AVENUE THERAPEUTICS, INC., 10-K filed on 3/30/2020
Annual Report
v3.20.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Mar. 29, 2020
Jun. 30, 2019
Document and Entity Information [Abstract]      
Document Type 10-K    
Document Period End Date Dec. 31, 2019    
Entity Registrant Name AVENUE THERAPEUTICS, INC.    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Interactive Data Current Yes    
Entity Filer Category Non-accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company true    
Entity Shell Company false    
Entity Public Float     $ 40,871,294
Entity Common Stock, Shares Outstanding   16,682,803  
Entity Central Index Key 0001644963    
Current Fiscal Year End Date --12-31    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Amendment Flag false    
Trading Symbol ATXI    
Entity Ex Transition Period true    
v3.20.1
BALANCE SHEETS - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current Assets:    
Cash and cash equivalents $ 8,745 $ 2,671
Deferred financing costs 0 1,702
Prepaid expenses and other current assets 170 152
Total Assets 8,915 4,525
Current Liabilities:    
Accounts payable and accrued expenses 1,101 4,669
Accounts payable and accrued expenses - related party 14 487
Licenses payable 1,000 0
Total current liabilities 2,115 5,156
Total Liabilities 2,115 5,156
Commitments and Contingencies
Stockholders' Equity (Deficit)    
Common Stock ($0.0001 par value), 50,000,000 shares authorized Common shares, 16,682,190 and 10,667,714 shares issued and outstanding as of December 31, 2019 and 2018, respectively 2 1
Additional paid-in capital 74,915 41,577
Accumulated deficit (68,117) (42,209)
Total Stockholders' Equity (Deficit) 6,800 (631)
Total Liabilities and Stockholders' Equity (Deficit) 8,915 4,525
Series A Preferred Stock [Member]    
Stockholders' Equity (Deficit)    
Preferred Stock ($0.0001 par value), 2,000,000 shares authorized Class A Preferred Stock, 250,000 shares issued and outstanding as of December 31, 2019 and 2018 $ 0 $ 0
v3.20.1
BALANCE SHEETS (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Preferred Stock, Par or Stated Value Per Share $ 0.0001 $ 0.0001
Preferred Stock, Shares Authorized 2,000,000 2,000,000
Common Stock, Par or Stated Value Per Share $ 0.0001 $ 0.0001
Common Stock, Shares Authorized 50,000,000 50,000,000
Common Stock, Shares, Issued 16,682,190 10,667,714
Common Stock, Shares, Outstanding 16,682,190 10,667,714
Series A Preferred Stock [Member]    
Preferred Stock, Shares Issued 250,000 250,000
Preferred Stock, Shares Outstanding 250,000 250,000
v3.20.1
STATEMENTS OF OPERATIONS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Operating expenses:    
Research and development $ 22,194 $ 17,696
Research and development - licenses acquired 1,000 0
General and administrative 3,071 4,120
Loss from operations (26,265) (21,816)
Interest income (357) (93)
Other income 0 (175)
Net Loss $ (25,908) $ (21,548)
Net loss per common share outstanding, basic and diluted $ (1.65) $ (2.10)
Weighted average number of common shares outstanding, basic and diluted 15,721,619 10,239,169
v3.20.1
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($)
Class A Preferred Shares
Common Shares
Common Shares Issuable
Additional paid-in capital
Accumulated deficit
Total
Balance at Dec. 31, 2017 $ 0 $ 1,000 $ 1,103,000 $ 38,937,000 $ (20,661,000) $ 19,380,000
Balance (in shares) at Dec. 31, 2017 250,000 10,265,083 273,837      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Share based compensation $ 0 $ 0 $ 0 1,537,000 0 1,537,000
Share based compensation (in shares) 0 107,978 0      
Issuance of common shares - Founders Agreement $ 0 $ 0 $ (1,103,000) 1,103,000 0 0
Issuance of common shares - Founders Agreement (in shares) 0 273,837 (273,837)      
Cashless exercise of warrants under the NSC Note $ 0 $ 0 $ 0 0 0 0
Cashless exercise of warrants under the NSC Note (in shares) 0 20,816 0      
Net loss $ 0 $ 0 $ 0 0 (21,548,000) (21,548,000)
Balance at Dec. 31, 2018 $ 0 $ 1,000 $ 0 41,577,000 (42,209,000) (631,000)
Balance (in shares) at Dec. 31, 2018 250,000 10,667,714 0      
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Share based compensation $ 0 $ 0   1,839,000 0 1,839,000
Share based compensation (in shares) 0 95,000        
Issuance of common shares, net of costs $ 0 $ 1,000   31,499,000 0 31,500,000
Issuance of common shares, net of costs (in shares) 0 5,833,333        
Cashless exercise of warrants under the NSC Note $ 0 $ 0   0 0 0
Cashless exercise of warrants under the NSC Note (in shares) 0 86,143        
Net loss $ 0 $ 0   0 (25,908,000) (25,908,000)
Balance at Dec. 31, 2019 $ 0 $ 2,000   $ 74,915,000 $ (68,117,000) $ 6,800,000
Balance (in shares) at Dec. 31, 2019 250,000 16,682,190        
v3.20.1
STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities:    
Net loss $ (25,908) $ (21,548)
Adjustments to reconcile net loss to net cash used in operating activities:    
Share based compensation 1,839 1,537
Changes in operating assets and liabilities:    
Prepaid expenses and other current assets (18) 236
Deferred financing costs 61 0
Accounts payable and accrued expenses (2,760) 1,125
Accounts payable and accrued expenses - related party (473) 434
Licenses payable 1,000 0
Net cash used in operating activities (26,259) (18,216)
Cash flows from investing activities:    
Purchase of Short-term investments (certificates of deposit) (5,000) 0
Maturity of Short-term investments (certificates of deposit) 5,000 10,000
Net cash provided by investing activities 0 10,000
Cash flows from financing activities:    
Issuance of common shares 35,000 0
Offering costs (2,667) (895)
Net cash provided by (used in) financing activities 32,333 (895)
Net change in cash 6,074 (9,111)
Cash and cash equivalents, beginning of period 2,671 11,782
Cash and cash equivalents, end of period 8,745 2,671
Non-cash financing activities:    
Prior period financing costs 833 0
Unpaid deferred financing costs $ 0 $ 807
v3.20.1
Organization, Plan of Business Operations
12 Months Ended
Dec. 31, 2019
Organization, Plan of Business Operations  
Organization, Plan of Business Operations

Note 1 — Organization, Plan of Business Operations

Avenue Therapeutics, Inc. (the “Company” or “Avenue”) was incorporated in Delaware on February 9, 2015, as a wholly owned subsidiary of Fortress Biotech, Inc. (“Fortress”), to develop and market pharmaceutical products for the acute care setting in the United States. The Company is focused on developing its product candidate, an intravenous (“IV”) formulation of tramadol HCI (“IV Tramadol”), for moderate to moderately severe post-operative pain.

Stock Purchase and Merger Agreement

On November 12, 2018, the Company and InvaGen Pharmaceuticals Inc. (“InvaGen”), entered into definitive agreements with two closing stages for a proposed acquisition of the Company for a total aggregate consideration of $215.0 million. The Stock Purchase and Merger Agreement (the “SPMA”) was approved by a majority of the Company’s stockholders, including a majority of its non-affiliated stockholders, at its special shareholder meeting on February 6, 2019. On February 8, 2019, InvaGen acquired 5,833,333 shares of the Company’s common stock at $6.00 per share (the “Stock Purchase Transaction”) for net proceeds of $31.5 million after deducting commission fees and other offering costs, representing a 33.3% stake in the Company’s capital stock on a fully diluted basis.

At the second stage closing, InvaGen will acquire the remaining shares of Avenue’s common stock, pursuant to a reverse triangular merger with Avenue remaining as the surviving entity, for up to $180.0 million in the aggregate (the “Merger Transaction”). The second stage closing is subject to the satisfaction of certain closing conditions, including conditions pertaining to U.S. Food and Drug Administration approval, labeling, scheduling and the absence of any Risk Evaluation and Mitigation Strategy or similar restrictions in effect with respect to IV Tramadol, as well as the expiration of any waiting period applicable to the acquisition under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Subject to the terms and conditions described in the SPMA, InvaGen may also provide interim financing to the Company in an amount of up to $7.0 million during the time period between the Stock Purchase Transaction (which occurred on February 8, 2019) and the Merger Transaction. Any amounts drawn on the interim financing will be deducted from the aggregate consideration payable to the Company’s stockholders by virtue of the Merger Transaction. There have been no amounts drawn upon this interim financing as of December  31, 2019.

Liquidity and Capital Resources

The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future as it executes on its product development plan and may never become profitable. As of December 31, 2019, the Company had an accumulated deficit of $68.1 million. The Company believes that its cash and cash equivalents as of December 31, 2019, as well as its access to potential interim financing from InvaGen and pledged financial support from Fortress, will enable the Company to continue to fund operations in the normal course of business for more than a twelve-month period from the date of filing this Annual Report on Form 10-K.  However, changing circumstances, some of which may be beyond its control, could cause the Company to consume capital faster than it currently anticipates if certain milestone payments become due, and it may need to seek additional funds sooner than planned.  If the amounts made available from InvaGen and Fortress are not sufficient, the Company would be required to obtain further funding through equity offerings, debt financings, collaborations and licensing arrangements or other sources.

v3.20.1
Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Significant Accounting Policies  
Significant Accounting Policies

Note 2 — Significant Accounting Policies

Basis of Presentation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), include all adjustments necessary for the fair presentation of the Company's financial position for the periods presented and are stated in U.S. dollars. The Company has no subsidiaries.

Reverse stock split

On June 26, 2017, the Company effected a 3.0‑to‑1.0 reverse stock split of Company’s common stock. No fractional shares were issued in connection with the stock split. The par value and other terms of these classes of stock were not affected by the reverse stock split.

All share and per share amounts, including stock options, have been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0‑to‑1.0 reverse stock split. Further, the fair value of stock issuances has been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0‑to‑1.0 reverse stock split.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 2019 and at December 31, 2018 consisted of cash, money market funds and certificates of deposit in institutions in the United States. Balances at certain institutions have exceeded Federal Deposit Insurance Corporation (“FDIC”) insured limits and U.S. government agency securities.

 

Accounts Payable and Accrued Expenses – Related Party

Accounts payable and accrued expenses consist of amounts due to Fortress, a related party, and are recorded at the invoiced amount.

 

Research and Development

Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is achieved.

Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings and patents, laboratory costs and other supplies.

Costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and have no alternative future use. The licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future use. Accordingly, the total purchase price including any development milestone payments for the licenses acquired are reflected as research and development — licenses acquired on the Company’s Statements of Operations.

 

Annual Stock Dividend

In September 2016, in connection with the Amended and Restated Articles of Incorporation, the Company issued 250,000 Class A preferred shares to Fortress. The Class A preferred shares entitled the holder to a stock dividend equal to 2.5% of the fully diluted outstanding equity of the Company (“The Annual Stock Dividend”) to be paid on February 17 of each year. On June 13, 2018, the Company’s Stockholders adopted an amendment to the Company’s Third Amended and Restated Certificate of Incorporation amending the payment date going forward to January 1 of each year. Concurrently with the execution and delivery of the SPMA, the Company, InvaGen and Fortress entered into a waiver agreement (“the Waiver Agreement”), pursuant to which, among other things, Fortress irrevocably waived its right to receive dividends of the Company’s common shares under the terms of the Class A Preferred Stock and any fees, payments, reimbursements or other distributions under a certain management services agreement between the Company and Fortress and the Founders Agreement (as defined in the SPMA), for the period November 12, 2018 to the termination of InvaGen’s rights under Section 4 of the Stockholders Agreement that was signed between the Company, certain stockholders of the Company, and InvaGen.

The Company recorded the Annual Stock Dividend due to Fortress as contingent consideration. Contingent consideration is recorded when probable and reasonably estimable. The Company’s future share prices cannot be estimated due to the nature of its assets and the Company’s stage of development. Due to these uncertainties, the Company concluded that it could not reasonably estimate the contingent consideration until shares were actually issued on February 17, 2018. Because the issuance of shares on February 17, 2018 occurred prior to the issuance of the December 31, 2017 financial statements, the Company recorded approximately $1.1 million in research and development - licenses acquired for the year ended December 31, 2017. Due to the Waiver Agreement, the Company recorded $0 in research and development - licenses acquired for the year ended December 31, 2018.

 

Stock-Based Compensation

The Company expenses stock-based compensation to its employees, consultants and board members over the requisite service period based on the estimated grant-date fair value of the awards. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

 

Income Taxes

The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The 2016 through 2018 tax years are the only periods subject to examination upon filing of appropriate tax returns. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the years ended December 31, 2019 and 2018. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

 

Net loss per Share

Loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding, excluding unvested restricted stock and stock options and preferred shares, during the period. Since dividends are declared paid and set aside among the holders of shares of common stock and Class A common stock pro-rata on an as-if-converted basis, the two-class method of computing net loss per share is not required.

The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented:

 

 

 

 

 

 

 

For the Years Ended

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Restricted stock units/awards

 

1,045,162

 

1,104,643

Preferred shares

 

250,000

 

250,000

Options

 

 —

 

20,000

Total potential dilutive effect

 

1,295,162

 

1,374,643

 

Recently Adopted Accounting Standards

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017‑01, Business Combinations (Topic 805) Clarifying the Definition of a Business (“ASU 2017‑01”). The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted ASU 2017‑01 in the first quarter of 2018 and its adoption did not have a material impact on the Company’s financial statements.

In May 2017, the FASB issued ASU No. 2017‑09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, (“ASU 2017‑09”) which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. It is effective prospectively for the annual period ending December 31, 2018 and interim periods within that annual period. Early adoption is permitted. The Company early adopted ASU 2017‑09 in the first quarter of 2018 and its adoption did not have a material impact on the Company’s financial statements.

In June 2018, the FASB issued ASU No. 2018‑07, Improvements to Nonemployee Share-Based Payment Accounting, (“ASU 2018‑07”) which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted ASU 2018‑07 in the first quarter of 2019 and its adoption did not have a material impact on the Company’s financial statements and related disclosures.

Recent Accounting Pronouncements to be Adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, (“ASU 2019-12”) which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

 

v3.20.1
License/Supplier Agreements
12 Months Ended
Dec. 31, 2019
License/Supplier Agreements  
License/Supplier Agreements

Note 3 — License/Supplier Agreements

Effective as of February 17, 2015, Fortress transferred the Revogenex license and all other rights and obligations under the License Agreement to Avenue, pursuant to the terms of the Founders Agreement. In connection with the terms of the License Agreement, Fortress purchased an exclusive license to IV Tramadol for the U.S. market from Revogenex, a privately held company in Dublin, Ireland. Fortress made an upfront payment of $2.0 million to Revogenex upon execution of the exclusive license, and on June 17, 2015, Fortress paid an additional $1.0 million to Revogenex after receiving all the assets specified in the agreement. The $3.0 million cumulative payment was included in research and development-licenses acquired in the statements of operations. In December 2019, $1.0 million became due to Revogenex in accordance with the Company's submission of its New Drug Application. The amount is expensed in research and development-licenses acquired in the statement of operations and is included in licenses payable on the Company's balance sheets. In addition, under the terms of the agreement, Revogenex is eligible to receive an additional milestone payment totaling $3.0 million upon the approval of IV Tramadol from the United States Food and Drug Administration, (“FDA”)  as well as royalty payments for sales of the product.

On October 29, 2018, the Company and Zaklady Farmaceutyczne Polpharma (“Polpharma”) extended the term of their exclusive supply agreement for drug product of IV Tramadol to eight years from the date of the launch of the product. In addition, under the terms of the amended agreement, Polpharma is eligible to receive a milestone payment totaling $2.0 million upon the approval of IV Tramadol from the FDA, as well as royalty payments for sales of the product.

v3.20.1
Related Party Agreements
12 Months Ended
Dec. 31, 2019
Related Party Agreements  
Related Party Agreements

Note 4 — Related Party Agreements

Founders Agreement and Management Services Agreement with Fortress

Fortress entered into a Founders Agreement with Avenue in February 2015, pursuant to which Fortress assigned to Avenue all of its rights and interest under Fortress’s license agreement with Revogenex for IV Tramadol (the “License Agreement”). As consideration for the Founders Agreement, Avenue assumed $3.0 million in debt that Fortress accumulated for expenses and costs of forming Avenue and obtaining the IV Tramadol license. This debt was repaid to Fortress in 2017. As additional consideration for the transfer of rights under the Founders Agreement, Avenue shall also: (i) issue annually to Fortress, on the anniversary date of the Founders Agreement, shares of common stock equal to two and one half percent (2.5%) of the fully-diluted outstanding equity of Avenue at the time of issuance; (ii) pay an equity fee in shares of Avenue common stock, payable within five (5) business days of the closing of any equity or debt financing for Avenue or any of its respective subsidiaries that occurs after the effective date of the Founders Agreement and ending on the date when Fortress no longer has majority voting control in Avenue’s voting equity, equal to two and one half percent (2.5%) of the gross amount of any such equity or debt financing; and (iii) pay a cash fee equal to four and one half percent (4.5%) of Avenue’s annual net sales, payable on an annual basis, within ninety (90) days of the end of each calendar year. In the event of a change in control (as it is defined in the Founders Agreement), Fortress will be paid a one-time change in control fee equal to five (5x) times the product of (i) net sales for the twelve (12) months immediately preceding the change in control and (ii) four and one-half percent (4.5%). This additional consideration was waived on November 12, 2018 with the Waiver Agreement signed between Avenue, Fortress and InvaGen.

On September 13, 2016, the Company entered into an Amended and Restated the Founders Agreement (“A&R Founders Agreement”) with Fortress. The A&R Founders Agreement eliminated the Annual Equity Fee in connection with the original agreement and added a term of 15 years, which upon expiration automatically renews for successive one-year periods unless terminated by Fortress or a Change in Control occurs. Concurrently with the A&R Founders Agreement the Company entered into an Exchange Agreement whereby the Company exchanged Fortress’ 2.3 million Class A common shares for approximately 2.5 million common shares and 250,000 Class A Preferred shares (see Note 7).

Effective as of February 17, 2015, Fortress entered into a Management Services Agreement (the “MSA”) with Avenue and each of Avenue’s current directors and officers who are directors or officers of Fortress, excluding services provided by Dr. Lucy Lu, the Company’s current Chief Executive Officer as of June 26, 2017 and the former Chief Financial Officer of Fortress (resigned as of June 26, 2017), to provide services to Avenue pursuant to the terms of the MSA. Pursuant to the terms of the MSA, for a period of five (5) years, Fortress will render advisory and consulting services to Avenue. Services provided under the MSA may include, without limitation, (i) advice and assistance concerning any and all aspects of Avenue’s operations, clinical trials, financial planning and strategic transactions and financings and (ii) conducting relations on behalf of Avenue with accountants, attorneys, financial advisors and other professionals (collectively, the “Services”). Avenue is obligated to utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services of companies or individuals designated by Fortress, provided those services are offered at market prices. However, Avenue is not obligated to take or act upon any advice rendered from Fortress and Fortress shall not be liable for any of Avenue’s actions or inactions based upon their advice. Fortress and its affiliates, including all members of Avenue’s Board of Directors, have been contractually exempt from fiduciary duties to Avenue relating to corporate opportunities. In consideration for the Services, Avenue will pay Fortress an annual consulting fee of $0.5 million (the “Annual Consulting Fee”), payable in advance in equal quarterly installments on the first business day of each calendar quarter in each year, provided, however, that such Annual Consulting Fee shall be increased to $1.0 million for each calendar year in which Avenue has net assets in excess of $100.0 million at the beginning of the calendar year.

For the years ended December 31, 2019 and 2018, the Company had expenses related to the MSA of approximately $0 and $0.4 million, respectively. Effective November 12, 2018, the MSA fee was waived with the Waiver Agreement signed between Avenue, Fortress and InvaGen.

v3.20.1
Accounts Payable and Accrued Expenses
12 Months Ended
Dec. 31, 2019
Accounts Payable and Accrued Expenses  
Accounts Payable and Accrued Expenses

Note 5  Accounts Payable and Accrued Expenses

Accounts payable, accrued expenses and other liabilities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

As of December 31, 

 

As of December 31, 

 

    

2019

    

2018

Accounts payable

 

$

354

 

$

3,089

Accrued employee compensation

 

 

477

 

 

463

Accrued contracted services and other

 

 

270

 

 

1,117

Accounts payable and accrued expenses

 

$

1,101

 

$

4,669

 

v3.20.1
Commitments and Contingencies
12 Months Ended
Dec. 31, 2019
Commitments and Contingencies  
Commitments and Contingencies

Note 6 — Commitments and Contingencies

Leases

The Company is not a party to any leases for office space or equipment.

Litigation

As of December 31, 2019, there was no litigation against the Company.

v3.20.1
Stockholders' Equity (Deficit)
12 Months Ended
Dec. 31, 2019
Stockholders' Equity (Deficit)  
Stockholders' Equity (Deficit)

Note 7 — Stockholders’ Equity (Deficit)

Class A Preferred Shares

On September 13, 2016, the Class A Common Stock was eliminated and 2,000,000 shares of Preferred Stock were authorized, of which 250,000 have been designated as Class A Preferred Stock and the remainder are undesignated preferred stock. The Class A Preferred Stock, with a par value of $0.0001 per share, is identical to undesignated Common Stock other than as to voting rights, conversion rights, and the PIK Dividend right (as described below). The undesignated Preferred Stock may be issued from time to time in one or more series. The Company’s Board of Directors is authorized to determine or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions, if any), the redemption price or prices, the liquidation preferences and other designations, powers, preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock (but not below the number of shares of any such series then outstanding).

Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation, the holders of the outstanding shares of Class A Preferred Stock shall receive on each February 17 (each a “PIK Dividend Payment Date”) after the original issuance date of the Class A Preferred Stock until the date all outstanding Class A Preferred Stock is converted into Common Stock or redeemed (and the purchase price is paid in full), pro rata per share dividends paid in additional fully paid and nonassessable shares of Common Stock (such dividend being herein called “PIK Dividends”) such that the aggregate number of shares of Common Stock issued pursuant to such PIK Dividend is equal to two and one-half percent (2.5%) of the Corporation’s fully-diluted outstanding capitalization on the date that is one (1) business day prior to any PIK Dividend Payment Date (“PIK Record Date”). In the event the Class A Preferred Stock converts into Common Stock, the holders shall receive all PIK Dividends accrued through the date of such conversion. No dividend or other distribution shall be paid, or declared and set apart for payment (other than dividends payable solely in capital stock on the capital stock of the Company) on the shares of Common Stock until all PIK Dividends on the Class A Preferred Stock shall have been paid or declared and set apart for payment. All dividends are non-cumulative. On June 13, 2018, the Company’s Stockholders adopted an amendment to the Company’s Third Amended and Restated Certificate of Incorporation amending the PIK Dividend Payment Date going forward to January 1 of each year. This PIK Dividend was waived in connection with the Waiver Agreement signed on November 12, 2018 between Avenue, Fortress and InvaGen.

On any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Class A Preferred Stock shall be entitled to cast for each share of Class A Preferred Stock held by such holder as of the record date for determining stockholders entitled to vote on such matter, the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the sum of (A) the number of shares of outstanding Common Stock and (B) the whole shares of Common Stock in to which the shares of outstanding Class A Common Stock and the Class A Preferred Stock are convertible, and the denominator of which is number of shares of outstanding Class A Preferred Stock (the “Class A Preferred Stock Ratio”). Thus, the Class A Preferred Stock will at all times constitute a voting majority.

Each share of Class A Preferred Stock is convertible, at the option of the holder, into one fully paid and nonassessable share of Common Stock (the “Conversion Ratio”), subject to certain adjustments. If the Company, at any time effects a subdivision or combination of the outstanding Common Stock (by any stock split, stock dividend, recapitalization, reverse stock split or otherwise), the applicable Conversion Ratio in effect immediately before that subdivision is proportionately decreased or increased, as applicable, so that the number of shares of Common Stock issuable on conversion of each share of Class A Preferred Stock shall be increased or decreased, a applicable, in proportion to such increase or decrease in the aggregate number of shares of Common Stock outstanding. Additionally, if any reorganization, recapitalization, reclassification, consolidation or merger involving the Company occurs in which the Common Stock (but not the Class A Preferred Stock) is converted into or exchanged for securities, cash or other property, then each share of Class A Preferred Stock becomes convertible into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Company issuable upon conversion of one share of the Class A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction.

Common Stock

As of December 31, 2019, the Company’s authorized capital stock consists of 50,000,000 shares of common stock, with $0.0001 par value, and 2,000,000 shares of Preferred Stock, with $0.0001 par value, of which 250,000 have been designated as Class A Preferred Stock and the remainder are undesignated Preferred Stock.

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our Board of Directors, subject to any preferential dividend rights of outstanding preferred stock.

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Awards to Fortress

Pursuant to the Company’s Third Amended and Restated Certificates of Incorporation, on February 17, 2018, the Company issued 273,837 shares of common stock to Fortress, which equaled to 2.5% of the fully diluted outstanding equity of Avenue at the time of issuance for the annual stock dividend.

Equity Incentive Plan

The Company has in effect the 2015 Incentive Plan (“2015 Incentive Plan’). The 2015 Incentive Plan was adopted in January 2015 by our stockholders. Under the 2015 Incentive Plan, the compensation committee of the Company’s board of directors is authorized to grant stock-based awards to directors, officers, employees and consultants. The plan authorizes grants to issue up to 2,000,000 shares of authorized but unissued common stock and expires 10 years from adoption and limits the term of each option to no more than 10 years from the date of grant.

Total shares available for the issuance of stock-based awards under the Company’s 2015 Incentive Plan was 405,849 shares at December 31, 2019.

Restricted Stock Units and Restricted Stock Awards

The following table summarizes restricted stock unit and award activity for the year ended December 31, 2019:

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

Number of Units

 

Average Grant

 

 

and Awards

 

Date Fair Value

Unvested balance at December 31, 2018

 

1,104,643

 

$

4.45

Granted

 

261,173

 

$

5.95

Vested

 

(320,654)

 

$

3.74

Unvested balance at December 31, 2019

 

1,045,162

 

$

5.10

 

For the years ended December 31, 2019 and 2018 stock-based compensation expenses associated with the amortization of restricted stock units and restricted stock awards for employees and non-employees were approximately $1.8 million and $1.5 million, respectively.

For the years ended December 31, 2019, and 2018, the weighted average grant date fair value of restricted stock units and awards granted was $5.95 and $3.48, respectively. The total fair value of restricted stock units and awards that vested during the years ended December 31, 2019 and 2018 was $1.2 million and $0.1 million, respectively.

At December 31, 2019, the Company had unrecognized stock-based compensation expense related to restricted stock units and restricted stock awards of $1.1 million, which is expected to be recognized over the remaining weighted-average vesting period of 1.3 years. This amount does not include, as of December 31, 2019, 311,173 shares of restricted stock outstanding which are performance-based and vest upon achievement of certain corporate milestones. The expense is recognized over the vesting period of the award. Stock-based compensation for milestone awards will be measured and recorded if and when it is probable that the milestone will be achieved.

On November 12, 2018, the Company and Dr. Lucy Lu entered into an amendment to the Executive Employment Agreement, dated June 10, 2015 (“the Employment Agreement”), pursuant to which the Dr. Lu. shall be vested in one hundred percent (100%) of all unvested equity rewards in the event of the termination of the Executive Employment Agreement upon her death, complete disability, termination without cause or resignation for good reason not in connection with a change of control (other than certain equity awards which may be granted following the SPMA). Pursuant to the amendment, the Executive’s separation benefits following her termination without cause or resignation for good reason in connection with a change of control (100% vesting) is subject to an additional condition that Dr. Lu has not entered into a new employment agreement with the Company’s acquirer or an affiliate thereof. Dr. Lu’s original Employment Agreement provided for accelerated vesting of only those unvested shares that would have vested in the upcoming year upon death or disability, termination without cause outside of a change in control, or resignation for good reason outside of a change in control. As this modification does not affect the fair value of the award, no adjustment to compensation cost is necessary. Any acceleration of vesting upon the events described above will result in a recognition of the remaining compensation cost associated with the award.

Stock Options

On August 15, 2017, 20,000 stock options were granted to a consultant under the 2015 Incentive Plan. These options were cancelled in January 2019 as the vesting criteria pertaining to the price of the Company's stock was not met by the deadline.

The following table summarizes stock option award activity for the year ended December 31, 2019:

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

 

    

Weighted Average  

 

 

 

 

 

Weighted 

 

 

Remaining

 

 

 

 

 

Average Exercise

 

 

Contractual Life

 

 

Stock Options

 

 

Price

 

 

(in years)

Outstanding, December 31, 2018

 

20,000

 

$

6.29

 

 

3.63

Cancelled/forfeited

 

(20,000)

 

 

6.29

 

 

 —

Outstanding, December 31, 2019

 

 —

 

$

 —

 

 

 —

 

Stock Warrants

On June 26, 2017, sufficient equity capital was raised so that the Company had cash equal to five times the amount of the portion of the proceeds of a note  payable with National Securities, Inc. The note payable was fully paid off in 2017. As a result, the Company issued warrants for 125,000 common shares with an exercise price of par value and a ten-year term.

On June 26, 2017, in connection with the automatic conversion of its convertible notes with WestPark Capital, Inc. which automatically converted upon the closing of the IPO, the Company issued 2,488 warrants at an exercise price of $4.02 and a ten-year term. Pursuant to the terms of the note agreement, the exercise price represents the price at which the notes converted, which is equal to a 33% discount to the IPO price of $6.00 per share.

The following table summarizes the warrant activity for the year ended December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

Aggregate

 

 

 

 

Average Exercise

 

Intrinsic Value

 

 

Warrants

 

Price

 

(in thousands)

Outstanding, December 31, 2018

 

102,597

 

$

0.0976

 

$

544

Exercised

 

(86,143)

 

$

0.0001

 

 

 —

Outstanding, December 31, 2019

 

16,454

 

$

0.6079

 

$

148

 

v3.20.1
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Taxes  
Income Taxes

Note 8 — Income Taxes

The Company has accumulated net losses since inception and has not recorded an income tax provision or benefit during the years ended December 31, 2019 and 2018.

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:

 

 

 

 

 

 

 

 

For the years ended December 31, 

 

 

    

2019

    

2018

 

Statutory federal income tax rate

 

21

%  

21

%

State taxes, net of federal tax benefit

 

14

%  

 9

%

State tax rate change

 

 1

%  

 0

%

Other

 

 4

%  

 0

%

Credits

 

 5

%  

 5

%

Change in valuation allowance

 

(45)

%  

(35)

%

Income taxes provision (benefit)

 

 0

%  

 0

%

 

The components of the net deferred tax asset as of December 31, 2019 and 2018 are the following (in thousands):

 

 

 

 

 

 

 

 

 

 

As of December 31, 

 

    

2019

    

2018

Deferred tax assets:

 

 

  

 

 

  

Net operating loss carryovers

 

$

19,953

 

$

10,160

Stock compensation and other

 

 

843

 

 

658

Amortization of license

 

 

1,413

 

 

1,006

Accruals and reserves

 

 

15

 

 

221

Tax credits

 

 

2,640

 

 

1,294

Total deferred tax assets

 

 

24,864

 

 

13,339

Less valuation allowance

 

 

(24,864)

 

 

(13,339)

Deferred tax assets, net of valuation allowance

 

$

 —

 

$

 —

 

The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax asset will not be realized and, accordingly, has provided a full valuation allowance against it. A valuation allowance of approximately $24.9 million and $13.3 million was recorded for the years ended December 31, 2019 and 2018, respectively.

As of December 31, 2019, the Company had federal and state net operating loss carryforwards of approximately $60.3 million and $111.9 million, respectively. The federal and state net operating loss carryforwards will begin to expire, if not utilized, by 2035 and 2035, respectively. The Company has $2.6 million of research and development credit carryforwards, which will begin to expire, if not utilized, in 2035. Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986. Certain tax attributes are subject to an annual limitation as a result of the Company’s June 2017 initial public offering, which constitutes an ownership change under Section 382. Certain tax attributes may be subject to an annual limitation as a result of the SPMA with InvaGen, which could constitute an ownership change under Section 382.

There are no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s financial statements for the periods ended December 31, 2019 and 2018. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.

Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the periods ended December 31, 2019 and 2018.

The federal and state tax returns for the years ended December 31, 2016, 2017, and 2018 are currently open for examination under the applicable federal and state income tax statues of limitations.

v3.20.1
Subsequent Events
12 Months Ended
Dec. 31, 2019
Subsequent Events  
Subsequent Events

Note 9 — Subsequent Events

 

On March 11, 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a global pandemic, which continues to spread throughout the United States and around the world. To date, the Company has not experienced any significant changes in its business that would have a signification negative impact on its statements of position, operations or cash flows. Management believes any disruption, when and if experienced, would be temporary, however, there is uncertainty around when any disruption might occur, the potential impact. As a result, the Company is unable to estimate the potential impact on its business as of the date of issuance of these financial statements.

v3.20.1
Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Significant Accounting Policies  
Basis of Presentation

Basis of Presentation

The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), include all adjustments necessary for the fair presentation of the Company's financial position for the periods presented and are stated in U.S. dollars. The Company has no subsidiaries.

Reverse stock split

On June 26, 2017, the Company effected a 3.0‑to‑1.0 reverse stock split of Company’s common stock. No fractional shares were issued in connection with the stock split. The par value and other terms of these classes of stock were not affected by the reverse stock split.

All share and per share amounts, including stock options, have been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0‑to‑1.0 reverse stock split. Further, the fair value of stock issuances has been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0‑to‑1.0 reverse stock split.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 2019 and at December 31, 2018 consisted of cash, money market funds and certificates of deposit in institutions in the United States. Balances at certain institutions have exceeded Federal Deposit Insurance Corporation (“FDIC”) insured limits and U.S. government agency securities.

Accounts Payable and Accrued Expenses - Related Party

Accounts Payable and Accrued Expenses – Related Party

Accounts payable and accrued expenses consist of amounts due to Fortress, a related party, and are recorded at the invoiced amount.

Research and Development

Research and Development

Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is achieved.

Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings and patents, laboratory costs and other supplies.

Costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and have no alternative future use. The licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future use. Accordingly, the total purchase price including any development milestone payments for the licenses acquired are reflected as research and development — licenses acquired on the Company’s Statements of Operations.

Annual Stock Dividend

Annual Stock Dividend

In September 2016, in connection with the Amended and Restated Articles of Incorporation, the Company issued 250,000 Class A preferred shares to Fortress. The Class A preferred shares entitled the holder to a stock dividend equal to 2.5% of the fully diluted outstanding equity of the Company (“The Annual Stock Dividend”) to be paid on February 17 of each year. On June 13, 2018, the Company’s Stockholders adopted an amendment to the Company’s Third Amended and Restated Certificate of Incorporation amending the payment date going forward to January 1 of each year. Concurrently with the execution and delivery of the SPMA, the Company, InvaGen and Fortress entered into a waiver agreement (“the Waiver Agreement”), pursuant to which, among other things, Fortress irrevocably waived its right to receive dividends of the Company’s common shares under the terms of the Class A Preferred Stock and any fees, payments, reimbursements or other distributions under a certain management services agreement between the Company and Fortress and the Founders Agreement (as defined in the SPMA), for the period November 12, 2018 to the termination of InvaGen’s rights under Section 4 of the Stockholders Agreement that was signed between the Company, certain stockholders of the Company, and InvaGen.

The Company recorded the Annual Stock Dividend due to Fortress as contingent consideration. Contingent consideration is recorded when probable and reasonably estimable. The Company’s future share prices cannot be estimated due to the nature of its assets and the Company’s stage of development. Due to these uncertainties, the Company concluded that it could not reasonably estimate the contingent consideration until shares were actually issued on February 17, 2018. Because the issuance of shares on February 17, 2018 occurred prior to the issuance of the December 31, 2017 financial statements, the Company recorded approximately $1.1 million in research and development - licenses acquired for the year ended December 31, 2017. Due to the Waiver Agreement, the Company recorded $0 in research and development - licenses acquired for the year ended December 31, 2018.

Stock-Based Compensation

Stock-Based Compensation

The Company expenses stock-based compensation to its employees, consultants and board members over the requisite service period based on the estimated grant-date fair value of the awards. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Income Taxes

Income Taxes

The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The 2016 through 2018 tax years are the only periods subject to examination upon filing of appropriate tax returns. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.

The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the years ended December 31, 2019 and 2018. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

Net loss per Share

Net loss per Share

Loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding, excluding unvested restricted stock and stock options and preferred shares, during the period. Since dividends are declared paid and set aside among the holders of shares of common stock and Class A common stock pro-rata on an as-if-converted basis, the two-class method of computing net loss per share is not required.

The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented:

 

 

 

 

 

 

 

For the Years Ended

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Restricted stock units/awards

 

1,045,162

 

1,104,643

Preferred shares

 

250,000

 

250,000

Options

 

 —

 

20,000

Total potential dilutive effect

 

1,295,162

 

1,374,643

 

Recently Adopted Accounting Standards and Recent Accounting Pronouncements to be Adopted

Recently Adopted Accounting Standards

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017‑01, Business Combinations (Topic 805) Clarifying the Definition of a Business (“ASU 2017‑01”). The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company adopted ASU 2017‑01 in the first quarter of 2018 and its adoption did not have a material impact on the Company’s financial statements.

In May 2017, the FASB issued ASU No. 2017‑09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, (“ASU 2017‑09”) which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. It is effective prospectively for the annual period ending December 31, 2018 and interim periods within that annual period. Early adoption is permitted. The Company early adopted ASU 2017‑09 in the first quarter of 2018 and its adoption did not have a material impact on the Company’s financial statements.

In June 2018, the FASB issued ASU No. 2018‑07, Improvements to Nonemployee Share-Based Payment Accounting, (“ASU 2018‑07”) which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within that fiscal year. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted ASU 2018‑07 in the first quarter of 2019 and its adoption did not have a material impact on the Company’s financial statements and related disclosures.

Recent Accounting Pronouncements to be Adopted

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, (“ASU 2019-12”) which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

v3.20.1
Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2019
Significant Accounting Policies  
Schedule of diluted income (loss) per share

The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented:

 

 

 

 

 

 

 

For the Years Ended

 

    

December 31, 

    

December 31, 

 

 

2019

 

2018

Restricted stock units/awards

 

1,045,162

 

1,104,643

Preferred shares

 

250,000

 

250,000

Options

 

 —

 

20,000

Total potential dilutive effect

 

1,295,162

 

1,374,643

 

v3.20.1
Accounts Payable and Accrued Expenses (Tables)
12 Months Ended
Dec. 31, 2019
Accounts Payable and Accrued Expenses  
Schedule of accounts payable, accrued expenses and other liabilities

Accounts payable, accrued expenses and other liabilities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

As of December 31, 

 

As of December 31, 

 

    

2019

    

2018

Accounts payable

 

$

354

 

$

3,089

Accrued employee compensation

 

 

477

 

 

463

Accrued contracted services and other

 

 

270

 

 

1,117

Accounts payable and accrued expenses

 

$

1,101

 

$

4,669

 

v3.20.1
Stockholders' Equity (Deficit) (Tables)
12 Months Ended
Dec. 31, 2019
Stockholders' Equity (Deficit)  
Schedule of restricted stock unit and award activity

The following table summarizes restricted stock unit and award activity for the year ended December 31, 2019:

 

 

 

 

 

 

 

    

 

    

Weighted

 

 

Number of Units

 

Average Grant

 

 

and Awards

 

Date Fair Value

Unvested balance at December 31, 2018

 

1,104,643

 

$

4.45

Granted

 

261,173

 

$

5.95

Vested

 

(320,654)

 

$

3.74

Unvested balance at December 31, 2019

 

1,045,162

 

$

5.10

 

Schedule of stock option activity

The following table summarizes stock option award activity for the year ended December 31, 2019:

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

 

    

Weighted Average  

 

 

 

 

 

Weighted 

 

 

Remaining

 

 

 

 

 

Average Exercise

 

 

Contractual Life

 

 

Stock Options

 

 

Price

 

 

(in years)

Outstanding, December 31, 2018

 

20,000

 

$

6.29

 

 

3.63

Cancelled/forfeited

 

(20,000)

 

 

6.29

 

 

 —

Outstanding, December 31, 2019

 

 —

 

$

 —

 

 

 —

 

Schedule of warrant activity

The following table summarizes the warrant activity for the year ended December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

Aggregate

 

 

 

 

Average Exercise

 

Intrinsic Value

 

 

Warrants

 

Price

 

(in thousands)

Outstanding, December 31, 2018

 

102,597

 

$

0.0976

 

$

544

Exercised

 

(86,143)

 

$

0.0001

 

 

 —

Outstanding, December 31, 2019

 

16,454

 

$

0.6079

 

$

148

 

v3.20.1
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2019
Income Taxes  
Schedule of federal rate

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:

 

 

 

 

 

 

 

 

For the years ended December 31, 

 

 

    

2019

    

2018

 

Statutory federal income tax rate

 

21

%  

21

%

State taxes, net of federal tax benefit

 

14

%  

 9

%

State tax rate change

 

 1

%  

 0

%

Other

 

 4

%  

 0

%

Credits

 

 5

%  

 5

%

Change in valuation allowance

 

(45)

%  

(35)

%

Income taxes provision (benefit)

 

 0

%  

 0

%

 

Schedule of deferred tax assets

The components of the net deferred tax asset as of December 31, 2019 and 2018 are the following (in thousands):

 

 

 

 

 

 

 

 

 

 

As of December 31, 

 

    

2019

    

2018

Deferred tax assets:

 

 

  

 

 

  

Net operating loss carryovers

 

$

19,953

 

$

10,160

Stock compensation and other

 

 

843

 

 

658

Amortization of license

 

 

1,413

 

 

1,006

Accruals and reserves

 

 

15

 

 

221

Tax credits

 

 

2,640

 

 

1,294

Total deferred tax assets

 

 

24,864

 

 

13,339

Less valuation allowance

 

 

(24,864)

 

 

(13,339)

Deferred tax assets, net of valuation allowance

 

$

 —

 

$

 —

 

v3.20.1
Organization, Plan of Business Operations (Details) - USD ($)
$ / shares in Units, $ in Thousands
Feb. 08, 2019
Dec. 31, 2019
Dec. 31, 2018
Nov. 12, 2018
Accumulated deficit   $ (68,117) $ (42,209)  
Line of Credit [Member]        
Interim Financing Amount $ 7,000      
Invagen Pharmaceuticals Inc [Member]        
Business Acquisition, Equity Interest Issued or Issuable, Value Assigned $ 31,500     $ 215,000
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares 5,833,333      
Business Acquisition, Share Price $ 6.00      
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners 33.30%      
Invagen Pharmaceuticals Inc [Member] | Common Shares        
Stock Issued During Period, Value, Acquisitions $ 180,000      
v3.20.1
Significant Accounting Policies (Details) - shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Total potential dilutive effect (in shares) 1,295,162 1,374,643
Restricted stock units/awards    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Total potential dilutive effect (in shares) 1,045,162 1,104,643
Preferred shares    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Total potential dilutive effect (in shares) 250,000 250,000
Options    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Total potential dilutive effect (in shares)   20,000
v3.20.1
Significant Accounting Policies - Additional Information (Details) - USD ($)
$ in Millions
1 Months Ended 12 Months Ended
Jun. 26, 2017
Sep. 30, 2016
Dec. 31, 2018
Dec. 31, 2017
Stockholders' Equity, Reverse Stock Split presented to reflect the 3.0-to-1.0 reverse stock split.      
Stock Issued During Period, Shares, New Issues   250,000    
Preferred Stock, Dividend Rate, Percentage   2.50%    
Fortress Biotech, Inc [Member]        
Research and Development in Process     $ 0.0 $ 1.1
v3.20.1
License Agreement (Details) - USD ($)
$ in Millions
1 Months Ended
Dec. 31, 2019
Oct. 29, 2018
Jun. 17, 2015
Revogenex License [Member]      
Contractual Obligation, Maximum Future Payments     $ 3.0
IV Tramadol [Member] | Fortress Biotech, Inc [Member]      
Payments to Acquire in Process Research and Development     3.0
IV Tramadol [Member] | Fortress Biotech, Inc [Member] | Upfront Payment [Member]      
Payments to Acquire in Process Research and Development     2.0
IV Tramadol [Member] | Fortress Biotech, Inc [Member] | Additional Payment [Member]      
Payments to Acquire in Process Research and Development     $ 1.0
Polpharma [Member]      
Payments to Acquire in Process Research and Development   $ 2.0  
New Drug Application [Member] | Revogenex License [Member]      
Payments to Acquire in Process Research and Development $ 1.0    
v3.20.1
Related Party Agreements (Details) - USD ($)
$ in Thousands
1 Months Ended 12 Months Ended
Sep. 13, 2016
Jun. 26, 2017
Feb. 17, 2015
Dec. 31, 2019
Dec. 31, 2018
Agreement Description Terms       (i) issue annually to Fortress, on the anniversary date of the Founders Agreement, shares of common stock equal to two and one half percent (2.5%) of the fully-diluted outstanding equity of Avenue at the time of issuance; (ii) pay an equity fee in shares of Avenue common stock, payable within five (5) business days of the closing of any equity or debt financing for Avenue or any of its respective subsidiaries that occurs after the effective date of the Founders Agreement and ending on the date when Fortress no longer has majority voting control in Avenue's voting equity, equal to two and one half percent (2.5%) of the gross amount of any such equity or debt financing; and (iii) pay a cash fee equal to four and one half percent (4.5%) of Avenue's annual net sales, payable on an annual basis, within ninety (90) days of the end of each calendar year. In the event of a change in control (as it is defined in the Founders Agreement), Fortress will be paid a one-time change in control fee equal to five (5x) times the product of (i) net sales for the twelve (12) months immediately preceding the change in control and (ii) four and one-half percent (4.5%).  
Stock Issued During Period, Value, New Issues         $ 0
Service Agreement Expenses       $ 0 400
Common Shares          
Stock Issued During Period, Value, New Issues         $ 0
Asset Management Income [Member]          
Annual Consulting Fee   $ 500      
Increase in Annual Consulting Fee     $ 1,000    
Excess in Net Assets Value     100,000    
AR Founders Agreement [Member]          
Number of shares Exchanged 2,500,000        
Amended Founders Agreements Terms 15 years        
Fortress Biotech, Inc [Member]          
Long-term Debt, Gross     $ 3,000    
Preferred Class A [Member] | AR Founders Agreement [Member]          
Number of shares Exchanged 250,000        
Common Class A [Member] | AR Founders Agreement [Member]          
Number of shares Exchanged 2,300,000        
v3.20.1
Accounts Payable and Accrued Expenses (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Accounts Payable and Accrued Expenses    
Accounts payable $ 354 $ 3,089
Accrued employee compensation 477 463
Accrued contracted services and other 270 1,117
Accounts payable and accrued expenses $ 1,101 $ 4,669
v3.20.1
Stockholders' Equity (Deficit) - Restricted stock unit (Details) - Restricted stock units/awards
12 Months Ended
Dec. 31, 2019
$ / shares
shares
Number of Units and Awards, Unvested Beginning Balance | shares 1,104,643
Number of Units and Awards, Granted | shares 261,173
Number of Units and Awards, Vested | shares (320,654)
Number of Units and Awards, Unvested Ending Balance | shares 1,045,162
Weighted Average Grant Date Fair Value, Unvested Beginning Balance | $ / shares $ 4.45
Weighted Average Grant Date Fair Value, Granted | $ / shares 5.95
Weighted Average Grant Date Fair Value, Vested | $ / shares 3.74
Weighted Average Grant Date Fair Value, Unvested Ending Balance | $ / shares $ 5.10
v3.20.1
Stockholders' Equity (Deficit) - Stock option (Details) - $ / shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Stockholders' Equity (Deficit)    
Stock Options, Outstanding, Beginning 20,000  
Stock Options, Cancelled/forfeited (20,000)  
Stock Options, Outstanding, Ending   20,000
Weighted Average Exercise Price, Outstanding, Beginning $ 6.29  
Weighted Average Exercise Price, Cancelled/forfeited $ 6.29  
Weighted Average Exercise Price, Outstanding, Ending   $ 6.29
Weighted Average Remaining Contractual Life 0 years 3 years 7 months 17 days
v3.20.1
Stockholders' Equity (Deficit) - Warrant activity (Details) - Warrant [Member] - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Number of Units and Awards, Unvested Beginning Balance 102,597  
Warrants, Exercise (86,143)  
Number of Units and Awards, Unvested Ending Balance 16,454  
Weighted Average Exercise Price, Outstanding $ 0.0976  
Weighted Average Exercise Price, Exercised 0.0001  
Weighted Average Exercise Price, Outstanding $ 0.6079  
Aggregate Intrinsic Value $ 148 $ 544
v3.20.1
Stockholders' Equity (Deficit) - Additional Information (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 12 Months Ended
Nov. 12, 2018
Aug. 15, 2017
Jun. 26, 2017
Sep. 13, 2016
Feb. 16, 2018
Jun. 26, 2017
Sep. 30, 2016
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2017
Preferred Stock, Shares Authorized               2,000,000 2,000,000  
Common Stock, Shares Authorized               50,000,000 50,000,000  
Common Stock, Par or Stated Value Per Share               $ 0.0001 $ 0.0001  
Share-based Compensation               $ 1,839 $ 1,537  
Stock Issued During Period, Value, New Issues                 $ 0  
Stock Issued During Period, Shares, New Issues             250,000      
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross   20,000                
Preferred Stock, Par or Stated Value Per Share               $ 0.0001 $ 0.0001  
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage (100.00%)                  
Two Thousand Fifteen Incentive Plan [Member]                    
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized               2,000,000    
Share-based Compensation Arrangement by Share-based Payment Award, Plan Modification, Description and Terms               P10Y    
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant               405,849    
Fortress Biotech, Inc [Member]                    
Stock Issuance Common Stock Issuable During Period, Shares         273,837          
Percentage of Diluted outstanding Equity         2.50%          
Research and Development in Process                 $ 0 $ 1,100
Common Shares                    
Stock Issued During Period, Value, New Issues                 $ 0  
Stock Issued During Period, Shares, New Issues                 273,837  
AR Founders Agreement [Member]                    
Amended Founders Agreements Terms       15 years            
Number of shares Exchanged       2,500,000            
IPO [Member] | Fortress Biotech, Inc [Member]                    
Stock Issued During Period, Shares, Issued for Services           125,000        
West Park [Member] | IPO [Member]                    
Common Stock, Par or Stated Value Per Share     $ 4.02     $ 4.02        
Incremental Common Shares Attributable to Dilutive Effect of Call Options and Warrants           2,488        
Conversion Term, Convertible Notes     10 years              
Share Price     $ 6.00     $ 6.00        
Percentage of Discount on Share Price     33.00%              
Restricted stock units/awards                    
Share-based Compensation               $ 1,800 $ 1,500  
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options               $ 1,100    
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition               1 year 3 months 18 days    
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested Upon Performance               311,173    
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value               $ 5.95    
Restricted Stock Units (RSUs) [Member]                    
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value               $ 5.95 $ 3.48  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value               $ 1,200 $ 100  
Preferred Class A [Member]                    
Preferred Stock, Shares Outstanding               250,000    
Common Stock, Par or Stated Value Per Share               $ 0.0001    
Preferred Class A [Member] | AR Founders Agreement [Member]                    
Number of shares Exchanged       250,000            
Common Class A [Member] | AR Founders Agreement [Member]                    
Number of shares Exchanged       2,300,000            
v3.20.1
Income Taxes - Federal rates (Details)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Income Taxes    
Statutory federal income tax rate 21.00% 21.00%
State taxes, net of federal tax benefit 14.00% 9.00%
State tax rate change 1.00% 0.00%
Other 4.00% 0.00%
Credits 5.00% 5.00%
Change in valuation allowance (45.00%) (35.00%)
Income taxes provision (benefit) 0.00% 0.00%
v3.20.1
Income Taxes - Deferred tax asset (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Deferred tax assets:    
Net operating loss carryovers $ 19,953 $ 10,160
Stock compensation and other 843 658
Amortization of license 1,413 1,006
Accruals and reserves 15 221
Tax credits 2,640 1,294
Total deferred tax assets 24,864 13,339
Less valuation allowance (24,864) (13,339)
Deferred tax assets, net of valuation allowance $ 0 $ 0
v3.20.1
Income Taxes - Additional Information (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Deferred Tax Assets, Valuation Allowance $ 24,864 $ 13,339
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent 21.00% 21.00%
Research Tax Credit Carryforward [Member]    
Tax Credit Carryforward, Amount $ 2,600  
Domestic Tax Authority [Member]    
Operating Loss Carryforwards $ 60,300  
Operating Loss Carry forward, Expire Period 2035  
State and Local Jurisdiction [Member]    
Operating Loss Carryforwards $ 111,900  
Operating Loss Carry forward, Expire Period 2035