TIDMVSN
RNS Number : 3201S
Verseon Corporation
25 June 2018
For immediate release June 25, 2018
Verseon Corporation
("Verseon" or the "Company")
Final Results
Fremont, Calif.-Verseon (AIM:VSN), a technology-based
pharmaceutical company employing a computer-driven platform to
develop a diverse drug pipeline, today announces its Final Results
for the year ended December 31, 2017. The report and accounts are
available for download from the Company's website
(www.verseon.com).
Adityo Prakash, CEO of Verseon Corporation, commented: "We have
made significant progress across our pipeline over the past year.
Most notably, our first PROAC (precision oral anticoagulant),
VE-1902, completed regulatory toxicology and safety pharmacology
testing and is now about to enter clinical trials. We also
announced a new rare-disease program in which we are developing
oral drugs for hereditary angioedema, a potentially
life-threatening genetic disorder. In addition, we have
demonstrated efficacy in multiple in vivo models for our orally
dosed diabetic macular edema candidates and have shown that our
novel anticancer agents hold promise for the treatment of multidrug
resistant cancers."
"We have worked diligently to build a strong foundation for our
platform that can roll out a steady stream of drug candidates. We
look forward to sending VE-1902 into clinical trials, the first of
many future clinical candidates across our pipeline."
Highlights
Finance
Results for the year ended December 31, 2017:
-- Total assets on the balance sheet stood at $54.2 million,
compared to $69.6 million at the end of 2016.
-- Cash, cash equivalents, and short-term investments stood at
$11.6 million, compared to $46.9 million at the end of 2016.
-- Property, equipment, buildings and land totaled $40.7
million, compared to $22.3 million at the end of 2016.
-- Research and development expenses were $15.1 million,
compared to $11.5 million in 2016, primarily attributable to an
acceleration of our drug programs and preparation for clinical
trials.
-- General and administrative expenses were $6.3 million, compared to $5.8 million in 2016.
-- Non-cash expenses include stock-based compensation of $0.9
million, compared to $0.8 million in 2016, and also a currency
exchange gain of $0.6 million, compared to a loss of $2.6 million
in 2016.
-- Net loss was $20.4 million or $0.13 per basic share, compared
to a net loss of $19.5 million or $0.13 per basic share in
2016.
Post-period events:
-- Closed $22.7M mortgage for our research and development
facility, realizing a portion of the value created through the
buildout.
-- Currently evaluating a range of non-dilutive funding options
linked to future revenues. This will enable us to accelerate the
development of our programs through clinical trials to market,
capturing their significant long-term value.
Anticoagulation
-- Developing novel class of precision oral anticoagulants
(PROACs) for long-term anticoagulant-antiplatelet combination
therapy.
-- First PROAC, VE-1902, successfully completed regulatory
toxicology studies and is about to enter clinical trials.
-- Second PROAC, VE-2851, is in preliminary toxicology studies
and is expected to enter clinical trials in 2019.
Diabetic macular edema
-- Developing oral DME drugs with the potential to complement or
replace current eye injections.
-- Candidates show efficacy in multiple in vivo models when administered orally.
Hereditary angioedema
-- Developing oral drugs for this rare, potentially life-threatening disease.
-- Candidates show efficacy in a well-established preclinical model with oral dosing.
Oncology
-- Developing new anticancer agents for the treatment of multidrug resistant cancers.
-- Candidates show potency against a variety of cancer cell
lines and are largely unaffected by common modes of drug
resistance.
Facilities development
-- Occupying purpose-built research and development facility.
-- Closed PACE funding for energy-related improvements.
About Verseon
Verseon Corporation (www.verseon.com AIM: VSN) is a
technology-based pharmaceutical company that pairs a proprietary,
computational drug discovery platform with a comprehensive in-house
chemistry and biology workflow to develop novel therapeutics that
are unlikely to be found using conventional methods. The Company is
applying its platform to a growing drug pipeline and currently has
four active drug programs in the areas of anticoagulation, diabetic
macular edema, hereditary angioedema, and oncology. The
anticoagulation program is scheduled to enter phase I clinical
trials in 2018.
For further information, please contact:
Verseon Corporation www.verseon.com
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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.
Chairman's statement
Comprehensive laboratory testing continues to confirm the good
preclinical profiles of Verseon's leading drug candidates and has
identified multiple candidates suitable for further development in
all programs. This gives the Board further confidence that
Verseon's innovative, computer-driven approach can deliver
compounds that differentiate themselves from current drugs and can
address unmet medical needs.
The upcoming clinical trials in Verseon's anticoagulation
program will provide the first opportunity for Verseon to
demonstrate the potential of their drug candidates in humans.
Successful completion of first-in-human studies will mark another
important milestone for the company.
Encouraged by last year's achievements, the Board continues to
support the development of Verseon's industry-leading proprietary
computational platform along with an expansion of their drug
pipeline.
During 2017, the Board and executive team have focused on
strategic growth and careful allocation of resources. We are
delighted to bring the entire team into Verseon's custom-built,
integrated facility.
As we oversee this consolidation, the main goal of the Board is
to maintain an appropriate balance between moving the discovery and
development process forward and ensuring financial discipline. We
continue to work with the executive team on capital management,
including the potential for monetization of existing
discoveries.
The dedication and hard work of Verseon's team have allowed all
programs to build up momentum that we expect to carry over into
2018 and beyond. We appreciate the continued confidence of our
shareholders.
Thomas A. Hecht, PhD
Chairman of the Board
Chief Executive's statement
We have made significant progress across our pipeline over the
past year. Most notably, our first PROAC (precision oral
anticoagulant), VE-1902, completed regulatory toxicology and safety
pharmacology testing as well as production of the engineering batch
tablets of drug-formulated product. As recently announced, VE-1902
is now about to enter clinical trials.
In preclinical studies, we have demonstrated the distinctive
profile of our PROACs combining efficacy with low bleeding risk. In
particular, our studies show that PROACs do not disrupt platelet
function, which may make them uniquely suited for long-term
combination therapy alongside antiplatelet drugs, a large market
unserved by current drugs. Our long-term clinical trial strategy is
designed to highlight the suitability of the PROACs for this
patient population, while the upcoming phase I study will focus on
safety and use biomarkers as an initial measure of efficacy.
We have also set up the necessary infrastructure for
first-in-human trials in Australia, a location that was chosen for
its excellent clinical trial framework combined with targeted
research incentives. We are working closely with the largest phase
I unit in Australia and a well-established contract research
organization to ensure the smooth execution of our trials.
A second clinical trial candidate, which shares VE-1902's
distinctive preclinical profile but has a different chemotype, was
also announced during this period. Preliminary in vivo toxicology
results on this candidate have been very promising, and we expect
it to advance into clinical trials in 2019.
In 2017, we announced a new rare-disease program, in which we
are developing oral drugs for hereditary angioedema, a potentially
life-threatening genetic disorder. We believe that our orally dosed
drug candidates could have a positive impact on patients' lives who
currently rely on injectable drugs.
Our diabetic macular edema (DME) and oncology programs have also
made good progress. In our DME program, we are developing oral
plasma kallikrein inhibitors that could complement or replace
current eye injections. During 2017, we have demonstrated efficacy
in multiple in vivo models for our DME candidates. In addition, our
oncology candidates are showing promise for the treatment of
multidrug resistant cancers.
We have worked diligently to build a strong foundation for our
platform that can roll out a steady stream of drug candidates. We
look forward to sending VE-1902 into clinical trials, the first of
many future clinical candidates across our pipeline.
Adityo Prakash
Chief Executive Officer
Verseon at a glance
We are a technology-based pharmaceutical company that pairs a
proprietary, computational drug discovery platform with
comprehensive in-house chemistry and biology capabilities to
develop novel therapeutics that are unlikely to be found with
conventional methods.
Our mission: To transform the way new small-molecule drugs are
developed
Industry trends are alarming. Despite large funding increases by
pharmaceutical companies for drug discovery and development, truly
novel medicines have become increasingly rare.
At Verseon, we believe that accurate, computer-driven drug
design is the key to reversing this trend.
Verseon's computer-driven drug discovery platform
We have built a computational platform that transforms
small-molecule drug discovery into a systematic, industrial
process.
Our proprietary drug discovery platform allows us to discover
novel drug candidates that are unlikely to be found by conventional
methods and to consistently develop multiple chemically diverse
candidates for clinical trials for each of our drug programs.
Built on an extensive medicinal chemistry knowledge base, our
platform computer-generates large, virtual, chemically diverse
collections of novel, synthesizable, drug-like molecules. This
gives us access to chemical space that remains largely unexplored
in conventional drug discovery.
From this space, we then identify potent binders to specific
disease-causing proteins using advanced computational methods and
focus our synthesis and biology resources on this selection of
promising compounds. This process is far more efficient than the
trial-and-error approach typically applied in conventional drug
discovery. Computational accuracy is key to driving our efficient
process and is achieved by combining proprietary advances in
physics-based molecular modeling of protein-drug interactions with
sophisticated optimization algorithms.
We employ a comprehensive laboratory workflow to efficiently
prioritize drug candidates based on a panel of in vitro and in vivo
assays. The integration of our in silico methods with our
laboratory workflow enables us to efficiently optimize multiple
chemically distinct candidates per program.
Business review
Program highlights
-- First precision anticoagulant (PROAC) candidate ready to enter clinical trials
-- Second PROAC development candidate announced and expected to enter clinical trials in 2019
-- Rare-disease program launched, developing oral drugs for hereditary angioedema
-- Efficacy shown in multiple preclinical models for orally
dosed diabetic macular edema candidates
-- Oncology candidates suitable for targeting multidrug resistant cancers announced
IP update
-- Six patent issuances worldwide in 2017, another three in Q1 2018
-- Two issuances in Australia strengthen IP rights in this
crucial jurisdiction prior to the start of clinical trials
-- First medicinal-chemistry related subject matter patents issued in the US
-- Continue to solidify global patent protection for our computational platform
Precision oral anticoagulants (PROACs)
We are developing potential first-in-class precision oral
anticoagulants (PROACs) to treat major cardiovascular diseases. In
preclinical testing, PROACs show a unique combination of efficacy
with lower bleeding than current anticoagulants and, importantly,
do not disrupt platelet function. This enables PROACs to more
precisely modulate the coagulation cascade, making them suitable
for co-administration with antiplatelet drugs, a market that is
poorly served by currents anticoagulants.
The case for a new safer precision anticoagulant
Millions of patients worldwide suffering from arterial disease
could benefit from prolonged combination therapy of an
anticoagulant with one or more antiplatelet drugs (e.g., aspirin or
Plavix(TM) ) to prevent stroke or heart attack. This includes
patients with acute coronary syndrome and those with both
non-valvular atrial fibrillation and coronary artery disease.
However, no current anticoagulant is suitable for such long-term
combination therapy due to their unacceptably high bleeding
risk.
Uniquely positioned to fill this need
In comprehensive preclinical testing, our drug candidates have
demonstrated a mechanism of action distinct from current novel oral
anticoagulants (NOACs). By acting through the reversible covalent
inhibition of thrombin, PROACs prevent thrombus formation while
leaving thrombin-mediated platelet activation almost unaffected.
This may explain the significantly lower bleeding risk observed
with PROACs compared to NOACs in preclinical studies.
Due to this novel profile, we believe that the PROACs are
uniquely positioned to fill the need for oral anticoagulants
suitable for safe long-term co-dosing alongside antiplatelet drugs.
In addition, the low bleeding risk of our drugs can also benefit
traditional anticoagulation patients, such as those suffering from
atrial fibrillation.
VE-1902: Getting ready for the clinic
Verseon has developed multiple drug candidates that are suitable
for oral dosing and have shown efficacy and low bleeding risk in a
number of preclinical models.
The first PROAC development candidate, VE-1902, is on target for
regulatory submission and initiation of phase I clinical trials in
mid-2018. The candidate was well tolerated with wide therapeutic
window in regulatory toxicology studies. VE-1902 also showed no
signs of genotoxicity or QT prolongation in safety pharmacology
studies.
In preclinical testing, VE-1902 also demonstrated lower renal
clearance than NOACs (6% compared to 27-80%), a desirable property
for the many elderly patients suffering from impaired kidney
function.
VE-2851: Another PROAC for the clinic
VE-2851, our second PROAC development candidate with a different
chemotype but same novel mechanism of action and same distinctive
pharmacological profile, was presented to the scientific community
at the American Heart Association's Scientific Sessions in November
2017.
Like VE-1902, this candidate exhibits promising
pharmacokinetics, good oral bioavailability, clean in vitro
toxicology, and low bleeding liability without disruption of
platelet function in preclinical testing. Preliminary in vivo
toxicology also looks promising. Notably, this candidate is
significantly more potent than VE-1902, which may allow for lower
dosing in the clinic.
Clinical trials
Our first PROAC development candidate, VE-1902, has completed
the regulatory requirements necessary for filing for clinical
trials and is scheduled to enter phase I in mid-2018, upon approval
by the Therapeutic Goods Administration (TGA). The second
candidate, VE--2851, is expected to enter clinical trials in
2019.
The similar preclinical profiles of the two candidates will
allow us to devise similar clinical trial designs for both. As
initial results come in, we will then select the most promising
candidate to move forward into later-stage clinical trials.
We have developed these phase I and phase II clinical trial
strategies in collaboration with external consultants and our
cardiovascular advisors with extensive anticoagulant clinical trial
experience.
We have structured these clinical trials with the goal of
generating compelling clinical data that demonstrates the benefits
of our PROACs over existing NOACs. In particular, we will aim to
show the suitability of our drugs for long-term combination therapy
with antiplatelet agents, a market poorly served by current
anticoagulants.
A phase I trial in healthy volunteers will serve to establish
VE-1902's safety and tolerability in humans from single- and
multiple-ascending doses and also study how food affects the level
and effectiveness of the drug. Biomarkers will be used to capture
early indications of efficacy and to provide initial clinical
confirmation of VE-1902's precision anticoagulation profile.
We are working closely with phase-I unit Nucleus Networks(c) and
full-service contract research organization CPR Pharma Services(c)
on the conduct of the phase I study. Nucleus Networks(c) will
provide bed space, operational staff, and sample collection and CPR
Pharma Services(c) will contribute oversight, data management, and
biostatistics.
We expect to submit our phase I application for VE-1902 to the
Australian Human Research Ethics Committee (HREC) within the next
few weeks and plan to initiate patient recruitment and
first-in-human dosing soon after TGA approval.
Anticoagulant-antiplatelet combination therapy: A large,
unserved market
Cardiovascular diseases such as acute coronary syndrome (ACS),
coronary artery disease (CAD), and atrial fibrillation (AF)
affected an estimated 423 million people globally in 2015 and led
to almost 18 million deaths.(1)
About 34% of the 33 million AF patients worldwide also suffer
from CAD.(1) This large patient population, as well as patient with
ACS, could benefit from long-term combination therapy with an
anticoagulant co-administered with single or dual antiplatelet
agents.
Bleeding risk-a major concern
For these patients, management of bleeding risk is a major
concern that is reflected in current treatment guidelines. As the
conventional anticoagulants are known to have high bleeding risk,
which is further elevated in combination with antiplatelet therapy,
anticoagulant-antiplatelet combination therapy is not recommended
beyond one year.(2)
COMPASS trial highlights potential of combination therapy
The large phase III COMPASS trial sponsored by Xarelto(TM)
-maker Bayer(3) has shown that combination therapy of aspirin with
sub-therapeutic doses of the anticoagulant Xarelto(TM) (2.5 mg
twice daily instead of 20 mg once daily) effectively decreases the
incidence of heart attack and stroke in patients with ACS. However,
this trial also confirmed that the risk of major bleeding events is
70% higher with Xarelto(TM) and aspirin compared to aspirin
alone.
The COMPASS trial has demonstrated the potential of combination
therapy but also highlighted the inherent bleeding liabilities of
NOACs, which restricts their suitability for prolonged
anticoagulant-antiplatelet combination therapy.
Verseon's PROACs may address this need
Our preclinical studies show that PROACs selectively target the
coagulation cascade without disrupting platelet function. This is
reflected in a substantially reduced bleeding risk of PROACs
compared to NOACs.
Owing to this novel pharmacological profile, PROACs may become
the first anticoagulants suitable for long-term combination therapy
with a significantly reduced risk of major adverse cardiovascular
events and bleeding.
(1) G. A. Roth et al., J Am. Coll. Cardio. (2017)
(2) P. Kirchhof et al., European Heart Journal (2016)
(3) J. W. Eikelboom et al., The New England Journal of Medicine
(2017)
Cardiovascular Advisors
-- Professor John Deanfield
British Heart Foundation Vandervell Professor of Cardiology and
Director of the National Centre for Cardiovascular Disease
Prevention and Outcomes (University College Hospital, London)
Professor Deanfield is a pioneer in cardiology and one of the
leading investigators in cardiovascular disease. He is an author on
over 500 papers and serves on numerous advisory and journal
editorial boards.
-- Professor Keith A. A. Fox
British Heart Foundation and Duke of Edinburgh Professor of
Cardiology (University of Edinburgh) and one of four 'Legends in
Cardiology' (American College of Cardiology and the European
Society of Cardiology)
Professor Fox is an award-winning cardiologist and founding
fellow of the European Society of Cardiology. He is an expert in
acute coronary artery disease and has been the lead investigator on
multiple novel anticoagulant trials.
-- Professor C. Michael Gibson
Professor of Medicine (Harvard Medical School), Interventional
Cardiologist and Cardiovascular Researcher (Beth Israel Deaconess
Medical Center)
Professor Gibson is a distinguished clinical researcher and
interventional cardiologist. He has pioneered novel measures of
coronary blood flow that are widely used today and has been the
lead investigator on several large antiplatelet and anticoagulant
trials.
-- Rt Hon. Professor the Lord Ajay Kakkar
Professor of Surgery (University College Hospital, London),
Chairman of University College London Partners, and Director of the
Thrombosis Research Institute
Lord Kakkar is a renowned expert in the prevention and treatment
of venous and arterial thromboembolic disease and has been involved
in phase II and pivotal phase III studies for NOACs. He is the
author of over 200 scientific papers and is a life Peer in the
House of Lords.
-- Professor Gregory YH Lip
Consultant Cardiologist and Professor of Cardiovascular Medicine
(University of Birmingham), member of the European Heart Rhythm
Association and the ESC Thrombosis and Cardiovascular Pharmacology
Committees
Professor Lip is one of the leading experts in the understanding
and treatment of atrial fibrillation and was the sole cardiologist
on the Thomson Reuters Science Watch list of "The World's Most
Influential Scientific Minds 2014".
Oral drugs for diabetic macular edema
We are developing orally dosed drug candidates for the treatment
of diabetic macular edema (DME), a major cause of blindness in
chronic diabetic patients that affects about 21 million patients
worldwide.(1) Our drugs have the potential to offer a compelling
alternative to marketed drugs, which all require recurring
injections directly in the eye.
In diabetic patients, chronically high blood sugar can weaken
the blood vessels in the eye, leading to fluid leaking into the
retina (edema). Over time, fluid may accumulate in the macula, the
central region of the retina, which results in swelling, blurred
vision, and eventually central vision loss associated with DME.
-If current trends continue, researchers estimate that about one
in three US adults could be suffering from diabetes by 2050,(2)
leading to a sharp increase in the number of people affected by
DME.
Current injectable treatments
The most widely employed current therapies for DME are recurring
intravitreal injections of the biologic drugs bevacizumab
(Avastin(TM) ), ranibizumab (Lucentis(TM) ), and aflibercept
(Eylea(TM) ). All of these inhibit the same target pathway,
vascular endothelial growth factor (VEGF), a key promoter of
undesired blood vessel growth. Corticosteroids administered as
intravitreal implants such as dexamethasone (Ozurdex(TM) ) or
fluocinolone acetonide (Iluvien(TM) ) have also been approved for
DME. All of these therapies are associated with side effects such
as eye infection, eye inflammation, increased eye pressure,
glaucoma, and retinal detachments.
Clearly there remains a need for a non-injectable DME
treatment.
Potential for prophylaxis
In addition, an oral DME drug would be more convenient for
ongoing prophylactic treatment to prevent the onset of DME in the
steadily growing diabetic population. This market remains untapped
by current therapies due to side effects and mode of administration
of intravitreal injections.
Verseon candidates target plasma kallikrein
By targeting plasma kallikrein, a central mediator of the
kallikrein-kinin cascade, Verseon's drug candidates address an
underlying cause and validated target for DME. The level and
activity of plasma kallikrein are both known to be upregulated in
the eyes of DME patients, which results in the activation of key
inflammatory pathways and vasodilation in the retina, leading to
edema and macular thickening.
We have discovered multiple novel, small-molecule inhibitors of
plasma kallikrein that show single-digit nanomolar potency,
excellent selectivity against related serine proteases
(>100-fold) and are suitable for oral dosing.
Established efficacy in multiple preclinical models
Our oral drug candidates have shown efficacy in two
industry-standard preclinical models: the human plasma-kallikrein
(hPK) injection and the STZ-induced retinal vascular permeability
models.
In these in vivo models, our drug candidates significantly
reduce retinal thickening and retinal leakage, thereby
counteracting several important hallmarks of DME. To the best of
our knowledge, our candidates are the first orally dosed
small-molecule plasma kallikrein inhibitors to demonstrate efficacy
in the STZ-induced retinal vascular permeability model.
Currently, we continue to optimize and test several promising
candidates with the goal to nominate the first development
candidate for this program and to initiate IND-enabling studies in
2018.
(1) Diabetes Care (2012)
(2) J. P. Boyle et al., Population Health Metrics (2010)
Oral drugs for hereditary angioedema
We are developing oral drugs for the treatment of hereditary
angioedema (HAE), a rare genetic disease characterized by recurring
episodes of swelling. These episodes can be life-threatening if
they affect the airways.
A rare but serious disease
HAE is a rare autosomal-dominant disorder in which a mutation of
the C1 inhibitor leads to overactivity of several serine proteases,
including plasma kallikrein. This results in acute attacks of
edema, which typically affect the face, limbs, or abdomen.
The disease affects an estimated 1 in every 10,000-50,000
persons(1) with a global market that is projected to grow to $3.8
billion by 2025.(2) The orphan disease status of HAE should allow
for more rapid preclinical and clinical development due to reduced
regulatory requirements and a well-established regulatory path.
The current standard of care
HAE therapies for both prophylaxis and management of acute
attacks are available today but are limited due to their
administration as subcutaneous or intravenous injections. These
treatments target the disease via different mediators in the HAE
pathway, including C1 esterase inhibitors, bradykinin B2 receptor
antagonists, and plasma kallikrein inhibitors. Prophylactic
treatments are typically injected every 3-4 days, while acute
treatments are injected on-demand or at the doctor's office.
Shire's subcutaneous polypeptide plasma kallikrein inhibitor
Kalbitor(TM) , as well as the positive phase III results for
Lanadelumab(TM) , Shire's subcutaneous monoclonal antibody plasma
kallikrein inhibitor, provide strong evidence that plasma
kallikrein is an important target central to the HAE disease
pathway.
Plasma kallikrein has been well-validated by macromolecular
therapeutics as a target for HAE and should also be amenable to
small-molecule inhibition.
Verseon focuses on unmet need
Our drug candidates are being developed for oral administration
as a more convenient alternative to current injectable therapies.
Oral drugs could be more affordable and are expected to have a
significant positive impact on the lives of HAE patients,
especially for ongoing disease prophylaxis.
Using our computer-driven platform, we have developed a class of
novel small-molecule plasma kallikrein inhibitors that are suitable
for oral dosing.
Potent and selective oral drug candidates
In preclinical studies, our small-molecule inhibitors inactivate
plasma kallikrein at nanomolar concentrations while being highly
selective (>100-fold) against a panel of related serine
proteases. In addition, they show good pharmacokinetics suitable
for oral dosing.
Reducing edema
In addition, our drug candidates show excellent efficacy in the
preclinical carrageenan-induced paw edema (CPE) model.
These results highlight the efficacy of Verseon's oral
kallikrein inhibitors in treating swelling associated with HAE.
Currently, we continue to optimize a number of compounds and
test them for in vivo efficacy.
(1) Credence Research (2018)
(2) Transparency Market Research (2018)
Targeting multidrug resistant cancers
We are advancing a novel class of anticancer agents that are
effective against tumor cell lines resistant to many current
chemotherapy drugs in preclinical testing.
Multidrug resistance - a major challenge for chemotherapy
A typical course of cancer therapy may include multiple
chemotherapy agents administered in combination regimens, possibly
as an adjunct to surgery and radiation therapy. Chemotherapy aims
to disrupt cancer cell growth by killing the dividing cells. In
2016, global sales for the top five chemotherapy drugs alone were
about $15 billion.(1)
Although many types of cancers are initially susceptible to
chemotherapy, over time these treatments can fail as the tumor
develops resistance to the administered drugs. This often means
that treatment with other anticancer agents will also be less
effective, limiting therapeutic options.
A common way for cancer cells to render drugs ineffective is by
triggering an overproduction of transporter proteins (efflux pumps)
that expel many chemicals, including chemotherapeutics, from inside
cells. Three transporters-multidrug resistance protein 1 (MDR1),
multidrug resistance-associated protein 1 (MRP1), and breast cancer
resistance protein (BCRP)-are implicated in many drug resistant
cancers.
Aiming to bring innovation to chemotherapy
We have developed a range of novel, small-molecule anticancer
drug candidates with good in vitro potency against a variety of
cancer cell lines. Importantly, our drug candidates are largely
unaffected by the overexpression of important transporters.
Inhibiting cancer cell growth
Microtubules play a critical role in the cell cycle, the process
of cell division and replication. These tube-shaped polymers are
involved in maintaining cell structure, providing a platform for
intracellular transport, and a variety of other cellular
processes.
A number of anticancer drugs currently in the market disrupt the
assembly (e.g. vincristine) or disassembly (e.g. paclitaxel) of
microtubules to treat cancers. These drugs interfere with mitotic
cell division, which eventually leads to cell death.
In vitro studies demonstrate that Verseon's anticancer drug
candidates potently inhibit tubulin polymerization--. Our tubulin
inhibitors interrupt crucial cancer cell functions by inhibiting
angiogenesis (blood vessel growth) and mitosis (cell division).
Targeting multidrug-resistant cancers
In functional assays, our class of anticancer drug candidates
are significantly less affected by the efflux pumps MDR1, MRP1, and
BCRP than many major chemotherapy agents.
Our compounds show comparable potency against wild type and cell
lines resistant to other cancer drugs, while the potency of
approved chemotherapy compounds such as paclitaxel, vincristine, or
doxorubicin is reduced up to 4000x in the same assay.
Suitable for infusion-based chemotherapy
In addition, our compounds display good in vitro physicochemical
properties as well as favorable in vivo pharmacokinetics suitable
for use as part of standard infusion-based chemotherapy
regimens.
Potential for precision second-line therapy
The ability of our novel class of tubulin inhibitors to maintain
their efficacy across multiple drug-resistant cancer cell lines
makes them attractive candidates for development as chemotherapy
agents. In particular, a new anticancer agent that is less
susceptible to major transporters could lead to more effective
precision second-line therapy.
We continue to optimize several promising compounds for this
program. A scale-up of the most potent compounds will allow us to
perform further testing, including in vivo tolerability and
efficacy studies.
(1) www.thebalance.com/top-cancer-drugs-2663234 (accessed May 8,
2018)
Pipeline development
Growing our portfolio of high-value disease programs
Our broad pipeline of drug programs demonstrates the ability of
our proprietary computer-driven platform to target a wide variety
of challenging diseases.
We continue to leverage the efficiency and scalability of our
platform to establish a steady stream of high-quality drug programs
and accelerate the development of new small-molecule drugs.
Targeting a wide range of diseases
Our disease-agnostic platform allows us to systematically pursue
the many indications that are not served or poorly served by
current drugs.
While chronic diseases typically involve large markets, they
generally require a rigorous, time-consuming regulatory process.
Acute indicates, in contrast, potentially affect smaller markets
but normally allow for faster development. A mix of chronic and
acute indications allows us to build a balanced portfolio of drug
programs, focusing first and foremost on patient needs.
Supported by the medical experts on our advisory boards, we
identify disease areas with significant market potential by
factoring in disease incidence, market size, competition, and
regulatory environment. In this way, we continue to grow our
diverse portfolio of drug programs.
Facilities development
A state-of-the-art facility to support the development of
next-generation drugs
Over the last few years, we have built-out our research and
administrative facility in Fremont, CA, with a view toward
consolidating our computing, chemistry, biology, and administrative
functions in a single location.
Supporting the Verseon pipeline
A comprehensive buildout has allowed us to shape the building to
best serve our interdisciplinary teams.
Close-knit collaboration between our computational, medicinal
chemistry, and discovery biology departments, and the availability
of our in silico methods throughout discovery and development is at
the heart of Verseon's drug discovery process.
The facility also provides room for all our departments to grow
as we launch additional drug programs and bring further laboratory
capacities in-house.
Our chemistry and biology labs allow our scientists to perform
industry-leading synthesis, testing, and biological
characterization of our drug candidates. In this way, we gain
closer control over the quality of our data. In addition, our lab
infrastructure will allow us to reduce our reliance on contract
research organizations and provides more control over timelines and
budgets.
An energy-efficient building
In September 2017, we closed a Property Assessed Clean Energy
(PACE) program of up to $8.65 million (subject to achievement of
certain milestones), which provides financing for energy-related
upgrades in this facility. 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 us to significantly reduce ongoing power-related operational
costs.
Leveraging value created
In June 2018, we also closed a $22.7 million mortgage for our
custom-built facility, leveraging our strong balance sheet and
realizing a portion of the value created through the acquisition
and development of the building.
This transaction frees up operating cash while allowing us to
retain ownership of our assets.
Finance review
In 2017, Verseon has continued to fund its drug programs in
anticoagulation, diabetic macular edema, and oncology. In addition,
a hereditary angioedema program based on orally bioavailable plasma
kallikrein inhibitors was initiated.
In parallel, the Company made substantial investments in an
infrastructure buildout that includes new facilities, laboratory
equipment, and a high-performance computing cluster.
Results for the year ended December 31, 2017:
-- Total assets on the balance sheet stood at $54.2 million,
compared to $69.6 million at the end of 2016.
-- Cash, cash equivalents, and short-term investments stood at
$11.6 million, compared to $46.9 million at the end of 2016.
-- Property, equipment, buildings and land totaled $40.7
million, compared to $22.3 million at the end of 2016.
-- Research and development expenses were $15.1 million,
compared to $11.5 million in 2016, primarily attributable to an
acceleration of our drug programs and preparation for clinical
trials.
-- General and administrative expenses were $6.3 million, compared to $5.8 million in 2016.
-- Non-cash expenses include stock-based compensation of $0.9
million, compared to $0.8 million in 2016, and also a currency
exchange gain of $0.6 million, compared to a loss of $2.6 million
in 2016.
-- Net loss was $20.4 million or $0.13 per basic share, compared
to a net loss of $19.5 million or $0.13 per basic share in
2016.
Capital structure
At December 31, 2017, Verseon's issued share capital consisted
of 151,489,789 shares of common stock and the Company held 42,917
shares in treasury, as compared to 151,414,659 shares of common
stock outstanding with no shares in treasury at December 31,
2016.
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.
Board of Directors
Thomas A. Hecht, PhD
Non-Executive Chairman
Dr. Hecht has forty years of experience in business development,
strategic planning, process engineering, quality management, and
environmental policy. During his more than thirty years at Chevron
Corporation, he served in senior positions in the United States,
Australia, and South Korea. His final positions were Executive Vice
President of Strategy for NWS Australia LNG and Vice President of
LNG Procurement for GS Caltex in Korea. Dr. Hecht received his PhD
from the California Institute of Technology.
Robert W. Karr, MD
Non-Executive Director
Dr. Karr has broad expertise in drug discovery and development,
clinical trials, as well as investor relations and partnering
efforts. During his extensive career in the pharmaceutical and
biotech industry, he has held various senior executive positions at
Idera Pharmaceuticals, Pfizer, and Warner-Lambert, including Senior
Vice President of R&D at Pfizer and Chief Scientific Officer at
Tioma Therapeutics. Dr. Karr completed his internship, residency,
and fellowship at Washington University School of Medicine and held
a faculty position at University Iowa College of Medicine.
Grover Wickersham
Non-Executive Director
Mr. Wickersham has over forty years of experience in corporate
law and finance. He is a founder and the Vice Chairman of S&W
Seed, a US publicly traded agricultural company. He is Chairman of
the Board of Trustees of the mutual funds of Fisher Investments and
general partner of Glenbrook Capital, a partnership that invests in
emerging growth companies. He served with the US Securities &
Exchange Commission as Staff Attorney in Washington, DC, and as an
SEC Branch Chief in Los Angeles. He received his AB from University
of California, Berkeley, his MBA from Harvard Business School, and
his JD from the University of California, Hasting College of the
Law, and is a practicing member of the California State Bar.
Adityo Prakash
Chief Executive Officer
Prior to founding Verseon, Mr. Prakash was co-founder and CEO of
Pulsent Corporation. He grew the company over five years and was
instrumental in bringing Pulsent's video compression and signal
processing technology to the marketplace. He is also an inventor on
38 patents. Mr. Prakash received his BS in Mathematics and Physics
from the California Institute of Technology.
Eniko Fodor
Chief Operating & Chief Financial Officer
Prior to founding Verseon, Ms. Fodor co-founded Pulsent
Corporation where she was the Chief Operating Officer. She played a
pivotal role in growing the company and developing highly effective
operating, marketing, and intellectual property strategies. She is
also an inventor on 23 patents. Ms. Fodor received her BS in
Physics from Universitatea Babes-Bolyai in Romania.
Directors' report
The Directors of the Company present their report and audited
financial statements for the year ended December 31, 2017.
Principal activity
Verseon is an emerging pharmaceutical company. Its proprietary
platform is capable of modeling interactions between a protein and
a drug molecule with precision sufficient for designing new drug
candidates. Verseon has been leveraging its drug discovery
technology to seed a growing portfolio of programs targeting
diverse disease areas, currently consisting of anticoagulation,
diabetic macular edema, hereditary angioedema, and oncology.
Verseon plans to expand its pipeline of drug discovery programs
to a multitude of disease areas.
Dividends
The Directors do not recommend the payment of a dividend in the
current year. No dividends were paid in prior years.
Employee involvement
The Company's policy is to encourage employee involvement at all
levels, as it believes that this is essential for the success of
the business.
Directors and their interests
The Directors during the year and up to the date of this report
are as follows:
Executive
-- Adityo Prakash
-- Eniko Fodor
Non-executive
-- Thomas Hecht, PhD
-- Robert Karr, PhD (appointed on October 19, 2017)
-- Grover Wickersham
-- Alastair Cade (resigned on September 25, 2017)
Directors' interests in shares are shown in the Compensation
Committee report.
Advisers
Nominated adviser and joint broker
-- Cenkos Securities plc
6.7.8 Tokenhouse Yard
London EC2R 7AS
UK
Joint brokers
-- Cantor Fitzgerald Europe
One Churchill Place
Canary Wharf
London E14 5RB
UK
Auditor
-- Deloitte LLP
Abbots House
Abbey St
Reading RG1 3BD
UK
Deloitte LLP has expressed willingness to continue in office as
auditor.
Registrars
-- Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier JE1 1ES
Jersey
This report was approved by the Board on June 25, 2018.
Eniko Fodor
Executive Director
Governance report
Principles of good corporate governance
Verseon is committed to high standards of corporate governance.
The Directors recognize the importance of good governance and
comply with the provisions of the Corporate Governance Code for
Small to Mid-Sized Quoted Companies, published from time to time by
the Quoted Companies Alliance, to the extent that they believe it
is appropriate in light of the size, stage of development, and
resources of the Company.
As the Company grows, it will regularly review the extent of its
corporate governance practices and procedures.
Application of principles
Board of Directors
The Board consists of a Non-Executive Chairman, two Executive
Directors, and two Non-Executive Directors.
The Board is responsible for overall Company strategy,
acquisition and divestment policy, approval of the budget, approval
of major commercial contracts and capital expenditure projects, and
consideration of significant operational and financial matters. The
Board monitors the exposure to key business risks and reviews the
progress of the Company toward achievement of its budgets and
forecasts. This is achieved by the close involvement of the
Executive Directors in the day-to-day running of the business and
by regular reports submitted to and considered at meetings of the
Board and subcommittees. The Board also considers employee issues,
key appointments, and compliance with relevant legislation.
The Board has both an Audit Committee and a Compensation
Committee. The Board does not consider it necessary to constitute a
separate Nominations Committee, and all members of the Board are
consulted on the potential appointment of a new Director or a
company secretary.
All Directors are able to take independent professional advice
in relation to their duties, if necessary, at the Company's
expense.
The Board is divided into three classes, as nearly equal in
number as possible, designated Class I, Class II, and Class III.
Class I Directors Thomas Hecht and Grover Wickersham were reelected
at the 2016 annual general meeting to a three-year term expiring at
the Company's annual general meeting in 2019. Class II Director
Robert Karr is serving a term expiring at the Company's annual
general meeting in 2020. Class III Directors Adityo Prakash and
Eniko Fodor are serving a term expiring at the Company's annual
general meeting in 2018.
Relationship with shareholders
The Board attaches high importance to maintaining good
relationships with all shareholders. The Company intends to have
regular meetings and communications with shareholders to keep them
updated on the Company's performance, strategy, management, and
Board membership.
On behalf the Board
Thomas A. Hecht, PhD
Chairman
June 25, 2018
Compensation report
Compensation Committee
Along with the Board, the Compensation Committee is responsible
for monitoring and providing advice on the framework and broad
policy for compensation of executive management, including any
compensation benefits and payments, taking into account all factors
it deems necessary; determining the compensation of Executive
Directors, including compensation benefits and payments; reviewing
the design of all share incentive plans for approval by the Board
and Stockholders; and ensuring that all provisions regarding
disclosure of compensation are clear and transparent.
The Compensation Committee comprises Thomas Hecht, who acts as
the Chairman of the committee, and Robert Karr. The Compensation
Committee meets as and when necessary but at least once a year.
Compensation policy
The Company's policy on executive compensation is intended to
attract and retain high-quality executives by paying competitive
compensation packages relevant to each executive's role,
experience, and the external market. The packages include a basic
salary, benefits, and stock options.
Directors' compensation
In 2017, Mr. Cade received his compensation in the amount of
$43.5 thousand in cash as compared to $60 thousand in 2016. In
addition, the Company engaged Chaka Investments UK Limited, where
Mr. Cade is the director, to provide consulting service for an
aggregated amount of $0.1 million in 2017, as compared to $0.2
million in 2016.
In 2017, Dr. Hecht received his compensation in from of a
combination of Restricted Stock Units (RSU) and $11 thousand in
cash. In 2016, Dr. Hecht received his compensation in the form of
RSU. In 2017, he was granted RSU for 36,144 shares of Common Stock,
compared to 28,037 in 2016. A total of 32,091 RSU vested in 2017,
compared to 22,665 in 2016. 18,072 RSU of the total vested in 2017
were admitted to AIM in January 2018.
In 2017, Dr. Karr received his compensation in the form of
Restricted Stock Units (RSU). In 2017, he was granted RSU for
36,144 shares of Common Stock. 6,024 RSU vested in 2017 that were
admitted to AIM in January 2018.
In 2017, Mr. Wickersham received his compensation in the form of
$30 thousand in cash. In 2016, he received his compensation in the
form of $50 thousand in cash and a grant of RSUs for 15,463 shares
of Common Stock. A total of 15,463 RSU vested in 2017, compared to
0 in 2016.
The employment agreements with Mr. Prakash and Ms. Fodor provide
each of them an annual salary of $0.3 million and, at the
discretion of the Board, a performance bonus. The agreements
contain provisions setting forth severance benefits upon
termination depending on whether employment is terminated with or
without cause, with or without good reason or upon death or
disability. The agreements include a proprietary information and
inventions agreement relating to confidentiality of the Company's
proprietary information and the assignment of inventions and
intellectual property. In 2017, Mr. Prakash and Ms. Fodor were each
granted 400,000 options that vest over three years. For the years
ended December 31, 2017 and 2016, total annual salary earned by Mr.
Prakash and Ms. Fodor were $0.3 million each.
Directors' interests
The Directors who held office at the date of this report had the
following beneficial interests in the Common Stock of the Company
at the date of this report:
Name Number of Shares
------------------- -----------------
Eniko Fodor 31,008,486
Thomas Hecht 45,328
Robert Karr 185,264
Adityo Prakash 31,528,281
Grover Wickersham 15,463
------------------- -----------------
On behalf of the Compensation Committee
Thomas Hecht
Chairman, Compensation Committee
June 25, 2018
Audit Committee report
Role and responsibilities
The Audit Committee (the "Committee") is responsible for
ensuring that the financial performance of the Company is properly
monitored and reported. The Committee reviews the independence and
objectivity of the external auditor each year. The Committee also
reviews the adequacy of the Company's internal controls, accounting
policies, and financial reporting, and provides a forum through
which the Company's external auditor reports to the Non-Executive
Directors.
Membership and meetings
The Committee comprises Grover Wickersham, who acts as the
Committee Chairman, and Thomas Hecht. The Committee has specific
terms of reference that deal with its authority and duties. It
meets at least three times a year, with the Executive Directors and
the external auditor attending by invitation.
The Board has decided that the size of the Company does not
justify a dedicated internal audit function. This position will be
reviewed as the Company's activities increase.
Financial reporting
The Committee shall monitor the integrity of the financial
statements of the Company, including its annual and interim
reports, interim management statements, preliminary results
announcements, and any other formal announcement relating to the
Company's financial performance. It will review significant
financial reporting issues and judgments they may contain. The
Committee shall also review summary financial statements and any
financial information contained in certain other documents, such as
announcements of a price-sensitive nature.
The Committee shall review and challenge where necessary:
-- The Company's accounting standards and the consistency of,
and any changes to, accounting policies both on a year-to-year
basis and across the Company.
-- The methods used to account for significant or unusual
transactions where different approaches are possible.
-- The appropriateness of any estimates and judgments in the
Company's financial reporting, while taking into account the views
of the independent auditor.
-- The clarity of disclosure in the Company's financial reports
and the context in which statements are made.
-- All material information presented with the financial
statements, such as the operating and financial review and the
corporate governance statement (insofar as they relate to the audit
and risk management).
Internal control and risk management
The Board has overall responsibility for ensuring that the
Company has processes to identify, evaluate, and manage key risks.
The system is designed to manage and minimize risk of failure to
achieve the Company's strategic objectives and can only provide
reasonable, and not absolute, assurance against material
misstatement or loss.
The Directors consider that the present system of internal
control is sufficient for the needs of the Company and adequately
addresses the risks to which the Company is perceived to be
exposed.
On behalf of the Audit Committee
Grover Wickersham
Chairman, Audit Committee
June 25, 2018
Directors' responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law and
regulations.
The AIM Rules require the Directors to prepare financial
statements for each financial year. Under those rules, the
Directors have elected to prepare the financial statements in
accordance with United States Generally Accepted Accounting
Practice ("US GAAP").
The Directors believe that the accounts should not be approved
unless the Directors are satisfied that the accounts give a true
and fair view of the state of affairs of the Company and of the
profit or loss of the Company for that period. In preparing these
financial statements, the Directors are required to
-- properly select and apply accounting policies,
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable, and
understandable information, and
-- provide additional disclosures when compliance with the
specific requirements in US GAAP are insufficient to enable users
to understand the impact of particular transactions, other events,
and conditions on the Company's financial position and financial
performance.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with US GAAP and the AIM Rules.
They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors confirm that to the best of their knowledge the
financial statements, prepared in accordance with US GAAP, give a
true and fair view of the assets, liabilities, financial position,
and profit or loss of the Company.
Independent auditor's report to the Directors of Verseon
Corporation
Report on the audit of the non-statutory financial
statements
Opinion
In our opinion the non-statutory financial statements:
-- present fairly, in all material respects, the state of the
group's affairs as of December 31, 2017 and of its loss for the
year then ended;
-- have been properly prepared in accordance with accounting
principles generally accepted in the United State of America.
We have audited the non-statutory financial statements of
Verseon Corporation and its subsidiaries (together the 'group')
which comprise:
-- the Consolidated balance sheets;
-- the Consolidated statements of operations and comprehensive loss;
-- the Consolidated statements of cash flows;
-- the Consolidated statements of stockholders' equity; and
-- the related notes A to E.
The financial reporting framework that has been applied in their
preparation is accounting principles generally accepted in the
United States of America ("US GAAP").
Basis for opinion
We conducted our non-statutory audit in accordance with
International Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the auditor's responsibilities for the audit of the
non-statutory financial statements section of our report.
We are independent of the group in accordance with the ethical
requirements that are relevant to our audit of the non-statutory
financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Summary of our audit approach
The key audit matters that we identified in the current year
were related to the accounting treatment of share based payment
arrangements, the valuation and allocation of costs relating to the
new premises within the VRH1 LLC subsidiary, and the classification
of PACE finance obtained in the year.
The materiality that we used in the current year was $0.75
million which was determined based on a blend of multiple of
benchmarks including total expenses, total assets and net
assets.
We have performed full scope audits on all entities within the
group; Verseon Corporation, Nirog Therapeutics LLC and VRH1 LLC.
There have been no significant changes in our audit approach to
that performed in the prior period.
Conclusions relating to going concern
We are required by ISAs (UK) to report in respect of the
following matters where:
-- the directors' use of the going concern basis of accounting
in preparation of the non-statutory financial statements is not
appropriate; or
-- the directors have not disclosed in the non-statutory
financial statements any identified material uncertainties that may
cast significant doubt about the group's ability to continue to
adopt the going concern basis of accounting for a period of at
least twelve months from the date when the non-statutory financial
statements are authorised for issue.
We have nothing to report in respect of these matters.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
non-statutory financial statements of the current period and
include the most significant assessed risks of material
misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit;
and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the
non-statutory financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters.
Key audit matter How the scope of our audit responded Key observations
to the key audit matter
Share based payment Our work in respect of assessing From our work
arrangements the volatility rate applied included performed,
the following: we are satisfied
The group has a number * Evaluated the design and implementation of controls that the volatility
of stock options, surrounding management's review of the volatility rates applied
warrants rate applied; in the models
and restricted stock to value share
units based payment
granted to participants. * For a sample of current year grants, assessed whether arrangements
the rate is being applied correctly within the fair are appropriate.
The accounting treatment value model;
and supporting grant date
fair value calculations
are inherently complex. * Calculated the actual volatility of the group share
We identified a key audit price since the May 2015 IPO to establish the impact
matter in respect of the on the fair value and current period expense;
significant volatility
rate applied within the
Black Scholes fair value * Considered the reasonableness of the rate taking
models. This requires account of the life cycle of the group and the
significant expected changes to the business over the vesting
management judgement and period of awards granted during the year; and
is a potential area for
misstatement due to
fraud. * Obtained share price data from comparative companies
Management have applied to further assess the rate applied and the impact on
a rate of 75% to awards the current period expense.
granted prior to the May
2015 initial public
offering
(IPO) and 50% to ones
granted
after this date, as set
out in footnote E 16 to
the financial statements.
=============================================================== =========================
Allocation of costs Our work in respect of assessing From our procedures
relating the allocation of costs capitalised performed,
to the new premises on the new premises included: we are satisfied
* Evaluated the design and implementation of controls that the costs
Within the company's surrounding management's review of costs capitalised; capitalised
subsidiary, relating to
VRH1 LLC, the the new premises
construction * Tested a sample of costs capitalised into Property are appropriate
of the new building and and equipment, assessing their nature against the under US GAAP.
premises was finalized specific capitalisation criteria set out in US GAAP;
during the period. Costs
capitalised in the year
amounted to $17.5m taking * Tested a sample of costs expensed to the Consolidated
the total construction statement of operations to assess whether these were
costs capitalised to date allocated correctly; and
to $29.6m as set out in
footnote E 3 to the
financial * Made inquiries and obtained evidence from management
statements. over constructor contract changes in the period to
Due to level of amounts assess the reasonableness of capitalised costs.
being incurred in the
period
we consider the valuation
and allocation of costs
to represent a potential
area of material risk of
misstatement, resultant
from non-adherence to the
capitalisation criteria
under US GAAP.
=============================================================== =========================
Classification of PACE Our work in respect of assessing From our procedures
finance the classification of PACE finance performed,
included: we are satisfied
Due to the limited * Evaluated the design and implementation of controls that the classification
accounting surrounding management's review of PACE of the finance
guidance under US GAAP, classification; within the
judgement is required as financial
to the classification of statements
the Property Assessed * Reviewed US GAAP in order to determine whether the is appropriate.
Clean accounting treatment of the finance was appropriate
Energy (PACE) finance under US GAAP;
facility
in the financial
statements, Reviewed the disclosures with respect
as set out in footnote to this matter to assess whether
E 6 to the financial they comply with US GAAP.
statements.
We identified a key audit
matter in respect of the
classification and
understandability
of PACE finance in the
statement of financial
position and statement
of profit and loss
respectfully
due to the unusual nature
of the finance.
=============================================================== =========================
Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality both in planning the scope of our
audit work and in evaluating the results of our work.
We determined materiality to be $0.75m for the group, and $0.74m
for the company which is determined based on a blend of multiple of
benchmarks including total expenses, total assets and net
assets.
Total expenses and asset related benchmarks have been chosen as
the basis for materiality as this is the measure by which
stakeholders and the market assess the progress of the group in its
research activities.
We agreed with the Audit Committee that we would report to the
Committee all audit differences in excess of $0.04m, as well as
differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding of the group
and its environment and assessing the risks of material
misstatement at the group level. All subsidiaries are managed from
the company's head office in Fremont, California and subject to a
common control environment. All audit work was performed by the
group engagement team which included visiting the group's US
headquarters.
Based on that assessment, we have performed full scope audits
for all three entities within the group structure; Verseon
Corporation, Nirog Therapeutics LLC and VRH1 LLC. Our audit work on
these entities was executed at levels of materiality applicable to
each individual company ranging from $0.29m to $0.74m which were
lower than group materiality. At the parent entity level we also
tested the consolidation process including assessment of all
entries posted at that stage.
Other information
The directors are responsible for the other information. The
other information comprises the information included in the annual
report, other than the non-statutory financial statements and our
auditor's report thereon.
Our opinion on the non-statutory financial statements does not
cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the non-statutory financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the non-statutory financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated.
If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there
is a material misstatement in the non-statutory financial
statements or a material misstatement of the other information. If,
based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to
report that fact.
We have nothing to report in respect of these matters.
Responsibilities of directors
As explained more fully in the directors' responsibilities
statement, the directors are responsible for the preparation of the
non-statutory financial statements and for being satisfied that
they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the non-statutory financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether
the non-statutory financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue
an auditor's report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
non-statutory financial statements.
A further description of our responsibilities for the audit of
the non-statutory financial statements is located on the Financial
Reporting Council's website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor's report.
Use of our report
This report is made solely to the company's Directors, as a
body, in accordance with our engagement letter dated 18 May 2018,
and to comply with the AIM listing rules. Our audit work has been
undertaken so that we might state to the company's Directors those
matters we are required to state to them in an auditor's report and
for no other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company and the company's Directors as a body, for our audit work,
for this report, or for the opinions we have formed.
The engagement partner on the audit resulting in this
independent auditor's report is Simon Olsen.
Deloitte LLP
Reading, United Kingdom
June 25, 2018
Consolidated balance sheets
As of December 31, 2017 and 2016
(US $'000, except share amounts and par December December
values) Note 31, 2017 31, 2016
------------------------------------------------ ---- --------- ---------
Assets
------------------------------------------------ ---- --------- ---------
Current assets
Cash and cash equivalents 1 3,290 29,225
Short-term investments 1 8,327 17,643
Prepaid expenses and other current assets 2 1,810 370
------------------------------------------------ ---- --------- ---------
Total current assets 13,427 47,238
Buildings and Land, net 3 38,314 20,938
Property and equipment, net 3 2,414 1,388
Total assets 54,155 69,564
Liabilities and stockholders' equity
------------------------------------------------ ---- --------- ---------
Current liabilities
Accounts payable 4,466 2,067
Accrued liabilities 5 1,902 2,550
Total current liabilities 6,368 4,617
---- ---------
Long term liabilities
Long term debts 6 2,572 -
------------------------------------------------ ---- --------- ---------
Total liabilities 8,940 4,617
------------------------------------------------ ---- --------- ---------
Commitments and contingencies 12
------------------------------------------------ ---- --------- ---------
Stockholders' equity 13
------------------------------------------------ ---- --------- ---------
Common stock-$0.001 par value, 300,000,000
shares authorized as of December 31,
2017 and 2016, respectively, 151,489,789
and 151,414,659 shares issued and outstanding
(exclusive of stock held in Treasury
of 42,917 and 0) as of December 31, 2017
and 2016, respectively. 152 151
Additional paid-in capital 137,560 136,646
Additional paid-in capital - Treasury (11) -
Loan receivable from stockholders (15,087) (14,830)
Accumulated deficit (81,114) (60,728)
Accumulated other comprehensive loss (5) (5)
================================================ ==== ========= =========
Total stockholders' equity 41,495 61,234
------------------------------------------------ ---- --------- ---------
Non-controlling interests in subsidiaries 4 3,720 3,713
------------------------------------------------ ---- --------- ---------
Total equity 45,215 64,947
------------------------------------------------ ---- --------- ---------
Total liabilities and stockholders' equity 54,155 69,564
------------------------------------------------ ---- --------- ---------
See accompanying notes to consolidated financial statements.
These financial statements were approved by the Board of
Directors June 25, 2018 and signed on its behalf by:
Adityo Prakash
Chief Executive Officer
Consolidated statements of operations and comprehensive loss
For the years ended December 31, 2017 and 2016
For the year ended
December 31,
------------------------
(US $'000, except share and per share Note 2017 2016
amounts)
============================================== ==== =========== ===========
Operating expenses
Research and development expenses 15,104 11,510
General and administrative expenses 6,329 5,828
============================================== ==== =========== ===========
Total operating expenses 21,433 17,338
============================================== ==== =========== ===========
Operating loss (21,433) (17,338)
Interest expense - (3)
Interest income 483 460
Currency exchange gain (loss) 562 (2,606)
============================================== ==== =========== ===========
Loss before income taxes (20,388) (19,487)
Income tax provision 7 - -
============================================== ==== =========== ===========
Net loss (20,388) (19,487)
Net loss attributable to non-controlling
interests 2 5
============================================== ==== =========== ===========
Net loss attributable to Verseon Corporation (20, 386) (19,482)
Net loss (20,388) (19,487)
Unrealized gains on available-for-sale
securities - 31
============================================== ==== =========== ===========
Total comprehensive loss (20,388) (19,456)
Comprehensive loss attributable to
non-controlling interests (2) (5)
============================================== ==== =========== ===========
Comprehensive loss attributable to
Verseon Corporation (20,386) (19,451)
============================================== ==== =========== ===========
Net loss attributable to Verseon Corporation
common stockholders per share-basic
and diluted 8 (0.13) (0.13)
Weighted-average shares of stock outstanding
used in computing net loss per share-basic
and diluted 151,436,635 151,339,342
See accompanying notes to consolidated
financial statements.
Consolidated statements of cash flows
For the years ended December 31, 2017 and 2016
For the year ended
December 31,
(US $'000) 2017 2016
Cash flows from operating activities
Net loss (20,388) (19,487)
Adjustments to reconcile net loss to net cash
used in operating activities
===================================================== ================== =========
Depreciation 506 298
Currency exchange (gain) loss from re-measurement (562) 2,612
Stock-based compensation expense 897 767
Interest earned from loan receivable from
stockholders (313) (294)
===================================================== ================== =========
Changes in assets and liabilities
===================================================== ================== =========
Increase in prepaid expenses and other current
assets (1,438) (202)
Increase in accounts payable 1,311 86
Increase in accrued liabilities 690 79
===================================================== ================== =========
Net cash used in operating activities (19,297) (16,141)
===================================================== ================== =========
Cash flows from investing activities
===================================================== ================== =========
Purchases of property and equipment (19,159) (9,895)
Purchases of available-for-sale securities
investments (21,545) (28,665)
Maturities of available-for-sale securities
investments 26,729 44,712
Sales of available-for-sale securities investments 4,133 250
===================================================== ================== =========
Net cash (used in) provided by investing activities (9,842) 6,402
===================================================== ================== =========
Cash flows from financing activities
----------------------------------------------------- ------------------ ---------
Proceeds from exercise of stock options and
warrants 17 31
Proceeds from PACE financing 2,572 -
Proceeds from issuance of equity in Nirog 9 -
Repayment of promissory note from stockholders 44 -
Repayment of debt - (219)
----------------------------------------------------- ------------------ ---------
Net cash provided by (used in) financing activities 2,642 (188)
===================================================== ================== =========
Net decrease in cash and cash equivalents (26,497) (9,927)
===================================================== ================== =========
Effect of currency exchange rate changes 562 (2,612)
===================================================== ================== =========
Cash and cash equivalents at the beginning
of the period 29,225 41,764
===================================================== ================== =========
Cash and cash equivalents at the end of the
period 3,290 29,225
===================================================== ================== =========
For the year
ended
December 31,
===============
(US $'000) Note 2017 2016
==================================================== ===== ======= ======
Supplemental disclosure of non-cash investing
and financing activities
==================================================== ===== ======= ======
Purchases of property and equipment under accounts
payable and accrued
liabilities 2,641 2,890
----------------------------------------------------------- ------- ------
Interest payment was $0 thousand in 2017 and $83 thousand in
2016.
No income taxes were paid in 2017 and 2016.
See accompanying notes to consolidated financial statements.
Consolidated statements of stockholders' equity
For the years ended December 31, 2017 and 2016
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,
2015 151 135,808 - (14,541) (41,246) (36) 80,136 3,718 83,854
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Exercise of
stock options
and
warrants-Common
Stock * 31 - - - - 31 - 31
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Issuance of
shares from
Restricted Stock
Units * * - - - - * - *
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Loans to
stockholders - - - (289) - - (289) - (289)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Stock-based
compensation - 807 - - - - 807 - 807
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss - - - - (19,487) - (19,487) - (19,487)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss
attributable to
non-controlling
interests - - - - 5 - 5 (5) -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Other
comprehensive
gain - - - - - 31 31 - 31
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Balance at
December 31,
2016 151 136,646 - (14,830) (60,728) (5) 61,234 3,713 64,947
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Exercise of
stock options
and
warrants-Common
Stock * 17 - - - - 17 - 17
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Issuance of
shares from
Restricted
Stock Units 1 - - - - - 1 - 1
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Loans to
stockholders - - (11) (257) - - (268) - (268)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Stock-based
compensation - 897 - - - - 897 - 897
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Investment in
Nirog - - - - - - - 9 9
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss - - - - (20,388) - (20,388) - (20,388)
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Net loss
attributable to
non-controlling
interests - - - - 2 - 2 (2) -
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
Balance at
December 31,
2017 152 137,560 (11) (15,087) (81,114) (5) 41,495 3,720 45,215
---------------- ------ ---------- -------- ------------- ----------- ------------- --------- ----------- --------------
* Amount less than $1,000 and insignificant after rounding.
See accompanying notes to consolidated financial statements.
Consolidated statements of stockholders' equity
For the years ended December 31, 2017 and 2016 (continued)
Common Total shares
(Shares) Stock outstanding
----------------------------------------------- ------------ -------------
Balance at December 31, 2015 150,878,815 150,878,815
Exercise of stock options and warrants-Common
Stock 476,166 476,166
Issuance of shares from Restricted Stock
Units 59,678 59,678
Balance at December 31, 2016 151,414,659 151,414,659
Exercise of stock options and warrants-Common
Stock 71,065 71,065
Issuance of shares from Restricted Stock
Units 46,982 46,982
Treasury Stock (42,917) (42,917)
Balance at December 31, 2017 151,489,789 151,489,789
----------------------------------------------- ------------ -------------
See accompanying notes to consolidated financial statements.
Notes to consolidated financial statements
A. Basis of presentation
The consolidated financial statements of the Company are
prepared in accordance with accounting principles generally
accepted in the United States of America ("US GAAP"). The financial
information is presented in United States Dollars ("$"). 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, 2016.
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 has 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 79.9% and 76.8% of
Nirog as of December 31, 2017 and 2016, 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 will house 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.
These consolidated financial statements have been prepared on a
going concern basis, which assumes the realization of assets and
settlement of liabilities in the normal course of business. The
Company is financed substantially through equity funding, upon
which the company is reliant to fund its operations until positive
cash flow is generated from ongoing business operations. A
successful public offering was made on May 7, 2015 and as such the
Company has secured the financing it requires to continue in
operational existence for the foreseeable future. The Company has
arranged additional financing in the amount of $22.7 million
secured against the facility as disclosed in the subsequent events.
As such, the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for a period of no less than 12 months from the date of signing
these consolidated financial statements. Thus, the Directors
continue to adopt the going concern basis of preparation.
These consolidated financial statements do not include any
adjustments to the carrying value or classification of recorded
asset amounts and carrying value or classification of liabilities
that might be necessary, should the Company be unable to continue
as a going concern.
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. Revenue recognition: The Company has not earned revenue from
the sale of its new drug candidates. Revenue will be recognized
when persuasive evidence of an agreement exists, delivery of
service occurs, the sales price is fixed, or determinable and
collectability is reasonably assured.
d. 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 years ended December 31, 2017 and 2016, research
and development expenses were $15.1 million and $11.5 million,
respectively.
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. The Company recorded a gain of
$0.6 million in 2017 as compared to a loss of $2.6 million in
2016.
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. 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. 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.
l. Property Assessed Clean Energy ("PACE") program: Under the
terms of the PACE agreement, the amounts received are repayable as
property tax assessments made over the 25-year term of the
agreement. In the event that the property is sold, the obligation
to pay such amounts transfers to the purchaser. The Company has
recorded the amount received as a liability.
m. 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:
Year ended December
31,
=================================== ==========================
2017 2016
=================================== ============ ============
Options to purchase Common Stock 3,111,109 1,990,825
Warrants to purchase Common Stock 2,331,408 2,351,965
Restricted Stock Units 101,663 76,357
=================================== ============ ============
Total 5,544,180 4,419,147
=================================== ============ ============
n. 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:
Year ended December
31,
===================================================== ====================================
(US $'000) 2017 2016
===================================================== ===================== =============
Research and development General and administrative 453 330
444 437
===================================================== ===================== =============
Total * 897 767
===================================================== ===================== =============
* Net of $40 thousand in 2016 to reverse liabilities accrued in
2015.
o. Recently issued accounting standards: In January 2016, the
FASB issued ASU No. 2016-01, "Recognition and Measurement of
Financial Assets and Financial Liabilities", which eliminates the
requirement for public companies to disclose the method(s) and
significant assumptions used to estimate the fair value that is
required to be disclosed for financial instruments measured at
amortized cost on the balance sheet. Additionally, the standard
requires public entities to use the exit price notion when
measuring the fair value of financial instruments for disclosure
purposes. Furthermore, the standard requires presentation of
financial assets and liabilities by measurement category and form
of financial asset on the balance sheet or accompanying notes to
the financial statements. The standard will be effective for the
fiscal year 2018 and annual periods and interim periods thereafter.
The Company is currently evaluating the impact of adoption on the
consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, "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. The Company is currently evaluating the impact of
adoption on the consolidated financial statements.
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 periods 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.
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 December 31, 2017 and 2016 were as follows:
December 31, 2017
------------------------------------- --------------------------------------------------------------------
Amortized Gross unrealized
(US $'000) cost Losses Fair value
------------------------------------- ------------------------- --------------------------- ------------
Certificate of deposits 4,080 - 4,080
Municipal securities 910 - 910
Government sponsored agencies 3,337 - 3,337
Total available-for-sale securities 8,327 - 8,327
===================================== ========================= =========================== ============
Classified as:
========================= ===========================
Cash equivalents * -
========================= ===========================
Short-term investments 8,327
Long-term investments -
===================================== ========================= =========================== ============
Total available-for-sale securities 8,327
===================================== ========================= =========================== ============
December 31, 2016
===================================== ====================================================================
Amortized Gross unrealized
(US $'000) cost losses Fair value
===================================== ========================= =========================== ============
Money market fund 12,797 - 12,797
Certificate of deposits 6,069 - 6,069
Municipal securities 4,211 (2) 4,209
Government sponsored agencies 6,720 (3) 6,717
Commercial paper 4,398 - 4,398
Corporate securities 1,000 - 1,000
===================================== ========================= =========================== ============
Total available-for-sale securities 35,195 (5) 35,190
===================================== ========================= =========================== ============
Classified as:
========================= ===========================
Cash equivalents * 17,547
========================= ===========================
Short-term investments 17,643
Long-term investments -
===================================== ========================= =========================== ============
Total available-for-sale securities 35,190
===================================== ========================= =========================== ============
* Cash and cash equivalents at December 31, 2017 of $3,290
thousand comprises cash of $3,290 thousand and cash equivalents of
$0 thousand, as compared to cash and cash equivalents of $29,225
thousand at December 31, 2016, which comprises cash of $11,678
thousand and cash equivalents of $17,547 thousand.
The Company invested the funds raised from the IPO in May 2015
with liquidity that is sufficient to meet its operating and
investment cash requirements as well as to preserve principal. All
available-for-sale securities held as of December 31, 2017 and 2016
had contractual maturities of less than two years and high quality
investment grade ratings. Realized gains on available-for-sale
securities for the year ended December 31, 2017 were $163 thousand
and were recorded as interest income, as compared to the realized
gains on available-for-sale securities of $146 thousand for the
year ended December 31, 2016.
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 December 31, 2017
and 2016:
(US $'000) December 31, 2017
Description
=============================== ==========================================================
Level 1 Level 2 Level 3 Total
=============================== ====================== =========== =========== ========
Certificate of deposits - 4,080 - 4,080
Municipal bonds - 910 - 910
Government sponsored agencies - 3,337 - 3,337
Total - 8,327 - 8,327
=============================== ====================== =========== =========== ========
(US $'000) December 31, 2016
Description
=============================== ==========================================================
Level 1 Level 2 Level 3 Total
=============================== ============== ============== ============= ===========
Money market fund 12,797 - - 12,797
Certificate of deposits - 6,069 - 6,069
Municipal bonds - 4,209 - 4,209
Government sponsored agencies - 6,717 - 6,717
Commercial paper - 4,398 - 4,398
Corporate debt securities - 1,000 - 1,000
=============================== ============== ============== ============= ===========
Total 12,797 22,393 - 35,190
=============================== ============== ============== ============= ===========
2. Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of:
December 31,
================================================ ============================
(US $'000) 2017 2016
================================================ =============== ===========
Prepaid expenses and other current assets:
Equipment related deposits 928 171
Facilities related deposits 418 -
Operating lease(s) related deposits 56 56
Equipment maintenances and software licenses 91 54
Insurance premium 42 42
Other 275 47
================================================ =============== ===========
Prepaid expenses and other current assets 1,810 370
================================================ =============== ===========
3. Property and equipment, net
Property and equipment, net consist of:
December 31,
================================ ============================
(US $'000) 2017 2016
================================ ============== ============
Land and building 38,314 20,938
Other property and equipment
Lab equipment 2,328 1,401
Office equipment 4 4
Computer and peripherals 867 362
Furniture and fittings 226 126
================================ ============== ============
Total 3,425 1,893
Less: Accumulated depreciation (1,011) (505)
================================ ============== ============
Property and equipment, net 2,414 1,388
================================ ============== ============
Depreciation expense was $0.5 million and $0.3 million for the
years ended December 31, 2017 and 2016, respectively.
4. Nirog
The consolidated financial statements presented include the
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 79.9% and
76.8% of the outstanding equity of Nirog as of December 31, 2017
and 2016, respectively.
5. Accrued liabilities
Accrued liabilities consist of:
December 31,
============================= ============================
(US $'000) 2017 2016
============================= ============= =============
Professional services-audit 91 95
Professional services-Other 402 243
Facility buildout 668 1,587
Legal services 84 74
Vacation accrual 534 421
Various operating accruals 123 130
Total accrued liabilities 1,902 2,550
============================= ============= =============
6. Debts
In September 2017, VRH1 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 December 31, 2017, based on
milestones achieved to date, the Company had received a payment of
$2.6 million, which is net of charges incurred of $0.4 million,
which will be amortized over the life of the loan.
7. Income taxes
The Company did not record a federal or state current or
deferred income tax provision or benefit for the years ended
December 31, 2017 and 2016 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%.
At December 31, 2017, the Company had federal and state Net
Operating Loss ("NOL") carry forwards of approximately $53.8
million and $33.3 million, respectively, which expire at various
dates through 2037 if not utilized. At December 31, 2017 the
Company had federal and state research credit carry forwards that
totaled $2.0 million and $1.6 million, respectively, which expire
at various dates through 2037 if not utilized.
During the year ended December 31, 2017, the only change in the
balance of gross uncertain tax benefits was an increase of $0.5
million related to current year and prior year tax positions. At
December 31, 2017, the balance of gross uncertain tax benefits was
$1.2 million as compared to $0.7 million as of December 31, 2016.
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 34% and the state
statutory income tax rate of 7% and 6% for 2017 and 2016
respectively. The Company's deferred tax assets differ from
deferred income tax assets computed by applying the federal
statutory income tax rate of 34% to the loss before income taxes
principally due to the effect of (i) stock based compensation
expenses of $0.9 million (2016: $0.8 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:
December 31,
====================================================== ============================
(US $'000) 2017 2016
====================================================== ============= =============
Deferred tax assets:
Net operating loss carry forwards 15,129 13,346
R&D credit carry forwards 2,507 1,293
Depreciation and amortization-property and equipment 127 117
Accruals and reserves 150 170
====================================================== ============= =============
Total deferred tax assets 17,913 14,926
Less valuation allowance (17,913) (14,926)
====================================================== ============= =============
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 December 31, 2017 and
2016.
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 2017 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 gross
deferred tax asset of $4.2 million.
8. 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:
2017 2016
=================================================================================== ===========
Weighted average shares-basic 151,436,635 151,339,342
=============================== ================================================== ===========
The components of basic and diluted earnings per share were as
follows:
2017 2016
============================================================= =============
Net loss attributable to Verseon Corporation $(20,388,000) $(19,482,000)
Average outstanding shares
Basic 151,436,635 151,339,342
Diluted * 151,436,635 151,339,342
Net loss per share
Basic $(0.13) $(0.13)
Diluted * $(0.13) $(0.13)
============================================== ============= =============
* 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.
9. 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.
10. Concentration of credit risk
Financial instruments that potentially subject the Company to
concentrations of credit risk principally consist of cash, cash
equivalents, short-term and long-term investments.
All cash, cash equivalents, and marketable securities
investments are held in the United States and United Kingdom as of
December 31, 2017 and 2016. All marketable securities investments
as of December 31, 2017 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.
11. Related-party transactions
Ms. Fodor purchased 6,000 shares of Common Stock in September
2016 from the market for $13 thousand.
"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 December 31, 2017 and 2016 were $15.1 million
and $14.8 million, respectively.
One of Nirog Therapeutics' Board member Ronald Kass exercised
Nirog 7,812 Preferred B2 Warrants (previously granted before
January 2017), exercised 6,513 Verseon Common Warrants and 14,044
Verseon Class Z Warrants.
12. Commitments and contingencies - Operating leases
Rental expense for operating leases amounted to $0.9 million and
$0.8 million for the years ended December 31, 2017 and 2016,
respectively. The operating lease for the biology laboratory is
cancellable with a three-month advance notice period, the chemistry
laboratory is cancellable with a one-month advance notice period.
The headquarters lease is cancellable at the end of the renewal
period annually and ran from August 1 through July 31.
The table sets out the Company's non-cancellable operating lease
commitments at each of the balance sheet dates stated, which are
due within one year:
(US $'000) 2017 2016
------------------------ ---- ----
Lease for headquarters - 83
Lease for laboratories 52 52
------------------------ ---- ----
Total obligation 52 135
======================== ==== ====
Legal proceedings
The Company has no ongoing legal proceedings nor is it aware of
any potential legal proceedings.
13. Stockholder's equity
As of December 31, 2017 and 2016, the Company had 151,489,789
shares and 151,414,659 shares of Common Stock outstanding, not
including 42,917 shares and 0 shares in treasury, for the
respective years, 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 17,760,825 shares and 16,420,666 shares were available for
grant under the 2015 Plan as of December 31, 2017 and 2016,
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 December 31, 2017 and 2016 were $15.1 million and
$14.8 million, respectively.
14. Restricted Stock Units (RSU)
In 2015, the Company began issuing RSU to certain employees and
consultants under the 2015 Plan. The RSU are valued at the closing
price of the Company's Common Stock on the date of grant. The
restricted stock unit activity for the year ended December 31, 2017
and 2016 is summarized as follows:
Weighted average
grant date
Shares fair value
per share
($)
========================================================= ==========================
Awarded and unvested at December 31, 2015 78,647 3.41
Granted in 2016 57,388 2.27
Vested in 2016 (59,678) 3.00
=========================================== ============ ==========================
Awarded and unvested at December 31, 2016 76,357 2.87
Granted in 2017 72,288 1.66
Vested in 2017 (71,078) (*) 2.25
=========================================== ============ ==========================
Awarded and unvested at December 31, 2017 77,567 2.32
=========================================== ============ ==========================
A total of $0.1 million and $0.2 million was recorded as
stock-based compensation expenses in 2017 and 2016 respectively for
RSU granted. As of December 31, 2017, there was $0.2 million of
unrecognized compensation expense associated with unvested RSUs,
which is expected to be recognized over a weighted-average period
of 1.4 years as compared to $0.2 million of unrecognized
compensation expense associated with unvested RSU with a
weighted-average period of 1.7 years in 2016.
*Includes 24,096 shares vested in 2017 that were admitted to AIM
in January 2018.
15. 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 $0.1 million was recorded as stock-based compensation
expenses in each of 2017 and 2016 for warrants.
A total of 21,052 Preferred A Warrants was outstanding and
exercisable at December 31, 2017 at a weighted-average exercise
price of $0.95 per share and with weighted-average remaining life
of 4.2 years. There was no Preferred A Warrant activity in 2016 and
2017. A total of 71,302 Preferred B Warrants was outstanding and
exercisable at December 31, 2017 at a weighted-average exercise
price of $2.54 per share and with weighted-average remaining life
of 1 years. There was no Preferred B Warrant activity in 2016 and
2017.
The following is a summary of the status of the Company's
outstanding stock warrants as of December 31, 2017 and 2016 and
changes that occurred during each time period:
Weighted- Weighted-
Number of average exercise average remaining
Common price life
Warrants ($) (Years)
============================================================================================================== ======================= ========================
Outstanding at December 31, 2015 1,890,713 3.59 4.3
Outstanding at December 31, 2016 1,890,713 3.59 3.3
------------------------------------------------------------- ----------------------------------------------- ----------------------- ------------------------
Exercised in 2017 (6,513) _ _
Outstanding at December 31, 2017 1,884,200 3.59 2.3
============================================================= =============================================== ======================= ========================
Exercisable at December 31, 2017 1,771,700 3.62 2.3
============================================================= =============================================== ======================= ========================
Weighted- Weighted-
Number of average exercise average remaining
Common Z price life
Warrants ($) (Years)
================================================================================================================ ======================== =========================
Outstanding at December 31, 2015 732,660 0.14 2.3
Exercised in 2016 (456,116) 0.09 _
Outstanding at December 31, 2016 276,544 0.22 2.9
Exercised in 2017 (14,044) 0.23 _
Outstanding and exercisable at December
31, 2017 262,500 0.22 2.0
================================================================ ============================================== ======================== =========================
Nirog
Nirog did not issue any warrants during the years ended December
31, 2017 and 2016. There were no Common Z Warrants or Preferred A
Warrants outstanding as of December 31, 2017 and 2016.
A total of 47,447 Preferred B2 Warrants was outstanding and
exercisable at December 31, 2017 at a weighted-average exercise
price of $0.80 per share and with weighted-average remaining life
of 1.0 years. In 2017, 7,812 Preferred B2 Warrants were exercised
with a weighted-average exercise price of $0.80, respectively. In
2017, 2,468 Preferred B2 Warrants were cancelled. There was no
Preferred B2 Warrant activity in 2016. A total of 102,128 Preferred
C1 Warrants was outstanding and exercisable at December 31, 2017 at
a weighted-average exercise price of $0.90 per share and with
weighted-average remaining life of 1.1 years. There was no
Preferred C1 Warrant activity in 2016 and 2017. A total of 5,250
Preferred C2 Warrants was outstanding and exercisable at December
31, 2017 at a weighted-average exercise price of $1.00 per share
and with weighted-average remaining life of 1.4 years. There was no
Preferred C2 Warrant activity in 2017 and 2016.
On December 31, 2017, Nirog appointed Ronald Kass as a Director.
Nirog did not issue any warrants during the years ended December
31, 2017 and 2016. There were no Common Z Warrants or Preferred A
Warrants outstanding as of December 31, 2017 and 2016.
16. Stock options and stock grants
Verseon
The activity in the Company's option grants during the years
2016 and 2017 are set out in the table below:
Weighted- average Weighted- average
Number of exercise price remaining life
options ($) (Years)
=============================================== ======================== ========================
Outstanding at December 31, 2015 1,517,375 2.29 9.4
Granted in 2016 658,000 2.34 10.0
Exercised in 2016 (20,050) 0.26 _
Cancelled in 2016 (164,500) 2.44 _
================================== =========== ======================== ========================
Outstanding at December 31, 2016 1,990,825 2.31 8.7
Granted in 2017 2,269,665 1.90 9.62
Exercised in 2017 (50,508) 0.25 _
Cancelled in 2017 (1,098,963) 2.00 _
================================== =========== ======================== ========================
Outstanding at December 31, 2017 3,111,019 2.13 9.07
================================== =========== ======================== ========================
Exercisable at December 31, 2017 1,042,829 2.30 8.8
================================== =========== ======================== ========================
In 2017 and 2016, stock based compensation expense for stock
options was $0.4 million and $0.5 million, respectively. The
weighted average grant date fair value of the Common Stock options
granted in 2017 was $0.89 per share, as compared to $1.13 per share
in 2016.
For details of the variables used by the Company in the
Black-Scholes option pricing model for the years December 31, 2017
and 2016, see the following table:
Year ended December
31,
================================== ==========================
2017 2016
================================== ============= ===========
Expected volatility 50% 50%
Expected dividend yields 0% 0%
Expected risk-free interest rate 1.95%-2.1% 1.2%-1.7%
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 2017 and 2016.
As of December 31, 2017, there were 5,130,667 unit options
available for grant.
17. Subsequent Events
On June 13, 2018, VRH1, a wholly owned subsidiary of Verseon,
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.
The Financing is an interest-only mortgage facility which
carries an annual interest rate of 8.0% 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%. The proceeds of the Financing will be used for
Verseon's drug programs and operations.
- 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
FR FKQDDFBKDDAB
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June 25, 2018 02:00 ET (06:00 GMT)
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