10.14 | | | Exhibit | | | Number | | Description of Document | 10.13 | | Lease Amendment, dated October 1, 2007, between the Registrant and Mulvaney Properties LLC (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on October 4, 2007). | | 10.14 | | | | Amendment to Lease Agreement, dated February 2, 2004, as amended, by and between the Registrant and Mulvaney Properties LLC. (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on July 27, 2007). | | 10.15 | | Severance Agreement, dated November 14, 2007, by and between the Registrant and F. Scott Reding (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on November 14, 2007). | | 10.16 | | Offer Letter, dated November 12, 2007, by and between the Registrant and Gerard J. Michel. (Incorporated by reference to the Registrant’s Current Report on Form 8-K filed on November 14, 2007). | | | | | | Form of Incentive Stock Option Agreement for 2004 Amended and Restated Stock Incentive Plan. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed on December 21, 2007). | | | | | | Form of Option Agreement for 2005 Non-Employee Directors’ Stock Option Plan. (Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed on December 21, 2007). | | | | | | Base salaries of Executive Officers of the Registrant. | | | | | | Summary of the Registrant’s Non-Employee Director Compensation. | | | | | | Supply Agreement, dated July 7, 2008, between the Registrant and N.V. Organon (Incorporated by reference to exhibit 10.3 the Registrant’s Quarterly Report on Form 10-Q filed on August 11, 2008). | | 10.22* | | | | Letter Agreement, dated November 12, 2009, between the Registrant and N.V. Organon, amending the Supply Agreement, dated July 7, 2008, between the parties. (Incorporated by reference to exhibit 10.22 to Registrant’s Annual Report on Form 10-K filed on December 14, 2009). | | 21.1 | | | | Letter Agreement, dated July 25, 2011, between the Registrant and N.V. Organon amending the Supply Agreement dated July 7, 2008 (Incorporated by reference to Exhibit 10.27 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 30, 2011 filed on December 15, 2011). | | | | | License Agreement, effective as of June 8, 2012, between Aegis Therapeutics, LLC and the Registrant (Incorporated by reference to Exhibit 10.01 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 filed on August 14, 2012). | | | | | Securities Purchase Agreement, dated as of June 21, 2012, among the Registrant and the purchasers named therein (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on June 21, 2012). | | | | | Subsidiaries of the Registrant. |
58
Exhibit Number
| | | | Description of Document
|
---|
| | | | | Consent of BDO Seidman,USA, LLP, Independent Registered Public Accounting Firm. | | 24.1 | | Powers of Attorney (included on signature page). | | 31.01 | | Chief Executive Officer — Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | Chief Financial Officer — Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | | | | | | Chief Executive Officer and Chief Financial Officer — Certification pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | | | | | | | | | | | XBRL Taxonomy Extension Schema Document.* | | | | | XBRL Taxonomy Calculation Linkbase Document.* | | | | | XBRL Taxonomy Label Linkbase Document.* | | | | | XBRL Taxonomy Presentation Linkbase Document.* | | | | | XBRL Taxonomy Extension Definition Linkbase Document.* |
† | | Confidential treatment granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission. | |
* | | Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.submitted electronically herewith |
48
Attached as Exhibit 101 to this are the following formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets; (ii) Statements of Operations, (iii) Statements of Stockholders’ Equity; (iv) Statements of Comprehensive Loss; (v) Statements of Cash Flows; and (vi) Notes to Financial Statements. In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act, is deemed not filed for purposes of section 18 of the Exchange Act, and otherwise is not subject to liability under these sections. 59
BIODEL INC. INDEX TO FINANCIAL STATEMENTS
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| | | | | F-2 | | | | | | | F-3 | | | | | | | F-4 | | | | | | | F-5 | | | | | | | F-7 | | | | | | | F-8 | | Notes to financial statements | | | | | F-10 | |
F-1
Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Biodel Inc. Danbury, Connecticut We have audited the accompanying balance sheets of Biodel Inc. (a development stage company) as of September 30, 20092012 and 20082011 and the related statements of operations, stockholders’ equity, and cash flows and comprehensive loss for each of the three years in the period ended September 30, 20092012 and the statements of operations, stockholders’ equity and cash flows for the period from December 3, 2003 (inception) to September 30, 2009.2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial statements referred to above present fairly, in all material respects, the financial position of Biodel Inc. at September 30, 20092012 and 2008,2011, and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2009,2012, and for the period from December 3, 2003 (inception) to September 30, 2009,2012, in conformity with accounting principles generally accepted in the United States. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Biodel Inc.’s internal control over financial reporting as of September 30, 2009, based on criteria established inInternal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated December 14, 2009 expressed an unqualified opinion thereon.
/s/ BDO Seidman,USA, LLP
New York, New York December 14, 200921, 2012
F-2
F-2
Biodel Inc. (A Development Stage Company) Balance Sheets (In thousands, except share and per share amounts) | | | | | | | | | | | September 30, | | | | 2008 | | | 2009 | | ASSETS | | Current: | | | | | | | | | Cash and cash equivalents | | $ | 64,731 | | | $ | 54,640 | | Marketable securities, available for sale | | | 25,552 | | | | — | | Taxes receivable | | | 1,988 | | | | 752 | | Prepaid and other assets | | | 1,130 | | | | 482 | | | | | | | | | | | | | | | | | | Total current assets | | | 93,401 | | | | 55,874 | | Property and equipment, net | | | 3,931 | | | | 3,695 | | Intellectual property, net | | | 59 | | | | 56 | | Other assets | | | 120 | | | | — | | | | | | | | | | | | | | | | | | Total assets | | $ | 97,511 | | | $ | 59,625 | | | | | | | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | Current: | | | | | | | | | Accounts payable | | $ | 813 | | | $ | 1,007 | | Accrued expenses: | | | | | | | | | Clinical trial expenses | | | 4,163 | | | | 5,647 | | Payroll and related | | | 1,420 | | | | 1,117 | | Accounting and legal fees | | | 509 | | | | 325 | | Severance | | | 268 | | | | 183 | | Other | | | 839 | | | | 643 | | Income taxes payable | | | 1,012 | | | | 165 | | | | | | | | | | | | | | | | | | Total current liabilities | | | 9,024 | | | | 9,087 | | Commitments | | | | | | | | | Stockholders’ equity: | | | | | | | | | Preferred stock, $.01 par value; 50,000,000 shares authorized, none outstanding | | | — | | | | — | | Common stock, $.01 par value; 100,000,000 shares authorized; 23,698,558 and 23,803,672 issued and outstanding | | | 237 | | | | 238 | | Additional paid-in capital | | | 171,506 | | | | 176,764 | | Accumulated other comprehensive loss | | | (62 | ) | | | — | | Deficit accumulated during the development stage | | | (83,194 | ) | | | (126,464 | ) | | | | | | | | | | | | | | | | | Total stockholders’ equity | | | 88,487 | | | | 50,538 | | | | | | | | | | | | | | | | | | Total liabilities and stockholders’ equity | | $ | 97,511 | | | $ | 59,625 | | | | | | | | |
| | | | September 30,
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| | | | 2011
| | 2012
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| | | | | | | | | | | | Cash and cash equivalents | | | | $ | 38,701 | | | $ | 39,050 | | | | | | | 60 | | | | 60 | | | | | | | 35 | | | | 34 | | | | | | | — | | | | 88 | | | | | | | 1 | | | | 9 | | | | | | | 399 | | | | 295 | | | | | | | 39,196 | | | | 39,536 | | Property and equipment, net | | | | | 2,253 | | | | 1,552 | | Intellectual property, net | | | | | 49 | | | | 46 | | | | | | | 7 | | | | — | | | | | | $ | 41,505 | | | $ | 41,134 | | | LIABILITIES AND STOCKHOLDERS’ EQUITY
| | | | | | | | | | | | | | | | $ | 222 | | | $ | 285 | | | | | | | | | | | | | | | | | | 763 | | | | 488 | | | | | | | 1,118 | | | | 1,248 | | Accounting and legal fees | | | | | 191 | | | | 244 | | | | | | | 688 | | | | 141 | | | | | | | 204 | | | | 273 | | | | | | | 103 | | | | 101 | | Total current liabilities | | | | | 3,289 | | | | 2,780 | | Common stock warrant liability | | | | | 996 | | | | 7,338 | | Severance payable, long term portion | | | | | 142 | | | | — | | | | | | | 4,427 | | | | 10,118 | | | | | | | | | | | | | | | | | | | | | | | | Convertible preferred stock, $.01 par value; 50,000,000 shares authorized, 1,813,944 and 5,419,551 issued and outstanding | | | | | 18 | | | | 54 | | Common stock, $.01 par value; 25,000,000 shares authorized; 9,661,868 and 14,174,545 issued and outstanding | | | | | 96 | | | | 142 | | Additional paid-in capital | | | | | 212,310 | | | | 226,913 | | Deficit accumulated during the development stage | | | | | (175,346 | ) | | | (196,093 | ) | Total stockholders’ equity | | | | | 37,078 | | | | 31,016 | | Total liabilities and stockholders’ equity | | | | $ | 41,505 | | | $ | 41,134 | | See accompanying notes to financial statements. F-3
F-3
Biodel Inc. (A Development Stage Company) Statements of Operations (In thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 3, | | | | | | | | | | | | | | | | 2003 | | | | | | | | | | | | | | | | (Inception) to | | | | Year Ended September 30, | | | September 30, | | | | 2007 | | | 2008 | | | 2009 | | | 2009 | | Revenue | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating expenses: | | | | | | | | | | | | | | | | | Research and development | | | 15,939 | | | | 32,554 | | | | 32,325 | | | | 90,051 | | General and administrative | | | 8,386 | | | | 14,800 | | | | 10,994 | | | | 36,645 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total operating expenses | | | 24,325 | | | | 47,354 | | | | 43,319 | | | | 126,696 | | Other (income) and expense: | | | | | | | | | | | | | | | | | Interest and other income | | | (1,902 | ) | | | (3,010 | ) | | | (386 | ) | | | (5,489 | ) | Interest expense | | | — | | | | — | | | | — | | | | 78 | | Loss on settlement of debt | | | — | | | | — | | | | — | | | | 627 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating loss before tax provision (benefit) | | | (22,423 | ) | | | (44,344 | ) | | | (42,933 | ) | | | (121,912 | ) | Tax provision (benefit) | | | 125 | | | | (983 | ) | | | 337 | | | | (508 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | | (22,548 | ) | | | (43,361 | ) | | | (43,270 | ) | | | (121,404 | ) | Charge for accretion of beneficial conversion rights | | | — | | | | — | | | | — | | | | (603 | ) | Deemed dividend — warrants | | | (4,457 | ) | | | — | | | | — | | | | (4,457 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss applicable to common stockholders | | $ | (27,005 | ) | | $ | (43,361 | ) | | $ | (43,270 | ) | | $ | (126,464 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss per share — basic and diluted | | $ | (1.76 | ) | | $ | (1.94 | ) | | $ | (1.82 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average shares outstanding — basic and diluted | | | 15,354,898 | | | | 22,390,434 | | | | 23,746,598 | | | | | | | | | | | | | | | | | | |
| | | | Year Ended September 30,
| |
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| | | | 2010
| | 2011
| | 2012
| | December 3, 2003 (Inception) to September 30, 2012
|
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| | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | 26,177 | | | | 13,901 | | | | 12,571 | | | | 142,700 | | | | | | | — | | | | — | | | | (88 | ) | | | (88 | ) | General and administrative | | | | | 10,980 | | | | 9,321 | | | | 6,816 | | | | 63,762 | | | | | | | 37,157 | | | | 23,222 | | | | 19,299 | | | | 206,374 | | Other (income) and expense:
| | | | | | | | | | | | | | | | | | | Interest and other income | | | | | (17 | ) | | | (60 | ) | | | (80 | ) | | | (5,646 | ) | | | | | | — | | | | — | | | | — | | | | 78 | | Adjustments to fair value of common stock warrant liability | | | | | 1,254 | | | | (12,611 | ) | | | 1,510 | | | | (9,847 | ) | Loss on settlement of debt | | | | | — | | | | — | | | | — | | | | 627 | | Loss before tax provision (benefit) | | | | | (38,394 | ) | | | (10,551 | ) | | | (20,729 | ) | | | (191,586 | ) | | | | | | (104 | ) | | | 41 | | | | 18 | | | | (553 | ) | | | | | | (38,290 | ) | | | (10,592 | ) | | | (20,747 | ) | | | (191,033 | ) | Charge for accretion of beneficial conversion rights | | | | | — | | | | — | | | | — | | | | (603 | ) | Deemed dividend — warrants | | | | | — | | | | — | | | | — | | | | (4,457 | ) | Net loss applicable to common stockholders | | | | $ | (38,290 | ) | | $ | (10,592 | ) | | $ | (20,747 | ) | | $ | (196,093 | ) | Net loss per share — basic and diluted* | | | | $ | (6.34 | ) | | $ | (1.36 | ) | | $ | (1.91 | ) | | | | | Weighted average shares outstanding — basic and diluted* | | | | | 6,040,467 | | | | 7,788,741 | | | | 10,882,688 | | | | | |
| | | * | | Restated for a one for four (1:4) reverse stock split effective on June 11, 2012. |
See accompanying notes to financial statements. F-4
F-4
Biodel Inc. (A Development Stage Company) Statements of Stockholders’ Equity (In thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deficit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | Accumulated | | | | | | | Common Stock | | | Series A Preferred stock | | | Series B Preferred stock | | | Additional | | | Other | | | During the | | | Total | | | | $01 Par Value | | | $.01 Par Value | | | $.01 Par Value | | | Paid in | | | Comprehensive | | | Development | | | Stockholders’ | | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Income (loss) | | | Stage | | | Equity | | Shares issued to employees | | | 732,504 | | | $ | 7 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | (7 | ) | | $ | | | | $ | — | | | $ | — | | January 2004 Proceeds from sale of common stock | | | 4,581,240 | | | | 46 | | | | — | | | | — | | | | — | | | | — | | | | 1,308 | | | | | | | | — | | | | 1,354 | | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | (774 | ) | | | (774 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, September 30, 2004 | | | 5,313,744 | | | | 53 | | | | — | | | | — | | | | — | | | | — | | | | 1,301 | | | | — | | | | (774 | ) | | | 580 | | Additional stockholder contributions | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 514 | | | | | | | | — | | | | 514 | | Share-based compensation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 353 | | | | | | | | — | | | | 353 | | Shares issued to employees and directors for services | | | 42,656 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 60 | | | | | | | | — | | | | 61 | | July 2005 Private placement — Sale of Series A preferred stock, net of issuance costs of $379 | | | — | | | | — | | | | 569,000 | | | | 6 | | | | — | | | | — | | | | 2,460 | | | | | | | | — | | | | 2,466 | | Founder’s compensation contributed to capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 63 | | | | | | | | — | | | | 63 | | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (3,383 | ) | | | (3,383 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, September 30, 2005 | | | 5,356,400 | | | | 54 | | | | 569,000 | | | | 6 | | | | — | | | | — | | | | 4,751 | | | | — | | | | (4,157 | ) | | | 654 | | Share-based compensation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,132 | | | | | | | | — | | | | 1,132 | | July 2006 Private placement — Sale of Series B preferred stock, net of issuance costs of $1,795 | | | — | | | | — | | | | — | | | | — | | | | 5,380,711 | | | | 54 | | | | 19,351 | | | | | | | | — | | | | 19,405 | | July 2006 — Series B preferred stock units issued July 2006 to settle debt | | | — | | | | — | | | | — | | | | — | | | | 817,468 | | | | 8 | | | | 3,194 | | | | | | | | — | | | | 3,202 | | Shares issued to employees and directors for services | | | 4,030 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 23 | | | | | | | | — | | | | 23 | | Accretion of fair value of beneficial conversion charge | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 603 | | | | | | | | (603 | ) | | | — | | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (8,068 | ) | | | (8,068 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, September 30, 2006 | | | 5,360,430 | | | | 54 | | | | 569,000 | | | | 6 | | | | 6,198,179 | | | | 62 | | | | 29,054 | | | | — | | | | (12,828 | ) | | | 16,348 | | May 2007 Proceeds from sale of common stock | | | 5,750,000 | | | | 58 | | | | — | | | | — | | | | — | | | | — | | | | 78,697 | | | | | | | | — | | | | 78,755 | | Conversion of preferred stock on May 16, 2007 | | | 6,407,008 | | | | 64 | | | | (569,000 | ) | | | (6 | ) | | | (6,198,179 | ) | | | (62 | ) | | | 4 | | | | | | | | — | | | | — | | Share-based compensation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,224 | | | | | | | | — | | | | 4,224 | | Shares issued to employees, non-employees and directors for services | | | 2,949 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16 | | | | | | | | — | | | | 16 | | Stock options exercised | | | 3,542 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5 | | | | | | | | — | | | | 5 | | March 2007 Warrants exercised | | | 2,636,907 | | | | 26 | | | | — | | | | — | | | | — | | | | — | | | | 397 | | | | | | | | — | | | | 423 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deemed dividend — warrants | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,457 | | | | | | | | (4,457 | ) | | | — | | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | (22,548 | ) | | | (22,548 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, September 30, 2007 | | | 20,160,836 | | | | 202 | | | | — | | | | — | | | | — | | | | — | | | | 116,854 | | | | — | | | | (39,833 | ) | | | 77,223 | | Proceeds from sale of common stock | | | 3,260,000 | | | | 32 | | | | — | | | | — | | | | — | | | | — | | | | 46,785 | | | | | | | | — | | | | 46,817 | | Issuance of restricted stock | | | 9,714 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 172 | | | | | | | | — | | | | 172 | | Share-based compensation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,503 | | | | | | | | — | | | | 6,503 | | Stock options exercised | | | 174,410 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 901 | | | | | | | | — | | | | 902 | | Warrants exercised | | | 79,210 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 111 | | | | | | | | — | | | | 112 | | Net unrealized (loss) on Marketable Securities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (62 | ) | | | — | | | | (62 | ) | Proceeds from sale of stock — ESPP | | | 14,388 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 180 | | | | | | | | — | | | | 181 | | Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | (43,361 | ) | | | (43,361 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, September 30, 2008 | | | 23,698,558 | | | $ | 237 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | 171,506 | | | $ | (62 | ) | | $ | (83,194 | ) | | $ | 88,487 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Stock $01 Par Value
| | Series A Preferred stock $.01 Par Value
| | Series B Preferred stock $.01 Par Value
| |
---|
| | | | Shares
| | Amount
| | Shares
| | Amount
| | Shares
| | Amount
| | Additional Paid in Capital
| | Accumulated Other Comprehensive Income (loss)
| | Deficit Accumulated During the Development Stage
| | Total Stockholders’ Equity
|
---|
Balance at Inception (December 3, 2003) | | | | | — | | | $ | — | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | Shares issued to employees | | | | | 183,126 | | | | 2 | | | | — | | | | — | | | | — | | | | — | | | | (2 | ) | | | — | | | | — | | | | — | | January 2004 Proceeds from sale of common stock | | | | | 1,145,306 | | | | 11 | | | | — | | | | — | | | | — | | | | — | | | | 1,343 | | | | — | | | | — | | | | 1,354 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (774 | ) | | | (774 | ) | Balance, September 30, 2004 | | | | | 1,328,432 | | | $ | 13 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | 1,341 | | | $ | — | | | $ | (774 | ) | | $ | 580 | | Additional stockholder contributions | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 514 | | | | — | | | | — | | | | 514 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 353 | | | | — | | | | — | | | | 353 | | Shares issued to employees and directors for services | | | | | 10,658 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 61 | | | | — | | | | — | | | | 61 | | July 2005 Private placement — Sale of Series A preferred stock, net of issuance costs of $379 | | | | | — | | | | — | | | | 569,000 | | | | 6 | | | | — | | | | — | | | | 2,460 | | | | — | | | | — | | | | 2,466 | | Founder’s compensation contributed to capital | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 63 | | | | — | | | | — | | | | 63 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (3,383 | ) | | | (3,383 | ) | Balance, September 30, 2005 | | | | | 1,339,090 | | | $ | 13 | | | | 569,000 | | | $ | 6 | | | | — | | | $ | — | | | $ | 4,792 | | | $ | — | | | $ | (4,157 | ) | | $ | 654 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,132 | | | | — | | | | — | | | | 1,132 | | July 2006 Private placement — Sale of Series B preferred stock, net of issuance costs of $1,795 | | | | | — | | | | — | | | | — | | | | — | | | | 5,380,711 | | | | 54 | | | | 19,351 | | | | — | | | | — | | | | 19,405 | | July 2006 — Series B preferred stock units issued July 2006 to settle debt | | | | | — | | | | — | | | | — | | | | — | | | | 817,468 | | | | 8 | | | | 3,194 | | | | — | | | | — | | | | 3,202 | | Shares issued to employees and directors for services | | | | | 988 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 23 | | | | — | | | | — | | | | 23 | | Accretion of fair value of beneficial conversion charge | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 603 | | | | — | | | | (603 | ) | | | — | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (8,068 | ) | | | (8,068 | ) | Balance, September 30, 2006 | | | | | 1,340,078 | | | $ | 13 | | | | 569,000 | | | $ | 6 | | | | 6,198,179 | | | $ | 62 | | | $ | 29,095 | | | $ | — | | | $ | (12,828 | ) | | $ | 16,348 | | May 2007 Proceeds from sale of common stock | | | | | 1,437,500 | | | | 14 | | | | — | | | | — | | | | — | | | | — | | | | 78,741 | | | | — | | | | — | | | | 78,755 | | Conversion of preferred stock on May 16, 2007 | | | | | 1,601,749 | | | | 16 | | | | (569,000 | ) | | | (6 | ) | | | (6,198,179 | ) | | | (62 | ) | | | 52 | | | | — | | | | — | | | | — | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,224 | | | | — | | | | — | | | | 4,224 | | Shares issued to employees, non-employees and directors for services | | | | | 732 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16 | | | | — | | | | — | | | | 16 | | | | | | | 885 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5 | | | | — | | | | — | | | | 5 | | March 2007 Warrants exercised | | | | | 659,226 | | | | 7 | | | | — | | | | — | | | | — | | | | — | | | | 416 | | | | — | | | | — | | | | 423 | | Deemed dividend — warrants | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,457 | | | | — | | | | (4,457 | ) | | | — | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (22,548 | ) | | | (22,548 | ) | Balance, September 30, 2007 | | | | | 5,040,170 | | | $ | 50 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | 117,006 | | | $ | — | | | $ | (39,833 | ) | | $ | 77,223 | | Proceeds from sale of common stock | | | | | 815,000 | | | | 8 | | | | — | | | | — | | | | — | | | | — | | | | 46,809 | | | | — | | | | — | | | | 46,817 | | Issuance of restricted stock | | | | | 2,428 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 172 | | | | — | | | | — | | | | 172 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,503 | | | | — | | | | — | | | | 6,503 | | | | | | | 43,600 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 901 | | | | — | | | | — | | | | 902 | | | | | | | 19,802 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 112 | | | | — | | | | — | | | | 112 | | Net unrealized loss on Marketable Securities | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (62 | ) | | | — | | | | (62 | ) | Proceeds from sale of stock — ESPP | | | | | 3,596 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 181 | | | | — | | | | — | | | | 181 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (43,361 | ) | | | (43,361 | ) | Balance, September 30, 2008 | | | | | 5,924,596 | | | $ | 59 | | | | — | | | $ | — | | | | — | | | | — | | | $ | 171,684 | | | $ | (62 | ) | | $ | (83,194 | ) | | $ | 88,487 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,064 | | | | — | | | | — | | | | 5,064 | | | | | | | 4,413 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 25 | | | | — | | | | — | | | | 25 | | Net unrealized gain on Marketable Securities | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 62 | | | | — | | | | 62 | | Proceeds from the sale of stock — ESPP | | | | | 21,863 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 170 | | | | — | | | | — | | | | 170 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (43,270 | ) | | | (43,270 | ) | Balance, September 30, 2009 | | | | | 5,950,872 | | | $ | 59 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | 176,943 | | | $ | — | | | $ | (126,464 | ) | | $ | 50,538 | | Registered direct financing | | | | | 599,550 | | | | 6 | | | | — | | | | — | | | | — | | | | — | | | | 8,706 | | | | — | | | | — | | | | 8,712 | | Initial value of warrants issued in a registered direct | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (2,915 | ) | | | — | | | | — | | | | (2,915 | ) | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,621 | | | | — | | | | — | | | | 5,621 | | | | | | | 8,076 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 68 | | | | — | | | | — | | | | 68 | | Net unrealized gain on marketable securities | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1 | | | | — | | | | 1 | | Proceeds from the sale of stock — ESPP | | | | | 41,393 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 324 | | | �� | — | | | | — | | | | 325 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (38,290 | ) | | | (38,290 | ) | See accompanying notes to financial statements. F-5
F-5
Biodel Inc. (A Development Stage Company) Statements of Stockholders’ Equity (In thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deficit | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | Accumulated | | | | | | | Common Stock | | | Series A Preferred stock | | | Series B Preferred stock | | | Additional | | | Other | | | During the | | | Total | | | | $01 Par Value | | | $.01 Par Value | | | $.01 Par Value | | | Paid in | | | Comprehensive | | | Development | | | Stockholders’ | | | | Shares | | | Amount | | | Shares | | | Amount | | | Shares | | | Amount | | | Capital | | | Income (loss) | | | Stage | | | Equity | | Balance, September 30, 2008 | | | 23,698,558 | | | $ | 237 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | 171,506 | | | $ | (62 | ) | | $ | (83,194 | ) | | $ | 88,487 | | Share-based compensation | | | | | | | | | | | | | | | | | | | | | | | | | | | 5,064 | | | | | | | | | | | | 5,064 | | Stock options exercised | | | 17,661 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 25 | | | | — | | | | — | | | | 25 | | Net unrealized gain on Marketable Securities | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 62 | | | | — | | | | 62 | | Proceeds from sale of stock — ESPP | | | 87,453 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | 169 | | | | — | | | | — | | | | 170 | | Net loss | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (43,270 | ) | | | (43,270 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, September 30, 2009 | | | 23,803,672 | | | $ | 238 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | 176,764 | | | $ | — | | | $ | (126,464 | ) | | $ | 50,538 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Stock $01 Par Value
| | Series A Preferred stock $.01 Par Value
| | Series B Preferred stock $.01 Par Value
| |
---|
| | | | Shares
| | Amount
| | Shares
| | Amount
| | Shares
| | Amount
| | Additional Paid in Capital
| | Accumulated Other Comprehensive Income (loss)
| | Deficit Accumulated During the Development Stage
| | Total Stockholders’ Equity
|
---|
Balance, September 30, 2010 | | | | | 6,599,891 | | | $ | 66 | | | | — | | | $ | — | | | | — | | | $ | — | | | $ | 188,747 | | | $ | 1 | | | $ | (164,754 | ) | | $ | 24,060 | | Registered direct financing | | | | | 3,018,736 | | | | 30 | | | | 1,813,944 | | | | 18 | | | | — | | | | — | | | | 27,913 | | | | — | | | | — | | | | 27,961 | | Initial value of warrants issued in a registered direct offering | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (9,438 | ) | | | — | | | | — | | | | (9,438 | ) | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,920 | | | | — | | | | — | | | | 4,920 | | | | | | | 104 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | 10,549 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 50 | | | | — | | | | — | | | | 50 | | | | | | | 15,537 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Net unrealized loss on marketable securities | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | (1 | ) | Proceeds from the sale of stock — ESPP | | | | | 17,051 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 118 | | | | — | | | | — | | | | 118 | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (10,592 | ) | | | (10,592 | ) | Balance, September 30, 2011 | | | | | 9,661,868 | | | $ | 96 | | | | 1,813,944 | | | $ | 18 | | | | — | | | $ | — | | | $ | 212,310 | | | $ | — | | | $ | (175,346 | ) | | $ | 37,078 | | Proceeds from the sale of unregistered securities | | | | | 4,250,020 | | | | 43 | | | | — | | | | — | | | | 3,605,607 | | | | 36 | | | | 16,999 | | | | — | | | | — | | | | 17,078 | | Initial value of warrants issued in private placement financing | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (4,832 | ) | | | — | | | | — | | | | (4,832 | ) | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,828 | | | | — | | | | — | | | | 1,828 | | Proceeds from the sale of stock — ESPP | | | | | 10,776 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 27 | | | | — | | | | — | | | | 27 | | RSUs issued to settle bonus liability | | | | | 191,719 | | | | 2 | | | | — | | | | — | | | | — | | | | — | | | | 582 | | | | — | | | | — | | | | 584 | | | | | | | 60,409 | | | | 1 | | | | — | | | | — | | | | — | | | | — | | | | (1 | ) | | | — | | | | — | | | | — | | | | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (20,747 | ) | | | (20,747 | ) | Company re-purchase of fractional shares from the reverse stock split | | | | | (247 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Balance, Septermber 30, 2012 | | | | | 14,174,545 | | | $ | 142 | | | | 1,813,944 | | | $ | 18 | | | | 3,605,607 | | | $ | 36 | | | $ | 226,913 | | | $ | — | | | $ | (196,093 | ) | | $ | 31,016 | | See accompanying notes to financial statements. F-6
F-6
Biodel Inc. (A Development Stage Company) Statements of Comprehensive Loss (In thousands) | | | | Year Ended September 30,
| |
---|
| | | | 2010
| | 2011
| | 2012
|
---|
| | | | $ | (38,290 | ) | | $ | (10,592 | ) | | $ | (20,747 | ) | Unrealized holding gains arising during the period | | | | | 1 | | | | — | | | | — | | | | | | $ | (38,289 | ) | | $ | (10,592 | ) | | $ | (20,747 | ) | See accompanying notes to financial statements.
F-7
Biodel Inc. (A Development Stage Company) Statements of Cash Flows (In thousands, except share and per share amounts) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 3, 2003 | | | | | | | | | | | | | | | | (Inception) to | | | | | | | | | | | | | | | | September 30, | | | | 2007 | | | 2008 | | | 2009 | | | 2009 | | Cash flows from operating activities: | | | | | | | | | | | | | | | | | Net loss | | $ | (22,548 | ) | | $ | (43,361 | ) | | $ | (43,270 | ) | | $ | (121,404 | ) | Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | | | | | | | | Depreciation and amortization | | | 254 | | | | 567 | | | | 877 | | | | 2,149 | | Founder’s compensation contributed to capital | | | — | | | | — | | | | — | | | | 271 | | Share-based compensation for employees and directors | | | 3,567 | | | | 6,434 | | | | 4,970 | | | | 15,204 | | Share-based compensation for non-employees | | | 657 | | | | 241 | | | | 94 | | | | 2,325 | | Loss on settlement of debt | | | — | | | | — | | | | — | | | | 627 | | Write-off of capitalized patent expense | | | — | | | | 208 | | | | — | | | | 208 | | Write-off of loan to related party | | | — | | | | — | | | | — | | | | 41 | | (Increase) decrease in: | | | | | | | | | | | | | | | | | Prepaid expenses and other assets | | | (430 | ) | | | (745 | ) | | | 768 | | | | (482 | ) | Income taxes receivable | | | — | | | | (1,988 | ) | | | 1,236 | | | | (752 | ) | Increase (decrease) in: | | | | | | | | | | | | | | | | | Accounts payable | | | 830 | | | | (1,374 | ) | | | 194 | | | | 1,007 | | Income tax payable | | | 255 | | | | 917 | | | | (847 | ) | | | 165 | | Deferred compensation | | | (500 | ) | | | — | | | | — | | | | — | | Accrued expenses and other liabilities | | | 2,406 | | | | 4,198 | | | | 715 | | | | 8,133 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total adjustments | | | 7,039 | | | | 8,458 | | | | 8,007 | | | | 28,896 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash used in operating activities | | | (15,509 | ) | | | (34,903 | ) | | | (35,263 | ) | | | (92,508 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities: | | | | | | | | | | | | | | | | | Purchase of property and equipment | | | (1,315 | ) | | | (2,769 | ) | | | (637 | ) | | | (5,809 | ) | Purchase of marketable securities | | | — | | | | (25,614 | ) | | | — | | | | (25,614 | ) | Sale of marketable securities | | | — | | | | — | | | | 25,614 | | | | 25,614 | | Capitalized intellectual properties | | | (66 | ) | | | (17 | ) | | | — | | | | (298 | ) | Loan to related party | | | — | | | | — | | | | — | | | | (41 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by (used in) investing activities | | | (1,381 | ) | | | (28,400 | ) | | | 24,977 | | | | (6,148 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | | | | | | | | | | | | | | | Options exercised | | | 5 | | | | 902 | | | | 25 | | | | 932 | | Warrants exercised | | | 423 | | | | 112 | | | | — | | | | 535 | | Deferred public offering costs | | | (1,268 | ) | | | — | | | | — | | | | (1,458 | ) | Stockholder contribution | | | — | | | | — | | | | — | | | | 1,660 | | Net proceeds from sale of Series A preferred stock | | | — | | | | — | | | | — | | | | 2,466 | | Net proceeds from employee stock purchase plan | | | — | | | | 181 | | | | 170 | | | | 351 | | Net proceeds from sale of common stock | | | 80,213 | | | | 46,817 | | | | — | | | | 127,030 | | Proceeds from bridge financing | | | — | | | | — | | | | — | | | | 2,575 | | Net proceeds from sale of Series B preferred stock | | | — | | | | — | | | | — | | | | 19,205 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net cash provided by financing activities | | | 79,373 | | | | 48,012 | | | | 194 | | | | 153,295 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net increase (decrease) in cash and cash equivalents | | | 62,483 | | | | (15,291 | ) | | | (10,091 | ) | | | 54,640 | | Cash and cash equivalents, beginning of period | | | 17,539 | | | | 80,022 | | | | 64,731 | | | | — | | | | | | | | | | | | | | | | | | | Cash and cash equivalents, end of period | | $ | 80,022 | | | $ | 64,731 | | | $ | 54,640 | | | $ | 54,640 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Supplemental disclosures of cash flow information: | | | | | | | | | | | | | | | | | Cash paid for interest and income taxes was: | | | | | | | | | | | | | | | | | Interest | | $ | — | | | $ | — | | | $ | — | | | $ | 9 | | Income taxes | | | 44 | | | | 88 | | | | 111 | | | | 246 | | Non-cash financing and investing activities: | | | | | | | | | | | | | | | | | Settlement of debt with Series B preferred stock | | $ | — | | | $ | — | | | $ | — | | | $ | 3,202 | | Accrued expenses settled with Series B preferred stock | | | — | | | | — | | | | — | | | | 150 | | Deemed dividend — warrants | | | 4,457 | | | | — | | | | — | | | | 4,457 | | Accretion of fair value of beneficial charge on preferred stock | | | — | | | | — | | | | — | | | | 603 | | Conversion of convertible preferred stock to common stock | | | 68 | | | | — | | | | — | | | | 68 | |
| | | | Year Ended September 30,
| |
---|
| | | | 2010
| | 2011
| | 2012
| | December 3, 2003 (Inception) to September 30, 2012
|
---|
Cash flows from operating activities:
| | | | | | | | | | | | | | | | | | | | | | | $ | (38,290 | ) | | $ | (10,592 | ) | | $ | (20,747 | ) | | $ | (191,033 | ) | Adjustments to reconcile net loss to net cash used in operating activities:
| | | | | | | | | | | | | | | | | | | Depreciation and amortization | | | | | 991 | | | | 938 | | | | 725 | | | | 4,803 | | Founder’s compensation contributed to capital | | | | | — | | | | — | | | | — | | | | 271 | | Share-based compensation for employees and directors | | | | | 5,628 | | | | 4,964 | | | | 1,828 | | | | 27,624 | | Share-based compensation for non-employees | | | | | (7 | ) | | | (44 | ) | | | — | | | | 2,274 | | Loss on settlement of debt | | | | | — | | | | — | | | | — | | | | 627 | | Write-off of capitalized patent expense | | | | | — | | | | — | | | | 38 | | | | 246 | | Write-off of loan to related party | | | | | — | | | | — | | | | — | | | | 41 | | Adjustment to fair value of common stock warrant liability | | | | | 1,254 | | | | (12,611 | ) | | | 1,510 | | | | (9,847 | ) | | | | | | �� | | | | | | | | | | | | | | Prepaid expenses and other assets | | | | | 117 | | | | (41 | ) | | | 111 | | | | (295 | ) | | | | | | 636 | | | | 81 | | | | 1 | | | | (34 | ) | | | | | | — | | | | — | | | | 88 | | | | 88 | | | | | | | (11 | ) | | | 10 | | | | (8 | ) | | | (9 | ) | | | | | | | | | | | | | | | | | | | | | | | | | 982 | | | | (1,767 | ) | | | 63 | | | | 285 | | | | | | | (120 | ) | | | 58 | | | | (2 | ) | | | 101 | | Accrued expenses and other liabilities | | | | | (5,561 | ) | | | 753 | | | | (128 | ) | | | 3,199 | | | | | | | 3,909 | | | | (7,659 | ) | | | 4,052 | | | | 29,198 | | Net cash used in operating activities | | | | | (34,381 | ) | | | (18,251 | ) | | | (16,695 | ) | | | (161,835 | ) | Cash flows from investing activities:
| | | | | | | | | | | | | | | | | | | Purchase of property and equipment | | | | | (292 | ) | | | (189 | ) | | | (59 | ) | | | (6,349 | ) | Purchase of marketable securities | | | | | (6,000 | ) | | | — | | | | — | | | | (31,614 | ) | Sale of marketable securities | | | | | — | | | | 6,000 | | | | — | | | | 31,614 | | Capitalized intellectual properties | | | | | — | | | | — | | | | — | | | | (298 | ) | | | | | | — | | | | — | | | | — | | | | (41 | ) | Net cash (used in) provided by investing activities | | | | | (6,292 | ) | | | 5,811 | | | | (59 | ) | | | (6,688 | ) | Cash flows from financing activities:
| | | | | | | | | | | | | | | | | | | | | | | | (150 | ) | | | 90 | | | | — | | | | (60 | ) | | | | | | 68 | | | | — | | | | — | | | | 1,000 | | | | | | | — | | | | 50 | | | | — | | | | 585 | | Net proceeds from employee stock purchase plan | | | | | 325 | | | | 118 | | | | 27 | | | | 821 | | Deferred public offering costs | | | | | — | | | | — | | | | — | | | | (1,458 | ) | | | | | | — | | | | — | | | | — | | | | 1,660 | | Net proceeds from sale of Series A preferred stock 2005 | | | | | — | | | | — | | | | — | | | | 2,466 | | Net proceeds from sale of Series A preferred stock 2011 | | | | | — | | | | 2,685 | | | | — | | | | 2,685 | | Net proceeds from sale of common stock | | | | | 8,712 | | | | 25,276 | | | | — | | | | 161,018 | | Proceeds from bridge financing | | | | | — | | | | — | | | | — | | | | 2,575 | | Net proceeds from sale of Series B preferred stock 2006 | | | | | — | | | | — | | | | — | | | | 19,205 | | Net proceeds from sale of Series B preferred stock 2012 | | | | | — | | | | — | | | | 8,491 | | | | 8,491 | | Net proceeds from sale of unregistered common stock — private placement | | | | | — | | | | — | | | | 8,585 | | | | 8,585 | | Net cash provided by financing activities | | | | | 8,955 | | | | 28,219 | | | | 17,103 | | | | 207,573 | | Net (decrease) increase in cash and cash equivalents | | | | | (31,718 | ) | | | 15,779 | | | | 349 | | | | 39,050 | | Cash and cash equivalents, beginning of period | | | | | 54,640 | | | | 22,922 | | | | 38,701 | | | | — | | Cash and cash equivalents, end of period | | | | $ | 22,922 | | | $ | 38,701 | | | $ | 39,050 | | | $ | 39,050 | | Cash paid for interest and income taxes was:
| | | | | | | | | | | | | | | | | | | | | | | $ | — | | | $ | — | | | $ | — | | | $ | 9 | | | | | | | 60 | | | | — | | | | 20 | | | | 326 | |
See accompanying notes to financial statements. F-7
F-8
| | | | Year Ended September 30,
| |
---|
| | | | 2010
| | 2011
| | 2012
| | December 3, 2003 (Inception) to September 30, 2012
|
---|
Non-cash financing and investing activities:
| | | | | | | | | | | | | | | | | | | Warrants issued in connection with registered direct offering | | | | $ | 2,915 | | | $ | 9,438 | | | $ | — | | | $ | 12,353 | | Warrants issued in connection with unregistered common stock — private placement | | | | | — | | | | — | | | | 4,832 | | | | 4,832 | | Settlement of debt with Series B preferred stock | | | | | — | | | | — | | | | — | | | | 3,202 | | Accrued expenses settled with Series B preferred stock | | | | | — | | | | — | | | | — | | | | 150 | | Deemed dividend — warrants | | | | | — | | | | — | | | | — | | | | 4,457 | | Accretion of fair value of beneficial charge on preferred stock | | | | | — | | | | — | | | | — | | | | 603 | | Conversion of convertible preferred stock to common stock | | | | | — | | | | — | | | | — | | | | 68 | | Issuance of restricted stock units to settle accrued bonus | | | | | — | | | | — | | | | 584 | | | | 584 | |
See accompanying notes to financial statements.
F-9
Biodel Inc. (A Development Stage Company)
Notes to Financial StatementStatements (In thousands, except share and per share amounts)
1. Business and Basis of Presentation Business Biodel Inc. (“Biodel”and its wholly owned subsidiary (collectively, “Biodel” or the “Company”, and formerly Global Positioning Group Ltd.) is a development stage specialty pharmaceutical company located in Danbury, Connecticut. The Company was incorporated in the State of Delaware on December 3, 2003 and commenced operations in January 2004. The Company is focusedformed a wholly owned subsidiary in the United Kingdom in October 2011 (“Biodel UK Limited”). This subsidiary has been inactive since its inception. The Company focuses on the development and commercialization of innovative treatments for diabetes. The Company develops product candidates by applying its proprietary formulation technologies to existing drugs in order to improve their therapeutic results. The Company’s initial development efforts are focused on peptide hormones.diabetes that may be safer, more effective and more convenient for patients. The Company’s most advanced product candidate, VIAject®, has been studied in two pivotal Phase 3 clinical trials forprogram involves developing proprietary formulations of injectable recombinant human insulin (“RHI”) designed to be more rapid-acting than the treatment of“rapid-acting” mealtime insulin analogs presently used to treat patients with Type 1 and Type 2 diabetes. Earlier stage product candidates include VIAtab™, a sublingual tablet formulation of insulin. The Company, has developed all oftherefore, refers to these formulations as its product candidates utilizing its proprietary VIAdel™ technology that allows“ultra-rapid-acting” insulin formulations. In addition to the Company’s RHI-based formulations, the Company is using its formulation technologies to develop new ultra-rapid-acting formulations of insulin analogs. These insulin analog-based formulations generally use the same or similar excipients as the Company’s RHI-based formulations and are designed to be more rapid-acting than the “rapid-acting” mealtime insulin analogs, but they may present characteristics that are different from those offered by the Company’s RHI-based formulations. In April 2012, the Company announced top-line results from a Phase 1 clinical trial of two RHI-based formulations, BIOD-123 and BIOD-125. In this clinical trial, BIOD-123 and BIOD-125 achieved the Company’s target pharmacokinetic, pharmacodynamic and toleration profiles. In May 2012, the Company selected two insulin analog-based formulations, BIOD-238 and BIOD-250, to study in a Phase 1 clinical trial. Based on its assessment of these two formulations, the interaction between peptide hormonesCompany selected BIOD-123 as its lead RHI-based product candidate, and small molecules.in the third calendar quarter of 2012, the Company began enrolling patients in a Phase 2 clinical trial of BIOD-123. This Phase 2 clinical trial is designed to assess the clinical impact of BIOD-123 relative to Humalog®. The trial is being conducted at investigative centers in the United States and is expected to enroll approximately 130 randomized patients with Type 1 diabetes. We expect to announce top-line results from this Phase 2 clinical trial in the third calendar quarter of 2013. In May 2012, we selected two insulin analog-based formulations, BIOD-238 and BIOD-250, to evaluate in a Phase 1 clinical trial. BIOD-238 and BIOD-250 generally use the same or similar excipients as BIOD-123 and are intended to be optimized for rapid absorption and injection site toleration. We began enrolling patients in the Phase 1 clinical trial in the third calendar quarter of 2012. This trial is designed to compare the pharmacokinetic and injection site toleration profiles of these formulations relative to a rapid-acting mealtime insulin analog. We expect to announce top-line results from this clinical trial in the first calendar quarter of 2013. In parallel with the Phase 1 clinical trial of BIOD-238 and BIOD-250, we have continued our formulation development work to improve the stability characteristics of our ultra-rapid-acting insulin analog-based formulations. In addition to our ultra-rapid-acting insulin formulation program, we are developing a liquid glucagon formulation for use as a rescue treatment for diabetes patients experiencing severe hypoglycemia, or very low concentrations of blood glucose. To date, we have not selected a lead formulation to advance into clinical trials. We are continuing to conduct preclinical testing to develop formulations that achieve a combination of pharmacokinetic, pharmacodynamic and stability characteristics that we believe would be required for a glucagon rescue treatment product to be commercially successful. Basis of Presentation The Company is in the development stage, as defined by Financial Accounting Standards Board (“FASB”) ASC 915 (prior authoritative literature: Statement of Financial Accounting Standards No. 7), F-10
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
“Accounting and Reporting by Development Stage Enterprises”, as its primary activities since incorporation have been establishing its facilities, recruiting personnel, conducting research and development, business development, business and financial planning and raising capital.On April 12, 2007,June 11, 2012, the Company effected a 0.7085 for one (0.7085:1)one-for-four reverse stock split (see Note 11).of its outstanding common stock. All references in these financial statements and accompanying notes to units of common stock or per share amounts are reflective of the reverse split for all periods reported. (See Note 13.) 2. Summary of Significant Accounting Policies Research and Development Costs The Company is in the business of research and development and, therefore, research and development costs include, but are not limited to, salaries and benefits, lab supplies, preclinical fees, clinical trial and related clinical manufacturing costs, allocated overhead costs and professional service providers. Research and development costs are expensed when incurred. Research and development costs aggregated $15,939, $32,554,$26,177, $13,901 and $32,325$12,483 for the years ended September 30, 2007, 20082010, 2011 and 2009,2012, respectively. Government Grants Grants received are recognized as grant income when the grants become receivable, provided there is reasonable assurance that the Company will comply with the conditions attached to the grant and there is reasonable assurance the grant will be received. The Company requests cash funding under approved grants as expenses are incurred (not in advance) and report these receipts on the statement of operations as a separate line item entitled “Government Grants” with the corresponding expenses are included in research and development. In July and September 2012, the Company was awarded two National Institutes of Health grants for the development of concentrated ultra-rapid-acting insulin formulation and glucagon formulation, respectively, for use in an artificial pancreas. Both awards are for two years and total approximately $580 each. Work on the grant for the development of concentrated ultra-rapid-acting insulin formulation started in August 2012 and expenses incurred were $88 during the twelve months ended September 30, 2012, and corresponding income and a receivable were recorded. In January 2011, the Company received $1,200 in tax credits under the Internal Revenue Service’s therapeutic tax credit program which was recorded as a credit to reduce our research and development expenses. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions including, but not limited to, accruals, income taxes payable, forfeiture rate used in the computation of share-based compensation and deferred tax assets. Actual results may differ from those estimates. Cash and Cash Equivalents The Company considers currency on hand, demand deposits and all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash and cash equivalents. AtAs of September 30, 2009,2011 and 2012, the Company had cash and cash equivalents of $54,640$38,701 and $39,050, respectively, and they are primarily held in U.S. treasury denominated,a premium commercial money market accounts. Marketable securities
The Company’s marketable securities were classified as available-for-sale and were reported at market value with unrealized gains and losses shown as a component of accumulated other comprehensive income (loss). The Company regularly evaluates the performance of these investments individually for impairment, taking into consideration the investment, volatility and current returns. If a determination is made that a decline in fair value is other-than-temporary, the related fund is written down to its estimated fair value. At September 30, 2008, marketable securities total $25,552. Due to the short-term need for funds and uncertainty in the credit and financial market, the Company modified its investment strategy and primarily invested in money market accounts comprised of treasury securities. At September 30, 2009, the Company had no marketable security investments.
F-8 account.F-11
Biodel Inc. (A Development Stage Company)
Notes to Financial StatementStatements — (Continued) (In thousands, except share and per share amounts)
Restricted Cash Restricted cash was $60 as of September 30, 2011 and 2012. This amount was held in a money market account with a bank to secure a credit card purchasing agreement utilized to facilitate employee travel and certain ordinary purchases. In February 2012, the Company brought action against one of its vendors before the American Arbitration Association in New York relating to disputed fees charged to the Company for inventory storage. As part of the arbitration stipulation, the Company established a $1,500 escrow account and recorded an accrual of $741 toward this claim. During the quarter ended June 30, 2012, the Company paid $500 from the escrow account. On July 30, 2012, the Company received a judgment from the arbitrator stating the Company’s final amount due was $55. The remaining escrow balance of $945 was removed from the escrow account and transferred to cash. The remaining accrual of $186 was reversed and recorded in research and development expense during the quarter ended September 30, 2012. Fair Value of Financial Instruments The carrying amounts of the Company’s financial instruments, which include cash and cash equivalents and accounts payable and accrued expenses approximate their fair values due to their short term maturities. Pre-Launch Inventory Inventory costs associated with productsproduct candidates that have not yet received regulatory approval are capitalized if the Company believes there is probable future commercial use and future economic benefit. If the probability of future commercial use and future economic benefit cannot be reasonably determined, then pre-launch inventory costs associated with pre-launch inventory that has not yet received regulatory approvalsuch product candidates are expensed as research and development expense during the period the costs are incurred. Because all of its product candidates are in early stages of preclinical or clinical development, the Company currently expenses all purchases of pre-launch inventory as research and development, and expects to continue to do so until it can determine the probability of regulatory approval for the applicable product candidate. For the yearyears ended September 30, 2009,2011 and 2012, the Company expensed $6.5 million$2,409 and $170, respectively, of costs associated with the purchase of recombinant human insulin,RHI and glucagon as research and development expense after itsuch materials passed quality control inspection by the Company and transfer of title occurred. The Company plans on submitting the NDA application for VIAject® in December 2009. Until the Company can determine the probability of VIAject® receiving regulatory approval, costs associated with the purchase of recombinant human insulin will continue to be expensed as research and development (see Note 7). Intellectual Property The intangible asset consistsIntangible assets consist primarily of capitalized costs associated with VIAject®the Company’s ultra-rapid-acting insulin patents and the purchase of two domain addresses. They are amortized using the straight-line method over twenty years. If the Company determines that a patent will not result in future revenues, the cost related to such patent will be expensed in full on the date of that determination. AmortizationIntellectual property amortization expense for the years ended September 30, 2007, 20082010, 2011 and 20092012 was $13, $13$3, $4 and $3, respectively.
Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation or amortization. Major improvements are capitalized, while maintenance and repairs are expensed in the period the cost is incurred. Property and equipment are depreciated over their estimated useful lives using the straight-line method. Leasehold improvements are amortized using the straight-line method over their estimated useful lives, or the remaining term of the lease, whichever is less.shorter. When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in other income (expense) in the statement of operations. Estimated useful lifelives for each asset category isare as follows: Furniture and fixtures — 7 years,years; Leasehold improvements — estimated useful life or remaining term F-12
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
of lease, whichever is shorter,shorter; Laboratory equipment — 7 years,years; Manufacturing equipment — 5 years,years; Device development— 5 years,years; Facility equipment— 3 years and 7 years,years; Computer equipment — 5 yearsyears; and Computer software — 3 years.
Impairment of Long-Lived Assets Whenever events or changes in circumstances indicate that the carrying amounts of a long-lived asset may not be recoverable, the Company reviews these assets for impairment and determines whether adjustments are needed to carrying values. There were no adjustments to the carrying value of long-lived assets at September 30, 20082011 and 2009.2012. Warrant Liability The Company applies the provisions of Accounting Standards Codification Topic 480 (“ASC 480”) (formerly FASB Staff Position 150-5 (FSP 15-5)), Issuers Accounting under FASB Statement No. 150 for Freestanding Warrants and other Similar Instruments on Shares that are Redeemable or Distinguishing Liabilities from Equities. Pursuant to ASC 480, a freestanding financial instrument (other than outstanding share) that, at inception, embodies an obligation to repurchase the issuer’s shares and “requires or may require” the obligation to be settled by transferring assets, qualifies as a liability (if the obligation is conditional, the number of conditions is irrelevant). The Company issued warrants in June 2012 and recorded a liability determined by the Black-Scholes valuation model. The Black-Scholes valuation model was used because the June 2012 warrants do not contain a repricing provision. The Black-Scholes valuation model takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the term of the warrant. These warrants will be revalued at each reporting period and changes in fair value are recognized currently in the statements of operations under the caption “Adjustment to fair value of common stock warrant liability.” The Company issued warrants in May 2011 and recorded a liability determined by the Black-Scholes valuation model. The Black-Scholes valuation model was used because the May 2011 warrants do not contain a repricing provision. These warrants will be revalued at each reporting period and changes in fair value are recognized currently in the statements of operations under the caption “Adjustment to fair value of common stock warrant liability.” The Company issued warrants in August 2010 and recorded a liability determined by the Monte Carlo simulation method, which was used because the August 2010 warrants contain a re-pricing provision. The Monte Carlo simulation is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of future expected stock prices of the Company and its peer group and minimize standard error. On December 2, 2011, the unexercised warrants to purchase 589,000 shares of common stock expired. The Company revalued the liability associated with these warrants from September 30, 2011 through the date of expiration and there was no material impact on the statement of operations. The common stock warrant liability associated with these warrants no longer exists. Comprehensive Income (Loss)Loss The Company classifies its marketable securities as available for sale. Other Comprehensive Income (Loss) includeLoss is comprised of net loss and changes in equity for unrealized holding gains/(losses)gains on marketable securities which have arose during the period. During the year ended September 30, 2009, marketable security investments were sold at par value
F-13
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and the September 30, 2008 unrealized loss of $62 was fully recaptured.per share amounts)
Income Taxes The Company uses the asset and liability method of accounting for deferred income taxes. The provision for income taxes includes income taxes currently payable and those deferred as a result of temporary differences between the financial statement and tax bases of assets and liabilities. A valuation allowance is provided to reduce deferred tax assets to the amount of future tax benefit when it is more likely than not that some portion of the deferred tax assets will not be realized. Projected future taxable income and ongoing tax planning strategies are considered and evaluated when assessing the need for a valuation allowance. Any increase or decrease in a valuation allowance could have a material adverse or beneficial impact on the Company’s income tax provision and net income or loss in the period which the determination is made. F-9
Biodel Inc.
(A Development Stage Company)
Notes to Financial Statements — (Continued)
(In thousands, except share and per share amounts)
The Company adopted the provisions of Accounting Standards Codification (ASC) Topic 740, Income Taxes, with respect to uncertain tax positions (substantially incorporating the Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or FIN 48) effective October 1, 2007. These provisions clarify the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. Recognition thresholds and measurement attributes were prescribed for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Guidance was also provided on derecognition, classification, interest and penalties, accounting in interim periods, disclosures and transition. The adoption had no resulting effect on our financial statements. See Note 8 for additional information.
Concentration of Risks and Uncertainties Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company deposits excess cash with major financial institutions in the United States. Balances may exceed the amount of insurance provided on such deposits. The Company believes that its investment policy guideline for its excess cash maintains safety and liquidity through its policies on credit requirements, diversification and investment maturity. The Company has experienced significant operating losses since inception. At September 30, 2009,2012, the Company had a deficit accumulated during the development stage of $126,464.$196,093. The Company has generated no revenue to date. The Company has funded its operations to date principally from the sale of securities. The Company expects to incur substantial additional operating losses for the next several years and will need to obtain additional financing in order to complete the clinical development of VIAject®,an ultra-rapid-acting insulin or a glucagon rescue product, launch and commercialize VIAject®,the product if it receives regulatory approval, and continue research and development programs. There can be no assurance that such financing will be available or will be at terms acceptable to the Company. The Company is currently developing its first product candidates and has no products that have received regulatory approval. Any products developed by the Company will require approval from the U.S. Food and Drug Administration (“FDA”)FDA or foreign regulatory agencies prior to commercial sales. There can be no assurance that the Company’s products will receive the necessary approvals. If the Company is denied such approvals or such approvals are delayed, it would have a material adverse effect on the Company’s future operating results. To achieve profitable operations, the Company must successfully develop, test, manufacture and market products, as well as secure the necessary regulatory approvals. There can be no assurance that any such products can be developed successfully or manufactured at an acceptable cost and with appropriate performance characteristics, or that such products will be successfully marketed. These factors would have a material adverse effect on the Company’s future financial results. Share-BasedStock-Based Compensation
In March 2010, the stockholders of the Company approved a new 2010 Stock Incentive Plan (the “2010 Plan”). The 2010 Plan replaces the 2004 Stock Incentive Plan and 2005 Non-Employee Directors Stock Option Plan. In addition, on March 8, 2012, the Company’s stockholders approved an amendment to the 2010 Plan to increase the number of shares of common stock authorized for issuance thereunder solely for the purpose of allowing the Company to issue an aggregate of 274,192 restricted stock units to certain of the Company’s employees in place of an aggregate of $823 in discretionary cash bonuses in connection with the fiscal year ended September 30, 2011 (the “2011 Bonus RSUs”). The Company will continue to use the Black-Scholes pricing model to assist in the calculation of fair value. The expected life for grants was calculated in accordance with the simplified method described in the Securities and Exchange Commission Staff Accounting Bulletin (SAB) Topic 14.D.2 in accordance with SAB No. 110. The simplified method was F-14
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
chosen due to limited Company history. Until the Company has adequate history, it will continue to utilize the simplified method (see Note 11).
The Company recognizes share-basedstock-based compensation arising from compensatory share-basedstock-based transactions using the fair value at the grant date of the award. Determining the fair value of share-basedstock-based awards at the grant date requires judgment. The Company uses an option-pricing model (the Black-Scholes valuation model) to assist in the calculation of fair value. Due to its limited history, the Company uses the “calculated value“simplified method” which relies on comparable company historical volatility and uses the average of (1) the weighted average vesting period and (2) the contractual life of the option, or seven or eight years, asto determine the estimated term of the option. The Company bases its estimates of expected volatility on the median historical volatility of a group of publicly traded companies that it believes are comparable to the Company based on the line of business, stage of development, size and financial leverage. The risk-free rate of interest for periods within the contractual life of the stock option award is based on the yield of U.S. Treasury strips on the date the award is granted with a maturity equal to the expected term of the award. The Company estimates forfeitures based on actual forfeitures during its limited history. Additionally, the Company has assumed that dividends will not be paid. For stock options granted to non-employees, the Company measures fair value of the equity instruments utilizing the Black-Scholes valuation model, if that value is more reliably measurable than the fair value of the consideration or service received. The fair value of these instruments areis periodically revalued as the options vest, and areis recognized as expense over the related period of service or vesting period, whichever is longer. The total cost expensed (credited) for options granted to non-employees for the years ended September 30, 2007, 20082010, 2011 and 20092012 was $657, $241,$(7), $(44) and $94$0, respectively. The Company expenses ratably over the vesting period the cost of the stock options granted to employees and directors. The total compensation cost expensed for the years ended September 30, 2007, 20082010, 2011 and 20092012 was $3,567, $6,434,$5,628, $4,964 and $4,970$1,828, respectively. At September 30, 2009,2012, the total compensation cost related to non-vested options not yet recognized was $9,203,$1,637, which will be recognized over the next three years assuming the employees complete their service period for vesting of the options. The Black-Scholes valuation model assumptions are as follows and were determined as discussed above: | | | | Year Ended September 30,
| |
---|
| | | | 2010
| | 2011
| | 2012
|
---|
| | | | | 2.72 – 5.25 | | | | 3.77 – 5.25 | | | | 3.0 – 4.75 | | | | | | | 64 – 77 | % | | | 65 – 72 | % | | | 58 – 76 | % | | | | | | 0 | % | | | 0 | % | | | 0 | % | | | | | | 0.77 – 2.69 | % | | | 0.75 – 1.97 | % | | | 0.39 – 0.91 | % | Weighted-average grant date fair value | | | | $ | 16.37 | | | $ | 6.36 | | | $ | 2.54 | |
F-10
Participating Securities
In June 2008 the Financial Accounting Standards Board (“FASB”) issued ASC 260-10-55 Earnings Per Share — Overall (formerly Financial Statement Position Emerging Issues Task Force 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities) (“ASC 260-10-55”). ASC 260-10-55 provides that securities and unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. Warrant Liability — Given that the warrant holders will participate fully on any dividends or dividend equivalents, the Company determined that the warrants are participating securities and therefore are subject to ASC 260-10-55. These securities were excluded from the per share calculation for all years since their inclusion would be anti-dilutive. F-15
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
| | | | | | | | | | | | | | | Year Ended September 30, | | | | 2007 | | | 2008 | | | 2009 | | Expected life (in years) | | | 5.25 | | | | 5.25 | | | | 5.25 | | Expected volatility | | | 60 - 70 | % | | | 57 - 60 | % | | | 59 - 68 | % | Expected dividend yield | | | 0 | % | | | 0 | % | | | 0 | % | Risk-free interest rate | | | 4.23% - 4.96 | % | | | 2.36% - 4.42 | % | | | 1.00% - 3.19 | % | Weighted-average grant date fair value | | $ | 11.09 | | | $ | 13.92 | | | $ | 2.69 | | | | | | | | | | | |
Subsequent Events
Effective April 1, 2009,Stock-based Compensation — Given that the holders of Restricted Stock Unit awards (“RSUs”) will only receive dividends or dividend equivalents on RSUs that have vested prior to the Company adopted the provisions of ASC Topic 855, Subsequent Events (substantially incorporating SFAS No. 165, Subsequent Events) which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issueddeclaring dividends as well as forfeiting their rights to receive dividends or are available to be issued. The provisions set forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of these provisions did not have an effectdividend equivalents on the Company’s financial position and results of operations. The Company evaluated all events or transactions that occurred after September 30, 2009 through December 14, 2009, the date it issued these financial statements. During the period,any unvested portion, the Company diddetermined that the RSUs are non-participating securities and therefore are not have any material recognizable or unrecognizable subsequent events.subject to ASC 260-10-55.
Recent Accounting Pronouncements In August 2009,June 2011, the FinancialFASB issued ASU 2011-05 Presentation of Comprehensive Income (“ASU 2011-05”). ASU 2011-05 allows an entity to present components of net income and other comprehensive income in one continuous statement, referred to as the statement of comprehensive income, or in two separate, but consecutive statements. The new guidance eliminates the current option to report other comprehensive income and its components in the statement of changes in equity. While ASU 2011-05 changes the presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive income under current accounting guidance. In December 2011, the FASB issued ASU 2011-12 Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Board (“FASB”) issued ASU 2009-5 Fair Value Measurements and Disclosures (Topic 820) Measuring Liabilities at Fair ValueUpdate No. 2011-05 (“ASU 2009-5”2011-12”). ASU 2009-5 provides amendments2011-12 deferred certain aspects of ASU 2011-05 pertaining only to Subtopic 820-10, Fair Value Measurementsthe presentation of reclassification adjustments out of accumulated other comprehensive income and Disclosures-Overall, forreinstates the fair value measurementprevious requirements to present reclassification adjustments either on the face of liabilities. ASU 2009-5 clarifies that in circumstancesthe statement in which other comprehensive income is reported or to disclose them in a quoted price in an active market fornote to the identical liability is not available, a reporting entity is required to measure fair value. ASU 2009-5financial statements. The new guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company adopted this guidance in the Company for interim and annual periodsfirst quarter of the fiscal year ending after September 30, 2009.2012. The Company does not expect the adoption of ASU 2009-5 to have a material impact on its consolidated results of operations or financial position. Effective October 1, 2008, the Company adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures (substantially incorporating SFAS No. 157, Fair Value Measurements). These provisions define fair value, establish a framework for measuring fair value in generally accepted accounting principles, and expand disclosures about fair value measurements. The FASB has agreed to defer for one year the effective date for certain provisions with respect to non-financial assets and liabilities. The adoption of this accounting pronouncement did not have a material effect on the Company’s financial statements.
During the fourth quarter of 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2009-01, “Amendments based on Statement of Financial Accounting Standards No. 168 – The FASB Accounting Standards Codification2011-05 and the Hierarchy of Generally Accepted Accounting Principles” (the “Codification”). The Codification became the single source of authoritative GAAPdeferrals in the United States, and other than rules and interpretive releases issued by the United States Securities and Exchange Commission (“SEC”). The Codification reorganized GAAP into a topical format that eliminates the previous GAAP hierarchy and instead established two levels of guidance – authoritative and nonauthoritative. All non-grandfathered, non-SEC accounting literature that was not included in the Codification became nonauthoritative. The adoption of the Codification did not change previous GAAP, but rather simplified user access to all authoritative literature related to a particular accounting topic in one place. Accordingly, the adoptionASU 2011-12 had no impact on the Company’s consolidated financial positionstatements.
3. Fair Value Measurement ASC Topic 820 (“ASC 820”), originally issued as SFAS No. 157, Fair Value Measurements) applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, ASC 820 does not require any new fair value measurements. The fair value framework requires the categorization of assets and resultsliabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The three levels of operations. All prior referencesinputs used are as follows: Level 1 — Quoted prices in active markets for identical assets or liabilities. Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to previous GAAP inthe fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. As of September 30, 2011 and 2012, the Company had assets and liabilities that fell under the scope of ASC 820. The fair value of the Company’s consolidated financial statements were updatedwarrant liability was determined by the Monte Carlo simulation method for the new references underwarrants issued in connection with the Codification. F-11 Company’s August 2010 financing and by the Black-Scholes valuation model for the warrants issued in connection with the Company’s May 2011 and June 2012 financings. The Monte Carlo simulation method is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of future expected stock prices of the Company and its peer group and minimize standard error. The Black-Scholes valuationF-16
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
3. Marketable Securities
The Company classifies model takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the term of the warrant. Accordingly, the Company’s fair value measurements of its marketable securities are classified as available for sale. The Company determines the appropriate classification of debt and equity securities at the time of purchase and re-evaluates such designation as of each balance sheet date.
The Company invests in certain marketable securities, which consist primarily of short-to-intermediate-term debt securities issued by the U.S. government, U.S. government agencies and municipalities and investment grade corporate securities. The Company only invests in marketable securities with active secondary or resale markets to ensure portfolio liquiditya Level 1 input, and the ability to readily convert investments into cash to fund current operations, or satisfy other cash requirementsCompany’s fair value measurements of its warrant liability is classified as needed. Due to the naturea Level 3 input.
The fair value of the Company as a development stage companyCompany’s financial assets and its funding needs at times being uncertain, the Company has classified all marketable securities as available-for-sale. The unrealized gains and losses on these securities are included in accumulated other comprehensive income as a separate component of stockholders’ equity. The specific-identification method is used to determine the cost of a security sold or the amount reclassified from accumulated other comprehensive income into earnings. As of September 30, 2008, the Company conducted a periodic review to identify and evaluate each investment that has an unrealized loss. Any unrealized loss identified as other-than-temporary is recorded directly in the Statement of Operations.
As of September 30, 2008 the Company concluded the unrealized losses were temporary because (1) the Company believes the market value is partially due to global and current economic conditions which are at unprecedented levels and (2) the securities continue to be of high quality and interest has been paid when due. The Company does not believe any unrealized losses represent an other-than-temporary impairment based on its evaluation of available evidence as of September 30, 2008. If in the future the Company determines that any decline is other-than-temporary, the Company would have to recognize the loss in its Statement of Operations. Unrealized gains and losses are recorded in accumulated other comprehensive income in the Company’s Balance Sheet.
Marketable securities classified as available for sale are measuredliabilities carried at fair value basedand measured on quoted market prices. a recurring basis are as follows:
Description
| | | | Fair Value at September 30, 2012
| | Quoted Prices in Active Markets for Identical Assets (Level 1)
| | Significant Other Observable Market Inputs (Level 2)
| | Significant Unobservable Inputs (Level 3)
|
---|
| | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | | $ | 39,050 | | | $ | 39,050 | | | $ | — | | | $ | — | | | | | | | 60 | | | | 60 | | | | — | | | | — | | | | | | | 39,110 | | | | 39,110 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | Common stock warrant liability | | | | | (7,338 | ) | | | — | | | | — | | | | (7,338 | ) | | | | | | (7,338 | ) | | | — | | | | — | | | | (7,338 | ) | | | | | $ | 31,772 | | | $ | 39,110 | | | $ | — | | | $ | (7,338 | ) | Description
| | | | Fair Value at September 30, 2011
| | Quoted Prices in Active Markets for Identical Assets (Level 1)
| | Significant Other Observable Market Inputs (Level 2)
| | Significant Unobservable Inputs (Level 3)
|
---|
| | | | | | | | | | | | | | | | | | | Cash and cash equivalents | | | | $ | 38,701 | | | $ | 38,701 | | | $ | — | | | $ | — | | | | | | | 60 | | | | 60 | | | | — | | | | — | | | | | | | 38,761 | | | | 38,761 | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | Common stock warrant liability | | | | | (996 | ) | | | — | | | | — | | | | (996 | ) | | | | | | (996 | ) | | | — | | | | — | | | | (996 | ) | | | | | $ | 37,765 | | | $ | 38,761 | | | $ | — | | | $ | (996 | ) | The amortized cost, gross unrealized gainsCompany recognizes transfers into and losses and fair valueout of investment securities at September 30, 2008 are summarized below. Asthe levels indicated above on the actual date of September 30, 2009, the Company had no marketable security investments. | | | | | | | | | | | | | | | | | | | September 30, 2008 | | | | Amortized | | | Gross Unrealized | | | Fair | | | | Cost | | | Gains | | | Losses | | | Value | | Short term marketable securities | | | | | | | | | | | | | | | | | Commercial paper | | $ | 998 | | | $ | — | | | $ | (1 | ) | | $ | 997 | | Certificates of deposits | | | 1,999 | | | | 1 | | | | — | | | | 2,000 | | US government agency securities | | | 10,170 | | | | — | | | | (54 | ) | | | 10,116 | | Corporate and agency bonds | | | 4,010 | | | | — | | | | (8 | ) | | | 4,002 | | Discount and bank notes | | | 8,437 | | | | — | | | | — | | | | 8,437 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | $ | 25,614 | | | $ | 1 | | | $ | (63 | ) | | $ | 25,552 | | | | | | | | | | | | | | |
F-12 event or change in circumstances that caused the transfer of change. All changes within Level 3 can be found in the following Level 3 reconciliation table:
Balance at September 30, 2009 | | | | $ | — | | August 2010 warrant — initial fair value at the date of issuance | | | | | (2,915 | ) | | | | | | (1,254 | ) | Balance at September 30, 2010 | | | | | (4,169 | ) | May 2011 warrant — initial fair value at the date of issuance | | | | | (9,438 | ) | | | | | | 29 | | | | | | | 12,582 | | Balance at September 30, 2011 | | | | | (996 | ) |
F-17
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
June 2012 warrant — initial fair value at the date of issuance | | | | | (4,832 | ) | | | | | | (1,510 | ) | Balance at September 30, 2012 | | | | $ | (7,338 | ) |
AsThe following table presents the Company’s liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of September 30, 2009,2011 and September 30, 2012:
Description
| | | | Quoted Prices in Active Markets for identical Assets and Liabilities (Level 1)
| | Significant other Observable Inputs (Level 2)
| | Significant Unobservable Inputs (Level 3)
| | Balance as of September 30, 2011
| | Quoted Prices in Active Markets for identical Assets and Liabilities (Level 1)
| | Significant other Observable Inputs (Level 2)
| | Significant Unobservable Inputs (Level 3)
| | Balance as of September 30, 2012
|
---|
Derivative liabilities related to Warrants | | | | $ | — | | | $ | — | | | $ | 996 | | | $ | 996 | | | $ | — | | | $ | — | | | $ | 7,338 | | | $ | 7,338 | |
The following table sets forth a summary of changes in the fair value of the Company’s Level 3 liabilities for the twelve months ended September 30, 2012 and September 30, 2011: Description
| | | | Balance at September 30, 2010
| | Fair Value of warrants upon issuance
| | Unrealized (gains) or losses
| | Balance as of September 30, 2011
| | Fair Value of warrants upon issuance
| | Unrealized (gains) or losses
| | Balance as of September 30, 2012
|
---|
Derivative liabilities related to Warrants | | | | $ | 4,169 | | | $ | 9,438 | | | $ | (12,611 | ) | | $ | 996 | | | $ | 4,832 | | �� | $ | 1,510 | | | $ | 7,338 | |
The unrealized gains or losses on the derivative liabilities are recorded as a change in fair value of derivative liabilities in the Company’s statement of operations. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, the Company classifiesreviews the assets and liabilities that are subject to ASC Topic 815-40. At each reporting period, all assets and liabilities for which the securitiesfair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as current since all investments are in U.S. Treasury based money market accounts with original maturities of three months or less at the date of purchase.Level 3. 4. Net Loss per Share Net loss per share information is determined using the two-class method, which includes the weighted-average number of common shares outstanding during the period and other securities that participate in dividends (“participating securities”). The Company considers the outstanding warrants participating securities because they include rights to participate in dividends with the common stock on a one-for-one basis. In applying the two-class method, earnings are allocated to both common stock shares and warrants based on their respective weighted-average shares outstanding for the period. Since losses are not allocated to the participating securities, the two-class method results in the same loss per common share calculated using the basic method for the periods presented in these financial statements. Basic and diluted net loss per share has been calculated by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding during the period. All potentially dilutive common shares have been excluded from the calculation of weighted average common shares outstanding since their inclusion would be antidilutive.anti-dilutive. F-18
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
The amount of options, warrants shares of preferred stock and warrantsrestricted stock units excluded are as follows: | | | | | | | | | | | | | | | Year Ended September 30, | | | 2007 | | 2008 | | 2009 | Common shares underlying warrants for Series A Preferred Stock | | | 198,025 | | | | 118,815 | | | | 118,815 | | Stock options | | | 1,685,974 | | | | 3,135,390 | | | | 3,407,633 | |
| | | | Year Ended September 30,
| |
---|
| | | | 2010
| | 2011
| | 2012
|
---|
Common shares issuable upon conversion of Series A Preferred Stock | | | | | — | | | | 453,486 | | | | 453,486 | | Common shares issuable upon conversion of Series B Preferred Stock | | | | | — | | | | — | | | | 3,605,607 | | Common shares underlying warrants issued for common stock | | | | | 629,254 | | | | 2,875,647 | | | | 5,006,398 | | | | | | | 1,158,891 | | | | 1,365,350 | | | | 1,546,454 | | | | | | | 62,264 | | | | 121,677 | | | | 68,153 | |
5. Property and equipmentEquipment Property and equipment consists of the following: | | | | September 30,
| |
---|
| | | | 2011
| | 2012
|
---|
| | | | $ | 324 | | | $ | 324 | | | | | | | 1,548 | | | | 1,548 | | | | | | | 38 | | | | 0 | | | | | | | 1,886 | | | | 1,945 | | | | | | | 655 | | | | 655 | | | | | | | 65 | | | | 65 | | Computer equipment and other | | | | | 1,308 | | | | 1,308 | | | | | | | 5,824 | | | | 5,845 | | Less: Accumulated depreciation and amortization | | | | | 3,571 | | | | 4,293 | | | | | | $ | 2,253 | | | $ | 1,552 | |
| | | | | | | | | | | September 30, | | | | 2008 | | | 2009 | | Furniture and fixtures | | $ | 313 | | | $ | 318 | | Leasehold improvements | | | 1,546 | | | | 1,549 | | Construction-in-progress | | | 121 | | | | 15 | | Laboratory equipment | | | 1,381 | | | | 1,612 | | Manufacturing equipment | | | 144 | | | | 372 | | Facility equipment | | | 50 | | | | 50 | | Device development | | | — | | | | 157 | | Computer equipment and other | | | 1,150 | | | | 1,270 | | | | | | | | | | | | | | | | | | Sub-Total | | | 4,705 | | | | 5,343 | | Less: Accumulated depreciation and amortization | | | 774 | | | | 1,648 | | | | | | | | | | | | | | | | | | Total | | $ | 3,931 | | | $ | 3,695 | | | | | | | | |
Depreciation expense for the years ended September 30, 2007, 20082010, 2011 and 20092012 was $543, $554$989, $935 and $874,$722, respectively. 6. Related Party Transactions The following is a description of material transactions, other than compensation arrangements, since the Company’s incorporation on December 3, 2003 to which the Company has been a party and in which any of its directors, executive officers or persons who it knows held more than five percent of any class of capital stock, including their immediate family members who had or will have a direct or indirect material interest. The Company believes that the terms obtained or consideration paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would have been paid or received, as applicable, in arm’s-length transactions. Consulting and Clinical Research Services Effective December 2008, Dr. Andreas Pfützner is no longer ourserved as the Company’s Chief Medical Officer in Europe.Europe until December 2008. During the fiscal year ended September 30, 2008, we paid Dr. Pfützner has been retained as a consultant$386 in connection with his services in this capacity. Dr. Pfützner continues to perform consulting services for ongoing clinical trials being conductedus from time to time, and during the fiscal years ended September 30, 2010, 2011 and 2012, we paid Dr. Pfützner $50, $11 and $0, respectively, in Europe.
F-13
Biodel Inc.
(A Development Stage Company)
Notes to Financial Statements — (Continued)
(In thousands, except share and per share amounts)
consulting fees. During the fiscal years ended September 30, 20072010, 2011 and 2008, the Company2012, we paid approximately $926$867, $86 and $2,710,$51, respectively, in clinical related costs to the Institute for Clinical Research and Development in Mainz, Germany, where AndreasDr. Pfützner our former Chief Medical Officer in Europe, servedserves as its managing director. Dr. Pfützner is majority F-19
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
owner of the Institute together with his spouse. In July 2007, Steiner Ventures, LLC loaned Dr. Pfützner approximately $200. As of September 30, 2010, the remaining balance on the loan was approximately $89. Dr. Solomon Steiner, our former Chief Scientific Officer, was the sole managing member of Steiner Ventures, LLC at that time. Also at that time, Dr. Steiner and his spouse are majority shareholdersjointly owned 54% of the institute.
On April 1, 2005, the Company entered into a consulting agreement with Dr. Pfützner to provide consulting services in connectionSteiner Ventures, LLC, with the research and development of the Company’s product candidates. The consulting agreement was amended and restated effective June 5, 2007. The initial term of the amended and restated agreement terminated on June 5, 2009 and automatically renews for successive one-year terms until the agreementbalance split equally among their four adult children, including Erik Steiner. Erik Steiner is terminated by either party on prior written notice in accordance with the terms of the agreement. Under the agreement, Dr. Pfützner is entitled to receive $2 for each full business day devoted to the performance of his services in addition to a non-refundable payment of $150 per annum for the two-year period commencing June 5, 2007. Dr. Pfützner is bound by non-competition and non-solicitation covenants that prohibit him from competing with the Company during the term of the agreement and for one year after termination of the agreement.our Vice President, Operations.
Issuance of Series A Convertible Preferred Stock Between March and July 2005, the Company issued and sold an aggregate of 35,000 shares of its Series A convertible preferred stock (see Note 9)11) to two executive officers and one director. McGinnSmithMcGinn, Smith & Company, Inc. (“MSI”) served as placement agent in connection with the offering of the Series A convertible preferred stock pursuant to a letter agreement (the “Letter Agreement”), for which MSI received $280 (excluding $15 reimbursement for expenses) and warrants to purchase 55,900 shares of Series A convertible preferred stock at $5.00 per share. The fair value of the warrants was $121 and was computed using the Black-Scholes valuation model using the following assumptions: term of 7 years; volatility rate of 90%; risk free rate of 3.65% and a dividend yield of 0.0%, which was treated as cost of raising capital. A former member of the Board of Directors of the Company was a managing director of MSI until May 2007.
In July 2005, Steiner Ventures LLC, (“SV”), an entity controlled by Dr. Solomon S. Steiner, Chairman and Chief ExecutiveScientific Officer, entered into a subscription agreement with the Company to purchase 60,000 shares of the Series A convertible preferred stock at a price of $5.00 per share which could be accepted by the Company at any time until July 2006. At a meeting of the Board of Directors held on October 24, 2005, the Board of Directors approved, with the agreement of SV, the amendment of that subscription agreement into a subscription to purchase 12 Units in the Bridge Financing (see Note 9) for $300. The Company accepted this subscription and SV purchased the Units. Since all securities contemplated to be issued pursuant to the SV subscription agreement were to be issued at fair value, no value was ascribed to the subscription agreement or amendment. Bridge Financing Between February and May 2006, the Company completed a Bridge Financing (see Note 9)11). Four executive officers and one director purchased an aggregate of 23 units, or $575, as part of the financing. These units were subsequently settled with 182,540 shares of Series B convertible preferred stock (see Note 9) and warrants to purchase 98,275 shares of common stock. In connection with the sales of units in the Bridge Financing, the Company paid MSI an aggregate commission of $70 and issued to MSI additional warrants to purchase 22,222 shares of Series B convertible preferred stock and a warrant to purchase 11,963 shares of common stock. The fair value of the warrants was $22 as computed using the Black-Scholes valuation model using the following assumptions: term of 3.5 years; volatility rate of 50%; risk free rate of 5.05% and a dividend yield of 0.0%. Issuance of Series B Convertible Preferred Stock On July 19, 2006, the Company issued and sold 38,071 shares of Series B convertible preferred stock (see Note 9)11) and a warrant to purchase 20,496 shares of common stock to its Chief Executive Officer in exchange for a $150 bonus that was earned by him during the calendar year ended December 31, 2005 but voluntarily deferred. At September 30, 2005, the Company accrued $113 of the bonus and the balance of $37 was expensed in fiscal 2006. The full amount of the accrued bonus was exchanged for Series B convertible preferred stock on July 19, 2006. F-20
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
In connection with the issuance of the Series B convertible preferred stock, the Company retained MSI to serve as placement agent pursuant to an amendment to the Letter Agreement. MSI was paid (a) an aggregate commission of $350 from the sale of the Series B convertible preferred stock, (b) a warrant to purchase 126,903 shares of Series B convertible preferred stock and (c) a warrant to purchase 68,322 shares of common stock. On July 19, 2006, the Company also sold and issued to a director 12,690 shares of Series B convertible preferred stock and a warrant to purchase 6,832 shares of common stock. At the completion of the Series B F-14
Biodel Inc.
(A Development Stage Company)
Notes to Financial Statements — (Continued)
(In thousands, except share and per share amounts)
preferred stock financing, the lead investor remitted the monies for its investment in the Series B Round net of offering-related expenses incurred by the investor group for which the Company was responsible. Total offering expenses were approximately $2,000, of which $1,470 was commissions for the placement of the offering. A director of the Company had arranged to pay for an investment in the Series B preferred stock financing (the “Investment”) utilizing a portion of commissions due. Since the monies due for the commission were not received by the Company, the purchase price of the Investment could not be deducted from the monies received. The fair values of the warrants for common stock were $126 and $13 and were computed using the Black-Scholes valuation model using the following assumptions: term of 3.5 years; volatility rate of 50%; risk free rate of 5.05% and a dividend yield of 0.0%. The fair value of the warrants for preferred stock was $167 and was computed using the Black-Scholes valuation model using the following assumptions: term of 3.5 years; volatility rate of 50%; risk free rate of 4.70% and a dividend yield of 0.0%. These amounts were treated as cost of raising capital. 7. Commitments Deferred Compensation
On December 15, 2005, the Board of Directors authorized a bonus to be paid to SV, if the Chairman and Chief Executive Officer directed the completion of a successful financing in excess of $10,000. Pursuant to that board resolution,Employment Agreement
On March 30, 2010, the Company owed SV $250 becauseannounced the appointment of Errol B. De Souza, Ph.D., as the issuanceCompany’s President, Chief Executive Officer and a Director. In connection with his appointment, Dr. De Souza signed an employment agreement, dated March 26, 2010, setting forth the terms of his employment. The agreement provides for an initial term of employment for the Series B convertible preferred stock duringperiod from March 29, 2010 to March 28, 2014 and it continues for successive one-year terms unless the year ended September 30, 2006 but payment was deferredagreement is terminated by Dr. Steiner. The Company recorded compensation expense for this bonus and had reflected the balance as due to relatedeither party at September 30, 2006. The balance was paidon 120 days prior written notice in July 2007. Separately, Dr. Steiner voluntarily deferred his calendar year compensation of $250. The Company recorded compensation expense for this salary and had reflected the balance as deferred compensation at September 30, 2006. The balance was paid in July 2007.
7. Commitments
Change of Control Agreements and Severance Agreements
In June 2008, the Company entered into change of control agreements and severance agreementsaccordance with two of its executive officers.
Pursuant to the terms of the changeagreement. The agreement provides for an annual salary of control$450 and eligibility for a target bonus of 50% of the annual salary. In addition, Dr. De Souza was granted options to purchase 175,000 Shares of the Company’s common stock pursuant to the Company’s 2010 Plan. These options vest over a four-year period, with 25% vesting on the first anniversary of the grant date and the rest vesting in equal monthly amounts over the next three years.
The Company may terminate the agreement with its executive officers, they are eachor without cause. Dr. De Souza will not be entitled to severance benefits if the following upon termination ofCompany terminates his employment for cause, or if he terminates his employment without good reason, as defined in the agreement. If the Company terminates Dr. De Souza’s employment without cause, or he terminates his employment with the Company occurring within two years of a change of control, unless such termination is by the executive officer for other than good reason, or by the Company for cause (each as defined in the agreement):he is entitled to: | • | | two times his then current salary, plus two times his target annual base salary earned throughbonus for the termination date;fiscal year in which he is terminated, plus the pro rata amount of his target annual bonus for the fiscal year in which he is terminated; |
| | • | | inCOBRA benefits until the event the executive officer satisfied the performance criteria for an annual bonus prior to termination, a portionearlier of the annual bonus based onend of the number of days worked during24th month after the year;date his employment with the Company ends or the date his COBRA coverage expires; |
| | • | | if the performance criteria were not fully satisfied, but the board24 months of directors determines that the criteria could have been satisfied had the executive officer remained employed for the full fiscal year, an amount equal to the averageacceleration of the annual bonus paid to the executive officer over the last three fiscal years, portioned based on the number of days worked during the year (the “Average Annual Bonus”);his outstanding equity compensation awards; and |
| | • | | anyfull vesting of his outstanding equity compensation previously deferred byawards, if the executive officer and any accrued paid time-off; | | | • | | annual base salary for a period of 18Company terminates his employment without cause, or he resigns within 12 months following a change in control, as defined in the date of termination; | | | • | | health insurance and, under certain circumstances, life, disability and other insurance benefits for a period of 18 months or until the executive officer qualifies for similar benefits from another employer; | | | • | | 150% of the Average Annual Bonus (paid in addition to the bonus described immediately above);agreement. |
F-15 F-21
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
| • | | acceleration of all outstanding options; and | | | • | | extension of the exercisability of options. | Change in Control and Severance Agreements UnderCertain employees have agreements which provide for payouts in the change of control agreement, ifevent that the Company terminatesconsummates a change in control. The amount of compensation due as a result of this event is approximately $4,552, as set forth in the executive officer’s employment for cause or the executive officer terminates his employment with the Company without good reason, then the executive officer is notagreements. These employees are also entitled to full vesting of their outstanding equity awards. These agreements also provide for routine severance payments or other benefits.
Pursuant to the Company’s severance agreement with its officers each executive officer is entitled to the following upon terminationcompensation. As of employment with the Company, unless such termination is by the executive officer for other than good reason or by the Company for cause:September 30, 2012, no amounts have been accrued.
| • | | annual base salary earned through the termination date; | | | • | | in the event the executive officer satisfied the performance criteria for an annual bonus prior to termination, a portion of the annual bonus based on the number of days worked during the year; | | | • | | if the performance criteria were not fully satisfied, but the board of directors determines that the criteria could have been satisfied had the executive officer remained employed for the full fiscal year, the Average Annual Bonus; | | | • | | any compensation previously deferred by the executive officer and any accrued paid time-off; | | | • | | annual base salary for a period of 18 months following the date of termination; | | | • | | health insurance for a period of 18 months or until the executive officer qualifies for similar benefits from another employer; | | | • | | 150% of the Average Annual Bonus (paid in addition to the bonus described immediately above); | | | • | | acceleration of all outstanding options; and | | | • | | extension of the exercisability of the options. |
The aggregate amount of base salary for both executives is $615. Bonuses for the executives are at the discretion of, and awarded by the Board of Directors.
Former Chief Scientific Officer General Counsel Severance AgreementRelease Effective January 1, 2009, R. Timmis Ware,December 14, 2010, Dr. Solomon Steiner, the Company’s former General Counsel and Secretary, resignedChief Scientific Officer, retired from all his management positions with the Company. PursuantOn the same date, the Company and Dr. Steiner executed a general release agreement. Dr. Steiner is therefore entitled to receive the Company’s severance benefits set forth in his employment agreement with Mr. Ware, Mr. Ware will receivethe Company that were conditioned upon his signing the release. We recorded a bonus, continuation of salary and certain benefits until June 30, 2010. Furthermore, the agreement permits for the acceleration of the vesting of options to purchase 170,445 shares of common stock at exercise prices between $1.41 through $18.16 that remain exercisable through the original expiration date. The charge of approximately $277$1,360 for the lump sum payment, salary, bonus and benefitbenefits continuation for eighteentwenty-four months and an option acceleration modification charge of approximately $100 were recorded.$7 in the three months ended December 31, 2010. As of September 30, 20092012, the Company has paid $138$1,219 in salary, bonus and benefits continuation per the terms of the $277 obligation, which leaves of $139agreement and $141 has been classified as a short term obligation. Former Chief Financial Officer Severance AgreementLeases
On November 13, 2007, F. Scott Reding, the Company’s former Chief Financial Officer, Chief Accounting Officer and Treasurer, resigned from all his positions with the Company. In connection with Mr. Reding’s resignation, the Company and Mr. Reding entered into a severance agreement that established the terms of Mr. Reding’s separation of employment. The charge of $482 for the lump sum payment, salary and benefit continuation for two years were recorded in the year ended September 30, 2008. The charge of $482 includes lump sum payment and payment for the continuation of salary and certain benefits for two years. As of September 30, 2009,2012, the Company has paid $451 of the $482 obligation, which leaves $31 as a short term obligation.
Leases
As of September 30, 2009, the Company leasesleased three facilities in Danbury, Connecticut with Mulvaney Properties, LLC, which is controlled by a non-affiliated stockholder of the Company.Connecticut.
The Company entered intorenewed its first lease for laboratory space in February 2004, which was subsequently renewed in September 2006.January 2010 for three years. The Company expects to renew this lease prior to its expirywill expire in January 2010.2013. This lease provides for annual basic lease payments of $64,$65, plus operating expenses. F-16
Biodel Inc.
(A Development Stage Company)
Notes to Financial Statements — (Continued)
(In thousands, except share and per share amounts)
In JulyOctober 2007, the Company entered into a secondamended its lease for its corporate office, which was subsequently amended in October 2007. The October 2007 amendment increased the term from a five yearyears to a seven year termyears beginning on August 1, 2007 untiland ending on July 31, 2014. The renewal option was also amended from a five year to a seven year term. This lease provides for annual basic lease payments of $357, plus operating expenses.
In December 2008,January 2010, the Company entered into arenewed its third lease agreement for additional office space adjacent to its laboratory space. The lease is for fourteen months beginning December 1, 2008 and ending on January 30, 2010. The Company has agreed to use the leased premises only for offices, laboratories, research, development and light manufacturing. The Company expects to renew this lease prior to its expiry in January 2010. This lease provides for annual basic lease payments of $29, plus operating expenses. Lease expense for the years ended September 30, 2007, 20082010, 2011, and 20092012 was $195, $383$624, $633, and $591,$636, respectively. Minimum lease payments under these agreements as of September 30, 2009,2012, as well as equipment leases subsequently entered into, are as follows: Years Ending September 30,
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| | | | $ | 594 | | | | | | | 463 | | | | | | | — | | | | | | $ | 1,057 | | | | | | | Years Ending September 30, | | | | | 2010 | | | 537 | | 2011 | | | 502 | | 2012 | | | 519 | | 2013 | | | 540 | | 2014 | | | 465 | | | | | | | | | | | Total | | $ | 2,563 | | | | | |
Purchase Commitments The Company contracted with N.V. Organon, a global producer of insulin,RHI, to supply the Company with all of the insulinRHI that the Company will need for testing and manufacturing of the Company’s product candidates. As subsequently amended in November 2009,In July 2011, the agreementCompany executed an amendment with N.V. Organon, will terminate in December 2011. Aswhich extends the term of Septemberthe existing supply agreement to June 30, 2009,2018 and releases the Company hadfrom any purchase commitments of approximately $12,268 associated withuntil the signing of a renewed contract with Organon. | | | | | Years Ending September 30, | | | | | 2010 | | $ | 5,025 | | 2011 | | | 7,243 | | | | | | | | | | | Total | | $ | 12,268 | | | | | |
8. Income Taxes
Effective October 1, 2007, the Company adopted the provisions of FIN48, which was incorporated into the Codification within ASC Topic 740, Income Taxes, with respect to uncertain tax positions. The Company did not recognize any increase or decrease in the liability for unrecognized tax benefits related to tax positions taken in prior periods as a result of the adoption, therefore, there was no corresponding adjustment to retained earnings.
F-17 thirdF-22
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
calendar quarter of 2014. These commitments commence in the third calendar quarter of 2014 and extend through the second calendar quarter of 2018 for a total purchase commitment of approximately 160 kilograms of RHI. Both parties have the right to terminate the agreement with six months notice, with the Company having the option to purchase significant additional quantities if the supplier terminates the agreement prior to June 30, 2018. As of September 30, 2012, the Company had purchase commitments of approximately $18,020 associated with the signing of the renewed contract with N.V. Organon.
Years Ending September 30,
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| | | | $ | — | | | | | | | 1,078 | | | | | | �� | 4,367 | | | | | | | 4,488 | | | | | | | 4,577 | | | | | | | 3,510 | | | | | | $ | 18,020 | | The Company did not have any liabilities for unrecognizedfiles its tax positions as of October 1, 2007 (adoption date). Duringreturns on a fiscal year basis. For the yearyears ended September 30, 2009,2010, 2011 and 2012, the Company performed a review onpaid only state taxes. The provision (benefit) for income taxes is as follows: | | | | Year Ended September 30,
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| | | | 2010
| | 2011
| | 2012
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| | | | | | | | | | | | | | | | | | | $ | — | | | $ | — | | | $ | — | | | | | | | (104 | ) | | | 41 | | | | 18 | | Actual tax provision (benefit) | | | | $ | (104 | ) | | $ | 41 | | | $ | 18 | | The following reconciles the research and development activities that occurred inamount of tax expense at the state of Connecticut that supports our Connecticut research and development credits and refunds. The results of that study decreased income tax receivable and the corresponding reserve relating to an anticipated tax refund from the state of Connecticut for research and development activities. For the year-ended September 30, 2009, this resulted in a 1% increasefederal statutory rate to the Company’s effective tax rate. The reserve does not include interest or penalties based on the nature of the liability. The Company plansprovision (benefit) in operations: | | | | Year Ended September 30,
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| | | | 2010
| | 2011
| | 2012
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| | | | | 34.00 | % | | | 34.00 | % | | | 34.00 | % | Federal taxes at statutory rate | | | | $ | (13,054 | ) | | $ | (3,587 | ) | | $ | (7,028 | ) | Tax expense on permanent differences (a) | | | | | 2,296 | | | | (2,631 | ) | | | 1,137 | | Tax benefit on research and business credits | | | | | (425 | ) | | | — | | | | — | | State taxes, net of federal tax effect | | | | | 23 | | | | 19 | | | | 12 | | State benefit, net operating loss | | | | | (2,990 | ) | | | (163 | ) | | | (312 | ) | Valuation allowance increase (b) | | | | | 14,156 | | | | 6,382 | | | | 6,164 | | Connecticut research and development refund | | | | | (30 | ) | | | — | | | | — | | Reserve for uncertain tax positions | | | | | 4 | | | | — | | | | — | | | | | | | (84 | ) | | | 21 | | | | 45 | | Actual tax provision (benefit) | | | | $ | (104 | ) | | $ | 41 | | | $ | 18 | |
(a) | | Permanent differences were derived from share based compensation and adjustments to common stock warrant liability. |
(b) | | Net of the Section 382 Adjustment. |
F-23
Biodel Inc. (A Development Stage Company)
Notes to treat any future interest or penalties as operating expense.Financial Statements — (Continued) (In thousands, except share and per share amounts)
The following table summarized the activity related to the Company’s liabilities for uncertain tax liabilities:positions: | | | | Year Ended September 30,
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| | | | 2010
| | 2011
| | 2012
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Balance, beginning of year | | | | $ | 188 | | | $ | 86 | | | $ | 75 | | Increase related to current year tax position | | | | | 5 | | | | — | | | | — | | Increase related to prior year’s tax position | | | | | — | | | | — | | | | — | | Decrease related to prior year’s tax position | | | | | (107 | ) | | | (11 | ) | | | — | | | | | | $ | 86 | | | $ | 75 | | | $ | 75 | |
| | | | | | | | | | | | | | | Year Ended September 30, | | | | 2007 | | | 2008 | | | 2009 | | Balance, beginning of year | | $ | — | | | $ | 75 | | | $ | 988 | | Increase related to current year tax position | | | 75 | | | | 913 | | | | 6 | | Increase related to prior year’s tax position | | | — | | | | — | | | | 107 | | Decrease related to prior year’s tax position | | | — | | | | — | | | | (913 | ) | | | | | | | | | | | Balance, at end of year | | $ | 75 | | | $ | 988 | | | $ | 188 | | | | | | | | | | | |
The Company files U.S. federal and state tax returns and has determined that its major tax jurisdictions are the United States and Connecticut. The tax years through 20082011 remain open due to net operating loss carryovers and are subject to examination by the appropriate governmental agencies in the United States and Connecticut.Connecticut carry-forwards. The provision (benefit) for income taxes is as follows:
| | | | | | | | | | | | | | | Year Ended September 30, | | | | 2007 | | | 2008 | | | 2009 | | Current expense | | | | | | | | | | | | | Federal | | $ | — | | | $ | — | | | $ | — | | State | | | 125 | | | | (983 | ) | | | 337 | | | | | | | | | | | | Deferred expense | | | — | | | | — | | | | — | | Actual tax provision (benefit) | | $ | 125 | | | $ | (983 | ) | | $ | 337 | | | | | | | | | | | |
AtAs of September 30, 2009,2012, the Company had net operating loss (“NOL”) carry-forwards of approximately $53,994 (net of Section 382 limitation discussed below) for U.S. federal tax purposes and $110,182 for state tax purposes. These loss carry-forwards expire between 2024 and 2032. To the extent these net operating loss carry-forwards are available, the Company intends to use them to reduce the corporate income tax liability associated with its operations.
The ability of the Company to utilize its NOL carry-forwards to reduce future taxable income is subject to various limitations under the Internal Revenue Code Section 382 (“Section 382”). The utilization of such carry-forwards may be limited upon the occurrence of certain ownership changes, including the purchase or sale of stock by 5% shareholders and the offering of stock by the Company during any three-year period resulting in an aggregate change of more than 50% in the beneficial ownership of the Company. In the event of an ownership change, Section 382 imposes an annual limitation on the amount of a Company’s taxable income that can be offset by these carry-forwards. As of September 30, 2011, the Company completed a study of the impact of Section 382 limitation on future payments and determined that the statutory provisions limited the Company’s ability to realize future tax benefits. Accordingly, the Company decreased federal net operating loss carryforwardscarry-forwards by approximately $55,890 and federal research and development credit carry-forwards by $1,815. As of September 30, 2012, the Company has determined that ownership change, under Section 382, occurred as a result of the June 2012 financing and therefore, the ability to utilize its current NOLs is further limited. The Company also has state research and development credit carry-forwards of approximately $100,900$477, which expire commencing in fiscal 2024 through 2029 and $100,400 of state net operating loss carryforwards, which expire commencing in fiscal 2024 through 2029. The Company also has federal and state research and development credit carryovers of approximately $2,100, which expire commencing in fiscal 2024. F-18 2022.
Biodel Inc.
(A Development Stage Company)
Notes to Financial Statement
(In thousands, except share and per share amounts)
The major components of deferred tax assets and valuation allowances and deferred tax liabilities at September 30, 20082011 and 20092012 are as follows: | | | | | | | | | | | September 30, | | | | 2008 | | | 2009 | | Deferred Tax Assets | | | | | | | | | Net operating losses | | $ | 26,889 | | | $ | 39,959 | | Research and development credit | | | 1,652 | | | | 2,149 | | Depreciation of fixed assets | | | 121 | | | | 284 | | Other | | | 222 | | | | 802 | | | | | | | | | Total deferred tax asset | | | 28,884 | | | | 43,195 | | Valuation Allowance | | | (28,763 | ) | | | (43,195 | ) | | | | | | | | Net Deferred Tax Assets | | | 121 | | | | — | | | | | | | | | | | Deferred Tax Liabilities | | | | | | | | | Other | | | (121 | ) | | | — | | | | | | | | | | | | | | | | | | Total deferred tax liabilities | | | (121 | ) | | | — | | | | | | | | | | | | | | | | | | Net Deferred Tax Asset (liabilities) | | $ | — | | | $ | — | | | | | | | | |
F-24
The Company files its tax returns on a fiscal year basis. For the years ended September 30, 2007, 2008Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and 2009, the Company only had to pay state taxes.per share amounts)
During the year ended September 30, 2009, the Company performed a book-to-tax reconciliation that adjusted the deferred tax assets and valuation allowance by approximately $300.
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| | | | 2011
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| | | | | | | | | | | | | | | $ | 23,699 | | | $ | 24,969 | | | | | | | 16,936 | | | | 21,907 | | Research and development credits | | | | | 477 | | | | 477 | | Depreciation of fixed assets | | | | | 303 | | | | 51 | | | | | | | 765 | | | | 453 | | | | | | | 42,180 | | | | 47,857 | | | | | | | (42,180 | ) | | | (47,857 | ) | | | | | $ | — | | | $ | — | |
As the Company has not yet achieved profitable operations,operation, management does not believe that it is more likely than not that the tax benefits as of September 30, 20092012 will be realized and therefore has recorded a valuation allowance against its deferred tax asset.assets. 9. Financings June 2012 Private Placement In June 2012, the Company completed a private placement (the “2012 Private Placement”) of an aggregate of 4,250,020 shares of the Company’s common stock, 3,605,607 shares of the Company’s Series B preferred stock and warrants to purchase an aggregate of 2,749,469 shares of common stock at an exercise price of $2.66 per share. For each unit, consisting of either a share of common stock or Series B preferred stock and a warrant to purchase 0.35 of a share of common stock, the purchasers in the June 2012 Private Placement paid a negotiated price of $2.355. The following reconcileswarrants are immediately exercisable and will expire on June 26, 2017, five years from the amountoriginal issuance date of tax expenseJune 27, 2012. The Company received net proceeds, after deducting placement agents’ fees and other transaction expenses, of approximately $17,100 from the 2012 Private Placement. Each share of Series B preferred stock is convertible into one share of the Company’s common stock at any time at the federal statutory rateoption of the holder, except that the securities purchase agreement that the Company entered into in connection with the 2012 Private Placement (the “Securities Purchase Agreement”) provides that a holder will be prohibited from converting shares of Series B preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than 9.98% of the total number of shares of common stock then issued and taxesoutstanding. In the event of the Company’s liquidation, dissolution or winding up, holders of the Series B preferred stock will receive a payment equal to $0.01 per share of Series B preferred stock before any proceeds are distributed to the holders of common stock. After the payment of this preferential amount, and subject to the rights of holders of any class or series of capital stock specifically ranking by its terms senior to the Series B preferred stock, holders of Series B preferred stock and holders of the Company’s Series A preferred stock will participate ratably in the distribution of any remaining assets with the common stock and any other class or series of capital stock that participates with the common stock in such distributions. Shares of Series B preferred stock will generally have no voting rights, except as required by law and except that the consent of the holders of a majority of the outstanding Series B preferred stock will be required to amend the terms of the Series B preferred stock. Holders of Series B preferred stock are entitled to receive, and the Company is required to pay, dividends on lossshares of the Series B preferred stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as reflecteddividends (other than dividends in operations: | | | | | | | | | | | | | | | Year Ended | | | | September 30, | | | | 2007 | | | 2008 | | | 2009 | | Federal statutory rate | | | 34.00 | % | | | 34.00 | % | | | 34.00 | % | Federal taxes at statutory rate | | $ | (9,080 | ) | | $ | (15,077 | ) | | $ | (14,597 | ) | Tax expense on permanent differences | | | 2,958 | | | | 2,293 | | | | 1,741 | | Tax benefit on research and business credits | | | (186 | ) | | | (325 | ) | | | (325 | ) | State taxes, net of federal tax effect | | | 33 | | | | 61 | | | | 43 | | State benefit, net operating loss | | | (1,877 | ) | | | (2,784 | ) | | | (1,249 | ) | Valuation allowance increase | | | 8,498 | | | | 14,972 | | | | 14,432 | | Connecticut research and development refund | | | — | | | | (1,988 | ) | | | (40 | ) | Reserve for uncertain tax positions | | | — | | | | 913 | | | | 6 | | Other | | | (221 | ) | | | 952 | | | | 326 | | | | | | | | | | | | | | | | | | | | | | | | | Actual tax provision | | $ | 125 | | | $ | (983 | ) | | $ | 337 | | | | | | | | | | | |
F-19 the form of common stock) actually paid on shares of the common stock when, as and if such dividends (other than dividends in the form of common stock) are paid on shares of the common stock.F-25
Biodel Inc. (A Development Stage Company)
Notes to Financial StatementStatements — (Continued) (In thousands, except share and per share amounts)
As required by the Securities Purchase Agreement, the Company filed a Registration Statement on Form S-3 (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) on July 27, 2012, which was within 30 days after the closing of the 2012 Private Placement. The Registration Statement, which was declared effective on August 13, 2012, registers the resale of the shares of common stock and Series B preferred stock issued and sold in the 2012 Private Placement, the shares of common stock issuable upon conversion of the Series B preferred stock issued and sold in the 2012 Private Placement, and the shares of common stock issuable upon exercise of the warrants issued and sold in the 2012 Private Placement. Pursuant to the terms of the Securities Purchase Agreement, the Company agreed to pay liquidated damages to the purchasers in the 2012 Private Placement if, after effectiveness of the Registration Statement and subject to certain specified exceptions, the Company suspends the use of the Registration Statement or the Registration Statement ceases to remain continuously effective as to all the securities for which it is required to be effective (each such event, a “Registration Default”). Subject to specified exceptions, for each 30-day period or portion thereof during which a Registration Default remains uncured, the Company is obligated to pay liquidated damages to each purchaser in cash in an amount equal to 1.0% of the aggregate purchase price paid by each such purchaser in the 2012 Private Placement, up to a maximum of 8.0% of such aggregate purchase price. As of the date of these financial statements, the Company does not believe that it is probable that it will be obligated to pay any such liquidated damages. Accordingly, the Company has not established an accrual for liquidated damages. In the event that the Company enters into a merger or change of control transaction, the holders of the warrants issued in the 2012 Private Placement will be entitled to receive consideration as if they had exercised the warrants immediately prior to such transaction, or they may require the Company to purchase the unexercised warrants at the Black-Scholes value (as defined in the warrant) of the warrant on the date of such transaction. The holders have up to 30 days following any such transaction to exercise this right. As a result of this provision, the Company recognizes the warrants as liabilities at their fair value on each reporting date. At September 30, 2012, the fair value of the warrant liability utilizing the Black-Scholes valuation model was approximately $5,633. During the year ended September 30, 2012, the Company recorded an adjustment to fair value of common stock warrant liability of $801, within Other (income) expense, to reflect a decrease in the valuation of the warrants from date of issuance to September 30, 2012. The following summarizes the changes in value of the warrant liability from the date of issuance through September 30, 2012: Balance at September 30, 2011 | | | | $ | — | | Initial fair value, at the date of issuance | | | | | 4,832 | | | | | | | 801 | | Balance at September 30, 2012 | | | | $ | 5,633 | |
May 2011 Registered Direct Offering In May 2011, the Company completed a registered direct offering of an aggregate of 3,018,736 shares of the Company’s common stock, 453,486 shares of the Company’s Series A preferred stock and warrants to purchase 2,256,929 shares of the Company’s common stock. The shares and warrants were sold in units consisting of (i) one share of common stock and (ii) one warrant to purchase 0.1625 of a share of common stock, at an exercise price of $9.92 per share of the Company’s common stock. However, one investor also purchased units consisting of one share of Series A preferred stock and a warrant to purchase 0.1625 of a share of common stock. No fractional warrants were issued. Each unit was sold at a price of $8.64 per unit. These units were not issued or certificated. The shares and warrants were immediately separated. The warrants will expire on May 17, 2016, five years from the issuance date of May 18, 2011. The Company received net F-26
9.Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
proceeds, after deducting placement agent fees and other offering expenses, of approximately $28.0 million from this financing.
Each share of Series A preferred stock is convertible into one quarter of a share of the Company’s common stock at any time at the option of the holder, provided that the holder will be prohibited from converting the shares of Series A preferred stock into shares of the Company’s common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own more than 9.98% of the total number of shares of the Company’s common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution or winding up, holders of the Series A preferred stock will receive a payment equal to $0.01 per share of Series A preferred stock before any proceeds are distributed to the holders of the Company’s common stock. After the payment of this preferential amount, and subject to the rights of holders of any class or series of capital stock specifically ranking by its terms senior to the Series A preferred stock, holders of Series A preferred stock will participate ratably in the distribution of any remaining assets with the Company’s common stock and any other class or series of capital stock that participates with the common stock in such distributions. Shares of Series A preferred stock will generally have no voting rights, except as required by law and except that the consent of the holders of a majority of the outstanding Series A preferred stock will be required to amend the terms of the Series A preferred stock. The Series A preferred stock will not be entitled to receive any dividends, unless and until specifically declared by the Company’s board of directors. In the event that the Company enters into a merger or change of control transaction, the holders of the warrants issued in the May 2011 financing will be entitled to receive consideration as if they had exercised the warrant immediately prior to such transaction, or they may require the Company to purchase the unexercised warrants at the Black-Scholes value (as defined in the warrant) of the warrant on the date of such transaction. As per the terms of the warrants, the holders have up to 30 days following any such transaction to exercise this right. As a result of this provision, the Company recognizes the warrants as liabilities at their fair value on each reporting date. The Company’s warrant liability is marked-to-market each reporting period with the change in fair value recorded as a gain or loss within Other Expense (“Adjustment to fair value of common stock warrant liability”), until the warrants are exercised, expire or other facts and circumstances lead the warrant liability to be reclassified as an equity instrument. Because the warrants issued in the May 2011 financing do not contain a re-pricing provision, the Company is using the Black-Scholes valuation model to estimate the fair value of the warrants. Using this model, the Company recorded an initial warrant liability of $9,438 as of May 18, 2011 (the warrant issuance date). The significant assumptions of the model were warrants and common stock outstanding, remaining terms of the warrants, the per stock price of $2.06, a risk-free rate of 1.89% and expected volatility rate of 75%. During the year ended September 30, 2012, the Company recorded an adjustment to fair value of common stock warrant liability of $709, within Other (income) expense, to reflect the increase in the valuation of the warrants from September 30, 2011 to September 30, 2012 due to the increase in the value of the Company’s common stock price from September 30, 2011 to September 30, 2012. At September 30, 2012, the fair value of the warrant liability determined utilizing the Black-Scholes valuation model was approximately $1,705. The following summarizes the changes in value of the warrant liability from the date of issuance through September 30, 2012: Balance at September 30, 2010 | | | | $ | — | | Initial fair value, at the date of issuance | | | | | 9,438 | | | | | | | (8,442 | ) | Balance at September 30, 2011 | | | | | 996 | | | | | | | 709 | | Balance at September 30, 2012 | | | | $ | 1,705 | |
F-27
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
August 2010 Registered Direct Offering In August 2010, the Company sold to two institutional investors an aggregate of 599,550 units, with each unit consisting of (i) one share of common stock and (ii) one warrant to purchase one share of common stock, for a purchase price of $15.72 per unit. These units were not issued or certificated. The shares and warrants were immediately separated and the Company issued 599,550 shares of its common stock and warrants to purchase an additional 599,550 shares of the Company’s common stock. This financing resulted in net proceeds of $8,700. In August 2011, one investor exercised 10,550 warrants, at $4.70 per share, and the Company received proceeds totaling approximately $50. Subsequently, on December 1, 2011 the remaining 589,000 warrants expired unexercised. Fair Value Assumptions Used in Accounting for Warrant Liability The Company has determined its warrant liability to be a Level 3 fair value measurement and used the Black Scholes valuation model to calculate the fair value for the fiscal year ended September 30, 2011 and 2012. At the measurement date, the Company estimated the fair value for the June 2012 warrants using the Black-Scholes valuation model using the following assumptions: | | | | September 30, 2012
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| | | | | | | | | | | $ | 2.97 | | | | | | $ | 2.66 | | | | | | | 0.62 | % | | | | | | 4.74 | years | | | | | | 98 | % | | | | | | 0 | % | Warrants outstanding June 2012 registered direct | | | | | 2,749,469 | |
The Company estimated the fair value for the May 2011 warrants using the Black-Scholes valuation model at the measurement dates of September 30, 2012 and 2011, respectively using the following assumptions: | | | | September 30, 2011
| | September 30, 2012
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---|
| | | | | | | | | | | | | | | $ | 2.16 | | | $ | 2.97 | | | | | | $ | 9.92 | | | $ | 9.92 | | | | | | | 0.96 | % | | | 0.31 | % | | | | | | 4.63 | years | | | 3.63 | years | | | | | | 75 | % | | | 82 | % | | | | | | 0 | % | | | 0 | % | Warrants outstanding May 2011 registered direct | | | | | 2,256,929 | | | | 2,256,929 | |
Risk-Free Interest Rate. This is the United States Treasury rate for the measurement date having a term equal to the expected remaining term of the warrant. An increase in the risk-free interest rate will increase the fair value and the associated derivative liability. Expected Remaining Term. This is the period of time over which the warrant is expected to remain outstanding and is based on management’s estimate, taking into consideration the remaining contractual life. F-28
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
Expected Volatility. This is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate. Since the Company’s stock has been traded for the expected remaining term of the warrants, the Company uses its own historic volatility over the retrospective period corresponding to the expected remaining term of the warrants on the measurement date. Extra weighting is attached to those companies most similar in terms of size and business activity. An increase in the expected volatility will increase the fair value and the associated derivative liability. Dividend Yield. The Company has not made any dividend payments nor does it have plans to pay dividends in the foreseeable future. An increase in the dividend yield will decrease the fair value and the associated derivative liability. Participating Securities If at any time the Company grants, issues or sells securities or other property to holders of any class of common stock the holders of the warrants are entitled to also acquire those same securities as if they held the number of shares of common stock acquirable upon complete exercise of the warrants. As such, given that the warrant holders will participate fully on any dividends or dividend equivalents, the Company determined that the warrants are participating securities and therefore are subject to ASC 260-10-55 earnings per share. These securities were excluded for the years ended September 30, 2012, 2011 and 2010 earnings per share calculation since their inclusion would be anti-dilutive. 10. Stockholders’ Equity Common Stock The Company’s authorized common stock consists of 100,000,00062,500,000 shares of a single class of common stock, having a par value of $0.01 per share. The holders of the common stock are entitled to one vote for each share and have no cumulative voting rights or preemptive rights. As of September 30, 2009,On June 27, 2012 the Company had warrants outstanding to purchasecompleted a private placement of an aggregate of 118,8154,250,020 shares of its common stock, with3,605,607 shares of Series B preferred stock and warrants to purchase 2,256,929 shares of common stock at an exercise price of $1.41$2.66 per share. The Company received net proceeds, after deducting placement agent fees and other offering expenses of approximately $17,100 from this financing.
On May 12, 2011, the Company completed a registered direct offering of an aggregate of 3,018,736 shares of common stock, 1,813,944 shares of Series A preferred stock and warrants to purchase 2,256,929 shares of common stock at an exercise price of $9.92 per share. The Company received net proceeds, after deducting placement agent fees and other offering expenses, of approximately $28,000 from this financing. On August 24, 2010, the Company completed a registered direct offering of an aggregate of 599,550 shares of common stock and warrants to purchase an additional 599,550 shares of common stock at an exercise price of $18.864. The Company received net proceeds, after deducting placement agent fees and other offering expenses, of approximately $8,700 from this financing. On February 12, 2008, the Company completed a follow-on public offering of 3,260,000815,000 shares of its common stock at a price to the public of $15.50$62.00 per share. The Company received net proceeds from this offering, after deducting underwriting discounts and commissions and expenses, of $46,817. Certain of the Company’s stockholders sold 550,000137,500 shares in the offering. The Company did not receive any proceeds from the sale of shares from the selling stockholders. On May 16, 2007, the Company completed an initial public offering of 5,750,0001,437,500 shares of its common stock at a price to the public of $15.00$60.00 per share. The offering resulted in gross proceeds of $86,300. The Company received net proceeds from the offering of approximately $78,800 after deducting underwriting discounts and commissions and additional offering expenses. The completion of the initial public offering F-29
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
resulted in the conversion of the Company’s Series A and B convertible preferred stock. A total of 6,407,0081,601,749 shares of common stock were issued upon the conversion of the preferred stock.
As of September 30, 2012, the Company had the following warrants outstanding:
(a) | | warrants to purchase 1,962,163 shares of the Company’s common stock with an exercise price of $9.92 per share and |
(b) | | Series A preferred stock — warrants to purchase 294,766 shares of the Company’s common stock with an exercise price of $9.92 per share. |
(ii) | | June 2012 financing — |
(a) | | warrants to purchase 1,487,507 shares of the Company’s common stock with an exercise price of $2.66 per share and |
(b) | | Series B convertible preferred stock — warrants to purchase 1,261,922 shares of the Company’s common stock with an exercise price of $2.66 per share. |
Preferred Stock The Company is authorized to issue up to 50,000,000 shares of preferred stock, having a par value of $0.01 per share. The Company’s preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Company’s Board of Directors, without further action by stockholders, and may include voting rights (including the right to vote as a series on particular matters), preferences as to dividends and liquidation and conversion, redemption rights and sinking fund provisions. The issuance of preferred stock could reduce the rights, including voting rights, of the holders of common stock and, therefore, could reduce the value of the common stock. In particular, specific rights granted to holders of preferred stock could be used to restrict the Company’s ability to merge with or sell the Company’s assets to a third party, thereby preserving control of the Company by existing management. F-20
Series A Preferred Stock May 2011 Financing
As part of the May 2011 registered direct offering, the Company issued 1,813,944 shares of the Company’s Series A preferred stock to one investor. The investor purchased units consisting of one share of Series A preferred stock and a warrant to purchase 0.1625 of a share of common stock. No fractional warrants were issued. Each unit was at a price of $8.84 per unit. Each share of Series A preferred stock is convertible into one share of the Company’s common stock at any time at the option of the holder, provided that the holder will be prohibited from converting the shares of series A preferred stock into shares of the Company’s common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own more than 9.98% of the total number of shares of the Company’s common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution or winding up, holders of the Series A preferred stock will receive a payment equal to $0.01 per share of Series A preferred stock before any proceeds are distributed to the holders of the Company’s common stock. After the payment of this preferential amount, and subject to the rights of holders of any class or series of capital stock specifically ranking by its terms senior to the Series A preferred stock, holders of Series A preferred stock will participate ratably in the distribution of any remaining assets with the Company’s common stock and any other class or series of capital stock that participates with the common stock in such distributions. Shares of Series A preferred stock will generally have no voting rights, except as required by law and except that the consent of the holders of a majority of the outstanding Series A preferred stock will be required to amend the terms of the Series A preferred stock. The Series A preferred stock will not be entitled to receive any dividends, unless and until specifically declared by the Company’s board of directors. F-30
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
Series A Convertible Preferred Stock July 2005 Private Placement The CompanyIn July 2005, the company authorized 1,050,000 shares of its Series A convertible preferred stock with certain rights and privileges,completed a private placement of 569,000 shares of these shares, of which 569,000 and 0 shares were issued and outstanding as of September 30, 2007. In addition, in connection with the July 2006 and 2007, respectively. In July 2005,private placement, the Company completed a private placement of 569,000issued warrants to purchase shares of its Seriesthe Company’s series A convertible preferred stock and received proceedsstock. All such warrants were expired as of $2,845. Fees incurred as part of the private placement totaled $379.September 30, 2012.
In connection with the Series A convertible preferred stock issuance, the Company entered into a registration rights agreement with the purchasers of its stock, which provided, among other things, for liquidated damages if the Company were initially unable to register and obtain an effective registration of the securities within the allotted time. The stockholders could not demand registration until one hundred and eighty (180) days after the Company had effected a qualified initial public offering. The penalties were (i) one and three quarters (13/4 %)(1-3/4%) percent of the aggregate number of shares of underlying common stock for each month, or part thereof, after a ninety (90) day period that a registration statement was not filed with the SEC or (ii) one (1%) percent of the aggregate number of shares of underlying common stock for each month if the forgoing filed registration statement was not declared effective by the SEC within one hundred and twenty (120) days. Each share of Series A convertible preferred stock was automatically convertible into a number of shares of common stock equal to the quotient of $3.54 divided by $1.00 immediately subsequent to the date of the initial public offering. As part of the compensation agreement, the placement agent received 279,50069,875 Series A Warrants.warrants. Each warrant consists of the right to purchase one share of fully paid and non-assessable common stock for a period of seven years which expiresexpired on July 12, 2012. The exercise price Series B Preferred Stock June 2012 Private Placement In June 2012, the Company completed a private placement of each warrant is $1.00 per share. The exercise price may be paid in cash or by tendering common stock. The warrants are transferable and provide for anti-dilution protection. The Company evaluated the warrants to ascertain if they should be recorded as equity instruments, or if they contained features which require them to be recorded as derivative liabilities, and concluded they should be classified as equity instruments on the balance sheet. As a resultan aggregate of 4,250,020 shares of the conversion option, the Company considered the features contained in the Series A convertible preferredCompany’s common stock, to ascertain whether the3,605,607 shares contained a beneficial conversion feature. The Company determined that the issuance of the Series A convertible preferred stock did not result in a beneficial conversion feature.
Company’s Series B Convertible Preferred Stock and warrants to purchase an aggregate of 2,749,469 shares of common stock at an exercise price of $2.66 per share. For each unit consisting of either a share of common stock or Series B preferred stock and a warrant to purchase 0.35 of a share of common stock, the purchasers in the June 2012 Private Placement paid a negotiated price of $2.355. Each share of Series B preferred stock is convertible into one share of the Company’s common stock at any time at the option of the holder, except that the securities purchase agreement that the Company entered into in connection with the 2012 Private Placement (the “Securities Purchase Agreement”) provides that a holder will be prohibited from converting shares of Series B preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than 9.98% of the total number of shares of common stock then issued and outstanding. In the event of the Company’s liquidation, dissolution or winding up, holders of the Series B preferred stock will receive a payment equal to $0.01 per share of Series B preferred stock before any proceeds are distributed to the holders of common stock. After the payment of this preferential amount, and subject to the rights of holders of any class or series of capital stock specifically ranking by its terms senior to the Series B preferred stock, holders of Series B preferred stock and holders of the Company’s Series A preferred stock will participate ratably in the distribution of any remaining assets with the common stock and any other class or series of capital stock that participates with the common stock in such distributions. Shares of Series B preferred stock will generally have no voting rights, except as required by law and except that the consent of the holders of a majority of the outstanding Series B preferred stock will be required to amend the terms of the Series B preferred stock. Holders of Series B preferred stock are entitled to receive, and the Company is required to pay, dividends on shares of the Series B preferred stock equal (on an as-if-converted-to-common-stock basis) F-31
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock when, as and if such dividends (other than dividends in the form of common stock) are paid on shares of the common stock.
As required by the Securities Purchase Agreement, the Company filed a Registration Statement on Form S-3 (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) on July 27, 2012, which was within 30 days after the closing of the 2012 Private Placement. The Registration Statement, which was declared effective on August 13, 2012, registers the resale of the shares of common stock and Series B preferred stock issued and sold in the 2012 Private Placement, the shares of common stock issuable upon conversion of the Series B preferred stock issued and sold in the 2012 Private Placement, and the shares of common stock issuable upon exercise of the warrants issued and sold in the 2012 Private Placement. Pursuant to the terms of the Securities Purchase Agreement, the Company agreed to pay liquidated damages to the purchasers in the 2012 Private Placement if, after effectiveness of the Registration Statement and subject to certain specified exceptions, the Company suspends the use of the Registration Statement or the Registration Statement ceases to remain continuously effective as to all the securities for which it is required to be effective (each such event, a “Registration Default”). Subject to specified exceptions, for each 30-day period or portion thereof during which a Registration Default remains uncured, the Company is obligated to pay liquidated damages to each purchaser in cash in an amount equal to 1.0% of the aggregate purchase price paid by each such purchaser in the 2012 Private Placement, up to a maximum of 8.0% of such aggregate purchase price. As of the date of these financial statements, the Company does not believe that it is probable that it will be obligated to pay any such liquidated damages. Accordingly, the Company has not established an accrual for liquidated damages. Series B Preferred Stock July 2006 Private Placement TheIn July 2006, the Company authorized 6,500,000 shares of its Series B convertible preferred stock (“Series B Preferred Stock”)and completed a private placement of 5,380,711 of these shares, of which 6,198,179 and 0 shares were issued and outstanding as of September 30, 2006 and 2007, respectively.2007. In addition, in connection with the July 2006 private placement the Company completed a private placement of 5,380,711issued warrants to purchase shares of itsthe Company’s Series B preferred stock and received gross proceeds of $21,200 as part of the private placement, fees incurred totaled $1,795. Additionally in July 2006, 817,468 shares of Series B preferred stock and 440,105 common stockstock. All such warrants were issued to repay the Company’s Bridge Financing units.
Each shareexpired as of Series B convertible preferred stock was automatically convertible into a number of shares of common stock equal to the quotient of $3.94 divided by $1.00 immediately subsequent to the date of the initial public offering.
As part of the compensation agreement relating to the Series B Preferred Stock transaction, the placement agent received 126,903 Agent Series B Preferred Warrants and 68,322 common stock warrants. Each such warrant consisted of the right to purchase one share of Series B Preferred Stock for a period of seven years which expires on July 19, 2013. The exercise price of each warrant was $5.56 per share. The exercise price was payable in cash or by tendering common stock. In the event the Company issued common stock or rights to purchase common stock below the then conversion price, then the price per share at which the Series B preferred stock was to be converted would be reduced to the weighted average of the existing conversion price per share and the price per share of the newly-issued stock or rights.
Also, as part of the compensation agreement relating to the bridge financing transaction, the placement agent received an aggregate of 22,222 Series B Preferred warrants and 11,963 common stock warrants. Each warrant consisted of the right to purchase one share of fully paid and non-assessable common stock for a period of seven years which expires on July 19,September 30, 2012. The exercise price of each warrant was $5.56 per share. The exercise price was payable in cash or by tendering common stock. In the event the Company issued common stock or rights to purchase common stock below the then conversion price, then the price per share at which the Series B preferred stock was to be converted would be reduced to the weighted average of the existing conversion price per share and the price per share of the newly-issued stock or rights.
F-21
Biodel Inc.
(A Development Stage Company)
Notes to Financial Statement
(In thousands, except share and per share amounts)
The Company evaluated all the warrants to ascertain if they should be recorded as equity instruments, or if they contained features which require them to be recorded as derivative liabilities and concluded they should be classified as equity on the balance sheet.
As a result of the conversion option, the Company considered the features contained in the Series B convertible preferred stock to ascertain whether the shares contained a beneficial conversion feature and determined that the issuance of the Series B convertible preferred stock resulted in a beneficial conversion feature in the amount of $603. The completion of the Company’s initial public offering in May 2007 resulted in the conversion of 6,407,008 shares of the Company’s Series A and B convertible preferred stock.
Shares Reserved for Future Issuance As of September 30, 2009,2012, the Company reserved shares of common stock for future issuance as follows: 2010 stock incentive plan | | | | | | 2004 stock incentive plan | | | 4,700,0002,201,908 | | 2005 employee stock purchase plan | | | 1,500,000 | | 2005 Non-employee directors’ stock option plan | | | 500,000 | | Exercise of warrants issued to placement agent | | | 118,815 | | | | | | | | | | | Total | | | 6,818,815450,000 | | Common shares issuable upon conversion of Series A Preferred Stock | | | | | 453,486 | | Common shares issuable upon conversion of Series B Preferred Stock | | | | | 3,605,607 | | Warrants issued in connection with May 2011 registered direct offering | | | | | 2,256,929 | | Warrants issued in connection with June 2012 private placement | | | | | 2,749,469 | | | | | | | 11,717,399 | |
2004 Stock Incentive Plan as amended The Company established the 2004 Stock Incentive Plan on October 1, 2004 (the “Plan”) and, as amended in March 2007.2007, and subsequently replaced by the 2010 Stock Incentive Plan. The Plan provides for the granting F-32
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
of shares of common stock or securities convertible into or exercisable for shares of common stock, including stock options (“Incentive Stock Options”) to directors, employees, consultants and advisors of or to the Company. Incentive Stock Options can be awarded only to persons who are employees of the Company at the time of the grant. Stock options are exercisable at the conclusion of the vesting period. Employees can exercise their vested shares up to 90 days after termination of services. A total of 4,700,000 options to purchase the equivalent number of shares of common stock may be issued pursuant to the Stock Incentive Plan. No awards may be granted under the planPlan after October 1, 2014.the effective date of the 2010 Plan.
The Plan is be administered by either the Board of Directors of the Company or a Committee thereof, which determines the terms and conditions of the awards granted under the Plan, including the recipient of the award, the nature of the award, the exercise price of the award, the number of shares subject to the award and the exercisability thereof. Non-employee directors are not entitled to receive awards other than the non-qualified stock options the plan directs be issued to non-employee directors. 2010 Stock Incentive Plan In March 2010, the shareholders of the Company approved the 2010 Stock Incentive Plan (the “2010 Plan”). Up to 1,350,000 shares of the Company’s common stock may be issued pursuant to awards granted under the 2010 Plan, plus 851,908 shares of common stock underlying already outstanding awards under the Company’s prior plans. As of September 30, 2012, the Company had 1,546,454 shares of common stock subject to outstanding awards. The contractual life of options granted under the 2010 Plan may not exceed seven years. The 2010 Plan uses a “fungible share” concept under which any awards that are not a full-value award will be counted against the share limit as one (1) share for each share of common stock and any award that is a full-value award will be counted against the share limit as 1.6 shares for each one share of common stock. The Company has not made any new awards under any prior equity plans after March 2, 2010 — the effective date the 2010 Plan was approved by the Company’s stockholders. The 2010 Plan replaces the 2004 Stock Incentive Plan and 2005 Non-Employee Directors Stock Option Plan. 2005 Employee Stock Purchase Plan The Company’s 2005 Employee Stock Purchase Plan, or the Purchase Plan, was adopted by its Board of Directors and approved by its stockholders on March 20, 2007. The Purchase Plan became effective upon the closing of the Company’s initial public offering. The Purchase Plan is intended to qualify as an employee stock purchase plan within the meaning of Section 423 of the Code. Under the Purchase Plan, eligible employees may contribute up to 15% of their eligible earnings for the period of that offering withheld for the purchase of common stock under the Purchase Plan. The employee’s purchase price is equal to the lower of: 85% of the fair market value per share on the start date of the offering period in which the employee is enrolled or 85% of the fair market value per share on the semi-annual purchase date. The Purchase Plan imposes a limitation upon a participant’s right to acquire common stock if immediately after the purchase, the employee would own 5% or more of the total combined voting power or value of the Company’s common stock or of any of its affiliates not eligible to participate in the Purchase Plan. The Purchase Plan provides for an automatic rollover when the purchase price for a new offering period is lower than previously established purchase price(s). The Purchase Plan also provides for a one-time election that allows an employee the opportunity to enroll into a new offering period when the new offering is higher than their current offering price. This election must be made within 30 days from the start of a new offering period. Offering periods are twenty-seven months in length. The compensation cost in connection with the plan for the years ended September 30, 20082010, 2011 and 20092012 was $49$454, $53 and $233,$16, respectively. F-22
Biodel Inc.
(A Development Stage Company)
Notes to Financial Statement
(In thousands, except share and per share amounts)
An aggregate of 1,500,000450,000 shares of common stock are reserved for issuance pursuant to purchase rights to be granted to the Company’s eligible employees under the Purchase Plan. The Purchase Plan shares are F-33
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
replenished annually on the first day of each fiscal year by virtue of an evergreen provision. The provision allows for share replenishment equal to the lesser of 1% of the total number of shares outstanding on that date or 100,00025,000 shares. As of September 30, 2009,2011 and 2012, a total of 1,318,220341,097 and 355,321 shares, respectively, were reserved and available for issuance under this plan. As ofFor the years ended September 30, 2009,2010, 2011 and 2012, the Company issued 101,841a total of 66,852, 83,903 and 94,679 shares, respectively, under the Purchase Plan.
2005 Non-Employee Directors’ Stock Option Plan The Company’s 2005 Non-Employee Directors’ Stock Option Plan or the Directors’ Plan,(the “Directors’ Plan”) was adopted by its Board of Directors and approved by its stockholders on March 20, 2007.2007 and subsequently replaced with the 2010 Stock Incentive Plan. The Directors’ Plan became effective upon the closing of the Company’s initial public offering. An aggregate of 500,000125,000 shares of common stock arewere reserved for issuance under the Directors’ Plan. Upon the effective date of the registration statement in connection with the Company’s initial public offering, each of its non-employee directors automatically received an initial option to purchase 25,0006,250 shares of common stock.Upon appointment, non-employee directors receive a one-time grant of an option to purchase 6,250 shares of common stock. EachAnnually, non-employee director who is first elected or appointed to the Company’s Board of Directors after the closing of the Company’s initial public offering willdirectors receive an initial option to purchase 25,000 shares of common stock on the date of his or her election or appointment. In addition, each non-employee director receives an option to purchase 20,0005,000 shares of common stock on an annual basis.stock. Effective March 3, 2009, these shares vest proratapro rata over one year. However, in the event a non-employee director has not served since the date of the preceding annual meeting of stockholders, that director will receive an annual grant that has been reduced pro rata for each full quarter prior to the date of grant during which such person did not serve as a non-employee director. The fair value per share is being recognized as compensation expense over the applicable vesting period. The fair value per share for awardawards granted as of December 31, 2008 through September 30, 2009 were2012 was calculated using the Black-Scholes valuation model. The fair value of the common stock for the grants from December 23, 2004 through November 1, 2006 was determined using a retrospective valuation. The fair value of the common stock for the grants during December 2006 and subsequently werewas determined contemporaneously with the grants. F-23
The following table summarizes the stock option activity through September 30, 2012: Options
| | | | Number
| | Weighted Average Exercise Price
| | Weighted Average Remaining Contractual Life in Years
| | Aggregate Intrinsic Value
|
---|
Balance, September 30, 2004 | | | | | — | | | $ | — | | | | | | | $ | — | | | | | | | 96,358 | | | | 5.64 | | | | | | | | — | | Outstanding balance, September 30, 2005 | | | | | 96,358 | | | | 5.64 | | | | | | | | — | | | | | | | 115,401 | | | | 22.60 | | | | | | | | — | | | | | | | 15,054 | | | | 13.60 | | | | | | | | — | | Outstanding balance, September 30, 2006 | | | | | 196,705 | | | | 12.92 | | | | | | | | — | | | | | | | 238,961 | | | | 55.84 | | | | | | | | — | | | | | | | 886 | | | | 5.64 | | | | | | | | — | | | | | | | 13,283 | | | | 22.60 | | | | | | | | — | | Outstanding balance, September 30, 2007 | | | | | 421,497 | | | | 27.20 | | | | | | | | — | | | | | | | 431,849 | | | | 67.52 | | | | | | | | — | | | | | | | 43,604 | | | | 20.72 | | | | | | | | — | | | | | | | 25,892 | | | | 44.16 | | | | | | | | — | | Outstanding balance, September 30, 2008 | | | | | 783,850 | | | | 55.68 | | | | | | | | — | | | | | | | 152,875 | | | | 10.76 | | | | | | | | — | | | | | | | 4,416 | | | | 5.64 | | | | | | | | — | | | | | | | 80,398 | | | | 55.52 | | | | | | | | — | |
F-34
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
Options
| | | | Number
| | Weighted Average Exercise Price
| | Weighted Average Remaining Contractual Life in Years
| | Aggregate Intrinsic Value
|
---|
Outstanding balance, September 30, 2009 | | | | | 851,911 | | | | 47.24 | | | | | | | | — | | | | | | | 328,530 | | | | 16.37 | | | | | | | | — | | | | | | | 8,081 | | | | 8.43 | | | | | | | | — | | | | | | | 13,469 | | | | 52.16 | | | | | | | | — | | Outstanding balance, September 30, 2010 | | | | | 1,158,891 | | | | 38.72 | | | | | | | | — | | | | | | | 290,834 | | | | 6.36 | | | | | | | | — | | | | | | | 104 | | | | 5.64 | | | | | | | | — | | | | | | | 84,271 | | | | 38.48 | | | | | | | | — | | Outstanding balance, September 30, 2011 | | | | | 1,365,350 | | | | 32.68 | | | | | | | | — | | | | | | | 215,877 | | | | 2.54 | | | | | | | | — | | | | | | | 34,773 | | | | 32.09 | | | | | | | | — | | Outstanding balance September 30, 2012 | | | | | 1,546,454 | | | $ | 27.80 | | | | 4 | | | $ | — | | Exercisable shares, September 30, 2012 | | | | | 1,197,230 | | | $ | 33.39 | | | | 3 | | | $ | — | |
Restricted Stock Units The Company grants restricted stock units (“RSUs”) to executive officers and employees pursuant to the 2010 Plan from time to time. There is no direct cost to the recipients of RSUs, except for any applicable taxes. In addition, on March 8, 2012, the Company’s stockholders approved an amendment to the 2010 Plan to increase the number of shares of common stock authorized for issuance thereunder solely for the purpose of allowing the Company to issue an 191,719 restricted stock units to certain of the Company’s employees in place of an aggregate of $823 in discretionary cash bonuses in connection with the fiscal year ended September 30, 2011 (the “2011 Bonus RSUs”). The 2011 Bonus RSUs vested and were distributed on September 30, 2012. The Company had previously accrued and expensed the $823 in the fiscal year ended September 30, 2011. The 2011 Bonus RSUs vested in full and was distributed on September 30, 2012. Since the total fair value of the 2011 Bonus RSUs did not exceed the discretionary aggregate cash bonus value of $823, the Company did not record any additional stock-based compensation expense in the year ended September 30, 2012. The accrued bonus liability was settled in March 2012 and, accordingly, the liability, net of taxes, in the amount of $582 was reversed into additional paid-in-capital. Each RSU award that was granted in December 2010 to our executive officers and employees represents one share of common stock and each award vests annually over three years, with fifty percent vesting on the first anniversary of the date of grant and the remainder vesting in two equal installments on each anniversary thereafter. Each year following the annual vesting date, between January 1st and March 15th, the Company will issue common stock for each vested RSU. During the period when the RSU is vested but not distributed, the RSUs cannot be transferred and the grantee has no voting rights. If the Company declares a dividend, RSU recipients will receive payment based upon the percentage of RSUs that have vested prior to the date of declaration. The costs of the awards, determined as the fair market value of the shares on the grant date, are expensed per the vesting schedule outlined in the award. For example, the December 2010 RSU awards vest over three years and are expensed 50% the first year and 25% the next two years; whereas, the December 2009 RSU awards are expensed ratably over the four year vesting period. Based on historical experience of option cancellations, the Company has estimated an annualized forfeiture rate of 9% for employee RSUs. Forfeiture rates will be adjusted over the requisite service period when actual forfeitures differ, or are expected to differ, from the estimate. As of September 30, 2012, the executives, the board of directors and employees had 350,148 vested and distributed RSUs. F-35
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
The stock-based compensation expense associated with the RSUs has been recorded in the statement of operations and in additional paid-in-capital on the balance sheets is as follows: | | | | September 30,
| |
---|
| | | | 2010
| | 2011
| | 2012
|
---|
Stock compensation expense — RSUs | | | | $ | 205 | | | $ | 585 | | | $ | 1,202 | |
At September 30, 2012, there was $418 of total unrecognized stock-based compensation expense related to RSU awards granted under the 2004 Stock Incentive Plan and the 2010 Plan. This expense is expected to be recognized over the remaining vesting periods up to four years. The following table summarizes the stock optionRSU activity from October 1, 2010 through September 30, 2009:2012: | | | | | | | | | | | | | | | | | | | Weighted Average | | | Aggregate | | | | Number | | | Exercise Price | | | Intrinsic Value | | Balance, September 30, 2004 | | | — | | | $ | — | | | | | | Granted | | | 385,432 | | | | 1.41 | | | $ | 1,526 | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding balance, September 30, 2005 | | | 385,432 | | | | 1.41 | | | $ | 1,526 | | Granted | | | 461,602 | | | | 5.65 | | | | | | Forfeited, expired | | | 60,222 | | | | 3.40 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding balance, September 30, 2006 | | | 786,812 | | | | 3.23 | | | $ | 1,287 | | Granted | | | 955,842 | | | | 13.96 | | | | | | Exercised | | | 3,542 | | | | 1.41 | | | $ | 14 | | Forfeited, expired | | | 53,138 | | | | 5.65 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding balance, September 30, 2007 | | | 1,685,974 | | | | 6.80 | | | $ | 1,273 | | Granted | | | 1,727,397 | | | | 16.88 | | | | | | Exercised | | | 174,410 | | | | 5.18 | | | | 33 | | Forfeited, expired | | | 103,571 | | | | 11.04 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding balance, September 30, 2008 | | | 3,135,390 | | | $ | 13.92 | | | $ | 832 | | Granted | | | 611,500 | | | | 2.69 | | | $ | 1,682 | | Exercised | | | 17,661 | | | | 1.41 | | | $ | 70 | | Forfeited, expired | | | 321,596 | | | | 13.88 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding balance, September 30, 2009 | | | 3,407,633 | | | $ | 11.81 | | | $ | 2,514 | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable shares, September 30, 2009 | | | 1,818,056 | | | $ | 10.66 | | | $ | 1,464 | | | | | | | | | | | |
| | | | Shares
| | Weighted Average Grant-Date Fair Value
|
---|
Non-vested and outstanding balance at September 30, 2009 | | | | | — | | | $ | — | | | | | | | 62,510 | | | | 15.80 | | Shares forfeited or expired | | | | | 246 | | | | 15.80 | | Non-vested and outstanding balance at September 30, 2010 | | | | | 62,264 | | | | 15.80 | | Changes during the period:
| | | | | | | | | | | | | | | | 90,639 | | | | 7.56 | | | | | | | 22,435 | | | | 17.20 | | Shares forfeited or expired | | | | | 8,791 | | | | 9.40 | | Non-vested and outstanding balance at September 30, 2011 | | | | | 121,677 | | | | 9.40 | | Changes during the period:
| | | | | | | | | | | | | | | | 274,189 | | | | 2.36 | | | | | | | 327,713 | | | | 3.45 | | Non-vested and outstanding balance at September 30, 2012 | | | | | 68,153 | | | $ | 10.51 | |
10.11. Employee Benefit Plan
Effective January 1, 2006, the Company established a 401(k) plan covering substantially all employees. Employees may contribute up to 100% of their salary per year (subject to maximum limit prescribed by federal tax law). The Company may elect to make a discretionary contribution or match a discretionary percentage of employee contributions. As ofFor the years ended September 30, 2009,2010, 2011 and 2012, the Company had not elected to make any contributions to the plan. F-24
12. Reverse Stock Splits
On June 11, 2012, the Company amended its certificate of incorporation in order to effect a one-for-four reverse split of its outstanding common stock and to fix on a post-split basis the number of authorized shares of its common stock at 25,000,000 (reduced from 100,000,000 authorized shares). As a result of the 2012 reverse stock split, each share of Company common stock outstanding at the effective time was automatically changed into one-quarter of a share of common stock. No fractional shares were issued in connection with the 2012 reverse stock split, and cash of $0.3 was paid in lieu of fractional shares. Also as a result of the 2012 reverse stock split, the number of shares of common stock subject to outstanding options, RSUs and warrants issued by the Company and the number of shares reserved for future issuance under the Company’s stock plans have been reduced by a factor of four. There was no alteration to the par value of the common stock or any modification of the voting rights or other terms thereof. All references in these financial statements and accompanying notes to units of common stock or per share amounts are reflective of the 2012 reverse stock split for all periods reported. F-36
Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
11. Reverse Split
On April 12, 2007, the Company completed a 0.7085 for one (0.7085:1) reverse stock split (“Reverse Split”) rounding all fractional shares down to the next full share. Stockholders received cash in lieu of fractional shares. After the Reverse Split,2007 reverse split, there were 8,003,8282,000,957 shares of common stock outstanding. The Reverse Split2007 reverse split did not reduce the number of authorized shares of common stock, alter the par value or modify the voting rights or other terms thereof. As a result of the Reverse Split,2007 reverse split, the conversion prices and/or the numbers of shares issuable upon the exercise of any outstanding options and warrants to purchase common stock were proportionally adjusted pursuant to the respective anti-dilution terms of the 2004 Stock Incentive Plan and the respective warrant agreements. All references in these financial statements and accompanying notes to units of common stock or per share amounts are reflective of the Reverse Split2007 reverse split for all periods reported. 12.13. Summary Selected Quarterly Financial Data (Unaudited)
The following table sets forth certain unaudited consolidated quarterly statement of operations data for the eight quarters ended September 30, 2009.2012. This information is unaudited, but in the opinion of management, it has been prepared substantially on the same basis as the audited consolidated financial statements and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts stated below to state fairly the unaudited consolidated quarterly results of operations. The results of operations for any quarter are not necessarily indicative of the results of operations for any future period. Quarter Ended (in thousands, except share and per share amounts) | | | | December 31, 2011
| | March 31, 2012
| | June 30, 2012
| | September 30, 2012
|
---|
| | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | $ | (4,501 | ) | | $ | (4,316 | ) | | $ | (6,051 | ) | | $ | (5,879 | ) | Basic and diluted net loss per common share(1) | | | | $ | (0.47 | ) | | $ | (0.45 | ) | | $ | (0.60 | ) | | $ | (0.42 | ) | Weighted average common shares basic and diluted | | | | | 9,673,529 | | | | 9,688,384 | | | | 10,152,194 | | | | 13,982,826 | |
| | | | | | | | | | | | | | | | | | | December 31, | | | March 31, | | | June 30, | | | September 30, | | | | 2008 | | | 2009 | | | 2009 | | | 2009 | | Revenue | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | $ | (10,024 | ) | | $ | (11,629 | ) | | $ | (11,148 | ) | | $ | (10,469 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic and diluted net loss per common share | | $ | (0.42 | ) | | $ | (0.49 | ) | | $ | (0.47 | ) | | $ | (0.44 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average common shares basic and diluted | | | 23,706,148 | | | | 23,717,800 | | | | 23,759,675 | | | | 23,802,286 | | | | | | | | | | | | | | |
Quarter Ended (in thousands, except share and per share amounts) | | | | December 31, 2010
| | March 31, 2011
| | June 30, 2011
| | September 30, 2011
|
---|
| | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | $ | (5,309 | ) | | $ | (5,442 | ) | | $ | (3,974 | ) | | $ | 4,133 | | Basic net (loss) income per common share | | | | $ | (0.80 | ) | | $ | (0.82 | ) | | $ | (0.48 | ) | | $ | 0.43 | | Diluted net (loss) income per common share(1) | | | | $ | (0.80 | ) | | $ | (0.82 | ) | | $ | (0.48 | ) | | $ | 0.41 | | Weighted average common shares basic | | | | | 6,604,726 | | | | 6,617,422 | | | | 8,254,413 | | | | 9,657,795 | | Weighted average common shares diluted | | | | | 6,604,726 | | | | 6,617,422 | | | | 8,254,413 | | | | 10,111,336 | |
| | | | | | | | | | | | | | | | | | | December 31, | | | March 31, | | | June 30, | | | September 30, | | | | 2007 | | | 2008 | | | 2008 | | | 2008 | | Revenue | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net loss | | $ | (11,025 | ) | | $ | (9,557 | ) | | $ | (10,114 | ) | | $ | (12,665 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic and diluted net loss per common share | | $ | (0.55 | ) | | $ | (0.43 | ) | | $ | (0.43 | ) | | $ | (0.53 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average common shares basic and diluted | | | 20,198,829 | | | | 22,045,400 | | | | 23,653,956 | | | | 23,674,362 | | | | | | | | | | | | | | |
(1) | | Basic earnings (loss) per share calculation for the third and fourth quarter include the weighted average effect of stock issuances; therefore, the sum of the quarterly earnings per share will not equal full-year earnings per share amounts which reflect the weighted average effect on an annual basis. |
F-37
13.Biodel Inc. (A Development Stage Company)
Notes to Financial Statements — (Continued) (In thousands, except share and per share amounts)
14. Subsequent Event In November 2009,On December 20, 2012, the Company amended its insulin supply agreement with N.V. Organon so thatcertificate of incorporation in order to effect an increase in the termnumber of shares of the agreement extends through December 2011. The remaining minimum quantities of insulin that the Company is obligatedCompany’s authorized common stock, par value $.01 per share, from 25,000,000 shares to purchase have been reduced slightly and redistributed over the remaining term of the agreement.
F-25 62,500,000 shares.F-38
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