Company Quick10K Filing
AmpliPhi Biosciences
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 10 $3
S-1 2019-12-20 Public Filing
10-Q 2019-11-12 Quarter: 2019-09-30
10-Q 2019-08-14 Quarter: 2019-06-30
10-Q 2019-05-06 Quarter: 2019-03-31
10-K 2019-03-25 Annual: 2018-12-31
10-Q 2018-11-08 Quarter: 2018-09-30
S-1 2018-08-21 Public Filing
10-Q 2018-08-09 Quarter: 2018-06-30
10-Q 2018-05-15 Quarter: 2018-03-31
10-K 2018-03-14 Annual: 2017-12-31
10-Q 2017-11-14 Quarter: 2017-09-30
10-Q 2017-08-14 Quarter: 2017-06-30
10-Q 2017-05-15 Quarter: 2017-03-31
10-K 2017-03-27 Annual: 2016-12-31
10-Q 2016-11-10 Quarter: 2016-09-30
10-Q 2016-08-15 Quarter: 2016-06-30
10-Q 2016-05-12 Quarter: 2016-03-31
10-K 2016-03-30 Annual: 2015-12-31
10-Q 2015-11-16 Quarter: 2015-09-30
10-Q 2015-08-13 Quarter: 2015-06-30
10-Q 2015-05-15 Quarter: 2015-03-31
10-K 2015-04-15 Annual: 2014-12-31
10-Q 2014-11-14 Quarter: 2014-09-30
10-Q 2014-05-20 Quarter: 2014-03-31
10-Q 2014-09-12 Quarter: 2013-12-31
10-K 2014-04-15 Annual: 2013-12-31
8-K 2019-12-10 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2019-10-10 Officers, Exhibits
8-K 2019-09-24 Regulation FD, Exhibits
8-K 2019-09-12 Other Events, Exhibits
8-K 2019-06-26 Regulation FD, Exhibits
8-K 2019-06-24 Regulation FD, Exhibits
8-K 2019-05-14 Regulation FD, Exhibits
8-K 2019-05-09 Enter Agreement, M&A, Sale of Shares, Shareholder Rights, Accountant, Control, Officers, Amend Bylaw, Shareholder Vote, Exhibits
8-K 2019-05-08 Regulation FD, Exhibits
8-K 2019-02-05 Enter Agreement, Sale of Shares, Exhibits
8-K 2019-01-14
8-K 2019-01-14 Other Events, Exhibits
8-K 2019-01-07 Regulation FD, Exhibits
8-K 2019-01-03 Enter Agreement, Other Events, Exhibits
8-K 2018-12-17 Amend Bylaw, Shareholder Vote, Exhibits
8-K 2018-10-12 Other Events
8-K 2018-10-11 Other Events
8-K 2018-10-08 Other Events, Exhibits
8-K 2018-09-18 Other Events, Exhibits
8-K 2018-09-05 Regulation FD, Exhibits
8-K 2018-08-09 Earnings, Exhibits
8-K 2018-05-15 Earnings, Regulation FD, Exhibits
8-K 2018-03-20 Other Events, Exhibits
8-K 2018-03-14 Earnings, Exhibits
8-K 2018-01-09 Other Events, Exhibits
8-K 2018-01-09 Earnings
8-K 2018-01-08 Regulation FD, Exhibits
8-K 2018-01-03 Other Events
APHB 2019-09-30
Item 2. Management’S Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 armp-20190930ex311eb69aa.htm
EX-31.2 armp-20190930ex31228abdf.htm
EX-32.1 armp-20190930ex321394324.htm
EX-32.2 armp-20190930ex322b22c22.htm

AmpliPhi Biosciences Earnings 2019-09-30

APHB 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
MBOT 3 13 5 0 0 -7 -7 -6 0.8 -59%
APHB 3 35 12 0 0 -14 -13 -11 0.8 -39%
LIFE 1 49 19 0 0 -25 -25 -1 0% 0.0 -52%
CUR 0 4 2 0 0 -7 -7 -2 0% 0.3 -190%
ENTX
BBI
OTLK
XFOR
GNFT
DYAI

10-Q 1 armp-20190930x10q.htm 10-Q armp_Current_Folio_10Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

 

 

 

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

 

 

For the quarterly period ended September 30, 2019

OR

 

 

 

 

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

 

 

For the transition period from _________________ to _______________________

Commission file number: 001‑37544

ARMATA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Washington

91‑1549568

(State or other jurisdiction of

(I.R.S. Employer Identification Number)

incorporation or organization)

 

 

 

4503 Glencoe Avenue

 

Marina del Rey, CA

90292

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (310) 665-2928

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

ARMP

NYSE American

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   ☒      No     ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes    ☒     No     ◻

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

 

 

Large accelerated filer   ◻

Accelerated filer   ◻

Non-accelerated filer ☒

Smaller reporting company   ☒

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).

Yes ◻     No ☒

The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding at November 8, 2019 was 9,934,299.

 

 

TABLE OF CONTENTS

 

 

 

 

 

 

Page

 

 

 

PART I. FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (unaudited)

 

 

 

 

 

Consolidated Balance Sheets

3

 

 

 

 

Consolidated Statements of Operations  and Comprehensive Loss

4

 

 

 

 

Consolidated Statements of Stockholders’ Equity

5

 

 

 

 

Consolidated Statements of Cash Flows

7

 

 

 

 

Condensed Notes to Consolidated Financial Statements

8

 

 

 

Item 2. 

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

20

 

 

 

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

25

 

 

 

Item 4. 

Controls and Procedures

25

 

 

 

PART II. OTHER INFORMATION 

26

 

 

 

Item 1. 

Legal Proceedings

26

 

 

 

Item 1A. 

Risk Factors

26

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

47

 

 

 

Item 3. 

Defaults upon Senior Securities

48

 

 

 

Item 4. 

Mine Safety Disclosures

48

 

 

 

Item 5. 

Other Information

48

 

 

 

Item 6. 

Exhibits

48

 

 

 

SIGNATURES 

49

 

 

 

 

Armata Pharmaceuticals, Inc.

Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

    

September 30, 2019

    

December 31, 2018

    

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,690,000

 

$

9,663,000

 

Prepaid expenses and other current assets

 

 

652,000

 

 

697,000

 

Held-for-sale assets, net

 

 

592,000

 

 

 —

 

Total current assets

 

 

9,934,000

 

 

10,360,000

 

Restricted cash

 

 

700,000

 

 

800,000

 

Property and equipment, net

 

 

2,530,000

 

 

3,249,000

 

Operating lease right-of-use asset

 

 

2,258,000

 

 

 —

 

In-process research and development

 

 

10,256,000

 

 

 —

 

Goodwill

 

 

3,490,000

 

 

 —

 

Other assets

 

 

136,000

 

 

136,000

 

Total assets

 

$

29,304,000

 

$

14,545,000

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

  

 

 

  

 

Current liabilities

 

 

  

 

 

  

 

Accounts payable and accrued liabilities

 

$

1,261,000

 

$

536,000

 

Accrued compensation

 

 

1,568,000

 

 

191,000

 

Deferred rent

 

 

 —

 

 

335,000

 

Current portion of operating lease liabilities

 

 

1,251,000

 

 

 —

 

Deferred asset acquisition consideration

 

 

885,000

 

 

970,000

 

Total current liabilities

 

 

4,965,000

 

 

2,032,000

 

Deferred rent, net of current portion

 

 

 —

 

 

810,000

 

Operating lease liabilities, net of current portion

 

 

1,900,000

 

 

 —

 

Deferred asset acquisition consideration, net of current portion

 

 

1,230,000

 

 

2,892,000

 

Asset acquisition derivative liability

 

 

 —

 

 

1,117,000

 

Deferred tax liability

 

 

3,077,000

 

 

 —

 

Total liabilities

 

 

11,172,000

 

 

6,851,000

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

  

 

 

  

 

Common stock, $0.01 par value; 217,000,000 shares authorized; 9,934,299 and 5,069,633 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively.

 

 

99,000

 

 

51,000

 

Additional paid-in capital

 

 

170,968,000

 

 

145,685,000

 

Accumulated deficit

 

 

(152,935,000)

 

 

(138,042,000)

 

Total stockholders’ equity

 

 

18,132,000

 

 

7,694,000

 

Total liabilities and stockholders’ equity

 

$

29,304,000

 

$

14,545,000

 

 

See accompanying condensed notes to consolidated financial statements.

3

Armata Pharmaceuticals, Inc.

Consolidated Statements of Operations and Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

    

2019

    

2018

    

2019

    

2018

    

 

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

 —

 

$

 —

 

$

 —

 

$

 —

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

3,019,000

 

 

1,915,000

 

 

8,156,000

 

 

6,388,000

 

Acquired in-process research and development

 

 

 —

 

 

 —

 

 

 —

 

 

6,767,000

 

General and administrative

 

 

3,758,000

 

 

514,000

 

 

7,220,000

 

 

1,709,000

 

Total operating expenses

 

 

6,777,000

 

 

2,429,000

 

 

15,376,000

 

 

14,864,000

 

Loss from operations

 

 

(6,777,000)

 

 

(2,429,000)

 

 

(15,376,000)

 

 

(14,864,000)

 

Other income (expense)

 

 

  

 

 

  

 

 

  

 

 

  

 

Interest income

 

 

13,000

 

 

70,000

 

 

89,000

 

 

180,000

 

Interest expense

 

 

(190,000)

 

 

(307,000)

 

 

(726,000)

 

 

(676,000)

 

Other income (expense)

 

 

(1,000)

 

 

 —

 

 

3,000

 

 

 —

 

Change in fair value of derivative liabilities

 

 

 —

 

 

(105,000)

 

 

1,117,000

 

 

(241,000)

 

Total other income (expense), net

 

 

(178,000)

 

 

(342,000)

 

 

483,000

 

 

(737,000)

 

Loss before income taxes

 

 

(6,955,000)

 

 

(2,771,000)

 

 

(14,893,000)

 

 

(15,601,000)

 

Income tax benefit

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

Net loss

 

$

(6,955,000)

 

$

(2,771,000)

 

$

(14,893,000)

 

$

(15,601,000)

 

Unrealized gain on investments

 

 

 —

 

 

 —

 

 

 —

 

 

7,000

 

Comprehensive loss

 

$

(6,955,000)

 

$

(2,771,000)

 

$

(14,893,000)

 

$

(15,594,000)

 

Per share information:

 

 

  

 

 

  

 

 

  

 

 

  

 

Net loss per share, basic

 

$

(0.73)

 

$

(0.60)

 

$

(2.05)

 

$

(3.35)

 

Weighted average shares outstanding, basic

 

 

9,552,688

 

 

4,652,777

 

 

7,254,803

 

 

4,652,777

 

Net loss per share, diluted

 

$

(0.73)

 

$

(0.60)

 

$

(2.11)

 

$

(3.35)

 

Weighted average shares outstanding, diluted

 

 

9,552,688

 

 

4,652,777

 

 

7,497,194

 

 

4,652,777

 

 

See accompanying condensed notes to consolidated financial statements.

 

 

4

 

Armata Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

Three Months Ended September 30, 2018 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

Total

 

 

 

 

 

 

 

Paid-in

 

Accumulated

 

Comprehensive

 

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income/(Loss)

    

Equity

Balances, June 30, 2018

 

5,068,547

 

$

51,000

 

$

145,678,000

 

$

(134,170,000)

 

$

 —

 

$

11,559,000

Forfeiture of restricted stock awards

 

(3,475)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Stock-based compensation

 

 

 

 

 

 

 

8,000

 

 

 

 

 

 

 

 

8,000

Net loss

 

 

 

 

 

 

 

 

 

 

(2,771,000)

 

 

 

 

 

(2,771,000)

Balances, September 30, 2018

 

5,065,072

 

$

51,000

 

$

145,686,000

 

$

(136,941,000)

 

$

 —

 

$

8,796,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, June 30, 2019

 

9,958,546

 

$

99,000

 

$

168,509,000

 

$

(145,980,000)

 

$

 —

 

$

22,628,000

Forfeiture of restricted stock awards

 

(24,247)

 

 

 

 

 

(39,000)

 

 

 

 

 

 

 

 

(39,000)

Stock-based compensation

 

 

 

 

 

 

 

2,498,000

 

 

 

 

 

 

 

 

2,498,000

Net loss

 

 

 

 

 

 

 

 

 

 

(6,955,000)

 

 

 

 

 

(6,955,000)

Balances, September 30, 2019

 

9,934,299

 

$

99,000

 

$

170,968,000

 

$

(152,935,000)

 

$

 —

 

$

18,132,000

 

See accompanying condensed notes to consolidated financial statements.

5

 

 

Armata Pharmaceuticals, Inc.

Consolidated Statements of Stockholders’ Equity

Nine Months Ended September 30, 2018 and 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

Other

 

Total

 

 

 

 

 

 

 

Paid-in

 

Accumulated

 

Comprehensive

 

Stockholders’

 

    

Shares

    

Amount

    

Capital

    

Deficit

    

Income/(Loss)

    

Equity

Balances, December 31, 2017

 

5,073,669

 

$

51,000

 

$

145,639,000

 

$

(121,340,000)

 

$

(7,000)

 

$

24,343,000

Grant of restricted stock awards

 

12,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Forfeiture of restricted stock awards

 

(20,928)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 —

Stock-based compensation

 

 

 

 

 

 

 

47,000

 

 

 

 

 

 

 

 

47,000

Net loss

 

 

 

 

 

 

 

 

 

 

(15,601,000)

 

 

 

 

 

(15,601,000)

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

7,000

 

 

7,000

Balances, September 30, 2018

 

5,065,072

 

$

51,000

 

$

145,686,000

 

$

(136,941,000)

 

$

 —

 

$

8,796,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, December 31, 2018

 

5,069,633

 

$

51,000

 

$

145,685,000

 

$

(138,042,000)

 

$

 —

 

$

7,694,000

Forfeiture of restricted stock awards

 

(32,714)

 

 

 

 

 

(39,000)

 

 

 

 

 

 

 

 

(39,000)

Issuance of common stock and conversion of deferred consideration for asset acquisition

 

516,976

 

 

5,000

 

 

1,457,000

 

 

 

 

 

 

 

 

1,462,000

Issuance of common stock in connection with reverse merger

 

2,389,135

 

 

23,000

 

 

10,686,000

 

 

 

 

 

 

 

 

10,709,000

Sale of common stock, net of issuance costs

 

1,991,269

 

 

20,000

 

 

9,955,000

 

 

 

 

 

 

 

 

9,975,000

Stock-based compensation

 

 

 

 

 

 

 

3,224,000

 

 

 

 

 

 

 

 

3,224,000

Net loss

 

 

 

 

 

 

 

 

 

 

(14,893,000)

 

 

 

 

 

(14,893,000)

Balances, September 30, 2019

 

9,934,299

 

$

99,000

 

$

170,968,000

 

$

(152,935,000)

 

$

 —

 

$

18,132,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying condensed notes to consolidated financial statements. 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Armata Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

    

2019

    

2018

 

 

(Unaudited)

 

(Unaudited)

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(14,893,000)

 

$

(15,601,000)

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

 

 

 

 

 

 

Acquired in-process research and development

 

 

 —

 

 

5,691,000

Depreciation

 

 

1,049,000

 

 

1,139,000

Stock-based compensation

 

 

3,224,000

 

 

47,000

Non-cash interest expense

 

 

717,000

 

 

676,000

Change in fair value of derivative liability

 

 

(1,117,000)

 

 

241,000

Amortization of premiums of available-for-sale securities

 

 

 —

 

 

33,000

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

 

(1,171,000)

 

 

515,000

Accrued compensation

 

 

(609,000)

 

 

 —

Deferred rent and lease liabilities, net

 

 

(252,000)

 

 

(216,000)

Prepaid expenses and other current assets

 

 

199,000

 

 

43,000

Net cash used in operating activities

 

 

(12,853,000)

 

 

(7,432,000)

Investing activities:

 

 

  

 

 

  

Purchases of available-for-sale securities

 

 

 —

 

 

(3,392,000)

Proceeds from sales and maturities of available-for-sale securities

 

 

 —

 

 

13,016,000

Purchases of property and equipment

 

 

(203,000)

 

 

(484,000)

Proceeds from sale of property and equipment

 

 

 —

 

 

209,000

Cash acquired in reverse merger transaction

 

 

3,008,000

 

 

 —

Net cash provided by investing activities

 

 

2,805,000

 

 

9,349,000

Financing activities:

 

 

  

 

 

  

Payment of deferred consideration for asset acquisition

 

 

(1,000,000)

 

 

 —

Proceeds from sale of common stock, net of offering costs

 

 

9,975,000

 

 

 —

Net cash provided by financing activities

 

 

8,975,000

 

 

 —

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

(1,073,000)

 

 

1,917,000

Cash, cash equivalents and restricted cash, beginning of period

 

 

10,463,000

 

 

12,276,000

Cash, cash equivalents and restricted cash, end of period

 

$

9,390,000

 

$

14,193,000

Supplemental schedule of non-cash financing activities:

 

 

  

 

 

  

Issuance of common stock in reverse merger transaction

 

$

10,710,000

 

$

 —

Conversion of deferred asset acquisition consideration upon reverse merger

 

$

1,463,000

 

$

 —

 

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

 

2019

    

2018

Cash and cash equivalents

 

$

8,690,000

 

$

13,393,000

Restricted cash

 

 

700,000

 

 

800,000

Cash, cash equivalents and restricted cash

 

$

9,390,000

 

$

14,193,000

 

See accompanying condensed notes to consolidated financial statements.

7

Armata Pharmaceuticals, Inc.

Condensed Notes to Consolidated Financial Statements

(Unaudited)

1. Organization and Description of the Business

Armata Pharmaceuticals, Inc. (“Armata”, and together with its subsidiaries referred to herein as, the “Company”) is a clinical-stage biotechnology company focused on the development of precisely targeted bacteriophage therapeutics for the treatment of antibiotic-resistant infections using its proprietary bacteriophage-based technology. The Company was created as a result of a business combination between C3J Therapeutics, Inc. (“C3J”) and AmpliPhi Biosciences Corporation (“AmpliPhi”) that closed on May 9, 2019, where Ceres Merger Sub, Inc., a wholly owned subsidiary of AmpliPhi, merged with and into C3J (the ”Merger”), with C3J surviving the Merger as a wholly owned subsidiary of AmpliPhi. In the Merger, each share of C3J common stock outstanding immediately prior to the Merger was converted into the right to receive approximately .6906 shares of AmpliPhi common stock. The shares were then adjusted further to account for a reverse split of AmpliPhi common stock at a reverse split ratio of 1‑for‑14.  All share and per share amounts have been retrospectively adjusted to give effect to the exchange of C3J common stock and the reverse split of AmpliPhi common stock.

Immediately prior to the closing of the Merger, AmpliPhi changed its name to Armata Pharmaceuticals, Inc. Armata’s common stock is traded on the NYSE American exchange under the ticker symbol “ARMP.”

Immediately following the Merger, certain existing C3J shareholders purchased $10.0 million in Armata common stock. After the Merger and such concurrent private placement, the former C3J security holders owned approximately 76% of the aggregate number of shares of Armata’s common stock and the security holders of AmpliPhi as of immediately prior to the Merger owned approximately 24% of the aggregate number of shares of Armata’s common stock. In addition, upon closing of the Merger, five of the seven members of the board of directors were appointed by C3J.

In connection with the Merger, C3J was considered the accounting acquirer of AmpliPhi because C3J’s shareholders retained a majority control of ownership of the Company subsequent to the Merger. In addition, the seven-member board of directors of the combined company include five members established by C3J. Therefore, the historical financial statements presented herein prior to the closing of the Merger are the historical financial statements of C3J.

C3J’s predecessor, C3 Jian, Inc., was incorporated under the laws of the State of California on November 4, 2005. On February 26, 2016, as part of a reorganization transaction, C3 Jian, Inc. merged with a wholly owned subsidiary of C3J, and as part of this process, C3 Jian, Inc. was converted to a limited liability company organized under the laws of the State of California named C3 Jian, LLC.  Prior to the Merger, C3J was privately held and was financed principally through a series of equity financings. 

2. Liquidity

The Company has prepared its consolidated financial statements on a going concern basis, which assumes that the Company will realize its assets and satisfy its liabilities in the normal course of business. However, the Company has incurred net losses since its inception and has negative operating cash flows. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning the Company’s ability to continue as a going concern.

As of September 30, 2019, the Company had cash and cash equivalents of $8.7 million. Considering the Company’s current cash resources, management believes the Company’s existing resources will be sufficient to fund the Company’s planned operations into the second quarter of 2020. For the foreseeable future, the Company’s ability to continue its operations is dependent upon its ability to obtain additional capital.

8

3. Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Armata and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements of the Company should be read in conjunction with the audited financial statements and accompanying notes thereto as of and for the year ended December 31, 2018 included in the Proxy Statement on Schedule 14A of AmpliPhi, filed with the U.S. Securities and Exchange Commission on April 4, 2019, as amended. The accompanying unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial statements. Any reference in the Notes to applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

 

In the opinion of management, the accompanying consolidated financial statements include all adjustments that are of a normal and recurring nature and that are necessary for the fair presentation of the Company’s financial position and the results of its operations and cash flows for the periods presented. Interim results are not necessarily indicative of results for the full year or any future period.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in its consolidated financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates and judgments, which are based on historical and anticipated results and trends, and on various other assumptions that management believes to be reasonable under the circumstances. By their nature, estimates are subject to an inherent degree of uncertainty and, as such, actual results may differ from management’s estimates.

 

Fair Value of Financial Instruments

The carrying amounts of cash equivalents, other current assets, accounts payable, and accrued liabilities approximate fair value because of the short-term nature of these instruments.

In-Process Research and Development (“IPR&D”) and Acquired IPR&D

IPR&D assets are intangible assets with indefinite lives and are not subject to amortization. The Company’s IPR&D assets represent capitalized incomplete research projects that the Company acquired through the Merger. Such assets are initially measured at their acquisition-date fair values and are subject to impairment testing at least annually until completion or abandonment of research and development efforts associated with the projects. Upon successful completion of each project, the Company makes a determination as to the then remaining useful life of the intangible asset and begins amortization.

 

The Company expenses acquired IPR&D in connection with an asset acquisition when there is no alterative future use. Acquired IPR&D expense of $6.8 million for the nine months ended September 30, 2018 consists of the estimated fair value of the assets acquired and consideration given in connection with the acquisition of certain synthetic phage assets in 2018 from Synthetic Genomics, Inc. (“SGI”). As the assets acquired were in the research and development phase and were determined to not have any alternative future use, it was expensed as acquired IPR&D.

 

Goodwill

Goodwill, which has an indefinite useful life, represents the excess of purchase consideration over fair value of net assets acquired. The Company’s goodwill as of September 30, 2019 is associated with AmpliPhi’s business prior to the Merger. Goodwill is not subject to amortization and is required to be tested for impairment at least on an annual basis. The Company tests goodwill for impairment as of December 31 of each year. The Company determines whether

9

goodwill may be impaired by comparing the carrying value of the single reporting unit, including goodwill, to the fair value of the reporting unit. If the fair value is less than the carrying amount, a more detailed analysis is performed to determine whether goodwill is impaired. The impairment loss, if any, is measured as the excess of the carrying value of the goodwill over the implied fair value of the goodwill and is recorded in the Company’s consolidated statements of operations.

 

Derivative Liabilities

Derivative liabilities are accounted for in accordance with the applicable accounting guidance provided in ASC 815 – Derivatives and Hedging based on the specific terms of the agreements. Derivative liabilities are recorded at fair value at each reporting period with any change in fair value recognized as a component of change in fair value of asset acquisition derivative liability in the consolidated statements of operations and comprehensive loss. The Company has a zero derivative liability balance at September 30, 2019 as the liability of $1.1 million at December 31, 2018 was settled upon the Merger.    

Net Loss per Share

Net earnings or loss per share (“EPS”) is calculated in accordance with the applicable accounting guidance provided in ASC 260, Earnings per Share. Basic EPS is calculated by dividing net income or loss by the weighted-average number of common shares outstanding.  Options, warrants, unvested share-based payment awards and convertible securities are excluded from the basic EPS calculation, and considered within the diluted EPS calculation. Diluted EPS for the nine months ended September 30, 2019 included a numerator adjustment to remove the gain related to the change in fair value of derivative liabilities $1.1 million. There was no gain related to the change in fair value of derivative liabilities for the three months ended September 30, 2019. Additionally, diluted EPS for the nine month period ended September 30, 2019 included an adjustment to the weighted-average shares outstanding to appropriately weight the 516,976 issuance of shares to SGI as discussed in Note 10.

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30, 

 

September 30, 

 

 

    

2019

    

2018

    

2019

    

2018

    

Options

 

1,311,496

 

144,354

 

1,311,496

 

144,354

 

Restricted stock awards

 

355,034

 

412,295

 

355,034

 

412,295

 

Warrants

 

1,854,262

 

 —

 

1,854,262

 

 —

 

Total

 

3,520,792

 

556,649

 

3,520,792

 

556,649

 

 

Research and Development Expenses

Research and development (“R&D”) costs consist primarily of direct and allocated salaries, incentive compensation, stock-based compensation and other personnel-related costs, facility costs, and third-party services. Third party services include studies and clinical trials conducted by clinical research organizations. R&D activities are expensed as incurred. The Company records accruals for estimated ongoing clinical trial expenses. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Judgments and estimates are made in determining the accrued balances at the end of the reporting period.

Recent Accounting Pronouncements Not Yet Adopted

In November 2018, FASB issued ASU 2018-18, Clarifying the Interaction between Topic 808 and Topic 606. The objective of the standard is to clarify the interaction between Topic 808, Collaborative Arrangements, and Topic 606, Revenue from Contracts with Customers. Currently, Topic 808 does not provide comprehensive recognition or measurement guidance for collaborative arrangements, and the accounting for those arrangements is often based on an analogy to other accounting literature or an accounting policy election. Similarly, aspects of Topic 606 have resulted in uncertainty in practice about the effect of the revenue standard and credit loss standard on the accounting for collaborative arrangements. The standard will become effective beginning on January 1, 2020, with early adoption

10

permitted. We are currently evaluating the guidance to determine the potential impact on our financial condition, results of operations, cash flows, and financial statement disclosures.

Recently Adopted Accounting Standards

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842), which amends the FASB Accounting Standards Codification and creates Topic 842, "Leases." The new topic supersedes Topic 840, "Leases," and increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and requires disclosures of key information about leasing arrangements. The Company has elected to adopt ASU 2016‑02 retrospectively at January 1, 2019 using a simplified transition option that allows companies to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings or accumulated deficit. We have also elected to adopt the package of practical expedients permitted in ASC Topic 842. Accordingly, we are continuing to account for our existing operating lease as an operating lease under the new guidance, without reassessing whether the agreements contain a lease under ASC 842. All of our leases at the adoption date were operating leases for facilities and did not include any non-lease components.

As a result of the adoption of ASU 2016‑02, on January 1, 2019 we recognized (i) a lease liability of approximately $3.8 million, which represents the present value of our remaining lease payments using an estimated incremental borrowing rate of 15%, and (ii) a right-of-use asset of approximately $2.7 million. There was no cumulative-effect adjustment to accumulated deficit. Lease expense is not expected to change materially as a result of the adoption of ASU 2016‑02.

In June 2018, the FASB issued ASU No. 2018‑07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which amends the FASB Accounting Standards Codification in order to simplify the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees will be aligned with the requirements for share-based payments granted to employees. The guidance mandates the modified retrospective approach and is effective for annual and interim reporting periods beginning after December 31, 2018, with early adoption permitted. The Company elected to early adopt this ASU as of June 30, 2018 and the adoption did not have an impact on the Company’s consolidated financial statements.

4. Fair Value Measurements

The guidance regarding fair value measurements prioritizes the inputs used in measuring fair value and establishes a three-tier value hierarchy that distinguishes among the following:

·

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

·

Level 2—Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly.

·

Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The Company estimates the fair values of derivative liabilities utilizing Level 3 inputs. No  derivative liabilities have been transferred between the classification levels. Estimating the fair values of derivative liabilities requires the use of

11

significant and subjective inputs that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. 

 

The recurring fair value measurements of the Company’s liabilities at September 30, 2019 and December 31, 2018 consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Quoted Prices in

    

 

 

    

 

 

    

 

 

 

 

Active Markets

 

Significant Other

 

Significant

 

 

 

 

 

for Identical

 

Observable Inputs

 

Unobservable

 

 

 

 

 

Items (Level 1)

 

(Level 2)

 

Inputs (Level 3)

 

Total

September 30, 2019

 

 

  

 

 

  

 

 

  

 

 

  

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

4,282,000

 

$

 —

 

$

 —

 

$

4,282,000

Total assets

 

$

4,282,000

 

$

 —

 

$

 —

 

$

4,282,000

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

 

  

 

 

  

 

 

  

 

 

  

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

9,430,000

 

$

 —

 

$

 —

 

$

9,430,000

Total assets

 

$

9,430,000

 

$

 —

 

$

 —

 

$

9,430,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

  

 

 

  

 

 

  

 

 

  

Asset acquisition derivative liability

 

$

 —

 

$

 —

 

$

1,117,000

 

$

1,117,000

Total liabilities

 

$

 —

 

$

 —

 

$

1,117,000

 

$

1,117,000

 

The following table sets forth a summary of changes in the fair value of the Company’s liabilities:

 

 

 

 

 

 

 

    

Asset

    

 

 

Acquisition

 

 

 

Derivative

 

 

 

Liability

 

Balance, December 31, 2018

 

$

1,117,000

 

Changes in estimated fair value

 

 

(1,117,000)

 

Balance, September 30, 2019

 

$

 —

 

 

We estimated the fair value of this derivative by forecasting the timing and likelihood of the events occurring and discounting the probability adjusted payments using an appropriate discount based on market interest rates and our own non-performance risk as required by ASC 820 – Fair Value Measurement.  There is no longer a potential payment requirement associated with the derivative liability subsequent to the Merger. Accordingly, the fair value of the derivative liability was reduced to zero with the associated change recorded in other income.

5. The Merger

On May 9, 2019, the Company completed the Merger (see Note 1). On the date of the Merger, AmpliPhi had, and the Company currently has, IPR&D related to the development of AP-SA01 (known as AB-SA01 prior to the Merger), a phage combination for the treatment of Staphylococcus aureus infections, and had tested such product in patients through single-patient expanded access guidelines established by U.S. and Australian regulatory agencies. Further, AmpliPhi had, and the Company currently has, a workforce that is considered to have the necessary skills, knowledge, and experience to perform a process, that when applied to IPR&D is critical to the ability to convert it into outputs. Based on this evaluation, the Company determined that the Merger should be accounted for as a business combination pursuant to Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”).

In connection with the Merger, the Company allocated the total purchase consideration of $10.7 million in stock to the net assets and liabilities acquired, including identifiable intangible assets and related deferred tax liability, based on

12

their respective fair values at the acquisition date. The Company recognizes deferred tax liabilities for indefinite-lived intangible assets in accordance with ASC 740, Income Taxes.

 

The following table summarizes the preliminary allocation of the purchase price to the fair value of the respective assets and liabilities acquired.  The purchase price allocations were prepared on a preliminary basis and are subject to change as additional information becomes available concerning the fair value and tax basis of the assets acquired and liabilities assumed.  Any measurement period adjustments to the purchase price allocation will be made as soon as practicable but no later than one year from the date of acquisition.

 

 

 

 

 

Cash and cash equivalents

 

$

3,008,000

Prepaid expenses

 

 

257,000

Property and equipment

 

 

708,000

Right of use asset

 

 

271,000

In-process research and development (1)

 

 

10,256,000

Total assets

 

 

14,500,000

Accounts payable

 

 

(4,004,000)

Other long term liabilities

 

 

(199,000)

Deferred tax liability

 

 

(3,077,000)

Net assets acquired

 

 

7,220,000

Purchase price

 

 

10,710,000

Goodwill (2)

 

$

3,490,000

 

(1) IPR&D relates to AP-SA01, a bacteriophage product candidate for the treatment of Staphylococcus aureus infections in patients with bacteremia. The valuation of this asset was prepared by an independent third party based on estimated discounted cash flows based on probability-weighted future development expenditures and revenue streams provided by the Company’s management.

 

(2) Goodwill represents the excess of the purchase price over the valuation of the fair value of tangible and identified intangible assets, less liabilities, acquired.

 

In addition, the Company incurred and expensed costs directly related to the Merger totaling approximately $1.1 million, of which approximately $0.0 and $1.1 million was incurred in the three and nine months ended September 30, 2019, and is included in general and administrative expenses in the consolidated statement of operations and comprehensive loss.

 

Since the closing date of the Merger, the results of AmpliPhi’s operations have been included in the Company’s consolidated financial statements. Selected amounts related to AmpliPhi’s business included in the Company’s consolidated statements of operations for the three months and nine months ended September 30, 2019, are as follows:

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

 

 

2019

 

 

2019

Research and development expenses

 

$

356,000

 

$

994,000

General and administrative expenses

 

$

833,000

 

$

1,530,000

Net loss

 

$

(1,189,000)

 

$

(2,524,000)

 

 

 

 

 

 

 

 

13

The unaudited pro forma information in the table below summarizes the combined results of operations of AmpliPhi with those of the Company as though these entities were combined as of January 1, 2018. The results of operations for the three and nine months ended September 30, 2019, are based on the unaudited financial statements prepared for the three and nine months ended September 30, 2019, and for the year ended December 31, 2018, are based on the Company’s audited financial statements. This unaudited pro forma information is summarized as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30, 

 

September 30, 

 

 

2019

 

2018

 

2019

 

2018

Revenue

 

<