cerc-20200630

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 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 June 30, 2020
OR
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER: 001-37590

CERECOR INC.

(Exact name of registrant as specified in its charter)


Delaware (State of incorporation)			45-0705648 (I.R.S. Employer Identification No.)
540 Gaither Road, Suite 400 Rockville, Maryland 20850 (Address of principal executive offices)			(410) 522-8707 (Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	CERC	Nasdaq Capital Market

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. 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 ☑

As of August 4, 2020, the registrant had 74,900,047 shares of common stock outstanding.

Table of Contents

CERECOR INC.

FORM 10-Q

For the Quarter Ended June 30, 2020

TABLE OF CONTENTS

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets as of June 30, 2020 (Unaudited) and December 31, 2019

Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2020 and 2019

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019

Notes to Unaudited Condensed Consolidated Financial Statements

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 I - FINANCIAL INFORMATION

Item 1. Financial Statements.

CERECOR INC. and SUBSIDIARIES

Condensed Consolidated Balance Sheets


	June 30, 2020		December 31, 2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	45,390,553	$	3,609,438
Accounts receivable, net	2,031,682		1,001,645
Other receivables	1,953,036		4,240,572
Inventory, net	12,196		21,334
Prepaid expenses and other current assets	823,900		706,968
Restricted cash, current portion	33,449		17,535
Investment in Aytu	—		7,628,947
Current assets of discontinued operations	—		497,577
Total current assets	50,244,816		17,724,016
Property and equipment, net	1,740,610		1,447,663
Intangible assets, net	2,292,175		2,426,258
Goodwill	14,409,088		14,409,088
Restricted cash, net of current portion	180,336		101,945
Deferred tax asset, net	337,797		—
Total assets	$	69,204,822	$	36,108,970
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,557,702	$	2,077,524
Accrued expenses and other current liabilities	6,487,658		5,640,252
Income taxes payable	—		551,671
Current liabilities of discontinued operations	5,549,751		3,891,012
Total current liabilities	14,595,111		12,160,459
Royalty obligation	2,000,000		—
Deferred tax liability, net	—		85,981
Other long-term liabilities	2,031,560		1,111,965
Long-term liabilities of discontinued operations	—		1,755,000
Total liabilities	18,626,671		15,113,405
Stockholders’ equity:
Common stock—$0.001 par value; 200,000,000 shares authorized at June 30, 2020 and December 31, 2019; 74,900,047 and 44,384,222 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	74,899		44,384
Preferred stock—$0.001 par value; 5,000,000 shares authorized at June 30, 2020 and December 31, 2019; 1,257,143 and 2,857,143 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	1,257		2,857
Additional paid-in capital	199,191,022		135,238,941
Accumulated deficit	(148,689,027)		(114,290,617)
Total stockholders’ equity	50,578,151		20,995,565
Total liabilities and stockholders’ equity	$	69,204,822	$	36,108,970

See accompanying notes to the unaudited condensed consolidated financial statements.

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CERECOR INC. and SUBSIDIARIES

Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020		2019		2020		2019
Revenues:
Product revenue, net	$	1,337,764	$	1,391,942	$	4,091,628	$	3,968,310
Total revenues, net	1,337,764		1,391,942		4,091,628		3,968,310

Operating expenses:
Cost of product sales	77,580		(1,496,677)		144,139		(744,128)
Research and development	5,916,869		3,712,596		10,684,619		7,113,785
Acquired in-process research and development	—		—		25,549,344		—
General and administrative	6,101,475		2,340,634		8,777,088		5,016,243
Sales and marketing	653,265		325,861		1,329,790		722,137
Amortization expense	403,500		334,747		834,083		669,495
Change in fair value of contingent consideration	—		(1,277,150)		—		(1,256,210)
Total operating expenses	13,152,689		3,940,011		47,319,063		11,521,322
Loss from continuing operations	(11,814,925)		(2,548,069)		(43,227,435)		(7,553,012)
Other income (expense):
Change in fair value of Investment in Aytu	(1,872,031)		—		5,207,789		—
Change in fair value of warrant liability and unit purchase option liability	2,647		18,910		13,928		(28,668)
Other income (expense), net	395,800		—		395,800		(9,400)
Interest income, net	8,711		38,412		18,501		68,632
Total other (expense) income, net from continuing operations	(1,464,873)		57,322		5,636,018		30,564
Loss from continuing operations before taxes	(13,279,798)		(2,490,747)		(37,591,417)		(7,522,448)
Income tax (benefit) expense	(453,957)		53,446		(2,610,812)		184,119
Loss from continuing operations	$	(12,825,841)	$	(2,544,193)	$	(34,980,605)	$	(7,706,567)
(Loss) income from discontinued operations, net of tax	(455,463)		(3,678,906)		582,195		(5,970,580)
Net loss	$	(13,281,304)	$	(6,223,099)	$	(34,398,410)	$	(13,677,147)

Net (loss) income per share of common stock, basic and diluted:
Continuing operations	$	(0.18)	$	(0.05)	$	(0.53)	$	(0.14)
Discontinued operations	(0.01)		(0.06)		0.01		(0.10)
Net loss per share of common stock, basic and diluted	$	(0.19)	$	(0.11)	$	(0.52)	$	(0.24)

Net (loss) income per share of preferred stock, basic and diluted:
Continuing operations	$	(0.93)	$	(0.23)	$	(2.66)	$	(0.68)
Discontinued operations	(0.03)		(0.32)		0.04		(0.53)
Net loss per share of preferred stock, basic and diluted	$	(0.96)	$	(0.55)	$	(2.62)	$	(1.21)

See accompanying notes to the unaudited condensed consolidated financial statements.

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CERECOR INC. and SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Unaudited)

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	Six Months Ended June 30,
	2020		2019
Operating activities
Net loss	$	(34,398,410)	$	(13,677,147)
Adjustments to reconcile net loss used in operating activities:
Depreciation and amortization	878,949		2,203,423
Impairment of intangible assets	—		1,449,121
Stock-based compensation	3,901,897		1,123,402
Acquired in-process research and development	25,549,344		—
Deferred taxes	(423,778)		18,870
Amortization of inventory fair value associated with acquisition of TRx and Avadel's pediatric products	—		40,240
Change in fair value of Investment in Aytu	(5,207,789)		—
Change in fair value of warrant liability and unit purchase option liability	(13,928)		28,668
Change in value of Guarantee	(1,755,000)		—
Change in fair value of contingent consideration	—		(811,948)
Changes in assets and liabilities:
Accounts receivable, net	(532,460)		297,267
Other receivables	(1,851,867)		5,326,000
Inventory, net	9,138		452,931
Prepaid expenses and other assets	(23,782)		664,454
Accounts payable	82,674		(666)
Income taxes payable	288,329		(639,784)
Accrued expenses and other liabilities	(815,014)		(6,313,686)
Lease liability, net	17,510		—
Net cash used in operating activities	(14,294,187)		(9,838,855)
Investing activities
Proceeds from sale of Investment in Aytu, net	12,836,736		—
Net cash paid in merger with Aevi	(1,250,650)		—
Purchase of property and equipment	—		(256,926)
Net cash provided by (used in) investing activities	11,586,086		(256,926)
Financing activities
Proceeds from underwritten public offering, net	35,427,963		8,975,960
Proceeds from registered direct offering, net	5,136,184		—
Proceeds from sale of shares pursuant to common stock private placement, net	3,887,991		—
Proceeds from exercise of stock options and warrants	92,342		256,816
Proceeds from shares purchased through employee stock purchase plan	132,910		127,537
Restricted Stock Units withheld for taxes	(93,869)		(18,057)
Payment of contingent consideration	—		(379,255)
Payment of long-term debt	—		(48,684)
Net cash provided by financing activities	44,583,521		8,914,317
Increase (decrease) in cash, cash equivalents and restricted cash	41,875,420		(1,181,464)
Cash, cash equivalents, and restricted cash at beginning of period	3,728,918		10,746,756
Cash, cash equivalents, and restricted cash at end of period	$	45,604,338	$	9,565,292
Supplemental disclosures of cash flow information
Cash paid for interest	$	—	$	525,000
Cash paid for taxes	$	316,000	$	852,025
Supplemental disclosures of non-cash activities
Issuance of common stock in Aevi Merger	$	15,495,578	$	—
Leased asset obtained in exchange for new operating lease liability	$	376,448	$	743,025

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

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	June 30,
	2020		2019

Cash and cash equivalents	$	45,390,553	$	9,386,865
Restricted cash, current	33,449		26,265
Restricted cash, non-current	180,336		152,162
Total cash, cash equivalents and restricted cash	$	45,604,338	$	9,565,292

See accompanying notes to the unaudited condensed consolidated financial statements.

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CERECOR INC. and SUBSIDIARIES

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)


	Common stock				Preferred Stock						Additional paid-in		Accumulated	Total stockholders’
	Shares	Amount		Shares	Amount		capital		deficit		equity
Three Months Ended June 30, 2020
Balance, March 31, 2020	59,560,252	$	59,560	1,257,143	$	1,257	$	160,935,648	$	(135,407,723)	$	25,588,742
Issuance of shares of common stock in underwritten public offering, net of offering costs	15,180,000	15,180			—		35,412,783		—		35,427,963
Exercise of stock options and warrants	25,071	25			—		18,110		—		18,135
Restricted Stock Units vested during period	111,667	111			—		(111)		—		—
Restricted Stock Units withheld for taxes	(35,279)	(35)			—		(93,834)		—		(93,869)
Shares purchased through employee stock purchase plan	58,336	58			—		132,852		—		132,910
Stock-based compensation		—			—		2,785,574		—		2,785,574
Net loss		—			—		—		(13,281,304)		(13,281,304)
Balance, June 30, 2020	74,900,047	$	74,899	1,257,143	$	1,257	$	199,191,022	$	(148,689,027)	$	50,578,151

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	Common stock				Preferred Stock						Additional paid-in		Accumulated	Total stockholders’
	Shares	Amount		Shares	Amount		capital		deficit		equity
Six Months Ended June 30, 2020
Balance, December 31, 2019	44,384,222	$	44,384	2,857,143	$	2,857	$	135,238,941	$	(114,290,617)	$	20,995,565
Conversion of preferred stock to common stock	8,000,000	8,000		(1,600,000)	(1,600)		(6,400)		—		—
Issuance of shares related to Aevi Merger	3,893,361	3,894			—		15,491,684		—		15,495,578
Issuance of shares pursuant to registered direct offering, net of offering costs	1,306,282	1,306			—		5,134,878		—		5,136,184
Issuance of shares pursuant to common stock private placement, net of offering costs	1,951,219	1,951			—		3,886,040		—		3,887,991
Issuance of shares of common stock in underwritten public offering, net of offering costs	15,180,000	15,180			—		35,412,783		—		35,427,963
Exercise of stock options and warrants	50,239	50			—		92,292		—		92,342
Restricted Stock Units vested during period	111,667	111			—		(111)		—		—
Restricted Stock Units withheld for taxes	(35,279)	(35)			—		(93,834)		—		(93,869)
Shares purchased through employee stock purchase plan	58,336	58			—		132,852		—		132,910
Stock-based compensation		—			—		3,901,897		—		3,901,897
Net loss		—			—		—		(34,398,410)		(34,398,410)
Balance, June 30, 2020	74,900,047	$	74,899	1,257,143	$	1,257	$	199,191,022	$	(148,689,027)	$	50,578,151

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	Common stock				Preferred Stock						Additional paid-in		Accumulated	Total stockholders’
	Shares	Amount		Shares	Amount		capital		deficit		equity
Three Months Ended June 30, 2019
Balance, March 31, 2019	42,753,659	$	42,754	2,857,143	$	2,857	$	128,747,037	$	(105,672,118)	$	23,120,530
Exercise of stock options and warrants	43,125	43			—		162,596		—		162,639
Restricted Stock Units vested during period	61,250	61			—		(61)		—		—
Restricted Stock Units withheld for taxes	(3,723)	(4)			—		(18,053)		—		(18,057)
Shares purchased through employee stock purchase plan	43,940	44			—		127,493		—		127,537
Stock-based compensation		—			—		526,709		—		526,709
Net loss		—			—		—		(6,223,099)		(6,223,099)
Balance, June 30, 2019	42,898,251	$	42,898	2,857,143	$	2,857	$	129,545,721	$	(111,895,217)	$	17,696,259

Common stock

Preferred Stock

Additional paid-in

Accumulated

Total stockholders’

Amount

capital

deficit

equity

Six Months Ended June 30, 2019

Balance, December 31, 2018

40,804,189

40,804