4 unchanged sentences
We have never declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on our common stock.
−Removed: Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on then existing conditions, including our operating results, financial condition, contractual restrictions, capital requirements, business prospects and other factors that our board of directors may deem relevant.
−Removed: Selected Financial Data.
−Removed: Per §229.301 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item.
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations .
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of the Company.
−Removed: The Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2020.
−Removed: In addition to historical information, this Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby.
−Removed: See “Cautionary Note Regarding Forward-Looking Statements” in this report.
−Removed: Our actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under the Part I, Item 1A.
−Removed: Risk Factors section and elsewhere in this report, as well as, in other reports and documents we file with the Securities and Exchange Commission from time to time.
−Removed: Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
−Removed: RECENT DEVELOPMENTS
−Removed: Legacy Operations and Acquisition of Anelixis Therapeutics, Inc.
−Removed: On September 14, 2020, the Company completed the acquisition of Anelixis Therapeutics, Inc.
−Removed: (“Anelixis”), a privately held clinical stage biotechnology company developing a next generation anti-CD40L antibody as a potential treatment for organ and cellular transplantation, autoimmune diseases, and ALS.
−Removed: Concurrent with the Company’s acquisition of Anelixis on September 14, 2020, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with certain institutional and accredited investors (the “PIPE Investors”), pursuant to which the Company issued and sold approximately 217,200 shares of Series X1 Preferred Stock (the “PIPE Shares”) for an aggregate purchase price of approximately $108.15 million (the “Financing”).
−Removed: The Financing was exempt from registration pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as a transaction by an issuer not involving a public offering.
−Removed: At the closing of the Financing, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the Investors.
−Removed: Pursuant to the Registration Rights Agreement, on December 22, 2020 the Company registered 12,065,875 shares of common stock, which may be issued upon conversion of the PIPE Shares on its under its effective shelf registration statement on Form S-3 (File No.
−Removed: The proceeds from the private placement will be used to fund the Company’s operations, including to advance up to Phase 2 clinical trials of AT-1501, a humanized IgG1 anti-CD40L antibody.
−Removed: Prior to our acquisition of Anelixis, we had been focused on developing novel products for patients with disorders of the ear, nose, and throat (“ENT”).
−Removed: In June 2020, we announced that our lead program did not achieve statistical significance for the primary efficacy endpoints in the treatment of acute otitis media.
−Removed: As a result of this failure to achieve the primary study endpoint and expected need to reformulate the investigational drug, we suspended the clinical development of our legacy ENT assets while we assess alternate development strategies, including out-licensing or a sale of these assets.
−Removed: Following the June 2020 announcement, we significantly curtailed development expenses as we sought to identify strategic alternatives that would maximize stockholder value.
−Removed: As a result of these activities, we acquired Anelixis and raised additional capital in September 2020, as described above.
−Removed: Other Developments
−Removed: Equity Distribution Agreement
−Removed: On July 23, 2018, the Company filed a prospectus supplement (the “2018 Prospectus Supplement”) under which the Company may offer and sell, from time to time, through Piper Jaffray, up to $9.8 million in shares of its common stock.
−Removed: During the year ended December 31, 2019, 1,401 shares were sold under the 2018 Prospectus Supplement for gross proceeds of approximately $110,000.
−Removed: No shares were sold during the year ended December 31, 2020 .
−Removed: This agreement was terminated in 2020.
−Removed: Accordingly, as of December 31, 2020, no additional amounts remained available to be offered and sold under the 2018 Prospectus Supplement.
−Removed: 2019 Equity Offering
−Removed: On April 30, 2019, the Company agreed to sell in a registered direct offering, an aggregate 191,617 shares of its common stock to certain investors for gross proceeds of approximately $10.7 million under its effective shelf registration statement on Form S-3 (File No.
−Removed: In a concurrent private placement, the Company also agreed to issue to such investors Series A warrants to purchase up to 191,617 shares of its common stock at an exercise price of $72.00 with a term
−Removed: of eighteen months (the “Series A Warrants”) and Series B warrants to purchase up 191,6172 shares of its common stock at an exercise price of $72.00 with a term of five years (the “Series B Warrants”).
−Removed: The Series B Warrants become exercisable only upon the exercise of the Series A Warrants.
−Removed: In addition, the Company agreed to issue to H.C.
−Removed: Wainwright & Co., LLC, the placement agent for the transaction, warrants to purchase up to 9,580 shares of common stock.
−Removed: The placement agent warrants have substantially the same terms as the Series A Warrants, except that the placement agent warrants have an exercise price equal to $69.6375 and will expire on April 20, 20 2 4 .
−Removed: We refer to the registered direct offering and the concurrent private placement collectively as the “2019 Equity Offering.”
−Removed: Warrant Exercise Transaction
−Removed: On January 10, 2020 and January 15, 2020, the Company entered into warrant exercise agreements (the “Exercise Agreements”) with the holders (the “Holders”) of its Series A Warrants and Series B Warrants (collectively, the “Warrants”), issued in the 2019 Equity Offering, pursuant to which the Holders agreed to exercise in cash their Warrants to purchase an aggregate of 383,234 shares of the Company’s common stock at a reduced exercise price of $12.87 per share, plus an additional $2.25 per share for the issuance of the private placement warrants for gross proceeds (before placement agent fees and expenses) to the Company of approximately $5.8 million (the “Exercise Transaction”).
−Removed: Under the Exercise Agreements, the Company also agreed to issue to the Holders new warrants to purchase up to 383,234 shares of the Company’s common stock at an exercise price of $12.96 per share, with an exercise period of five and a half years (the “Private Placement Warrants”).
−Removed: The Private Placement Warrants transaction subsequently closed and the Private Placement Warrants were issued on January 14, 2020 with respect to the Warrants exercised on January 10, 2020 and on or about January 17, 2020, with respect to the Warrants exercised on January 15, 2020.
−Removed: In addition, the Company agreed to issue to the placement agent warrants to purchase up to 19,162 shares of common stock, representing 5.0% of the aggregate number of shares of common stock issued in the Exercise Transaction.
−Removed: The placement agent warrants have substantially the same terms as the Private Placement Warrants issued to the Holders, except that the placement agent warrants have an exercise price equal to $18.90.
−Removed: A warrant inducement expense of $4.8 million was incurred which was determined using the Black-Scholes option pricing model and was calculated as the difference between the fair value of the Warrants prior to, and immediately after, the reduction in the exercise price on the date of repricing in addition to the fair value of the Private Placement Warrants issued.
−Removed: Common Stock Exchange Agreements
−Removed: On February 13, 2020, the Company entered into an exchange agreement (the “Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P.
−Removed: and Biotechnology Value Trading Fund OS, L.P.
−Removed: (the “Exchanging Stockholders”), pursuant to which the Exchanging Stockholders exchanged (the “February Exchange”) 210,888 shares of the Company’s common stock, par value $0.001 per share, for 3,796 shares of newly designated Series X Convertible Preferred Stock (the “Series X Preferred Stock”).
−Removed: The Company agreed to reimburse the Exchanging Stockholders for their expenses in connection with the Exchange up to a total of $25,000, which was recorded as operating expense in the Company’s condensed consolidated statements of operations and comprehensive loss.
−Removed: On February 13, 2020, in connection with the February Exchange, the Company filed a Certificate of Designation setting forth the preferences, rights and limitations of the Series X Preferred Stock with the Secretary of State of the State of Delaware.
−Removed: Each share of Series X Preferred Stock will be convertible into 55.5556 shares of common stock at the option of the holder at any time;
−Removed: subject to certain limitations, including, that the holder will be prohibited from converting Series X Preferred Stock into common stock if, as a result of such conversion, the holder, together with its affiliates, would beneficially own a number of shares of common stock above a conversion blocker, which is initially set at 9.99% of the total common stock then issued and outstanding immediately following the conversion of such shares of Series X Preferred Stock.
−Removed: In the event of the Company’s liquidation, dissolution or winding up, holders of Series X Preferred Stock will participate pari passu with any distribution of proceeds to holders of common stock.
−Removed: Holders of Series X Preferred Stock are entitled to receive dividends on shares of Series X Preferred Stock equal (on an as-if-converted-to-common stock basis) to and in the same form as dividends actually paid on the common stock or other junior securities of the Company.
−Removed: Shares of Series X Preferred Stock will generally have no voting rights, except as required by law and except that the consent of a majority of the holders of the outstanding Series X Preferred Stock will be required to amend the terms of the Series X Preferred Stock.
−Removed: On December 31, 2020, the Company entered into an exchange agreement (the “Series X Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS, L.P.
−Removed: , MSI BVF SPV, L.L.C.
−Removed: (the “BVF Exchanging Stockholders”) and Cormorant Global Healthcare Master Fund, LP (together with the BVF Exchanging Stockholders, the “Exchanging Stockholders”), pursuant to which the Exchanging Stockholders
−Removed: exchanged (the “Series X Exchange”) 344,666 shares of the Company’s common stock, for 6,203.98 shares of Series X Preferred Stock .
−Removed: In addition, on December 31, 2020 the Company entered into an exchange agreement (the “Warrant Exchange Agreement,” and together with the Series X Exchange Agreement, the “Exchange Agreements”) with the BVF Exchanging Stockholders, pursuant to which the BVF Exchanging Stockholders exchanged (the “Warrant Exchange,” and together with the Series X Exchange, “the Exchanges”) 509,117 shares of the Common Stock for one or more pre-funded warrants to purchase an aggregate of 509,117 shares of the Common Stock at a nominal exercise price (the “Warrants”).
−Removed: Following the Exchanges, the Company will have 14,306,614 shares of Common Stock outstanding and 6,203.98 shares of Series X Preferred Stock outstanding, which are convertible into 344,663 shares of Common Stock (after rounding for fractional shares)
−Removed: September 2020 Stock Purchase Agreement
−Removed: On September 14, 2020, Eledon entered into a Stock Purchase Agreement (the “Purchase Agreement”) with certain institutional and accredited investors (the “Investors”).
−Removed: Pursuant to the Purchase Agreement, Eledon agreed to sell an aggregate of approximately 199,112 shares of Series X 1 Preferred Stock for an aggregate purchase price of approximately $99.1 million (collectively, the “Financing”).
−Removed: Eledon had commitments for an additional $9.0 million in equity financing that was contingent upon the satisfaction of certain incremental closing conditions, including stockholder approval of the issuance of the Company’s common stock upon the conversion of the Company’s X 1 Preferred Stock and the effective registration of its common stock.
−Removed: Subject to stockholder approval, each share of Series X 1 Preferred Stock was convertible into 55.5556 shares of Common Stock, as described below.
−Removed: The preferences, rights and limitations applicable to the Series X 1 Preferred Stock are set forth in the Certificate of Designation, as filed with the SEC.
−Removed: The Financing was exempt from registration pursuant to Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, as a transaction by an issuer not involving a public offering.
−Removed: The Investors have acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends have been affixed to the securities issued in this transaction.
−Removed: On December 18, 2020, the Company held a special meeting of stockholders (the “Special Meeting”).
−Removed: At the Special Meeting, the Company’s stockholders approved the issuance of the Company’s common stock, upon conversion of the Company’s Series X 1 Preferred Stock, par value $0.001 per share, issued in September 2020.
−Removed: On December 23, 2020, the Company sold 1,004,111 shares of its common stock for gross proceeds of $9.0 million that was contingent upon the satisfaction of certain incremental closing conditions, as described above.
−Removed: Reverse Stock-Split
−Removed: On October 5, 2020, the Company effected a reverse stock-split of its issued and outstanding common stock and options for common stock at a ratio of one-for-eighteen.
−Removed: The Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware effecting the reverse stock-split.
−Removed: The discussion in this Management’s Discussion and Analysis of Financial Condition and Results of Operations gives retroactive effect to the reverse stock-split for all periods presented.
−Removed: COVID-19 Impact
−Removed: The COVID-19 pandemic and resulting global disruptions have adversely affected our business and operations, including, but not limited to, the operations of third parties upon whom we rely.
−Removed: The effects of executive and similar government orders, shelter-in-place orders and our work-from-home policies may negatively impact our productivity and disrupt our business.
−Removed: Although the impacts of COVID-19 have not been material to-date, we have experienced delays in certain preclinical studies and resulting delays in data collection and have also experienced inefficiencies in planning and executing trials due to our limited ability to conduct meetings with key third parties.
−Removed: In addition, in response to public health directives and orders, we have ceased all non-essential business travel and implemented work-from-home policies for all of our employees, resulting in reduced productivity and limited business development and investor relations activities.
−Removed: The magnitude of such effects which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.
−Removed: These and similar, and perhaps more severe, disruptions in our operations could negatively impact our business, operating results and financial condition.
−Removed: The COVID-19 pandemic and resulting global disruptions have caused significant volatility in financial and credit markets.
−Removed: We have utilized a range of financing methods to fund our operations in the past;
−Removed: however, current conditions in the financial and credit markets may limit the availability of funding or increase the cost of funding.
−Removed: Due to the rapidly evolving nature of the global situation, it is not possible to predict the extent to which these conditions could adversely affect our liquidity and capital resources in the future.
−Removed: CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
−Removed: Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
−Removed: The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements.
−Removed: On an ongoing basis, we evaluate our estimates and judgments.
−Removed: We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.
−Removed: Actual results may differ materially from these estimates under different assumptions or conditions.
−Removed: Business Combinations
−Removed: Accounting for acquisitions requires extensive use of estimates and judgment to measure the fair value of the identifiable tangible and intangible assets acquired, including in-process research and development (“IPR&D”) and liabilities assumed.
−Removed: Additionally, the Company must determine whether an acquired entity is considered a business or a set of net assets because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination.
−Removed: The Company accounted for the acquisition of Anelixis as a business combination under the acquisition method of accounting.
−Removed: Consideration paid to acquire Anelixis was measured at fair value and included the exchange of Anelixis’ common stock.
−Removed: The allocation of the purchase price resulted in recognition of intangible assets related to goodwill and IPR&D.
−Removed: Acquired IPR&D is recognized at fair value and initially characterized as an indefinite-lived intangible asset, irrespective of whether the acquired IPR&D has an alternative future use.
−Removed: The operating activity for Anelixis, the acquiree for accounting purposes, was immediately integrated with Eledon post-acquisition, therefore it is not practical to segregate results of operations related specifically to Anelixis since the date of acquisition.
−Removed: During the measurement period, which extends no later than one year from the acquisition date, the Company may record certain adjustments to the carrying value of the assets acquired and liabilities assumed with the corresponding offset to goodwill.
−Removed: After the measurement period, all adjustments are recorded in the consolidated statements of operations as operating expenses or income.
−Removed: Goodwill represents the difference between the consideration transferred and the fair value of the net assets acquired under the acquisition method of accounting.
−Removed: Goodwill is not amortized but is evaluated for impairment as of October 1 of each year or earlier if indicators of impairment exist that would, more likely than not, reduce the fair value from its carrying amount.
−Removed: For the year ended December 31, 2019, the Company recognized $1.9 million of goodwill impairment which was included in the consolidated statements of operations.
−Removed: No impairment was recorded for the year ended December 31, 2020.
−Removed: The Company performs its goodwill impairment analysis at the reporting unit level, which aligns with the Company’s reporting structure and availability of discrete financial information.
−Removed: The Company performs its annual impairment analysis by either comparing the reporting unit’s estimated fair value to its carrying amount or doing a qualitative assessment of a reporting unit’s fair value from the last quantitative assessment to determine if there is potential impairment.
−Removed: The Company may do a qualitative assessment when the results of the previous quantitative test indicated the reporting unit’s estimated fair value was significantly in excess of the carrying value of its net assets and it does not believe there have been significant changes in the reporting unit’s operations that would significantly decrease its estimated fair value or significantly increase its net assets.
−Removed: If a quantitative assessment is performed the evaluation includes management estimates of cash flow projections based on internal future projections and/or use of a market approach by looking at market values of comparable companies .
−Removed: Key assumptions for these projections include revenue growth, future gross and operating margin growth, and its weighted cost of capital and terminal growth rates.
−Removed: The revenue and margin growth are based on increased sales of new products as the Company maintains investments in research and development.
−Removed: Additional assumed value creators may include increased efficiencies from capital spending.
−Removed: The resulting cash flows are discounted using a weighted average cost of capital.
−Removed: Operating mechanisms and requirements to ensure that growth and efficiency assumptions will ultimately be
−Removed: realized are also considered in the evaluation, including timing and probability of regulatory approvals for Company products to be commercialized.
−Removed: The Company’s market capitalization is also considered as a part of its analysis.
−Removed: Research and Development Expenses
−Removed: Research and development expenses include personnel and facility-related expenses, outside contracted services including clinical trial costs, manufacturing and process development costs, research costs and other consulting services and non-cash stock-based compensation.
−Removed: Research and development costs are expensed as incurred.
−Removed: Amounts due under contracts with third parties may be either fixed fee or fee for service, and may include upfront payments, monthly payments and payments upon the completion of milestones or receipt of deliverables.
−Removed: Non-refundable advance payments under agreements are capitalized and expensed as the related goods are delivered or services are performed.
−Removed: The Company’s contracts with third parties to perform various clinical trial activities in the on-going development of potential products.
−Removed: The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows to its vendors.
−Removed: Payments under the contracts depend on factors such as the achievement of certain events, successful enrollment of patients, and completion of portions of the clinical trial or similar conditions.
−Removed: The Company’s accrual for clinical trials is based on estimates of the services received and efforts expended pursuant to contracts with clinical trial centers and clinical research organizations.
−Removed: These contracts may be terminated by the Company upon written notice and the Company is generally only liable for actual effort expended by the organizations to the date of termination, although in certain instances the Company may be further responsible for termination fees and penalties.
−Removed: The Company estimates its research and development expenses and the related accrual as of each balance sheet date based on the facts and circumstances known to the Company at that time.
−Removed: There have been no material adjustments to the Company’s prior period accrued estimates for clinical trial activities through December 31, 2020.
−Removed: Stock-Based Compensation
−Removed: For stock options granted to employees and directors, the Company recognizes compensation expense for all stock-based awards based on the grant-date estimated fair value.
−Removed: The fair value of stock options is determined using the Black-Scholes option pricing model, using assumptions which are subjective and require significant judgment and estimation by management.
−Removed: The risk-free rate assumption was based on observed yields from governmental zero-coupon bonds with an equivalent term.
−Removed: The expected volatility assumption was based on historical volatilities of a group of comparable industry companies whose share prices are publicly available.
−Removed: The peer group was developed based on companies in the pharmaceutical industry.
−Removed: The expected term of stock options represents the weighted-average period that the stock options are expected to be outstanding.
−Removed: Because the Company does not have historical exercise behavior, the Company determined the expected life assumption using the simplified method for stock options granted to employees, which is an average of the options ordinary vesting period and the contractual term.
−Removed: For stock options granted to the board of directors, the Company determined the expected life assumption using the simplified method as the starting point with an average period of twelve (12) months added to take into account for the extended range of time of 12 to 18 months vested stock options granted to board of directors may be exercised upon termination.
−Removed: The expected dividend assumption was based on the Company’s history and expectation of dividend payouts.
−Removed: The Company has not paid and does not expect to pay dividends at any time in the foreseeable future.
−Removed: The Company recognizes forfeitures on an actual basis and as such did not estimate forfeitures to calculate stock-based compensation.
−Removed: Restricted Stock Units (“RSU”) and Performance-Based Restricted Stock Units (“PRSU”) are measured and recognized based on the quoted market price of our common stock on the date of grant.
−Removed: Stock-based compensation expense related to stock options granted to nonemployees is recognized based on the estimated fair value of the stock options on their grant date, determined using the Black-Scholes option pricing model.
−Removed: The awards generally vest over the period the Company expects to receive services from the nonemployees.
−Removed: Similar to stock options granted to employees, the fair value of stock options granted nonemployees, determined using the Black-Scholes option pricing model, involves assumptions that are subjective and require significant judgment and estimation by management.
−Removed: The risk-free rate assumption was based on observed yields from governmental zero-coupon bonds with an equivalent term.
−Removed: The expected volatility assumption was based on historical volatilities of a group of comparable industry companies whose share prices are publicly available.
−Removed: The peer group was developed based on companies in the pharmaceutical industry.
−Removed: The expected term of stock options represents the weighted-average period that the stock options are expected to be outstanding.
−Removed: Because the Company does not have historical exercise behavior on stock options granted to nonemployees, the Company determined the contractual term is the appropriate period for expected life on stock options granted to nonemployees.
−Removed: The expected dividend assumption was based on the Company’s history and expectation of
−Removed: dividend payouts.
−Removed: The Company has not paid and does not expect to pay dividends at any time in the foreseeable future.
−Removed: The Company recognizes forfeitures on an actual basis and as such did not estimate forfeitures to calculate stock-based compensation.
−Removed: RESULTS OF OPERATIONS
−Removed: Comparison of the Years Ended December 31, 2020 and 2019
−Removed: The following table provides comparative results of operations for the years ended December 31, 2020 and 2019 (in thousands):
−Removed: Operating expenses:
−Removed: Research and development
−Removed: General and administrative
−Removed: Restructuring expense
−Removed: Goodwill impairment
−Removed: Total operating expenses
−Removed: Loss from operations
−Removed: Other income (expense), net
−Removed: Warrant inducement expense
−Removed: Loss before income tax benefit
−Removed: Income tax benefit
−Removed: Net loss and other comprehensive loss
−Removed: Research and Development Expenses
−Removed: The decrease in research and development expenses of $2.0 million for the year ended December 31, 2020 was primarily due to decreases in clinical costs of $1.5 million and formulation development costs of $1.5 million, as well as decreases in personnel costs of $84,000, travel and meetings expense of $82,000, and miscellaneous operating costs of $2,000 .
−Removed: The decreases were partially offset by increases in stock-based compensation expense and consulting costs of $911,000 and $247,000, respectively.
−Removed: The decreases were made following the completion of our Phase 2a study of our legacy lead program in acute otitis media and the subsequent suspension of development as we assessed strategic options.
−Removed: We expect our research and development costs to increase in future periods as we proceed with the development of AT-1501.
−Removed: General and Administrative Expenses
−Removed: The increase in general and administrative expenses of $4.0 million for the year ended December 31, 2020 was primarily due to increases in merger related costs of $2.9 million as a result of the Anelixis acquisition and $441,000 in administrative costs associated with operating a public company, as well as increases in stock-based compensation expense and general operating costs of $953,000 and $80,000, respectively.
−Removed: The increases were offset by a decrease in litigation costs of $281,000, as well as decreases in travel and meetings expense and personnel costs of $44,000 and $5,000, respectively.
−Removed: Following the completion of Anelixis acquisition, we expect our general and administrative expenses to increase in future periods, as we have a larger headcount and incur expenses relating to the development of a larger product pipeline.
−Removed: Restructuring Expense
−Removed: On June 11, 2020, following the prior announcement of topline results of the Phase 2a Clinical Trial of OP0201 in acute otitis media, the Board of the Company approved a reduction in force.
−Removed: The restructuring was completed on June 30, 2020.
−Removed: Additionally, on September 3, 2020, the Board of the Company accepted the resignation of Gregory Flesher as the Company’s Chief Executive Officer and a member of the Board, effective as of the close of business on September 4, 2020.
−Removed: Furthermore, following the acquisition of Anelixis, the severance terms of certain terminated employees were modified.
−Removed: The Company incurred charges totaling $2.3 million for the estimated cash payments related to employee separation costs, including severance and post-employment health benefits.
−Removed: Goodwill Impairment
−Removed: The Company performed a goodwill impairment test as of December 31, 2019 and determined that the fair value of its goodwill was below its carrying value.
−Removed: As a result, the Company recognized $1.9 million of goodwill impairment.
−Removed: No impairment was recorded for the year ended December 31, 2020.
−Removed: Other Income, Net
−Removed: The change in other income, net was due to miscellaneous income of $35,000 related to disgorgement of profits on prohibited stock transactions by an investor, a decrease in realized losses on foreign currency translation of $22,000, and a decrease in VAT tax of $3,000, partially offset by a decrease in interest income of $21,000 for the year ended December 31, 2020.
−Removed: Warrant Inducement Expense
−Removed: The Company recognized warrant inducement expense of $4.8 million as a result of the Warrant Exercise Transaction in addition to the fair value of the Private Placement Warrants issued.
−Removed: (See Note 7 to the consolidated financial statements included elsewhere in this filing).
−Removed: Income Tax Benefit
−Removed: The Company recognized an income tax benefit of $404,000 for the year ended December 31, 2020 due to the current year change in deferred tax liability for the acquired IPR&D related to the Anelixis acquisition.
−Removed: Pro Forma Comparison of the Years Ended December 31, 2020 and 2019
−Removed: The following table provides pro forma combined financial information presented to illustrate the estimated effects of the Anelixis acquisition based on the historical financial statements and accounting records of the Company and Anelixis after giving effect to the acquisition.
−Removed: This pro forma information is not necessarily indicative either of the combined results of operations that actually would have been realized by us had the Anelixis acquisition been consummated at the beginning of the period for which the pro forma information is presented, or of future results.
−Removed: Additionally, the pro forma combined financial information does not reflect any merger-related expenses.
−Removed: Operating expenses
−Removed: Research and development
−Removed: General and administrative
−Removed: Restructuring expense
−Removed: Goodwill impairment
−Removed: Total operating expenses
−Removed: Loss from operations
−Removed: Other income, net
−Removed: Warrant inducement expense
−Removed: Loss before income tax provision
−Removed: Income tax benefit
−Removed: Net loss and other comprehensive loss
−Removed: The decrease in revenue of $380,000 for the year ended December 31, 2020 was due to the difference in amount Anelixis earned from a research grant.
−Removed: Anelixis had a $944,000 research grant agreement, which contained four research and productivity milestones.
−Removed: The current phase, which earned Anelixis $120,000, was the fourth and final phase of this agreement.
−Removed: Research and Development Expenses
−Removed: The decrease in research and development expenses of approximately $2.0 million for the year ended December 31, 2020 was primarily due to decreases in clinical costs and formulation development costs of approximately $2.2 million and $1.2 million, respectively, as well as a decrease in travel and meetings expense of $82,000.
−Removed: The decreases were partially offset by an increase in stock-based compensation costs of $911,000, personnel costs of $343,000, consulting services of $232,000, and $13,000 in general operating costs.
−Removed: As noted above, we expect research and development expenses to increase in future periods.
−Removed: General and Administrative Expenses
−Removed: The increase in general and administrative expenses of $732,000 for the year ended December 31, 2020 was primarily due to increases in stock-based compensation costs of $953,000 and costs associated with operating a publicly traded company of $510,000.
−Removed: The increase was offset by decreases in litigation costs of $281,000, general operating costs of $245,000, personnel costs of $161,000, and travel and meetings expense of $44,000.
−Removed: As noted above, we expect our general and administrative expenses to increase in future periods.
−Removed: Restructuring Expense
−Removed: On June 11, 2020, following the prior announcement of topline results of the Phase 2a Clinical Trial of OP0201 in acute otitis media, the Board of the Company approved a reduction in force.
−Removed: The restructuring was completed on June 30, 2020.
−Removed: Additionally, on September 3, 2020, the Board of the Company accepted the resignation of Gregory Flesher as the Company’s Chief Executive Officer and a member of the Board, effective as of the close of business on September 4, 2020.
−Removed: Furthermore, following the acquisition of Anelixis, the severance terms of certain terminated employees were modified.
−Removed: The Company incurred charges totaling $2.3 million for the estimated cash payments related to employee separation costs, including severance and post-employment health benefits.
−Removed: Other Income, Net
−Removed: The change in other income, net was due to miscellaneous income of $35,000 related to disgorgement of profits on prohibited stock transactions by an investor, a decrease in realized losses on foreign currency translation of $22,000, and a decrease in VAT tax of $3,000, offset by a decrease in interest income of $21,000 for the year ended December 31, 2020.
−Removed: Warrant Inducement Expense
−Removed: The Company recognized warrant inducement expense of $4.8 million as a result of the Warrant Exercise Transaction in addition to the fair value of the Private Placement Warrants issued.
−Removed: (See Note 7 to the consolidated financial statements included elsewhere in this filing).
−Removed: Income Tax Benefit
−Removed: The Company recognized an income tax benefit of $404,000 for the year ended December 31, 2020 due to the current year change in deferred tax liability.
−Removed: LIQUIDITY AND CAPITAL RESOURCES
−Removed: As of December 31, 2020, we had cash and cash equivalents of approximately $114.2 million, consisting of readily available cash and cash equivalents in bank accounts and an accumulated deficit of $80.4 million.
−Removed: While we believe our cash and cash equivalents are not subject to excessive risk, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are in excess of federally insured limits.
−Removed: To date, our operations have been financed primarily by net proceeds from the sale of preferred and common stock and warrants, the issuance of convertible promissory notes.
−Removed: We do not have any approved products for commercial sale and have never generated revenue from product sales, and have incurred significant net losses since our inception and expect to continue to incur net operating losses for the foreseeable future.
−Removed: We do not expect to receive any revenue from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our product candidates or enter into collaborative arrangements with third parties.
−Removed: Our primary use of cash is to fund operating expenses, which consist of research and development expenses and general and administrative expenses.
−Removed: Cash used to fund operating expenses is impacted by the timing of when we pay or prepay these expenses.
−Removed: We expect our expenses to increase in connection with our ongoing activities, particularly as we expand our clinical program with AT-1501, continue the research and development of, and seek marketing approval for, our product candidates.
−Removed: In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.
−Removed: We will continue to require additional financing in order to advance our drug product through clinical development, to manufacture, obtain regulatory approval for and to commercialize our product candidates, to develop, acquire or in-license other potential product candidates, and to fund operations for the foreseeable future.
−Removed: Therefore, we will seek to raise additional capital through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements.
−Removed: Adequate additional funding may not be available to us on acceptable terms on a timely basis, or at all.
−Removed: Any such failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, and may cause us to delay the scope of or suspend one or more of our clinical trials, research and development programs or commercialization efforts, out-license intellectual property rights to our product candidates or sell unsecured assets, or a combination of the above.
−Removed: Any of these actions could materially harm our business.
−Removed: To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights.
−Removed: Debt financing, if available, would result in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
−Removed: If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us.
−Removed: Please see the section of this Annual Report titled “Risk Factors” for additional risks associated with our substantial capital requirements and the challenges we may face in raising capital.
−Removed: We plan to continue to fund losses from operations and capital funding needs through cash on hand and future equity or debt financings, as well as potential additional collaborations or strategic partnerships with other companies.
−Removed: The sale of additional equity or convertible debt could result in additional dilution to our stockholders.
−Removed: The incurrence of indebtedness would result in debt service obligations and could result in operating and financing covenants that would restrict our operations.
−Removed: See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Annual Report on Form 10-K under the caption “Recent Developments” for a discussion of additional sources of liquidity, including the 2019 Equity Offering, the Exercise Transaction and the Financing.
−Removed: Our primary uses of capital are, and we expect will continue to be, funding research efforts and the development of our product candidates, compensation and related expenses, hiring additional staff (including clinical, scientific, operational, financial, and management personnel) and costs associated with operating as a public company.
−Removed: We expect to incur substantial expenditures in the foreseeable future for the development and potential commercialization of our product candidates.
−Removed: The following table provides a summary of our net cash flow activity for the years ended December 31, 2020 and 2019 (in thousands):
−Removed: Net cash used in operating activities
−Removed: Net cash provided by investing activities
−Removed: Net cash provided by financing activities
−Removed: Net change in cash and cash equivalents
−Removed: Comparison of the Years Ended December 31, 2020 and 2019
−Removed: Net cash used in operating activities for the year ended December 31, 2020 consisted primarily of our net loss of $22.8 million, partially offset by non-cash items consisting primarily of depreciation and amortization of $183,000, warrant inducement expense of $4.8 million, net deferred income taxes of $404,000, and stock-based compensation totaling $3.2 million.
−Removed: Additionally, cash used in operating activities for the year ended December 31, 2020 reflected a net decrease in cash from changes in operating assets and liabilities of $180,000, due to a decrease in operating lease liability .
−Removed: Net cash used in operating activities for the year ended December 31, 2019 consisted primarily of our net loss of $16.0 million, partially offset by non-cash items consisting primarily of depreciation and amortization of $182,000, a goodwill impairment charge of $1.9 million, and stock-based compensation totaling $1.3 million.
−Removed: Additionally, cash used in operating activities for the year ended December 31, 2019 reflected a net decrease in cash from changes in operating assets and liabilities of $1.2 million, due to a decrease in our accounts payable and accrued liabilities of $1.4 million and a decrease in our operating lease liability of $165,000, offset by a decrease in prepaid expenses and other assets of $354,000.
−Removed: Net cash provided by investing activities for the year ended December 31, 2020 consisted of cash and cash equivalents received from the acquisition of Anelixis.
−Removed: There was no cash provided by or used in investing activities for the year ended December 31, 2019.
−Removed: Net cash provided by financing activities for the year ended December 31, 2020 was comprised of $95.2 million in net proceeds from the 2020 Purchase Agreement for the sale of 199,112 shares of Series X1 preferred stock, $5.4 million in net proceeds from the exercise of warrants by stockholders to purchase approximately 0.4 million shares of common stock, and $9.0 million in net proceeds for the sale of approximately 1.0 million shares of common stock, offset by $25,000 of cash paid in connection with the cancellation of common stock related to the Company’s reverse stock-split.
−Removed: Net cash provided by financing activities for the year ended December 31, 2019 was comprised of $9.6 million in net proceeds from the 2019 Equity Offering for the sale of approximately 3.4 million shares of common stock and $107,000 in net proceeds from the 2018 Prospectus for the sale of approximately 25,000 shares of common stock.
−Removed: Contractual Obligations
−Removed: Per §229.303 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item.
−Removed: Off-Balance Sheet Arrangements
−Removed: We do not have any off-balance sheet arrangements as defined in the rules and regulations of the SEC.
−Removed: Quantitative and Qualitative Disclosures About Market Risk.
−Removed: Per §229.305 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item.
+Added: Future determination as to the declaration and payment of dividends, if any, will be at the discretion of our Board and will depend on then existing conditions, including our operating results, financial condition, contractual restrictions, capital requirements, business prospects and other factors that our Board may deem relevant.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.