative sites, payments to universities under our license agreements and other outside expenses. In the early phases of development, our research and development costs are often devoted to expanding our product platform and are not necessarily allocable to a specific product candidate.

Our research and development expenses are made up of external costs and internal costs, which are primarily compensation expenses for our full-time research and development employees and related expenses. Beginning in January 2013, we implemented a

16


project-based time reporting system so that we can allocate internal costs on a project-by-project basis. June 30, 2016 We expense research and development costs as incurred.

General and Administrative

General and administrative expense primarily consists of compensation of personnel in executive, finance, accounting, legal, corporate communications, corporate development, human resources and early commercial functions. Other costs include facilities costs not otherwise included in research and development expense, and professional fees for legal and accounting services. General and administrative expense also consists of the costs of maintaining our intellectual property portfolio.

Change in Fair Value of Warrant Liability

Change in fair value of warrant liability consists of changes in fair value of our warrants issued in our February 2015 underwritten public offering. The warrants contain weighted-average anti-dilution protection upon the issuance of any common stock, securities convertible into common stock or certain other issuances at a price below the then-existing exercise price of the warrants, with certain exceptions, including but not limited to securities issued pursuant to equity compensation plans or arrangements, currently outstanding warrants, securities issued pursuant to shareholder rights plans, securities issued pursuant to certain strategic transactions or financings, and the first $30 million of securities sold under our at-the-market facility with Cowen & Company, LLC that would otherwise cause an adjustment. The warrants are being recorded at fair value on our Condensed Consolidated Balance Sheets as a liability, and changes in fair value are included in change in fair value of warrant liability on our Condensed Consolidated Statements of Operations.

Reorganization Items, net

For the three and six months ended June 30, 2016, the Company incurred $2.4 million in reorganization items. The costs represent legal and professional costs related to the Company’s Chapter 11 Filing and restructuring plan. There were no reorganization items for the same periods in 2015.

Interest Expense

Interest expense consists of interest expense on our amounts borrowed under our credit facility with Hercules as lender.

Other Income (Expense), net

Other income (expense) consists of foreign currency transaction gains and losses and interest income. The functional currency of our Russian subsidiary is the ruble. Accordingly, the amounts denominated in U.S. dollars are subject to transaction gains and losses, which are reported in our Consolidated Statement of Operations. Interest income consists of interest income earned on our cash, cash equivalents and short-term investments.

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements, as well as the reported revenues and expenses during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.

The critical accounting policies that we believe impact significant judgments and estimates used in the preparation of our financial statements presented in this Quarterly Report on Form 10-Q are described in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 15, 2016. Apart from the below, there have been no material changes to our critical accounting policies through June 30, 2016 from those discussed in our Annual Report on Form 10-K filed on March 15, 2016.

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The Unaudited Condensed Financial Statements have been prepared to reflect the application of Financial Accounting Standards Board, or “FASB” Accounting Standards Codification, or “ASC” 852, Reorganizations, which is a critical accounting policy. During the pendency of the Chapter 11 Cases, expenses, gains and losses directly associated with reorganization proceedings are reported as Reorganization items, net in the accompanying unaudited condensed consolidated statement of operations. In addition, liabilities subject to compromise in the Chapter 11 proceedings are distinguished from liabilities of non-filing entities, fully secured liabilities not expected to be compromised and from post-petition liabilities in the accompanying unaudited condensed consolidated balance sheet as of June 30, 2016. Where there is uncertainty about whether a secured claim will be paid or impaired under the Chapter 11 proceedings, we have classified the entire amount of the claim as a liability subject to compromise. The amount of liabilities subject to compromise represents our estimate, where an estimate is determinable, of known or potential pre-petition claims to be addressed in connection with the bankruptcy proceedings. Such liabilities are reported at our current estimate, where an estimate is determinable, of the allowed claim amounts, even though the claims may be settled for different amounts. These claims remain subject to future adjustments, which may result from: negotiations; actions of the Bankruptcy Court; disputed claims; rejection of contracts and unexpired leases; the determination as to the value of any collateral securing claims; proofs of claims; or other events.

Results of Operations for the three and six months ended June 30, 2016 and 2015

Results of Operations

The following table summarizes our results of operations for the three and six months ended June 30, 2016 and 2015, in thousands, together with the change in each item as a percentage.

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2016

 

 

%

change

 

 

2015

 

 

2016

 

 

%

change

 

 

2015

 

Revenue

 

$

4,483

 

 

 

78

%

 

$

2,524

 

 

$

6,356

 

 

 

(8

%)

 

$

6,908

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

8,527

 

 

 

3

%

 

 

8,299

 

 

 

19,764

 

 

 

20

%

 

 

16,479

 

General and administrative

 

 

2,932

 

 

 

(33

%)

 

 

4,370

 

 

 

6,506

 

 

 

(29

%)

 

 

9,133

 

Restructuring charges

 

 

800

 

 

 

100

%

 

 

-

 

 

 

800

 

 

 

100

%

 

 

 

Total operating expenses

 

 

12,259

 

 

 

(3

%)

 

 

12,669

 

 

 

27,070

 

 

 

6

%

 

 

25,612

 

Loss from operations

 

 

(7,776

)

 

 

(23

%)

 

 

(10,145

)

 

 

(20,714

)

 

 

11

%

 

 

(18,704

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

1,655

 

 

 

515

%

 

 

269

 

 

 

2,754

 

 

 

132

%

 

 

1,189

 

Reorganization items, net

 

 

(2,366

)

 

 

100

%

 

 

 

 

 

(2,366

)

 

 

100

%

 

 

 

Interest expense

 

 

(488

)

 

 

3

%

 

 

(472

)

 

 

(1,310

)

 

 

52

%

 

 

(862

)

Other income (expense), net

 

 

(51

)

 

 

(59

%)

 

 

(124

)

 

 

(53

)

 

 

(87

%)

 

 

(408

)

Total other income (expense)

 

 

(1,250

)

 

 

282

%

 

 

(327

)

 

 

(975

)

 

 

1104

%

 

 

(81

)

Net loss

 

$

(9,026

)

 

 

(14

%)

 

$

(10,472

)