10-K/A 1 srne-10ka_20161231.htm 10-K/A srne-10ka_20161231.htm

 

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-K/A

(Amendment No. 1)

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2016

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission File Number 001-36150

 

SORRENTO THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

33-0344842

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

 

9380 Judicial Drive,

San Diego, California

 

92121

(Address of Principal Executive Offices)

 

(Zip Code)

(858) 210-3700

(Registrant’s telephone number, including area code)

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

Title of each class

 

Name of exchange on which registered

Common Stock, par value $0.0001 per share

 

The NASDAQ Stock Market LLC

 

Securities registered pursuant to Section 12(g) of the Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      Yes      No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.      Yes      No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.      Yes      No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes      No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

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

The aggregate market value of voting stock held by non-affiliates of the registrant is calculated based upon the closing sale price of the common stock on June 30, 2016 (the last trading day of the registrant’s second fiscal quarter of 2016), as reported on The NASDAQ Capital Market, was approximately $366.5 million.

At March 9, 2017, the registrant had 50,887,102 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of our Proxy Statement for the 2017 Annual Meeting of Stockholders or an amendment to this Annual Report on Form 10-K, to be filed within 120 days of December 31, 2016, are incorporated by reference in Part III.

 

 

 


 

EXPLANATORY NOTE

 

This Amendment No. 1 to Annual Report on Form 10-K/A (this “Amendment”) is being filed by Sorrento Therapeutics, Inc. (the “Company”) to amend the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016, which was originally filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2017 (the “Annual Report”).

The Company is filing this Amendment solely for the purposes of: (1) correcting certain clerical errors to the disclosures included under Part II, Item 9A of the Annual Report, (2) deleting information inadvertently included under Part II, Item 9B of the Annual Report as such information had already been previously disclosed by the Company on Current Reports on Form 8-K filed with the SEC on March 20, 2017 and March 21, 2017, (3) amending certain line items in the Company’s Consolidated Statements of Cash Flows included in Part IV, Item 15 of the Annual Report, which were incorrectly stated as a result of inadvertently including a superseded version of the Company’s Consolidated Statements of Cash Flows in the initial filing, and (4) correcting certain minor omissions in footnote 11 to the Company’s Consolidated Financial Statements included in Part IV, Item 15 of the Annual Report.  The amended Consolidated Statements of Cash Flows line items referenced in number (3) above result in an increase in net cash used for operating activities by $36 thousand, as well as corrections to the Supplemental disclosures of non-cash investing and financing activities. 

 

In addition, as required by Rule 12b-15 promulgated under the Securities Exchange Act of 1934, as amended, new certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 by the Company’s principal executive officer and principal financial officer are filed herewith as exhibits to this Amendment.  This Amendment also contains an amended consent of Mayer Hoffman McCann P.C. Accordingly, Part IV, Item 15 of the Annual Report has been amended and restated in its entirety to include the currently dated certifications and amended consent as exhibits.

Except as described above, no attempt has been made in this Amendment to modify or update the other disclosures in the Annual Report. This Amendment continues to speak as of the date of the Annual Report, and the Company has not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Annual Report. Accordingly, this Amendment should be read in conjunction with the Annual Report.

 

 

 

 

 

 

 

 

i


 

 

 

PART II

Item 9A.

Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended(the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s regulations, rules and forms and that such information is accumulated and communicated to our management, including our chief executive officer and principal financial and accounting officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. As required by Rule 13a-15(b) promulgated by the SEC under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and principal financial and accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Form 10-K. Based on the foregoing, our chief executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Form 10-K as a result of the material weakness described below.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for our company. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as a process designed by, or under the supervision of, a company’s principal executive officer and principal financial and accounting officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP and includes those policies and procedures that:

 

 

(1)

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

 

(2)

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the company are being made in accordance with authorizations of management and directors of the company; and

 

(3)

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible enhancements to controls and procedures.

We conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In March 2017, in connection with the preparation of our 2016 financial statements, we identified certain purchase agreements which contained terms for contingent consideration that were not identified timely and accounted for in our historical financial statements on a timely basis.  Further, certain other purchase agreements containing terms for contingent consideration were identified timely, but we failed to adjust the liabilities for changes in fair value at each subsequent reporting period. Accordingly, we did not appropriately account for liabilities for contingent consideration payable and the related adjustments to earnings. 

Based on these findings and the criteria discussed above, our management identified a material weakness in our review controls over unusual or non-recurring and significant transactions.  Specifically, our controls were not properly designed to provide

 

1


 

reasonable assurance that we (1) timely identify and assess the accounting implications of terms in unusual or non-recurring agreements and (2) reassess the valuation of associated assets or liabilities at the end of each reporting period. Accordingly, our principal executive officer and principal financial officer concluded that, at December 31, 2016, our internal control over financial reporting was not effective at the reasonable assurance level.

The material weakness did not result in a restatement of previously issued annual consolidated financial statements, but it did result in an immaterial restatement of our quarterly financial information included in Note 19 of the Consolidated Financial Statements incorporated in this Form 10-K.  Notwithstanding the material weakness in our internal control over financial reporting, based on the additional analyses and procedures performed, we believe the consolidated financial statements included in this Form 10-K, are fairly presented in all material respects, in conformity with accounting principles generally accepted in the United States of America.

The effectiveness of our internal control over financial reporting at December 31, 2016 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears herein.

 

Remediation Efforts to Address the Material Weakness

As a result of the material weakness, we have initiated and will continue to implement remediation measures including, but not limited to, improving centralized documentation control, improving the internal communication procedures between senior executive management, accounting personnel, and related business owners, leveraging external accounting experts as appropriate, and strengthening policies and procedures related to the transferring of responsibilities and the handoff of personnel duties. We believe that our remediation measures will ensure that we timely identify terms in agreements that could have material accounting implications, assesses the accounting and disclosures implications of the terms, and accounts for such items in the financial statements appropriately.  Any failure to implement these improvements to our internal control over financial reporting may render our future assertions as ineffective and potentially impact our ability to produce reliable financial reports, effectively manage the company or prevent fraud, and could potentially harm our business and our performance.

 

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting during the quarter ended December 31, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As identified above under “Management’s Annual Report on Internal Control Over Financial Reporting,” a material weakness was identified in our internal control over financial reporting as of December 31, 2016.  Our plans for remediating such material weakness, which would constitute changes in our internal control over financial reporting prospectively, are also enumerated above.

Item 9B.

Other Information.

None.

PART IV

Item 15.

Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements

Reference is made to the Index to Consolidated Financial Statements of Sorrento Therapeutics, Inc. appearing on page F-1 of this Form 10-K.

(a)(2) Financial Statement Schedules

Schedule II – Valuation of Qualifying Accounts

All other schedules not listed above have been omitted because of the absence of conditions under which they are required, or because the required information is included in the consolidated financial statements or the notes thereto.

 

2


 

(a)(3) Exhibits

 

Exhibit

No.

  

Description

 

 

 

   2.1*

 

Agreement and Plan of Merger between Sorrento Therapeutics, Inc. and IgDraSol, Inc. dated September 9, 2013 (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 11, 2013).

 

 

 

   2.2*

 

Agreement of Merger by and among Sorrento Therapeutics, Inc., Catalyst Merger Sub, Inc., Concortis Biosystems, Corp., Zhenwei Miao and Gang Chen dated as of November 11, 2013 (incorporated by reference to Exhibit 2.1

to the Registrant’s Current Report on Form 8-K filed with the SEC on November 14, 2013).

 

 

 

  2.3*

 

Stock Purchase Agreement, dated November 8, 2016, by and among Sorrento Therapeutics, Inc., Scilex Pharmaceuticals Inc., the stockholders of Scilex Pharmaceuticals Inc. party thereto and SPI Shareholders Representative, LLC, as representative of the stockholders of Scilex Pharmaceuticals Inc. party thereto (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 8, 2016).

 

 

 

   3.1

 

Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2013).

 

 

 

   3.2

 

Certificate of Amendment of the Restated Certificate of Incorporation of Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 1, 2013).

 

 

 

   3.3

 

Bylaws (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 23, 2009).

 

 

 

   3.4

 

Certificate of Designation of Rights, Preferences and Privileges of Series A Junior Participating Preferred Stock of Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 12, 2013).

 

 

 

   4.1

 

Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 23, 2009).

 

 

 

   4.2

 

Form of Convertible Promissory Note (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 21, 2013).

 

 

 

   4.3

 

Amended and Restated Rights Agreement, dated as of December 21, 2015 by and between Sorrento Therapeutics, Inc. and Philadelphia Stock Transfer, Inc., as rights agent (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2015).

 

 

 

   4.4

 

Common Stock Purchase Warrant issued to Cambridge Equities, LP. (incorporated by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 16, 2015).

 

 

 

   4.5

 

Securities Purchase Agreement, dated as of April 3, 2016, by and among Sorrento Therapeutics, Inc., ABG SRNE Limited and Ally Bridge LB Healthcare Master Fund Limited (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

   4.6

 

Securities Purchase Agreement, dated as of April 3, 2016, by and between Sorrento Therapeutics, Inc. and FREJOY Investment Management Co., Ltd. (incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

   4.7

 

Securities Purchase Agreement, dated as of April 3, 2016, by and between Sorrento Therapeutics, Inc. and Beijing Shijilongxin Investment Co., Ltd. (incorporated by reference to Exhibit 4.7 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

   4.8

 

Securities Purchase Agreement, dated as of April 3, 2016, by and between Sorrento Therapeutics, Inc. and Yuhan Corporation (incorporated by reference to Exhibit 4.8 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

   4.9

 

Form of Common Stock Purchase Warrant issued to investors pursuant to the Securities Purchase Agreement, dated as of April 3, 2016, by and among Sorrento Therapeutics, Inc., ABG SRNE Limited and Ally Bridge LB Healthcare Master Fund Limited (incorporated by reference to Exhibit 4.9 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

 

3


 

Exhibit

No.

  

Description

 

 

 

   4.10

 

Form of Common Stock Purchase Warrant issued to investors pursuant to the Securities Purchase Agreement, dated as of April 3, 2016, by and between Sorrento Therapeutics, Inc. and FREJOY Investment Management Co., Ltd. and Securities Purchase Agreement, dated as of April 3, 2016, by and between Sorrento Therapeutics, Inc. and Beijing Shijilongxin Investment Co., Ltd. (incorporated by reference to Exhibit 4.10 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

   4.11

 

Common Stock Purchase Warrant issued to Yuhan Corporation on April 29, 2016 (incorporated by reference to Exhibit 4.11 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

   4.12

 

Voting Agreement, dated as of April 29, 2016, by and between Sorrento Therapeutics, Inc. and Yuhan Corporation (incorporated by reference to Exhibit 4.12 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).

 

 

 

   4.13

 

Registration Rights Agreement, dated November 8, 2016, by and among Sorrento Therapeutics, Inc. and the persons party thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 8, 2016).

 

 

 

   4.14

 

Warrant Agreement, dated November 23, 2016, issued to Hercules Capital, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 29, 2016).

 

 

 

  10.1+

 

Exclusive License and Development Agreement between Sorrento Therapeutics, Inc. and China Oncology Focus Limited dated October 3, 2014 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q/A filed with the SEC on November 25, 2014).

 

 

 

  10.2+

 

License Agreement, dated January 8, 2010, by and between The Scripps Research Institute and Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2010).

 

 

 

  10.3±

 

Form of Stock Option Agreement (incorporated by reference to Exhibit 10.11 to the Registrant’s Current Report on Form 8-K/A filed with the SEC on September 22, 2009).

 

 

 

  10.4±

 

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 7, 2012).

 

 

 

  10.5±

 

2009 Amended and Restated Stock Incentive Plan, and forms of agreements related thereto (incorporated by reference to Appendix A to the definitive proxy statement filed by Sorrento Therapeutics, Inc. with the Securities and Exchange Commission on May 13, 2016).

 

 

 

  10.6±

 

2009 Equity Incentive Plan, and forms of agreement related thereto (incorporated by reference to Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 25, 2010).

 

 

 

  10.7±

 

Employment Agreement, dated September 21, 2012, by and between Sorrento Therapeutics, Inc. and Henry Ji, Ph.D. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 8, 2012).

 

 

 

  10.8±

 

First Amendment to Employment Agreement dated October 18, 2012, by and between Sorrento Therapeutics, Inc. and Henry Ji, Ph.D. (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 8, 2012).

 

 

 

  10.9±

 

Independent Director Compensation Policy (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 25, 2013).

 

 

 

  10.10

 

Option Agreement between Sorrento Therapeutics, Inc. and B.G, Negev Technologies and Applications Ltd. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 13, 2013).

 

 

 

  10.11*

 

Lease dated as of February 3, 2015 by and between HCP University Center West LLC and Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 16, 2015).

 

 

 

 

4


 

Exhibit

No.

  

Description

 

 

 

  10.12+

 

Exclusive License Agreement dated as of April 21, 2015 by and between NantCell, Inc. and Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2015).

 

 

 

  10.13*

 

Stock Sale and Purchase Agreement dated as of May 14, 2015 by and between NantPharma, LLC and Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 7, 2015).

 

 

 

  10.14*

 

Membership Interest Purchase Agreement by and among TNK Therapeutics, Inc., CARgenix Holdings LLC, the Members of CARgenix Holdings LLC, Jaymin Patel as the Members Representative and Sorrento Therapeutics, Inc. dated as of August 7, 2015 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015).

 

 

 

  10.15

 

Amendment No. 1 to Membership Interest Purchase Agreement, dated as of March 7, 2016, by and between TNK Therapeutics, Inc. and Jaymin Patel, as the Members’ Representative (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2016).

 

 

 

  10.16*

 

Stock Purchase Agreement by and among TNK Therapeutics, Inc., BDL Products, Inc., the Stockholders of BDL Products, Inc., Richard Junghans, M.D., Ph.D. as the Stockholders’ Representative and Sorrento Therapeutics, Inc. dated as of August 7, 2015 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015).

 

 

 

  10.17

 

Amendment No. 1 to Stock Purchase Agreement, dated as of March 7, 2016, by and between TNK Therapeutics, Inc. and Richard P. Junghans, M.D., Ph.D., as the Stockholders’ Representative (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2016).

 

 

 

  10.18

 

Binding Term Sheet with NanoVelcro Circulating Tumor Cell (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 16, 2015).

 

 

 

  10.19+

 

Exclusive License Agreement dated September 25, 2015 by and between LA Cell, Inc. and City of Hope (incorporated by reference to Exhibit 10.26 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 15, 2016).

 

 

 

  10.20±

 

Employment Agreement, dated December 8, 2014, by and between Sorrento Therapeutics, Inc. and George Ng (incorporated by reference to Exhibit 10.28 to the Registrant’s Annual Report on Form 10-K/A filed with the SEC on April 29, 2016).

 

 

 

  10.21±

 

Employment Agreement, dated October 16, 2015, by and between Sorrento Therapeutics, Inc. and Jeffrey Su (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K/A filed with the SEC on April 29, 2016).

 

 

 

  10.22±

 

Employment Agreement between Sorrento Therapeutics, Inc. and Kevin M. Herde dated as of April 5, 2016 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 10, 2016).

 

 

 

  10.23

 

Letter Agreement, dated June 30, 2016, among Chan Soon-Shiong Family Foundation, Cambridge Equities, L.P. and Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 8, 2016).

 

 

 

  10.24+

 

License and Collaboration Agreement, dated July 6, 2016, among Les Laboratoires Servier, SAS, Institut de Recherches Internationales Servier and Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 10.7 to the Registrant’s Quarterly Report on Form 10-Q/A filed with the SEC on January 17, 2017).

 

 

 

  10.25

 

Binding Term Sheet, dated August 15, 2016, among Sorrento Therapeutics, Inc., Scintilla Pharmaceuticals, Inc. and Semnur Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2016).

 

 

 

  10.26

 

Lease Agreement, dated September 12, 2016, between Sorrento Therapeutics, Inc. and HCP Life Science REIT, Inc. (incorporated by reference to Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2016).

 

 

 

 

5


 

Exhibit

No.

  

Description

 

 

 

  10.27

 

Unit Purchase Agreement dated August 5, 2016, by and among MedoveX Corporation and the purchasers party thereto (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by MedoveX Corporation (File No. 001-36763) with the SEC on August 8, 2016).

 

 

 

  10.28

 

Registration Rights Agreement, dated August 5, 2016, by and among MedoveX Corporation and the investors party thereto (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by MedoveX Corporation (File No. 001-36763) with the SEC on August 8, 2016).

 

 

 

  10.29

 

Promissory Note, dated November 1, 2016, issued by Celularity, Inc. to Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 10.29 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

  10.30

 

Binding Term Sheet, dated November 15, 2016, among Sorrento Therapeutics, Inc., TNK Therapeutics, Inc., and Virttu Biologics Limited (incorporated by reference to Exhibit 10.30 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

  10.31**

 

Loan and Security Agreement, dated November 23, 2016, among Sorrento Therapeutics, Inc., certain of its domestic subsidiaries, and Hercules Capital, Inc. (incorporated by reference to Exhibit 10.31 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

  10.32**

 

First Amendment to Loan and Security Agreement, dated December 27, 2016, among Sorrento Therapeutics, Inc., certain of its domestic subsidiaries, and Hercules Capital, Inc. (incorporated by reference to Exhibit 10.32 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

  10.33

 

Amendment No. 2 to Stock Purchase Agreement, dated as of September 14, 2016, by and between TNK Therapeutics, Inc. and Richard P. Junghans, M.D., Ph.D., as the Stockholders’ Representative (incorporated by reference to Exhibit 10.33 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

  10.34**

 

Second Amendment to Loan and Security Agreement, dated March 2, 2017, among Sorrento Therapeutics, Inc., certain of its domestic subsidiaries, and Hercules Capital, Inc. (incorporated by reference to Exhibit 10.34 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

  10.35**

 

Third Amendment to Loan and Security Agreement, dated March 15, 2017, among Sorrento Therapeutics, Inc., certain of its domestic subsidiaries, and Hercules Capital, Inc. (incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

  21.1

 

List of Subsidiaries (incorporated by reference to Exhibit 21.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

 

  23.1

 

Consent of Deloitte & Touche LLP (incorporated by reference to Exhibit 23.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

  23.2

 

Consent of Mayer Hoffman McCann P.C. (incorporated by reference to Exhibit 23.2 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

  23.3

 

Amended consent of Mayer Hoffman McCann P.C.

 

 

 

  24

 

Power of Attorney (included on signature page hereto) (incorporated by reference to Exhibit 24 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

  31.1

 

Certification of Henry Ji, Ph.D., Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended (incorporated by reference to Exhibit 31.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

 

 

  31.2

 

Certification of Kevin Herde, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended (incorporated by reference to Exhibit 31.2 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

  31.3

 

Certification of Henry Ji, Ph.D., Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

 

 

 

  31.4

 

Certification of Kevin Herde, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as amended.

 

 

6


 

Exhibit

No.

  

Description

 

 

 

  32.1

 

Certification of Henry Ji, Ph.D., Principal Executive Officer and Kevin Herde, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (incorporated by reference to Exhibit 32.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 22, 2017).

 

  32.2

 

Certification of Henry Ji, Ph.D., Principal Executive Officer and Kevin Herde, Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

 

 

 

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

 

*

Non-material schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the SEC.

**

Portions of this exhibit have been omitted and filed separately with the SEC pursuant to a request for confidential treatment.

+

The SEC has granted confidential treatment with respect to certain portions of this exhibit. Omitted portions have been filed separately with the SEC.

±

Management contract or compensatory plan.

 

 

The following financial statement schedule is filed as part of this Annual Report on Form 10-K:

 

Schedule

Number

  

Description

II

  

Valuation and Qualifying Accounts

 

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Balance at
Beginning
of Period

 

Reserves Acquired

 

Additions

 

Deductions

 

Balance at
End of Period

Fiscal Year 2016:

 

 

 

 

 

 

 

 

 

 

Income tax valuation allowance

 

39,605

 

 

 

 

41,434

 

 

 

 

81,039

 

 

 

$

39,605

 

 

$

 

 

$

41,434

 

 

$

 

 

$

81,039

 

Fiscal Year 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax valuation allowance

 

25,350

 

 

 

 

14,255

 

 

 

 

39,605

 

 

 

$

25,350

 

 

$

 

 

$

14,255

 

 

$

 

 

$

39,605

 

Fiscal Year 2014:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax valuation allowance

 

12,299

 

 

 

 

13,051

 

 

 

 

25,350

 

 

$

12,299

 

 

$

 

 

$

13,051

 

 

$

 

 

$

25,350

 

 

 

7


 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: March 27, 2017

 

SORRENTO THERAPEUTICS, INC.

 

 

 

 

 

 

 

By:

 

                            /s/ HENRY JI

 

 

 

 

Director, Chief Executive Officer

& President

 

 

 

 

 

8


 

Sorrento Therapeutics, Inc.

Index to Consolidated Financial Statements

 

 

 

 

 

F-1


 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of

Sorrento Therapeutics, Inc. and Subsidiaries

San Diego, California

 

 

We have audited the accompanying consolidated balance sheets of Sorrento Therapeutics, Inc. and Subsidiaries (the “Company”) as of December 31, 2015 and 2014, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2015 and 2014.  These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Sorrento Therapeutics, Inc. and Subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the years ended December 31, 2015 and 2014, in conformity with accounting principles generally accepted in the United States of America.

/s/ Mayer Hoffman McCann P.C.

San Diego, CA

March 14, 2016

 

 

F-2


 

Report of Independent Registered Public Accounting Firm

 

To the Board of Directors and Stockholders of

Sorrento Therapeutics, Inc. and Subsidiaries

San Diego, California

 

We have audited the accompanying consolidated balance sheet of Sorrento Therapeutics, Inc. and subsidiaries (the "Company") as of December 31, 2016, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 15.  These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Sorrento Therapeutics, Inc. and subsidiaries as of December 31, 2016, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.  Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements for the year ended December 31, 2016, have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's recurring losses from operations and availability of working capital raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 21, 2017 expressed an adverse opinion on the Company's internal control over financial reporting because of a material weakness.

 

 

DELOITTE & TOUCHE LLP

 

San Diego, California

March 21, 2017

 

F-3


 

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Sorrento Therapeutics, Inc. and Subsidiaries

San Diego, California

 

 

We have audited Sorrento Therapeutics, Inc. and subsidiaries’ (the "Company's") internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on that risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management's assessment:  The Company’s review controls over unusual or non-recurring and significant transactions were not properly designed to provide reasonable assurance that it (1) timely identifies and assesses the accounting implications of terms in unusual or non-recurring agreements and (2) reassesses the valuation of associated assets or liabilities at the end of each reporting period. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016, of the Company and this report does not affect our report on such financial statements and financial statement schedule.

In our opinion, because of the effect of the material weakness identified above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2016, based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2016, of the Company and our report dated March 21, 2017 expressed an unqualified opinion on those consolidated financial statements and financial statement schedule and included an explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern.

DELOITTE & TOUCHE LLP

San Diego, California

March 21, 2017

 

 

 

F-4


 

  SORRENTO THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share amounts)

 

 

 

December 31,

 

 

 

2016

 

 

2015

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

82,398

 

 

$

39,038

 

Marketable securities

 

 

1,106

 

 

 

97,366

 

Grants and accounts receivables, net

 

 

1,696

 

 

 

903

 

Income tax receivable

 

 

1,289

 

 

 

1,715

 

Prepaid expenses and other, net

 

 

3,165

 

 

 

1,996

 

Total current assets

 

 

89,654

 

 

 

141,018

 

Property and equipment, net

 

 

12,707

 

 

 

7,246

 

Intangibles, net

 

 

64,766

 

 

 

3,912

 

Goodwill

 

 

41,548

 

 

 

20,626

 

Investments in common stock

 

 

112,008

 

 

 

112,008

 

Equity method investments

 

 

76,994

 

 

 

58,119

 

Other, net

 

 

3,909

 

 

 

590

 

Total assets

 

$

401,586

 

 

$

343,519

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

8,282

 

 

$

1,339

 

Accrued payroll and related

 

 

3,565

 

 

 

2,361

 

Current portion of deferred compensation

 

 

1,012

 

 

 

891

 

Accrued expenses

 

 

4,741

 

 

 

3,927

 

Current portion of deferred revenue

 

 

9,666

 

 

 

 

Derivative liability

 

 

 

 

 

5,520

 

Current portion of deferred rent

 

 

248

 

 

 

 

Acquisition consideration payable

 

 

48,362

 

 

 

12,000

 

Current portion of debt

 

 

209

 

 

 

4,835

 

Total current liabilities

 

 

76,085

 

 

 

30,873

 

Long-term debt

 

 

47,107

 

 

 

4,394

 

Deferred compensation

 

 

 

 

 

12

 

Deferred tax liabilities

 

 

53,238

 

 

 

49,341

 

Deferred revenue

 

 

134,376

 

 

 

110,900

 

Deferred rent and other

 

 

4,278

 

 

 

7,061

 

Total liabilities

 

 

              315,084

 

 

 

             202,581

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

Sorrento Therapeutics, Inc. equity

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 100,000,000 shares authorized and no shares

   issued or outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 750,000,000 shares authorized and

   50,882,856 and 37,771,459 shares issued and outstanding at

   December 31, 2016 and 2015, respectively

 

 

 

 

6

 

 

 

4

 

Additional paid-in capital

 

 

303,865

 

 

 

184,898

 

Accumulated other comprehensive income

 

 

(118)

 

 

 

73,579

 

Accumulated deficit

 

 

(174,252)

 

 

 

(113,329)

 

Treasury stock, 7,568,182 shares and no shares at cost at December 31, 2016,

 

 

 

 

 

 

 

 

and 2015, respectively

 

 

(49,464)

 

 

 

 

Total Sorrento Therapeutics, Inc. stockholders' equity

 

 

80,037

 

 

 

145,152

 

Noncontrolling interests

 

 

6,465

 

 

 

(4,214)

 

Total equity

 

 

86,502

 

 

 

140,938

 

Total liabilities and equity

 

$

401,586

 

 

$

343,519

 

 

See accompanying notes

 

 

F-5


 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2016, 2015 and 2014

(In thousands, except for per share amounts)

 

 

 

2016

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Grant

 

$

1,033

 

 

$

1,530

 

 

$

488

 

Royalties and licenses

 

 

4,017

 

 

 

 

 

 

 

Sales and services

 

 

3,102

 

 

 

3,060

 

 

 

3,337

 

Total revenues

 

 

8,152

 

 

 

4,590

 

 

 

3,825

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Costs of revenues

 

 

811

 

 

 

1,950

 

 

 

2,043

 

Research and development

 

 

       42,175

 

 

 

31,343

 

 

 

23,983

 

Acquired in-process research and development

 

 

45,000

 

 

 

24,013

 

 

 

209

 

General and administrative

 

 

24,219

 

 

 

20,132

 

 

 

9,987

 

Intangible amortization

 

 

845

 

 

 

1,157

 

 

 

2,345

 

(Gain) loss on contingent liabilities

 

 

(8,121)

 

 

 

 

 

 

 

Total costs and operating expenses

 

 

104,929

 

 

 

78,595

 

 

 

38,567

 

Loss from operations

 

 

(96,777)

 

 

 

(74,005)

 

 

 

(34,742)

 

Gain on sale of IgDraSol, net

 

 

 

 

 

69,274

 

 

 

 

Gain (loss) on derivative liabilities

 

 

5,520

 

 

 

(3,360)

 

 

 

 

Gain on marketable securities

 

 

27,193

 

 

 

 

 

 

 

Gain on trading securities

 

 

356

 

 

 

 

 

 

 

Gain (loss) on equity investments

 

 

435

 

 

 

(4,041)

 

 

 

 

Interest expense

 

 

(1,610)

 

 

 

(1,652)

 

 

 

(1,629)

 

Interest income

 

 

272

 

 

 

24

 

 

 

12

 

Loss on debt extinguishment

 

 

(222)

 

 

 

 

 

 

 

Loss before income tax expense

 

 

     (64,833)

 

 

 

(13,760)

 

 

 

(36,359)

 

Income tax expense (benefit)

 

 

(896)

 

 

 

36,314

 

 

 

(1,702)

 

Net loss

 

 

   (63,937)

 

 

 

(50,074)

 

 

 

(34,657)

 

Net loss attributable to noncontrolling interests

 

 

        (3,014)

 

 

 

(4,263)

 

 

 

 

Net loss attributable to Sorrento

 

$

     (60,923)

 

 

$

(45,811)

 

 

$

(34,657)

 

Net loss per share - basic and diluted per share attributable

   to Sorrento

 

$

 

(1.21)

 

 

$

(1.24)

 

 

$

(1.30)

 

Weighted-average shares used during period - basic

  and diluted per share attributable to Sorrento

 

 

 

50,360

 

 

 

36,909

 

 

 

26,679

 

 

See accompanying notes

 

 

F-6


 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Years Ended December 31, 2016, 2015 and 2014

(In thousands, except for share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

2015

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Sorrento

 

$

(60,923)

 

 

$

(45,811

)

 

$

(34,657

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (loss) gain on marketable securities, net of tax of
   $(14,294), $14,294, and $0

 

 

 

(73,579)

 

 

 

73,579

 

 

 

 

Foreign currency translations adjustments and other

 

 

(118)

 

 

 

 

 

 

 

Total other comprehensive income

 

 

(73,697)

 

 

 

73,579

 

 

 

 

Comprehensive (loss) income attributable to Sorrento

 

 

(134,620)

 

 

 

27,768

 

 

 

(34,657

)

Comprehensive income (loss) attributable to

   noncontrolling interests

 

 

 

 

 

 

 

 

 

Comprehensive (loss) income

 

$

(134,620)

 

 

$

27,768

 

 

$

(34,657

)

 

See accompanying notes

 

 

F-7


 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Years Ended December 31, 2016, 2015 and 2014

(In thousands, except for share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Treasury Stock

 

Additional
Paid-in

 

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

 

Noncontrolling

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

Capital

 

 

 

Income (Loss)

 

 

Deficit

 

 

 

Interest

 

 

Total

Balance, December 31, 2013

 

 

23,028,100

 

 

 

2

 

 

 

 

 

 

99,668

 

 

 

 

 

 

(32,861

)

 

 

 

 

 

66,809

Issuance of common stock for research

   agreement

 

 

25,000

 

 

 

 

 

 

 

 

 

209

 

 

 

 

 

 

 

 

 

 

 

 

209

Issuance of common stock with exercise

   of options

 

 

64,000

 

 

 

 

 

 

 

 

 

304

 

 

 

 

 

 

 

 

 

 

 

 

304

Issuance of common stock warrants in

   connection with amended loan and

   security agreement

 

 

 

 

 

 

 

 

 

 

 

322

 

 

 

 

 

 

 

 

 

 

 

 

322

Issuance of common stock for cash at

   $5.25 per share, net of issuance costs

   of $2,126

 

 

5,479,750

 

 

 

1

 

 

 

 

 

 

26,642

 

 

 

 

 

 

 

 

 

 

 

 

26,643

Issuance of common stock for cash at

   $9.00 per share, net of issuance costs of $180

 

 

400,000

 

 

 

 

 

 

 

 

 

3,420

 

 

 

 

 

 

 

 

 

 

 

 

3,420

Issuance of common stock warrants

   for cash at $5.80 per share, net of

   issuance costs of $20

 

 

7,188,062

 

 

 

1

 

 

 

 

 

 

41,722

 

 

 

 

 

 

 

 

 

 

 

 

41,723

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

3,940

 

 

 

 

 

 

 

 

 

 

 

3,940

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(34,657

)

 

 

 

 

 

(34,657

)

Balance, December 31, 2014

 

 

36,184,912

 

 

 

4

 

 

 

 

 

 

176,227

 

 

 

 

 

 

(67,518

)

 

 

 

 

 

108,713

 

Issuance of common stock with exercise

  of warrants

 

 

3,563

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock with exercise

    of options

 

 

276,712

 

 

 

 

 

 

 

 

 

1,699

 

 

 

 

 

 

 

 

 

 

 

 

1,699

 

Issuance of common stock upon

   achievement of milestone

 

 

1,306,272

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

6,972

 

 

 

 

 

 

 

 

 

 

 

 

6,972

 

Change in unrealized gain on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

73,579

 

 

 

 

 

 

 

 

 

73,579

 

Sale of noncontrolling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

49

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,811

)

 

 

(4,263

)

 

 

(50,074

)

Balance, December 31, 2015

 

 

37,771,459

 

 

 

4

 

 

 

 

 

 

184,898

 

 

 

73,579

 

 

 

(113,329

)

 

 

(4,214

)

 

 

140,938

 

Issuance of common stock with exercise

   of options

 

 

204,668

 

 

 

 

 

 

 

 

 

524

 

 

 

 

 

 

 

 

 

 

 

 

527

 

Issuance of common stock for private

   placement and investments, net

 

 

27,598,235

 

 

 

3

 

 

 

 

 

 

108,298

 

 

 

 

 

 

 

 

 

 

 

 

108,301

 

Issuance of common stock upon

   acquisition of Scilex

 

 

 

754,911

 

 

 

1

 

 

 

 

 

 

 

5,368

 

 

 

 

 

 

 

 

 

13,693

 

 

 

 

19,061

 

Cancellation of stock issuance

 

 

(15,446,417)

 

 

 

(2)

 

 

7,568,182

 

 

(49,464)

 

 

(1,341)

 

 

 

 

 

 

 

 

 

 

 

 

(50,807)

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

4,741

 

 

 

 

 

 

 

 

 

 

 

 

4,741

 

Change in unrealized gain on marketable

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(73,579)

 

 

 

 

 

 

 

 

 

 

(73,579)

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(118)

 

 

 

 

 

 

 

 

 

(118)

 

Hercules warrant

 

 

 

 

 

 

 

 

 

 

 

1,377

 

 

 

 

 

 

 

 

 

 

 

 

1,377

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(60,923)

 

 

 

(3,014)

 

 

 

(63,937)

 

Balance, December 31, 2016

 

 

50,882,856

 

 

$

6

 

 

7,568,182

 

 

(49,464)

 

$

303,865

 

 

$

(118)

 

 

$

(174,252)

 

 

$

6,465

 

 

$

86,502

 

 

See accompanying notes

 

F-8


 

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2016, 2015 and 2014

(In thousands, except for share amounts)

 

 

 

 

 

 

 

 

 

 

 

2016

 

 

2015

 

 

2014

 

Operating activities

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(63,937)

 

 

$

(50,074

)

 

$

(34,657

)

Adjustments to reconcile net loss to net cash provided by

   and (used in) operating activities:

 

 

 

</