Tobira Therapeutics
Tobira Therapeutics, Inc. (Form: 10-Q, Received: 11/10/2015 16:10:28)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

OR

o

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

For the transition period from          to         

Commission File Number: 001-35953

 

TOBIRA THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

03-0422069

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

701 Gateway Blvd., Suite 300

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 741-6625

 

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

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   o

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

 

Large accelerated filer

¨  

 

  

Accelerated filer

¨

 

 

 

 

 

 

Non-accelerated filer

x

  (Do not check if a small reporting company)

  

Small reporting company

¨

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

As of November 6, 2015, there were 18,809,993 shares of the Registrant’s common stock outstanding.

 

 

 


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our expectations for the timing of clinical study results, including the CENTAUR and ORION studies, and the timing and success of future development of CVC, our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment and potential growth opportunities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

As used in this report, the term “Private Tobira” refers to Tobira Development, Inc. (formerly known as Tobira Therapeutics, Inc.) prior to the consummation of the Merger described in this report and references to the terms the "combined company”, “Tobira”, the "Company”, “we”, “our” and “us” refer to Private Tobira, prior to the consummation of the Merger described in this report and Tobira Therapeutics, Inc. (formerly known as Regado Biosciences, Inc.) and its subsidiaries upon the consummation of the Merger described in this report. The term "Regado" refers to the Regado Biosciences, Inc. and its subsidiaries prior to the Merger described in this report.

 

 

2


TOBIRA THERAPEUTICS, INC.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2015

Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

 

Item 1.

 

Financial Statements (Unaudited)

 

4

 

 

Condensed Balance Sheets as of September 30, 2015 and December 31, 2014

 

4

 

 

Condensed Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2015 and 2014

 

5

 

 

Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2015 and 2014

 

6

 

 

Notes to Condensed Financial Statements

 

7

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

28

Item 4.

 

Controls and Procedures

 

29

PART II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

30

Item 1A.

 

Risk Factors

 

31

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

56

Item 3.

 

Defaults Upon Senior Securities

 

56

Item 4.

 

Mine Safety Disclosures

 

56

Item 5.

 

Other Information

 

56

Item 6.

 

Exhibits

 

56

Signatures

 

57

Exhibit Index

 

58

 

3


PART I. FINANCI AL INFORMATION

Item 1. Financial Statements (Unaudited).

TOBIRA THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

September 30,

2015

 

 

December 31,

2014

 

 

 

(Unaudited)

 

 

(Note 2)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

68,624

 

 

$

6,178

 

Prepaid expenses and other current assets

 

 

886

 

 

 

1,013

 

Total current assets

 

 

69,510

 

 

 

7,191

 

Property and equipment, net

 

 

416

 

 

 

474

 

Restricted cash

 

 

334

 

 

 

334

 

Other assets

 

 

1,560

 

 

 

347

 

Total assets

 

$

71,820

 

 

$

8,346

 

Liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,283

 

 

$

1,887

 

Accrued expenses and other liabilities

 

 

3,898

 

 

 

6,503

 

Capital lease obligations

 

 

23

 

 

 

21

 

Deferred rent

 

 

53

 

 

 

57

 

Convertible notes, related party

 

 

 

 

 

29,770

 

Total current liabilities

 

 

5,257

 

 

 

38,238

 

Capital lease obligations

 

 

23

 

 

 

40

 

Deferred rent

 

 

194

 

 

 

219

 

Term loan

 

 

15,013

 

 

 

14,789

 

Preferred stock warrant liabilities

 

 

 

 

 

2,460

 

Total liabilities

 

 

20,487

 

 

 

55,746

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Convertible preferred stock

 

 

 

 

 

61,982

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 1,000,000 and no shares authorized at September 30,

   2015 and December 31, 2014, respectively; no shares issued and outstanding at

   September 30, 2015 and December 31, 2014

 

 

 

 

 

 

Common stock, par value $0.001; 500,000,000 shares authorized and 18,809,993 shares

   issued and outstanding at September 30, 2015; common stock, par value $0.0001;

   8,456,867 shares authorized and 403,539 shares issued and outstanding at

   December 31, 2014

 

 

19

 

 

 

 

Additional paid-in capital

 

 

205,304

 

 

 

4,378

 

Accumulated other comprehensive income (loss)

 

 

 

 

 

 

Accumulated deficit

 

 

(153,990

)

 

 

(113,760

)

Total stockholders’ equity (deficit)

 

 

51,333

 

 

 

(109,382

)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

$

71,820

 

 

$

8,346

 

 

See accompanying notes to unaudited condensed financial statements.

4


TOBIRA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

6,092

 

 

$

3,511

 

 

$

18,379

 

 

$

8,274

 

General and administrative

 

 

2,826

 

 

 

12

 

 

 

8,097

 

 

 

2,754

 

Impairment of intangible assets

 

 

17,315

 

 

 

 

 

 

17,315

 

 

 

 

Total operating expenses

 

 

26,233

 

 

 

3,523

 

 

 

43,791

 

 

 

11,028

 

Loss from operations

 

 

(26,233

)

 

 

(3,523

)

 

 

(43,791

)

 

 

(11,028

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(335

)

 

 

(1,514

)

 

 

(2,770

)

 

 

(3,795

)

Change in fair value of preferred stock warrant

   liabilities

 

 

 

 

 

2,097

 

 

 

1,939

 

 

 

1,408

 

Loss before income tax benefit (expense)

 

 

(26,568

)

 

 

(2,940

)

 

 

(44,622

)

 

 

(13,415

)

Income tax benefit (expense)

 

 

4,357

 

 

 

 

 

 

4,392

 

 

 

(271

)

Net loss and comprehensive loss

 

$

(22,211

)

 

$

(2,940

)

 

$

(40,230

)

 

$

(13,686

)

Net loss per share, basic and diluted

 

$

(1.22

)

 

$

(7.29

)

 

$

(4.05

)

 

$

(33.91

)

Weighted-average common shares outstanding,

   basic and diluted

 

 

18,184,146

 

 

 

403,539

 

 

 

9,929,260

 

 

 

403,539

 

 

See accompanying notes to unaudited condensed financial statements.

5


TOBIRA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(40,230

)

 

$

(13,686

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

89

 

 

 

21

 

Stock-based compensation

 

 

1,474

 

 

 

528

 

Loss on disposal of assets

 

 

 

 

 

3

 

Amortization of debt discount

 

 

422

 

 

 

834

 

Change in fair value of preferred stock warrant liabilities

 

 

(1,939

)

 

 

(1,408

)

Noncash interest expense on convertible notes

 

 

1,068

 

 

 

1,740

 

Amortization of beneficial conversion feature

 

 

429

 

 

 

895

 

Amortization of debt issuance costs

 

 

66

 

 

 

14

 

Deferred income taxes

 

 

(4,392

)

 

 

 

Impairment of intangible assets

 

 

17,315

 

 

 

 

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

302

 

 

 

(761

)

Restricted cash

 

 

 

 

 

(334

)

Accounts payable and accrued expenses

 

 

232

 

 

 

1,428

 

Deferred rent

 

 

(33

)

 

 

26

 

Net cash used in operating activities

 

 

(25,197

)

 

 

(10,700

)

Investing activities

 

 

 

 

 

 

 

 

Cash received from merger transaction

 

 

33,232

 

 

 

 

Purchase of property and equipment

 

 

(31

)

 

 

(130

)

Net cash provided by (used in) investing activities

 

 

33,201

 

 

 

(130

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

41,504

 

 

 

 

Proceeds from borrowings — term loans, net

 

 

 

 

 

14,822

 

Proceeds from convertible notes, net

 

 

12,954

 

 

 

7,984

 

Payments on term loan

 

 

 

 

 

(1,833

)

Payments on capital lease obligations

 

 

(16

)

 

 

 

Costs paid in connection with preparations for initial public offering

 

 

 

 

 

(2,423

)

Net cash provided by financing activities

 

 

54,442

 

 

 

18,550

 

Net increase in cash and cash equivalents

 

 

62,446

 

 

 

7,720

 

Cash and cash equivalents at beginning of period

 

 

6,178

 

 

 

4,088

 

Cash and cash equivalents at end of period

 

$

68,624

 

 

$

11,808

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

786

 

 

$

223

 

Noncash activities:

 

 

 

 

 

 

 

 

Conversion of promissory notes and interest to common stock

 

$

48,221

 

 

$

 

Conversion of Series A and B preferred stock to common stock

 

$

61,982

 

 

$

 

Conversion of Series F preferred stock to common stock

 

$

24,832

 

 

$

 

Financing costs in accounts payable and accrued expenses

 

$

130

 

 

$

 

Beneficial conversion feature related to promissory notes

 

$

396

 

 

$

 

Reclassification of preferred stock warrant liability to additional paid-in capital

 

$

521

 

 

$

 

Issuance of common stock to financial advisors — Merger transaction

 

$

852

 

 

$

 

Issuance of warrants — term loan and convertible notes, related party

 

$

 

 

$

868

 

Reclassification of stock award liability from equity upon modification

 

$

 

 

$

399

 

Accrued deferred initial public offering costs

 

$

 

 

$

1,147

 

Landlord paid leasehold improvements

 

$

 

 

$

259

 

Equipment purchased under capital lease

 

$

 

 

$

70

 

Accrued debt issuance costs

 

$

 

 

$

25

 

Fair value of assets acquired and liabilities assumed in the Merger:

 

 

 

 

 

 

 

 

Fair value of assets acquired

 

$

18,723

 

 

$

 

Fair value of liabilities assumed

 

 

(5,832

)

 

 

 

Fair value of net assets acquired in the Merger

 

$

12,891

 

 

$

 

 

See accompanying notes to unaudited condensed financial statements.

 

6


TOBIRA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.

DESCRIPTION OF BUSINESS

Tobira Therapeutics, Inc., or Tobira or the Company, is a clinical-stage biopharmaceutical company focused on the development and commercialization of therapeutics to treat NASH, or nonalcoholic steatohepatitis, which is a form of liver disease affecting 3-5% of the U.S. population and is becoming the leading cause of liver transplant. The Company’s lead product candidate, cenicriviroc, or CVC, is a proprietary immunomodulator that can potentially be used to treat a number of disease states with high unmet medical need such as NASH, fibrosis, inflammation and human immunodeficiency virus, or HIV. CVC is a once-daily pill with well-established safety and tolerability in approximately 600 subjects dosed in completed Phase 1 and Phase 2 trials, including a pharmacokinetics, or PK, and safety study in subjects with liver cirrhosis and 115 HIV infected subjects on treatment for up to 48 weeks.

Tobira is developing CVC for NASH, for which the Company recently completed enrollment of a Phase 2b clinical trial of CVC in 289 subjects with confirmed NASH and liver fibrosis entitled CENTAUR. The Company expects to announce CENTAUR primary endpoint results in the third quarter of 2016 and the study design incorporates surrogate endpoints that may form the basis for demonstrating efficacy required for accelerated approval. The U.S. Food and Drug Administration, or the FDA, Accelerated Approval Program allows for earlier approval of drugs that treat serious conditions and fill an unmet medical need based on a surrogate endpoint. CVC has been granted Fast Track designation by the FDA for the treatment of NASH in patients with liver fibrosis. Tobira is developing CVC both as a standalone, as well as a cornerstone for combination therapies for NASH and fibrosis and expects to present initial clinical combination data in 2015.

Reverse Merger

On May 4, 2015, Regado Biosciences, Inc., or Regado, completed its business combination with Private Tobira in accordance with the terms of an Agreement and Plan of Merger and Reorganization, dated as of January 14, 2015, as amended on January 23, 2015, or the Merger Agreement. Pursuant to the Merger Agreement, a newly formed wholly-owned subsidiary was established that merged with and into Private Tobira, with Private Tobira surviving the merger and becoming a wholly-owned subsidiary of Regado, or the Merger. In connection with the Merger, the name of Private Tobira was changed to Tobira Development, Inc., or Tobira Development. In connection with, and immediately prior to, the completion of the Merger, Regado filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a one for nine reverse stock split of Regado’s common stock. In connection with and immediately following the consummation of the Merger, Regado filed an amendment to the amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to change its name to Tobira Therapeutics, Inc. On June 29, 2015, a Certificate of Ownership and Merger was filed with the Secretary of State of the State of Delaware to effect the merger of Tobira Development with and into Tobira Therapeutics, Inc. As a result, Tobira Therapeutics, Inc. is the sole entity.

The Company, or Tobira, as used in the accompanying notes to the condensed financial statements, refers to Private Tobira prior to the completion of the Merger and Public Tobira subsequent to the completion of the Merger.

 

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X set forth by the Securities and Exchange Commission, or the SEC, for interim reporting.  As permitted under these rules, certain footnotes or other financial information normally required by GAAP may be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments including normal and recurring adjustments which the Company considers necessary for the fair presentation of financial information. The results of operations and comprehensive loss for the three and nine months ended September 30, 2015 are not necessarily indicative of expected results for the full fiscal year or any other period. The condensed balance sheet as of December 31, 2014 has been derived from audited financial statements but does not include all information required by U.S. GAAP for complete financial statements.

The accompanying unaudited condensed financial statements and notes should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2014 included in the Current Report, as amended, on Form 8-K/A filed on June 2, 2015. There have been no significant and material changes in our critical accounting policies and significant judgments and estimates during the three and nine months ended September 30, 2015, except as described below.

7


Reverse Stock Splits

On May 4, 2015, Regado effected a one for nine reverse stock split of its outstanding common stock and options for common stock. The par value was not adjusted as a result of the reverse stock split.

On July 28, 2014, Private Tobira effected a one for 26.4065866 reverse stock split of Private Tobira’s common stock, convertible preferred stock, preferred stock warrants and options for common stock, or the Private Tobira Reverse Split. The par value was not adjusted as a result of the Private Tobira Reverse Split. On February 23, 2015, in connection with the Private Tobira Reverse Split, Private Tobira filed a correction to its amended articles of incorporation to effect a one for 26.4065866 reverse stock split of its authorized shares of common stock, Series A preferred stock and Series B preferred stock.

The accompanying condensed financial statements and notes to the condensed financial statements give retroactive effect to the Private Tobira Reverse Split for all periods presented.

Deferred Offering Costs

Deferred offering costs, which primarily consist of direct incremental legal and accounting fees relating to an initial public offering, are capitalized and offset against initial public offering proceeds upon the consummation of an offering. In the event an offering is terminated, deferred offering costs are expensed. The Company capitalized deferred offering costs related to a planned initial public offering as of September 30, 2014 that were subsequently expensed as of December 31, 2014 upon its termination.

Business Combinations

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 and liabilities assumed. 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. The Company accounted for the Merger with Regado as a business combination under the acquisition method of accounting. Consideration paid to acquire Regado was measured at fair value and included the exchange of Regado’s common stock, Series F preferred stock and vested stock options. The allocation of the purchase price resulted in recognition of intangible assets related to in-process research and development and goodwill. The key assumptions in determining the fair value of intangible assets were assessing the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, developing an appropriate discount rate and the estimated future cash flows.

As a result of the Merger, historical common stock, stock options and additional paid-in capital, including share and per share amounts, have been retroactively adjusted to reflect the equity structure of the Company including the effect of the exchange ratio of 1.4302 and the Company’s common stock par value of $0.001 per share.

In-Process Research and Development

In-process research and development, or IPR&D, represents the fair value assigned to research and development assets that were not fully developed as of the completion of the Merger. IPR&D acquired in a business combination is capitalized on the Company’s balance sheet at its acquisition-date fair value. Until the project is completed, the asset is accounted for as an indefinite-lived intangible asset subject to impairment testing. Upon completion of a project, the carrying value of the related IPR&D is reclassified to intangible assets and is amortized over the estimated useful life of the asset. The Company evaluates the potential impairment of intangible assets if events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable.

IPR&D consists of intellectual property related to Regado’s aptamer platform and is valued based on the estimated net present value of future cash flows expected to be generated from commercialization. Through September 30, 2015, the Company engaged in discussions with several third parties to divest or license the aptamer platform but was unsuccessful in securing an agreement. The Company’s board of directors agreed to discontinue investment in developing the intellectual property. As a result of this indicator of impairment, as of September 30, 2015, management calculated and compared the fair value of the IPR&D to the carrying value to assess the recoverability of the asset. As of September 30, 2015, the Company recorded an impairment of the IPR&D of $12.2 million which is included under the caption “Impairment of intangible assets” in the accompanying Condensed Statements of Operations and Comprehensive Loss.

8


Goodwill

Goodwill represents the difference between the consideration transferred and the fair value of the net assets acquired under the acquisition method of accounting. Goodwill is not amortized but is evaluated for impairment during the last fiscal quarter of the year or if indicators of impairment exist that would, more likely than not, reduce the fair value from its carrying amount.

The Company recorded goodwill related to the Merger on May 4, 2015. As noted above under In-Process Research and Development, the Company was unable to divest or license the aptamer platform and plans to discontinue investment in the Regado business. The Company determined the fair value was less than the carrying value and impaired the IPR&D associated with its acquisition of Regado as of September 30, 2015. Further, the Company determined the Regado operations acquired in the Merger had not been integrated with the Company and thus no benefit was realized. As a result, the Company recorded an impairment of goodwill of $5.1 million in accordance with the applicable guidance as of September 30, 2015, which is included under the caption “Impairment of intangible assets” in the accompanying Condensed Statements of Operations and Comprehensive Loss.

Stock-Based Compensation Expense

For stock options granted to employees, the Company recognizes compensation expense for all stock-based awards based on the grant date estimated fair value. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service period. The fair value of stock options is determined using the Black-Scholes option pricing model net of estimated forfeitures. The determination of fair value for stock-based awards on the date of grant using an option pricing model requires management to make certain assumptions regarding subjective variables.

Stock-based compensation expense related to stock options granted to non-employees is recognized based on the fair value of the stock options, determined using the Black-Scholes option pricing model, as the options are vested. The awards generally vest over the time period the Company expects to receive services from non-employees. Stock options granted to non-employees are subject to periodic revaluation over their vesting terms.

              

Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. The calculation of diluted loss per share also requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of such securities are dilutive to earnings (loss) per share for the period, adjustments to net income or net loss used in the calculation are required to remove the change in fair value of the warrants for the period. Likewise, adjustments to the denominator are required to reflect the related dilutive shares. For purposes of the diluted net loss per share calculation, convertible preferred stock, convertible notes and accrued interest, stock options and preferred stock warrants are considered to be potentially dilutive securities and are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. Therefore, basic and diluted net loss per share was the same for the periods presented due to the Company’s net loss position.

The following table sets forth the outstanding potentially dilutive securities, as adjusted retroactively reflecting the exchange for Regado shares, that have been excluded in the calculation of diluted net loss per share because including such would be anti-dilutive (in common stock equivalent shares):

 

 

 

Three and Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

Common stock options

 

 

2,373,996

 

 

 

1,324,297

 

Warrants to purchase preferred stock

 

 

64,657

 

 

 

901,987

 

Convertible preferred stock

 

 

 

 

 

5,559,977

 

Convertible notes

 

 

 

 

 

3,304,252

 

Total

 

 

2,438,653

 

 

 

11,090,513

 

 

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board, or the FASB, issued Accounting Standard Update, or ASU, 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , which amends the presentation of debt issuance costs as a direct deduction from the face amount of a liability rather than an asset. Amortization of debt

9


issuance costs is to be reported as interest expense. Additionall y, amortization of a discount or premium is to be reported as interest expense in the case of liabilities or interest income in the case of assets. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2015 a nd interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2015 and interim periods with fiscal years beginning after December 15, 2016. Earlier adoption of the amendments i s permitted for financial statements that have not been previously issued, and the new guidance shall be applied retrospectively to comparative balance sheets presented. The Company expects to adopt this guidance for its 2016 fiscal year commencing on Janu ary 1, 2016 and does not expect adoption to have a material impact on its financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. This guidance is effective for annual periods ending after December 15, 2016, and, as such, will be applicable to the Company in 2017. Early adoption is permitted. The Company does not expect this standard to have a material impact on its financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity , which changed the requirements for reporting disposals as discontinued operations. A disposal that represents a strategic shift that has a major effect on the Company’s operations and financial results, such as a major line of business, should be presented as a discontinued operation with additional financial disclosures. This guidance is effective for reporting periods beginning on or after December 15, 2014. As of September 30, 2015, the Company adopted this guidance. The decision to discontinue investment in the aptamer platform does not represent a strategic shift as prescribed by this guidance. Thus, there is no impact to the Condensed Financial Statements resulting from adopting this guidance.

 

 

3.

REVERSE MERGER

The Company completed its Merger with Regado on May 4, 2015. Based on the terms of the Merger, Private Tobira was deemed the acquiring company for accounting purposes, and the transaction has been accounted for as a reverse acquisition under the acquisition method of accounting for business combinations in accordance with U.S. GAAP. Accordingly, the assets and liabilities of Regado have been recorded as of the Merger closing date at estimated fair value.

Immediately prior to the effective date of the Merger, the principal and accrued interest of outstanding convertible notes of Private Tobira converted into shares of Series B preferred stock of Private Tobira. Further, all outstanding shares of preferred stock of Private Tobira converted into shares of common stock of Private Tobira. Each Private Tobira warrant issued to Square 1 Bank in connection with a Loan and Security Agreement between Square 1 Bank and Private Tobira dated as of November 9, 2011 and Oxford Finance LLC in connection with a Loan and Security Agreement between Oxford Finance LLC and Tobira dated as of June 30, 2014 that were outstanding and unexercised as of and immediately prior to the effective date of the Merger were exchanged for warrants to purchase Regado common stock. All other Private Tobira warrants were terminated and cancelled in full. At the effective date of the Merger, each outstanding share of common stock of Private Tobira was converted into the right to receive 1.4302 shares of Regado common stock as adjusted for the one for nine reverse stock split, or the Exchange Ratio, as determined pursuant to the terms of the Merger Agreement, and all outstanding options, warrants, or other rights to purchase shares of capital stock of Private Tobira were exchanged for rights to acquire Regado common stock, as renamed Tobira. No fractional shares of Regado common stock were issued in connection with the Merger, and holders of Private Tobira capital stock were entitled to receive cash for any fractional share ownership in lieu of stock thereof.

After consummation of the Merger, Private Tobira stockholders owned a majority of the fully diluted common stock of Tobira.

10


Purchase Consideration

The purchase price for Regado on May 4, 2015, the closing date of the Merger, was as follows (in thousands):

 

Fair value of Regado common stock outstanding (1)

 

$

40,667

 

Fair value of Regado Series F convertible preferred stock

   outstanding (2)

 

 

2,420

 

Fair value of Regado vested stock options (3)

 

 

3,036

 

Total purchase price

 

$

46,123

 

 

(1)

Comprised of 3,734,536 shares of common stock outstanding at the date of the Merger based on the closing price of $10.89 per share as adjusted for the one for nine reverse stock split on May 4, 2015;

(2)

Comprised of 222,222 shares of common stock equivalents, as converted, at the date of the Merger based on the closing price of $10.89 per share as adjusted for the one for nine reverse stock split on May 4, 2015; and

(3)

Consideration transferred includes 551,363 Regado vested equity awards assumed and deemed attributable to pre-combination services to Regado.

Allocation of Purchase Consideration

Under the acquisition method of accounting, the total purchase price was allocated to tangible and identifiable intangible assets acquired and liabilities assumed of Regado on the basis of their estimated fair values as of the transaction closing date on May 4, 2015. The Company engaged a third party valuation firm to assist management in its analysis of the fair value of Regado. All estimates, key assumptions, and forecasts were either provided by or reviewed by management. While the Company chose to utilize a third party valuation firm, the fair value analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party. The excess of the total purchase price over the fair value of assets acquired and liabilities assumed was allocated to goodwill.

The following table summarizes the allocation of the purchase consideration to the assets acquired and liabilities assumed based on their fair values as of May 4, 2015 (in thousands):

 

Cash, cash equivalents and restricted cash

 

$

33,232

 

Prepaid expenses and other assets acquired

 

 

1,408

 

In-process research and development

 

 

12,205

 

Goodwill

 

 

5,110

 

Deferred tax liability

 

 

(4,393

)

Other liabilities

 

 

(1,439

)

Total

 

$

46,123

 

 

The Company believes that the historical values of Regado’s current assets and current liabilities approximate fair value based on the short-term nature of such items.

IPR&D consists of intellectual property related to Regado’s aptamer platform and is valued based on the estimated net present value of future cash flows expected to be generated from commercialization. The valuation of the aptamer platform technology was valued using the income approach which values the asset by estimating the present value of future economic benefits that the asset is expected to produce. The Company will not amortize IPR&D until research and development is complete and the asset is reclassified to a definite-lived amortizable asset. Subsequently, as discussed in Note 2, the Company recorded an impairment of IPR&D as of September 30, 2015.

Goodwill is calculated as the difference between the fair value of the consideration expected to be transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. Goodwill is not expected to be deductible for tax purposes. Subsequently, as discussed in Note 2, the Company recorded an impairment of goodwill as of September 30, 2015.

The deferred tax liability of $4.4 million relates to the temporary difference associated with the $12.2 million value of IPR&D. The deferred tax liability was recorded based on an effective tax rate of 35.99%. As of September 30, 2015, the deferred tax liability was reduced to $0 and recorded as an income tax benefit of $4.4 million in the accompanying Condensed Statements of Operations and Comprehensive Loss following the impairment of the associated IPR&D.

11


Other liabilities include $0.9 million liability for the settlement of common stock for Merger relate d fees to financial advisors that were settled by the issuance of 78,213 shares of common stock. The fair value of the liability was determined based upon the fair value of Regado common stock using the closing price of $10.89 per share, as adjusted for th e one for nine reverse stock split on May 4, 2015.

The Company’s operating results include operating expenses attributable to the former Regado business activities for the period of May 5, 2015 to September 30, 2015 and were $0.3 million and $0.6 million for the three and nine months ended September 30, 2015, respectively.

The unaudited financial information in the following table summarizes the combined results of operations of the Company and Regado, on a pro forma basis, as if the Merger had occurred at the beginning of the periods presented (in thousands):              

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net loss

 

$

(22,211

)

 

$

(24,950

)

 

$

(46,064

)

 

$

(70,059

)

Deemed dividend

 

 

 

 

 

 

 

 

 

 

 

(14,840

)

Net loss attributable to stockholders

 

$

(22,211

)

 

$

(24,950

)

 

$

(46,064

)

 

$

(84,899

)

Net loss attributable to preferred stockholders

 

$

 

 

$

(416

)

 

$

 

 

$

(1,442

)

Net loss attributable to common stockholders,

   basic and diluted

 

$

(22,211

)

 

$

(24,534

)

 

$

(46,064

)

 

$

(83,457

)

Net loss per share, basic and diluted

 

$

(1.49

)

 

$

(1.88

)

 

$

(3.10

)

 

$

(6.49

)

 

The above unaudited pro forma information was determined based on historical GAAP results of the Company and Regado. The unaudited pro forma combined results are not necessarily indicative of what the Company’s combined results of operations would have been if the acquisition was completed on January 1, 2014. The unaudited pro forma combined net loss includes pro forma adjustments primarily relating to the following non-recurring items directly attributable to the business combination:

 

 

·

Elimination of transaction costs of $0 and $5.2 million for the three and nine months ended September 30, 2015, respectively;

 

·

Elimination of stock-based compensation expense of $0 and $1.8 million related to the acceleration of vesting and modification of post-termination exercise periods of Regado stock option awards in connection with the Merger for the three and nine months ended September 30, 2015;

 

·

Elimination of $0 and $1.4 million expense related to severance agreements and transaction bonuses directly attributable to the Merger for the three and nine months ended September 30, 2015;

 

·

Elimination of interest expense of $0 and $1.7 million for the three and nine months ended September 30, 2015, respectively, and $1.2 million and $3.4 million for the three and nine months ended September 30, 2014, respectively, related to the conversion of Private Tobira’s convertible notes in connection with the Merger; and

 

·

Elimination of the change in fair value of preferred stock warrant liabilities of $0 and $1.9 million of income for the three and nine months ended September 30, 2015, respectively, and $2.1 million and $1.4 million of income for the three and nine months ended September 30, 2014, respectively to reflect 1) the net exercise and cancellation of warrants issued in connection with the convertible notes payable and 2) the conversion of the Oxford Finance LLC, Square 1, and Comerica warrants from warrants on preferred stock to warrants on common stock eliminating the terms that caused the preferred stock warrants to be classified as a liability.

 

The combined transaction costs of the Company were $6.8 million which were expensed as incurred.

 

 

12


4 .

FAIR VALUE MEASUREMENTS

The following tables and disclosure present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 and December 31, 2014 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

 

 

 

As of September 30, 2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

67,493

 

 

$

 

 

$

 

 

$

67,493

 

Total

 

$

67,493

 

 

$

 

 

$

 

 

$

67,493

 

 

 

 

As of December 31, 2014

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

4,800

 

 

$

 

 

$

 

 

$

4,800

 

Total

 

$

4,800

 

 

$

 

 

$

 

 

$

4,800

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock warrant liabilities

 

$

 

 

$

 

 

$

2,460

 

 

$

2,460

 

Total

 

$

 

 

$

 

 

$

2,460

 

 

$

2,460

 

 

The carrying amounts of the Company’s financial instruments, including cash, restricted cash, deposits, accounts payable, and accrued expenses and other liabilities, approximate fair value due to their short maturities. The Company’s lease obligations, term loan and convertible notes have fair values that approximate their carrying value based on prevailing borrowing rates available to the Company for loans with similar terms. Financial assets and liabilities, which are measured or disclosed at fair value on a recurring basis and are classified within the Level 3 designation, consist of preferred stock warrant liabilities. On May 4, 2015, the preferred stock warrants outstanding were converted to warrants to purchase common stock eliminating the terms that caused the preferred stock warrants to be accounted for as a liability and revalued at each reporting date.

The Company acquired IPR&D in connection with its Merger. IPR&D consists of intellectual property related to Regado’s aptamer platform and is valued based on the estimated net present value of future cash flows expected to be generated from commercialization. The valuation of the aptamer platform technology was valued using the income approach which values the asset by estimating the present value of future economic benefits that the asset is expected to produce. There was no carrying value of IPR&D for the periods presented.

None of the Company’s non-financial assets or liabilities is recorded at fair value on a non-recurring basis for the periods presented. There were no transfers between levels within the fair value hierarchy during the periods presented.

The following table provides a reconciliation of liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands) for the nine months ended September 30, 2015 and the year ended December 31, 2014:

 

 

 

Nine   Months Ended

September 30,

2015

 

 

Year Ended

December 31,

2014

 

Balance, beginning of period

 

$

2,460

 

 

$

2,773

 

Issuance of preferred stock warrants

 

 

 

 

 

868

 

Reclassification of stock award liability from equity

   upon modification

 

 

 

 

 

399

 

Reclassification of stock award liability to equity

   upon expiration

 

 

 

 

 

(292

)

Change in fair value of stock award liability

 

 

 

 

 

(107

)

Reclassification of preferred stock warrant liability

   to equity upon conversion to common stock

 

 

(521

)

 

 

 

Change in fair value of preferred stock warrant

   liabilities (1)

 

 

(1,939

)

 

 

(1,181

)

Balance, end of period

 

$

 

 

$

2,460

 

 

(1)

Changes in fair value of the preferred stock warrant liabilities are recorded in other income (expense), net on the accompanying Statements of Operations and Comprehensive Loss.

13


As of September 30, 2015, there were no Level 3 liabilities measured at fair value outstanding. As of December 31, 2014, the significant unobservable inputs used to determine the fair value of preferred stock warrant liabilities using an option-pricing model and the weighted average assumptions used in determining the fair value of the outstanding preferred stock warrant liabilities were as follows: risk-free interest rate of 0.13%, no expected dividend yield, expected price volatility of 107%, and expected term (in years) of 0.8.

 

 

5.

RESTRICTED CASH

The Company held restricted cash of $0.3 million as of September 30, 2015 and December 31, 2014 consisting of a cash secured letter of credit required by the landlord associated with the May 2014 headquarters lease.

 

 

6.

ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following (in thousands):

 

 

 

As of September 30,

2015

 

 

As of December 31,

2014

 

Clinical trial expenses

 

$

2,069

 

 

$

478

 

Research and development

 

 

490

 

 

 

235

 

Compensation expense

 

 

913

 

 

 

928

 

Professional services

 

 

426

 

 

 

709

 

Loan interest

 

 

 

 

 

4,153

 

Total accrued expenses and other liabilities

 

$

3,898

 

 

$

6,503

 

 

 

7.

DEBT AND WARRANTS

Convertible Notes and Warrants

On May 4, 2015, Private Tobira’s convertible notes of $43.0 million and accrued interest of $5.2 million were converted into 3,532,756 shares of Series B preferred stock of Private Tobira immediately followed by conversion on a one for one basis into shares of Private Tobira common stock. The following table presents convertible notes, including principal and accrued interest, that were converted to shares of common stock (in thousands):

 

Convertible Notes

 

Principal

 

 

Accrued   Interest

 

July 2012

 

$

10,000

 

 

$

2,368

 

January 2013

 

 

7,000

 

 

 

1,342

 

October 2013

 

 

5,000

 

 

 

617

 

March 2014

 

 

8,000

 

 

 

726

 

March 2015

 

 

13,000

 

 

 

168

 

Total

 

$

43,000

 

 

$

5,221

 

 

In connection with the conversion of the March 2015 notes, the Company recorded a contingent beneficial conversion feature of $0.4 million equal to the difference between the conversion price of $11.81 and the fair value of the underlying Series B preferred stock on the date of issuance. The contingent beneficial conversion feature was immediately expensed to interest expense and recorded in other income (expense), net, on the accompanying statement of operations and comprehensive loss. 

On May 4, 2015, warrants issued to holders of the July 2012 notes, January 2013 notes, October 2013 notes and March 2014 notes expired unexercised. No warrants were issued in connection with the March 2015 notes.

Oxford Finance Term Loan

On June 30, 2014, and as amended on May 5, 2015 to address the Merger, the Company entered into an aggregate $15.0 million, four year term loan with Oxford Finance LLC, or the Oxford Loan. The Oxford Loan bears interest at a fixed rate of 6.954% per annum with interest only payments through December 31, 2015 followed by 30 equal payments of principal and interest until maturity at June 1, 2018. At the time of final payment, the Company is required to pay an exit fee of 4.0% of the original principal balance of the Oxford Loan, which the Company recorded as a liability and debt discount at the origination of the term loan. In addition, the

14


Company incurred loan originati on fees of $0.1 million which were recorded as a loan discount and debt issuance costs of $0.1 million which were recorded as a n other asset.

On August 10, 2015, the Company amended the terms of the Oxford Loan to extend the interest only period through December 31, 2016 and the maturity date to June 1, 2019. The exit fee was increased from 4.0% to approximately 5.0% of the original principal balance. The Oxford Loan continues to bear interest at a fixed rate of 6.954% per annum. The Company accounted for the amended terms as a debt modification. No additional fees or other consideration were paid to Oxford Finance LLC. Costs incurred with third parties were expensed as incurred.

In connection with the Oxford Loan, the Company granted a security interest in all of its assets, except intellectual property, provided that a judicial authority could require the Company’s intellectual property to be part of the collateral package to the extent necessary to satisfy repayment if the company’s other secured assets are insufficient. The Oxford Loan restricts the Company from issuing dividends and contains customary affirmative and negative covenants. At September 30, 2015, the Company was in compliance with all loan covenants.

The Company is permitted to make voluntary prepayments of the Oxford Loan with a prepayment fee equal to (i) 3.0% of the loan prepaid during the first 12 months, (ii) 2.0% of the loan prepaid in months 13-24 and (iii) 1.0% of the loan thereafter. The Company is required to make mandatory prepayments of the outstanding loan upon the acceleration by the lenders following the occurrence of an event of default, along with a payment of the final payment, the prepayment fee and any other obligations that are due and payable at the time of prepayment.

The Company evaluated the Oxford Loan in accordance with accounting guidance for derivatives and determined there was de minimis value to the identified derivative features at issuance and at subsequent reporting periods through September 30, 2015.

The Company accounts for the debt discount and deferred issuance costs utilizing the effective interest method. The Company recorded interest expense and amortization of the debt discount of $0.3 million and $1.0 million for the three and nine months ended September 30, 2015, respectively, and $0.3 million and $0.3 million for the three and nine months ended September 30, 2014, respectively.

Long-term debt and unamortized discount balances are as follows (in thousands):

 

 

 

As of September 30,

2015

 

 

As of December 31,

2014

 

Face value of term loan

 

$

15,000

 

 

$

15,000

 

Exit fee

 

 

755

 

 

 

600

 

Unamortized debt discount associated with issuance of

   preferred stock warrants, exit fee, and loan origination

   fees

 

 

(742

)

 

 

(811

)

Term loan, net

 

$

15,013

 

 

$

14,789

 

 

As of September 30, 2015, future minimum payments under the Oxford Loan were as follows (in thousands):

 

Year ending December 31,

 

 

 

 

2015 (remaining three months)

 

$

261

 

2016

 

 

1,043

 

2017

 

 

6,554

 

2018

 

 

6,554

 

2019

 

 

4,031

 

Total future minimum payments

 

 

18,443

 

Less: unamortized interest

 

 

(2,688

)

Less: exit fee

 

 

(755

)

Present value of loan payments

 

$

15,000

 

 

Warrants

In connection with the Oxford Loan, the Company issued warrants to the lenders to purchase an aggregate of 51,783 of Series B preferred stock at a purchase price of $10.14 per share after giving effect for the Exchange Ratio.

15


In November 2011, the Company entered into a loan and security agreement with Square 1 Bank for a $4.0 million three-year loan, or the Square 1 Loan. The Square 1 Loan was paid in full and terminated in June 2014. In connection with the Square 1 Loan, the Company issued to Square 1 Ba nk a warrant to purchase 11,835 shares of Series B preferred stock with an exercise price of $10.14 per share after giving effect for the Exchange Ratio.

Prior to the Merger, Regado secured a venture debt loan with Comerica Bank for $4.5 million, or the Comerica Loan. The Comerica Loan was paid in full and was terminated in March 2015. In connection with the Comerica Loan, Regado issued to Comerica Bank a warrant to purchase 1,039 shares of common stock with an exercise price of $108.18 per share after giving effect to the one for nine reverse stock split.

Prior to May 4, 2015, the Company accounted for these warrants as a liability, which were revalued to fair value at each reporting period. On May 4, 2015, in connection with the Merger, the warrants to purchase shares of Series B preferred stock converted to warrants to purchase common stock, and the associated preferred stock warrant liability was revalued to fair value and reclassified to additional paid-in capital.

The Company had the following shares of common stock warrants outstanding as of September 30, 2015 after giving effect for the Exchange Ratio:

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

 

Outstanding as of

 

 

 

 

 

Per Share Exercise

 

 

September 30,

 

Issuance Date

 

Expiration Date

 

Price

 

 

2015

 

November 2011

 

November 2018

 

$

10.14

 

 

 

11,835

 

May 2013

 

May 2023

 

$

108.18

 

 

 

1,039

 

June 2014

 

June 2021

 

$

10.14

 

 

 

51,783

 

 

 

 

 

 

 

 

 

 

64,657

 

 

 

8.

CONVERTIBLE PREFERRED STOCK

Prior to May 4, 2015, Private Tobira’s convertible preferred stock was classified as temporary equity on the accompanying condensed balance sheets. The preferred stock was not redeemable; however, upon certain change in control events that were outside of the Company’s control, including liquidation, sale or transfer of control of the Company, holders of the convertible preferred stock had the right to receive its liquidation preference under the terms of the Company’s certificate of incorporation.

Immediately prior to the Merger, Private Tobira’s convertible notes and accrued interest were converted to 3,532,756 shares of Series B preferred stock. Immediately thereafter, Private Tobira’s Series A and B preferred stock was converted to 3,916,772 shares of Private Tobira common stock at a conversion rate of 1.7742 for Series A preferred stock and a one for one basis for Series B preferred stock. Upon the close of the Merger, all resultant Private Tobira common stock was exchanged for 10,654,460 shares of Regado common stock, as renamed Tobira, at the Exchange Ratio.

The following table summarizes the Company’s convertible preferred stock balances as of September 30, 2015 and December 31, 2014 (in thousands, except share and per share amounts):

 

 

 

September 30,

2015

 

 

December 31,

2014

 

Series A, noncumulative convertible preferred stock, par value $0.0001;

   zero and 1,043,011 shares authorized at September 30, 2015 and December 31,

   2014, respectively; zero and 994,866 shares issued and outstanding at

   September 30, 2015 and December 31, 2014, respectively; liquidation value of

   $0 and $31,000 at September 30, 2015 and December 31, 2014, respectively

 

 

 

 

 

30,908

 

Series B, noncumulative convertible preferred stock, par value $0.0001; zero and

   5,133,477 shares authorized at September 30, 2015 and December 31, 2014,

   respectively; zero and 2,151,722 shares issued and outstanding at September 30,

   2015 and December 31, 2014, respectively; liquidation value of $0 and $54,600

   at September 30, 2015 and December 31, 2014, respectively

 

 

 

 

 

31,074

 

 

Following the completion of the Merger, on May 15, 2015, the holders of Series F convertible preferred stock elected to convert all 10,000 shares of outstanding preferred stock into 222,222 shares of common stock. No remaining convertible preferred stock balances were outstanding as of September 30, 2015.

 

16


 

9.

STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

Immediately prior to the effective date of the Merger, the principal and accrued interest under Private Tobira’s outstanding convertible notes converted into shares of Series B Preferred Stock of Private Tobira. Immediately thereafter, all outstanding preferred stock of Private Tobira converted into common stock of Private Tobira.

At the effective date of the Merger, each outstanding share of Private Tobira’s common stock was converted into the right to receive 1.4302 shares of Regado common stock, as renamed Tobira, with cash paid in lieu of any fractional shares.

On May 4, 2015, Tobira entered into the 2015 Purchase Agreement with certain Private Tobira stockholders and other institutional investors which provided for the sale and issuance, promptly after the consummation of the Merger, of 2,542,365 shares of Tobira in the Private Placement at a purchase price of $10.62 per share (which price is equal to the closing price of Tobira’s common stock on April 30, 2015, as adjusted by the one for nine reverse split effected on May 4, 2015) for aggregate gross proceeds of $27.0 million. Issuance costs of $0.2 million were recorded as a reduction to proceeds received in additional paid-in capital.

On June 3, 2015, the Company entered into a sales agreement with Cowen and Company, LLC, or Cowen, to issue shares of common stock at-the-market having an aggregate offering price of up to $40.0 million. Cowen will earn a commission equal to 3.0% of the gross proceeds from the sale of common stock pursuant to the terms of the sales agreement. The agreement may be terminated with advance notice by either party. During August 2015, the Company sold an aggregate of 1,141,970 shares of common stock for gross proceeds of $15.1 million. Issuance costs of $0.7 million were recorded as a reduction to proceeds received in additional paid-in capital.

The Company issued common stock during the nine months ended September 30, 2015 as follows:

 

 

 

Common Stock Issued and Outstanding (in

shares)

 

Balance at December 31, 2014

 

 

403,539

 

Conversion of convertible notes and accrued interest

 

 

3,532,756

 

Conversion of Series A and B preferred stock

 

 

3,916,772

 

Conversion of Series F preferred stock

 

 

222,222

 

Issuance of shares in connection with the Merger

 

 

6,939,282

 

Issuance of shares for banker fees

 

 

78,213

 

Issuance of shares in connection with the Private Placement

 

 

2,542,365

 

Issuance of shares at-the-market

 

 

1,141,970

 

Issuance of shares from options exercised

 

 

32,874

 

Balance at September 30, 2015

 

 

18,809,993

 

 

 

10 .

STOCK-BASED COMPENSATION EXPENSE

The Company adopted two stock compensation plans prior to the Merger, the 2007 Stock Option Plan, or the 2007 Plan, adopted in August 2007, and the 2010 Stock Option Plan, or the 2010 Plan, adopted in March 2010. The Company ceased granting awards under the 2007 Plan when it adopted the 2010 Plan. Options remain outstanding under both the 2007 Plan and the 2010 Plan. In connection with the Merger, all such options converted into options to purchase shares of Regado common stock, as renamed Tobira, and the applicable exercise prices were adjusted to reflect the Exchange Ratio. The Company assumed the 2010 Plan under the terms of the Merger and may grant awards under this plan to certain employees. No additional grants can be made from the 2007 Plan, and shares subject to awards granted under this plan that cancel or expire unexercised do not revert to or become available for re-grant under any other Company stock compensation plan.

Prior to the Merger, Regado adopted two stock compensation plans, the 2004 Plan and 2013 Plan. Options remain outstanding under both the 2004 and the 2013 Plan. The number of shares subject to and the exercise prices applicable to these outstanding options were adjusted in connection with the one for nine reverse stock split. No additional grants may be made from the 2004 Plan. However, shares subject to awards granted under this plan that cancel or expire unexercised do revert to and become available for re-grant under the 2013 Plan pool.  On July 9, 2015, the Company’s stockholders approved amendments to material terms of the Company’s 2013 Plan, including an increase by 1.2 million shares reserved for issuance and increases in, or imposition of, certain share limits under the 2013 Plan. The Company intends that the 2013 Plan will be its primary stock compensation plan in the future.  

17


Because the Company is considered to be the acquirer for accounting purposes, the pre-Merger vested stock options granted by Regado under the 2004 Plan and the 2013 Plan are deemed to have been exchanged for equity awards of the Company and as such the por tion of the acquisition date fair value of these equity awards attributable to pre-Merger service to Regado were accounted for as a component of the consideration transferred.

The exchange of Private Tobira stock options to purchase Regado common stock, as renamed Tobira, was accounted for as a modification of the awards because the legal exchange of the awards is considered a modification of Private Tobira stock options. The modification of the stock options did not result in any incremental compensation expense as the modification did not increase the fair value of the stock options.

The following table summarizes stock option activity under the Company’s stock-based compensation plan during the nine months ended September 30, 2015:

 

 

 

Number of

Options

 

 

Weighted-

Average

Exercise

Price Per Share

 

 

Weighted-

Average

Remaining

Contractual

Life

(in Years)

 

 

Weighted-

Average

Grant

Date Fair

Value

 

Outstanding at December 31, 2014

 

 

1,110,744

 

 

$

4.59

 

 

 

8.72

 

 

 

 

 

Granted

 

 

761,382

 

 

$

15.08

 

 

 

 

 

 

$

10.95

 

Options assumed in the Merger

 

 

551,363

 

 

$

30.11

 

 

 

 

 

 

 

 

 

Exercised

 

 

(32,874

)

 

$

3.51

 

 

 

 

 

 

 

 

 

Canceled

 

 

(16,619

)

 

$

20.30

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2015

 

 

2,373,996

 

 

$

14.00

 

 

 

8.51

 

 

 

 

 

Vested and expected to vest at September 30, 2015

 

 

2,310,312

 

 

$

14.08

 

 

 

 

 

 

 

 

 

Vested and exercisable at September 30, 2015

 

 

1,090,000

 

 

$

17.77

 

 

 

 

 

 

 

 

 

 

As of September 30, 2015 and December 31, 2014, the total intrinsic value of vested and exercisable options was $3.2 million and $1.3 million, respectively. Under our stock-based compensation plan, option awards generally vest over a four-year period contingent upon continuous service and expire ten years from the date of grant (or earlier upon termination of continuous service). The fair value-based measurement of each option is estimated on the date of grant using the Black-Scholes option valuation model.

Stock-based compensation expense related to options granted was recorded as follows (in thousands):

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014