(Mark One) | |
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2019 | |
OR | |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Transition Period from to |
Delaware (State or Other Jurisdiction of Incorporation or Organization) | 46-5087339 (I.R.S. Employer Identification Number) |
Large Accelerated Filer o | Accelerated Filer o | Non-accelerated Filer ý | Smaller Reporting Company ý | Emerging Growth Company ý | ||||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $ 0.0001 par value | FLKS | The Nasdaq Stock Market LLC |
Page | ||
Item 1. | Financial Statements |
March 31, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 7,297,468 | $ | 9,829,624 | |||
Restricted cash | — | 126,595 | |||||
Accounts receivable | 9,069 | 9,939 | |||||
Inventory | 164,597 | 186,920 | |||||
Prepaid expenses and other current assets | 675,277 | 162,088 | |||||
Total current assets | 8,146,411 | 10,315,166 | |||||
Property and equipment, net | 38,008 | 74,460 | |||||
Total assets | $ | 8,184,419 | $ | 10,389,626 | |||
Liabilities and stockholders' equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 186,349 | $ | 342,530 | |||
Accrued expenses and other current liabilities | 724,769 | 764,340 | |||||
Total current liabilities | 911,118 | 1,106,870 | |||||
Total liabilities | 911,118 | 1,106,870 | |||||
Stockholders' equity: | |||||||
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at March 31, 2019 and December 31, 2018; none issued or outstanding at March 31, 2019 and December 31, 2018 | — | — | |||||
Common stock, $0.0001 par value; 100,000,000 shares authorized at March 31, 2019 and December 31, 2018; 18,069,476 and 18,069,476 shares issued at March 31, 2019 and December 31, 2018, and 18,068,017 and 18,067,392 shares outstanding at March 31, 2019 and December 31, 2018, respectively | 1,807 | 1,807 | |||||
Additional paid-in capital | 142,463,199 | 142,242,224 | |||||
Accumulated deficit | (135,191,705 | ) | (132,961,275 | ) | |||
Total stockholders' equity | 7,273,301 | 9,282,756 | |||||
Total liabilities and stockholders' equity | $ | 8,184,419 | $ | 10,389,626 |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||
Net product revenue | $ | 104,220 | $ | 176,255 | |||
Other revenue | 757 | 2,327 | |||||
Total revenue | 104,977 | 178,582 | |||||
Costs and expenses: | |||||||
Cost of product revenue | 47,329 | 83,934 | |||||
Research and development | 1,706 | 4,680,181 | |||||
Selling, general and administrative | 2,299,585 | 3,697,287 | |||||
Total costs and expenses | 2,348,620 | 8,461,402 | |||||
Loss from operations | (2,243,643 | ) | (8,282,820 | ) | |||
Interest income, net | 13,213 | 59,593 | |||||
Net loss | $ | (2,230,430 | ) | $ | (8,223,227 | ) | |
Net loss attributable to common stockholders | $ | (2,230,430 | ) | $ | (8,223,227 | ) | |
Net loss per share attributable to common stockholders — basic and diluted | $ | (0.12 | ) | $ | (0.46 | ) | |
Weighted-average number of common shares outstanding — basic and diluted | 18,067,807 | 17,893,912 |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||
Net loss | $ | (2,230,430 | ) | $ | (8,223,227 | ) | |
Other comprehensive gain (loss): | |||||||
Unrealized gain on available-for-sale securities | — | 1,340 | |||||
Comprehensive loss | $ | (2,230,430 | ) | $ | (8,221,887 | ) |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||
Operating activities | |||||||
Net loss | $ | (2,230,430 | ) | $ | (8,223,227 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
Depreciation expense | 36,452 | 64,066 | |||||
Stock-based compensation expense | 220,975 | 908,940 | |||||
Amortization and accretion on investments | — | 12,231 | |||||
Other non-cash items | — | (3,480 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | 870 | 4,514 | |||||
Inventory | 22,323 | (3,297 | ) | ||||
Prepaid expenses and other current assets | (513,189 | ) | (499,023 | ) | |||
Accounts payable | (156,181 | ) | 236,962 | ||||
Accrued expenses and other current liabilities | (39,571 | ) | (1,895,468 | ) | |||
Deferred rent | — | (14,705 | ) | ||||
Net cash used in operating activities | (2,658,751 | ) | (9,412,487 | ) | |||
Investing activities | |||||||
Purchases of marketable securities | — | (1,997,751 | ) | ||||
Proceeds from maturities and sales of marketable securities | — | 14,117,184 | |||||
Proceeds from sales of property and equipment | — | 500 | |||||
Net cash provided by investing activities | — | 12,119,933 | |||||
Financing activities | |||||||
Proceeds from exercise of common stock | — | 54,913 | |||||
Net cash provided by financing activities | — | 54,913 | |||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (2,658,751 | ) | 2,762,359 | ||||
Cash, cash equivalents and restricted cash at beginning of period | 9,956,219 | 19,312,631 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 7,297,468 | $ | 22,074,990 |
Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' Equity | |||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||
Balance at December 31, 2017 | — | $ | — | 17,797,178 | $ | 1,780 | $ | 140,184,630 | $ | (1,247 | ) | $ | (111,079,275 | ) | $ | 29,105,888 | ||||||||||||||
Vesting of restricted common stock | — | — | 171,029 | 17 | (17 | ) | — | — | — | |||||||||||||||||||||
Issuance of common stock from option exercises | — | — | 12,645 | 1 | 54,912 | — | — | 54,913 | ||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 908,940 | — | — | 908,940 | ||||||||||||||||||||||
Unrealized gain on available-for-sale securities | — | — | — | — | — | 1,340 | — | 1,340 | ||||||||||||||||||||||
Adjustment related to adoption of new accounting pronouncement using the modified retrospective transition method | — | — | — | — | — | — | 40,217 | 40,217 | ||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (8,223,227 | ) | (8,223,227 | ) | ||||||||||||||||||||
Balance at March 31, 2018 | — | $ | — | 17,980,852 | $ | 1,798 | $ | 141,148,465 | $ | 93 | $ | (119,262,285 | ) | $ | 21,888,071 | |||||||||||||||
Balance at December 31, 2018 | — | $ | — | 18,067,392 | $ | 1,807 | $ | 142,242,224 | $ | — | $ | (132,961,275 | ) | $ | 9,282,756 | |||||||||||||||
Vesting of restricted common stock | — | — | 625 | — | — | — | — | — | ||||||||||||||||||||||
Issuance of common stock from option exercises | — | — | — | — | — | — | — | — | ||||||||||||||||||||||
Stock-based compensation expense | — | — | — | — | 220,975 | — | — | 220,975 | ||||||||||||||||||||||
Net loss | — | — | — | — | — | — | (2,230,430 | ) | (2,230,430 | ) | ||||||||||||||||||||
Balance at March 31, 2019 | — | $ | — | 18,068,017 | $ | 1,807 | $ | 142,463,199 | $ | — | $ | (135,191,705 | ) | $ | 7,273,301 |
1. | Identify the contract with a customer |
2. | Identify the performance obligations in the contract |
3. | Determine the transaction price |
4. | Determine the satisfaction of performance obligation |
Level 1 | Level 2 | Level 3 | Balance as of March 31, 2019 | ||||||||||||
Cash equivalents | $ | 2,346,856 | $ | — | $ | — | $ | 2,346,856 | |||||||
$ | 2,346,856 | $ | — | $ | — | $ | 2,346,856 |
Level 1 | Level 2 | Level 3 | Balance as of December 31, 2018 | ||||||||||||
Cash equivalents | $ | 2,333,771 | $ | — | $ | — | $ | 2,333,771 | |||||||
$ | 2,333,771 | $ | — | $ | — | $ | 2,333,771 |
March 31, 2019 | December 31, 2018 | ||||||
Cash and cash equivalents | $ | 7,297,468 | $ | 9,829,624 | |||
Restricted cash | — | 126,595 | |||||
Cash, cash equivalents and restricted cash shown on the condensed consolidated statement of cash flows | $ | 7,297,468 | $ | 9,956,219 |
March 31, 2019 | December 31, 2018 | ||||||
Raw materials | $ | 7,247 | $ | 7,247 | |||
Finished goods | 157,350 | 179,673 | |||||
Total inventory | $ | 164,597 | $ | 186,920 |
March 31, 2019 | December 31, 2018 | ||||||
Professional fees | $ | 681,360 | $ | 269,544 | |||
Payroll and other employee-related costs | 36,239 | 417,997 | |||||
Consumer product-related costs | 7,170 | 5,360 | |||||
Restructuring-related costs | — | 68,593 | |||||
Other research and development-related costs | — | 2,846 | |||||
Total | $ | 724,769 | $ | 764,340 |
Accrued restructuring balance as of December 31, 2018 | $ | 68,593 | |
Adjustments: | |||
Employee termination benefits | (11,228 | ) | |
Payments | (57,365 | ) | |
Accrued restructuring balance as of March 31, 2019 | $ | — |
Number of Shares | Weighted-Average Grant Date Fair Value | |||||
Unvested at December 31, 2018 | 2,084 | $ | 11.05 | |||
Issued | — | — | ||||
Vested | (625 | ) | 11.05 | |||
Forfeited | — | — | ||||
Unvested at March 31, 2019 | 1,459 | $ | 11.05 |
Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||
Outstanding at December 31, 2018 | 2,320,981 | $ | 4.10 | 7.61 | $ | — | ||||||
Granted | — | — | ||||||||||
Exercised | — | — | ||||||||||
Forfeited | — | — | ||||||||||
Expired | (23,945 | ) | 4.41 | |||||||||
Outstanding at March 31, 2019 | 2,297,036 | $ | 4.10 | 7.36 | $ | — | ||||||
Exercisable at March 31, 2019 | 1,237,034 | $ | 5.31 | 6.09 | $ | — | ||||||
Vested or expected to vest at March 31, 2019 | 2,297,036 | $ | 4.10 | 7.36 | $ | — |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||
Research and development | $ | 19,442 | $ | 386,537 | |||
Selling, general and administrative | 201,533 | 522,403 | |||||
Total | $ | 220,975 | $ | 908,940 |
March 31, 2019 | March 31, 2018 | ||||
Options to purchase common stock | 2,297,036 | 3,128,519 | |||
Unvested restricted common stock | 1,459 | 3,959 | |||
Total | 2,298,495 | 3,132,478 |
• | The Consumer Operations segment, which reflects the total revenue and costs and expenses related to HOTSHOT and the Company's consumer operations. |
• | The Drug Development segment, which reflects the costs and expenses related to the Company's efforts to develop innovative and proprietary drug products; previously to treat muscle cramps, spasms and spasticity associated with severe neurological conditions. |
Three Months Ended March 31, 2019 | Consumer Operations | Drug Development | Corporate | Consolidated | ||||||
Total revenue | $ | 104,977 | — | — | $ | 104,977 | ||||
Interest income, net | $ | — | — | 13,213 | $ | 13,213 | ||||
Loss from operations | $ | 53,108 | 384 | 2,190,151 | $ | 2,243,643 |
Three Months Ended March 31, 2018 | Consumer Operations | Drug Development | Corporate | Consolidated | ||||||
Total revenue | $ | 178,582 | — | — | $ | 178,582 | ||||
Interest income, net | $ | — | — | 59,593 | $ | 59,593 | ||||
Loss from operations | $ | 1,257,306 | 4,664,077 | 2,361,437 | $ | 8,282,820 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | Dissolve and liquidate our assets. If, for any reason, the merger does not close, our board of directors will most likely conclude that it is in the best interest of stockholders to dissolve the Company and liquidate our assets. In that event, the Company would be required to pay all of our debts and contractual obligations, and to set aside certain reserves for potential future claims. There would be no assurances as to the amount or timing of available cash remaining to distribute to stockholders after paying our obligations and setting aside funds for reserves. |
• | Pursue another strategic transaction. We may resume the process of evaluating a potential strategic transaction in order to attempt another strategic transaction like the merger. |
• | Operate the consumer business. Although less likely than the alternatives above, our board of directors may elect to continue to market and sell HOTSHOT and continue to operate our consumer business. |
• | The Consumer Operations segment, which reflects the total revenue and costs and expense for HOTSHOT and our consumer operations; and |
• | The Drug Development segment, which reflects the costs and expenses related to our efforts to develop innovative and proprietary drug products; previously to treat muscle cramps, spasms and spasticity associated with severe neurological conditions. |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | Change | ||||||||||||
$ | % | |||||||||||||
Net product revenue | $ | 104,220 | $ | 176,255 | $ | (72,035 | ) | (41 | )% | |||||
Other revenue | 757 | 2,327 | (1,570 | ) | (67 | )% | ||||||||
Total revenue | 104,977 | 178,582 | (73,605 | ) | (41 | )% | ||||||||
Costs and expenses: | ||||||||||||||
Cost of product revenue | 47,329 | 83,934 | (36,605 | ) | (44 | )% | ||||||||
Research and development | 1,706 | 4,680,181 | (4,678,475 | ) | (100 | )% | ||||||||
Selling, general and administrative | 2,299,585 | 3,697,287 | (1,397,702 | ) | (38 | )% | ||||||||
Total costs and expenses | 2,348,620 | 8,461,402 | (6,112,782 | ) | (72 | )% | ||||||||
Loss from operations | (2,243,643 | ) | (8,282,820 | ) | 6,039,177 | (73 | )% | |||||||
Interest income, net | 13,213 | 59,593 | (46,380 | ) | (78 | )% | ||||||||
Net loss | $ | (2,230,430 | ) | $ | (8,223,227 | ) | $ | 5,992,797 | (73 | )% |
• | $2.9 million decrease in clinical trial costs, primarily related to the decision to end our Phase 2 clinical trials of FLX-787 in MND and CMT, and other supporting studies in the second quarter of 2018; |
• | $0.6 million decrease in salary and benefit costs due to the elimination of headcount in 2019 compared to the prior year; |
• | $0.4 million decrease in manufacturing and formulation of drug product to support clinical studies, the majority of which ceased during the second quarter of 2018; |
• | $0.4 million decrease related to stock-based compensation expense, related to the elimination of headcount compared to the prior year and the final vesting of restricted common stock issued to the founders in 2014 during the first quarter of 2018; |
• | $0.2 million decrease in consulting expenses due to the reduction of our research and development activities due to our ongoing strategic assessment; and |
• | $0.2 million decrease in other expenses, mainly insurance and office related costs, related to eliminated headcount compared to the prior year, as these expenses are allocated. |
• | $0.8 million decrease in marketing and consulting costs within our Consumer Operations segment for HOTSHOT due to decreased marketing and cash conservation efforts; |
• | $0.6 million decrease related to salaries and benefits as Consumer Operations and corporate headcount decreased from the prior year; |
• | $0.3 million decrease related to stock-based compensation expense, related to decreased headcount compared to the prior year and the final vesting of restricted common stock issued to the founders in 2014 during the first quarter of 2018; |
• | $0.1 million decrease in employee travel and recruiting costs, related to decreased Consumer Operations and corporate headcount from the prior year; |
• | $0.1 million decrease in office and other expenses mainly due to the termination of our lease agreement for our former corporate headquarters in Boston, MA, and other cost saving initiatives; and |
• | $0.5 million increase in consulting and legal and professional expenses related to $1.2 million in merger related fees, which consisted of $0.7 million of legal and professional fees and $0.5 million of banking fees incurred in Q1 2019, offset by a reduction of $0.7 million as we decreased activity due to our ongoing strategic assessment. |
Three Months Ended March 31, 2019 | Three Months Ended March 31, 2018 | ||||||
Net cash (used in) provided by: | |||||||
Operating activities | $ | (2,658,751 | ) | $ | (9,412,487 | ) | |
Investing activities | — | 12,119,933 | |||||
Financing activities | — | 54,913 | |||||
Net decrease in cash and cash equivalents | $ | (2,658,751 | ) | $ | 2,762,359 |
• | receiving regulatory approval to conduct clinical trials; |
• | successfully enrolling, and completing, clinical trials; |
• | receiving marketing approvals from applicable regulatory authorities; |
• | establishing arrangements with third-party manufacturers; |
• | obtaining and maintaining patent and trade secret protection and regulatory exclusivity; and |
• | launching commercial sales of our products, if and when approved, whether alone or in collaboration with others. |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits |
Exhibit number | Description of Document | ||
2.1 | (1) | ||
3.1 | (2) | ||
3.2 | (3) | ||
4.1 | (4) | ||
4.2 | (5) | ||
31.1 | |||
31.2 | |||
32.1 | |||
101 | The following materials from Flex Pharma, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in XBRL (eXtensible Business Reporting Language):(i) Unaudited Condensed Consolidated Balance Sheets, (ii) Unaudited Condensed Consolidated Statements of Operations (iii) Unaudited Condensed Consolidated Statements of Comprehensive Loss, (iv) Unaudited Condensed Consolidated Statements of Cash Flows, and (v) Notes to Unaudited Condensed Consolidated Financial Statements. |
FLEX PHARMA, INC. | |||||
By: | /s/ William McVicar | ||||
William McVicar, Ph.D. President and Chief Executive Officer (Principal Executive Officer) | |||||
By: | /s/ John McCabe | ||||
John McCabe Chief Financial Officer (Principal Financial and Accounting Officer) | |||||
Date: | May 1, 2019 |
/s/ William McVicar | ||
William McVicar, Ph.D. | ||
May 1, 2019 | President and Chief Executive Officer (Principal Executive Officer) |
/s/ John McCabe | ||
John McCabe | ||
May 1, 2019 | Chief Financial Officer (Principal Financial and Accounting Officer) |
/s/ William McVicar | ||
William McVicar, Ph.D. | ||
May 1, 2019 | President and Chief Executive Officer (Principal Executive Officer) |
/s/ John McCabe | ||
John McCabe | ||
May 1, 2019 | Chief Financial Officer (Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 26, 2019 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Flex Pharma, Inc. | |
Entity Central Index Key | 0001615219 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 18,069,476 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized (shares) | 10,000,000 | 10,000,000 |
Preferred stock, shares issued (shares) | 0 | 0 |
Preferred stock, shares outstanding (shares) | 0 | 0 |
Common stock, par value (in usd per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized (shares) | 100,000,000 | 100,000,000 |
Common stock, shares issued (shares) | 18,069,476 | 18,069,476 |
Common stock, shares outstanding (shares) | 18,068,017 | 18,067,392 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Total revenue | $ 104,977 | $ 178,582 |
Costs and expenses: | ||
Cost of product revenue | 47,329 | 83,934 |
Research and development | 1,706 | 4,680,181 |
Selling, general and administrative | 2,299,585 | 3,697,287 |
Total costs and expenses | 2,348,620 | 8,461,402 |
Loss from operations | (2,243,643) | (8,282,820) |
Interest income, net | 13,213 | 59,593 |
Net loss | (2,230,430) | (8,223,227) |
Net loss attributable to common stockholders | $ (2,230,430) | $ (8,223,227) |
Net loss per share attributable to common stockholders - basic and diluted (in usd per share) | $ (0.12) | $ (0.46) |
Weighted-average number of common shares outstanding — basic and diluted (shares) | 18,067,807 | 17,893,912 |
Net product revenue | ||
Total revenue | $ 104,220 | $ 176,255 |
Other revenue | ||
Total revenue | $ 757 | $ 2,327 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (2,230,430) | $ (8,223,227) |
Other comprehensive gain (loss): | ||
Unrealized gain on available-for-sale securities | 0 | 1,340 |
Comprehensive loss | $ (2,230,430) | $ (8,221,887) |
Organization and operations |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Organization and operations | Organization and operations The Company Flex Pharma Inc. (the “Company”) is a biotechnology company that was previously focused on developing innovative and proprietary treatments for muscle cramps, spasms and spasticity associated with severe neurological conditions. In June 2018, the Company announced that it was ending its ongoing Phase 2 clinical trials of its lead drug product candidate, FLX-787, in patients with motor neuron disease, or MND, primarily with amyotrophic lateral sclerosis, or ALS, and in patients with Charcot-Marie-Tooth disease, or CMT, due to oral tolerability concerns observed in both studies. The wind-down of the activities associated with these studies was completed in the third quarter of 2018. In 2016, the Company launched its consumer product, HOTSHOT®, to prevent and treat exercise-associated muscle cramps, or EAMCs. The Company continues to market and sell HOTSHOT to endurance athletes who drink it before, during and after exercise to prevent and treat EAMCs. In June 2018, the Company initiated a process to explore a range of strategic alternatives for enhancing stockholder value, including the potential sale or merger of the Company. Wedbush PacGrow was engaged to act as its strategic financial advisor at that time. The Company also announced the restructuring of its organization to reduce the Company's cost structure. In connection with the restructuring plan, the Company reduced its workforce by approximately 60%, with the reduction completed as of September 30, 2018. Following an extensive process of evaluating strategic alternatives for the Company, including identifying and reviewing potential candidates for a strategic acquisition or other transaction, on January 3, 2019, the Company entered into an Agreement and Plan of Merger, or the Merger Agreement, with Salarius Pharmaceuticals, LLC, or Salarius, under which the privately-held Salarius will merge with a wholly-owned subsidiary of the Company. If the merger is completed, the business of Salarius will continue as the business of the combined company. The Company operates as two reportable segments, Consumer Operations and Drug Development. See Note 12 for additional discussion and information on the reportable segments. Liquidity The Company incurred a loss of $2,230,430 for the three months ended March 31, 2019, and had an accumulated deficit of $135,191,705 as of March 31, 2019. The Company had unrestricted cash and cash equivalents of $7,297,468 at March 31, 2019. The Company's operating plan assumes limited research and development activities and that the Consumer Operations segment will continue to sell HOTSHOT. In the event that the Company does not complete the merger with Salarius, the Company (i) may elect to pursue a dissolution and liquidation of the Company, (ii) pursue another strategic transaction or (iii) may continue to market HOTSHOT and operate its consumer business. If the Company dissolves and liquidates, the Company's common stockholders may lose their entire investment. The amount of assets available for distribution to the Company's stockholders will depend heavily on the timing of such liquidation as well as the amount of cash that will be needed for commitments and contingent liabilities. Based on the Company's operating plan, the Company believes that its existing cash and cash equivalents will be sufficient to allow the Company to fund its current operating plan for at least 12 months from the date the financial statements are issued. The Company cannot predict the outcome of the merger or whether and to what extent it will resume drug development activities for FLX-787 or other drug product candidates and to what extent it will promote and sell HOTSHOT or other consumer products in the future. Accordingly, it is difficult to predict future cash needs. Management does expect the Company to incur losses for the foreseeable future. The Company's ability to achieve profitability in the future is dependent upon achieving a level of revenues adequate to support the Company's cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. If the Company raises funds through the sale of equity or convertible debt securities, the issuance of those securities could result in substantial dilution of the stockholders' ownership in the Company. There can be no assurances, however, that additional funding will be available on terms acceptable to the Company, or at all. |
Summary of significant accounting policies and recent accounting pronouncements |
3 Months Ended |
---|---|
Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Summary of significant accounting policies and recent accounting pronouncements | Summary of significant accounting policies and recent accounting pronouncements The accompanying unaudited condensed consolidated financial statements reflect the application of certain significant accounting policies as described below and elsewhere in these notes to the condensed consolidated financial statements. As of March 31, 2019, the Company’s significant accounting policies, which are detailed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 10-K”), have not changed, other than as noted below. Accounts receivable and allowance for doubtful accounts Accounts receivable are stated at their carrying values, net of any allowances for doubtful accounts. Accounts receivable consist primarily of amounts due from specialty retailers and sports teams, for which collection is probable based on the customer's intent and ability to pay. Receivables are evaluated for collection probability on a regular basis and an allowance for doubtful accounts is recorded, if necessary. No allowance for doubtful accounts was deemed necessary at March 31, 2019 or December 31, 2018. Restricted cash As of December 31, 2018, the Company had restricted cash in the form of a letter of credit it maintained as a security deposit on the lease of its former corporate headquarters in Boston, Massachusetts that was set to expire on August 31, 2019. The Company terminated this lease on December 13, 2018. The letter of credit was released, and the cash became unrestricted on January 4, 2019. Advertising expense Advertising expense consists of media and production costs related to print and digital advertising. All advertising is expensed as incurred. Total advertising expenses are included in selling, general and administrative expenses in the condensed consolidated statement of operations, and were approximately $10,000 for the three months ended March 31, 2019 and approximately $508,000 for the three months ended March 31, 2018. Shipping and handling costs Shipping and handling costs related to the movement of inventory to the Company's co-packer and from the co-packer to the Company's third-party warehousing and fulfillment partners are capitalized as inventory and expensed as cost of product revenue when revenue is recognized. Shipping and handling costs to move finished goods from the Company's third-party warehousing and fulfillment partners to customer locations are included in selling, general and administrative expenses in the condensed consolidated statement of operations, and were approximately $15,000 for the three months ended March 31, 2019, and approximately $25,000 for the three months ended March 31, 2018. Restructuring-related costs The Company records employee termination costs in accordance with Accounting Standards Codification ("ASC") Topic 712, Compensation - Nonretirement and Postemployment Benefits ("ASC 712"), if the termination benefits are paid as part of an ongoing benefit arrangement, which includes benefits provided as part of the Company's established severance policy or as part of an executive employment agreement. The Company accrues employee termination costs associated with an on-going benefit arrangement if the obligation is attributable to prior services rendered, the rights to the benefits have vested, the payment is probable, and the Company can reasonably estimate the liability. The Company accounts for employee termination benefits that represent a one-time benefit in accordance with ASC Topic 420, Exit or Disposal Cost Obligations ("ASC 420"). Upon communication of the termination to the employee, the Company expenses these costs over the employee’s future service period, if any. Restructuring-related costs are recorded within research and development expenses and selling, general and administrative expenses on the Company's consolidated statement of operations. Liabilities associated with the Company's restructuring activities are recorded as a component of accrued expenses and other current liabilities on its consolidated balance sheets. See Note 7 for additional information on the Company's current restructuring plan. Unaudited interim financial information Certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the 2018 10-K. The condensed consolidated financial statements as of March 31, 2019, for the three months ended March 31, 2019 and 2018, and the related information contained within the notes to the condensed consolidated financial statements, are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as annual audited consolidated financial statements, and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s condensed consolidated financial position as of March 31, 2019, and the statements of operations, comprehensive loss and cash flows for the three month periods ended March 31, 2019 and 2018. The results for the three months ended March 31, 2019 are not necessarily indicative of results to be expected for the year ending December 31, 2019, or any other future annual or interim periods. Basis of presentation and use of estimates The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company's management evaluates its estimates, which include, but are not limited to, estimates related to clinical study accruals, estimates related to inventory realizability, stock-based compensation expense and amounts of expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions. Principles of consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: TK Pharma, Inc., a Massachusetts Securities Corporation, Flex Innovation Group LLC, a Delaware limited liability company which contains the Company's consumer-related operations, and Falcon Acquisition Sub, LLC, a Delaware limited liability company established for purposes of the merger. All significant intercompany balances and transactions have been eliminated in consolidation. Recent accounting pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). The ASU requires lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term. It also requires disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. The guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years. The Company adopted ASU No. 2016-02 in the first quarter of 2019, which did not materially impact the Company's condensed consolidated financial statements or disclosures. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The guidance is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2018-13 on its consolidated financial statements and disclosures. The Company believes that the impact of other recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption. |
Revenue from contracts with customers |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||
Revenue from contracts with customers | Revenue from contracts with customers Revenue recognition Revenue includes sales of HOTSHOT bottled finished goods to e-commerce customers, specialty retailers and sports teams, including professional and amateur teams. Revenue also consists of payments made by customers for expedited shipping and handling. The Company expenses fulfillment costs as incurred because the amortization period would be less than one year in accordance with the ASC 606, Revenue from Contracts with Customers ("ASC 606"), practical expedient. In accordance with ASC 606, the Company applies the following steps to recognize revenue for the sale of bottled finished goods that reflects the consideration to which the Company expects to be entitled to receive in exchange for the promised goods:
A contract with a customer exists when the Company enters into an enforceable contract with a customer. The contract is based on either the acceptance of standard terms and conditions on the websites for e-commerce customers, or the execution of terms and conditions contracts with specialty retailers and sports teams. These contracts define each party's rights, payment terms and other contractual terms and conditions of the sale. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience and, in some circumstances, published credit and financial information pertaining to the customer.
Performance obligations promised in a contract are identified based on the goods that will be transferred to the customer that are both capable of being distinct and are distinct in the context of the contract, whereby the transfer of the goods is separately identifiable from other promises in the contract. The Company has concluded the sale of bottled finished goods and related shipping and handling are accounted for as a single performance obligation.
The transaction price is determined based on the consideration to which the Company will be entitled to receive in exchange for transferring goods to the customer. For sales through June 18, 2018, the Company offered refunds to e-commerce customers, upon request, within 30 days of delivery. For sales subsequent to June 18, 2018, the Company now offers refunds to e-commerce customers, upon request, within 14 days of delivery. The Company estimates the amount of potential refunds at each reporting period using a portfolio approach of historical data, adjusted for changes in expected customer experience, including seasonality and changes in economic factors, as necessary. For specialty retailers and sports teams, the Company does not offer a right of return or refund and revenue is recognized at the time products are delivered to customers. Discounts provided to customers are accounted for as an element of the transaction price and as a reduction to revenue, and were approximately $1,000 and $8,000 for the three months ended March 31, 2019 and March 31, 2018, respectively. Revenue is presented net of taxes collected from customers and remitted to governmental authorities.
Revenue is recognized when control of the bottled finished goods is transferred to the customer. Control of the bottled finished goods is transferred at a point in time, upon delivery to the customer. The period of time between the satisfaction of the performance obligation and when payment is due from the customer is not significant. Concentrations of credit risk The Company had no customers that represented greater than 10% of total revenue during the three months ended March 31, 2019 or the three months ended March 31, 2018. All of the Company's revenue was generated from sales within the United States. |
Fair value measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value measurements | Fair value measurements The Company records cash equivalents at fair value. ASC Topic 820, Fair Value Measurements and Disclosures, established a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability. Level 3 – Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. The following tables summarize the cash equivalents measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:
Cash equivalents have been initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing third-party pricing services or other market observable data. The third-party pricing services utilize industry standard valuation models, including both income and market based approaches and observable market inputs to determine value. The Company's cash equivalents consist of money market funds that are valued based on publicly available quoted market prices for identical securities as of March 31, 2019. After completing its validation procedures, the Company did not adjust or override any fair value carrying amounts as of March 31, 2019. The carrying amounts reflected in the condensed consolidated balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate their fair values at March 31, 2019 and December 31, 2018, due to their short-term nature. The Company evaluates transfers between levels at the end of each reporting period. There were no transfers of assets or liabilities between Level 1 and Level 2 during the three months ended March 31, 2019 or the year ended December 31, 2018. The Company had no financial assets or liabilities that were classified as Level 3 at any time during the three months ended March 31, 2019 or the year ended December 31, 2018. |
Cash equivalents |
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Cash and Cash Equivalents [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash equivalents | Cash equivalents The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents as of March 31, 2019 and December 31, 2018 consisted of money market funds. The Company held no marketable securities at March 31, 2019 and December 31, 2018. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts in the condensed consolidated statements of cash flows:
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Inventory |
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Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory | Inventory Inventory has been recorded at cost as of March 31, 2019 and December 31, 2018. Costs capitalized at March 31, 2019 and December 31, 2018 relate to HOTSHOT finished goods, as well as raw materials available to be used for future production runs. The following table presents inventory:
There were no inventory write-offs during the three months ended March 31, 2019 or March 31, 2018. |
Accrued expenses and other current liabilities |
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Payables and Accruals [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accrued expenses and other current liabilities | Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following:
Restructuring-related costs In June 2018, the Company's Board of Directors ("Board") approved a corporate restructuring plan to reduce the Company's cost structure. In connection with the corporate restructuring plan, the Company reduced its workforce by approximately 60%, with the reduction completed as of September 30, 2018. As of March 31, 2019, the Company had paid $51,000 in retention bonuses and $889,000 in severance benefits associated with these arrangements. Also, in June 2018, the Board approved employee retention arrangements and certain increased severance payments related to the corporate restructuring plan, to incentivize certain employees to remain with the Company through a potential sale or merger. As of March 31, 2019, the Company had paid $214,000 in retention bonuses, $410,000 in annual bonuses and $185,000 in severance benefits associated with these arrangements. As of March 31, 2019, cash retention benefits totaling approximately $603,000 will be payable to the remaining employees and certain former employees who continue to provide service as consultants, upon the occurrence of a change in control event, including a sale or merger of the Company. Upon a change in control event and termination without cause, the remaining employees will be eligible for up to approximately $928,000, in the aggregate, of severance benefits. During the three months ended March 31, 2019, the Company recognized a reduction in the accrual for restructuring-related activities of approximately $11,000, which is comprised of approximately $3,000 recorded as a for one-time termination benefit costs and approximately $8,000 for termination benefits under ongoing benefit arrangements for terminated employees as certain benefit payments are no longer expected to occur. Cumulatively, through March 31, 2019, the Company recognized expense for restructuring-related activities of approximately $1,355,000 which is comprised of approximately $1,029,000 recorded as termination benefits under ongoing benefit arrangements for terminated employees, approximately $97,000 as one-time termination benefit costs for terminated employees, approximately $214,000 in retention benefits for seven retained employees who had retention bonuses not triggered by a change in control event and approximately $15,000 of other restructuring related costs including consulting and legal fees. There are currently no assurances a change in control event will take place. The Company does not consider the payment of severance benefits for retained employees or the payment of retention benefits only payable upon a change in control to be probable for accounting purposes as of March 31, 2019. Unless and until the Company's shareholders have approved a specific transaction, the Company's probability assessment regarding a change in control event is not expected to change. The Company expects to incur between approximately $1,765,000 and $3,343,000 in total costs for its restructuring-related activities, including approximately $1,355,000 in termination and retention charges and approximately $410,000 related to the annual bonus program, both of which were recorded between the second quarter of 2018 and the first quarter of 2019. Based on the Company's current probability assessment regarding a change in control event and termination of retained employees, there are no anticipated charges in 2019. The range noted above includes approximately $603,000 related to retention benefits only payable upon a change in control event and $928,000 of severance benefits only payable upon a change in control event and termination under certain circumstances. The following table outlines the Company's restructuring activities for the three months ended March 31, 2019:
For the three months ended March 31, 2019, the $11,000 of the reduction in the accrual for restructuring-related activities is included in research and development expenses in the Company's condensed consolidated statement of operations. Cumulatively through March 31, 2019, approximately $957,000 of the restructuring-related and annual bonus charges are included in research and development expenses and approximately $808,000 are included in selling, general and administrative expenses. For the three months ended March 31, 2019, the reduction in the accrual for restructuring-related activities of approximately $11,000 was incurred by the Company's Drug Development segment. Cumulatively through March 31, 2019, approximately $94,000 of the restructuring-related and annual bonus charges were incurred by the Company's Consumer Operations segment, approximately $957,000 were incurred by the Company's Drug Development segment and the remaining charges of approximately $714,000 related to corporate costs. Including approximately $1,765,000 of cumulative costs incurred through March 31, 2019, the Company may incur total restructuring-related charges of up to approximately $114,000 and $1,024,000 within its Consumer Operations and Drug Development segments, respectively. The Company may incur up to $2,205,000 of corporate costs that do not relate to a reportable segment. |
Common stock |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock | Common stock As of March 31, 2019, the Company had authorized 100,000,000 shares of common stock, $0.0001 par value per share. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors. The Company does not intend to declare dividends for the foreseeable future. Restricted common stock to consultants During 2016, the Company issued 18,194 shares of restricted common stock to non-employee consultants and advisors. Such shares are not accounted for as outstanding until they vest. There were 16,735 shares of restricted common stock issued to consultants outstanding as of March 31, 2019. The following is a summary of restricted common stock activity:
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Stock-based compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | Stock-based compensation In March 2014, the Company adopted the Flex Pharma, Inc. 2014 Equity Incentive Plan (the "2014 Plan"), under which it had the ability to grant incentive stock options ("ISOs"), non-qualified stock options, restricted stock awards, restricted stock units and stock appreciation rights. Terms of stock award agreements, including vesting requirements, were determined by the board of directors, subject to the provisions of the 2014 Plan. For options granted under the 2014 Plan, the exercise price equaled the fair market value of the common stock as determined by the board of directors on the date of grant. No further awards will be granted under the 2014 Plan. In January 2015, the Company's Board adopted, and the Company's stockholders approved, the 2015 Equity Incentive Plan (the "2015 Plan"), which became effective immediately prior to the closing of the Company's initial public offering ("IPO"). The 2015 Plan provides for the grant of ISOs, nonstatutory stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance-based stock awards and other stock-based awards. Additionally, the 2015 Plan provides for the grant of performance-based cash awards. ISOs may be granted only to the Company's employees. All other awards may be granted to the Company's employees, including officers, and to non-employee directors and consultants. As of March 31, 2019, there were 2,487,140 shares remaining available for the grant of stock awards under the 2015 Plan. The Company has awarded stock options to its employees, directors, advisors and consultants, pursuant to the plans described above. Stock options subsequent to the completion of the Company's IPO were granted with an exercise price equal to the closing market price of the Company's common stock on the date of grant. Stock options generally vest over one to four years and have a contractual term of ten years. Stock options are valued using the Black-Scholes option pricing model and compensation cost is recognized based on the resulting value over the service period. The following table summarizes stock option activity for employees and non-employees for the three months ended March 31, 2019:
Total stock-based compensation expense recognized for employee and non-employee restricted common stock, and stock options granted to employees and non-employees is included in the Company's condensed consolidated statements of operations as follows:
As of March 31, 2019, there was approximately $1,938,476 of total unrecognized compensation cost related to unvested equity awards. Total unrecognized compensation cost will be adjusted for future changes in employee and non-employee forfeitures, if any. The Company expects to recognize that cost over a remaining weighted-average period of 2.54 years. On June 14, 2018, the Company granted 654,544 stock options, in the aggregate, to seven employees as part of the Company's retention arrangements with these employees. These awards vest monthly over 48 months as the employees provide continuous service, and expense is being recognized over this period. The awards are exercisable for one to three-years post termination depending on the employee to which the stock options were granted. The awards vest in full upon a change in control event and termination under certain circumstances. A change in control event is not currently considered probable for accounting purposes. On January 3, 2019, the Company entered into a Merger Agreement with Salarius. Unless and until the Company's shareholders have approved this specific transaction, the Company's probability assessment regarding a change in control event is not expected to change. Employee stock purchase plan As of March 31, 2019, no shares of common stock have been purchased under the ESPP. |
Income taxes |
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Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income taxes | Income taxes Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax basis of assets and liabilities using statutory rates. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. Based upon the Company's history of operating losses and the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a full valuation allowance against the Company’s otherwise recognizable net deferred tax assets. There was no significant income tax provision or benefit for the three months ended March 31, 2019 or 2018. |
Net loss per share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
Net loss per share | Net loss per share Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period, determined using the treasury stock method and the if-converted method, for convertible securities, if inclusion of these is dilutive. As the Company has reported a net loss for the periods presented, diluted net loss per common share is the same as basic net loss per common share. The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding for the periods indicated, because including them would have had an anti-dilutive impact:
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Segment Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Information | Segment Information The Company operates as two reportable segments:
The Company discloses information about its reportable segments based on the way that the Company's Chief Operating Decision Maker, who the Company has identified as the Chief Executive Officer, and management, organizes segments within the Company for making operating decisions and assessing financial performance. The Company evaluates the performance of its reportable segments based on revenue and operating income or loss. Although the Company reduced its research and development efforts in connection with its strategic assessment in June 2018, the Company continues to manage and operate as two segments and it is unclear to what extent it may resume research and development activities in the future. The accounting policies of the segments are the same as those described herein as well as those described in Note 2. Corporate and unallocated amounts that do not relate to a reportable segment have been allocated to "Corporate." No asset information has been provided for the Company's reportable segments as management does not measure or allocate such assets on a reportable segment basis. Information for the Company's reportable segments for the three months ended March 31, 2019 and 2018 are as follows:
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Summary of significant accounting policies and recent accounting pronouncements (Policies) |
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Mar. 31, 2019 | |
Accounting Policies [Abstract] | |
Accounts receivable | Accounts receivable are stated at their carrying values, net of any allowances for doubtful accounts. Accounts receivable consist primarily of amounts due from specialty retailers and sports teams, for which collection is probable based on the customer's intent and ability to pay. |
Allowance for doubtful accounts | Receivables are evaluated for collection probability on a regular basis and an allowance for doubtful accounts is recorded, if necessary. |
Restricted Cash | As of December 31, 2018, the Company had restricted cash in the form of a letter of credit it maintained as a security deposit on the lease of its former corporate headquarters in Boston, Massachusetts that was set to expire on August 31, 2019. The Company terminated this lease on December 13, 2018. The letter of credit was released, and the cash became unrestricted on January 4, 2019. |
Advertising expense | Advertising expense consists of media and production costs related to print and digital advertising. All advertising is expensed as incurred. |
Shipping and handling costs | Shipping and handling costs related to the movement of inventory to the Company's co-packer and from the co-packer to the Company's third-party warehousing and fulfillment partners are capitalized as inventory and expensed as cost of product revenue when revenue is recognized. Shipping and handling costs to move finished goods from the Company's third-party warehousing and fulfillment partners to customer locations are included in selling, general and administrative expenses in the condensed consolidated statement of operations |
Restructuring-related costs | The Company records employee termination costs in accordance with Accounting Standards Codification ("ASC") Topic 712, Compensation - Nonretirement and Postemployment Benefits ("ASC 712"), if the termination benefits are paid as part of an ongoing benefit arrangement, which includes benefits provided as part of the Company's established severance policy or as part of an executive employment agreement. The Company accrues employee termination costs associated with an on-going benefit arrangement if the obligation is attributable to prior services rendered, the rights to the benefits have vested, the payment is probable, and the Company can reasonably estimate the liability. The Company accounts for employee termination benefits that represent a one-time benefit in accordance with ASC Topic 420, Exit or Disposal Cost Obligations ("ASC 420"). Upon communication of the termination to the employee, the Company expenses these costs over the employee’s future service period, if any. Restructuring-related costs are recorded within research and development expenses and selling, general and administrative expenses on the Company's consolidated statement of operations. Liabilities associated with the Company's restructuring activities are recorded as a component of accrued expenses and other current liabilities on its consolidated balance sheets. See Note 7 for additional information on the Company's current restructuring plan. |
Basis of presentation | The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("GAAP"). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the ASC and Accounting Standards Update ("ASU") of the Financial Accounting Standards Board ("FASB"). |
Use of estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company's management evaluates its estimates, which include, but are not limited to, estimates related to clinical study accruals, estimates related to inventory realizability, stock-based compensation expense and amounts of expenses during the reported period. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions. |
Principles of consolidation | The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: TK Pharma, Inc., a Massachusetts Securities Corporation, Flex Innovation Group LLC, a Delaware limited liability company which contains the Company's consumer-related operations, and Falcon Acquisition Sub, LLC, a Delaware limited liability company established for purposes of the merger. All significant intercompany balances and transactions have been eliminated in consolidation. |
Recent accounting pronouncements | In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) ("ASU 2016-02"). The ASU requires lessees to recognize the assets and liabilities on their balance sheet for the rights and obligations created by most leases and continue to recognize expenses on their income statements over the lease term. It also requires disclosures designed to give financial statement users information on the amount, timing and uncertainty of cash flows arising from leases. The guidance is effective for annual reporting periods beginning after December 15, 2018, and interim periods within those years. The Company adopted ASU No. 2016-02 in the first quarter of 2019, which did not materially impact the Company's condensed consolidated financial statements or disclosures. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This ASU modifies the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The guidance is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those years. Early adoption is permitted. The Company is currently evaluating the impact of ASU No. 2018-13 on its consolidated financial statements and disclosures. The Company believes that the impact of other recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption. |
Fair value measurements | The Company records cash equivalents at fair value. ASC Topic 820, Fair Value Measurements and Disclosures, established a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). The hierarchy consists of three levels: Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 – Quoted prices for similar assets and liabilities in active markets, quoted prices in markets that are not active, or inputs which are observable, directly or indirectly, for substantially the full term of the asset or liability. Level 3 – Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. |
Cash equivalents | The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Cash equivalents as of March 31, 2019 and December 31, 2018 consisted of money market funds. |
Fair value measurements (Tables) |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Cash Equivalents And Marketable Securities Measured At Fair Value On A Recurring Basis | The following tables summarize the cash equivalents measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:
|
Cash equivalents (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and Cash Equivalents [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Restrictions On Cash And Cash Equivalents | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts in the condensed consolidated statements of cash flows:
|
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Schedule Of Cash And Cash Equivalents | The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of such amounts in the condensed consolidated statements of cash flows:
|
Inventory (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Inventory, Net | The following table presents inventory:
|
Accrued expenses and other current liabilities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Accrued Expenses | Accrued expenses and other current liabilities consisted of the following:
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Schedule Of Other Current Liabilities | Accrued expenses and other current liabilities consisted of the following:
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Restructuring And Related Costs | The following table outlines the Company's restructuring activities for the three months ended March 31, 2019:
|
Common stock (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restricted Common Stock Activity | The following is a summary of restricted common stock activity:
|
Stock-based compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary Of Stock Option Activity | The following table summarizes stock option activity for employees and non-employees for the three months ended March 31, 2019:
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Summary Of Stock-based Compensation Expense | Total stock-based compensation expense recognized for employee and non-employee restricted common stock, and stock options granted to employees and non-employees is included in the Company's condensed consolidated statements of operations as follows:
|
Net loss per share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||
Schedule Of Antidilutive Securities Excluded from Computation Of Earnings Per Share | The following potentially dilutive securities outstanding, prior to the use of the treasury stock method or if-converted method, have been excluded from the computation of diluted weighted-average shares outstanding for the periods indicated, because including them would have had an anti-dilutive impact:
|
Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Information For The Company's Operating Segments | Information for the Company's reportable segments for the three months ended March 31, 2019 and 2018 are as follows:
|
Organization and operations (Details) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019
USD ($)
segment
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
|
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Percentage decrease in company workforce | 60.00% | ||
Number of reportable segments | segment | 2 | ||
Net loss | $ 2,230,430 | $ 8,223,227 | |
Retained earnings (accumulated deficit) | (135,191,705) | $ (132,961,275) | |
Cash and cash equivalents | $ 7,297,468 | $ 9,829,624 |
Summary of significant accounting policies and recent accounting pronouncements (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Accounting Policies [Abstract] | ||
Advertising expense | $ 10,000 | $ 508,000 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cost of product revenue | 47,329 | 83,934 |
Shipping and Handling | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Cost of product revenue | $ 15,000 | $ 25,000 |
Revenue from contracts with customers (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 9 Months Ended | |
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Jun. 18, 2018 |
Mar. 31, 2019 |
|
Revenue from Contract with Customer [Abstract] | ||||
Refund period | 30 days | 14 days | ||
Discounts to customers | $ 1 | $ 8 |
Fair value measurements (Details) - Fair Value, Measurements, Recurring - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | $ 2,346,856 | $ 2,333,771 |
Total assets | 2,346,856 | 2,333,771 |
Level 1 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 2,346,856 | 2,333,771 |
Total assets | 2,346,856 | 2,333,771 |
Level 2 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 0 | 0 |
Total assets | 0 | 0 |
Level 3 | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash equivalents | 0 | 0 |
Total assets | $ 0 | $ 0 |
Cash equivalents (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Cash and Cash Equivalents [Abstract] | ||||
Marketable securities | $ 0 | $ 0 | ||
Cash and cash equivalents | 7,297,468 | 9,829,624 | ||
Restricted cash | 0 | 126,595 | ||
Cash, cash equivalents and restricted cash shown on the condensed consolidated statement of cash flows | $ 7,297,468 | $ 9,956,219 | $ 22,074,990 | $ 19,312,631 |
Inventory (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Inventory Disclosure [Abstract] | |||
Raw materials | $ 7,247 | $ 7,247 | |
Finished goods | 157,350 | 179,673 | |
Total inventory | 164,597 | $ 186,920 | |
Write-off of inventory | $ 0 | $ 0 |
Accrued expenses and other current liabilities - Summary of accrued expenses and other current liabilities (Details) - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Payables and Accruals [Abstract] | ||
Consumer product-related costs | $ 681,360 | $ 269,544 |
Payroll and other employee-related costs | 36,239 | 417,997 |
Consumer product-related costs | 7,170 | 5,360 |
Restructuring-related costs | 0 | 68,593 |
Other research and development-related costs | 0 | 2,846 |
Total | $ 724,769 | $ 764,340 |
Accrued expenses and other current liabilities - Summary of restructuring reserve activity (Details) - USD ($) |
3 Months Ended | 10 Months Ended |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2019 |
|
Restructuring Reserve [Roll Forward] | ||
Accrued restructuring balance as of December 31, 2018 | $ 68,593 | |
Adjustments: Employee termination benefits | (11,000) | $ 1,765,000 |
Payments | (57,365) | |
Accrued restructuring balance as of March 31, 2019 | 0 | $ 0 |
Employee termination benefits | ||
Restructuring Reserve [Roll Forward] | ||
Adjustments: Employee termination benefits | $ (11,228) |
Common stock - Narrative (Details) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2019
vote
$ / shares
shares
|
Dec. 31, 2016
shares
|
Dec. 31, 2018
$ / shares
shares
|
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Common stock, shares authorized (shares) | 100,000,000 | 100,000,000 | |
Common stock, par value (in usd per share) | $ / shares | $ 0.0001 | $ 0.0001 | |
Common stock, number of votes per share | vote | 1 | ||
Restricted stock | Non-employee Consultants and Advisers | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Restricted common stock, shares sold (shares) | 18,194 | ||
Restricted common stock, shares outstanding (shares) | 16,735 |
Common stock - Restricted common stock activity (Details) - Restricted stock - Non-employee Consultants and Advisers |
3 Months Ended |
---|---|
Mar. 31, 2019
$ / shares
shares
| |
Number of Shares | |
Beginning balance, unvested (shares) | shares | 2,084 |
Issued (shares) | shares | 0 |
Vested (shares) | shares | (625) |
Forfeited (shares) | shares | 0 |
Ending balance, unvested (shares) | shares | 1,459 |
Weighted-Average Grant Date Fair Value | |
Beginning balance, weighted average grant date fair value (in usd per share) | $ / shares | $ 11.05 |
Issued, weighted average grant date fair value (in usd per share) | $ / shares | 0.00 |
Vested, weighted average grant date fair value (in usd per share) | $ / shares | 11.05 |
Forfeited, weighted average grant date fair value (in usd per share) | $ / shares | 0.00 |
Ending balance, weighted average grant date fair value (in usd per share) | $ / shares | $ 11.05 |
Stock-based compensation - Summary of stock-based compensation expense (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Employee Service Share-Based Compensation Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $ 220,975 | $ 908,940 |
Research and development | ||
Employee Service Share-Based Compensation Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | 19,442 | 386,537 |
Selling, general and administrative | ||
Employee Service Share-Based Compensation Allocation of Recognized Period Costs [Line Items] | ||
Stock-based compensation expense | $ 201,533 | $ 522,403 |
Income taxes (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Income tax provision (benefit) | $ 0 | $ 0 |
Net loss per share (Details) - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (shares) | 2,298,495 | 3,132,478 |
Options to purchase common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (shares) | 2,297,036 | 3,128,519 |
Unvested restricted common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (shares) | 1,459 | 3,959 |
Segment Information (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019
USD ($)
segment
|
Mar. 31, 2018
USD ($)
|
|
Segment Reporting [Abstract] | ||
Number of reportable segments | segment | 2 | |
Segment Reporting Information [Line Items] | ||
Total revenue | $ 104,977 | $ 178,582 |
Interest income, net | 13,213 | 59,593 |
Loss from operations | 2,243,643 | 8,282,820 |
Operating Segments | Consumer Operations | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 104,977 | 178,582 |
Interest income, net | 0 | 0 |
Loss from operations | 53,108 | 1,257,306 |
Operating Segments | Drug Development | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 0 | 0 |
Interest income, net | 0 | 0 |
Loss from operations | 384 | 4,664,077 |
Corporate | ||
Segment Reporting Information [Line Items] | ||
Total revenue | 0 | 0 |
Interest income, net | 13,213 | 59,593 |
Loss from operations | $ 2,190,151 | $ 2,361,437 |
Label | Element | Value |
---|---|---|
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 40,217 |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ 40,217 |
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