Edge Therapeutics, Inc.
|
(Exact name of registrant as specified in its charter)
|
Delaware
|
26-4231384
|
|
(State or other jurisdiction of incorporation or organization)
|
(IRS Employer Identification No.)
|
300 Connell Drive, Suite 4000, Berkeley Heights, NJ 07922
|
(Address of principal executive offices)
|
(800) 208-3343
|
(Registrant’s telephone number)
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
Non-accelerated filer ☐
|
Smaller Reporting Company ☒
|
Emerging growth company ☒
|
PAGE
|
||
PART I
|
||
Item 1
|
4
|
|
Item 1A
|
8
|
|
Item 1B
|
28
|
|
Item 2
|
28
|
|
Item 3
|
28
|
|
Item 4
|
28
|
|
PART II
|
||
Item 5
|
29
|
|
Item 6
|
Selected Financial Data |
29 |
Item 7
|
30 |
|
Item 8
|
38 |
|
Item 9
|
38
|
|
Item 9A
|
38
|
|
Item 9B
|
38
|
|
PART III
|
||
Item 10
|
39
|
|
Item 11
|
45
|
|
Item 12
|
51
|
|
Item 13
|
52
|
|
Item 14
|
53
|
|
PART IV
|
||
Item 15
|
55
|
|
Item 16
|
55
|
|
59
|
● |
the expected benefits of and potential value created by the proposed merger among Edge Therapeutics, Inc., a Delaware corporation, or Edge, Echos Merger Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of Edge, or Merger Sub, and PDS Biotechnology Corporation, a Delaware corporation, or PDS, for the stockholders of Edge;
|
● |
the likelihood of the satisfaction of certain conditions to the completion of the merger and whether and when the merger will be consummated;
|
● |
Edge’s ability to control and correctly estimate its operating expenses and its expenses associated with the merger;
|
● |
the plans, strategies and objectives of management for future operations, including the execution of integration plans and the anticipated timing of filings;
|
● |
the plans to develop and commercialize additional products;
|
● |
the attraction and retention of highly qualified personnel;
|
● |
the ability to protect and enhance the combined company’s products and intellectual property;
|
● |
developments and projections relating to the combined company’s competitors or industry;
|
● |
the combined company’s financial performance;
|
● |
expectations concerning Edge’s or PDS’s relationships and actions with third parties;
|
● |
future regulatory, judicial and legislative changes in Edge’s or PDS’s industry; and
|
● |
other risks and uncertainties, including those listed under Item 1A. Risk Factors.
|
● |
Pursue another strategic transaction similar to the merger. Edge may resume its process of evaluating other companies interested in pursuing a strategic transaction with
Edge and, if a candidate is identified, focus its attention on negotiating and completing such a transaction with such candidate.
|
● |
Dissolve and liquidate its assets. If Edge is unable, or does not believe that it is able, to find a suitable candidate for another strategic transaction, Edge may dissolve
and liquidate its assets. In the event of dissolution, Edge would be required to pay all of its debts and contractual obligations and to set aside certain reserves for potential future claims. If Edge dissolves and liquidates its
assets, there can be no assurance as to the amount or timing of available cash that will remain for distribution to Edge’s stockholders after paying Edge’ debts and other obligations and setting aside funds for its reserves.
|
● |
completion of preclinical laboratory tests, animal trials and formulation trials conducted according to Good Laboratory Practices, animal welfare laws and other applicable
regulations;
|
● |
submission to the FDA of an Investigational New Drug, or IND, application which must become effective before clinical trials (trials in human subjects) in the United States
may begin, obtaining similar authorizations in other jurisdictions where clinical research will be conducted and maintaining these authorizations on a continuing basis throughout the time that trials are performed and new data are
collected;
|
● |
performance of adequate and well-controlled clinical trials according to Good Clinical Practices to demonstrate whether a proposed drug is safe and effective for its
proposed intended use;
|
● |
preparation and submission to the FDA of a marketing authorization application, such as a new drug application, or NDA, and submitting similar marketing authorization
applications in other jurisdictions where commercialization will be pursued;
|
● |
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product will be produced to assess compliance with cGMP to assure that
the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity; and
|
● |
FDA review and approval of the NDA or other marketing authorization application.
|
● |
if the Merger Agreement is terminated under certain circumstances and certain events occur, Edge will be required to pay PDS a termination fee of $1.75 million;
|
● |
the price of Edge stock may decline and remain volatile; and
|
● |
costs related to the merger, such as legal, accounting and investment banking fees which Edge and PDS estimate will total approximately $5.3 million, of which $3.5 million must be paid even if the merger is not completed.
|
● |
any effect, change, event, circumstance or development in general economic or business conditions generally affecting the industries in which PDS or Edge operate;
|
● |
any act of war, armed hostilities or terrorism;
|
● |
any changes in financial, banking or securities markets;
|
● |
the taking of any action required to be taken by the Merger Agreement;
|
● |
any changes in accounting requirements or principles or any change in applicable laws, rules or regulations or the interpretation thereof;
|
● |
any effect resulting from the announcement or pendency of the merger or any related transactions;
|
● |
with respect to Edge, any change in the stock price or trading volume of Edge common stock; or
|
● |
with respect to Edge, any clinical trial programs or studies, including any adverse data, event or outcome arising out of or related to any such programs or studies.
|
● |
investors react negatively to the prospects of the combined company’s business and prospects from the merger;
|
● |
the effect of the merger on the combined company’s business and prospects is not consistent with the expectations of financial or industry analysts; or
|
● |
the combined company does not achieve the perceived benefits of the merger as rapidly or to the extent anticipated by financial or industry analysts.
|
● |
the attention of Edge’s management may be directed toward the closing of the merger and related matters and may be diverted from the day-to-day business operations; and
|
● |
third parties may seek to terminate or renegotiate their relationships with Edge as a result of the merger, whether pursuant to the terms of their existing agreements with
Edge or otherwise.
|
● |
Edge has incurred and expects to continue to incur significant expenses related to the proposed merger even if the merger is not consummated;
|
● |
Edge could be obligated to pay PDS a termination fee of up to $1.75 million under certain circumstances pursuant to the Merger Agreement;
|
● |
the market price of Edge common stock may decline to the extent that the current market price reflects a market assumption that the proposed merger will be completed; and
|
● |
Edge may not be able to pursue an alternate merger transaction if the proposed merger with PDS is not completed.
|
● |
providing adequate and well-controlled data that the product candidate is safe and effective and shows a significant benefit over the active comparator in patients for the
intended indication;
|
● |
demonstrating that the product candidate formulation is reproducible and can meet the relevant release specifications for each market Edge intends to commercialize in; and
|
● |
completing the development and scale-up to permit manufacture of Edge’s product candidates in commercial quantities and at acceptable prices.
|
● |
disagreement with, or disapproval of, the design of, procedures for, or implementation of, clinical trials;
|
● |
the inability to comply with conditions imposed by a regulatory authority regarding the scope or design of a clinical trial;
|
● |
disagreement with the sufficiency of the final content and data included in a marketing application;
|
● |
feedback from the FDA or a comparable foreign regulatory authority on results from earlier stage or concurrent preclinical and clinical studies, that might require
modification to the protocol;
|
● |
a decision by the FDA or a comparable foreign regulatory authority to suspend or terminate clinical trials at any time for safety issues or for any other reason;
|
● |
challenges in meeting regulatory requirements to commence clinical trials in countries outside the United States;
|
● |
failure to conduct the trial in accordance with regulatory requirements;
|
● |
failure to demonstrate that the product candidate provides an overall benefit to risk or significant enough improvement over the comparator in the proposed indication;
|
● |
failure of the product candidate to demonstrate efficacy at the level of statistical significance required for approval;
|
● |
a negative interpretation of the data from preclinical studies or clinical trials;
|
● |
deficiencies in the manufacturing processes or failure of third party manufacturing facilities to effectively and consistently manufacture product or to pass FDA
pre-approval facility inspection;
|
● |
failure to demonstrate adequate and reproducible product stability to support product commercialization;
|
● |
failure to adequately demonstrate process performance qualification prior to product commercialization;
|
● |
inability to validate analytical and microbiological methods consistent with industry and government agency expectations; or
|
● |
changes in governmental regulations or administrative actions.
|
● |
regulatory actions with respect to Edge;
|
● |
the recruitment or departure of key personnel;
|
● |
announcements by Edge or Edge’s competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capital commitments;
|
● |
regulatory or legal developments in the United States and other countries;
|
● |
developments or disputes concerning patent applications, issued/granted patents or other proprietary rights;
|
● |
the level of Edge’s expenses;
|
● |
actual or anticipated changes in estimates as to financial results;
|
● |
variations in Edge’s financial results or those of companies that are perceived to be similar to Edge;
|
● |
fluctuations in the valuation of companies perceived by investors to be comparable to Edge;
|
● |
share price and volume fluctuations attributable to inconsistent trading volume levels of Edge’s shares;
|
● |
announcement or expectation of additional financing efforts;
|
● |
sales of Edge’s common stock by Edge, Edge’s insiders or Edge’s other stockholders;
|
● |
market conditions in the pharmaceutical and biotechnology sectors; and
|
● |
general economic, industry and market conditions.
|
● |
authorizing the issuance of “blank check” preferred stock, the terms of which may be established and shares of which may be issued without stockholder approval;
|
● |
prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect director candidates;
|
● |
prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of Edge’s stockholders;
|
● |
eliminating the ability of stockholders to call a special meeting of stockholders;
|
● |
establishing a staggered board of directors; and
|
● |
establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted upon at stockholder meetings.
|
● |
the ability of the combined company or its partners to develop product candidates and conduct clinical trials that demonstrate such product candidates are safe and
effective;
|
● |
the ability of the combined company or its partners to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals;
|
● |
failure of any of the combined company’s product candidates to demonstrate safety and efficacy, receive regulatory approval and achieve commercial success;
|
● |
failure by the combined company to maintain its existing third-party license, manufacturing and supply agreements;
|
● |
failure by the combined company or its licensors to prosecute, maintain, or enforce its intellectual property rights;
|
● |
changes in laws or regulations applicable to the combined company’s product candidates;
|
● |
any inability to obtain adequate supply of product candidates or the inability to do so at acceptable prices;
|
● |
adverse regulatory authority decisions;
|
● |
introduction of new or competing products by its competitors;
|
● |
failure to meet or exceed financial and development projections the combined company may provide to the public;
|
● |
the perception of the pharmaceutical industry by the public, legislatures, regulators and the investment community;
|
● |
announcements of significant acquisitions, strategic partnerships, joint ventures, or capital commitments by the combined company or its competitors;
|
● |
disputes or other developments relating to proprietary rights, including patents, litigation matters, and the combined company’s ability to obtain intellectual property
protection for its technologies;
|
● |
additions or departures of key personnel;
|
● |
significant lawsuits, including intellectual property or stockholder litigation;
|
● |
if securities or industry analysts do not publish research or reports about the combined company, or if they issue an adverse or misleading opinions regarding its business
and stock;
|
● |
changes in the market valuations of similar companies;
|
● |
general market or macroeconomic conditions;
|
● |
sales of its common stock by the combined company or its stockholders in the future;
|
● |
trading volume of the combined company’s common stock;
|
● |
adverse publicity relating to the combined company’s markets generally, including with respect to other products and potential products in such markets;
|
● |
changes in the structure of health care payment systems; and
|
● |
period-to-period fluctuations in the combined company’s financial results.
|
Year Ended December 31, 2018
|
High
|
Low
|
||||||
Fourth Quarter
|
$
|
1.09
|
$
|
0.31
|
||||
Third Quarter
|
$
|
1.10
|
$
|
0.70
|
||||
Second Quarter
|
$
|
1.28
|
$
|
0.87
|
||||
First Quarter
|
$
|
17.47
|
$
|
1.18
|
||||
Year Ended December 31, 2017
|
High
|
Low
|
||||||
Fourth Quarter
|
$
|
11.16
|
$
|
9.07
|
||||
Third Quarter
|
$
|
11.51
|
$
|
9.20
|
||||
Second Quarter
|
$
|
10.72
|
$
|
8.81
|
||||
First Quarter
|
$
|
12.99
|
$
|
7.62
|
|
(A)
|
(B)
|
(C)
|
|||||||||
Plan category
|
Number of
securities
to be issued
upon exercise
of outstanding
options, warrants
and rights
|
Weighted-
average
exercise price
of outstanding
options, warrants
and rights
($)
|
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (A))
|
|||||||||
Equity compensation plans approved by security holders
|
7,238,787
|
5.41
|
136,228
|
|||||||||
Equity compensation plans not approved by security holders
|
315,003
|
8.35
|
-
|
|||||||||
Total
|
7,553,787
|
5.68
|
136,228
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
EG-1962 product candidate
|
$
|
9,504
|
$
|
22,075
|
||||
EG-1964 product candidate
|
5
|
640
|
||||||
Pipeline
|
188
|
371
|
||||||
Internal Operating Expenses
|
6,372
|
11,226
|
||||||
Total
|
$
|
16,069
|
$
|
34,312
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
General and administrative expenses
|
$
|
14,291
|
$
|
17,655
|
|
Year Ended December 31,
|
|||||||
2018
|
2017
|
|||||||
Weighted Average
|
Weighted Average
|
|||||||
Volatility
|
86.33
|
%
|
88.87
|
%
|
||||
Risk-Free Interest Rate
|
2.23
|
%
|
1.88
|
%
|
||||
Expected Term in Years
|
6.00
|
6.00
|
||||||
Dividend Rate
|
0.00
|
%
|
0.00
|
%
|
||||
Fair Value of Option on Grant Date
|
$
|
5.08
|
$
|
6.93
|
Year Ended December 31,
|
Increase (Decrease)
|
|||||||||||||||
2018
|
2017
|
$ |
%
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Operating expenses:
|
||||||||||||||||
Research and development expenses
|
$
|
16,069
|
$
|
34,312
|
$
|
(18,243
|
)
|
(53
|
)%
|
|||||||
General and administrative expenses
|
14,291
|
17,655
|
(3,364
|
)
|
(19
|
)%
|
||||||||||
Restructuring expenses
|
9,914
|
–
|
9,914
|
100
|
%
|
|||||||||||
Impairment charges
|
2,823
|
–
|
2,823
|
100
|
%
|
|||||||||||
Total operating expenses
|
43,097
|
51,967
|
(8,870
|
)
|
(17
|
)%
|
||||||||||
Loss from operations
|
(43,097
|
)
|
(51,967
|
)
|
8,870
|
(17
|
)%
|
|||||||||
Interest income (expense), net
|
(553
|
)
|
(1,479
|
)
|
926
|
(63
|
)%
|
|||||||||
Loss before income taxes
|
(43,650
|
)
|
(53,446
|
)
|
9,796
|
(18
|
)%
|
|||||||||
Benefit for income taxes
|
2,782
|
2,586
|
196
|
8
|
%
|
|||||||||||
Net loss and comprehensive loss
|
$
|
(40,868
|
)
|
$
|
(50,860
|
)
|
$
|
9,992
|
(20
|
)%
|
● |
Pursue another strategic transaction similar to the merger. Edge may resume its process of evaluating other companies interested in pursuing a strategic transaction with
Edge and, if a candidate is identified, focus its attention on negotiating and completing such a transaction with such candidate.
|
● |
Dissolve and liquidate its assets. If Edge is unable, or does not believe that it is able, to find a suitable candidate for another strategic transaction, Edge may dissolve
and liquidate its assets. In the event of dissolution, Edge would be required to pay all of its debts and contractual obligations and to set aside certain reserves for potential future claims. If Edge dissolves and liquidates its
assets, there can be no assurance as to the amount or timing of available cash that will remain for distribution to Edge’ stockholders after paying Edge’ debts and other obligations and setting aside funds for its reserves.
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
Net cash used in operating activities
|
$
|
(33,153
|
)
|
$
|
(40,697
|
)
|
||
Net cash used in investing activities
|
–
|
(188
|
)
|
|||||
Net cash (used in) provided by financing activities
|
(20,269
|
)
|
22,554
|
|||||
Net decrease in cash
|
$
|
(53,422
|
)
|
$
|
(18,331
|
)
|
● |
our ability to timely consummate the merger with PDS;
|
● |
the costs incurred in defending the class action civil litigation;
|
● |
the costs incurred in responding to disruptive actions by activist stockholders;
|
● |
the timing and nature of any strategic transactions that we undertake;
|
● |
personnel-related expenses, including salaries, benefits, severance, stock-based compensation expense and other compensation costs related to implementing our restructuring
plan;
|
● |
the scope and nature of activities we may pursue to advance clinical development for our product candidates, if any; and
|
● |
the number and characteristics of product candidates that we develop or may acquire or in-license;
|
As of December 31, 2018
|
Total
|
Less than One Year
|
1-3 Years
|
3-5 Years
|
More than 5 Years
|
|||||||||||||||
(in thousands)
|
||||||||||||||||||||
Operating lease obligations
|
$
|
1,739
|
$
|
605
|
$
|
1,134
|
$
|
–
|
$
|
–
|
||||||||||
Total contractual obligations
|
$
|
1,739
|
$
|
605
|
$
|
1,134
|
$
|
–
|
$
|
–
|
Name
|
Age
|
Director Since
|
||
(Class A − Term expiring at annual meeting of stockholders in 2019)
|
||||
Rose Crane
|
59
|
2017
|
||
Liam Ratcliffe, M.D., Ph.D.
|
55
|
2016
|
||
Robert Spiegel, M.D.
|
69
|
2013
|
||
(Class B − Term expiring at annual meeting of stockholders in 2020)
|
||||
Isaac Blech
|
69
|
2013
|
||
James Loughlin
|
75
|
2011
|
||
R. Loch Macdonald, M.D., Ph.D.
|
57
|
2009
|
||
(Class C − Term expiring at annual meeting of stockholders in 2021)
|
||||
Sol Barer, Ph.D.
|
71
|
2011
|
||
Brian A. Leuthner | 54 |
2009 |
Name
|
Age
|
Position
|
||
Brian A. Leuthner
|
54
|
President, Chief Executive Officer and Director
|
||
Andrew Saik
|
49
|
Chief Financial Officer
|
||
W. Bradford Middlekauff
|
57
|
Senior Vice President, General Counsel and Secretary
|
Name
|
Audit
|
Compensation
|
Nominating
and Corporate
Governance
|
|||
Sol Barer, Ph.D.
|
X
|
X*
|
||||
Isaac Blech
|
X
|
|||||
Rose Crane
|
X
|
|||||
James Loughlin
|
X*
|
|||||
Liam Ratcliffe, M.D., Ph.D.
|
X
|
|||||
Robert Spiegel, M.D.
|
X
|
X*
|
X
|
* |
Committee Chairperson
|
● |
hiring an independent registered public accounting firm to conduct the annual audit of our financial statements and monitoring its independence and performance;
|
● |
reviewing and approving the planned scope of the annual audit and the results of the annual audit;
|
● |
pre-approving all audit services and permissible non-audit services provided by our independent registered public accounting firm;
|
● |
reviewing the significant accounting and reporting principles to understand their impact on our financial statements;
|
● |
reviewing our internal financial, operating and accounting controls with management and our independent registered public accounting firm;
|
● |
reviewing with management and our independent registered public accounting firm, as appropriate, our financial reports, earnings announcements and our compliance with
legal and regulatory requirements;
|
● |
reviewing potential conflicts of interest under and violations of our Code of Conduct;
|
● |
establishing procedures for the treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and confidential submissions
by our employees of concerns regarding questionable accounting or auditing matters;
|
● |
reviewing and approving related-party transactions;
|
● |
primary responsibility for overseeing our risk management function; and
|
● |
reviewing and evaluating, at least annually, our Audit Committee’s charter.
|
● |
designing and implementing competitive compensation policies to attract and retain key personnel;
|
● |
reviewing and formulating policy and determining the compensation of our executive officers and employees;
|
● |
reviewing and recommending to the Edge Board the compensation of our directors;
|
● |
administering our equity incentive plans and granting equity awards to our employees and directors under these plans;
|
● |
if required from time to time, reviewing with management our disclosures under the caption “Compensation Discussion and Analysis” and recommending to the full board its
inclusion in our periodic reports to be filed with the SEC;
|
● |
if required from time to time, preparing the report of the Compensation Committee to be included in our annual proxy statement;
|
● |
engaging compensation consultants or other advisors it deems appropriate to assist with its duties; and
|
● |
reviewing and evaluating, at least annually, our Compensation Committee’s charter.
|
● |
identifying, reviewing and evaluating candidates to serve on the Edge Board;
|
● |
determining the minimum qualifications for service on the Edge Board;
|
● |
developing and recommending to the Edge Board an annual self-evaluation process for the Edge Board and overseeing the annual self-evaluation process;
|
● |
developing, as appropriate, a set of corporate governance principles, and reviewing and recommending to the Edge Board any changes to such principles; and
|
● |
periodically reviewing and evaluating our Nominating and Corporate Governance Committee’s charter.
|
Name and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Option
Awards (1)
($)
|
Restricted
Stock Units
($)
|
All Other
Compensation (2)
($)
|
Total
($)
|
|||||||||||||||||||||
Brian A. Leuthner
Chief Executive Officer
|
2018
2017
|
530,000
500,000
|
318,000
255,000
|
3,356,300
1,761,831
|
143,846
-
|
10,800
10,800
|
4,358,946
2,527,631
|
|||||||||||||||||||||
R. Loch Macdonald, M.D., Ph.D.
Chief Scientific Officer (3)
|
2018
2017
|
150,750
402,000
|
-
153,765
|
11,578
724,493
|
8,510
-
|
272,179
10,800
|
443,017
1,291,059
|
|||||||||||||||||||||
Herbert J. Faleck
Chief Medical Officer (4)
|
2018
2017
|
416,000
400,000
|
187,200
724,493
|
646,945
153,000
|
50,918
-
|
10,800
10,800
|
1,311,863
1,288,293
|
|||||||||||||||||||||
Andrew Saik
|
2018
|
370,000
|
166,500
|
660,490
|
70,632
|
-
|
1,267,622
|
|||||||||||||||||||||
Chief Financial Officer
|
2017
|
61,667
|
-
|
1,594,402
|
-
|
-
|
1,656,069
|
|||||||||||||||||||||
W. Bradford Middlekauff
|
2018
|
347,700
|
156,470
|
791,426
|
42,351
|
10,800
|
1,348,747
|
|||||||||||||||||||||
SVP, General Counsel and Secretary
|
2017
|
328,000
|
97,580
|
345,782
|
-
|
10,800
|
782,162
|
(1) |
Amounts shown in this column do not reflect actual compensation received by the named executive officers. The amounts reflect the grant date fair value of stock option
awards and are calculated in accordance with the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718- Stock Compensation, and assume no forfeiture rate derived in the calculation of the grant
date fair value of these awards. Assumptions used in calculating the value of these awards are included in Note 7, “Stock Options” in the notes to Edge’s financial statements included in this Annual Report. The executive will only
realize compensation to the extent the trading price of Edge’s common stock is greater than the exercise price of such stock options at the time such options are exercised.
|
(2) |
Amounts shown in this column reflect Edge’s matching contributions to Edge’s 401(k) plan in the amount of $10,800 except that, due to Dr. Macdonald’s termination on May 15,
2018, Edge’s contributions to the 401(k) plan for Dr. Macdonald in 2018 were $6,110. For Dr. Macdonald, the amount shown in this column also includes the dollar value of severance benefits paid through December 31, 2018, which is
comprised of continuation of Dr. Macdonald’s base salary ($251,250) and reimbursements of amounts paid for health care continuation under COBRA for Dr. Macdonald and his eligible dependents ($14,819).
|
(3) |
Dr. Macdonald ceased employment with Edge on May 15, 2018.
|
(4) |
Dr. Faleck ceased employment with Edge on December 31, 2018.
|
Name
|
Number of Securities
Underlying Unexercised
Options Exercisable
|
Number of Securities
Underlying Unexercised
Options Unexercisable
|
Option
Exercise Price
|
Grant Date
|
Expiration Date
|
Number of Restricted
Stock Award Shares that
have not Vested
|
Market Value of Restricted
Stock Award Shares that
have not Vested
|
||||||||||||||||
Brian A. Leuthner (1) (2)
|
186,390
|
-
|
$
|
2.04
|
10/11/2013
|
10/11/2023
|
-
|
-
|
|||||||||||||||
69,440
|
-
|
$
|
8.28
|
3/27/2014
|
3/27/2024
|
-
|
-
|
||||||||||||||||
504,350
|
21,928
|
$
|
6.36
|
3/11/2015
|
3/11/2025
|
-
|
-
|
||||||||||||||||
162,916
|
67,084
|
$
|
6.99
|
2/16/2016
|
2/16/2026
|
-
|
-
|
||||||||||||||||
122,615
|
144,885
|
$
|
8.86
|
3/13/2017
|
3/13/2027
|
-
|
-
|
||||||||||||||||
-
|
280,000
|
$
|
14.98
|
3/1/2018
|
3/1/2028
|
-
|
-
|
||||||||||||||||
-
|
338,068
|
$
|
1.10
|
6/19/2018 (3)
|
6/19/2022
|
-
|
-
|
||||||||||||||||
-
|
-
|
-
|
8/14/2018 (4)
|
NA
|
169,032
|
$
|
54,090
|
||||||||||||||||
R. Loch Macdonald, M.D., PhD. (1) (2)
|
75,505
|
-
|
$
|
2.04
|
10/11/2013
|
3/1/2027
|
-
|
-
|
|||||||||||||||
63,958
|
-
|
$
|
8.28
|
3/27/2014
|
3/27/2024
|
-
|
-
|
||||||||||||||||
109,642
|
7,309
|
$
|
6.36
|
3/11/2015
|
3/11/2025
|
-
|
-
|
||||||||||||||||
178,166
|
41,116
|
$
|
11.00
|
9/30/2015
|
9/30/2025
|
-
|
-
|
||||||||||||||||
60,202
|
24,798
|
$
|
6.99
|
2/16/2016
|
2/16/2026
|
-
|
-
|
||||||||||||||||
50,420
|
59,580
|
$
|
8.86
|
3/13/2017
|
3/13/2027
|
-
|
-
|
||||||||||||||||
-
|
20,000
|
$
|
1.10
|
6/19/2018 (3)
|
6/19/2022
|
-
|
-
|
||||||||||||||||
-
|
-
|
-
|
8/14/2018 (4)
|
NA
|
10,000
|
$
|
3,200
|
||||||||||||||||
Herbert J. Faleck (1) (2)
|
148,341
|
-
|
$
|
8.28
|
3/27/2014
|
3/27/2024
|
-
|
-
|
|||||||||||||||
116,951
|
-
|
$
|
6.36
|
3/11/2015
|
3/11/2016
|
-
|
-
|
||||||||||||||||
77,914
|
32,086
|
$
|
6.99
|
2/16/2016
|
2/16/2026
|
-
|
-
|
||||||||||||||||
17,182
|
7,818
|
$
|
7.24
|
3/1/2016
|
3/1/2026
|
-
|
-
|
||||||||||||||||
50,420
|
59,580
|
$
|
0.00
|
3/13/2017
|
3/13/2027
|
-
|
-
|
||||||||||||||||
-
|
50,000
|
$
|
10.10
|
1/2/2018
|
1/2/2028
|
-
|
-
|
||||||||||||||||
-
|
90,000
|
$
|
14.98
|
3/1/2018
|
3/1/2028
|
-
|
-
|
||||||||||||||||
-
|
119,667
|
$
|
1.10
|
6/19/2018 (3)
|
6/19/2022
|
-
|
-
|
||||||||||||||||
-
|
-
|
-
|
8/14/2018 (4)
|
NA
|
59,833
|
$
|
19,147
|
||||||||||||||||
Andrew Saik (1) (2)
|
58,336
|
141,664
|
$
|
10.73
|
11/1/2017
|
11/1/2027
|
-
|
-
|
|||||||||||||||
-
|
50,000
|
$
|
14.98
|
3/1/2018
|
3/1/2028
|
-
|
-
|
||||||||||||||||
-
|
166,001
|
$
|
1.10
|
6/19/2018 (3)
|
6/19/2022
|
-
|
-
|
||||||||||||||||
-
|
-
|
-
|
8/14/2018 (4)
|
NA
|
82,999
|
$
|
26,560
|
||||||||||||||||
W. Bradford Middlekauff (1) (2)
|
63,328
|
16,672
|
$
|
14.92
|
11/16/2015
|
11/16/2025
|
-
|
-
|
|||||||||||||||
24,788
|
10,212
|
$
|
6.99
|
2/16/2016
|
2/16/2026
|
-
|
-
|
||||||||||||||||
24,065
|
28,435
|
$
|
8.86
|
3/13/2017
|
3/13/2027
|
-
|
-
|
||||||||||||||||
-
|
65,000
|
$
|
14.98
|
3/1/2018
|
3/1/2028
|
-
|
-
|
||||||||||||||||
-
|
99,534
|
$
|
1.10
|
6/19/2018 (3)
|
6/19/2022
|
-
|
-
|
||||||||||||||||
-
|
-
|
-
|
8/14/2018 (4)
|
NA
|
49,766
|
$
|
15,925
|
(1) |
Except as otherwise noted, options vest with respect to one-fourth of the underlying shares on the first anniversary of the grant date and in equal installments of 1⁄48 of
the underlying shares on each monthly anniversary of the grant date thereafter for the subsequent 36 months.
|
(2) |
Options granted after November 3, 2014 were granted under the Current Plan. Options granted prior to such date were granted under the Edge Therapeutics, Inc. 2012 Equity
Incentive Plan.
|
(3) |
Represents stock options granted in connection with the Retention Arrangements. These options vest on the earliest to occur of (i) the termination of the executive’s
employment with Edge other than for cause (as defined in the Current Plan), (ii) the consummation of a strategic transaction arising out of the strategic review discussed above and (iii) the one-year anniversary of the grant date.
|
(4) |
Represents RSUs granted in connection with the Retention Arrangements. These RSUs have the same vesting terms as those described in note (3) above relating to retention
stock options.
|
Upon Termination Without Cause or Resignation for
|
||||||||||||||||
Good Reason—No Change in Control
|
||||||||||||||||
Cash
Payment ($)
|
Accelerated
Equity Vesting
|
Other ($) (1)
|
Total ($)
|
|||||||||||||
Brian A. Leuthner
|
|
795,000
|
|
-
|
38,105
|
|
833,105
|
|||||||||
Herbert J. Faleck, D.O. (2)
|
416,000
|
-
|
25,403
|
441,403
|
||||||||||||
Andrew Saik
|
370,000
|
-
|
25,403
|
395,403
|
||||||||||||
W. Bradford Middlekauff
|
347,700
|
-
|
25,403
|
373,103
|
(1) |
Reflects the value of COBRA premium reimbursements for the named executive officer and his eligible dependents.
|
(2) |
Mr. Faleck became entitled to these payments upon the termination of his employment on December 31, 2018.
|
Upon Termination Without Cause or Resignation for
|
||||||||||||||||
Good Reason—With Change in Control
|
||||||||||||||||
Cash
Payment ($)
|
Accelerated
Equity Vesting ($) (1)
|
Other ($) (2)
|
Total ($)
|
|||||||||||||
Brian A.Leuthner
|
|
1,510,500
|
|
4,041,238
|
|
38,105
|
|
5,589,843
|
||||||||
Herbert J. Faleck, D.O.
|
416,000
|
1,770,053
|
25,403
|
2,211,456
|
||||||||||||
Andrew Saik
|
370,000
|
1,662,394
|
25,403
|
2,057,797
|
||||||||||||
W. Bradford Middlekauff
|
347,700
|
1,036,037
|
25,403
|
1,409,140
|
(1) |
Assumes all outstanding options vest upon termination.
|
(2) |
Reflects the value of COBRA premium reimbursements for the named executive officer and his eligible dependents.
|
Upon A Change in Control—No Termination of Employment
|
||||||||||||||||
Cash
Payment ($)
|
Accelerated
Equity Vesting ($) (1)
|
Other ($)
|
Total ($)
|
|||||||||||||
Brian A. Leuthner
|
|
-
|
1,361,534
|
|
-
|
|
1,361,534
|
|||||||||
Herbert J. Faleck, D.O.
|
-
|
1,072,108
|
-
|
1,072,108
|
||||||||||||
Andrew Saik
|
-
|
1,126,718
|
-
|
1,126,718
|
||||||||||||
W. Bradford Middlekauff
|
-
|
402,694
|
-
|
402,694
|
(1) |
Options granted in 2018 are not included in this column because such options have “double trigger” vesting.
|
Name
|
Fees Earned
or Paid in Cash
($)
|
Option
Awards
($) (1)
|
Total
($)
|
|||||||||
Sol Barer, Ph.D.
|
92,500
|
40,175
|
132,675
|
|||||||||
Isaac Blech
|
41,750
|
20,088
|
61,838
|
|||||||||
Kurt Conti (2)
|
21,500
|
-
|
21,500
|
|||||||||
Rose Crane
|
51,750
|
20,088
|
71,838
|
|||||||||
James I. Healy, M.D., Ph.D. (3)
|
21,500
|
-
|
21,500
|
|||||||||
James Loughlin
|
54,250
|
20,088
|
74,338
|
|||||||||
Liam Ratcliffe, M.D., Ph.D.
|
44,500
|
20,088
|
64,588
|
|||||||||
Robert Spiegel, M.D.
|
69,250
|
20,088
|
89,338
|
(1)
|
The amounts shown in this column do not reflect actual compensation received by our directors. The amounts reflect
the grant date fair value of option awards and are calculated in accordance with the provisions of FASB Accounting Standards Codification Topic 718 Compensation — Stock Options (“ASC Topic 718”), and assume no forfeiture rate
derived in the calculation of the grant date fair value of these awards. Assumptions used in calculating the value of these awards are included in Note 7, “Stock Options” in the notes to Edge’s financial statements included in
this Annual Report. The director will only realize compensation to the extent the trading price of Edge’s common stock is greater than the exercise price of such stock options at the time such options are exercised.
|
(2)
|
Mr. Conti resigned from the Edge Board on June 19, 2018.
|
(3)
|
Mr. Healy ceased to serve on the Edge Board following the 2018 annual meeting of the stockholders held on June 19,
2018.
|
Name
|
Number of Options
|
|||
Sol Barer, Ph.D.
|
720,836
|
|||
Isaac Blech
|
828,950
|
|||
Rose Crane
|
60,000
|
|||
James Loughlin
|
119,939
|
|||
Liam Ratcliffe, M.D., Ph.D.
|
75,000
|
|||
Robert Spiegel, M.D.
|
120,668
|
● |
each person, entity or group known to Edge to beneficially own more than 5% of its common stock;
|
● |
each of Edge’s named executive officers;
|
● |
each of Edge’s directors; and
|
● |
all of Edge’s executive officers and directors as a group.
|
Beneficial Ownership
|
||||||||
Name of Beneficial Owner
|
Shares
|
%
|
||||||
Greater than 5% Stockholders:
|
||||||||
Sofinnova Venture Partners IX, L.P.(1)
|
2,852,711
|
9.07
|
||||||
Entities affiliated with New Leaf Ventures III, L.P.(2)
|
2,379,668
|
7.57
|
||||||
Named Executive Officers and
Directors:
|
||||||||
Sol Barer, Ph.D.(3)
|
1,318,911
|
4.19
|
||||||
Isaac Blech(4)
|
798,950
|
2.54
|
||||||
Brian Leuthner(5)
|
1,622,719
|
5.16
|
||||||
Rosemary Crane(6)
|
9,900
|
0.03
|
||||||
James Loughlin(7)
|
115,564
|
0.37
|
||||||
R. Loch Macdonald, M.D., Ph.D.(8)
|
1,165,194
|
3.70
|
||||||
Liam Ratcliffe, M.D., Ph.D.(2)
|
2,379,668
|
7.57
|
||||||
Robert Spiegel, M.D., FACP(9)
|
129,329
|
0.41
|
||||||
W. Bradford Middlekauff(10)
|
145,406
|
0.46
|
||||||
Andrew Saik(11)
|
79,172
|
0.25
|
||||||
All current executive officers and directors as a group 10 persons)
|
7,764,816
|
24.69
|
* |
all of Edge’s executive officers and directors as a group.
|
(1) |
Represents shares held directly by Sofinnova Venture Partners IX, L.P., or SVP IX. Dr. James Healy, a former director of Edge together with Dr. Michael F. Powell and Dr.
Anand Mehra, are the managing members of Sofinnova Management IX, L.L.C., the general partner of SVP IX, and as such, may be deemed to share voting and investment power with respect to such shares. Dr. Healy disclaims beneficial
ownership. The mailing address of SVP IX is c/o Sofinnova Ventures, Inc., 3000 Sand Hill Road, Bldg. 4, Suite 250, Menlo Park, CA 94025.
|
(2) |
New Leaf Venture Associates III, L.P., or NLVA-III LP, is the general partner of NLV-III and New Leaf BPO Associates I, L.P., or BPOA-I LP, is the general partner of New
Leaf Biopharma Opportunities I, L.P., or BPO-I. New Leaf Venture Management III, L.L.C., or NLVM-III LLC, is the General Partner of both NLVA-III LP and BPOA-I LP. Ronald M. Hunt, Vijay K. Lathi, and Liam Ratcliffe are individual
members of NLVM-III LLC, or collectively, the Individual Members. NLVA-III LP, BPOA-I LP and NLVM-III LLC disclaim beneficial ownership of such shares, except to the extent of their pecuniary interest therein. As one of three individual
members, each of the Individual Members disclaims beneficial ownership over the shares, and in all events disclaims pecuniary interest except to the extent of his economic interest. The mailing address of the beneficial owner is Times
Square Tower, 7 Times Square, Suite 3502, New York, NY 10036.
|
(3) |
Includes 658,075 shares owned of record by Meryl Barer, Dr. Barer’s wife, all of which she may be deemed to have beneficial ownership of, and 660,836 shares for Dr. Barer
subject to stock options that are currently exercisable within 60 days of December 31, 2018.
|
(4) |
Represents shares that are subject to outstanding options held by Mr. Blech that are currently exercisable with 60 days of December 31, 2018.
|
(5) |
Includes 162,000 shares owned of record by Cristina Leuthner, Mr. Leuthner’s wife, 78,730 shares held directly by Mr. Leuthner and 223,622 shares held in trust for the
Leuthner children, to which Mr. Leuthner disclaims beneficial ownership, and 1,158,367 shares subject to outstanding options held by Mr. Leuthner that are currently exercisable with 60 days of December 31, 2018.
|
(6) |
Represents shares that are subject to outstanding options held by Ms. Crane that are currently exercisable within 60 days of December 31, 2018.
|
(7) |
Includes 25,625 shares held directly by Mr. Loughlin and 89,939 shares subject to outstanding options held by Mr. Loughlin that are exercisable within 60 days of December
31, 2018.
|
(8) |
Includes 577,730 shares held directly by Dr. Macdonald and 587,464 shares subject to outstanding options held by Dr. Macdonald that are currently exercisable with 60 days
of December 31, 2018.
|
(9) |
Includes 38,661 shares held directly by Dr. Spiegel and 90,668 shares subject to outstanding options held by Dr. Spiegel that are exercisable within 60 days of December 31,
2018.
|
(10) |
Includes 10,000 shares held directly by Mr. Middlekauff and 135,409 shares subject to outstanding options held by Mr. Middlekauff that are exercisable within 60 days of
December 31, 2018.
|
(11) |
Represents shares that are subject to outstanding options held by Mr. Saik that are currently exercisable within 60 days of December 31, 2018.
|
● |
The amounts exceeded or will exceed $120,000; and
|
● |
Any of the directors, executive officers or holders of more than 5% of the respective capital stock, or any member of the immediate family of any of the foregoing persons,
had or will have a direct or indirect material financial interest.
|
Recipient
|
Title
|
Stock Options with a
Grant Date of
June 19, 2018
|
RSUs with a
Grant Date of
August 14, 2018
|
Cash
Compensation
|
||||||||||
Brian A. Leuthner
|
President and Chief Executive Officer
|
338,068
|
169,032
|
$
|
318,000
|
|||||||||
Herbert J. Faleck
|
Former Chief Medical Officer
|
119,667
|
59,833
|
$
|
187,200
|
|||||||||
Andrew Saik
|
Chief Financial Officer
|
166,001
|
82,999
|
$
|
166,500
|
|||||||||
W. Bradford Middlekauff
|
Senior Vice President, General Counsel and Secretary
|
99,534
|
49,766
|
$
|
157,470
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
Audit fees
|
$
|
398,000
|
$
|
398,000
|
||||
Audit-related fees
|
58,450
|
15,000
|
||||||
Tax fees |
–
|
97,650 |
||||||
All Other Fees |
–
|
–
|
||||||
Total
|
$
|
456,450
|
$
|
510,650
|
(a) |
The following documents are filed as part of this report:
|
Exhibit
Number
|
Exhibit Description
|
|
2.1
|
Agreement and Plan of Merger and Reorganization, dated November 23, 2018, by and among Edge Therapeutics, Inc., Echos Merger Sub, Inc. and PDS
Biotechnology Corporation (filed as exhibit 2.1 to the Company’s Current Report on Form 8-K filed on November 26, 2018, and incorporated by reference
herein).
|
|
2.2
|
Amendment No. 1 to Agreement and Plan of Merger and Reorganization, dated January 24, 2019, by and among Edge Therapeutics, Inc., Echos
Merger Sub, Inc. and PDS Biotechnology Corporation (filed as exhibit 2.1 to the
Company’s Current Report on Form 8-K filed on January 30, 2019, and incorporated by reference herein).
|
|
2.3
|
Form of Support Agreement by and among Edge Therapeutics, Inc., Echos Merger Sub, Inc., PDS Biotechnology Corporation and certain of PDS
Biotechnology Corporation’s directors, officers and stockholders (filed as exhibit 2.2 to the Company’s Current Report on Form 8-K filed on November 26,
2018, and incorporated by reference herein).
|
|
2.4
|
Form of Support Agreement by and among Edge Therapeutics, Inc., Echos Merger Sub, Inc., PDS Biotechnology Corporation and certain of Edge
Therapeutics, Inc.’s directors, officers and stockholders (filed as exhibit 2.3 to the Company’s Current Report on Form 8-K filed on November 26, 2018, and
incorporated by reference herein).
|
|
3.1
|
Eighth Amended and Restated Certificate of Incorporation of Edge Therapeutics, Inc. (filed as exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 6, 2015, and incorporated by reference herein).
|
|
3.2
|
Second Amended and Restated Bylaws of Edge Therapeutics, Inc. (filed as exhibit 3.2 to the Company’s Current Report on Form 8-K filed on October 6, 2015, and incorporated by reference herein).
|
|
4.1
|
Form of Certificate of Common Stock. (filed as exhibit 4.1 to the Company’s Pre-Effective Amendment No. 1 to the registration statement on Form
S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
|
|
4.2
|
Warrant to Purchase 16,667 Shares of Capital Stock Issued to New Jersey Economic Development Authority, dated as of May 3, 2010. (filed as
exhibit 4.2 to the Company’s Registration Statement on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
|
|
4.3
|
First Amendment to Warrant Issued to New Jersey Economic Development Authority, dated October 9, 2013 (filed as exhibit 4.3 to the Company’s
Registration Statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
4.4
|
Form of Warrant Issued to Series B-1 Stockholders. (filed as exhibit 4.4 to the Company’s Registration Statement on Form S-1 (File No. 333-
206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
4.5
|
Form of Warrant to Purchase Series C Preferred Stock issued to Maxim Group LLC. (filed as exhibit 4.5 to the Company’s Registration Statement on
Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
4.6
|
Warrant Agreement, dated as of August 28, 2014, by and between the Company and Hercules. (filed as exhibit 4.6 to the Company’s Registration
Statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
4.7
|
Form of Warrant to Purchase Series C-1 Preferred Stock issued to Maxim Group LLC. (filed as exhibit 4.7 to the Company’s Registration Statement
on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
4.8
|
Investors’ Rights Agreement, dated as of April 6, 2015, by and among the Company and the Investors named therein. (filed as exhibit 4.8 to the
Company’s Registration Statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
4.9
|
Warrant to Purchase 18,000 Shares of Common Stock issued to Maxim Partners LLC, dated as of October 6, 2015. (filed as exhibit 4.1 to the Company’s
Quarterly Report on Form 10-Q filed on November 6, 2015, and incorporated by reference herein).
|
10.1 *
|
Licensing Agreement by and between the Company and Evonik Industries (as successor in interest to SurModics Pharmaceuticals, Inc.), dated as of October 20, 2010. (filed as exhibit 10.1 to the Company’s Registration Statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
10.2 *
|
Amendment No. 1 to the License Agreement, effective as of September 21, 2015, by and between the Company and Evonik Corporation. (filed as
exhibit 10.15 to the Company’s Pre-Effective Amendment No. 1 to the registration statement on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
|
|
10.3 **
|
Amended and Restated Master Formulation Development Agreement, by and between the Company and Oakwood Laboratories LLC, dated as of June 30, 2017 (filed as
exhibit 10.1 to the Company’s Form 10-Q for the quarter ended June 30, 2017 and incorporated by reference herein).
|
|
10.4 **
|
Manufacturing and Supply Agreement, by and between the Company and Oakwood Laboratories LLC, dated as of June 30, 2017 (filed as Exhibit 10.2 to the
Company’s Form 10-Q for the quarter ended June 30, 2017 and incorporated by reference herein).
|
|
10.5**+
|
Edge Therapeutics, Inc. 2010 Equity Incentive Plan and forms of agreement thereunder. (filed as exhibit 10.2 to the Company’s Pre-Effective
Amendment No. 1 to the registration statement on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
|
|
10.6+
|
Amendment to the Edge Therapeutics, Inc. 2010 Equity Incentive Plan, dated June 30, 2014 (filed as exhibit 10.11 to the Company’s Registration
Statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
10.7+
|
Edge Therapeutics, Inc. 2012 Equity Incentive Plan and forms of agreement thereunder. (filed as exhibit 10.3 to the Company’s Pre-Effective
Amendment No. 1 to the registration statement on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
|
|
10.8+
|
Edge Therapeutics, Inc. 2014 Equity Incentive Plan and forms of agreement thereunder. (filed as exhibit 10.4 to the Company’s Pre-Effective
Amendment No. 1 to the registration statement on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
|
|
10.9+
|
Second Amended and Restated Employment Agreement by and between Brian A. Leuthner and the Company dated as of June 10, 2015. (filed as exhibit
10.5 to the Company’s Registration Statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
10.10+
|
Second Amended and Restated Employment Agreement by and between Albert N. Marchio, II and the Company dated as of June 8, 2015 (filed as exhibit
10.8 to the Company’s Registration Statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
10.11+
|
Amended and Restated Employment Agreement by and between Herbert J. Faleck and the Company dated as of August 11, 2015 (filed as exhibit 10.13
to the Company’s registration statement on Form S-1 (File No. 333- 206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
10.12+
|
Second Amended and Restated Employment Agreement by and between Dr. R. Loch Macdonald and the Company dated September 21, 2015 (filed as exhibit
10.14 to the Company’s Pre-Effective Amendment No. 1 to the registration statement on Form S-1 (File No. 333- 206416) filed on September 21, 2015, and incorporated by reference herein).
|
|
10.13+
|
Executive Employment Agreement by and between W. Bradford Middlekauff and the Company dated as of October 30, 2015 (filed as exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on November 5, 2015, and incorporated by reference herein).
|
|
10.14+
|
Employment Agreement by and between Daniel Brennan and the Company, dated as of October 17, 2016 (filed as exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on October 18, 2016, and incorporated by reference herein).
|
|
10.15+
|
Executive Employment Agreement by and between Andrew Saik and the Company dated as of October 31, 2017 (filed as exhibit 10.1 to the Company’s
Current Report on Form 8-K filed November 1, 2017, and incorporated by reference herein).
|
|
10.15
|
Form of Indemnification Agreement for officers and directors (filed as exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File
No. 333-206416) filed on August 14, 2015, and incorporated by reference herein).
|
|
10.17
|
Form of Executive Stock Option Agreement (filed
as Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on March 2, 2017, and incorporated by reference herein)
|
10.18
|
Form of Employee Stock Option Agreement (filed
as Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on March 2, 2017, and incorporated by reference herein)
|
|
10.19
|
Lease, dated February 18, 2016, between The Connell Company and Edge Therapeutics, Inc. (filed as exhibit 10.1 to the Company’s Quarterly Report on Form
10-Q filed on May 3, 2016, and incorporated by reference herein).
|
|
10.20
|
Letter Agreement, dated February 3, 2019, by and among Edge Therapeutics, Inc., PDS Biotechnology Corporation and Brian A. Leuthner (filed as
exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 4, 2019, and incorporated by reference herein)
|
|
23.1
|
Consent of KPMG LLP
(filed herewith).
|
|
31.1
|
||
31.2
|
||
32.1 (1)
|
||
32.2 (1)
|
||
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
(1) |
This certification is deemed not filed for purpose of section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed
incorporated by reference into any filing under the Securities Act or the Exchange Act.
|
+ |
Indicates management contract or compensatory plan.
|
* |
Confidential Treatment has been granted with respect to certain portions of this Exhibit. Omitted portions have been filed separately with the Securities and Exchange
Commission.
|
** |
Confidential Treatment has been requested with respect to certain portions of this Exhibit. Omitted portions have been filed separately with the Securities and Exchange
Commission.
|
Edge Therapeutics, Inc.
|
||
February 21, 2019
|
By:
|
/s/ Brian A. Leuthner
|
Brian A. Leuthner
|
||
President and Chief Executive Officer
|
||
(Principal Executive Officer)
|
||
February 21, 2019
|
By:
|
/s/ Andrew Saik
|
Andrew Saik
|
||
Chief Financial Officer
|
||
(Principal Financial Officer)
|
Signature
|
Title
|
Date
|
||
/s/ Brian A. Leuthner
|
President and Chief Executive Officer and Director
|
February 21, 2019
|
||
Brian A. Leuthner
|
(Principal Executive Officer)
|
|||
/s/ Andrew Saik
|
Chief Financial Officer
|
February 21, 2019
|
||
Andrew Saik
|
(Principal Financial Officer)
|
|||
/s/ Sol Barer
|
Chairman, Board of Directors
|
February 21, 2019
|
||
Sol Barer, Ph.D.
|
||||
/s/ Isaac Blech
|
Vice Chairman, Board of Directors
|
February 21, 2019
|
||
Isaac Blech
|
||||
/s/ Rosemary A. Crane
|
Director
|
February 21, 2019
|
||
Rosemary A. Crane
|
||||
/s/ James Loughlin
|
Director
|
February 21, 2019
|
||
James Loughlin
|
||||
/s/ R. Loch Macdonald
|
Director
|
February 21, 2019
|
||
R. Loch Macdonald, M.D., Ph.D.
|
||||
/s/ Liam Ratcliffe
|
Director
|
February 21, 2019
|
||
Liam Ratcliffe, M.D., Ph.D.
|
||||
/s/ Robert Spiegel
|
Director
|
February 21, 2019
|
||
Robert Spiegel, M.D.
|
December 31,
2018
|
December 31,
2017
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
34,645,549
|
$
|
88,067,647
|
||||
Prepaid expenses and other current assets
|
1,005,589
|
986,680
|
||||||
Total current assets
|
35,651,138
|
89,054,327
|
||||||
Property and equipment, net
|
426,952
|
3,423,880
|
||||||
Other assets
|
142,870
|
142,870
|
||||||
Total assets
|
$
|
36,220,960
|
$
|
92,621,077
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
LIABILITIES
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
399,447
|
$
|
4,369,133
|
||||
Accrued expenses
|
419,119
|
5,422,205
|
||||||
Restructuring reserve
|
5,563,186
|
-
|
||||||
Short term debt
|
–
|
3,075,421
|
||||||
Total current liabilities
|
6,381,752
|
12,866,759
|
||||||
Noncurrent liability:
|
||||||||
Long term debt
|
–
|
17,382,907
|
||||||
STOCKHOLDERS’ EQUITY
|
||||||||
Preferred stock, 5,000,000 shares authorized at December 31, 2018 and 2017, zero outstanding
|
–
|
–
|
||||||
Common stock, $0.00033 par value, 75,000,000 shares authorized at December 31, 2018 and December 31, 2017,
31,449,989 shares and 30,869,205 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively
|
10,591
|
10,400
|
||||||
Additional paid-in capital
|
222,644,982
|
214,309,370
|
||||||
Accumulated deficit
|
(192,816,365
|
)
|
(151,948,359
|
)
|
||||
Total stockholders’ equity
|
29,839,208
|
62,371,411
|
||||||
Total liabilities and stockholders’ equity
|
$
|
36,220,960
|
$
|
92,621,077
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
Operating expenses:
|
||||||||
Research and development expenses
|
$
|
16,068,769
|
$
|
34,311,650
|
||||
General and administrative expenses
|
14,291,008
|
17,654,970
|
||||||
Restructuring expenses
|
9,914,209
|
–
|
||||||
Impairment charges
|
2,822,581
|
–
|
||||||
Total operating expenses
|
43,096,567
|
51,966,620
|
||||||
Loss from operations
|
(43,096,567
|
)
|
(51,966,620
|
)
|
||||
Other income (expense):
|
||||||||
Interest income
|
871,879
|
700,903
|
||||||
Interest expense
|
(1,425,255
|
)
|
(2,180,143
|
)
|
||||
Loss before income taxes
|
(43,649,943
|
)
|
(53,445,860
|
)
|
||||
Benefit for income taxes
|
2,781,937
|
2,586,057
|
||||||
Net loss and comprehensive loss
|
$
|
(40,868,006
|
)
|
$
|
(50,859,803
|
)
|
||
Loss per share attributable to common stockholders basic and diluted
|
$
|
(1.31
|
)
|
$
|
(1.67
|
)
|
||
Weighted average common shares outstanding basic and diluted
|
31,242,176
|
30,393,952
|
Common Stock
|
||||||||||||||||||||
Shares
Issued
|
Amount
|
Additional
Paid-in Capital
|
Deficit
Accumulated
|
Total
|
||||||||||||||||
Balance - December 31, 2016
|
28,918,516
|
$
|
9,756
|
$
|
190,341,769
|
$
|
(101,074,968
|
)
|
$
|
89,276,557
|
||||||||||
Stock based compensation expense
|
–
|
–
|
6,182,841
|
–
|
6,182,841
|
|||||||||||||||
Issuance of common stock, net of issuance costs
|
1,800,000
|
594
|
17,382,349
|
–
|
17,382,943
|
|||||||||||||||
Issuance of common stock from exercise of stock options
|
35,366
|
12
|
118,176
|
–
|
118,188
|
|||||||||||||||
Issuance of common stock from exercise of warrants
|
94,200
|
31
|
53,118
|
–
|
53,149
|
|||||||||||||||
Issuance of common stock from 401K match
|
21,123
|
7
|
217,529
|
–
|
217,536
|
|||||||||||||||
Cumulative-effect of new share-based compensation guidance
|
–
|
–
|
13,588
|
(13,588
|
)
|
–
|
||||||||||||||
Net loss
|
–
|
–
|
–
|
(50,859,803
|
)
|
(50,859,803
|
)
|
|||||||||||||
Balance - December 31, 2017
|
30,869,205
|
10,400
|
214,309,370
|
(151,948,359
|
)
|
62,371,411
|
||||||||||||||
Stock based compensation expense
|
–
|
–
|
7,469,441
|
–
|
7,469,441
|
|||||||||||||||
Issuance of common stock from exercise of stock options
|
198,300
|
65
|
721,130
|
–
|
721,195
|
|||||||||||||||
Issuance of common stock from exercise of warrants
|
175,999
|
58
|
(58
|
)
|
–
|
–
|
||||||||||||||
Issuance of common stock from vesting of RSUs
|
91,432
|
30
|
(30
|
)
|
–
|
–
|
||||||||||||||
Issuance of common stock from 401K match
|
115,053
|
38
|
145,129
|
–
|
145,167
|
|||||||||||||||
Net loss
|
–
|
–
|
–
|
(40,868,006
|
)
|
(40,868,006
|
)
|
|||||||||||||
Balance - December 31, 2018
|
31,449,989
|
$
|
10,591
|
$
|
222,644,982
|
$
|
(192,816,365
|
)
|
$
|
29,839,208
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$
|
(40,868,006
|
)
|
$
|
(50,859,803
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Stock-based compensation expense
|
7,469,442
|
6,182,841
|
||||||
Stock-based 401K company common match
|
145,167
|
217,536
|
||||||
Depreciation expense
|
174,347
|
182,918
|
||||||
Impairment of machinery and equipment
|
2,822,581
|
–
|
||||||
Amortization of debt discount
|
1,039
|
32,869
|
||||||
Amortization of debt issuance costs
|
125,355
|
108,407
|
||||||
Non-cash interest expense
|
405,278
|
363,909
|
||||||
Changes in assets and liabilities:
|
||||||||
Prepaid expenses and other assets
|
(18,909
|
)
|
(32,099
|
)
|
||||
Accounts payable
|
(3,969,686
|
)
|
898,101
|
|||||
Accrued expenses
|
(5,003,087
|
)
|
2,208,490
|
|||||
Restructuring reserve
|
5,563,186
|
–
|
||||||
Net cash used in operating activities
|
(33,153,293
|
)
|
(40,696,831
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchases of property and equipment
|
–
|
(188,721
|
)
|
|||||
Net cash used in investing activities
|
–
|
(188,721
|
)
|
|||||
Cash flows from financing activities:
|
||||||||
Proceeds from issuance of debt
|
–
|
5,000,000
|
||||||
Proceeds from exercise of stock options
|
721,195
|
118,188
|
||||||
Proceeds from exercise of warrants
|
–
|
53,149
|
||||||
Payments for debt back end fees
|
(990,000
|
)
|
–
|
|||||
Repayment of debt
|
(20,000,000
|
)
|
–
|
|||||
Proceeds from issuance of common stock, net of underwriting costs
|
–
|
17,382,943
|
||||||
Net cash (used) provided by financing activities
|
(20,268,805
|
)
|
22,554,280
|
|||||
Net decrease in cash
|
(53,422,098
|
)
|
(18,331,272
|
)
|
||||
Cash and cash equivalents at beginning of period
|
88,067,647
|
106,398,919
|
||||||
Cash and cash equivalents at end of period
|
$
|
34,645,549
|
$
|
88,067,647
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid for:
|
||||||||
Interest
|
$
|
1,051,167
|
$
|
1,635,562
|
||||
● |
Pursue another strategic transaction similar to the merger. Edge may resume its process of evaluating other companies interested in pursuing a strategic transaction with
Edge and, if a candidate is identified, focus its attention on negotiating and completing such a transaction with such candidate.
|
● |
Dissolve and liquidate its assets. If Edge is unable, or does not believe that it is able, to find a suitable candidate for another strategic transaction, Edge may dissolve
and liquidate its assets. In the event of dissolution, Edge would be required to pay all of its debts and contractual obligations and to set aside certain reserves for potential future claims. If Edge dissolves and liquidates its
assets, there can be no assurance as to the amount or timing of available cash that will remain for distribution to Edge’ stockholders after paying Edge’ debts and other obligations and setting aside funds for its reserves.
|
Restructuring reserve at December 31, 2017
|
$
|
–
|
||
Initial restructuring charge
|
6,276,563
|
|||
Incurred legal fees
|
1,447,079
|
|||
Severance revisions
|
259,529
|
|||
Retention compensation
|
1,201,568
|
|||
Restructuring expenses to date (1)
|
9,184,739
|
|||
Payment of legal fees
|
(493,404
|
)
|
||
Payment of retention compensation
|
(56,925
|
)
|
||
Payment of advisor fees
|
(500,000
|
)
|
||
Payment of severance benefits
|
(2,571,224
|
)
|
||
Restructuring reserve as of December 31, 2018
|
$
|
5,563,186
|
(1) |
Excludes non-cash stock based retention compensation of $729,470 expensed to date through restructuring expenses.
|
(A) |
Use of estimates:
|
(B) |
Significant risks and uncertainties:
|
(C) |
Cash equivalents and concentration of cash balance:
|
(D) |
Property and equipment:
|
(E) |
Research and development:
|
(F) |
Patent costs:
|
(G) |
Stock-based compensation:
|
(H) |
Net loss per common share:
|
As of December 31,
|
||||||||
2018
|
2017
|
|||||||
Stock options to purchase Common Stock
|
7,043,825
|
6,462,795
|
||||||
Unvested Restricted Stock Units
|
509,962
|
-
|
||||||
Warrants to purchase Common Stock
|
78,596
|
374,653
|
||||||
Total
|
7,632,383
|
6,837,448
|
(I) |
Income taxes:
|
(J) |
Fair value of financial instruments:
|
● |
Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level
1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.
|
● |
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of
similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active). Level 2 includes financial instruments that are valued using models or other valuation
methodologies.
|
● |
Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models,
discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
|
(K) |
Subsequent events:
|
(L) |
New accounting standards not yet adopted:
|
● |
The Company recognized $84,786 of tax benefit along with a full valuation allowance as of the adoption date related to the historical excess tax benefits from historical
option exercises related to employee equity award activity.
|
● |
The Company elected to recognize forfeitures as they occur. The cumulative effect adjustment as a result of the adoption of this amendment on a modified retrospective basis
was not material.
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||||||
Total
|
Quoted Prices in
Active Markets
(Level 1)
|
Quoted Prices in
Inactive Markets
(Level 2)
|
Significant
Unobservable Inputs
(Level 3)
|
|||||||||||||
As of December 31, 2018:
|
||||||||||||||||
Cash and cash equivalents
|
$
|
34,645,549
|
$
|
34,645,549
|
$
|
–
|
$
|
–
|
||||||||
As of December 31, 2017:
|
||||||||||||||||
Cash and cash equivalents
|
$
|
88,067,647
|
$
|
88,067,647
|
$
|
–
|
$
|
–
|
December 31,
|
||||||||
2018
|
2017
|
|||||||
Furniture and equipment
|
$
|
439,620
|
$
|
564,596
|
||||
Leasehold Improvements
|
438,996
|
438,996
|
||||||
Construction in Process
|
-
|
2,725,569
|
||||||
878,616
|
3,729,161
|
|||||||
Less accumulated depreciation
|
(451,664
|
)
|
(305,281
|
)
|
||||
Property and equipment, net
|
$
|
426,952
|
$
|
3,423,880
|
December 31,
|
||||||||
2018
|
2017
|
|||||||
Accrued research and development costs
|
$
|
76,600
|
$
|
2,857,025
|
||||
Accrued professional fees
|
69,083
|
267,646
|
||||||
Accrued compensation
|
27,405
|
1,886,638
|
||||||
Accrued other
|
213,074
|
385,896
|
||||||
Deferred rent
|
32,957
|
25,000
|
||||||
Total
|
$
|
419,119
|
$
|
5,422,205
|
Issue Date
|
25% Vesting Date
|
Executive
|
Number of Options
|
|||
November 16, 2015
|
October 30, 2016
|
SVP, General Counsel and Secretary
|
80,000
|
|||
November 1, 2017
|
October 31, 2018
|
Chief Financial Officer
|
200,000
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
Stock-Based Compensation
|
||||||||
Research and development
|
$
|
2,503,889
|
$
|
2,687,975
|
||||
General and administrative
|
4,236,083
|
3,494,866
|
||||||
Retention compensation
|
729,470
|
–
|
||||||
Total
|
$
|
7,469,442
|
$
|
6,182,841
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
Weighted
Average
|
Weighted
Average
|
|||||||
Volatility
|
86.33
|
%
|
88.87
|
%
|
||||
Risk-Free Interest Rate
|
2.23
|
%
|
1.88
|
%
|
||||
Expected Term in Years
|
6.00
|
6.00
|
||||||
Dividend Rate
|
0.00
|
%
|
0.00
|
%
|
||||
Fair Value of Option on Grant Date
|
$
|
5.08
|
$
|
6.93
|
Number
of Shares
|
Weighted Average
Exercise Price
|
Weighted Average Remaining
Contractual Life in Years
|
Aggregate
Intrinsic Value
|
|||||||||||||
Options outstanding at January 1, 2017
|
5,316,511
|
$
|
5.84
|
|||||||||||||
Granted
|
1,365,400
|
9.39
|
||||||||||||||
Exercised
|
(35,366
|
)
|
3.34
|
|||||||||||||
Forfeited
|
(183,750
|
)
|
9.46
|
|||||||||||||
Options outstanding at December 31, 2017
|
6,462,795
|
$
|
6.50
|
7.13
|
$
|
20,467,335
|
||||||||||
Vested and expected to vest at December 31, 2017
|
6,462,795
|
$
|
6.50
|
7.13
|
$
|
20,467,335
|
||||||||||
Exercisable at December 31, 2017
|
4,066,066
|
$
|
5.14
|
6.21
|
$
|
18,100,589
|
||||||||||
Options outstanding at December 31, 2017
|
6,462,795
|
$
|
6.50
|
|||||||||||||
Granted
|
2,322,906
|
7.52
|
||||||||||||||
Exercised
|
(198,300
|
)
|
3.64
|
|||||||||||||
Forfeited
|
(1,543,576
|
)
|
10.30
|
|||||||||||||
Options outstanding at December 31, 2018
|
7,043,825
|
$
|
6.09
|
5.84
|
$
|
3,977
|
||||||||||
Vested and expected to vest at December 31, 2018
|
7,043,825
|
$
|
6.09
|
5.84
|
$
|
3,977
|
||||||||||
Exercisable at December 31, 2018
|
5,001,465
|
$
|
5.71
|
5.67
|
$
|
3,977
|
Number
of RSUs
|
Weighted Average
Grant Price
|
|||||||
RSUs outstanding at December 31, 2017
|
–
|
$
|
–
|
|||||
Granted
|
601,394
|
0.85
|
||||||
Released
|
(91,432
|
)
|
0.85
|
|||||
Forfeited
|
–
|
–
|
||||||
RSUs outstanding at December 31, 2018
|
509,962
|
$
|
0.85
|
Year Ended December 31,
|
||||||||
2018
|
2017
|
|||||||
Federal statutory rate
|
21.0
|
%
|
34.0
|
%
|
||||
State taxes
|
0.4
|
%
|
1.1
|
%
|
||||
Change in Statutory Rate
|
–
|
(25.6
|
)%
|
|||||
Permanent differences
|
(5.4
|
)%
|
(11.0
|
)%
|
||||
Research and development
|
6.3
|
%
|
21.2
|
%
|
||||
State taxes/ sale of NOL
|
6.4
|
%
|
4.8
|
%
|
||||
Valuation allowance
|
(22.3
|
)%
|
(19.7
|
)%
|
||||
Effective tax rate
|
6.4
|
%
|
4.8
|
%
|
December 31,
|
||||||||
2018
|
2017
|
|||||||
Federal net operating losses
|
$
|
27,011,760
|
$
|
21,312,121
|
||||
State net operating losses
|
1,929,997
|
2,268,249
|
||||||
Stock options
|
1,847,546
|
1,608,750
|
||||||
Federal tax credit
|
26,815,998
|
24,060,243
|
||||||
State tax credits
|
506,752
|
384,740
|
||||||
Amortization
|
229,065
|
612,878
|
||||||
Accrued expense
|
813,073
|
7,027
|
||||||
Depreciation
|
826,109
|
18,498 |
||||||
Other
|
17,993
|
12,501
|
||||||
Total gross deferred tax assets
|
59,998,293
|
50,285,007
|
||||||
Less valuation allowance
|
(59,998,293
|
)
|
(50,285,007
|
)
|
||||
Net deferred tax assets
|
$
|
–
|
$
|
–
|
Year Ended December 31,
|
||||
2019
|
$
|
604,541
|
||
2020
|
603,371
|
|||
2021
|
530,385
|
|||
2022 and after
|
–
|
|||
Total minimum payments required
|
$
|
1,738,297
|
1. |
I have reviewed this Annual Report on Form 10-K of Edge Therapeutics, Inc. for the year ended December 31, 2018;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
|
Dated: February 21, 2019
|
/s/ Brian A. Leuthner
|
Brian A. Leuthner
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
1. |
I have reviewed this Annual Report on Form 10-K of Edge Therapeutics, Inc. for the year ended December 31, 2018;
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state
a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
|
b) |
Designed such internal control over financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles;
|
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
|
Dated: February 21, 2019
|
/s/ Andrew Saik
|
Andrew Saik
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
(1) |
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: February 21, 2019
|
/s/ Brian A. Leuthner
|
Brian A. Leuthner
|
|
President and Chief Executive Officer
|
|
(Principal Executive Officer)
|
(1) |
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Dated: February 21, 2019
|
/s/ Andrew Saik
|
Andrew Saik
|
|
Chief Financial Officer
|
|
(Principal Financial Officer)
|
Document and Entity Information - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2018 |
Feb. 14, 2019 |
Jun. 30, 2018 |
|
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Edge Therapeutics, Inc. | ||
Entity Central Index Key | 0001472091 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Shell Company | false | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true | ||
Entity Public Float | $ 32.3 | ||
Entity Common Stock, Shares Outstanding | 31,509,822 | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2018 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY |
Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
STOCKHOLDERS' EQUITY | ||
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.00033 | $ 0.00033 |
Common stock, shares authorized (in shares) | 75,000,000 | 75,000,000 |
Common stock, shares issued (in shares) | 31,449,989 | 30,869,205 |
Common stock, shares outstanding (in shares) | 31,449,989 | 30,869,205 |
Statements of Operations and Comprehensive Loss - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Operating expenses: | ||
Research and development expenses | $ 16,068,769 | $ 34,311,650 |
General and administrative expenses | 14,291,008 | 17,654,970 |
Restructuring expenses | 9,914,209 | 0 |
Impairment charges | 2,822,581 | 0 |
Total operating expenses | 43,096,567 | 51,966,620 |
Loss from operations | (43,096,567) | (51,966,620) |
Other income (expense): | ||
Interest income | 871,879 | 700,903 |
Interest expense | (1,425,255) | (2,180,143) |
Loss before income taxes | (43,649,943) | (53,445,860) |
Benefit for income taxes | 2,781,937 | 2,586,057 |
Net loss | (40,868,006) | (50,859,803) |
Comprehensive loss | $ (40,868,006) | $ (50,859,803) |
Loss per share attributable to common stockholders basic and diluted (in dollars per share) | $ (1.31) | $ (1.67) |
Weighted average common shares outstanding basic and diluted (in shares) | 31,242,176 | 30,393,952 |
Nature of Operations |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nature of Operations | Note 1 – Nature of Operations Edge Therapeutics, Inc. (the “Company” or “Edge”) is a clinical-stage biotechnology company that seeks to discover, develop and commercialize novel therapies capable of transforming treatment paradigms in the management of medical conditions. On March 28, 2018, the Company announced that a pre-specified interim analysis performed on data from the Day 90 visit of the first 210 subjects randomized and treated in the Phase 3 multi-center, randomized, double-blind, placebo-controlled NEWTON 2 study of EG-1962 in adults with aneurysmal subarachnoid hemorrhage demonstrated a low probability of achieving a statistically significant difference compared to the standard of care in the study’s primary endpoint, if the study were to be fully enrolled. The independent Data Monitoring Committee (“DMC”) for the NEWTON 2 study recommended that the study be stopped based on this demonstration. The DMC also reported that there were no safety concerns attributed to EG-1962. Based on the DMC recommendation, the Company decided to discontinue the NEWTON 2 study and took steps to notify health authorities and clinical investigators participating in the study. On April 30, 2018, the Company announced that it was exploring strategic alternatives, which might have included, without limitation, an acquisition of another company, acquisitions or in-licensing of products or product candidates, technologies or other assets, the sale of all or substantially all of the assets of the Company, a sale of stock, a strategic merger or other business combination transaction or other transaction between the Company and a third party. The Company retained Piper Jaffray & Co. to serve as the financial advisor to its Board of Directors in certain aspects of the process. On November 23, 2018, Edge, Merger Sub and PDS, a privately-held clinical-stage cancer immunotherapy company, entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, pursuant to which, among other things, subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into PDS, with PDS surviving the merger as the wholly-owned subsidiary of the combined company. If the merger is completed, the business of Edge will become the business of PDS. If the merger is not completed, Edge will reconsider its strategic alternatives and may pursue one of the following courses of action, which Edge currently believes are the most likely alternatives if the merger with PDS is not completed:
In the second quarter of 2018, the Company recorded an initial restructuring charge of $6.3 million. The components of the restructuring charge included expenses of $4.0 million for severance benefits and $2.3 million for financial advisor fees, as well as ongoing legal fees expensed as incurred, and accrued retention compensation related to the restructuring of the organization. The restructuring activity during 2018 is as follows:
(1) Excludes non-cash stock based retention compensation of $729,470 expensed to date through restructuring expenses. From the Company’s inception, it has devoted substantially all of its efforts to business planning, engaging regulatory, manufacturing and other technical consultants, acquiring operating assets, planning and executing clinical trials and raising capital. The Company’s future operations are highly dependent on the success of the merger with PDS. |
Summary of Significant Accounting Policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company’s operations are subject to a number of factors that may affect its operating results and financial condition. Such factors include, but are not limited to: the Company’s ability to consummate the merger with PDS, the Company’s ability to preserve its cash resources, the Company’s ability to add product candidates to its pipeline, the Company’s intellectual property, competition from products manufactured and sold or being developed by other companies, the price of, and demand for, Company products if approved for sale, the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, and the Company’s ability to raise capital. The Company currently has no commercially approved products and has ceased all research and development activities related to EG-1962 and suspended research for its other product candidates. As such, there can be no assurance that the Company’s future research and development programs will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies.
The Company considers all highly liquid securities with a maturity weighted average of less than three months to be cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits.
Property and equipment is recorded at cost. Depreciation is recorded for property and equipment using the straight-line method over the estimated useful lives of three to five years. Leasehold improvements are amortized over the shorter of the estimated useful life or term of the underlying lease. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable.
Costs incurred in connection with research and development activities are expensed as incurred. These costs include licensing fees to use certain technology in the Company’s research and development projects as well as fees paid to consultants and various entities that perform certain research and testing on behalf of the Company. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data, such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred. Following the DMC’s recommendation that the NEWTON 2 Trial for EG-1962 be stopped, the Company decided to discontinue the NEWTON 2 study and took steps to notify health authorities and clinical investigators participating in the study. The Company has ceased all further research and development activities for EG-1962 and suspended research for its other product candidates and implemented operating cost reductions and organizational restructurings, including a reduction in the Company’s workforce, to preserve its cash resources and better align the organization with its current operating plan. The estimated costs associated with the study discontinuance have been accrued as of December 31, 2018.
The Company expenses patent costs as incurred and classifies such costs as general and administrative expenses in the accompanying statements of operations and comprehensive loss. In light of the Company’s cessation of all further research and development activities for EG-1962 and suspension of research for its other product candidates, the Company has substantially scaled back its patent prosecution activities.
The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including, for stock options, the expected life of the option, and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options was estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of options grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option.
Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted average common shares outstanding during the period. For all periods presented, the common shares underlying the preferred stock, common stock options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted average shares outstanding used to calculate both basic and diluted loss per common share are the same. The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as they would be anti-dilutive:
The Company provides for deferred income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the future tax consequences attributable to net operating loss carryforwards and for differences between the financial statement carrying amounts and the respective tax bases of assets and liabilities. Deferred tax assets are reduced if necessary by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:
Subsequent events have been evaluated through the date these financial statements were issued.
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” The new standard requires organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases (see Note 9). This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The standard requires a modified retroactive approach, but use of certain practical expedients is permitted as per ASU 2018-11. The Company expects to use the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any expired or existing leases. The Company additionally expects to use the practical expedient that allows it to treat the lease and non-lease components of its leases as a single component. The Company adopted this ASU on January 1, 2019. The impact of adoption on its financial statements will be to record a Right to Use Asset and Lease Liability of $1.5 million.
In March 2016, the FASB issued ASU No. 2016-09 which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Public companies will be required to adopt this standard in annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted this ASU on January 1, 2017. The impact of adopting ASU 2016-09 resulted in the following:
There were no other material impacts to our consolidated financial statements as a result of adopting this updated standard. |
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Fair Value of Financial Instruments | Note 3 – Fair Value of Financial Instruments
There were no transfers between Levels 1, 2, or 3 during 2018 or 2017. |
Property and Equipment |
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Property and Equipment | Note 4 – Property and Equipment Property and equipment is summarized as follows:
In March 2018, following the recommendation of the Data Monitoring Committee, the Company made the decision to close down the EG-1962 NEWTON 2 study. The Company believes that it would be highly unlikely that the Company would be able to use the manufacturing equipment associated with EG-1962 for future use. As a result, the Company has recorded a full equipment impairment charge in 2018 of $2,822,581. |
Accrued Expenses |
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Accrued Expenses | Note 5 – Accrued Expenses Accrued expenses and other liabilities consist of the following:
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Stock Warrants |
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Stock Warrants [Abstract] | |
Stock Warrants | Note 6 – Stock Warrants In connection with certain of our preferred stock sales and debt issuances, we issued warrants to the placement agent and lender for preferred stock. The warrants were recorded as liabilities with changes in fair value being recorded in the statement of operations and are calculated utilizing the Black-Scholes option pricing model. At the closing of the IPO date on October 6, 2015, these warrants become exercisable for shares of our common stock. These warrants were exercisable for 600,184 shares of common stock at exercise prices ranging from $5.79 to $12.10 and expire at various dates through 2020. During 2018, 2017 and 2016, 296,057, 166,762 and 58,769 warrants were exercised resulting in the issuance of 175,999, 94,200 and 44,032 shares of common stock, respectively. As of December 31, 2018, 78,596 warrants were exercisable. |
Stock Options |
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Stock Options [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options | Note 7 – Stock Options The Company has three equity compensation plans: the 2010 Equity Incentive Plan, the 2012 Equity Incentive Plan and the 2014 Equity Incentive Plan (the “Plans”). Originally, the Company was able to grant up to 548,206 and 1,096,411 shares of Common Stock as both incentive stock options (“ISOs”) and nonqualified stock options (“NQs”) under the 2010 Equity Incentive Plan and the 2012 Equity Incentive Plan, respectively. In 2013, the Company’s stockholders approved an increase to 1,279,146 shares authorized for issuance under the 2010 Equity Incentive Plan. In 2014, the Board of Directors of the Company (the “Board”) approved an increase to 1,350,412 shares authorized for issuance under the 2010 Equity Incentive Plan. In 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan pursuant to which the Company may grant up to 1,827,351 shares as ISOs, NQs and restricted stock units (“RSUs”), subject to increases as hereafter described (the “Plan Limit”). In addition, on January 1, 2015 and each January 1 thereafter prior to the termination of the 2014 Equity Incentive Plan, pursuant to the terms of the 2014 Equity Incentive Plan, the Plan Limit was and shall be increased by the lesser of (x) 4% of the number of shares of Common Stock outstanding as of the immediately preceding December 31 and (y) such lesser number as the Board of Directors may determine in its discretion. On January 1, 2016, 2017 and 2018 the Plan Limit was increased to 3,047,323 shares, 4,204,063 shares and 5,438,831 shares, respectively. Pursuant to the terms of the Plans, ISOs have a term of ten years from the date of grant or such shorter term as may be provided in the option agreement. Unless specified otherwise in an individual option agreement, ISOs generally vest over a four year term and NQs generally vest over a one, three or four year term. Unless terminated by the Board, the Plans shall continue to remain effective for a term of ten years or until such time as no further awards may be granted and all awards granted under the Plans are no longer outstanding. The Company issued the following non-qualified options to purchase shares of common stock to its newly appointed executives who are still employed by the Company. The awards were granted outside of the Company’s 2014 Equity Incentive Plan and vest over four years with 25% vesting one year following the date of hire, and the remaining 75% vesting in 36 equal monthly installments thereafter, subject to continued service to the Company through each vesting date and subject to acceleration or forfeiture upon the occurrence of certain events as set forth in the applicable option agreement and employment agreement. The grant awards were made pursuant to the Nasdaq inducement grant exception as a material component of employment compensation.
The Company’s stock-based compensation expense was recognized in operating expense as follows:
The fair value of options granted during the years ended December 31, 2018 and 2017 was estimated using the Black-Scholes option valuation model utilizing the following assumptions:
The following table summarizes the number of options outstanding and the weighted average exercise price:
At December 31, 2018 there was approximately $8,725,126 of unamortized stock compensation expense, which is expected to be recognized over a remaining average vesting period of 2.52 years. The Company may grant RSUs to eligible employees, including its executives, and non-employee directors. RSUs represent a right to receive one share of the Company’s common stock, upon the completion of a specific period of continued service or achievement of a certain milestone. RSU awards are valued at the market price of the Company’s common stock on the date of grant. The Company recognizes noncash compensation expense for the fair values of these RSU awards on a straight-line basis over the requisite service period of these awards. The following table summarizes the number of RSUs outstanding and the weighted average grant price:
At December 31, 2018, there was approximately $236,534 of unamortized RSU compensation expense, which is expected to be recognized over a remaining average vesting period of 0.62 years. |
Income Taxes |
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Income Taxes | Note 8 – Income Taxes A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows:
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows:
In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. There was a full valuation allowance against the net deferred tax assets as of December 31, 2018 and December 31, 2017. At December 31, 2018, the Company had federal net operating loss (“NOL”) carryforwards of approximately $101.5 million which expire between 2029 and 2037. NOLs of $27.1 million generated in 2018 have an indefinite carryforward period. At December 31, 2018, the Company had federal research and development credits carryforwards of approximately $2.4 million and an orphan drug credit carryover of approximately $24.4 million. The Company may be subject to the net operating loss utilization provisions of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate. Although the Company has not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited. At December 31, 2018, the Company had approximately $27.1 million of State of New Jersey NOLs which expire between 2030 and 2038. At December 31, 2018, the Company had approximately $0.6 million of the State of New Jersey research development credits carryforwards. The State of New Jersey has enacted legislation permitting certain corporations located in New Jersey to sell state tax loss carryforwards and state research and development credits, or net loss carryforwards. The Technology Business Tax Certificate Transfer Program enables qualified, unprofitable NJ-based technology or biotechnology companies with fewer than 225 US employees (including parent company and all subsidiaries) to sell a percentage of New Jersey NOLs and research and development (“R&D”) tax credits to unrelated profitable corporations. In 2018, the Company sold $31,689,956 of State of New Jersey NOLs and $131,214 of State of New Jersey R&D Credits for $2,824,228. In 2017, the Company sold $26,097,607 of State of New Jersey NOLs and $424,466 of State of New Jersey R&D Credits for $2,586,057. Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2018, there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception in 2009 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities. In September 2017, the IRS concluded auditing the Company’s 2015 tax year resulting in a no change letter. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for 2018. On December 22, 2017, H.R. 1 (also, known as the Tax Cuts and Jobs Act (the “Tax Act”)) was signed into law. Among its numerous changes to the Internal Revenue Code, the Tax Act reduces U.S. federal corporate tax rate to 21%. As a result, the most significant impact on its financial statements was the reduction of approximately $13.6 million for the deferred tax assets related to net operating losses and other assets. Such reduction was offset by changes to the Company’s valuation allowance as of December 31, 2017.We previously provided a provisional estimate of the effect of the Tax Act in our financial statements. In the fourth quarter of 2018, we completed our analysis to determine there was no additional effect of the Tax Act as of December 31, 2018. On July 1, 2018, the New Jersey governor signed into law a bill which included significant changes to the New Jersey taxation of corporations. Chiefly, this legislation imposes a 2.5% surtax on taxpayers with allocated net income over $1 million for 2018 and 2019, and a 1.5% surtax for taxpayers with allocated net income over $1 million for 2020 and 2021. In addition, the state is changing its filing requirements from separate entity reporting to combined reporting on a water’s edge basis. Further, there are changes to the state’s computation of its dividend received deduction and application of IRC section 163(j). The Company has considered these changes and does not believe this change in law will have a material impact due to availability of significant New Jersey NOL carried forward to set off against future taxable income and a full valuation allowance against the net deferred tax assets. |
Commitments and Contingencies |
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Commitments and Contingencies | Note 9 – Commitments and Contingencies Evonik The Company entered into an agreement with SurModics Pharmaceuticals, Inc. (“SurModics”) in October 2010 for the exclusive worldwide licensing of certain technology, patent rights and know-how rights related to the production of EG-1962, (the “Evonik Agreement”). This agreement was later transferred to Evonik Industries AG (“Evonik”) when it purchased substantially all the assets of SurModics. Pursuant to the Evonik Agreement, in exchange for the license, the Company agreed to make milestone payments totaling up to $14.75 million upon the achievement of certain development, regulatory and sales milestones detailed in the Evonik Agreement. The Company paid $0.25 million upon execution of the Evonik Agreement. In August 2016, the Company paid a milestone of $1.0 million after the first patient in the Phase 3 clinical trial of EG-1962 was dosed. In addition, the Evonik Agreement calls for the Company to pay royalties on sales of certain products based on a mid-single digit percentage of net sales. The Evonik Agreement provides for the reduction of royalties in certain limited circumstances. The term of the Evonik Agreement will continue until the expiration of the Company’s obligation to pay royalties to Evonik. Either party may terminate the Evonik Agreement due to material breach by the other party. Evonik may terminate the Evonik Agreement or convert it to a non-exclusive license, in either case upon giving the Company written notice, if the Company fails to use commercially reasonable efforts to hit certain specified development, regulatory and commercial milestones. Following the discontinuation of the NEWTON 2 trial for EG-1962, the Company has ceased all research and development efforts related to EG-1962 and suspended efforts on its other product candidates. As such, unless the Company resumes such development activities, it is unlikely that the Company will have any additional milestone or royalty obligations to Evonik in the future. Oakwood Amended and Restated Master Formulation Development Agreement In June 2017, the Company entered into an Amended and Restated Master Formulation Development Agreement (the “Restated Development Agreement”) with Oakwood Laboratories, L.L.C. (“Oakwood”), pursuant to which Oakwood agreed to continue to provide the Company with certain drug formulation development and non-commercial manufacturing services for EG-1962, in accordance with project plans that may be entered into from time to time. Under the Restated Development Agreement, the Company agreed to pay Oakwood to perform services under agreed upon project plans and to pay Oakwood up to an aggregate of $4.5 million. In July 2017 and April 2018, the Company paid $1.5 million and $0.5 million, respectively, of such aggregate amount in connection with entering into the Restated Development Agreement. The remaining $2.5 million was payable no later than April 1, 2019. The remaining payment was discounted to $2.375 million and paid pursuant to an accelerated payment agreement entered into in August 2018. As of December 31, 2018, there are no remaining payments under the Restated Development Agreement. As additional consideration for performance under the Restated Development Agreement and the Supply Agreement (as defined below), the Company agreed to pay Oakwood a royalty, during the Royalty Term, in an amount equal to a low single digit percentage of net sales of EG-1962, regardless of the manufacturer or supplier thereof. The “Royalty Term” is the period commencing upon the commercial launch of EG-1962 by the Company and continuing until twelve (12) years following such launch. The term of the Restated Development Agreement continues until the expiration or termination of the Supply Agreement, unless earlier terminated (the “Term”). The Company has the right to terminate project plans upon the occurrence of various circumstances described in the Restated Development Agreement. In the event that the Company terminates the most recent project plan prior to completion (which would include the Company’s decision to discontinue the development or commercialization of EG-1962), the Company must pay to Oakwood a termination fee for work completed. There are no payments due as of December 31, 2018. Oakwood Manufacturing and Supply Agreement Concurrent with its entry into the Restated Development Agreement, on June 30, 2017, the Company entered into a Manufacturing and Supply Agreement with Oakwood (the “Supply Agreement”), pursuant to which Oakwood agreed to manufacture and supply, and the Company agreed to purchase from Oakwood, EG-1962 in commercial quantities following the commercial launch of the product. Pursuant to the Supply Agreement, the Company agreed to pay Oakwood milestone payments that could total up to an aggregate of $2.25 million upon the achievement of certain development and regulatory milestones. The term of the Supply Agreement will terminate automatically upon the termination of the Restated Development Agreement for any reason. Additionally, either party may terminate the Supply Agreement upon a material breach by the other party that fails to be cured in the applicable cure period. Following the discontinuation of the NEWTON 2 trial for EG-1962, the Company has ceased all research and development efforts related to EG-1962 and suspended efforts on its other product candidates. As such, the Company may terminate the Supply Agreement immediately upon notice to Oakwood (which will also result in the automatic termination of the Restated Development Agreement); provided, that if it chooses to do so prior to completion of the most recent project plan attached to the Restated Development Agreement, the Company must pay to Oakwood a termination fee. While certain of the Company’s milestone payments to Oakwood will remain outstanding (including the termination fee in the event the Restated Development Agreement is terminated), unless the Company resumes such development activities, it is unlikely that the Company will be required to pay additional milestone or royalty payments to Oakwood in the future pursuant to the Restated Development Agreement or the Supply Agreement. Class Action Civil Litigation On April 23, 2018, a purported securities class action complaint was filed against Edge, Brian Leuthner (Edge’s President and Chief Executive Officer) and Andrew Saik (Edge’s Chief Financial Officer) in the United States District Court for the District of New Jersey, captioned Sanfilippo v. Edge Therapeutics, Inc., Case No. 2:18-cv-8236. The complaint alleged that Edge, Mr. Leuthner and Mr. Saik violated Section 10(b) of the Securities Exchange Act of 1934 by making false and misleading statements concerning Edge’s business, operations and prospects by failing to disclose that Edge’s developmental product EG-1962 allegedly would likely fail a futility analysis. The complaint also asserted a “control” person claim against Mr. Leuthner and Mr. Saik pursuant to Section 20(a) of the Exchange Act. The complaint was brought on behalf of all purchasers of Edge’s common stock between December 27, 2017, and March 27, 2018, and sought unspecified damages. On December 7, 2018, the court appointed Sam Kirkpatrick and Amos Bakouple lead plaintiffs for the putative class and appointed the firm Glancy, Prongay & Murray LLP lead counsel for the putative class. On February 14, 2019, lead plaintiffs voluntarily dismissed the action, without prejudice, as to all defendants. Edge and the Edge Board have been named as defendants in two individual lawsuits and two putative class action lawsuits regarding the merger, each of which alleges that the registration statement on Form S-4 (Registration No. 333-228937) filed by Edge on December 21, 2018 omitted material information with respect to the proposed transaction, which rendered the registration statement on Form S-4 false or misleading. The case captioned Michael Condon v. Edge Therapeutics et al., case no. 2:19-cv-00152, or the Condon Action, was filed on January 4, 2019 in the United States District Court for the District of New Jersey. The case captioned Adam Franchi et al. v. Edge Therapeutics et al., case no. 1:19-cv-00058-UNA, or the Franchi Action, was filed on January 9, 2019 in the United States District Court for the District of Delaware. The case captioned Jeffrey L. Prince v. Edge Therapeutics et al., case no. 1:19-cv-00280, or the Prince Action, was filed on January 10, 2019 in the United States District Court for the Southern District of New York. The case captioned Brian Foldenauer et al. v. Edge Therapeutics et al., case no. 1:19-cv-00280, or the Foldenauer Action, was filed on January 22, 2019 in the United States District Court for the District of Delaware. The causes of action set forth in each of the Condon Action, the Franchi Action, the Prince Action and the Foldenauer Action are (i) a claim against Edge and the Board for violations of Section 14(a) of the Exchange Act, as well as (ii) a claim against the Board for violations of Section 20(a) of the Exchange Act. In the Franchi Action, PDS was also named as a defendant in respect of the claim regarding violations of Section 20(a) of the Exchange Act. In each case, the plaintiffs seek, among other things, injunctive relief, rescissory damages, and an award of attorneys’ fees and expenses. Edge has voluntarily accepted service of process in the Franchi Action and Prince Action, but has not yet been served with process in the Condon Action or the Foldenauer Action. On January 18, 2019, the plaintiffs in the Prince Action filed a motion for a preliminary injunction barring any stockholder vote on the proposed merger until revised disclosures are made to Edge’s stockholders, and withdrew the motion for a preliminary injunction on February 1, 2019. Edge believes the litigation is without merit and in any event has been rendered moot by the final S-4 and subsequent disclosures. This litigation remains in the initial pleadings phase. Employment Matters The Company has entered into employment agreements with each of its executive officers. The agreements generally provide for, among other things, salary, bonus and severance payments. The employment agreements generally provide for between 12 months and 18 months of severance benefits to be paid to an executive (as well as certain potential bonus, COBRA and equity award benefits), subject to the effectiveness of a general release of claims, if the executive terminates his or her employment for good reason or if the Company terminates the executive’s employment without cause. Such severance payments may be provided for as long as 24 months in connection with a termination following a change of control. The continued provision of severance benefits is conditioned on each executive’s compliance with the terms of the Company’s confidentiality and invention and assignment agreement as well as his or her release of claims. On April 30, 2018, the Company initiated a corporate realignment to focus its efforts and resources on its ongoing operations and future plans that include a reduction in its workforce. This realignment was initiated following the Company’s announcement that it was discontinuing the Phase 3 NEWTON 2 study, based on the recommendation of an independent Data Monitoring Committee (the “DMC”) that the Company stop its Phase 3 NEWTON 2 study. The DMC recommendation was based on its conclusion that the study had a low probability of meeting its primary endpoint. During 2018, the Company reduced its workforce from 37 employees to 10 employees. In addition, the Company anticipates completing the payment of certain employee severance and benefits and certain retention compensation, as approved by the Compensation Committee of the Board of Directors, by the fourth quarter of fiscal year 2019. Leases Effective December 13, 2013, the Company entered into a 63 month lease for approximately 8,000 square feet of office space in Berkeley Heights, New Jersey. On February 18, 2016, the Company entered into a new 63 month lease for approximately 20,410 square feet of office space within the same office complex in Berkeley Heights, New Jersey. The terms of the new lease were structured so that the termination date of the December 13, 2013 lease coincided with the commencement date of the new lease on August 13, 2016. As a result of the lease termination, the Company wrote off $67,118 of leasehold improvements. Rent expense is recognized on a straight line basis where there are escalating payments, and was approximately $598,037 and $602,925 for the years ended December 31, 2018 and 2017, respectively. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018:
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Debt |
12 Months Ended |
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Dec. 31, 2018 | |
Debt [Abstract] | |
Debt | Note 10 – Debt On August 1, 2016, the Company entered into an Amended and Restated Loan and Security Agreement (the “Amended Loan Agreement”) with Hercules Capital, Inc., formerly known as Hercules Technology Growth Capital, Inc. (“Hercules”). Pursuant to the Amended Loan Agreement, the Company was able to borrow up to $20,000,000. At closing, the Company borrowed $15,000,000 of the amount available for draw under the Amended Loan Agreement (and received proceeds net of the amount then outstanding under the Original Loan Agreement, fees and expenses). On May 23, 2017, the Company elected to draw down the second tranche of $5 million. Pursuant to the Amended Loan Agreement, in March 2018, the Company made a payment of $90,000, which is equal to 1.5% of the total amounts funded under the Original Loan Agreement. In June 2018, the Company paid off its entire outstanding debt under the Amended Loan Agreement. The payment consisted of $20.0 million for the principal amount, an additional $0.9 million in back-end fees and $0.1 million in accrued and unpaid interest. As of December 31, 2018, the Company has no outstanding debt. |
Retirement Plan |
12 Months Ended |
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Dec. 31, 2018 | |
Retirement Plan [Abstract] | |
Retirement Plan | Note 11 – Retirement Plan The Company has a 401(k) defined contribution plan for the benefit for all employees and permits voluntary contributions by employees subject to IRS-imposed limitations. The 401K employer contribution for the 2018 and 2017 plan years were $159,559 and $258,383 respectively. |
Summary of Significant Accounting Policies (Policies) |
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Use of Estimates |
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Significant Risks and Uncertainties |
The Company’s operations are subject to a number of factors that may affect its operating results and financial condition. Such factors include, but are not limited to: the Company’s ability to consummate the merger with PDS, the Company’s ability to preserve its cash resources, the Company’s ability to add product candidates to its pipeline, the Company’s intellectual property, competition from products manufactured and sold or being developed by other companies, the price of, and demand for, Company products if approved for sale, the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, and the Company’s ability to raise capital. The Company currently has no commercially approved products and has ceased all research and development activities related to EG-1962 and suspended research for its other product candidates. As such, there can be no assurance that the Company’s future research and development programs will be successfully commercialized. Developing and commercializing a product requires significant time and capital and is subject to regulatory review and approval as well as competition from other biotechnology and pharmaceutical companies. |
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Cash Equivalents and Concentration of Cash Balance |
The Company considers all highly liquid securities with a maturity weighted average of less than three months to be cash equivalents. The Company’s cash and cash equivalents in bank deposit accounts, at times, may exceed federally insured limits. |
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Property and Equipment |
Property and equipment is recorded at cost. Depreciation is recorded for property and equipment using the straight-line method over the estimated useful lives of three to five years. Leasehold improvements are amortized over the shorter of the estimated useful life or term of the underlying lease. The Company reviews the recoverability of all long-lived assets, including the related useful lives, whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset might not be recoverable. |
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Research and Development |
Costs incurred in connection with research and development activities are expensed as incurred. These costs include licensing fees to use certain technology in the Company’s research and development projects as well as fees paid to consultants and various entities that perform certain research and testing on behalf of the Company. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data, such as patient enrollment, clinical site activations or information provided by vendors on their actual costs incurred. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred. Following the DMC’s recommendation that the NEWTON 2 Trial for EG-1962 be stopped, the Company decided to discontinue the NEWTON 2 study and took steps to notify health authorities and clinical investigators participating in the study. The Company has ceased all further research and development activities for EG-1962 and suspended research for its other product candidates and implemented operating cost reductions and organizational restructurings, including a reduction in the Company’s workforce, to preserve its cash resources and better align the organization with its current operating plan. The estimated costs associated with the study discontinuance have been accrued as of December 31, 2018. |
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Patent Costs |
The Company expenses patent costs as incurred and classifies such costs as general and administrative expenses in the accompanying statements of operations and comprehensive loss. In light of the Company’s cessation of all further research and development activities for EG-1962 and suspension of research for its other product candidates, the Company has substantially scaled back its patent prosecution activities. |
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Stock-Based Compensation |
The Company measures employee stock-based awards at grant-date fair value and recognizes employee compensation expense on a straight-line basis over the vesting period of the award. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions, including, for stock options, the expected life of the option, and expected stock price volatility. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards. The expected life of stock options was estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and employment duration for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant. For stock price volatility, the Company uses comparable public companies as a basis for its expected volatility to calculate the fair value of options grants. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected life of the option. |
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Net Loss per Common Share |
Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted average common shares outstanding during the period. For all periods presented, the common shares underlying the preferred stock, common stock options and warrants have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted average shares outstanding used to calculate both basic and diluted loss per common share are the same. The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as they would be anti-dilutive:
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Income Taxes |
The Company provides for deferred income taxes under the asset and liability method, which requires deferred tax assets and liabilities to be recognized for the future tax consequences attributable to net operating loss carryforwards and for differences between the financial statement carrying amounts and the respective tax bases of assets and liabilities. Deferred tax assets are reduced if necessary by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
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Fair Value of Financial Instruments |
Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are as follows:
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Subsequent Events |
Subsequent events have been evaluated through the date these financial statements were issued. |
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New Accounting Standards Not Yet Adopted |
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842).” The new standard requires organizations that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases (see Note 9). This standard is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The standard requires a modified retroactive approach, but use of certain practical expedients is permitted as per ASU 2018-11. The Company expects to use the package of practical expedients that allows it to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any expired or existing leases. The Company additionally expects to use the practical expedient that allows it to treat the lease and non-lease components of its leases as a single component. The Company adopted this ASU on January 1, 2019. The impact of adoption on its financial statements will be to record a Right to Use Asset and Lease Liability of $1.5 million. |
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New Accounting Standards Adopted |
In March 2016, the FASB issued ASU No. 2016-09 which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Public companies will be required to adopt this standard in annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods. The Company adopted this ASU on January 1, 2017. The impact of adopting ASU 2016-09 resulted in the following:
There were no other material impacts to our consolidated financial statements as a result of adopting this updated standard. |
Nature of Operations (Tables) |
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Nature of Operations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Activity | The restructuring activity during 2018 is as follows:
(1) Excludes non-cash stock based retention compensation of $729,470 expensed to date through restructuring expenses. |
Summary of Significant Accounting Policies (Tables) |
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Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Potentially Dilutive Securities Excluded from Computations of Diluted Weighted Average Shares Outstanding | The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding as they would be anti-dilutive:
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Fair Value of Financial Instruments (Tables) |
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Fair Value of Financial Instruments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments |
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Property and Equipment (Tables) |
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Property and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and equipment is summarized as follows:
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Accrued Expenses (Tables) |
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Accrued Expenses [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued Expenses and Other Liabilities | Accrued expenses and other liabilities consist of the following:
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Stock Options (Tables) |
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Stock Options [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Qualified Stock Options | The Company issued the following non-qualified options to purchase shares of common stock to its newly appointed executives who are still employed by the Company. The awards were granted outside of the Company’s 2014 Equity Incentive Plan and vest over four years with 25% vesting one year following the date of hire, and the remaining 75% vesting in 36 equal monthly installments thereafter, subject to continued service to the Company through each vesting date and subject to acceleration or forfeiture upon the occurrence of certain events as set forth in the applicable option agreement and employment agreement. The grant awards were made pursuant to the Nasdaq inducement grant exception as a material component of employment compensation.
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Stock-Based Compensation Expense | The Company’s stock-based compensation expense was recognized in operating expense as follows:
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Assumptions Used to Value Stock Options Granted | The fair value of options granted during the years ended December 31, 2018 and 2017 was estimated using the Black-Scholes option valuation model utilizing the following assumptions:
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Stock Option Activity | The following table summarizes the number of options outstanding and the weighted average exercise price:
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RSU Activity | The following table summarizes the number of RSUs outstanding and the weighted average grant price:
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Income Taxes (Tables) |
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Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Statutory to Effective Federal Income Tax Rate Reconciliation | A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate is as follows:
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Deferred Tax Assets | The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows:
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Commitments and Contingencies (Tables) |
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Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||
Future Minimum Rental Payments Required under Operating Leases | The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining non-cancelable lease terms in excess of one year as of December 31, 2018:
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Nature of Operations (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
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Jun. 30, 2018 |
Dec. 31, 2018 |
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Nature of Operations [Abstract] | ||
Severance costs | $ 4,000,000 | |
Financial advisor fees | 2,300,000 | |
Restructuring Reserve [Roll Forward] | ||
Restructuring reserve at beginning of period | $ 0 | |
Initial restructuring charge | $ 6,300,000 | 6,276,563 |
Incurred legal fees | 1,447,079 | |
Severance revisions | 259,529 | |
Retention compensation | 1,201,568 | |
Restructuring expenses to date | 9,184,739 | |
Payment of legal fees | (493,404) | |
Payment of retention compensation | (56,925) | |
Payment of advisor fees | (500,000) | |
Payment of severance benefits | (2,571,224) | |
Restructuring reserve at end of period | 5,563,186 | |
Non-cash stock-based retention compensation | $ 729,470 |
Fair Value of Financial Instruments (Details) - USD ($) |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
|
Fair Value Transfers Between Levels [Abstract] | ||
Transfers from Level 1 to Level 2, assets | $ 0 | $ 0 |
Transfers from Level 2 to Level 1, assets | 0 | 0 |
Transfers into Level 3, assets | 0 | 0 |
Transfers out of Level 3, assets | 0 | 0 |
Fair Value of Financial Instruments [Abstract] | ||
Cash and cash equivalents | 34,645,549 | 88,067,647 |
Quoted Prices in Active Markets (Level 1) [Member] | ||
Fair Value of Financial Instruments [Abstract] | ||
Cash and cash equivalents | 34,645,549 | 88,067,647 |
Quoted Prices in Inactive Markets (Level 2) [Member] | ||
Fair Value of Financial Instruments [Abstract] | ||
Cash and cash equivalents | 0 | 0 |
Significant Unobservable Inputs (Level 3) [Member] | ||
Fair Value of Financial Instruments [Abstract] | ||
Cash and cash equivalents | $ 0 | $ 0 |
Property and Equipment (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Property and Equipment [Abstract] | ||
Property and equipment | $ 878,616 | $ 3,729,161 |
Less accumulated depreciation | (451,664) | (305,281) |
Property and equipment, net | 426,952 | 3,423,880 |
Equipment impairment charge | 2,822,581 | 0 |
Furniture and Equipment [Member] | ||
Property and Equipment [Abstract] | ||
Property and equipment | 439,620 | 564,596 |
Leasehold Improvements [Member] | ||
Property and Equipment [Abstract] | ||
Property and equipment | 438,996 | 438,996 |
Construction in Process [Member] | ||
Property and Equipment [Abstract] | ||
Property and equipment | $ 0 | $ 2,725,569 |
Accrued Expenses (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accrued Expenses [Abstract] | ||
Accrued research and development costs | $ 76,600 | $ 2,857,025 |
Accrued professional fees | 69,083 | 267,646 |
Accrued compensation | 27,405 | 1,886,638 |
Accrued other | 213,074 | 385,896 |
Deferred rent | 32,957 | 25,000 |
Total | $ 419,119 | $ 5,422,205 |
Stock Warrants (Details) - Warrants Issued in Connection with Certain Preferred Stock Sales and Debt Issuances [Member] - $ / shares |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Oct. 06, 2015 |
|
Stock Warrants [Abstract] | ||||
Number of shares of stock that can be purchased with warrants (in shares) | 600,184 | |||
Warrants exercised (in shares) | 296,057 | 166,762 | 58,769 | |
Issuance of common stock from exercise of warrants (in shares) | 175,999 | 94,200 | 44,032 | |
Warrants exercisable (in shares) | 78,596 | |||
Minimum [Member] | ||||
Stock Warrants [Abstract] | ||||
Exercise price of warrants (in dollars per share) | $ 5.79 | |||
Maximum [Member] | ||||
Stock Warrants [Abstract] | ||||
Exercise price of warrants (in dollars per share) | $ 12.10 |
Stock Options, Non-qualified Options (Details) - Nonqualified Stock Options [Member] |
12 Months Ended | ||
---|---|---|---|
Nov. 01, 2017
shares
|
Nov. 16, 2015
shares
|
Dec. 31, 2018
Installment
|
|
Executives [Member] | |||
Stock Options [Abstract] | |||
Vesting period | 4 years | ||
Executives [Member] | Vesting One Year Following Date of Hire [Member] | |||
Stock Options [Abstract] | |||
Vesting percentage | 25.00% | ||
Executives [Member] | Vesting in 36 Monthly Installments Thereafter [Member] | |||
Stock Options [Abstract] | |||
Vesting percentage | 75.00% | ||
Number of monthly installments for vesting | Installment | 36 | ||
SVP, General Counsel and Secretary [Member] | |||
Stock Options [Abstract] | |||
Issue date | Nov. 16, 2015 | ||
25% vesting date | Oct. 30, 2016 | ||
Number of options (in shares) | 80,000 | ||
Chief Financial Officer [Member] | |||
Stock Options [Abstract] | |||
Issue date | Nov. 01, 2017 | ||
25% vesting date | Oct. 31, 2018 | ||
Number of options (in shares) | 200,000 |
Stock Options, Stock-Based Compensation Expense (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Stock-Based Compensation [Abstract] | ||
Stock-based compensation expense | $ 7,469,442 | $ 6,182,841 |
Research and Development [Member] | ||
Stock-Based Compensation [Abstract] | ||
Stock-based compensation expense | 2,503,889 | 2,687,975 |
General and Administrative [Member] | ||
Stock-Based Compensation [Abstract] | ||
Stock-based compensation expense | 4,236,083 | 3,494,866 |
Retention Compensation [Member] | ||
Stock-Based Compensation [Abstract] | ||
Stock-based compensation expense | $ 729,470 | $ 0 |
Stock Options, Assumptions Used to Value Stock Options Granted (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Assumptions Used in Determining Fair Value of Stock Options Granted [Abstract] | ||
Volatility | 86.33% | 88.87% |
Risk-free interest rate | 2.23% | 1.88% |
Expected term | 6 years | 6 years |
Dividend rate | 0.00% | 0.00% |
Fair value of option on grant date (in dollars per share) | $ 5.08 | $ 6.93 |
Stock Options, RSU Activity (Details) |
12 Months Ended |
---|---|
Dec. 31, 2018
USD ($)
$ / shares
shares
| |
Stock Options [Abstract] | |
Number of shares of common stock received with an RSU (in shares) | 1 |
Unamortized Stock Compensation Expense [Abstract] | |
Unamortized stock compensation expense | $ | $ 236,534 |
RSUs [Member] | |
Number of RSUs [Roll Forward] | |
RSUs outstanding, beginning balance (in shares) | 0 |
Granted (in shares) | 601,394 |
Released (in shares) | (91,432) |
Forfeited (in shares) | 0 |
RSUs outstanding, ending balance (in shares) | 509,962 |
Weighted Average Grant Price [Roll Forward] | |
RSUs outstanding, beginning balance (in dollars per share) | $ / shares | $ 0 |
Granted (in dollars per shares)) | $ / shares | 0.85 |
Released (in dollars per share) | $ / shares | 0.85 |
Forfeited (in dollars per share)) | $ / shares | 0 |
RSUs outstanding, ending balance (in dollars per share) | $ / shares | $ 0.85 |
Unamortized Stock Compensation Expense [Abstract] | |
Period for recognition | 7 months 13 days |
Debt (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|---|
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2018 |
Dec. 31, 2017 |
May 23, 2017 |
Aug. 01, 2016 |
|
Loan and Security Agreement [Abstract] | ||||||
Payments for debt issuance costs | $ 990,000 | $ 0 | ||||
Repayments of debt | 20,000,000 | $ 0 | ||||
Outstanding debt | $ 0 | |||||
Original Loan Agreement [Member] | ||||||
Loan and Security Agreement [Abstract] | ||||||
Payments for debt issuance costs | $ 90,000 | |||||
Additional interest rate charged on due date | 1.50% | |||||
Amended Loan Agreement [Member] | ||||||
Loan and Security Agreement [Abstract] | ||||||
Aggregate principal amount of borrowing capacity | $ 20,000,000 | |||||
Payments for debt issuance costs | $ 900,000 | |||||
Repayments of debt | 20,000,000 | |||||
Payment for accrued and unpaid interest | $ 100,000 | |||||
First Term Loan under Amended Loan Agreement [Member] | ||||||
Loan and Security Agreement [Abstract] | ||||||
Face amount | $ 15,000,000 | |||||
Second Term Loan under Amended Loan Agreement [Member] | ||||||
Loan and Security Agreement [Abstract] | ||||||
Face amount | $ 5,000,000 |
Retirement Plan (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Retirement Plan [Abstract] | ||
401(k) employer contribution | $ 159,559 | $ 258,383 |
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