TIDMVERS
RNS Number : 0941O
Verseon Corporation
30 September 2019
For immediate release September 30, 2019
Verseon Corporation
("Verseon" or the "Company")
Interim Results
Fremont, Calif.-Verseon (AIM:VERS), the clinical-stage
pharmaceutical company developing disruptive life-science
technologies to advance global health, today announces its Interim
Results for the six months ended June 30, 2019. The report and
accounts are available for download from the Company's website
(www.verseon.com).
Drug program highlights
Anticoagulation
-- We are developing precision oral anticoagulants (PROACs) for
long-term anticoagulant-antiplatelet therapy.
-- Dosing in the phase 1 clinical trial of our first PROAC,
VE-1902, began in early 2019 and is expected to continue through
2019.
-- VE-2851, our second PROAC clinical candidate, is targeted to enter clinical trials in 2020.
Clinical trial update
To assess VE-1902's safety, tolerability, and
pharmacokinetic/pharmacodynamic profile, healthy adult volunteers
have been assigned to single ascending dose (SAD), food effect, or
multiple ascending dose (MAD) arms of this double-blind,
randomized, placebo-controlled first-in-human phase 1 trial. To
date, six SAD, one MAD, and the food effect cohort have been
completed and no serious adverse events have been observed. The
study report is expected in late Q1 2020.
Diabetic macular edema
-- We are developing oral drugs for diabetic eye disease to
replace or complement current eye injections.
-- Presentations on our oral DME candidates at multiple
scientific conferences were well received.
-- VE-4839, our first candidate for clinical trials in this
program, is expected to enter phase 1 clinical trials in
mid-2020.
Hereditary angioedema
-- We are developing oral drugs for this rare, potentially
life-threatening disease that is currently only treated with
injections.
-- Our oral drug candidates continue to show good potency and
pharmacokinetics in preclinical testing.
Oncology
-- We are developing next-generation chemotherapy agents
targeted at the treatment of multidrug resistant cancers.
-- In preclinical testing, our drug candidates appear largely
unaffected by common modes of drug resistance.
Conferences
-- International Stroke Conference 2019 (PROACs)
-- Association for Research in Vision and Ophthalmology 2019
annual meeting (Diabetic macular edema)
-- BIO 2019 International Convention (Diabetic macular edema)
Business review
During the first half of 2019 and the months leading up to this
report, market events outside of the Company's control impacting
various third parties and Verseon shareholders have put Verseon's
common share price under extreme pressure and delayed the Company's
attempts to implement its growth strategy outlined in previous
reports.
The Company is currently pursuing alternate efforts to raise
working capital, including a refinancing or sale-leaseback of its
headquarters in Fremont, CA, a bridge debt facility, as well as the
previously announced preferred share offering. The Company's
current focus is on a bridge debt facility and it expects to make a
further announcement in the near future.
Finance review
During the first six months of 2019, Verseon has continued to
fund its drug programs in anticoagulation, diabetic macular edema,
hereditary angioedema, metabolic disorders, and oncology.
Results for the six months ended June 30, 2019:
-- Total assets on the balance sheet stood at $57.6 million,
compared to $56.4 million as of December 31, 2018.
-- Cash, cash equivalents, and short-term investments stood at
$2.3 million, compared to $3.6 million as of December 31, 2018.
-- Property, equipment, buildings and land totaled $52.3
million, compared to $51.3 million as of December 31, 2018.
-- Research and development expenses were $6.5 million for the
six months ended June 30, 2019, compared to $7.0 million for the
six months ended June 30, 2018.
-- General and administrative expenses were $6.0 million,
compared to $3.2 million for the six months ended June 30,
2018.
-- Non-cash expenses include stock-based compensation of $0.9
million, compared to $0.6 million for the six months ended June 30,
2018, and also a currency exchange loss of $4 thousand, compared to
a loss of $4 thousand for the six months ended June 30, 2018.
-- Net loss was $12.6 million or $0.08 per basic share, compared
to a net loss of $10.2 million or $0.07 per basic share for the
first six months of 2018.
-- On March 19, 2019, the Company closed a common share
subscription raising $10.7 million from existing shareholders.
Capital structure
At June 30, 2019, Verseon's issued share capital consisted of
159,686,512 shares of common stock and the Company held 42,917
shares in treasury, as compared to 151,640,732 shares of common
stock outstanding with 42,917 shares in treasury at December 31,
2018.
About Verseon
Verseon Corporation (www.verseon.com, AIM: VERS) is developing
disruptive life-science technology to advance global health. The
clinical-stage company is using its proprietary, computational drug
discovery platform paired with a comprehensive in-house chemistry
and biology workflow to build a growing drug development pipeline.
The company is applying its platform to a growing drug pipeline and
currently has active drug programs in anticoagulation, diabetic
macular edema, hereditary angioedema, metabolic disorders, and
oncology.
For further information, please contact:
Verseon Corporation www.verseon.com
Sebastian Wykeham / Tina Schlafly +1 (510) 225 9000
Arden Partners (NOMAD and Joint Broker)
Ruari McGirr / Ciaran Walsh / Dan Gee-Summons
(Corporate Finance) / Fraser Marshall +44 (0) 20 7614
(Equity Sales) 5900
Cantor Fitzgerald Europe (Joint Broker)
+44 (0) 20 7894
Phil Davies 7000
For trade and pharma media enquiries, please contact:
Vane Percy & Roberts
+44 (0) 1737 821
Simon Vane Percy 890
Cautionary Note on Forward-Looking Statements
This press release contains forward-looking statements, which
are generally statements that are not historical facts.
Forward-looking statements can be identified by the words
"expects," "anticipates," "believes," "intends, " "estimates,"
"plans," "will," "outlook," and similar expressions.
Forward-looking statements are based on management's current plans,
estimates, assumptions, and projections, and speak only as of the
date they are made. We undertake no obligation to update any
forward-looking statement in light of new information or future
events, except as otherwise required by law. Forward-looking
statements involve inherent risks and uncertainties, most of which
are difficult to predict and are generally beyond our control.
Actual results or outcomes may differ materially from those implied
by the forward-looking statements as a result of the impact of a
number of factors.
Risks and uncertainties
Research and development risks
Drug development projects are subject to numerous external
influences, including economic and regulatory environments, that
are outside our control.
We cannot be certain that our current or future drug development
efforts will result in drug candidates that progress into human
trials and subsequently into the marketplace.
The market for pharmaceuticals is highly competitive and our
drug candidates may not become adopted by the medical community and
may not become profitable.
Risks related to operations
We may not be able to find, attract, and retain personnel.
Unfavorable global economic conditions, natural disasters, and
other factors outside our control may adversely affect us.
We rely on third parties for a portion of our scientific work as
well as for manufacturing of drugs and other supplies for our
clinical trials. If this work does not meet sufficient quality
standards or if one of those third parties fails to live up to
their obligations, operations might be negatively impacted.
Our growth may require significant capital expenditures and can
experience unexpected delays that could impact various aspects of
operations.
Risks related to intellectual property
Competitors may infringe upon our patents and other intellectual
property and force us to defend our intellectual property by legal
means.
Other companies could develop or market drug candidates with
comparable treatment capabilities, reducing the market potential of
our drugs.
Financial risks
Our Common Stock is settled in pound sterling, but our
operations are in the United States, and, to date, we use US
dollars to fund our operations. We hold funds in both currencies
and are susceptible to currency uctuations.
We have initiated clinical operations in Australia, which
requires payment of vendors and contractors in Australian dollars.
Currency fluctuations relating to the Australian dollar may also
affect our net operating losses.
The net losses we incur may fluctuate significantly from
half-year to half-year and year to year. In any particular
reporting period, our operating results could be below the
expectations of securities analysts or investors, which could cause
the stock price to decline.
To date, we have financed our operations primarily through the
sale of equity securities, convertible debt, and the mortgage loan
on our freehold building signed in June 2018. The amount of our
future net losses and sustainability will depend, in part, on the
rate of our future expenditures and our ability to obtain funding
through equity or debt financing, strategic collaborations, or
out-licensing of one or more of our product candidates to potential
partners.
We have not yet generated revenue and cannot be certain of
securing revenue-generating agreements and profits in the
future.
Risks related to securities
Even though our Common Stock is listed on AIM, a liquid market
for it may not develop or be sustained.
Company operations are based in the United States, and we are
incorporated under the laws of the State of Delaware, United
States. Accordingly, some of the legislation in England and Wales
regulating the operation of companies may not apply to us.
Consolidated balance sheets
As of June 30, 2019 and December 31, 2018
June 30, December
(US $'000, except share amounts and par
values) Note 2019 31, 2018
-------------------------------------------- ---- --------- ----------
Assets
-------------------------------------------- ---- --------- ----------
Current assets
Cash and cash equivalents 1 2,262 3,640
Short-term investments 1 2 3
Prepaid expenses and other current assets 2 754 417
-------------------------------------------- ---- --------- ----------
Total current assets 3,018 4,060
Buildings and land, net 3 51,186 49,850
Property and equipment, net 3 1,112 1,402
Software 4 1,807 497
Right to use asset 5 493 550
----------
Total assets 57,616 56,359
Liabilities and stockholders' equity
-------------------------------------------- ---- --------- ----------
Current liabilities
Accounts payable 4,657 2,923
Accrued liabilities 7 1,402 1,422
Lease liability 5 220 214
Short term debts 8 160 160
Total current liabilities 6,439 4,719
---- ---------
Long term liabilities
Lease liability 5 113 226
Long term debts 8 27,088 26,218
-------------------------------------------- ---- --------- ----------
Total long-term liabilities 27,201 26,444
-------------------------------------------- ---- --------- ----------
Total liabilities 33,640 31,163
-------------------------------------------- ---- --------- ----------
Commitments and contingencies
-------------------------------------------- ---- --------- ----------
Stockholders' equity 14
-------------------------------------------- ---- --------- ----------
Common stock-$0.001 par value, 300,000,000
shares authorized as of June 30, 2019
and December 31, 2018, respectively,
159,686,512 and 151,640,732 shares issued
and outstanding (exclusive of stock held
in Treasury of 42,917 and 42,917) as
of June 30, 2019 and December 31, 2018,
respectively. 160 152
Additional paid-in capital 150,813 139,283
Additional paid-in capital - Treasury (11) (11)
Loan receivable from stockholders (15,439) (15,282)
Accumulated deficit (115,263) (102,670)
Total stockholders' equity 20,260 21,472
-------------------------------------------- ---- --------- ----------
Non-controlling interests in subsidiaries 6 3,716 3,724
-------------------------------------------- ---- --------- ----------
Total equity 23,976 25,196
-------------------------------------------- ---- --------- ----------
Total liabilities and stockholders' equity 57,616 56,359
-------------------------------------------- ---- --------- ----------
See accompanying notes to consolidated financial statements.
Consolidated statements of operations and comprehensive loss
For the six months ended June 30, 2019 and 2018
June 30, June 30,
(US $'000, except share and
per share amounts) Note 2019 2018
========================================== ==== =========== ===========
Operating expenses
Research and development expenses 6,470 6,973
General and administrative
expenses 6,032 3,246
========================================== ==== =========== ===========
Total operating expenses 12,452 10,219
========================================== ==== =========== ===========
Operating loss (12,452) (10,219)
Interest expense (498) (92)
Interest income 162 165
Other income 246 -
Currency exchange (loss)/gain (4) (4)
========================================== ==== =========== ===========
Loss before income taxes (12,596) (10,150)
Income taxes 9 - -
========================================== ==== =========== ===========
Net loss (12,596) (10,150)
Net loss attributable to non-controlling
interests 3 1
========================================== ==== =========== ===========
Net loss attributable to Verseon
Corporation (12,593) (10,149)
Net loss (12,596) (10,150)
Unrealized gains on available-for-sale
securities 0 5
========================================== ==== =========== ===========
Total comprehensive loss (12,596) (10,145)
Comprehensive loss attributable
to non-controlling interests (3) (1)
========================================== ==== =========== ===========
Comprehensive loss attributable
to Verseon Corporation (12,593) (10,144)
========================================== ==== =========== ===========
Net loss attributable to Verseon
Corporation common stockholders
per share-basic and diluted 10 (0.08) (0.07)
Weighted-average shares of
stock outstanding used in computing
net loss per share-basic and
diluted 155,550,806 151,539,063
See accompanying notes to consolidated
financial statements.
Consolidated statements of cash flows
For the six months ended June 30, 2019 and June 30, 2018
(US $'000) June 30, June 30,
2019 2018
--------------------------------------------------------- -------- --------
Cash flows from operating activities
Net loss (12,596) (10,150)
Adjustments to reconcile net loss to net cash used
in operating activities
========================================================= ======== ========
Depreciation 1,079 402
Amortization of loan expense 530 -
Currency exchange loss (gain) from re-measurement 4 4
Stock-based compensation expense 891 643
Interest earned from loan receivable from stockholders (157) (155)
========================================================= ======== ========
Changes in assets and liabilities
========================================================= ======== ========
Decrease/(Increase) in prepaid expenses and other
current assets (337) 113
Increase in accounts payable 1,490 1,411
(Decrease)/Increase in accrued liabilities (20) (524)
========================================================= ======== ========
Net cash used in operating activities (9,117) (8,256)
========================================================= ======== ========
Cash flows from investing activities
========================================================= ======== ========
Purchases of property and equipment (1,731) (7,606)
Capitalized expenses (1,410) -
Purchases of available-for-sale securities investments 1 -
Maturities of available-for-sale securities investments - 1,249
Sales of available-for-sale securities investments - 7,081
========================================================= ======== ========
Net cash used in investing activities (3,140) 724
========================================================= ======== ========
Cash flows from financing activities
--------------------------------------------------------- -------- --------
Proceeds from exercise of stock options and warrants - 4
Proceeds from issuance of common stock 10,648 -
Proceeds from PACE financing 340 2,578
Proceeds from loan - 21,022
Payment on lease finance (105) (110)
(Purchase)/Proceeds from issuance of equity in Nirog - (6)
Net cash provided by financing activities 10,883 23,488
========================================================= ======== ========
Net increase/(decrease) in cash and cash equivalents (1,374) 15,956
========================================================= ======== ========
Effect of currency exchange rate changes (4) (4)
========================================================= ======== ========
Cash and cash equivalents at the beginning of the
year 3,640 3,290
========================================================= ======== ========
Cash and cash equivalents at the end of the period 2,262 19,242
========================================================= ======== ========
June 30, June 30,
(US $'000) Note 2019 2018
==================================================== ===== ======== ========
Supplemental disclosure of non-cash investing
and financing activities
==================================================== ===== ======== ========
Finance lease - 440
----------------------------------------------------------- -------- --------
Purchases of property and equipment under accounts
payable and accrued
liabilities 979 1,517
----------------------------------------------------------- -------- --------
Interest payment was $498 thousand in 2019 and $92 thousand in
2018.
No income taxes were paid in 2019 and 2018.
See accompanying notes to consolidated financial statements.
Consolidated statements of stockholders' equity
For the six months ended June 30, 2019, and the year ended
December 31, 2018
Common Loan Stock- Total
Stock Additional Treasury receivable Other holders' Non- stock-holders'
at par paid-in Stock from Accumulated comprehensive equity controlling equity
(US $'000) value capital APIC stock-holders deficit gain (loss) (deficit) interest (deficit)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Balance at
December 31,
2017 152 137,560 (11) (15,087) (81,114) (5) 41,495 3,720 45,215
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Exercise of
stock options
and
warrants-Common
Stock * 4 - - - - 4 - 4
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Issuance of
shares from
Restricted Stock
Units * * - - - - - - -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Loans to
stockholders - - - (155) - - (155) 11 (144)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Stock-based
compensation - 643 - - - - 643 - 643
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Investment in
Nirog - (17) - - - - (17) - (17)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss - - - - (10,150) 5 (10,145) - (10,145)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss
attributable to
non-controlling
interests - - - - 1 - 1 (1) -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Balance at June
30, 2018 152 138,190 (11) (15,242) (91,263) - 31,826 3,730 35,556
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Exercise of
stock options
and
warrants-Common
Stock - 27 - - - - 27 - 27
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Issuance of
shares from
Restricted Stock
Units - - - - - - - - -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Loans to
stockholders - - - (40) - - (40) 2 (38)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Stock-based
compensation - 1,066 - - - - 1,066 1,066
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss - - - - (11,415) - (11,415) - (11,415)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss
attributable to
non-controlling
interests - - - - 8 - 8 (8) -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Balance at
December 31,
2018 152 139,283 (11) (15,282) (102,670) - 21,472 3,724 25,196
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Exercise of
stock options
and
warrants-Common
Stock * - - - - - - - -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Issuance of
shares from
Restricted Stock
Units * * - - - - - - -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Issuance of new
shares 8 10,639 - - - - 10,647 - 10,647
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Loans to
stockholders - - - (157) - - (157) (5) (162)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Stock-based
compensation - 891 - - - - 891 - 891
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Investment in
Nirog - - - - - - - - -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss - - - - (12,596) - (12,596) - (12,596)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss
attributable to
non-controlling
interests - - - - 3 - 3 (3) -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Balance at June
30, 2019 160 150,813 (11) (15,439) (115,263) - 20,260 3,716 23,976
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
* Amount less than $1,000 and insignificant after rounding.
See accompanying notes to consolidated financial statements.
Consolidated statements of stockholders' equity
For the six months ended June 30, 2019 and year ended December
31, 2018 (continued)
Common Total shares
(Shares) Stock outstanding
----------------------------------------------- ------------ -------------
Balance at December 31, 2017 151,489,789 151,489,789
Exercise of stock options and warrants-Common
Stock 55,596 55,596
Issuance of shares from Restricted Stock
Units 95,347 95,347
Balance at December 31, 2018 151,640,732 151,640,732
----------------------------------------------- ------------ -------------
Exercise of stock options and warrants-Common
Stock 5,542 5,542
Issuance of shares from Restricted Stock
Units 26,738 26,738
Issuance of shares from Restricted Stock
Award 313,500 313,500
Issuance of new shares 7,700,000 7,700,000
Balance at June 30, 2019 159,686,512 159,686,512
----------------------------------------------- ------------ -------------
See accompanying notes to consolidated financial statements.
Notes to consolidated financial statements
A. Basis of presentation
The consolidated financial statements of the Company are
prepared in accordance with accounting principles generally
accepted in the United States of America ("US GAAP"). The financial
information is presented in United States Dollars ("$"). All
intercompany accounts and transactions have been eliminated in
consolidation.
The accounting policies applied are consistent with those that
were applied to the consolidated financial statements for the year
ended December 31, 2018.
B. History and organization of the Company
The Company was established as Verseon LLC on July 18, 2002 in
the State of Delaware. In August 2007, the Company incorporated as
a general corporation in the State of Delaware. The Company is
headquartered in Fremont, California. It completed its initial
public offering ("IPO") on May 7, 2015 on the Alternative
Investment Market ("AIM") of the London Stock Exchange.
The Company formed Verseon India Private Limited ("VIPL")
together with a Mauritius-based private equity investor. VIPL was
incorporated in Andhra Pradesh, India in March 2006 to manage and
maintain the Company's supercomputing cluster. The Company has
since closed this operation in 2009 and is in the process of
dissolving the legal entity.
Nirog Therapeutics LLC ("Nirog") was formed on September 23,
2009 as a Delaware limited liability company. Nirog was established
as a vehicle to fund the research and development of the Company's
anticoagulation program and the Company owned 81.9% and 81.2% of
Nirog as of June 30, 2019 and December 31, 2018, respectively.
In August 2015, the Company acquired a property in Fremont,
California with approximately 85,000 square feet of office and
laboratory space for $8.7 million through its wholly owned
subsidiary, VRH1 LLC, in the State of California. The redeveloped
facility accommodates the Company's drug discovery and development
operations as well as the corporate headquarters.
On October 13, 2017, VCR1, a wholly owned subsidiary of Verseon,
was incorporated in Australia. VCR1 conducts clinical trials on
behalf of Verseon.
On September 14, 2018, BlockRules Limited, a wholly owned
subsidiary of Verseon, was incorporated in the United Kingdom.
BlockRules will develop innovative technology and services to
enable international companies to issue regulated securities on
public blockchains, including "VIAT(TM) ," Verseon's preferred
share.
On October 22, 2018, VDP1 LLC ("VDP1"), a wholly owned
subsidiary of Verseon, was incorporated in the state of California.
VDP1 was formed to conduct research and development in the field of
use of diagnosis, treatment, and prevention of diabetic macular
edema, hereditary angioedema, and related issues.
On October 22, 2018, VDP2 LLC ("VDP2"), a wholly owned
subsidiary of Verseon, was incorporated in the state of California.
VDP2 was formed to conduct research and development in the field of
use of diagnosis, treatment, and prevention of cancer.
C. Description of business
Verseon is an emerging pharmaceutical company that uses a
proprietary platform to design and develop new drug candidates.
Verseon has created a proprietary computational platform that can
model molecular interactions with sufficient accuracy to drive the
drug discovery process. For any disease program, the platform first
generates vast numbers of novel drug-like, synthesizable compounds
which are then computationally tested against a disease-causing
protein to identify the best binders, i.e., drug candidates that
could potentially treat the disease. These computationally designed
candidates are synthesized and sent through a series of disease
specific in vitro and in vivo tests to identify the best candidates
for clinical testing in humans. The Verseon process is disease
agnostic and can systematically yield drug candidates that cannot
be found with other current methods.
D. Summary of significant accounting policies
a. Basis of preparation and principles of consolidation: The
accompanying consolidated financial statements include the accounts
of the Company, consolidated with the accounts of all of its
subsidiaries and affiliates in which the Company holds a
controlling financial interest as of the financial statement date.
These consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States
of America ("US GAAP"). The financial information is presented in
United States Dollars ("$"). All intercompany amounts have been
eliminated.
b. Use of estimates: The preparation of the financial statements
in conformity with US GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities as on the date
of the financial statements and the reported amount of revenues and
expenses during the reported period. Actual results could differ
materially from those estimates.
c. Research and development expenses: The Company's research and
development expenses include, but are not limited to, wages and
related benefits, including stock-based compensation, facilities,
supplies, external services, and other expenses that are directly
related to its research and development activities. Research and
development costs are expensed as they occur. When payments for
research and development services are made prior to the services
being rendered, those amounts are recorded as prepaid assets on the
consolidated balance sheet and are expensed as the services are
provided. For the six months ended June 30, 2019 and 2018, research
and development expenses were $6.5 million and $7.0 million,
respectively.
d. Government grants: The Company recognizes government grants
as other income as receivable in the Consolidated Statements of
Operations and Comprehensive Loss, with the cash flows recognized
in line with the research and development expenditures as an
operating activity. For the six months ended June 30, 2019 and
2018, the Company recognized $0.2 million and $0 million
respectively, as other income from the Australian government for a
research and development credit refund.
e. Foreign currency: The Company records foreign currency
transaction gains and losses, realized and unrealized, and foreign
exchange gains and losses due to re-measurement of monetary assets
and liabilities denominated in foreign currency as currency
exchange gains or losses in the consolidated statements of
operations and comprehensive loss. For the six months ended June
30, 2019 and 2018, the Company recorded a loss of $4 thousand and
$4 thousand, respectively.
f. Cash equivalents and investments: The Company considers
investments in highly liquid instruments that are purchased with
original maturities of three months or less to be cash equivalents.
The Company limits its concentration of risk by diversifying its
investments among a variety of issuers. All investments are
classified as available for sale and are recorded at fair value
based on quoted prices in active markets or based upon other
observable inputs, with unrealized gains and losses excluded from
earnings and reported in other comprehensive loss. Purchase
premiums and discounts are recognized in interest income using the
interest method over the terms of the securities. Realized gains
and losses and declines in fair value that are deemed to be other
than temporary are reflected in the consolidated statement of
operations. The cost of securities sold is based on the
specific-identification method.
g. Fair value of financial instruments: The carrying amounts of
certain of the Company's financial instruments, including cash
equivalents and short-term investments, approximate their fair
value. Fair value is considered to be the price at which an asset
could be exchanged or a liability transferred in an orderly
transaction between knowledgeable, willing parties in the principal
or most advantageous market for the asset or liability. Where
available, fair value is based on or derived from observable market
prices or other observable inputs. Where observable prices or
inputs are not available, valuation models are applied. The
valuation techniques involve estimation and judgment, the degree of
which is dependent on the price transparency for the instruments or
market and the instruments' complexity.
h. Concentration of credit risk: The Company invests in a
variety of financial instruments and, by its policy, limits the
amount of credit exposure with any one issuer, industry, or
geographic area.
i. Property and equipment, net: Property and equipment are
stated at cost less accumulated depreciation. Depreciation is
computed using the straight-line method over the estimated useful
lives. The estimated useful lives of assets are as follows:
Estimated useful life
------------------------- ---------------------
Computer and peripherals 2 years
Lab equipment 5 years
Office equipment 5 years
Furniture and fittings 5 years
Building 20 years
------------------------- ---------------------
j. Impairment of long-lived assets: The Company reviews
long-lived assets, including property and equipment, for impairment
whenever events or changes in business circumstances indicate that
the carrying amount of the assets may not be fully recoverable. An
impairment loss would be recognized when estimated undiscounted
future cash flows expected to result from the use of an asset are
less than its carrying amount. The impairment loss would be based
on the excess of the carrying value of the impaired asset over its
respective fair value. To date, the Company has not recorded any
impairment losses.
k. Leased assets: Under ASC 842, the Company as a lessee
recognizes a "right-of-use" asset and lease liabilities in the
balance sheet measured at the present value of the unavoidable
future lease payments. The "right-of-use" asset is amortized and
interest on lease liabilities is recognized over the lease term.
For a lease classified as a finance lease the "right-of-use" asset
is generally depreciated on a straight-line basis over the lease
term and the interest expense is recognized on an effective
interest expense method, which results in the aggregate income
statement charge being front-loaded. For a lease classified as an
operating lease the total lease expense is recognized on a
straight-line basis so that as the interest expense declines over
the lease term the amortization of the right-of-use asset increases
in order to provide a constant expense profile.
The Company has elected to not apply ASC 842 to short-term
leases defined as one with a term of 12 months or less that does
not include a purchase option that the Company is reasonably likely
to exercise. For such short-term leases the Company recognizes the
lease payments on a straight-line basis over the lease term.
l. Loans: The Company capitalizes the issuance costs incurred
and amortizes them over the term of the loan. The loan balances are
presented net of unamortized issuance costs.
m. Income taxes: Income taxes are accounted for under the asset and liability method.
i. Current income taxes: The Company assesses its current income
tax expense based upon the taxes due in each of its operating tax
jurisdictions, which are comprised of the U.S., Australia and
India. The Company has its Indian subsidiary, VIPL, which is
dormant and not incurring any taxes. The Company is located in the
United States with all of its operating expenses occurring within
this tax jurisdiction. Payments of advance taxes and income taxes
payable in the same tax jurisdictions are offset.
ii. Deferred income taxes: Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial information carrying amounts of
assets and liabilities and their respective tax basis, operating
loss carry forwards, and tax credits. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Valuation allowances are
recorded to reduce deferred tax assets when it is more likely than
not that a tax benefit will not be realized. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in the Consolidated Statements of Operations in the period of
change.
Uncertain tax positions are recognized using the
more-likely-than-not threshold determined solely based on technical
merits that the tax positions will be sustained upon examination by
a taxing authority that has full knowledge of all relevant
information. Tax positions that meet the recognition threshold are
measured as the largest amount of benefit that is greater than
fifty percent likely of being realized upon settlement.
n. Property Assessed Clean Energy ("PACE") program: Under the
terms of the PACE agreement, the amount is repayable through annual
property tax assessment over 25 years. The annual property tax
liability arises once the annual assessment is received and will be
treated as property tax expense. The PACE outstanding balance will
be reduced by the property tax expense recognized.
o. Net loss per share: In accordance with the provisions of ASC
Topic 260, "Earnings per Share", basic loss per share is computed
by dividing the net loss attributable to stockholders of the
Company by the weighted average number of shares outstanding during
the period. Diluted earnings per share are computed on the basis of
the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Potentially
dilutive shares are excluded when the effect would be to increase
diluted earnings per share or reduce diluted losses per share. The
following potentially dilutive securities were excluded from the
calculation of diluted net loss per share due to their anti-
dilutive effect:
Six months ended June
30,
=================================== ============================
2019 2018
=================================== ============= =============
Options to purchase Common Stock 5,073,202 3,140,457
Warrants to purchase Common Stock 2,292,523 2,295,523
Restricted Stock Units 5,000 50,745
=================================== ============= =============
Total 7,373,725 5,486,725
=================================== ============= =============
p. Stock-based compensation: The Company accounts for
stock-based compensation using the Black-Scholes pricing model to
determine the fair value of stock option and warrant grants. The
stock-based compensation cost is generally recognized over the
vesting period of the equity grant. For grants to employees, the
cost is recognized over the requisite service period.
The Black-Scholes option-pricing model requires the use of
highly subjective and complex assumptions, including the expected
stock-price volatility, the expected term of the grants, risk-free
interest rate, and expected dividends, which play a significant
role in determining the fair value of stock-based awards. As
sufficient trading history does not yet exist for our Common Stock,
our estimate of the expected stock-price volatility is based on
various factors including the volatility of the shares of
comparable publicly traded companies in the industry. The expected
term of the grants is based on the vesting date and the contractual
term. The risk-free interest rate is based on the U.S. Treasury
yield for a term consistent with the expected term of the grants.
The Company has no history or expectation of paying dividends on
its Common Stock.
Total stock-based compensation expense recognized associated
with stock options, warrants, and restricted stock units was as
follows:
Six months ended June
30,
============================ ============================
(US $'000) 2019 2018
============================ ============= =============
Research and development 298 307
General and administrative 592 336
============================ ============= =============
Total 890 643
============================ ============= =============
q. Recently-issued accounting standards: In May 2014, the
Financial Accounting Standards Board ("FASB") issued Accounting
Standards Update ("ASU") 2014-09 "Revenue from Contracts with
Customers (Topic 606)." The standard's core principle is that a
reporting entity will recognize revenue when it transfers promised
goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in
exchange for those goods or services. In August 2015, the FASB
decided to postpone the effective date of the new standard by one
year. The standard was effective for the Company in the first
quarter of 2018. Since the Company has yet to report revenue, the
adoption of this standard did not impact its consolidated financial
statements.
The FASB issued ASU No. 2016-02, ASU No. 2018-10 and ASU No.
2018-11 "Leases (Topic 842)," which establishes the principles to
report transparent and economically neutral information about the
assets and liabilities that arise from leases. It requires lessees
to recognize the lease assets and lease liabilities that arise from
leases in the statement of financial position and to disclose
qualitative and quantitative information about lease transactions,
such as information about variable lease payments and options to
renew and terminate leases. The new standard will be effective for
the fiscal year 2019 and annual periods and interim periods
thereafter, however the Company has elected to early adopt Topic
842.
In June 2016, the FASB issued ASU No. 2016-13, "Financial
Instruments- Credit Losses (Topic 326): Measurement of Credit
Losses on Financial Instruments," which aims to provide financial
statement users with more decision-useful information about the
expected credit losses on financial instruments and other
commitments to extend credit held by a reporting entity at each
reporting date. It replaces the incurred loss impairment
methodology in current GAAP with a methodology that reflects
expected credit losses and requires consideration of a broader
range of reasonable and supportable information to inform credit
loss estimates. The standard is effective for the fiscal year 2020
and annual and interim periods thereafter. Early adoption is
permitted. The Company is currently evaluating the impact of
adopting this guidance on its consolidated financial
statements.
In May 2017, the FASB issued ASU No. 2017-09 (ASC Topic 718),
"Stock Compensation: Scope of Modification Accounting." The
amendments in this ASU provide guidance about which changes to the
terms or conditions of a share-based payment award require an
entity to apply modification accounting. The Company is required to
adopt the guidance in the first quarter of fiscal year 2019. Early
adoption is permitted. The Company is in the process of assessing
the impact of this ASU on its consolidated interim report.
On February 14, 2018, the FASB issued ASU No. 2018-02, "Income
Statement-Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other
Comprehensive Income." The amendments in this ASU address a
narrow-scope financial reporting issue related to the tax effects
that may become "stranded" in accumulated other comprehensive
income (AOCI) as a result of the Tax Cuts and Jobs Act (TCJA). The
standard is effective for the fiscal year 2019 and annual periods
and interim periods thereafter.
On June 20, 2018, the FASB issued ASU No. 2018-07, which
simplifies the accounting for share-based payments granted to
nonemployees for goods and services. Under the ASU, most of the
guidance on such payments to nonemployees would be aligned with the
requirements for share-based payments granted to employees. The
standard is effective for the fiscal year 2019 and annual periods
and interim periods thereafter.
On August 29, 2018, the FASB issued ASU No. 2018-15, new
guidance on a customer's accounting for implementation, set-up, and
other upfront costs incurred in a cloud computing arrangement that
is hosted by the vendor, i.e., a service contract. Under the new
guidance, customers will apply the same criteria for capitalizing
implementation costs as they would for an arrangement that has a
software license. The standard is effective for the fiscal year
2020 and annual periods and interim periods thereafter.
Only the updates that the Company believes are relevant to its
operations have been included here.
E. Notes to financial information
1. Cash, cash equivalents, and short-term investments
The amortized cost and fair value of cash equivalents and
investments at June 30, 2019 and December 31, 2018 were as
follows:
June 30, 2019
------------------------------------- ------------------------------------------------
Amortized Gross unrealized
(US $'000) cost Losses Fair value
------------------------------------- --------- ----------------------- ------------
Certificate of deposits 3 - 3
Total available-for-sale securities 3 - 3
===================================== ========= ======================= ============
Classified as:
Cash equivalents * 1
Short-term investments 2
Total available-for-sale securities 3
===================================== ========= ======================= ============
December 31, 2018
===================================== ==============================================
Amortized Gross unrealized
(US $'000) cost losses Fair value
===================================== ========= ======================= ==========
Certificate of deposits 3 - 3
Total available-for-sale securities 3 - 3
===================================== ========= ======================= ==========
Classified as:
Cash equivalents * -
Short-term investments 3
Total available-for-sale securities 3
===================================== ========= ======================= ==========
* Cash and cash equivalents at June 30, 2019 of $2,264 thousand
comprises cash of $2,261 thousand and cash equivalents of $1
thousand, as compared to cash and cash equivalents of $3,640
thousand at December 31, 2018, which comprised cash of $3,640
thousand and cash equivalents of $0 thousand.
All available-for-sale securities held as of June 30, 2019 and
December 31, 2018 had contractual maturities of less than two years
and high-quality investment grade ratings. Realized gains on
available-for-sale securities for the six months ended June 30,
2019 were $0, as compared to the realized gains on
available-for-sale securities of $4 thousand for the year ended
December 31, 2018 and were recorded as interest income.
In accordance with the guidance of Accounting Standards
Codification ("ASC") Top 820, "Fair Value Measurement", fair value
is estimated by applying the following hierarchy, which prioritizes
the inputs used to measure fair value into three levels and bases
the categorization within the hierarchy upon the lowest level of
input that is available and significant to the fair value
measurement:
Level 1-Quoted prices in active markets for identical assets or
liabilities.
Level 2-Observable inputs other than quoted prices in active
markets for identical assets and liabilities, quoted prices for
identical or similar assets or liabilities in inactive markets, or
other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the
assets or liabilities.
Level 3-Inputs that are generally unobservable and typically
reflect management's estimate of assumptions that market
participants would use in pricing the asset or liability.
The Company's financial assets and liabilities subject to fair
value measurements on a recurring basis and the level of inputs
used in such measurements are as follows as of June 30, 2019 and
December 31, 2018:
June 30, 2019
========================= ======================================================
(US $'000) Level 1 Level 2 Level 3 Total
Description
========================= ==================== =========== ========== =======
Certificate of deposits - 3 - 3
Total - 3 - 3
========================= ==================== =========== ========== =======
December 31, 2018
========================= ==========================================================
(US $'000) Level 1 Level 2 Level 3 Total
Description
========================= ============== ============== ============== ==========
Certificate of deposits - 3 - 3
Total - 3 - 3
========================= ============== ============== ============== ==========
2. Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of:
June 30,
December
(US $'000) 2019 31, 2018
================================================ ======== =========
Prepaid expenses and other current assets:
Equipment related deposits 17 15
Equipment maintenances and software licenses 75 92
Insurance premium 38 44
Prepaid interest 133 105
Research and development credit 353 109
================================================ ======== =========
Other 138 52
================================================ ======== =========
Prepaid expenses and other current assets 754 417
================================================ ======== =========
3. Fixed Assets
June 30,
December
(US $'000) 2019 31, 2018
=================================== ======== =========
Land and building
Land and building 52,371 50,292
Less: Accumulated depreciation (1,185) (442)
-------- ---------
Land and building net 51,186 49,850
-------- ---------
Other property and equipment
Lab equipment 2,029 2,029
Office equipment - 4
Computer and peripherals 886 876
Furniture and fittings - 226
=================================== ======== =========
Total 2,915 3,135
Less: Accumulated depreciation (1,803) (1,733)
=================================== ======== =========
Property and equipment, net 1,112 1,402
=================================== ======== =========
Depreciation expense was $1.3 million and $0.4 million for the
six months ended June 30, 2019 and 2018, respectively.
4. Software
June 30,
December
(US $'000) 2019 31, 2018
=============================== ======== =========
Purchased software 112 100
Internally developed software 1,695 397
------------------------------- -------- ---------
Total 1,807 497
------------------------------- -------- ---------
In 2019, $1,298 thousand and in 2018 $397 thousand of initial
development costs for the BlockRules platform were capitalized as
internally developed software.
5. Lease
In March 2018, the Company entered into a Finance Lease
agreement with a vendor in respect of laboratory equipment. The
agreement entails financing of equipment costing $0.55 million,
with a 20% deposit (the right of use asset). The financing carries
a fixed 5.8% interest for 2 years, with an option to purchase the
equipment for $1 at the end of the lease period. The lease is
determined to be a finance lease under ASC 842.
(US $'000) Gross amounts payable
----------------------- ---------------------
Within 1 year 233
Within 1-2 years 117
Impact of discounting (17)
----------------------- ---------------------
Total 333
----------------------- ---------------------
6. Nirog
The consolidated financial statements presented include
financial position and performance of Nirog Therapeutics LLC
("Nirog"), a Delaware limited liability company. Nirog was
established in September 2009 as a vehicle to fund the research and
development of the Company's anticoagulation program. The Company
has been investing in Nirog and as a consequence owned 81.9% and
81.2% of the outstanding equity of Nirog as of June 30, 2019 and
December 31, 2018, respectively.
7. Accrued liabilities
Accrued liabilities consist of:
June 30, December
31, 2018
(US $'000) 2019
============================= ======== =========
Professional services-audit 11 102
Professional services-Other 9 11
Facility buildout 249 249
Legal services 277 245
Vacation accrual 722 665
Various operating accruals 134 150
Total accrued liabilities 1,402 1,422
============================= ======== =========
8. Debts
In September 2017, VRH1, a wholly owned subsidiary of Verseon,
secured financing for energy-related upgrades to its property via
the Property Assessed Clean Energy (PACE) program in the amount of
up to $8.65 million subject to achievement of certain milestones.
PACE is a state-legislated framework providing long-term financing
for energy efficiency, renewable energy, and water conservation
projects that is repaid through property assessments. PACE is
non-recourse financing that is also non-accelerating and
transferable upon property sale. The financing carries a fixed
6.50% interest for 25 years and the term of the property assessment
is 25 years. These funds will be used for building and installation
of a natural gas plant and solar power panels along with other
energy efficiency upgrades, all of which will allow the Company to
significantly reduce its ongoing power-related operational costs.
As of June 30, 2019 based on milestones achieved to date, the
Company had received a payment of $6.3 million, which is net of
charges incurred of $0.4 million to be amortized over the life of
the loan. As of December 31, 2018, based on milestones achieved to
date, the Company had received a payment of $5.6million, which is
net of charges incurred of $0.4 million to be amortized over the
life of the loan.
On June 13, 2018, VRH1 closed a $22.7 million financing (the
"Financing") with MCREIF SubREIT LLC (t/a Money 360) secured on the
Company's custom-built research, development, and operations
facility in Fremont, California (the "Facility"). Of the total
amount of the Financing, $21.7 million has been received on
closing, with an additional $1 million available to be drawn at a
future date for facilities-related expenses. Charges incurred of
$0.7 million have been netted against the loan and will be
amortized over the life of the loan.
The Financing is an interest-only mortgage facility that carries
an annual interest rate of 8.0 percent and is repayable after 24
months, with an option to extend for up to a further 12 months. The
documentation entered into in relation to the Financing contains
customary financial covenants and is based on a loan-to-value of
approximately 50 percent. The proceeds of the Financing will be
used for Verseon's drug programs and operations.
The components of the debt are as follows:
(US $'000) June 30, December
31, 2018
2019
=========================================== ======== =========
PACE financing 6,283 5,591
Money 360 21,700 21,700
-------- ---------
Total Debt 27,983 27,291
Less: Unamortized debt issuance costs (735) (913)
=========================================== ======== =========
Total 27,248 26,378
Less: Current portion of long-term debt (160) (160)
=========================================== ======== =========
Total 27,088 26,218
=========================================== ======== =========
9. Income taxes
The Company did not record a federal or state current or
deferred income tax provision or benefit for the six months ended
June 30, 2019 and year ended December 31, 2018 due to the losses
incurred in the corresponding periods, as well as the Company's
continued maintenance of full valuation allowance against its net
deferred tax assets. The Company's income tax provision of $nil in
said periods represents an effective tax rate of 0%. The
consolidated financial statements include in other income a grant
of $246 thousand relating to research and development refund for
VCR1.
At June 30, 2019, the Company had federal and state Net
Operating Loss ("NOL") carry forwards of approximately $84.1
million and $85.9 million, respectively, of which $52.4 million and
$85.9 million expire at various dates through 2038 if not utilized.
At June 30, 2019 the Company had federal and state research credit
carry forwards that totaled $2.9 million and $2.6 million,
respectively, which expire at various dates through 2038 if not
utilized.
During the six months ended June 30, 2019, the only change in
the balance of gross uncertain tax benefits was an increase of $0.2
million related to current year and prior year tax positions. At
June 30, 2019, the balance of gross uncertain tax benefits was $1.6
million as compared to $1.6 million as of December 31, 2018. All of
the unrecognized tax benefits would, if recognized, reduce the
Company's annual effective tax rate. The Company currently has a
full valuation allowance against its net deferred tax assets which
would impact the timing of the effective tax benefit should any of
the uncertain tax positions be favorably settled in the future.
The components of the Deferred Tax Assets were calculated using
the federal statutory income tax rate of 21% and the state
statutory income tax rate of 7% for both 2019 and 2018,
respectively. The Company's deferred tax assets differ from
deferred income tax assets computed by applying the federal
statutory income tax rate of 21% to the loss before income taxes
principally due to the effect of (i) stock-based compensation
expenses of $0.9 million (2018: $0.6 million) for which there is no
associated income tax deduction; (ii) losses in Nirog not
attributable to the Company; and (iii) the effect of losses
incurred by the Company for which the potential deferred tax asset
has a full valuation allowance.
The components of the deferred tax assets are as follows:
(US $'000) June 30, December
31, 2018
2019
====================================== ======== =========
Deferred tax assets:
Net operating loss carry forwards 22,307 20,541
R&D credit carry forwards 3,855 3,304
Depreciation and amortization 230 181
Accruals and reserves 194 186
====================================== ======== =========
Total deferred tax assets 26,586 24,212
Less valuation allowance (26,586) (24,212)
====================================== ======== =========
Total - -
====================================== ======== =========
Based on available objective evidence, management believes it is
likely that the deferred tax assets will not be realized.
Accordingly, the Company has provided a full valuation allowance
against its net deferred tax assets at June 30, 2019 and December
31, 2018.
The Tax Reform Act of 1986 limits the use of net operating loss
carry forwards in certain situations where changes occur in the
stock ownership of the Company. In the event that the Company has
had a change in ownership, utilization of net operating loss carry
forwards would be limited.
The tax years 2007 to 2018 remain open to regular examination of
their income tax returns and other related tax-fillings by the
Internal Revenue Service and state tax authorities. There are no
prior or current year tax returns under audit by tax authorities,
and management is not aware of any impending audits.
The net impact of the corporate tax rate reduction resulting
from the Tax Cuts and Jobs Act of 2017 was a reduction in net
deferred tax asset of $4.2 million.
10. Net loss per share
Basic net loss per share is computed by dividing net loss by the
average number of shares outstanding each period. The Company
calculates the dilutive effects of both the warrants and stock
options utilizing the treasury stock method. All warrants and
options were anti-dilutive in all the periods presented. The
weighted average shares for basic earnings per share calculation
consists of the following:
June 30, 2019 June 30,2018
============================================ ============
Weighted average shares-basic 155,550,806 151,539,063
=============================== =========== ============
The components of basic and diluted earnings per share were as
follows:
June 30, June 30,
2019 2018
============================================== ============= =============
Net loss attributable to Verseon Corporation $(12,596,000) $(10,149,000)
Average outstanding shares
Basic 155,550,806 151,539,063
Diluted * 155,550,806 151,539,063
Net loss per share
Basic $(0.08) $(0.07)
Diluted * $(0.08) $(0.07)
============================================== ============= =============
* Diluted earnings per share are the same as basic earnings per
share since the impact of the dilutive instruments on earnings per
share is antidilutive.
11. Segment reporting
ASC Topic 280 "Segment reporting" establishes standards for the
way that public business enterprises report information about
business segments and related disclosures about products and
services, geographical areas, and major customers.
The Chief Executive Officer ("CEO") of the Company has been
identified as the Chief Operating Decision Maker as defined by ASC
Topic 280. The CEO of the Company allocates resources based upon
information related to its one operating segment, pharmaceutical
research based in the United States. Accordingly, the Company has
concluded they have one reportable segment.
12. Concentration of credit risk
Financial instruments that potentially subject the Company to
concentrations of credit risk principally consist of cash, cash
equivalents, and short- and long-term investments.
All cash, cash equivalents, and marketable securities
investments are held in the United States, Australia, and the
United Kingdom as of June 30, 2019 and December 31, 2018. All
marketable securities investments as of June 30, 2019 had high
quality investment grade ratings. At times, cash balances may
exceed federally insured amounts and potentially subject the
Company to a concentration of credit risk. To limit the credit
risk, the Company invests its excess cash primarily in high quality
securities such as money market funds. Management believes that no
significant concentration of credit risk exists with respect to
these cash and marketable securities investment balances because of
its assessment of the credit worthiness and financial viability of
the respective financial institutions.
13. Related-party transactions
"Loan receivable from stockholders" refers to employees and
consultants of the Company who purchased their shares through the
issuance of promissory notes by the Company. Total loan receivable
from stockholders at June 30, 2019 and December 31, 2018 were $15.4
million and $15.3 million, respectively.
14. Stockholder's equity
As of June 30, 2019 and December 31, 2018, the Company had
159,686,512 shares and 151,640,732 shares of Common Stock
outstanding, not including 42,917 shares and 42,917 shares in
treasury, for the respective periods, and no shares of Preferred
Stock outstanding.
2015 Equity Incentive Plan
In April 2015, the Company adopted the Verseon Corporation 2015
Equity Incentive Plan (the "2015 Plan"). The 2015 Plan provides for
the grant of stock options, stock appreciation rights, restricted
stock, restricted stock units, performance units, performance
shares, cash-based awards, and other stock-based awards to
non-employee directors, officers, employees, advisors, consultants,
and independent contractors. An aggregate of 15,000,000 shares of
Common Stock was initially available for grant pursuant to awards
under the 2015 Plan. The 2015 Plan contains a provision that
provides annual increases in the number of Common Stock available
for delivery pursuant to awards on each January 1st beginning
January 1, 2016, and ending on (and including) January 1, 2025.
Such annual increase equals to 2% of the total shares of Common
Stock outstanding on December 31st of the preceding calendar year;
provided that the Board decides, prior to the first day of any
calendar year, that there will be no increase or a lesser increase
for such calendar year. In September 2015, the plan was amended to
limit the annual increase of incentive stock option shares
available for grant to a maximum of 3,000,000 shares. A total of
21,789,761 and 18,876,776 shares were available for grant under the
2015 Plan as of six months ended June 30, 2019 and December 31,
2018, respectively.
Loan receivable from stockholders
The Company issued promissory notes to employees and consultants
to purchase shares of the Company's stock and recorded them as
"Loan receivable from stockholders." Total loan receivable from
stockholders at June 30, 2019 and December 31, 2018 were $15.4
million and $15.3 million, respectively.
15. Restricted Stock Units (RSU)
In 2015, the Company began issuing RSU to certain employees and
consultants under the 2015 Plan. The RSU are valued at the closing
price of the Company's Common Stock on the date of grant. The
restricted stock unit activity for the six months ended June 30,
2019 and year ended December 31, 2018 is summarized as follows:
Weighted average
grant date fair
value per share
Shares ($)
======================================= ======== ==========================
Awarded and unvested at December 31,
2017 77,567 2.32
Granted in 2018 33,897 1.77
(71,251)
Vested in 2018 (*) 2.09
======================================= ======== ==========================
Awarded and unvested at December 31,
2018 40,213 2.24
======================================= ======== ==========================
Granted in 2019 _ _
(35,213)
Vested in 2019 (**) 2.22
======================================= ======== ==========================
Awarded and unvested at June 30, 2019 5,000 3.36
======================================= ======== ==========================
A total of $0.05 million and $0.05 million was recorded as
stock-based compensation expenses in for the six months ended June
30, 2019 and 2018 respectively for RSU granted. As of June 30,
2019, there was $0.01 million of unrecognized compensation expense
associated with unvested RSUs, which is expected to be recognized
over a weighted-average period of 0.5 years as compared to $0.1
million of unrecognized compensation expense associated with
unvested RSU with a weighted-average period of 1.2 years in
2018.
(*) Includes 11,049 shares vested in 2018 that were admitted to
AIM in January 2019
(**) Includes 8,476 shares vested in June 2019 that were
admitted to AIM in July 2019
16. Restricted Stock Awards (RSA)
In 2019, the Company began issuing RSA to certain Directors and
consultants under the 2015 Plan. The RSU are valued at the closing
price of the Company's Common Stock on the date of grant. The
restricted stock unit activity for the six months ended June 30,
2019 and year ended December 31, 2018 is summarized as follows:
Weighted average
grant date fair
value per share
Shares ($)
======================================= ========= ==========================
Awarded and unvested at December 31, _ _
2018
======================================= ========= ==========================
Granted in 2019 313,500 0.88
Vested in 2019 (313,500) 0.88
======================================= ========= ==========================
Awarded and unvested at June 30, 2019 _ _
======================================= ========= ==========================
A total of $0.3 million and $0 million was recorded as
stock-based compensation expenses in for the six months ended June
30, 2019 and 2018 respectively for RSA granted. As of June 30,
2019, there was $0 million of unrecognized compensation expense
associated with unvested RSAs.
17. Warrants
In April 2015, all outstanding warrants were amended to be
exercisable for shares of the Company's Common Stock from Class A,
Class B Preferred Stock, and Class Z Common Stock. There was no
Class C Preferred Stock outstanding. Common Warrants and Common Z
Warrants are exercisable into one share of Common Stock. Preferred
A Warrants and Preferred B Warrants are exercisable into two shares
of Common Stock.
A total of $0.06 million and $0.06 million was recorded as
stock-based compensation expenses in six months ended June 30, 2019
and 2018 for warrants.
A total of 21,052 Preferred A Warrants was outstanding and
exercisable at June 30, 2019 at a weighted-average exercise price
of $0.95 per share and with weighted-average remaining life of 2.7
years. There was no Preferred A Warrant activity in 2019 and 2018.
A total of 71,302 Preferred B Warrants were outstanding and
exercisable at June 30, 2019 at a weighted-average exercise price
of $2.54 per share and with weighted-average remaining life of 0.7
years. There was no Preferred B Warrant activity in 2019 and
2018.
The following is a summary of the status of the Company's
outstanding stock warrants as of June 30, 2019 and December 31,
2018 and changes that occurred during each time period:
Weighted- Weighted-
average exercise average remaining
Number of price life
Common Warrants ($) (Years)
================================== ================ ====================== =======================
Outstanding at December 31,
2017 1,884,200 3.62 2.3
---------------------------------- ---------------- ---------------------- -----------------------
Exercised in 2018 (16,346) 0.25 _
Cancelled in 2018 (19,539) 0.25 _
---------------------------------- ---------------- ---------------------- -----------------------
Transferred to Common Z Warrants
in 2018 (30,000) 0.25 1.0
---------------------------------- ---------------- ---------------------- -----------------------
Outstanding at December 31,
2018 1,818,315 3.74 1.4
---------------------------------- ---------------- ---------------------- -----------------------
Exercised in 2019 _ _ _
Outstanding at June 30, 2019 1,818,315 3.74 0.9
================================== ================ ====================== =======================
Exercisable at June 30, 2019 1,780,815 3.74 0.9
================================== ================ ====================== =======================
Weighted-average Weighted-
exercise average remaining
Number of price life
Common Z Warrants ($) (Years)
==================================== ==================== ================== =======================
Outstanding at December 31,
2017 262,500 0.22 2.0
Exercised in 2018 _ _ _
Transferred from Common Warrants 30,000 0.25 1.0
Outstanding and exercisable
at December 31, 2018 292,500 0.22 1.0
==================================== ==================== ================== =======================
Exercised in 2019 _ _ _
Outstanding and exercisable
at June 30, 2018 292,500 0.22 0.5
==================================== ==================== ================== =======================
Nirog
Nirog did not issue any warrants during the six months ended
June 30, 2019. There were no Common Z Warrants or Preferred A
Warrants outstanding as of June 30, 2019 and December 31, 2018.
A total of 47,447 Preferred B2 Warrants was outstanding and
exercisable at June 30, 2019 at a weighted-average exercise price
of $0.80 per share and with weighted-average remaining life of 0.65
years. In 2019 and 2018 there was no Preferred B2 Warrant activity.
A total of 102,128 Preferred C1 Warrants was outstanding and
exercisable at June 30, 2019 at a weighted-average price of $0.90
per share and with weighted-average remaining life of 0.6 years.
There was no Preferred C1 Warrant activity in 2018 and 2019. A
total of 5,250 Preferred C2 Warrants was outstanding and
exercisable at June 30, 2019 at a weighted-average exercise price
of $1.00 per share and with weighted-average remaining life of 0.85
years. There was no Preferred C2 Warrant activity in 2019 and
2018.
18. Stock options and stock grants
Verseon
The activity in the Company's option grants during the six
months ended June 30, 2019 and year ended on December 31, 2018 are
set out in the table below:
Weighted- Weighted-
average exercise average remaining
Number of price life
options ($) (Years)
============================== =========== ====================== =======================
Outstanding at December 31,
2017 3,111,019 2.13 9.07
Granted in 2018 2,206,850 1.75 9.62
Exercised in 2018 (39,250) 0.69 _
Cancelled in 2018 (325,562) 2.01 _
============================== =========== ====================== =======================
Outstanding at December 31,
2018 4,953,057 2.32 8.8
Granted in 2019 4,893,500 0.67 9.62
Exercised in 2019 (5,542) 0.25 _
Cancelled in 2019 (4,767,813) 5.54 _
------------------------------ ----------- ---------------------- -----------------------
Outstanding at June 30, 2019 5,073,202 2.90 9.22
------------------------------ ----------- ---------------------- -----------------------
Exercisable at June 30, 2019 680,707 1.04 9.03
============================== =========== ====================== =======================
In the six months ended June 30, 2019 and 2018, stock-based
compensation expense for stock options was $0.5 million and $0.5
million, respectively. The weighted average grant date fair value
of the Common Stock options granted in 2019 was $0.67 per share, as
compared to $0.83 per share in 2018.
For details of the variables used by the Company in the
Black-Scholes option pricing model for the six months ended on June
30, 2019 and the year ended on December 31, 2018, see the following
table:
Six months Year ended
ended June December 31,
30, 2019 2018
================================== =========== =============
Expected volatility 50% 50%
Expected dividend yields 0% 0%
Expected risk-free interest rate 1.83%-2.8% 2.6%-2.8%
Expected life of options 5-6 years 5-6 years
================================== =========== =============
Nirog
The Nirog Unit Option Plan provides for both incentive and
non-qualified unit options. Unit option grants generally vest over
a two-year period from the unit option grant date. In December
2017, Nirog adopted a new Stock Option Plan and 5,000,000 shares
were allocated. No options were issued in 2018 and 2017.
As of June 30, 2019 and December 31 2018, there were 5,130,667
unit options available for grant.
19. Issuance of new shares
In 2019 the Company issued 7,700,000 common shares which were
acquired by the existing shareholders.
20. Subsequent events
As at September 30, 2019, the date the accounts were available
to be issued, there were no reportable subsequent events.
-- Ends --
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EBLBXKKFZBBZ
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