UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ | |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2017
or
☐ | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from
toCommission File Number: 001-36593
SOLENO THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)
Delaware | 77-0523891 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
203 Redwood Shores Parkway, Suite 110,
Redwood City, California
(Address of principal executive offices)
94065
(Zip Code)
(650) 213-8444
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: | ||
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.001 par value | SLNO | NASDAQ |
Common Stock, $0.001 per value, underlying the warrants | SLNOW | NASDAQ |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒x No ☐¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ☐ | Accelerated filer | ☐ | ||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | ||
Emerging growth company | |||||
☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐¨ No ☒x
As of November 9, 2017,1, 2019, there were 10,002,25644,658,054 shares of the registrant’s Common Stock, par value $0.001 per share, outstanding.
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32 |
Item 1. |
Soleno Therapeutics, Inc.
(In thousands except share and per share data)
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Assets |
| (Unaudited) |
|
|
|
|
| |
Current assets |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 11,225 |
|
| $ | 23,099 |
|
Prepaid expenses and other current assets |
|
| 375 |
|
|
| 529 |
|
Due from related party |
|
| 9 |
|
|
| 64 |
|
Minority interest investment in former subsidiary |
|
| — |
|
|
| 978 |
|
Total current assets |
|
| 11,609 |
|
|
| 24,670 |
|
Long-term assets |
|
|
|
|
|
|
|
|
Property and equipment, net |
|
| 46 |
|
|
| 12 |
|
Intangible assets, net |
|
| 17,011 |
|
|
| 18,469 |
|
Other long-term assets |
|
| 59 |
|
|
| — |
|
Total assets |
| $ | 28,725 |
|
| $ | 43,151 |
|
Liabilities and stockholders’ equity |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Accounts payable |
| $ | 1,735 |
|
| $ | 934 |
|
Accrued compensation and other current liabilities |
|
| 1,719 |
|
|
| 943 |
|
Total current liabilities |
|
| 3,454 |
|
|
| 1,877 |
|
Long-term liabilities |
|
|
|
|
|
|
|
|
Series A warrant liability |
|
| 25 |
|
|
| 49 |
|
2017 PIPE Warrant liability |
|
| 3,667 |
|
|
| 4,563 |
|
2018 PIPE Warrant liability |
|
| 590 |
|
|
| 600 |
|
Contingent liability for Essentialis purchase price |
|
| 6,066 |
|
|
| 5,649 |
|
Other long-term liabilities |
|
| 38 |
|
|
| — |
|
Total liabilities |
|
| 13,840 |
|
|
| 12,738 |
|
Commitments and contingencies (Note 6) |
|
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
|
|
|
|
|
Preferred Stock, $.001 par value, 10,000,000 shares authorized: |
|
|
|
|
|
|
|
|
Series B convertible preferred stock, 13,780 shares designated at September 30, 2019 and December 31, 2018; zero shares issued and outstanding at September 30, 2019 and at December 31, 2018. Liquidation value of zero. |
|
| — |
|
|
| — |
|
Common stock, $0.001 par value, 100,000,000 shares authorized, 31,793,292 and 31,755,169 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively. |
|
| 32 |
|
|
| 32 |
|
Additional paid-in-capital |
|
| 158,034 |
|
|
| 157,413 |
|
Accumulated deficit |
|
| (143,181 | ) |
|
| (127,032 | ) |
Total stockholders’ equity |
|
| 14,885 |
|
|
| 30,413 |
|
Total liabilities and stockholders’ equity |
| $ | 28,725 |
|
| $ | 43,151 |
|
September 30, 2017 | December 31, 2016 | ||||||
Assets | (Unaudited) | ||||||
Current assets | |||||||
Cash and cash equivalents | $ | 5,647 | $ | 2,726 | |||
Accounts receivable | — | 3 | |||||
Restricted cash | 35 | 35 | |||||
Prepaid expenses and other current assets | 145 | 247 | |||||
Current assets held for sale | 563 | 790 | |||||
Total current assets | 6,390 | 3,801 | |||||
Long-term assets | |||||||
Property and equipment, net | 55 | 54 | |||||
Other intangible assets, net | 19,353 | — | |||||
Other assets | 126 | 126 | |||||
Long-term assets held for sale | 458 | 1,584 | |||||
Total assets | $ | 26,382 | $ | 5,565 | |||
Liabilities and stockholders’ equity | |||||||
Current liabilities | |||||||
Accounts payable | 642 | 411 | |||||
Accrued compensation and other current liabilities | 976 | 1,050 | |||||
Current liabilities held for sale | 113 | 246 | |||||
Total current liabilities | 1,731 | 1,707 | |||||
Long-term liabilities | |||||||
Series A warrant liability | 289 | 194 | |||||
Series C warrant liability | 20 | 86 | |||||
Other long-term liabilities | 1,132 | 62 | |||||
Long-term liabilities held for sale | — | 81 | |||||
Total liabilities | 3,172 | 2,130 | |||||
Commitments and contingencies (Note 8) | |||||||
Stockholders’ equity | |||||||
Preferred Stock, $.001 par value, 10,000,000 shares authorized: | |||||||
Series B convertible preferred stock, 13,780 are designated at September 30, 2017 and December 31, 2016; 10,049 and 12,780 shares issued and outstanding at September 30, 2017 and at December 31, 2016, respectively. Liquidation value of zero. | — | — | |||||
Common stock, $0.001 par value, 100,000,000 shares authorized, 9,970,538 and 3,357,390 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively. (Note 14) | 10 | 4 | |||||
Additional paid-in-capital | 132,154 | 101,743 | |||||
Accumulated deficit | (108,954 | ) | (98,312 | ) | |||
Total stockholders’ equity | 23,210 | 3,435 | |||||
Total liabilities and stockholders’ equity | $ | 26,382 | $ | 5,565 |
See accompanying notes to condensed consolidated financial statements
(unaudited)
(In thousands except share and per share data)
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development | $ | 4,490 |
|
| $ | 2,092 |
|
| $ | 10,995 |
|
| $ | 4,986 |
|
General and administrative |
| 1,615 |
|
|
| 1,558 |
|
|
| 5,322 |
|
|
| 5,191 |
|
Change in fair value of contingent consideration |
| 28 |
|
|
| 228 |
|
|
| 417 |
|
|
| 589 |
|
Total operating expenses |
| 6,133 |
|
|
| 3,878 |
|
|
| 16,734 |
|
|
| 10,766 |
|
Operating loss |
| (6,133 | ) |
|
| (3,878 | ) |
|
| (16,734 | ) |
|
| (10,766 | ) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cease-use income |
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
Change in fair value of warrants liabilities |
| 7,116 |
|
|
| 1,543 |
|
|
| 930 |
|
|
| (1,549 | ) |
Loss from minority interest investment |
| (123 | ) |
|
| — |
|
|
| (478 | ) |
|
| — |
|
Interest income, net |
| 29 |
|
|
| 26 |
|
|
| 133 |
|
|
| 75 |
|
Total other income (expense) |
| 7,022 |
|
|
| 1,569 |
|
|
| 585 |
|
|
| (1,468 | ) |
Income (loss) from continuing operations |
| 889 |
|
|
| (2,309 | ) |
|
| (16,149 | ) |
|
| (12,234 | ) |
Loss from discontinued operations |
| — |
|
|
| (427 | ) |
|
| — |
|
|
| (1,364 | ) |
Net income (loss) | $ | 889 |
|
| $ | (2,736 | ) |
| $ | (16,149 | ) |
| $ | (13,598 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 0.03 |
|
| $ | (0.11 | ) |
| $ | (0.51 | ) |
| $ | (0.60 | ) |
Diluted | $ | (0.19 | ) |
| $ | (0.11 | ) |
| $ | (0.53 | ) |
| $ | (0.60 | ) |
Loss per common share from discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | — |
|
| $ | (0.02 | ) |
| $ | — |
|
| $ | (0.07 | ) |
Diluted | $ | — |
|
| $ | (0.02 | ) |
| $ | — |
|
| $ | (0.07 | ) |
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 0.03 |
|
| $ | (0.13 | ) |
| $ | (0.51 | ) |
| $ | (0.67 | ) |
Diluted | $ | (0.19 | ) |
| $ | (0.13 | ) |
| $ | (0.53 | ) |
| $ | (0.67 | ) |
Weighted-average common shares outstanding used in per-share calculation: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
| 31,793,292 |
|
|
| 21,432,482 |
|
|
| 31,775,590 |
|
|
| 20,443,044 |
|
Diluted |
| 32,443,647 |
|
|
| 21,432,482 |
|
|
| 32,235,528 |
|
|
| 20,443,044 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Operating expenses | |||||||||||||||
Research and development | $ | 982 | $ | 708 | $ | 2,046 | $ | 1,959 | |||||||
Sales and marketing | — | — | 26 | — | |||||||||||
General and administrative | 1,707 | 1,260 | 4,900 | 4,532 | |||||||||||
Total expenses | 2,689 | 1,968 | 6,972 | 6,491 | |||||||||||
Operating loss | (2,689 | ) | (1,968 | ) | (6,972 | ) | (6,491 | ) | |||||||
Interest and other income (expense) | |||||||||||||||
Interest Income | 4 | — | 7 | — | |||||||||||
Change in fair value of warrants liabilities income (expense) | 130 | 200 | (29 | ) | 1,295 | ||||||||||
Cease-use expense | 4 | — | 3 | (94 | ) | ||||||||||
Other expense | — | (9 | ) | (602 | ) | (26 | ) | ||||||||
Interest and other income (expense), net | 138 | 191 | (621 | ) | 1,175 | ||||||||||
Loss from continuing operations | (2,551 | ) | (1,777 | ) | (7,593 | ) | (5,316 | ) | |||||||
Loss from discontinued operations: | |||||||||||||||
Operating loss | (1,027 | ) | (973 | ) | (2,841 | ) | (4,136 | ) | |||||||
Loss on sale of assets | (208 | ) | — | (208 | ) | — | |||||||||
Total | (1,235 | ) | (973 | ) | (3,049 | ) | (4,136 | ) | |||||||
Net loss | $ | (3,786 | ) | $ | (2,750 | ) | $ | (10,642 | ) | $ | (9,452 | ) | |||
Loss per common share from continuing operations, basic and diluted (Note 14) | $ | (0.24 | ) | $ | (0.56 | ) | $ | (0.85 | ) | $ | (1.73 | ) | |||
Loss per common share from discontinued operations, basic and diluted (Note 14): | |||||||||||||||
Operating | $ | (0.09 | ) | $ | (0.31 | ) | $ | (0.32 | ) | $ | (1.35 | ) | |||
�� Loss on sale of assets | $ | (0.02 | ) | $ | — | $ | (0.02 | ) | $ | — | |||||
Total | $ | (0.11 | ) | $ | (0.31 | ) | $ | (0.34 | ) | $ | (1.35 | ) | |||
Net loss per common share, basic and diluted (Note 14) | $ | (0.35 | ) | $ | (0.87 | ) | $ | (1.19 | ) | $ | (3.08 | ) | |||
Weighted-average common shares outstanding used to calculate basic and diluted net loss per common share (Note 14) | 10,766,608 | 3,152,306 | 8,936,255 | 3,072,729 | |||||||||||
See accompanying notes to condensed consolidated financial statements
Condensed Consolidated Statements of Stockholders’ Equity
For the Three and Nine Months Ended September 30, 2019 and 2018
(unaudited)
(In thousands except share data)
|
| Series B Convertible Preferred Stock |
|
| Common Stock |
|
| Additional Paid-In |
|
| Accumulated |
|
| Total Stockholders’ |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||
Balances at January 1, 2019 |
|
| — |
|
| $ | — |
|
|
| 31,755,169 |
|
| $ | 32 |
|
| $ | 157,413 |
|
| $ | (127,032 | ) |
| $ | 30,413 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 202 |
|
|
|
|
|
|
| 202 |
|
Issuance of common stock to board members in lieu of cash payments for quarterly board fees |
|
|
|
|
|
|
|
|
|
| 21,415 |
|
|
| — |
|
|
| 46 |
|
|
|
|
|
|
| 46 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,030 | ) |
|
| (7,030 | ) |
Balances at March 31, 2019 |
|
| — |
|
|
| — |
|
|
| 31,776,584 |
|
|
| 32 |
|
|
| 157,661 |
|
|
| (134,062 | ) |
|
| 23,631 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 175 |
|
|
|
|
|
|
| 175 |
|
Issuance of common stock to board members in lieu of cash payments for quarterly board fees |
|
|
|
|
|
|
|
|
|
| 16,708 |
|
|
| — |
|
|
| 45 |
|
|
|
|
|
|
| 45 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10,008 | ) |
|
| (10,008 | ) |
Balances at June 30, 2019 |
|
| — |
|
|
| — |
|
|
| 31,793,292 |
|
|
| 32 |
|
|
| 157,881 |
|
|
| (144,070 | ) |
|
| 13,843 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 153 |
|
|
|
|
|
|
| 153 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 889 |
|
|
| 889 |
|
Balances at September 30, 2019 |
|
| — |
|
| $ | — |
|
|
| 31,793,292 |
|
| $ | 32 |
|
|
| 158,034 |
|
| $ | (143,181 | ) |
| $ | 14,885 |
|
| Series B Convertible Preferred Stock |
|
| Common Stock |
|
| Additional Paid-In |
|
| Accumulated |
|
| Total Stockholders’ |
| ||||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Equity |
| |||||||
Balances at January 1, 2018 |
|
| 4,571 |
|
| $ | — |
|
|
| 19,238,972 |
|
| $ | 19 |
|
| $ | 140,495 |
|
| $ | (113,697 | ) |
| $ | 26,817 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 200 |
|
|
|
|
|
|
| 200 |
|
Issuance of common stock on conversion of series B convertible preferred shares |
|
| (1,000 | ) |
|
| (— | ) |
|
| 200,000 |
|
|
| 1 |
|
|
| — |
|
|
|
|
|
|
| 1 |
|
Issuance of restricted common stock for bonuses |
|
|
|
|
|
|
|
|
|
| 99,217 |
|
|
| — |
|
|
| 159 |
|
|
|
|
|
|
| 159 |
|
Issuance of common stock to board members in lieu of cash payments for quarterly board fees |
|
|
|
|
|
|
|
|
|
| 49,519 |
|
|
| — |
|
|
| 82 |
|
|
|
|
|
|
| 82 |
|
Transaction costs for the 2017 PIPE common stock and warrant issuance. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (203 | ) |
|
|
|
|
|
| (203 | ) |
Issuance of common stock held back on acquisition of Essentialis |
|
|
|
|
|
|
|
|
|
| 180,667 |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
| — |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (3,804 | ) |
|
| (3,804 | ) |
Balances at March 31, 2018 |
|
| 3,571 |
|
|
| — |
|
|
| 19,768,375 |
|
|
| 20 |
|
|
| 140,733 |
|
|
| (117,501 | ) |
|
| 23,252 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 199 |
|
|
|
|
|
|
| 199 |
|
Issuance of common stock on conversion of series B convertible preferred shares |
|
| (3,571 | ) |
|
| (— | ) |
|
| 714,200 |
|
|
| — |
|
|
| (1 | ) |
|
|
|
|
|
| (1 | ) |
Issuance of common stock to board members in lieu of cash payments for quarterly board fees |
|
|
|
|
|
|
|
|
|
| 27,925 |
|
|
| — |
|
|
| 54 |
|
|
|
|
|
|
| 54 |
|
Transaction costs for the 2017 PIPE common stock and warrant issuance. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 203 |
|
|
|
|
|
|
| 203 |
|
Issuance of common stock held back on acquisition of Essentialis |
|
|
|
|
|
|
|
|
|
| 903,367 |
|
|
| 1 |
|
|
| (1 | ) |
|
|
|
|
|
| — |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,058 | ) |
|
| (7,058 | ) |
Balances at June 30, 2018 |
|
| — |
|
|
| — |
|
|
| 21,413,867 |
|
|
| 21 |
|
|
| 141,187 |
|
|
| (124,559 | ) |
|
| 16,649 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 231 |
|
|
|
|
|
|
| 231 |
|
Issuance of common stock to board members in lieu of cash payments for quarterly board fees |
|
|
|
|
|
|
|
|
|
| 21,374 |
|
|
| — |
|
|
| 61 |
|
|
|
|
|
|
| 61 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| - |
|
Balances at September 30, 2018 |
|
| — |
|
| $ | — |
|
|
| 21,435,241 |
|
| $ | 21 |
|
| $ | 141,479 |
|
| $ | (124,559 | ) |
| $ | 16,941 |
|
See accompanying notes to condensed consolidated financial statements
(unaudited)
(In thousands)
|
| Nine Months Ended September 30, |
| |||||
| 2019 |
|
| 2018 |
| |||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
| $ | (16,149 | ) |
| $ | (13,598 | ) |
Loss from discontinued operations |
|
| — |
|
|
| (1,364 | ) |
Loss from continuing operations |
|
| (16,149 | ) |
|
| (12,234 | ) |
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 1,468 |
|
|
| 1,473 |
|
Stock-based compensation expense |
|
| 530 |
|
|
| 731 |
|
Board fees paid with common stock |
|
| 91 |
|
|
| 197 |
|
Change in fair value of stock warrants |
|
| (930 | ) |
|
| 1,549 |
|
Change in fair value of contingent consideration |
|
| 417 |
|
|
| 589 |
|
Operating loss on minority interest investment |
|
| 478 |
|
|
| — |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| 154 |
|
|
| 142 |
|
Due from related party |
|
| 55 |
|
|
| — |
|
Accounts payable |
|
| 801 |
|
|
| 612 |
|
Accrued compensation and other liabilities |
|
| 786 |
|
|
| 167 |
|
Net cash used in continuing operating activities |
|
| (12,299 | ) |
|
| (6,774 | ) |
Net cash used in discontinued operating activities |
|
| — |
|
|
| (1,173 | ) |
Net cash used in operating activities |
|
| (12,299 | ) |
|
| (7,947 | ) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Purchases of property and equipment |
|
| (16 | ) |
|
| (6 | ) |
Security deposit on sublease |
|
| (59 | ) |
|
| — |
|
Proceeds from sale of minority interest investment in former subsidiary |
|
| 500 |
|
|
| — |
|
Net cash provided by (used in) continuing investing activities |
|
| 425 |
|
|
| (6 | ) |
Net cash provided by (used in) investing activities |
|
| 425 |
|
|
| (6 | ) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Net cash provided by discontinued financing activities |
|
| — |
|
|
| 1,525 |
|
Net cash provided by financing activities |
|
| — |
|
|
| 1,525 |
|
Net decrease in cash, cash equivalents and restricted cash from continuing operations |
|
| (11,874 | ) |
|
| (6,780 | ) |
Net increase in cash, cash equivalents and restricted cash from discontinued operations |
|
| — |
|
|
| 352 |
|
Net decrease in cash, cash equivalents and restricted cash |
|
| (11,874 | ) |
|
| (6,428 | ) |
Net increase in cash and cash equivalents included in current assets held for sale |
|
| — |
|
|
| (468 | ) |
Cash, cash equivalents and restricted cash, beginning of period |
|
| 23,099 |
|
|
| 17,135 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 11,225 |
|
| $ | 10,239 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing information |
|
|
|
|
|
|
|
|
Purchases of property and equipment with capital lease obligation |
| $ | 28 |
|
| $ | - |
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (10,642 | ) | $ | (9,452 | ) | |
Loss from discontinued operations | (3,049 | ) | (4,136 | ) | |||
Loss from continuing operations | (7,593 | ) | (5,316 | ) | |||
Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | |||||||
Depreciation and amortization | 1,029 | 1 | |||||
Stock-based compensation expense | 855 | 560 | |||||
Loss on disposition of property & equipment | — | 1 | |||||
Board fees paid with common stock | 195 | — | |||||
Change in fair value of common stock warrants | 29 | (1,323 | ) | ||||
Non-cash expense of issuing shares to Aspire Capital | 602 | — | |||||
Change in operating assets and liabilities: | |||||||
Accounts receivable | 3 | — | |||||
Prepaid expenses and other assets | 101 | (52 | ) | ||||
Other long-term assets | — | (49 | ) | ||||
Accounts payable | 232 | 336 | |||||
Accrued compensation and other current liabilities | (74 | ) | (166 | ) | |||
Other long-term liabilities | (20 | ) | 52 | ||||
Net cash used in continuing operating activities | (4,641 | ) | (5,956 | ) | |||
Net cash used in discontinued operating activities | (2,577 | ) | (4,853 | ) | |||
Net cash used in operating activities | (7,218 | ) | (10,809 | ) | |||
Cash flows from investing activities: | |||||||
Costs of Essentialis acquisition paid | (573 | ) | — | ||||
Purchase of property and equipment | (4 | ) | (22 | ) | |||
Net cash used in continuing investing activities | (577 | ) | (22 | ) | |||
Net cash provided by (used for) discontinued investing activities | 716 | (17 | ) | ||||
Net cash used in investing activities | 139 | (39 | ) | ||||
Cash flows from financing activities: | |||||||
Proceeds from sale of Series A preferred convertible stock | — | 5,070 | |||||
Series A preferred convertible stock transaction costs paid | — | (71 | ) | ||||
Proceeds from sale of Series B preferred stock | — | 13,479 | |||||
Redemption of Series A preferred stock in conjunction with issuance of Series B preferred stock | — | (7,780 | ) | ||||
Proceeds from issuance of common stock | 10,000 | 70 | |||||
Net cash provided by continuing financing activities | 10,000 | 10,768 | |||||
Net cash provided by discontinued financing activities | — | — | |||||
Net cash provided by financing activities | 10,000 | 10,768 | |||||
Net increase (decrease) in cash and cash equivalents | |||||||
Continuing operations | 4,783 | 4,790 | |||||
Discontinued operations | (1,862 | ) | (4,870 | ) | |||
Net increase (decrease) in cash and cash equivalents | 2,921 | (80 | ) | ||||
Cash and cash equivalents, beginning of period | 2,726 | 5,495 | |||||
Cash and cash equivalents, end of period | $ | 5,647 | $ | 5,415 | |||
Supplemental disclosures of non-cash investing and financing information | |||||||
Conversion of Series A preferred to common stock | $ | — | $ | 2,220 | |||
Issuance of common stock in Essentialis acquisition | $ | 18,764 | $ | — | |||
Contingent consideration of Essentialis acquisition | $ | 1,090 | $ | — | |||
De-recognition of Series B warrant liability (cashless exercise) | $ | — | $ | 593 | |||
Series B preferred transactions costs in accounts payable | $ | — | $ | 52 | |||
Fixed asset purchases in accounts payable | $ | — | $ | 11 |
See accompanying notes to condensed consolidated financial statements.
September 30, 2017
(unaudited)
Note 1. Description of Business
Soleno Therapeutics, Inc. (formerly known as Capnia, Inc.) (the “Company” or “Soleno”) was incorporated in the State of Delaware on August 25, 1999, and is located in Redwood City, California. On May 8, 2017, the CompanySoleno received stockholder approval to amend theits Amended and RestateRestated Certificate of Incorporation of the Company, to change theits name of the Companyfrom “Capnia, Inc.” to Soleno“Soleno Therapeutics, Inc.
The Company sold NFI ininitially established its operations as a stock transactiondiversified healthcare company that was completed on July 18, 2017, pursuant to a Stock Purchase Agreement with Neoforce Holdings, Inc. a wholly-owned subsidiarydeveloped and commercialized innovative diagnostics, devices and therapeutics addressing unmet medical needs, which consisted of: precision metering of Flexicare Medical Limited, a privately-held United Kingdom company (see Note 5).
On March 7, 2017, the Company completed its merger, or the mergerMerger, with Essentialis, Inc., a Delaware corporation, or Essentialis.Essentialis, in accordance with the Merger Agreement by and between Soleno Therapeutics and Essentialis dated December 22, 2016, or the Merger Agreement. After the merger,Merger, the Company'sCompany’s primary focus is transitioning tohas been the development and commercialization of novel therapeutics for the treatment of rare diseases. Essentialis was a privately held, clinical stageprivately-held, clinical-stage biotechnology company focused on the development of breakthrough medicines for the treatment of rare metabolic diseases wherein which there is increased mortality and risk of cardiovascular and endocrine complications. Prior to the merger, Essentialis’sMerger, Essentialis’s efforts were focused primarily on developing and testing product candidates that target the ATP-sensitive potassium channel, a metabolically regulatedmetabolically-regulated membrane protein whose modulation has the potential to impact a wide range of rare metabolic, cardiovascular, and central nervous system diseases. Essentialis hashad tested Diazoxide Choline Controlled Release, or DCCR tablets as a treatment for Prader-Willi syndrome, or PWS, a complex metabolic/neurobehavioral disorder.
Subsequent to the Merger with Essentialis described above, the Company had a scientific advice meeting withdetermined to divest, sell or dispose of its business efforts focused on the U. S. Fooddevelopment and Drug Administration, or FDA . The FDA supported change in hyperphagia score (without a change in weight) comparedcommercialization of its Serenz and CoSense technologies. Accordingly, and pursuant to placeboASC 205-20-45-10, any assets and liabilities related to the discontinued activities of CoSense and Serenz were presented separately as held for sale items, and the primary endpointrelated operations reported herein for the planned Phase III study. The dosing paradigm proposed for the Phase III study was acceptable. The FDA proposedCoSense and the Company agreed that the duration of the randomized double-blind placebo controlled study should be shorter (3-4 months). Safety information about DCCR could be obtained in a long-term, safety extension study. There was agreement on several other aspects of the study and the overall development program, and additional regulatory input is being sought on others.
The Company may also license elements of its Sensalyze Technology Platform to other companies that have complementary development or commercial capabilities (see Note 5).
Note 2. Liquidity, Going Concern and Management’s Plans
The Company had a net loss of approximately $10.6$16.1 million forduring the nine months ended September 30, 2017,2019 and has an accumulated deficit of approximately $109.0$143.2 million at September 30, 2017,2019, resulting from having incurredrecurring losses since its inception. The Company has approximately $4.7had $8.2 million of working capital at September 30, 2017,2019, and used approximately $7.2$12.3 million of cash in its operating activities during the nine months ended September 30, 2017.2019. The Company has financed its operations principally through issuances of debt and equity securities.
On January 27, 2017,October 25, 2019, the Company entered into a Common Stock Purchase Agreement (the "2017 Aspire Purchase Agreement") with Aspire Capital Fund, LLC ("Aspire Capital"), which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $17.0 million in value of shares of our Common Stock over the 30-month term of the 2017 Aspire Purchase Agreement. The Company issued Aspire Capital 141,666 shares of Common Stock as commitment shares under the 2017 Aspire Purchase Agreement.
The accompanying condensed consolidated financial statements have been prepared under the completion of the concurrent financing and issued 416,666 shares of common stock for an investment of $2 million from Aspire Capital.
The Company expects to continue incurring losses for the foreseeable future and may be required to raise additional capital to pursuecomplete its therapeuticclinical trials, pursue product development initiatives. These conditions raise substantial doubt aboutinitiatives and penetrate markets for the Company's ability to continue as a going concern for a periodsale of twelve months from the date of this report.
meet its obligations. These measures could cause significant delays in the Company'sCompany’s efforts to complete its therapeutic development program,clinical trials and commercialize its products, which is critical to the realization of its business plan and the future operations of the Company.
Management believes that the Company does not have sufficient capital resources to sustain operations through at least the next twelve months from the date of this filing. Additionally, in view of the Company’s expectation to incur significant losses for the foreseeable future it will be required to raise additional capital resources in order to fund its operations, although the availability of, and the Company’s access to such resources is not assured. Accordingly, management believes that there is substantial doubt regarding the Company’s ability to continue operating as a going concern within one year from the date of filing these financial statements.
The Company’s current research and development efforts are primarily focused on advancing its lead candidate, DCCR tablets for the treatment of PWS, into late-stage clinical development.
Note 3. Summary of Significant Accounting Policies
There have been no material changes to the significant accounting policies during the nine months ended September 30, 2017,2019 as compared to the significant accounting policies described in Note 3 of the “Notes to Consolidated Financial Statements” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2018. Below are those policies with current period updates:
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, ("GAAP")or GAAP, and the applicable rules and regulations of the Securities and Exchange Commission ("SEC")SEC for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States, or GAAP for complete financial statements. The condensed consolidated balance sheet at December 31, 2016,2018, has been derived from the audited consolidated financial statements at that date, but does not include all disclosures, including notes, required by GAAP for complete financial statements.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments of a normal recurring nature consideredthat are necessary to present fairlyfor a fair presentation of the Company's financial position as of September 30, 2017, and results of its operations for the three and nine months ended September 30, 2017, and 2016, and cash flows for the nine months ended September 30, 2017, and 2016.interim periods presented. The interim results are not necessarily indicative of the results for any future interim period or for the entire year. Certain prior period amounts have been reclassified to conform to current period presentation. These classifications have no effect on the previously reported net loss of loss per share.
The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2016,2018, included in the Company'sCompany’s Annual Report on Form 10-K.
Recent Accounting Standards
Recently Adopted Accounting Standards
In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees, with certain exceptions. Under the guidance, the measurement of Estimates
In August 2018, SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification”, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must now be provided in a note or separate statement. The Company has applied this new guidance to its condensed financial statements beginning in conformity with GAAP requires managementthe first quarter of 2019.
Recently Issued Accounting Standards
In February 2016, the FASB issued ASU 2016-02: “Leases (Topic 842)”. ASU 2016-02 provides new comprehensive lease accounting guidance that supersedes existing lease guidance. Upon adoption of ASU 2016-02, the Company may elect to make estimates
In July 2017, the FASB issued ASU No. 2017-11, “Earnings perPer Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480),; Derivatives and Hedging (Topic 815). ASU 2017-11 consists: (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of two parts. The amendments inthe Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception”, (ASU 2017-11). Part I of this Update changeupdate addresses the classification analysiscomplexity of accounting for certain financial instruments with down round features. Down round features are features of certain equity-linked financial instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability atfeatures that require fair value as a resultmeasurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of a down round feature. For freestanding equity classifiedextensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments the amendments
In January 2017,August 2018, the FASB issued ASU 2017-04: “Intangibles - Goodwill and Other2018-13, “Fair Value Measurement (Topic 350)820): SimplifyingDisclosure Framework—Changes to the TestDisclosure Requirements for Goodwill Impairment” (“Fair Value Measurement”. The ASU 2017-04”), which removes Step 2 frommodifies the goodwill impairment test. Itdisclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. This ASU is effective for annual and interim periodsthe Company beginning after December 15, 2019.in 2020. Early adoption is permitted. An entity is permitted for interimto early adopt any removed or annual goodwill impairment test performed with a measurement date after January 1, 2017.modified disclosures upon issuance of ASU No. 2018-13 and delay adoption of the additional disclosures until their effective date. The Company is currently evaluatinghas not yet evaluated the effect thatimpact of adoption of this ASU 2017-04 will have on the Company’sits condensed consolidated financial position and results of operations.
Note 4. Fair Value of Financial Instruments
The carrying value of the Company’s cash, andrestricted cash, cash equivalents restricted cash,and accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to the short-term nature of these items.
Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:
Level I — Unadjusted quoted prices in active markets for identical assets or liabilities;
Level II — Inputs other than quoted prices included within Level I that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level III — Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands).
|
| Fair Value Measurements at September 30, 2019 |
| |||||||||||||
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A warrant liability |
| $ | 25 |
|
| $ | 25 |
|
| $ | — |
|
| $ | — |
|
2017 PIPE warrant liability |
|
| 3,667 |
|
|
| — |
|
|
| — |
|
|
| 3,667 |
|
2018 PIPE warrant liability |
|
| 590 |
|
|
| — |
|
|
| — |
|
|
| 590 |
|
Essentialis purchase price contingency liability |
|
| 6,066 |
|
|
| — |
|
|
| — |
|
|
| 6,066 |
|
Total common stock warrant and contingent consideration liability |
| $ | 10,348 |
|
| $ | 25 |
|
| $ | — |
|
| $ | 10,323 |
|
|
| Fair Value Measurements at December 31, 2018 |
| |||||||||||||
|
| Total |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A warrant liability |
| $ | 49 |
|
| $ | 49 |
|
| $ | — |
|
| $ | — |
|
2017 PIPE warrant liability |
|
| 4,563 |
|
|
| — |
|
|
| — |
|
|
| 4,563 |
|
2018 PIPE warrant liability |
|
| 600 |
|
|
| — |
|
|
| — |
|
|
| 600 |
|
Essentialis purchase price contingency liability |
|
| 5,649 |
|
|
| — |
|
|
| — |
|
|
| 5,649 |
|
Total common stock warrant and contingent consideration liability |
| $ | 10,861 |
|
| $ | 49 |
|
| $ | — |
|
| $ | 10,812 |
|
Fair Value Measurements at September 30, 2017 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | |||||||||||||||
Series A warrant liability | $ | 289 | $ | 289 | $ | — | $ | — | |||||||
Series C warrant liability | 20 | — | — | 20 | |||||||||||
Total liabilities | $ | 309 | $ | 289 | $ | — | $ | 20 | |||||||
Fair Value Measurements at December 31, 2016 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Liabilities | |||||||||||||||
Series A warrant liability | $ | 194 | $ | 194 | $ | — | $ | — | |||||||
Series C warrant liability | 86 | — | — | 86 | |||||||||||
Total common stock warrant liability | $ | 280 | $ | 194 | $ | — | $ | 86 |
The Series A Warrant is a registered security that trades on the open market. Themarket and the fair value of the Series A Warrant liability is based on the publicly quoted trading price of the warrants which is listed on and obtained from NASDAQ. Accordingly, the fair value of Series A Warrants is a Level 1 measurement. The fair value measurementsmeasurement of the Series C Warrants areis based on significant inputs that are unobservable and thus represent Level 3 measurements. The Company’s estimated fair value of the Series C Warrant liability is calculated using the Black-Scholes valuation model.model, which is equivalent to fair value computed using the Binomial Lattice Option Model. Key assumptions include the volatility of the Company’s stock, the expected warrant term, expected dividend yield and risk-free interest ratesrates. The Company’s estimated fair value of the 2017 PIPE Warrants and the 2018 PIPE Warrants was calculated using a Monte Carlo simulation of a geometric Brownian motion model. The Monte Carlo simulation pricing model requires the input of highly subjective assumptions including the expected stock price volatility, the expected term, the expected dividend yield and the risk-free interest rate. The fair value of the Essentialis purchase price contingent liability is estimated using scenario-based methods based upon the Company’s analysis of the likelihood of obtaining specified approvals from the Federal Drug Administration as well as reaching cumulative revenue milestones (see Note 6)10). The Level 3 estimates are based, in part, on subjective assumptions.
During the periods presented, the Company has not changed the manner in which it values liabilities that are measured at fair value using Level 3 inputs. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the periods presented.
The following table sets forth a summary of the changes in the fair value of the Company’s Level 1 and Level 3 warrants, which are treated as liabilities as follows (dollars in thousands).
|
| Series A Warrant |
|
| Series C Warrant |
|
| 2017 PIPE Warrants |
|
| 2018 PIPE Warrants |
|
| Purchase Price |
| |||||||||||||||||||||
|
| Number of Warrants |
|
| Liability |
|
| Number of Warrants |
|
| Liability |
|
| Number of Warrants |
|
| Liability |
|
| Number of Warrants |
|
| Liability |
|
| Contingent Liability |
| |||||||||
Balance at December 31, 2018 |
|
| 485,121 |
|
| $ | 49 |
|
|
| 118,083 |
|
| $ | — |
|
|
| 6,024,425 |
|
| $ | 4,563 |
|
|
| 513,617 |
|
| $ | 600 |
|
| $ | 5,649 |
|
Change in value of Series A Warrants |
|
| — |
|
|
| (24 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Change in value of 2017 PIPE Warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (896 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Change in value of 2018 PIPE Warrants |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10 | ) |
|
| — |
|
Change in value of contingent liability |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 417 |
|
Balance at September 30, 2019 |
|
| 485,121 |
|
| $ | 25 |
|
|
| 118,083 |
|
| $ | — |
|
|
| 6,024,425 |
|
| $ | 3,667 |
|
|
| 513,617 |
|
| $ | 590 |
|
| $ | 6,066 |
|
Series A Warrant | Series C Warrant | ||||||||||||
Number of Warrants | Liability | Number of Warrants | Liability | ||||||||||
Balance at December 31, 2016 | 485,121 | $ | 194 | 118,083 | $ | 86 | |||||||
Change in value of Series A Warrants | — | 95 | — | — | |||||||||
Change in value of Series C Warrants | — | — | — | (66 | ) | ||||||||
Balance at September 30, 2017 | 485,121 | $ | 289 | 118,083 | $ | 20 |
Note 5. Discontinued Operations, Assets Held for SaleWarrant Liabilities
The Company has issued multiple warrant series, of which the Series A Warrants, Series C Warrants, the 2017 PIPE Warrants and Asset Sale Transaction
Accounting Treatment
The Company accounts for the Warrants in accordance with Essentialis (see Note 11),the guidance in ASC 815. As indicated below, the Company explored opportunities divest, sellmay be obligated to settle Warrants in cash in the case of a Fundamental Transaction (as defined in the Warrants).
The Company classified the Warrants, with a term greater than one year, as long-term liabilities at their fair value and will re-measure the warrants at each balance sheet date until they are exercised or disposeexpire. Any change in the fair value is recognized as other income (expense) in the Company’s condensed consolidated statements of operations.
Series A Warrants
The Company has issued 489,921 Series A Warrants to purchase shares of its common stock at an exercise price of $32.50 per share in connection with the unit offering offered in the Company’s initial public offering, or the IPO, in November 2014. The Series A Warrants are exercisable at any time prior to the expiration of the CoSense, Neo Force, Inc. and Serenz businesses.
Upon the period in which a component meets the assets held for sale and discontinued operations criteria, an entity must present the assets and liabilitiescompletion of the discontinued operation separately inIPO, the asset and liability sections ofSeries A Warrants started trading on the balance sheet forNASDAQ under the comparative reporting periods. The prior period balance sheet should be reclassified forsymbol SLNOW. As the held for sale items. For income statements, the current and prior periods should report the results of operations of the component in discontinued operations when comparative income statementsSeries A Warrants are presented.
September 30, 2017 | December 31, 2016 | ||||||
Current assets | |||||||
Accounts receivable | $ | 126 | $ | 130 | |||
Inventory | 437 | 660 | |||||
Current assets held for sale | 563 | 790 | |||||
Long-term assets | |||||||
Property & equipment, net | — | 39 | |||||
Goodwill | — | 718 | |||||
Other intangible assets | 458 | 818 | |||||
Long-term assets held for sale | 458 | 1,575 | |||||
Current liabilities | |||||||
Accounts payable | 23 | 127 | |||||
Accrued compensation and other current liabilities | 90 | 119 | |||||
Total current liabilities for sale | 113 | 246 | |||||
Long-term liabilities | |||||||
Other long-term liabilities | $ | — | 81 | ||||
Long-term liabilities held for sale | $ | — | $ | 81 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Product revenue | $ | 61 | $ | 329 | $ | 702 | $ | 1,166 | |||||||
Cost of product revenue | 237 | 399 | 769 | 1,288 | |||||||||||
Gross loss | (176 | ) | (70 | ) | (67 | ) | (122 | ) | |||||||
Expenses | |||||||||||||||
Research and development | 573 | 423 | 1,946 | 2,273 | |||||||||||
Sales and marketing | 37 | 342 | 220 | 1,454 | |||||||||||
General and administrative | 204 | 138 | 600 | 314 | |||||||||||
Total expenses | 814 | 903 | 2,766 | 4,041 | |||||||||||
Operating loss | (990 | ) | (973 | ) | (2,833 | ) | (4,163 | ) | |||||||
Other income (expense) | (37 | ) | — | (8 | ) | 27 | |||||||||
Operating loss | (1,027 | ) | (973 | ) | (2,841 | ) | (4,136 | ) | |||||||
Loss on sale of assets | (208 | ) | — | (208 | ) | — | |||||||||
Net loss from discontinued operations | $ | (1,235 | ) | $ | (973 | ) | $ | (3,049 | ) | $ | (4,136 | ) |
Since their issuance, a total of 4,800 Series A Warrants have been exercised. As of September 30, 2017,2019, the fair value of the 485,121 outstanding Series A Warrants was approximately $289,000, and the$25,000. The decrease of $126,000approximately $26,000 and the increase of $95,000, respectively,$24,000 in fair value during the three and nine months ended September 30, 2017, was recorded as other income and other expense,2019, respectively, in the statement of operations. As of September 30, 2016, the fair value of the outstanding Series A warrants was approximately $509,000, and the decrease of $121,000 and $703,000 in fair value during the three and nine months ended September 30, 2016, was recorded as other income in the statementcondensed consolidated statements of operations.
Series C Warrants
On March 5, 2015, the Company entered into separate agreements with certain Series B Warrant holders, who agreed to exercise their Series B Warrants to purchase an aggregate of 117,902 shares of the Company’s Common Stockcommon stock at an exercise price of $32.50 per share, resulting in the de-recognition of $6.7 million of the previously issued Series B Warrant liability and gross proceeds to the
Company of approximately $3.8 million based on the exercise price of the Series B Warrants. In connection with this exercise of the Series B Warrants, the Company issued to each investor who exercised Series B Warrants, new Series C Warrants for the number of shares of the Company’s Common Stockcommon stock underlying the Series B Warrants that were exercised. Each Series C Warrant is exercisable at $31.25 per share and will expire on March 5, 2020.
In April 2015, the Company issued a tender offer to the remaining holders of Series B Warrants to induce the holders to cash exercise the outstanding Series B Warrants in exchange for new Series C Warrants with an exercise price of $31.25 per share that expire on March 5, 2020. The tender offer was extended to Series B Warrant holders under a registration statement filed with the SEC on Form S-4, which was declared effective on June 25, 2015 and expired on July 24, 2015. During July 2015, certain Series B Warrant holder(s)holders tendered their Series B Warrants under the tender offer, which resulted in the issuance of 181 shares of the Company's Common Stock,Company’s common stock, the issuance of 905181 Series C Warrants and proceeds to the Company of $5,882.
The Series C Warrants are exercisable into 118,083 shares of the Company’s Common Stock.common stock. As of September 30, 2017,2019, the fair value of the Series C Warrants was determined to be $20,000. The decline inzero, consistent with the fair valuebalance as of the Series C Warrants of $4,000 during the three months ended SeptemberDecember 31, 2018 and June 30, 2017 and $66,000 in the nine months ended September 30, 2017, was recorded as other income in the consolidated statement of operations. As of September 30, 2016, the fair value of the Series C Warrants was determined to be $115,000. The decline in the fair value of the warrants of $79,000 during the three months ended September 30, 2016, and $348,000 in the nine months ended September 30, 2016 was recorded as other income in the consolidated statement of operations.
The Company has calculated the fair value of the Series C Warrants using a Black-Scholes pricing model. The Black-Scholes pricing model which requires the input of highly subjective assumptions including the expected stock price volatility. The Company used the following inputs:
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Volatility |
|
| 90 | % |
|
| 90 | % |
Contractual term (years) |
|
| 0.42 |
|
|
| 1.17 |
|
Expected dividend yield |
|
| — | % |
|
| — | % |
Risk-free rate |
|
| 1.85 | % |
|
| 2.60 | % |
June 30, 2017 | December 31, 2016 | ||||
Volatility | 90 | % | 90 | % | |
Expected Term (years) | 2.42 | 3.17 | |||
Expected dividend yield | — | % | — | % | |
Risk-free rate | 1.53 | % | 1.51 | % |
Warrants Issued as Part of the Company entered intoUnits in the 2017 Aspire PurchasePIPE Offering
The 2017 PIPE Warrants were issued on December 15, 2017 in the 2017 PIPE Offering, pursuant to a Warrant Agreement with Aspire Capital, which provides that, uponeach of the termsinvestors in the 2017 PIPE Offering, and entitle the holder to purchase one share of the Company’s common stock at an exercise price equal to $2.00 per share, subject to adjustment as discussed below, at any time commencing upon issuance of the conditions2017 PIPE Warrants and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregateterminating at the earlier of $17.0 millionDecember 15, 2020 or 30 days following positive Phase III results for the DCCR tablet in valuePWS.
The exercise price and number of shares of the Company's Common Stock over the 30-month termcommon stock issuable upon exercise of the 2017 Aspire Purchase Agreement. The Company issued Aspire Capital 141,666 sharesPIPE Warrants may be adjusted in certain circumstances, including the event of Common Stock as commitment shares undera stock split, stock dividend, extraordinary dividend, or recapitalization, reorganization, merger or consolidation. However, the exercise price of the 2017 Aspire Purchase AgreementPIPE Warrants will not be reduced below $1.72.
In the event of a change of control of the Company, the holders of unexercised warrants may present their unexercised warrants to the Company, or its successor, to be purchased by the Company, or its successor, in an amount equal to the per share value determined by the Black Scholes methodology.
As of September 30, 2019, the fair value of the 2017 PIPE Warrants was estimated at $3.7 million. The decrease in the fair value of the liability for the 2017 PIPE Warrants of $6.5 million and approximately $896,000 during the three and nine months ended September 30, 2019, respectively, was recorded as other income in the condensed consolidated statements of operations. The decrease in the fair value of the liability for the 2017 PIPE Warrants of approximately $1.4 million during the three months ended September 30, 2018 and the resulting expense for issuing these commitment shares,increase in the amountfair value of $602 thousand, is recorded as Other Expense in the Statement of Operations. Further, on March 7, 2017, the closing of the financing, as described in the Agreement and Plan of Merger dated December 22, 2016 (the "Merger Agreement"), the Company sold to Aspire Capital, 416,666 of the Company's common stock at $4.80 per share for an aggregate of $2.0 million.
The Company has calculated the fair value of the 2017 PIPE Warrants using a Monte Carlo simulation of a geometric Brownian motion model. The Monte Carlo simulation pricing model requires the input of highly subjective assumptions including the expected stock price volatility. The following summarizes certain key assumptions used in estimating the fair values.
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Volatility |
|
| 85 | % |
|
| 75 | % |
Contractual term (years) |
|
| 1.2 |
|
|
| 2.0 |
|
Expected dividend yield |
|
| — | % |
|
| — | % |
Risk-free rate |
|
| 1.80 | % |
|
| 2.51 | % |
Warrants Issued as Part of the Units in the 2018 PIPE Offering
The 2018 PIPE Warrants were issued on December 19, 2018 in the 2018 PIPE Offering, pursuant to a Warrant Agreement with each of the investors in the 2018 PIPE Offering, and entitle the holders of each of the 10,272,375 units to purchase 0.05 shares of the Company’s common stock at an exercise price equal to $2.00 per share, subject to adjustment as discussed below, at any time commencing upon issuance of the 2018 PIPE Warrants and terminating on December 21, 2023.
The exercise price and number of shares of common stock issuable upon exercise of the 2018 PIPE Warrants may be adjusted in certain circumstances, including the event of a stock split, stock dividend, extraordinary dividend, or recapitalization, reorganization, merger or consolidation. However, the exercise price of the 2018 PIPE Warrants will not be reduced below $2.00.
In the event of a change of control of the Company, the holders of unexercised warrants may present their unexercised warrants to the Company, or its successor, to be purchased by the Company, or its successor, in an amount equal to the per share value determined by the Black Scholes methodology.
As of September 30, 2019, the fair value of the 2018 PIPE Warrants was estimated at approximately $590,000. The approximate $555,000 and $10,000 decrease in the fair value of the liability for the 2018 PIPE Warrants during the three and nine months ended September 30, 2019, respectively, was recorded as other income in the condensed consolidated statements of operations.
The Company has calculated the fair value of the 2018 PIPE Warrants using a Monte Carlo simulation of a geometric Brownian motion model. The Monte Carlo simulation pricing model requires the input of highly subjective assumptions including the expected stock price volatility. The following summarizes certain key assumptions used in estimating the fair values.
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Volatility |
|
| 85 | % |
|
| 75 | % |
Contractual term (years) |
|
| 4.2 |
|
|
| 5.0 |
|
Expected dividend yield |
|
| — | % |
|
| — | % |
Risk-free rate |
|
| 1.56 | % |
|
| 2.51 | % |
The Monte Carlo simulation of a geometric Brownian motion model requires the use of highly subjective assumptions to estimate the fair value of stock-based awards. These assumptions include the following estimates.
Volatility: The Company calculates the estimated volatility rate based on the volatilities of common stock of comparable companies in its industry.
Contractual term: The expected life of the warrants, which is based on the contractual term of the warrants.
Expected dividend yield: The Company has never declared or paid any cash dividends and does not currently plan to pay cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero.
Risk-free rate: The risk-free interest rate is based on the U.S. Treasury rate for similar periods as those of expected volatility.
Note 6. Commitments and Contingencies
Facility Leases
The Company’s previous operating lease for its headquarters facility office space in Redwood City, California, terminated in August 2019. In July 2019, the Company executed a non-cancellable lease agreement for 6,368 square feet of new space in Redwood City, California, which began in September 2019 and expires in May 2021. The lease also provides the Company with the right to use office furniture in the space and allows the purchase of this furniture at the end of the lease term for $1. The lease agreement requires monthly lease payments of approximately $29,000 beginning in November of 2019, with an increase to approximately $30,000 per month in September of 2020. The Company has accounted for the new lease as an operating lease for the office space and a capital lease for the office furniture, based on their relative fair values. The gross value of office furniture under this capital lease was approximately $27,000.
Rent expense was approximately $65,000 and $78,000 during the three months ended September 30, 2019 and 2018, respectively, net of sublease income of approximately $43,000 and $39,000, respectively. Rent expense was approximately $167,000 and $246,000 during the nine months ended September 30, 2019 and 2018, respectively, net of sublease income of approximately $173,000 and $237,000, respectively.
The following is a schedule by year of future minimum lease payments under the Company’s lease agreement as of September 30, 2019 (in thousands):
| Capital Lease |
| Operating Lease |
| Total |
| |||
Remaining of 2019 | $ | 3 |
| $ | 56 |
| $ | 59 |
|
2020 |
| 19 |
|
| 336 |
|
| 355 |
|
2021 |
| 8 |
|
| 143 |
|
| 151 |
|
Total |
| 30 |
| $ | 535 |
| $ | 565 |
|
Less: Amount representing interest |
| (2 | ) |
|
|
|
|
|
|
Present value of minimum lease payments | $ | 28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingencies
In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.
Note 7. CoSense Joint Venture Agreement and Discontinued Operations
In connectionDecember 2017, the Company entered into a joint venture with OptAsia Healthcare Limited, or OAHL, with respect to its CoSense product by agreeing to sell shares of Capnia, its then wholly-owned subsidiary, to OAHL. CoSense was Soleno’s first Sensalyze Technology Platform product to receive 510(k) clearances from the acquisitionFDA and CE Mark certification. CoSense measures CO, which can be elevated due to endogenous causes such as excessive breakdown of red blood cells, or hemolysis, or exogenous causes such as CO poisoning and smoke inhalation. The first target market for CoSense is for the use of ETCO measurements to aid in detection of hemolysis in neonates, a disorder in which CO and bilirubin are produced in excess as byproducts of the breakdown of red blood cells. The Company’s entry into the joint venture resulted from a comprehensive review of strategic alternatives for its legacy products and product candidates following its transition to a primarily therapeutic drug product company. The terms of the Joint Venture Agreement provide that OAHL would invest up to a total of $2.2 million in Capnia’s common shares on an incremental quarterly basis commencing in December 2017. OAHL was also responsible for funding a portion of the Capnia operations. The Joint Venture Agreement provided that Capnia would issue shares of common stock to OAHL based on a negotiated price of $1.00 per share when the cumulative investment made by OAHL equaled or exceeded $1.2 million. For financial reporting purposes, Capnia’s assets, liabilities and results of NeoForce,operations had historically been consolidated with those of the Company.
During October 2018, the Company and OAHL determined and agreed that the cumulative investment made by OAHL exceeded $1.2 million during the quarter ended September 30, 2018. Accordingly, on October 16, 2018, Capnia issued 1,690,322 shares of its common stock to payOAHL, representing 53% of its outstanding shares. After the former NeoForce shareholder an annual royalty payment forshare issuance the Company no longer held a period of 36 months. The agreement to pay the annual royaltycontrolling interest in Capnia and resulted in the recognitiondeconsolidation of Capnia’s financial statements from those of the Company and a contingent consideration,$2.0 million gain was recognized in the fourth quarter of 2018 as a result of the deconsolidation. Of this amount, $1.2 million
related to the remeasurement of the Company's retained interest in the joint venture to fair value which was recognized atmeasured based on the closingnegotiated price of $1.00 per share for Soleno’s remaining ownership of 1,480,000 shares less a 23% discount for lack of control over Capnia. The total gain was included in other income from continuing operations on the transaction, and subsequent changes to estimate of the amounts of contingent consideration to be paid will be recognized as charges or credits in the statementCompany's consolidated statements of operations. The fair valueremaining 47% investment in Capnia was classified as an equity method investment and presented as a Minority interest investment in former subsidiary in the condensed consolidated balance sheet. The balance of Minority interest investment in former subsidiary decreased by approximately $156,000 and $511,000 during the three and nine months ended September 30, 2019, respectively, as a result of the contingent considerationCompany recording its share of Capnia’s net losses during the period, which is based on preliminary cash flow projections, growthincluded in expected product sales and other assumptions. Based on the assumptions,line titled “Loss from minority interest investment” in the fair valueCompany’s condensed consolidated statements of operations. During September 2019, the Company sold its remaining 47% investment in Capnia to Sinon Investments LLC (“Sinon”) for a total purchase price of $500,000. As of the royalty obligationsale date, the Company had a minority interest investment in former subsidiary balance of approximately $467,000, after recording approximately $511,000 for its share of Capnia’s losses during 2019 up until the date of sale. A gain of approximately $33,000 was determined to be $153,000 at June 30, 2016. The fair value ofrecognized upon the royalty obligation was determined by applying the income approach, using several significant unobservable inputs for projected cash flowssale and a discount rate of 20% commensurateis presented, together with the Company's costCompany’s share of capitalCapnia’s net losses during the period, in the condensed consolidated statements of operations in the line titled “Loss from minority interest investment”. Following the transaction, the Company has no interest remaining in Capnia and expectation of the revenue growth for products at their life cycle stage. These inputs are considered Level 3
There were no assets or liabilities held for sale as of June 30, 2017. The Neo Force royalty obligation was assumed by Flexicare Medical Limited to whom the company sold NFI on July 18, 2017 (see Note 5).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, 2018 |
|
| Nine Months Ended September 30, 2018 |
| ||
|
|
|
|
|
|
|
|
|
Product revenue |
| $ | 6 |
|
| $ | 60 |
|
Cost of product revenue |
|
| 2 |
|
|
| 30 |
|
Gross profit (loss) |
|
| 4 |
|
|
| 30 |
|
Expenses |
|
|
|
|
|
|
|
|
Research and development |
|
| 306 |
|
|
| 1,009 |
|
Sales and marketing |
|
| 1 |
|
|
| 25 |
|
General and administrative |
|
| 124 |
|
|
| 360 |
|
Total expenses |
|
| 431 |
|
|
| 1,394 |
|
Net loss from discontinued operations |
| $ | (427 | ) |
| $ | (1,364 | ) |
Stock-based compensation expense of approximately $20,000 and $58,000 was classified in discontinued operations for the three and nine months ended September 30, 2018, respectively. There were 10,049 Series B Convertible Preferred Stock outstanding.
Note 8. Stockholders’ Equity
Equity Incentive Plans
The Company has adopted the 1999 Incentive Stock Plan, the 2010 Equity Incentive Plan, and the 2014 Equity Incentive Plan, (together,or the "Plans").2014 Plan, and together, the Plans. The 1999 Incentive Stock Plan expired in 2009, and the 2010 Equity Incentive Plan has been closed to new issuances. Therefore,Under the 2014 Plan the Company may issuegrant stock options, to purchasestock appreciation rights, restricted stock, restricted stock units, performance units or performance shares of common stock to employees, directors, advisors, and consultants only under the 2014 Equity Incentive Plan.consultants. Options granted under the 2014 Plan may be incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs may be granted only to Company employees, including officers and directors. NSOs may be granted to employees, directors, advisors, and consultants.
The Board of Directors has the authority to determine to whom stock options will be granted, the number of options, the term, and the exercise price.
The Company recognized stock-based compensation expense related to options and restricted stock units granted to employees, directors and consultants for the three and nine months ended September 30, 2019 of approximately $153,000 and $530,000, respectively. Stock-based compensation expense related to options and restricted stock units granted to employees, directors and consultants during the three and nine months ended September 30, 2018 was approximately $231,000 and $789,000, respectively, of which approximately $20,000 and $58,000, was recorded in discontinued operations in the three and nine months ended September 30, 2018, respectively. There were no discontinued operations during the nine months ended September 30, 2019. The compensation expense is allocated on a departmental basis, based on the classification of the option holder. No income tax benefits have been recognized in the statements of operations for stock-based compensation arrangements asduring any of September 30, 2017, and September 30, 2016.
Stock compensation expense (in thousands) was allocated between departments in continuing operations as follows.follows (in thousands).
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Research and development |
| $ | 42 |
|
| $ | 34 |
|
| $ | 124 |
|
| $ | 174 |
|
General and administrative |
|
| 111 |
|
|
| 177 |
|
|
| 406 |
|
|
| 557 |
|
Total |
| $ | 153 |
|
| $ | 211 |
|
| $ | 530 |
|
| $ | 731 |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Research & Development | $ | 43 | $ | 41 | $ | 140 | $ | 116 | |||||||
Sales & Marketing | — | 11 | 7 | 22 | |||||||||||
General & Administrative | 183 | 154 | 708 | 422 | |||||||||||
Total | $ | 226 | $ | 206 | $ | 855 | $ | 560 |
Stock Options
The Company granted options to purchase 565,785 and 736,086 of the Company’s common stock during the nine months ended September 30, 2019 and 2018, respectively. There were no options granted during the three months ended September 30, 2017 and 2016, and the2019 or 2018. The fair value of each award granted for the nine months ended September 30, 2017 and 2016, was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions.
|
| Nine Months Ended September 30, |
| ||
|
| 2019 |
| 2018 |
|
Expected life (years) |
| 5.5-6.1 |
| 5.5-6.02 |
|
Risk-free interest rate |
| 1.9%-2.6% |
| 2.7%-2.8% |
|
Volatility |
| 70%-71% |
| 70% |
|
Dividend rate |
| — % |
| — % |
|
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2017 | 2016 | 2017 | 2016 | ||||
Expected life (years) | - | - | 5.5-6.08 | 5.5-6.08 | |||
Risk-free interest rate | - | - | 1.9%-2.2% | 1.3%-1.7% | |||
Volatility | - | - | 61%-69% | 65% - 73% | |||
Dividend rate | - | - | —% | —% |
The Black-Scholes option-pricing model requires the use of highly subjective assumptions to estimate the fair value of stock-based awards. These assumptions include:
Expected volatility: The estimated volatility rate based on a peer index of common stock of comparable companies in the Company's industry.
Risk-free interest rate: The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected time to liquidity.
Expected dividend yield:Volatility: The estimated volatility rate based on the volatilities of common stock of comparable companies in the Company’s industry.
Dividend rate: The Company has never declared or paid any cash dividends and dodoes not presently plan to pay cash dividends in the foreseeable future. Consequently, the Company used an expected dividend yield of zero.
The following table summarizes stock option transactions for the nine months ended September 30, 20172019 as issued under the Plans:
|
| Shares Available |
|
| Number of Options |
|
| Weighted- Average Exercise Price per |
|
| Weighted Average Remaining Contractual Term |
| ||||
|
| for Grant |
|
| Outstanding |
|
| Share |
|
| (in years) |
| ||||
Balance at December 31, 2018 |
|
| 1,150,961 |
|
|
| 1,667,153 |
|
| $ | 6.03 |
|
|
| 8.27 |
|
Additional shares authorized |
|
| 223,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Options granted |
|
| (565,785 | ) |
|
| 565,785 |
|
| $ | 1.82 |
|
|
|
|
|
Options exercised |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
Options canceled/forfeited |
|
| 96,614 |
|
|
| (96,614 | ) |
| $ | 4.75 |
|
|
|
|
|
Balance at September 30, 2019 |
|
| 905,532 |
|
|
| 2,136,324 |
|
| $ | 4.97 |
|
|
| 8.02 |
|
Options vested at September 30, 2019 |
|
|
|
|
|
| 1,104,712 |
|
| $ | 7.79 |
|
|
| 7.34 |
|
Options vested and expected to vest at September 30, 2019 |
|
|
|
|
|
| 2,136,324 |
|
| $ | 4.97 |
|
|
| 8.02 |
|
Shares Available for Grant | Number of Options Outstanding | Weighted-Average Exercise Price per Share | Weighted Average Remaining Contractual Term | ||||||||
(in years) | |||||||||||
Balance at January 1, 2017 | 191,771 | 581,686 | $ | 17.10 | 8.48 | ||||||
Additional shares authorized | 134,295 | — | |||||||||
Amendment to plan to authorize additional shares | 1,785,837 | — | |||||||||
Options granted | (622,755 | ) | 622,755 | 3.05 | |||||||
Options exercised | — | — | |||||||||
Options canceled/forfeited | 132,437 | (132,437 | ) | 9.30 | |||||||
Balance at September 30, 2017 | 1,621,585 | 1,072,004 | 9.9 | 8.11 | |||||||
Options vested at September 30, 2017 | 533,202 | $ | 14.05 | 6.96 | |||||||
Options vested and expected to vest at September 30, 2017 | 1,072,004 | $ | 9.90 | 8.11 |
The weighted-average grant date fair value of employee options granted was $3.05$1.17 and $4.05$1.09 per share for the nine months ended September 30, 20172019 and year ended December 31, 2016,2018, respectively. At September 30, 2017,2019 total unrecognized employee stock-based compensation was $1.4$1.2 million, which is expected to be recognized over the weighted-average remaining vesting period of 2.72.5 years. As of September 30, 2017,2019, the outstanding stock options had an intrinsic value of zero.
Restricted Stock Units
There were 99,217 restricted stock units granted by the Company during the nine months ended September 30, 2018 to employees and nonemployees. The fair value of an equity award granted to a non-employee generally is determined inshares were 100% vested on the same manner as an equity award granted to an employee. In most cases,grant date and were valued based on the fair valueCompany’s common stock price on the grant date, with approximately $159,000 of the equity securitiesrelated stock-based compensation expense recognized at that time. There were no restricted stock units granted is more reliably determinable thanby the fair value ofCompany during the goods or services received. Stock-based compensation related to its grant of options to non-employees has not been material to date.
2014 Employee Stock Purchase Plan
The Company’s board of Directorsdirectors and stockholders have adopted the 2014 Employee Stock Purchase Plan, or the ESPP. The ESPP has become effective, and our Boardthe board of Directorsdirectors will implement commencement of offers thereunder in its discretion. A total of 27,967 shares of our Common Stockthe Company’s common stock has been made available for sale under the ESPP. In addition, ourthe ESPP provides for annual increases in the number of shares available for issuance under the plan on the first day of each year beginning in the year following the initial date that our Boardthe board of Directorsdirectors authorizes commencement, equal to the least of:
1.0% of the outstanding shares of our Common Stockthe Company’s common stock on the first day of such year;
55,936 shares; or
such amount as determined by our Boardthe board of Directors.directors.
As of September 30, 20172019, there were no purchases by employees under this plan.
Series D Warrants
The Company issued 256,064 Series D Warrants in October 2015, which are exercisable into 586,182 shares of the 2015 Sabby Purchase Agreement, the Company previously issued 562,162 Series D Warrants,Company’s common stock, with an exercise price of $12.30. The exercise price of 540,540 Series D Warrants issued to Sabby were subsequently amended to $8.75 per share$12.30 and a term of five years expiring on October 15, 2020 pursuant to the 2016 Sabby Purchase Agreement. The exercise price of the remaining 21,621 Series D Warrants issued to Maxim LLC, as placement agent, was $12.30, and are exercisable beginning on April 15, 2016, and through and including October 15, 2020. The Company’s Series D Warrants
to the registration payment arrangement. The Series D Warrant agreement specifically provides that under no circumstances will the Company be required to settle any Series D Warrant exercise for cash, whether by net settlement or otherwise.
Accounting Treatment
The Company accounts for the Series D Warrants in accordance with the guidance in ASC 815
Derivatives andOther Common Stock Warrants
As of September 30, 2017,2019, the Company had 102,070 Common Stockcommon stock warrants outstanding originally issued in conjunction withfrom the 2010/2012 convertible notes, with an exercise price of $24.35 and a term of 10 years expiring in November 2024. The Company also has outstanding 1,851 Common Stock warrants issued in 2009, with an exercise price of $108.00 and a term of 10 years, expiring in January 2019 andhad 16,500 Common Stockcommon stock warrants issued to the underwriter in ourthe Company’s IPO, with an exercise price of 35.70$35.70 and a term of 10 years, expiring in November 2024.
Note 10.9. Net lossincome (loss) per share
Basic net loss per share is computed by dividing net loss by the weighted-average number of Common Stockcommon stock actually outstanding during the period including contingent shares to be issued to Essentialis stockholders of 182,675 shares of common stock to be issued on the 1 year anniversary of the closing of the merger and 913,389 shares of common stock to be issued upon the achievement of a development milestone.period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of Common Stockcommon stock outstanding and dilutive potential Common Stockcommon stock that would be issued upon the exercise of Common Stock warrantscommon stock options and options. Forwarrants.
The following table presents the three and nine months ended September 30, 2017 and 2016 the effectcalculation of issuing the potential Common Stock is anti-dilutive due to the net losses in those periods and the number of shares used to compute basic and diluted earnings per share are the same in each of those periods.(in thousands, except per-share amounts):
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations | $ | 889 |
|
| $ | (2,309 | ) |
| $ | (16,149 | ) |
| $ | (12,234 | ) |
Loss from discontinued operations |
| — |
|
|
| (427 | ) |
|
| — |
|
|
| (1,364 | ) |
Net income (loss) - basic |
| 889 |
|
|
| (2,736 | ) |
|
| (16,149 | ) |
|
| (13,598 | ) |
Less: noncash income from change in fair value of warrants |
| 7,090 |
|
|
| — |
|
|
| 906 |
|
|
| — |
|
Net loss - diluted | $ | (6,201 | ) |
| $ | (2,736 | ) |
| $ | (17,055 | ) |
| $ | (13,598 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average common shares outstanding |
| 31,793,292 |
|
|
| 21,432,482 |
|
|
| 31,775,590 |
|
|
| 20,443,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase common stock |
| 260,882 |
|
|
| — |
|
|
| 236,395 |
|
|
| — |
|
Warrants |
| 389,473 |
|
|
| — |
|
|
| 223,543 |
|
|
| — |
|
Diluted weighted-average common shares outstanding |
| 32,443,647 |
|
|
| 21,432,482 |
|
|
| 32,235,528 |
|
|
| 20,443,044 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 0.03 |
|
| $ | (0.11 | ) |
| $ | (0.51 | ) |
| $ | (0.60 | ) |
Diluted | $ | (0.19 | ) |
| $ | (0.11 | ) |
| $ | (0.53 | ) |
| $ | (0.60 | ) |
Loss per common share from discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | - |
|
| $ | (0.02 | ) |
| $ | - |
|
| $ | (0.07 | ) |
Diluted | $ | - |
|
| $ | (0.02 | ) |
| $ | - |
|
| $ | (0.07 | ) |
Net income (loss) per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic | $ | 0.03 |
|
| $ | (0.13 | ) |
| $ | (0.51 | ) |
| $ | (0.67 | ) |
Diluted | $ | (0.19 | ) |
| $ | (0.13 | ) |
| $ | (0.53 | ) |
| $ | (0.67 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following potentially dilutive securities outstanding have been excluded from the computations of diluted weighted-average shares outstanding for the periods presented because such securities have an antidilutive impact, either due to the losses reported (in Common Stock equivalent shares):or because the exercise price was greater than the average market price of the common shares during the period.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Warrants issued to 2010/2012 convertible note holders to purchase common stock |
|
| 102,070 |
|
|
| 102,070 |
|
|
| 102,070 |
|
|
| 102,070 |
|
Options to purchase common stock |
|
| 1,875,442 |
|
|
| 1,667,896 |
|
|
| 1,899,930 |
|
|
| 1,667,896 |
|
Warrants issued in 2009 to purchase common stock |
|
| — |
|
|
| 1,851 |
|
|
| — |
|
|
| 1,851 |
|
Warrants issued to underwriter to purchase common stock |
|
| 16,500 |
|
|
| 16,500 |
|
|
| 16,500 |
|
|
| 16,500 |
|
Series A warrants to purchase common stock |
|
| 485,121 |
|
|
| 485,121 |
|
|
| 485,121 |
|
|
| 485,121 |
|
Series C warrants to purchase common stock |
|
| 118,083 |
|
|
| 118,083 |
|
|
| 118,083 |
|
|
| 118,083 |
|
Series D warrants to purchase common stock |
|
| 586,162 |
|
|
| 586,182 |
|
|
| 586,162 |
|
|
| 586,182 |
|
2017 PIPE warrants |
|
| 5,665,548 |
|
|
| 6,024,425 |
|
|
| 5,818,443 |
|
|
| 6,024,425 |
|
2018 PIPE warrants |
|
| 483,021 |
|
|
| — |
|
|
| 496,056 |
|
|
| — |
|
Total |
|
| 9,331,947 |
|
|
| 9,002,128 |
|
|
| 9,522,365 |
|
|
| 9,002,128 |
|
As of September 30 | |||||
2017 | 2016 | ||||
Series A Convertible preferred stock | — | — | |||
Series B Convertible preferred stock | 2,009,800 | 2,756,000 | |||
Warrants issued to 2010/2012 convertible note holders to purchase common stock | 102,070 | 102,070 | |||
Options to purchase common stock | 1,072,004 | 587,630 | |||
Warrants issued in 2009 to purchase common stock | 1,851 | 1,851 | |||
Warrants issued to underwriter to purchase common stock | 16,500 | 16,500 | |||
Series A Warrants to purchase common stock | 485,121 | 485,121 | |||
Series C Warrants to purchase common stock | 118,083 | 118,083 | |||
Series D Warrants to purchase common stock | 586,162 | 586,162 | |||
Total | 4,391,591 | 4,653,417 |
Note 11. Essentialis, Inc. Acquisition
On March 7, 2017, the Company acquired Essentialis through the mergerMerger of the Company'sCompany’s wholly-owned subsidiary, Company E Merger Sub, Inc., a Delaware corporation, ("or the Merger Sub"),Sub, whereby Merger Sub merged into Essentialis,with Essentialis surviving the mergerMerger as a wholly owned subsidiary of the Company.
The transaction has been accounted for as an asset acquisition under the acquisition method of accounting. The amendments in ASU 2017-01 provide a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of assets and activities is not a business.
Upon the acquisition was determined to be an asset acquisition,achievement of certain commercial milestones associated with the total valuesale of Essentialis’ product in accordance with the terms of the purchase consideration will be allocated to the asset acquired. The value of the shares issued on the completion of the merger and the shares to be issued was based on the stock price ofMerger Agreement, the Company on the dateis obligated to make cash earnout payments of completion of the merger. In addition, the trading history of the Company was reviewed to assess the reliability of the implied consideration value. The Company trades on the NASDAQ, a major U.S. stock exchange, and has significant average daily trading volume with tight intraday bid-ask spreads. These characteristics indicate Capnia’s shares are actively traded and provide a reliable indication of value. On March 7, 2017, the date of the transaction close, the Company's stock was trading at $3.85 per common share. Additionally, the average closing price of the stock in the 30 calendar days leading up to the close was also approximately $3.85. Accordingly, the identifiable intangible assets acquired are recorded at fair value based on this stock price.
Management engaged independent professional assistance and advice in order to assess the fair value of the contingent stock and cash consideration as of March 7, 2017 and December 31, 2017. During the process of determining the likelihoodfair value of this occurring, the analysis relied on 2016 research published by BIO, Biomedtraker, & Amplion titles “Clinical Development Success Rates 2006-2015.” Based on management's assessment,contingent consideration at December 31, 2017, the Company became aware that certain of the subjective assumptions made at the time of the initial valuation should be modified based upon management’s increased understanding of the commercial capabilities of the DCCR drug. Accordingly, the Company determined that it was appropriate to adjust the provisional valuation amounts recorded for the contingent stock and cash consideration made at the inception in March 2017. As a 15.3% probabilityresult, the value of achieving each milestone was determinedthe contingent cash consideration to be reasonable. Additionally,paid upon completing successive sales milestones increased and the value of the contingent stock consideration payable upon timing milestones was reduced; the resulting combined change to the total contingent consideration was not material. The initial valuation of the contingent consideration determined the fair value of the contingent stock consideration to be $4.2 million and the fair value of the contingent cash consideration to be $1.1 million, for the combined value of $5.3 million. The revision of the initial valuation of the contingent consideration, made within the measurement period, determined the fair value of the contingent stock consideration to be $2.7 million and the fair value of the contingent cash consideration to be $2.6 million, for the combined value of $5.3 million.
Also subsequent to March 7, 2017 and prior to December 31, 2017, the Company anticipatescompleted its assessment of the tax effect on the net assets acquired by obtaining the independent study and report regarding the change in control in the previously outstanding stock of Essentialis. As a result of completing the study, the Company determined that, it could reachpursuant to Section 382 of the commercial milestonesInternal Revenue Code, the utilization of $100Essentialis’s federal and state operating loss carryforwards were limited, which required the Company to record a net deferred tax liability in the amount of $1.7 million, and $200 million in applicable revenue in 2023 and 2025, respectively.
acquired. As a consequence of recording the net deferred tax liability, the Company’s valuation allowance was reduced by $1.7 million, which resulted in the provision for income tax benefit and an increase in the value of the intangible asset acquired.
The probability weighted milestone payments were discounted to determine the present value of future cash payments. The analysis utilized the weighted average cost of capital, (WACC)or WACC, discount rate. The WACC used for the first and second milestones were 30% and 21%, respectively.
Fair value of stock consideration | $ | 18,785,926 | |
Fair value of contingent consideration | 1,090,125 | ||
Total purchase price consideration | $ | 19,876,051 |
The fair value of the asset acquired is as follows:
Patents | 19,876,051 | ||
Net Assets Acquired | $ | 19,876,051 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||
Pro forma total revenue | $ | — | $ | 329 | $ | 641 | $ | 1,167 | ||||
Pro forma net loss | $ | (3,786 | ) | $ | (7,075 | ) | $ | (11,988 | ) | $ | (15,039 | ) |
Pro forma net loss per share - basic and diluted | $ | (0.56 | ) | $ | (1.20 | ) | $ | (0.81 | ) | $ | (1.68 | ) |
Proforma weighted-average shares - basic and diluted | 6,797,067 | 5,906,396 | 14,802,976 | 8,939,450 |
Note 12.11. Compensation Plan for Board Members
In 2017, the Compensation Committee of the Board of Directors of the Company recommended, and the Board approved a newrevised compensation plan for thepursuant to which each board member may choose to receive payment of quarterly Board fees. Starting in the first quarter of 2017, all annual board fees have been paid in Common Stockcommon stock of the Company. PaymentNet payment to the Board of Directors in shares of the Company's Common StockCompany’s common stock is made after the close of the quarter in which the compensation is earned, with the appropriate federal and state taxes thereon paid in cash directly to the taxing authority. Generally, directors who are citizens and residents of the United States receive their annual board fees in the form of stock, and directors who are not citizens and residents of the United States receive payment of their annual board fees in cash. During the three months ended September 30, 2019 and 2018, the Company issued zero and 21,374 shares, respectively, of common stock to its Board members for fees earned. During the nine months ended September 30, 2017,2019 and 2018, the Company issued 58,58938,123 and 98,818 shares, respectively, of Common Stockcommon stock to its Board members (see for fees earned. The appropriate federal and state taxes thereon was paid in cash directly to the taxing authority.
Note 14).
The Company has evaluated its subsequent events from September 30, 2019 through the date these condensed consolidated financial statements were issued and has determined that there are no subsequent events requiring disclosure in these condensed consolidated financial statements other than the item noted below.
Public Offering
On February 16, 2017, a purported stockholder class action lawsuit captioned
The interim consolidated financial statements included in this Quarterly Report on Form 10-Q and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2016,2018, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Form 10-K for the year ended December 31, 2016.2018. In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are subject to risks and uncertainties, including those set forth in Part II – Other Information, Item 1A. Risk Factors below and elsewhere in this report that could cause actual results to differ materially from historical results or anticipated results.
Overview
We are focus ised on the development and commercialization of novel therapeutics for the treatment of rare diseases. Essentialis wasOur lead
candidate, Diazoxide Choline Controlled Release tablets, or DCCR, a privately-held, clinical stage biotechnology company focused on the development of breakthrough medicinesonce-daily oral tablet for the treatment of rare metabolic diseases where therePrader-Willi Syndrome, or PWS, is increased mortality and risk of cardiovascular and endocrine complications. Essentialis has been developing Diazoxide Choline Controlled Release, or DCCR, tabletscurrently being evaluated in a Phase III clinical development program.
We initially established our operations as a treatment for Prader-Willi syndrome,diversified healthcare company that developed and commercialized innovative diagnostics, devices and therapeutics addressing unmet medical needs, which consisted of: precision metering of gas flow technology marketed as Serenz® Allergy Relief, or PWS, a complex neurobehavioral/metabolic disorder.
On December 22, 2016, we entered into the Merger Agreement with Essentialis. Essentialis’s efforts prior to the Merger were focused primarily on developing and testing product candidates that target the ATP-sensitive potassium channel, a metabolically regulated membrane protein whose modulation has the potential to impact a wide range of rare metabolic, cardiovascular, and central nervous system diseases. Essentialis had tested DCCR as a treatment for salePWS, a complex metabolic/neurobehavioral disorder. DCCR has orphan designation for the treatment of PWS in the U.S. and received CE Mark certification for saleas well as in the E.U. (see Note 5).
Subsequent to the Merger with Essentialis described above, we determined to divest, sell or dispose of our business efforts focused on the development and commercialization of our Serenz and CoSense technologies. As a result, we now primarily focus on the development and commercialization of novel therapeutics for CoSense.the treatment of rare diseases. Our current research and development efforts are primarily focused on advancing our lead candidate, DCCR tablets for the treatment of PWS, into late-stage clinical development.
On December 4, 2017, we and may reduce aggressive behaviors.
On July 30, 2018, the FDA has granted Fast Track designation to DCCR for the treatment of PWS. We are currently conducting a totalPhase III clinical trial of 4,879,453 sharesDCCR for the treatment of Common Stock to Essentialis stockholders. Additionally, upon the achievement of certain commercial milestones associated with the sale of Essentialis’ product in accordance with the terms of the Merger Agreement, we are obligated to make cash earnout payments of up to a maximum of $30 million to Essentialis stockholders. The merger consideration described above will be reduced by any
As of September 30, 2017,2019, we had an accumulated deficit of $109.0$143.2 million, primarily as a result of research and development and general and administrative expenses. While we may in the future generate revenue from a variety of sources, potentially including sales of our neonatology products, therapeutic products, other diagnostic products, license fees, milestone payments, and research and development payments in connection with potential future strategic partnerships, we have, to date, generated approximately $2,000 of revenue only from the 2013 license agreement pertaining to Serenz, $2.2approximately $2.7 million in revenue from our neonatology products and approximately $0.2 million in government grants.grants; these activities are reported as discontinued operations in our accompanying consolidated financial statements. We may never be successful in commercializing our novel therapeutic and in divesting, selling or otherwise disposing of our existing neonatology products therapeutic products or in developing additionalrelated therapeutic products. Accordingly, we expect to incur significant
losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenue or profits.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations are based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our significant accounting policies are more fully described in Note 3 of the accompanying unaudited consolidated condensed financial statements.
Results of Continuing Operations
Comparison of the three months ended September 30, 2019 and 2018, from continuing operations
|
| Three Months Ended September 30, |
|
| Increase (decrease) |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| Amount |
|
| Percentage |
| ||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| $ | 4,490 |
|
| $ | 2,092 |
|
| $ | 2,398 |
|
|
| 115 | % |
General and administrative |
|
| 1,615 |
|
|
| 1,558 |
|
|
| 57 |
|
|
| 4 | % |
Change in fair value of contingent consideration |
|
| 28 |
|
|
| 228 |
|
|
| (200 | ) |
|
| 88 | % |
Total operating expenses |
|
| 6,133 |
|
|
| 3,878 |
|
|
| 2,255 |
|
|
| 58 | % |
Operating loss |
|
| (6,133 | ) |
|
| (3,878 | ) |
|
| (2,255 | ) |
|
| 58 | % |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cease-use income |
|
| — |
|
|
| — |
|
|
| — |
|
| n/a |
| |
Change in fair value of warrants liabilities |
|
| 7,116 |
|
|
| 1,543 |
|
|
| 5,573 |
|
|
| 361 | % |
Loss from minority interest investment |
|
| (123 | ) |
|
| — |
|
|
| (123 | ) |
| n/a |
| |
Interest income, net |
|
| 29 |
|
|
| 26 |
|
|
| 3 |
|
|
| 12 | % |
Total other income |
|
| 7,022 |
|
|
| 1,569 |
|
|
| 5,453 |
|
|
| 348 | % |
Income (loss) from continuing operations |
|
| 889 |
|
|
| (2,309 | ) |
|
| 3,198 |
|
|
| 139 | % |
Loss from discontinued operations |
|
| — |
|
|
| (427 | ) |
|
| 427 |
|
|
| 100 | % |
Net income (loss) |
| $ | 889 |
|
| $ | (2,736 | ) |
| $ | 3,625 |
|
|
| 132 | % |
Revenue
We have yet not commenced commercialization of DCCR, our current sole product, and accordingly, through September 30, 2019, have generated no revenue from continuing operations.
Research and development expense
Research and development expense of $4.5 million for the three months ended September 30, 2019, increased by $2.4 million over the three months ended September 30, 2018, resulting primarily from the initiation of the Phase III clinical trial in May 2018. As of September 30, 2019, we have 26 clinical trial sites initiated compared to 10 as of September 30, 2018. As a result, we have incurred increased clinical site costs, consulting costs, lab costs, and manufacturing costs for DCCR production.
General and administrative expense
General and administrative expense of $1.6 million for the three months ended September 30, 2019, was generally consistent with the expense during the three months ended September 30, 2018.
Change in fair value of contingent consideration
The approximate $28,000 for the three months ended September 30, 2019, represents the increase in the fair value of the additional consideration that we expect to pay Essentialis stockholders based on our assessment of the expected likelihood of achieving commercial sales milestones of $100 million and $200 million in future years.
Other income (expense)
Other income of $7.0 million in the three months ended September 30, 2019, increased by $5.5 million from the three months ended September 30, 2018. This increase was primarily due to a $5.6 million larger decrease in the fair value of our outstanding warrants during the three months ended September 30, 2019 compared to the three months ended September 30, 2018. This change in valuation was primarily a result of the fluctuations of our common stock price. This increase was partially offset by an approximate $123,000 loss recorded on our minority interest investment in Capnia, our former subsidiary, during the three months ended September 30, 2019, which includes approximately $156,000 for our share of Capnia’s net losses during the period, partially offset by a gain of approximately $33,000 recognized upon the sale of the investment.
Comparison of the nine months ended September 30, 2017,2019 and 2016,2018, from continuing operations
|
| Nine Months Ended September 30, |
|
| Increase (decrease) |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| Amount |
|
| Percentage |
| ||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
| |||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
| $ | 10,995 |
|
| $ | 4,986 |
|
| $ | 6,009 |
|
|
| 121 | % |
General and administrative |
|
| 5,322 |
|
|
| 5,191 |
|
|
| 131 |
|
|
| 3 | % |
Change in fair value of contingent consideration |
|
| 417 |
|
|
| 589 |
|
|
| (172 | ) |
|
| 29 | % |
Total operating expenses |
|
| 16,734 |
|
|
| 10,766 |
|
|
| 5,968 |
|
|
| 55 | % |
Operating loss |
|
| (16,734 | ) |
|
| (10,766 | ) |
|
| (5,968 | ) |
|
| 55 | % |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cease-use income |
|
| — |
|
|
| 6 |
|
|
| (6 | ) |
|
| 100 | % |
Change in fair value of warrants liabilities |
|
| 930 |
|
|
| (1,549 | ) |
|
| 2,479 |
|
|
| 160 | % |
Loss from minority interest investment |
|
| (478 | ) |
|
| - |
|
|
| (478 | ) |
| n/a |
| |
Interest income, net |
|
| 133 |
|
|
| 75 |
|
|
| 58 |
|
|
| 77 | % |
Total other income (expense) |
|
| 585 |
|
|
| (1,468 | ) |
|
| 2,053 |
|
|
| 140 | % |
Loss from continuing operations |
|
| (16,149 | ) |
|
| (12,234 | ) |
|
| (3,915 | ) |
|
| 32 | % |
Loss from discontinued operations |
|
| - |
|
|
| (1,364 | ) |
|
| 1,364 |
|
|
| 100 | % |
Net loss |
| $ | (16,149 | ) |
| $ | (13,598 | ) |
| $ | (2,551 | ) |
|
| 19 | % |
Nine Months Ended September 30, | Increase (decrease) | |||||||||||||
2017 | 2016 | Amount | Percentage | |||||||||||
(in thousands) | ||||||||||||||
Operating expenses: | ||||||||||||||
Research and development | $ | 2,046 | $ | 1,959 | $ | 87 | 4 | % | ||||||
Sales and marketing | 26 | — | 26 | - | ||||||||||
General and administrative | 4,900 | 4,532 | 368 | 8 | % | |||||||||
Total | 6,972 | 6,491 | 481 | 7 | % | |||||||||
Loss from operations | (6,972 | ) | (6,491 | ) | (481 | ) | 7 | % | ||||||
Interest Income | 7 | — | 7 | — | % | |||||||||
Change in fair value of warrants | (29 | ) | 1,295 | (1,324 | ) | (102 | )% | |||||||
Cease-use expense | 3 | (94 | ) | 97 | (103 | )% | ||||||||
Other income (expense) | (602 | ) | (26 | ) | (576 | ) | 2,215 | % | ||||||
Interest and other income (expense), net | (621 | ) | 1,175 | (1,803 | ) | (153 | )% | |||||||
Loss from continuing operations | (7,593 | ) | (5,316 | ) | (2,284 | ) | 43 | % | ||||||
Loss from discontinued operations: | ||||||||||||||
Operating | (2,841 | ) | (4,136 | ) | 1,295 | (31 | )% | |||||||
Non-operating | (208 | ) | — | (208 | ) | — | % | |||||||
Total | (3,049 | ) | (4,136 | ) | 1,087 | (26 | )% | |||||||
Net loss | $ | (10,642 | ) | $ | (9,452 | ) | $ | (1,190 | ) | 13 | % |
Revenue
We have yet not commenced commercialization of Serenz was determined to meet the criteria as a discontinued operationsDCCR, our current sole product, and accordingly, operating activities for the Serenz product component is reported in Discontinued Operationsthrough September 30, 2019, have generated no revenue from continuing operations.
Research and development expense
Research and development expense of $11.0 million for the nine months ended September 30, 2017,2019, increased by $6.0 million over the nine months ended September 30, 2018, resulting primarily from the initiation of the Phase III clinical trial in May 2018. As of September 30, 2019, we have 26 clinical trial sites initiated and, 2016.
General and administrative expense
General and administrative expense of $5.3 million for the nine months ended September 30, 2017,2019 was generally consistent with the expense during the nine months ended September 30, 2018.
Change in fair value of contingent consideration
The approximate $417,000 for the nine months ended September 30, 2019, represents the increase in the fair value of the additional consideration that we expect to pay Essentialis stockholders based on our assessment of the expected likelihood of achieving commercial sales milestones of $100 million and 2016.
Other income (expense)
Other income of approximately $585,000 in the nine months ended September 30, 2017,2019, increased $87,000by $2.1 million from other expense during the nine months ended September 30, 2018. This increase was primarily due to a $2.5 million larger decrease in the fair value of our outstanding warrants during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. This change in valuation was primarily a result of the fluctuations of our common stock price. During the nine months ended September 30, 2019, the Company also had $58,000 more of net interest income as compared to the nine months ended September 30, 2016. The decrease was primarily due to reduction2018. These increases were partially offset by an approximate $478,000 loss recorded on our minority interest investment in headcount.
Results of Discontinued Operations
Discontinued operations during 2018 consist of our activities previously dedicated to the cessationdevelopment and commercialization of salesinnovative diagnostics, devices and therapeutics addressing unmet medical needs, which consisted of: precision metering of gas flow technology marketed as Serenz® Allergy Relief, or Serenz; CoSense® End-Tidal Carbon Monoxide (ETCO) Monitor, or CoSense, which measures ETCO and aids in the United Kingdom.
Three Months Ended September 30, | Increase (decrease) | |||||||||||||
2017 | 2016 | Amount | Percentage | |||||||||||
(in thousands) | ||||||||||||||
Operating expenses: | ||||||||||||||
Research and development | $ | 982 | $ | 708 | $ | 274 | 39 | % | ||||||
General and administrative | 1,707 | 1,260 | 447 | 35 | % | |||||||||
Total | 2,689 | 1,968 | 721 | 37 | % | |||||||||
Loss from operations | (2,689 | ) | (1,968 | ) | (721 | ) | 37 | % | ||||||
Interest Income | 3 | — | 3 | — | % | |||||||||
Change in fair value of warrants | 130 | 200 | (70 | ) | (35 | )% | ||||||||
Other income (expense) | 4 | (9 | ) | 13 | (144 | )% | ||||||||
Interest and other income (expense), net | 138 | 191 | (53 | ) | (28 | )% | ||||||||
Loss from continuing operations | (2,551 | ) | (1,777 | ) | (774 | ) | 44 | % | ||||||
Loss from discontinued operations: | — | |||||||||||||
Operating | (1,027 | ) | (973 | ) | (54 | ) | 6 | % | ||||||
Non-operating | (208 | ) | — | (208 | ) | — | % | |||||||
Total | (1,235 | ) | (973 | ) | (262 | ) | 27 | % | ||||||
Net loss | $ | (3,786 | ) | $ | (2,750 | ) | $ | (1,036 | ) | 38 | % |
Comparison of the three and nine months ended September 30, 2017,2019 and 2016,2018, from discontinued operations
|
| Three Months Ended September 30, |
|
| Increase (decrease) |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| Amount |
|
| Percentage |
| ||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
| |||||
Product revenue |
| $ | — |
|
| $ | 6 |
|
| $ | (6 | ) |
|
| 100 | % |
Cost of product revenue |
|
| — |
|
|
| 2 |
|
|
| (2 | ) |
|
| 100 | % |
Gross profit (loss) |
|
| — |
|
|
| 4 |
|
|
| (4 | ) |
|
| 100 | % |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| — |
|
|
| 306 |
|
|
| (306 | ) |
|
| 100 | % |
Sales and marketing |
|
| — |
|
|
| 1 |
|
|
| (1 | ) |
|
| 100 | % |
General and administrative |
|
| — |
|
|
| 124 |
|
|
| (124 | ) |
|
| 100 | % |
Total expenses |
|
| — |
|
|
| 431 |
|
|
| (431 | ) |
|
| 100 | % |
Net loss from discontinued operations |
| $ | — |
|
| $ | (427 | ) |
| $ | 427 |
|
|
| 100 | % |
| Nine Months Ended September 30, |
|
| Increase (decrease) |
| |||||||||||
|
| 2019 |
|
| 2018 |
|
| Amount |
|
| Percentage |
| ||||
|
| (in thousands) |
|
|
|
|
|
|
|
|
| |||||
Product revenue |
| $ | — |
|
| $ | 60 |
|
| $ | (60 | ) |
|
| 100 | % |
Cost of product revenue |
|
| — |
|
|
| 30 |
|
|
| (30 | ) |
|
| 100 | % |
Gross profit (loss) |
|
| — |
|
|
| 30 |
|
|
| (30 | ) |
|
| 100 | % |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
| — |
|
|
| 1,009 |
|
|
| (1,009 | ) |
|
| 100 | % |
Sales and marketing |
|
| — |
|
|
| 25 |
|
|
| (25 | ) |
|
| 100 | % |
General and administrative |
|
| — |
|
|
| 360 |
|
|
| (360 | ) |
|
| 100 | % |
Total expenses |
|
| — |
|
|
| 1,394 |
|
|
| (1,394 | ) |
|
| 100 | % |
Net loss from discontinued operations |
| $ | — |
|
| $ | (1,364 | ) |
| $ | 1,364 |
|
|
| 100 | % |
All discontinued operations activity during the three and nine months ended September 30, 2018 related to Capnia and its CoSense products. During October 2018, Capnia issued 53% of its outstanding shares of common stock to OAHL, leaving us with a noncontrolling interest. Accordingly, we deconsolidated Capnia’s financial statements from ours and our remaining minority interest in Capnia was reported as a minority interest investment in our condensed consolidated balance sheet. During September 2019, the Company sold its remaining 47% investment in Capnia to Sinon Investments LLC (“Sinon”). As Capnia is no longer a consolidated entity of ours, there is no corresponding discontinued operations activity for the three or nine months ended September 30, 2019.
Liquidity and Capital Resources
We had a net loss of $16.1 million during the nine months ended September 30, 2017,2019, and 2016,an accumulated deficit of $143.2 million at September 30, 2019, from having incurred losses since our inception. We had $8.2 million of working capital at September 30, 2019, and used $12.3 million of cash in operating activities during the Company’s revenues were generated by product sales for the CoSense, Precision Sampling Sets, Serenz, and NFI, whose product portfolio consistsnine months ended September 30, 2019. We have financed our operations principally through issuances of neonatology resuscitation devices. These medical device products are associated with operations discontinued by the Company and sales have declined as the Company has focused its efforts sell or otherwise monetize these operations. Sales by the Company of the NFI products ceased in July 2017 whenequity securities. On October 25, 2019, the Company sold NFI12,841,667 shares of common stock in an underwritten public offering at a price of $1.20 per share for net proceeds of $14.5 million.
We have continued to Holdings (see Note 5).
We expect to the decrease in sales activity, and resulting decrease in revenue,continue incurring losses for the CoSense, Precision Sampling Sets, Serenz,foreseeable future and NFI productsmay be required to raise additional capital to complete our clinical trials, pursue product development initiatives and penetrate markets for which sales have declined as the Company has focused effort sell or otherwise monetize these discontinued operations.
The Company recordedaccompanying condensed consolidated financial statements have been prepared under the assumption we will continue to operate as a lossgoing concern, which contemplates the realization of assets and the settlement of liabilities in the normal course of business. The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the sale in the amount of $208,000 as the net book valuerecoverability and classification of assets sold inor the amountamounts of $1.185 million exceeded the total proceeds of $977,000 (see Note 5).
The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:
|
| Nine Months Ended September 30, |
| |||||
| 2019 |
|
| 2018 |
| |||
|
| (in thousands) |
| |||||
Net cash used in continuing operating activities |
| $ | (12,299 | ) |
| $ | (6,774 | ) |
Net cash used in discontinued operating activities |
|
| - |
|
|
| (1,173 | ) |
Net cash used in operating activities |
|
| (12,299 | ) |
|
| (7,947 | ) |
Net cash provided by (used in) continuing investing activities |
|
| 425 |
|
|
| (6 | ) |
Net cash provided by (used in) investing activities |
|
| 425 |
|
|
| (6 | ) |
Net cash provided by discontinued financing activities |
|
| — |
|
|
| 1,525 |
|
Net cash provided by financing activities |
|
| — |
|
|
| 1,525 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
Continuing operations |
|
| (11,874 | ) |
|
| (6,780 | ) |
Discontinued operations |
|
| — |
|
|
| 352 |
|
Net decrease in cash, cash equivalents and restricted cash |
| $ | (11,874 | ) |
| $ | (6,428 | ) |
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
(in thousands) | |||||||
Cash Flows | |||||||
Net cash used in continuing operating activities | $ | (4,641 | ) | $ | (5,956 | ) | |
Net cash used in discontinued operating activities | (2,577 | ) | (4,853 | ) | |||
Net cash used in operating activities | (7,218 | ) | (10,809 | ) | |||
Net cash used in continuing investing activities | (577 | ) | (22 | ) | |||
Net cash used in discontinued investing activities | 716 | (17 | ) | ||||
Net cash used in investing activities | 139 | (39 | ) | ||||
Net cash provided by continuing financing activities | 10,000 | 10,768 | |||||
Net cash provided by discontinued financing activities | — | — | |||||
Net cash provided by financing activities | 10,000 | 10,768 | |||||
Net increase (decrease) in cash and cash equivalents | |||||||
Continuing operations | 4,783 | 4,790 | |||||
Discontinued operations | (1,862 | ) | (4,870 | ) | |||
Net increase (decrease) in cash and cash equivalents | $ | 2,921 | $ | (80 | ) |
Continuing Operations
Cash used in operating activities
During the nine months ended September 30, 2017,2019, operating activities used net cash of approximately $4.6$12.3 million, which was primarily due to the useloss from continuing operations of funds resulting$16.1 million and approximately $513,000 for the change in thefair value of stock warrants and contingent consideration. These uses are adjusted for non-cash expenses of approximately $1.5 million for depreciation and amortization, approximately $621,000 of expenses paid with common stock or equity awards, and an approximate $478,000 operating loss on minority interest investment. Additionally, the usage of $7.6cash during the nine months ended September 30, 2019, was reduced by $1.8 million partially offset by non-cashdue to decreases in prepaid expenses which were primarily $1.0 million of non-cash amortization and depreciation, approximately $855,000 of non-cash stockother current assets and amounts due from related parties, and increases in accounts payable, and accrued compensation expense, approximately $600,000 of non-cash expense for issuing shares to Aspire Capital, and approximately $200 thousand non-cash expense for board member fees paid with shares of the Company's stock.
During the nine months ended September 30, 2016,2018, operating activities used net cash used in operating activities was $6.0of $6.8 million, which was primarily due primarily to the useloss from continuing operations of funds resulting in$12.2 million, adjusted for non-cash expenses of $1.5 million for depreciation and amortization, approximately $928,000 of expenses paid with common stock or equity awards, and $2.1 million for the operating loss of approximately $5.3 million, including costs incurred to launch Serenz in the E.U. and excluding the non-cash income of $1.3 million from change in fair value of stock warrants alland contingent consideration. Additionally, the usage of which were partially offsetcash during the nine months ended September 30, 2018 was reduced by approximately $560,000 of non-cash expense for stock-based$921,000 from an increase in accounts payable, accrued compensation expense.
Cash used in investing activities
During the nine months ended September 30, 2017, we used $577,000 for2019, investing activities resulting from $573,000 expenses incurred resulting from our merger with Essentialis andrelated to continuing operations provided cash of approximately $425,000. This was primarily a result of the $500,000 that we received for the purchasesale of property and equipmentour 47% investment in Capnia to Sinon in September 2019. This was partially offset by cash that was used for a deposit of approximately $59,000 related to the amountnew lease that we entered into in July 2019 for 6,368 square feet of $4,000.
Cash provided by financing activities was $10.8 million resulting from
There were no financing activities related to continued operations during the second close under the 2015 Sabby Purchase Agreementnine months ended September 30, 2019 and from the first and second close under the 2016 Sabby Purchase Agreement.
As of September 30, 2017, The Company2019, we had cash and cash equivalents of approximately $5.6$11.2 million.
We do not believe that we do not have sufficient capital resources to sustain operations through at least the next twelve months from the date of this filing.The Company expectsfiling. We expect to continue incurring losses for the foreseeable future and may be required to raise additional capital to pursue itsour therapeutic product development initiatives. These conditions raise substantial doubt about the Company'sour ability to continue as a going concern for a period of twelve monthsone year from the date of this report.
Cash used in operating activities
There were no discontinued operations during the nine months ended September 30, 2017 totaled $2.6 million compared to $4.9 million for2019, after the deconsolidation of Capnia in October 2018. During the nine months ended September 30, 2016 representing a decrease2018, we used net cash of $2.3 million. The decrease was primarily due to the lower comparative level of$1.2 million for discontinued operating activities, forresulting primarily from the loss from discontinued operations of $1.4 million partially offset by approximately $71,000 of non-cash expenses associated with stock compensation and depreciation and amortization. Changes in the discontinued operations which resultedworking capital accounts also offset the cash used by approximately $120,000, primarily from the decrease in lower cash requirements during the first half of 2017.
Cash used in investing activities
There were no investing activities related to discontinued operations during the nine months ended September 30, 2017 totaled $716,000 compared to net cash used of $17,000 for investing activities in the nine months ended2019 or September 30, 2016, resulting primarily from the sale of the NFI operations in July 2017 which eliminated operating expenditures from that activity and for cash proceeds of $862,000 from the sale collected prior to September 30, 2017.
Cash provided by financing activities
There were no financing activities related to discontinued operations during either period.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
There have not been any material changes to our exposure to market risk during the nine month periodmonths ended September 30, 2017.2019. For additional information regarding market risk, refer to the
(a) Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in U.S. Securities and Exchange Commission, or SEC, rules and forms, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.
Our management, under the supervision and with the participation of our Chief Executive Officer who also currently serves as our principal financial and accounting officer,Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer hasand Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting
There have been no changes to our internal control over financial reporting that occurred during the third fiscal quarter ended September 30, 2017,2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, even if determined effective and no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives to prevent or detect misstatements. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PART II – OTHEROTHER INFORMATION
We also agreed to pay $175,000 in attorney's fees. This amount was accrued as a current liability on the balance sheet as of December 31, 2016, and recorded as a general and administrative expense on the statement of operations for the year ended December 31, 2016. The stipulation of dismissal was approved by the court on April 14, 2017.
An investment in our securities has a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described below together with all theuncertainties. A description of the other informationfactors that could materially affect our business, financial condition, or operating results is included under “Risk Factors” in thisItem 1A of Part I of our 2018 Annual Report on Form 10-K includingand is incorporated herein by reference. There have been no material changes to the risk factor disclosure since our consolidated2018 Annual Report on Form 10-K. The risk factors described in our Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial statements and related notes.conditions and/or operating results. If any of the followingthese risks actually occur, our business, operating results and financial condition could be harmed, and the value of our stock could go down. This means you could lose all or a part of your investment.
Item 2. |
None.
Item 3. |
None.
Item 4. |
Not applicable.
Item 5. |
The Company’s current focus is on the development of Diazoxide Choline Controlled-Release, or DCCR, for patients with Prader-Willi Syndrome, or PWS. On July 30, 2018, the DCCR development program for PWS was granted Fast Track designation by the FDA.
DCCR is a once-a-day tablet formulation, which is currently being evaluated in a Phase III program, in approximately 105 patients being enrolled at multiple sites. The program consists of a three-month Phase III randomized, double-blind, placebo-controlled, parallel group study (also called C601 or DESTINY PWS) as well as a 12-month open-label safety extension study, which has recently been amended to allow patients the option to continue taking DCCR for an additional two years. All patients who complete the Phase III study are eligible to enroll into the open-label extension study (C602).
The Company continues to enroll patients into its ongoing DESTINY PWS study, which commenced in May 2018 and is evaluating DCCR tablets for the treatment of PWS. As of July 25, 2019, approximately 50% of the targeted number of patients have been enrolled into the DESTINY PWS clinical study and approximately 90% of them have either successfully completed or continue to be treated in the study. Approximately 90% of those completing the Destiny PWS study have elected to continue in C602, Soleno’s open-label safety extension study and approximately 90% of those enrolled have continued to receive DCCR treatment in C602.
As of September 30, 2019, 19 trial sites have been activated in the U.S., and 7 sites have been activated in the United Kingdom. The most recent sites activated are Indiana University in Indianapolis, IN and St. Joseph’s University Medical Center in Patterson, NJ in the U.S., and Fulbourn Hospital in Cambridge, Aintree University Hospital in Liverpool, Hammersmith Hospital in London, and The Royal Hospital for Sick Children in Glasgow in the U.K. Top-line data from the DESTINY PWS study is expected in the first half of 2020.
On March 14, 2019, and again on October 1, 2019, the Data Safety Monitoring Board, the independent group of experts monitoring the safety of the DESTINY PWS study, recommended the continuation of the study without modification, which supports the Company’s understanding of DCCR’s safety.
Item 6. |
See the Exhibit Index on the page immediately preceding the exhibits for a list of exhibits filed as part of this Quarterly Report on Form 10-Q, which Exhibit Index is incorporated herein by reference.
Incorporated by Reference from | ||||||||||
Exhibit Number | Description of Document | Registrant’s Form | Date Filed with the SEC | Exhibit Number | Filed Herewith | |||||
31.1 | X | |||||||||
31.2 | X | |||||||||
32.1 | X | |||||||||
32.2 | X | |||||||||
101.INS | XBRL Instance Document. | X | ||||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | ||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | ||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | ||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | ||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X | ||||||||
Incorporated by Reference from | |||||||||
Exhibit Number | Description of Document | Registrant’s Form | Date Filed with the SEC | Exhibit Number | Filed Herewith | ||||
3.1 | S-1/A | August 7, 2014 | 3.2 | ||||||
3.2 | S-1/A | July 1, 2014 | 3.4 | ||||||
3.3 | 8-K | October 15, 2015 | 3.1 | ||||||
4.1 | S-1/A | August 5, 2014 | 4.1 | ||||||
4.2 | S-1 | June 10, 2014 | 4.2 | ||||||
4.3 | S-1/A | August 5, 2014 | 4.3 | ||||||
4.4 | S-1/A | August 5, 2014 | 4.4 | ||||||
4.5 | S-1/A | August 5, 2014 | 4.5 | ||||||
4.6 | S-1 | June 10, 2014 | 4.6 | ||||||
4.7 | S-1 | June 10, 2014 | 4.7 | ||||||
4.8 | S-1 | June 10, 2014 | 4.8 | ||||||
4.9 | S-1 | June 10, 2014 | 4.9 | ||||||
4.10 | S-1 | June 10, 2014 | 4.10 | ||||||
4.11 | S-1 | June 10, 2014 | 4.11 | ||||||
4.12 | S-1 | June 10, 2014 | 4.12 | ||||||
4.13 | S-1 | June 10, 2014 | 4.13 | ||||||
4.14 | S-1 | June 10, 2014 | 4.14 | ||||||
4.15 | S-1 | June 10, 2014 | 4.15 | ||||||
4.16 | S-1/A | August 5, 2014 | 4.16 | ||||||
4.17 | S-1/A | November 4, 2014 | 4.17 | ||||||
4.18 | S-1/A | November 4, 2014 | 4.18 | ||||||
4.19 | S-4 | April 1, 2015 | 4.19 | ||||||
4.20 | S-4 | April 1, 2015 | 4.20 | ||||||
4.21 | 8-K | October 15, 2015 | 4.1 |
Incorporated by Reference from | |||||||||
Exhibit Number | Description of Document | Registrant’s Form | Date Filed with the SEC | Exhibit Number | Filed Herewith | ||||
4.22 | 8-K | October 15, 2015 | 4.2 | ||||||
4.23 | 8-K | October 15, 2015 | 4.3 | ||||||
4.24 | 8-K | October 15, 2015 | 4.4 | ||||||
4.25 | 8-K | July 6, 2016 | 4.1 | ||||||
4.26 | 8-K | July 6, 2016 | 4.2 | ||||||
9.10 | 8-K | October 15, 2015 | 9.1 | ||||||
9.2 | 8-K | July 6, 2016 | 9.1 | ||||||
10.1 | S-1/A | June 10, 2014 | 10.1 | ||||||
10.2 | S-1/A | June 10, 2014 | 10.2 | ||||||
10.3 | S-1/A | June 10, 2014 | 10.3 | ||||||
10.4 | S-1/A | July 1, 2014 | 10.4 | ||||||
10.5 | S-1/A | July 1, 2014 | 10.5 | ||||||
10.6 | S-1 | June 10, 2014 | 10.6 | ||||||
10.7 | S-1 | June 10, 2014 | 10.7 | ||||||
10.8 | S-1 | June 10, 2014 | 10.8 | ||||||
10.9 | S-1 | June 10, 2014 | 10.9 | ||||||
10.10 | S-1 | June 10, 2014 | 10.10 | ||||||
10.11 | S-1 | June 10, 2014 | 10.11 | ||||||
10.12 | S-1 | June 10, 2014 | 10.12 | ||||||
10.13 | S-1/A | June 10, 2014 | 10.3 | ||||||
10.14 | S-1/A | July 1, 2014 | 10.4 | ||||||
10.15 | S-1/A | July 1, 2014 | 10.5 | ||||||
10.16 | S-1 | June 10, 2014 | 10.6 | ||||||
10.17 | S-1 | June 10, 2014 | 10.7 | ||||||
10.18 | S-1 | June 10, 2014 | 10.8 |
Incorporated by Reference from | |||||||||
Exhibit Number | Description of Document | Registrant’s Form | Date Filed with the SEC | Exhibit Number | Filed Herewith | ||||
10.19 | S-1 | June 10, 2014 | 10.9 | ||||||
10.20 | S-1 | June 10, 2014 | 10.10 | ||||||
10.21 | S-1 | June 10, 2014 | 10.11 | ||||||
10.22 | S-1 | June 10, 2014 | 10.12 | ||||||
10.23 | S-1 | June 10, 2014 | 10.13 | ||||||
10.24 | S-1 | June 10, 2014 | 10.14 | ||||||
10.25 | S-1 | June 10, 2014 | 10.15 | ||||||
10.26 | S-1 | June 10, 2014 | 10.16 | ||||||
10.27 | S-1 | June 10, 2014 | 10.17 | ||||||
10.28 | S-1 | June 10, 2014 | 10.18 | ||||||
10.29 | S-1/A | July 1, 2014 | 10.19 | ||||||
10.30 | S-1/A | July 22, 2014 | 10.20 | ||||||
10.31 | S-1/A | September 29, 2014 | 10.21 | ||||||
10.32 | S-1/A | November 4, 2014 | 10.22 | ||||||
10.33 | S-1/A | November 4, 2014 | 10.23 | ||||||
10.34 | 8-K | March 5, 2015 | 10.1 | ||||||
10.35 | S-4 | April 1, 2014 | 10.25 | ||||||
10.36 | 8-K | July 7, 2015 | 10.1 | ||||||
10.37 | 8-K | July 7, 2015 | 10.2 | ||||||
10.38 | 8-K | July 27, 2015 | 4.1 | ||||||
10.39 | 8-K | July 27, 2015 | 10.1 | ||||||
10.40 | 8-K | October 15, 2015 | 1.1 | ||||||
10.41 | 8-K | October 15, 2015 | 10.1 |
Incorporated by Reference from | |||||||||
Exhibit Number | Description of Document | Registrant’s Form | Date Filed with the SEC | Exhibit Number | Filed Herewith | ||||
10.42 | 8-K | October 15, 2015 | 10.2 | ||||||
10.43 | 8-K | October 15, 2015 | 10.3 | ||||||
10.44 | S-1/A | December 22, 2015 | 10.33 | ||||||
10.45 | 8-K | January 28, 2016 | 10.1 | ||||||
10.46 | 8-K | July 6, 2016 | 1.1 | ||||||
10.47 | 8-K | July 6, 2016 | 10.1 | ||||||
10.48 | 8-K | July 6, 2016 | 10.2 | ||||||
10.49 | S-1/A | September 20, 2016 | 10.39 | ||||||
10.50 | 8-K | December 27, 2016 | 2.1 | ||||||
10.51 | S-1 | February 1, 2017 | 10.51 | ||||||
10.52 | S-1 | February 1, 2017 | 10.52 | ||||||
10.53 | 8-K | July 24, 2017 | 2.1 | ||||||
31.2 | X | ||||||||
32.1* | X | ||||||||
101.INS | XBRL Instance Document. | X | |||||||
101.SCH | XBRL Taxonomy Extension Schema Document. | X | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | X | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. | X | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | X | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | X | |||||||
* | The certifications attached as Exhibit 32.1 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Capnia, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: November 13, 2019 | |||||
SOLENO THERAPEUTICS, INC. | |||||
By: | /s/ | ||||
Jonathan Wolter Chief ( |
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