Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark one)

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

 

For the quarterly period ended June 30, 2018

 

OR

 

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

 

Commission File Number 001-38135

 


 

DOVA PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

81-3858961

(State or other jurisdiction of incorporation or organization)

 

(I.R.S.  Employer Identification No.)

 

240 Leigh Farm Road, Suite 245

Durham, North Carolina 27707

(Address of principal executive offices and zip code)

 

(919) 748-5975

(Registrant’s telephone number, including area code)

 

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   x   NO   o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES   x   NO   o

 

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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

o

 

Accelerated Filer  

x

Non-accelerated Filer

o

(Do not check if smaller reporting company)

Smaller Reporting Company  

o

Emerging growth company

x

 

 

 

 

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.   x

 

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o  NO x

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Class of Common Stock

 

Outstanding Shares as of August 3, 2018

Common Stock, $0.001 par value

 

28,202,266

 

 

 



Table of Contents

 

 

 

 

Page No.

PART I. FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

1

 

 

 

 

Item 2.

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

 

17

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

27

 

 

 

 

Item 4.

Controls and Procedures

 

28

 

 

 

 

PART II. OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

28

 

 

 

 

Item 1A.

Risk Factors

 

28

 

 

 

 

Item 2.

Recent Sales of Unregistered Securities

 

29

 

 

 

 

Item 6.

Exhibits

 

29

 

 

 

 

Signatures

 

 

31

 



Table of Contents

 

Dova Pharmaceuticals, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

 

 

 

June 30,

 

December 31,

 

 

 

2018

 

2017

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and equivalents

 

$

134,695

 

$

94,846

 

Accounts receivable, net

 

3,409

 

 

Inventory, net

 

563

 

 

Prepaid expenses and other current assets

 

2,343

 

1,471

 

Total current assets

 

141,010

 

96,317

 

Furniture and equipment, net

 

257

 

62

 

Total assets

 

$

141,267

 

$

96,379

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities

 

 

 

 

 

Accounts payable

 

$

1,542

 

$

1,263

 

Accrued expenses

 

7,409

 

2,520

 

Accrued interest

 

76

 

1,005

 

Due to related party

 

 

97

 

Early exercise liability, related party

 

 

100

 

Note payable, short-term

 

 

30,212

 

Current portion of long-term debt

 

1,667

 

 

Total current liabilities

 

10,694

 

35,197

 

Deferred revenue

 

2,373

 

 

Long-term debt

 

18,483

 

 

Total liabilities

 

31,550

 

35,197

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 28,202,266 and 25,652,457 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively

 

28

 

26

 

Additional paid-in capital

 

200,261

 

118,301

 

Accumulated deficit

 

(90,572

)

(57,145

)

Total stockholders’ equity

 

109,717

 

61,182

 

Total liabilities and stockholders’ equity

 

$

141,267

 

$

96,379

 

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Revenue

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

1,957

 

$

 

$

1,957

 

$

 

Other revenue

 

2,627

 

 

2,627

 

 

Total revenue, net

 

4,584

 

 

4,584

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

519

 

 

 

 

519

 

 

 

Research and development

 

4,508

 

3,293

 

7,924

 

7,569

 

Selling, general and administrative

 

18,565

 

1,905

 

28,826

 

2,860

 

Total operating expenses

 

23,592

 

5,198

 

37,269

 

10,429

 

Loss from operations

 

(19,008

)

(5,198

)

(32,685

)

(10,429

)

 

 

 

 

 

 

 

 

 

 

Interest income and other income (expense), net

 

(195

)

(14

)

27

 

19

 

Interest expense

 

(454

)

(295

)

(769

)

(521

)

Total other expenses, net

 

(649

)

(309

)

(742

)

(502

)

Net loss

 

$

(19,657

)

$

(5,507

)

$

(33,427

)

$

(10,931

)

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.70

)

$

(0.32

)

$

(1.22

)

$

(0.63

)

Weighted average common shares outstanding, basic and diluted

 

28,194,046

 

17,332,257

 

27,396,052

 

17,332,257

 

 

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Dova Pharmaceuticals, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

 

 

Six months ended June 30,

 

 

 

2018

 

2017

 

Cash flows from operating activities

 

 

 

 

 

Net loss

 

$

(33,427

)

$

(10,931

)

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

 

 

 

 

 

Non-cash research and development expenses

 

 

6,570

 

Depreciation

 

9

 

 

Loss on disposal of furniture and equipment

 

35

 

 

Amortization of debt discount and debt issuance costs

 

188

 

 

Stock-based compensation

 

7,007

 

619

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable, net

 

(3,409

)

 

Inventory

 

(563

)

 

Prepaid expenses

 

(872

)

(70

)

Accounts payable

 

279

 

14

 

Accrued expenses

 

5,754

 

678

 

Accrued interest

 

(929

)

144

 

Due to related party

 

(97

)

(35

)

Deferred revenue

 

2,373

 

 

Net cash used in operating activities

 

(23,652

)

(3,011

)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchases of furniture and equipment

 

(239

)

(34

)

Net cash used in investing activities

 

(239

)

(34

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Payment of note payable

 

(31,077

)

 

Debt issuance costs

 

(38

)

 

Proceeds from the issuance of debt

 

20,000

 

 

Proceeds from exercise of stock options

 

125

 

 

Proceeds from the issuance of common stock

 

80,000

 

 

Payment of offering cost in connection with issuance of common stock

 

(5,270

)

(902

)

Net cash provided by (used in) financing activities

 

63,740

 

(902

)

 

 

 

 

 

 

Net increase (decrease) in cash and equivalents

 

39,849

 

(3,947

)

Cash and equivalents at the beginning of the period

 

94,846

 

28,709

 

Cash and equivalents at the end of the period

 

$

134,695

 

$

24,762

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

Cash paid for interest

 

$

1,511

 

$

377

 

 

 

 

 

 

 

Supplemental disclosure of noncash investing and financing activities:

 

 

 

 

 

Change in note payable

 

$

 

$

11,177

 

Unpaid deferred offering costs

 

$

 

$

1,317

 

Shares issued from the early exercise of options

 

$

100

 

$

 

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1—Organization and description of business operations

 

Dova Pharmaceuticals, Inc. (“Dova”) was originally formed as PBM AKX Holdings, LLC, a limited liability company formed under the laws of the State of Delaware on March 24, 2016 (“Inception”). PBM AKX Holdings, LLC changed its name to Dova Pharmaceuticals, LLC by filing a Certificate of Amendment to its Certificate of Formation with the State of Delaware on June 15, 2016. Dova converted from a limited liability company to a corporation on September 15, 2016.

 

Dova is a pharmaceutical company focused on acquiring, developing and commercializing drug candidates for diseases that are treated by specialist physicians, with an initial focus on addressing thrombocytopenia, a disorder characterized by a low blood platelet count. On May 21, 2018, the U.S. Food and Drug Administration (“FDA”) approved DOPTELET (avatrombopag), which is an orally administered thrombopoietin receptor agonist for the treatment of thrombocytopenia in adult patients with chronic liver disease (“CLD”) scheduled to undergo a procedure.

 

The unaudited condensed consolidated financial statements of Dova and its wholly owned subsidiaries AkaRx, Inc. (“AkaRx”) and Dova Pharmaceuticals Ireland Limited (together, the “Company”) include the results of operations for the three and six months ended June 30, 2018 and June 30, 2017.

 

Note 2—Significant accounting policies

 

Basis of presentation and principles of consolidation

 

The Company’s unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and include all adjustments necessary for the fair presentation of the Company’s financial position for the periods presented. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results for the full year or the results for any future periods.  These financial statements have been prepared on a going concern basis and should be read in conjunction with the audited consolidated financial statements and related notes for the year ended December 31, 2017 in the Company’s Annual Report on Form 10-K.

 

Liquidity and capital resources

 

The Company has incurred substantial operating losses since inception and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of June 30, 2018, the Company had an accumulated deficit of $90.6 million.

 

Since inception, the Company has financed its operations through the issuance of equity and debt with net aggregate proceeds of $238.0 million.  Although the Company began generating revenue from product sales of DOPTELET in May 2018, the Company does not expect product revenues to be sufficient to satisfy its operating needs for several years, if ever.  As of June 30, 2018, the Company had $134.7 million in cash and equivalents. Based on the Company’s forecast of future cash flows, the Company believes that it has adequate cash and equivalents to continue to fund operations in the normal course of business for at least the next 12 months.

 

Use of estimates

 

The preparation of financial statements in conformity with 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 condensed consolidated financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s condensed consolidated financial statements relate to the determination of variable consideration for product sales, share-based compensation and some of its research and development expenses. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates, which could affect the Company’s future results of operations.

 

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Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Segments

 

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.

 

Cash and equivalents

 

The Company considers all highly liquid investments purchased with original maturities of 90 days or less at acquisition to be cash equivalents. Cash and equivalents include cash held in banks and money market mutual funds.  The carrying amount of the Company’s cash equivalents approximates its fair value.

 

Inventory

 

Inventory acquired prior to receipt of the FDA approval for DOPTELET was expensed as research and development expense as incurred. The Company began capitalizing inventory upon receipt of FDA approval on May 21, 2018. The Company reduces its inventory to net realizable value for potentially excess, dated or obsolete inventory based on an analysis of forecasted demand compared to quantities on hand and any firm purchase orders, as well as product shelf life. At June 30, 2018, the Company determined that no write downs to inventory for potentially excess, dated or obsolete inventory were required.  The Company’s inventory consists of finished goods only.

 

Research and development prepaid and accrued expenses

 

As part of the process of preparing financial statements, the Company is required to estimate its expenses resulting from its obligation under contracts with vendors and consultants and clinical site agreements in connection with its research and development efforts. The financial terms of these contracts are subject to negotiations which vary contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts.  The Company’s objective is to reflect the appropriate clinical trial expenses in its financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of the trial as measured by patient progression and the timing of various aspects of the trial. The Company determines prepaid and accrual estimates through discussion with applicable personnel and outside service providers as to the progress or state of communication of clinical trials, or other services completed. During the course of a clinical trial, the Company adjusts its rate of clinical trial expense recognition if actual results differ from its estimates. The Company makes estimates of its prepaid and accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in the Company reporting amounts that are too high or too low for any particular period. The Company’s clinical trial prepaid and accrual expense is dependent upon the timely and accurate reporting of fee billings and pass-through expenses from contract research organizations and other third-party vendors as well as the timely processing of any change orders from the contract research organizations.

 

Concentrations of credit risk and off-balance sheet risk

 

Cash and equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company’s cash and equivalents are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The majority of the Company’s cash equivalents is in money market mutual funds invested solely in U.S. Government securities. The Company believes it is not exposed to significant credit risk due to the financial strength of the depository institutions in which the cash and equivalents are held. The Company has no financial instruments with off-balance sheet risk of loss.

 

Research and development costs

 

Research and development (“R&D”) expenses for three and six months ended June 30, 2018 include direct and indirect R&D costs. Direct R&D costs consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and clinical research organizations, including costs incurred in connection with clinical trials, and related clinical trial fees and all employee-related expenses for those employees working in R&D functions, including stock-based compensation for R&D personnel. Indirect

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

R&D costs include insurance or other indirect costs related to the Company’s R&D function to specific product candidates.  The Company expenses pre-approval inventory as R&D until regulatory approval is received.

 

Revenue recognition

 

Effective January 1, 2018, the Company adopted the provisions of Accounting Standard Codification (“ASC”) Topic 606, Revenue from Contracts with Customers. The guidance provides a unified model to determine how revenue is recognized.

 

Product sales

 

The Company is currently approved to sell DOPTELET in the United States market.  The product is distributed through an exclusive distribution model with Integrated Commercialization Solutions (“ICS”).  ICS sells DOPTELET to a limited number of specialty pharmacies (“customers”), who have agreements in place with the Company.  Patients and healthcare providers purchase the product from the specialty pharmacy providers.  (See Note 7 “Significant agreements and contracts” for more information on the Company’s agreement with ICS).

 

The Company recognizes revenue on product sales when the control of the Company’s product passes to its customers, which occurs at a point in time, upon delivery to the customers. The Company has determined that the delivery of its product to its customers constitutes a single performance obligation as there are no other promises to deliver goods or services. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation. The Company has assessed the existence of a significant financing component in the agreements with its customers. The trade payment terms with its customers do not exceed one year and therefore the Company has elected to apply the practical expedient and no amount of consideration has been allocated as a financing component.

 

Revenue from product sales is recorded at the net sales price, which includes estimates of variable consideration for which reserves are established. Components of variable consideration include trade discounts and allowances, product returns, government chargebacks, discounts and rebates, and other incentives, such as voluntary patient assistance, and other fee for service amounts that are detailed within contracts between the Company and its customers relating to the Company’s sale of its products. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as reductions of accounts receivable or a current liability. These reserves reflect the Company’s best estimates of the amount of consideration to which it is entitled based on the terms of the respective underlying contracts.

 

Revenue from product sales is recorded after considering the impact of the following variable consideration amounts at the time of revenue recognition:

 

Trade discounts and distribution fees: Trade discounts relate to prompt settlement discounts provided to ICS and the customers.  Distribution fees include fees paid to ICS for the distribution of the product (which is based on a percentage of sales).  In addition, the Company compensates its customers for data and other activities. The Company has determined that such services received to date are not distinct from its sale of products and may not reasonably represent fair value for these services.  Therefore, estimates of these payments are recorded as a reduction of revenue based on contractual terms.

 

Product returns: Consistent with industry practice, the Company generally offers customers a limited right of return for product that has been purchased from the Company based on the product’s expiration date. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as within accrued expenses on the condensed consolidated balance sheets. The Company currently estimates product return liabilities using available industry data and its own sales information, including its visibility into the inventory remaining in the distribution channel. The Company has not received any returns to date and believes that returns of DOPTELET will be minimal.

 

Government rebates and chargebacks: The Company will contract with Medicaid, Medicare, U.S Department of Veterans Affairs and other government agencies (“Government Payors”) so that DOPTELET will be eligible for purchase by, or partial or full reimbursement from, such Government Payors. The Company estimates the rebates, chargebacks and discounts it will provide to Government Payors and deducts these estimated amounts from its gross product revenues at the time the revenues are recognized. The Company estimates these reserves based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which is included in accrued expenses and other current liabilities on the condensed consolidated

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

balance sheets. For Medicare, the Company also estimates the number of patients in the prescription drug coverage gap for whom the Company will owe an additional liability under the Medicare Part D program. The Company estimates the rebates, chargebacks and discounts that it will provide to Government Payors based upon (i) the government-mandated discounts applicable to government-funded programs, (ii) information obtained from its customers and (iii) information obtained from other third parties regarding the payor mix for DOPTELET. The Company’s liability for these rebates consists of estimates of claims for the current quarter and estimated future claims that will be made for product shipments that have been recognized as revenue, but remain in the distribution channel inventories at the end of each reporting period.

 

Other incentives— Other incentives which the Company offers include voluntary patient assistance and assurance programs, such as a co-pay assistance program, which are intended to provide financial assistance to qualified commercially-insured patients with prescription drug co-payments required by payers. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue but remains in the distribution channel inventories at the end of each reporting period. The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses and other current liabilities on the condensed consolidated balance sheets.

 

Strategic agreements

 

The Company’s other revenue consists of revenue from the Company’s strategic agreements for the development and commercialization of DOPTELET. The terms of the agreements typically include non-refundable upfront fees, payments based upon achievement of milestones and eventually revenue from the commercialized product. These agreements usually have both fixed and variable consideration. Non-refundable upfront fees are considered fixed, while milestone payments and revenues from the commercialized product are identified as variable consideration.

 

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under these agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC Topic 606. The Company’s performance obligations include intellectual property rights, development services, and services associated with regulatory submission and approval processes. Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations either are completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.

 

As part of the accounting for these arrangements, the Company develops assumptions that require judgment to determine the estimated selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the selling price on a stand alone basis, which may include forecasted revenue, development timelines, and probabilities of regulatory success.

 

The Company allocates the total transaction price to each performance obligation based on the estimated relative standalone selling prices of the promised goods or service underlying each performance obligation.

 

If the right to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the right when the right is transferred to the customer, and the customer can use and benefit from the right. For rights that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

 

At the inception of the arrangement, the Company evaluates whether the development milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

those approvals are received.

 

Stock-based compensation

 

The Company expenses stock-based compensation to 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 Company records the expense for stock-based compensation awards subject to performance-based milestone vesting over the remaining service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and 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. All stock-based compensation costs are recorded in cost of goods sold, general and administrative or research and development expenses in the consolidated statements of operations based upon the underlying individual’s role at the Company.

 

Income taxes

 

Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

 

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances.

 

Net loss per share

 

Net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the period assuming the retrospective conversion of member units described above. Since the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same. The computations of diluted net loss per common share for the three and six months ended June 30, 2018 did not include options to purchase 2,596,080 shares and 2,425,386 shares, respectively, of common stock, as the inclusion of these securities would have been antidilutive.

 

Recent accounting pronouncements

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, Leases (Topic 842), which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the estimated term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The Company expects to adopt ASU 2016-02 in the first quarter of 2019. Although the Company is in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements, the Company currently believes the most significant change will be related to the recognition of right-of-use assets and lease liabilities on the Company’s balance sheet for real estate operating leases.

 

In May 2017, the FASB issued Accounting Standards Update (“ASU”) No.  2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, 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.  The Company adopted ASU No. 2017-09 as of January 1, 2018.  The adoption of this standard did not impact the Company’s consolidated financial statements and disclosures.

 

In June 2018, the FASB issued ASU 2018-07, “Improvements to Nonemployee Share-Based Payment Accounting”, 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 Dec. 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 expects that the adoption of this ASU would not have a material impact on the Company’s consolidated financial statements.

 

8



Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 3—The purchase agreement with Eisai and related transactions

 

Purchase agreement with Eisai

 

Dova entered into a purchase agreement dated March 29, 2016 (the “Purchase Agreement”) with Eisai, Inc. (“Eisai”) for all of the issued and outstanding shares of the capital stock of AkaRx. The terms of the Purchase Agreement included (i) an upfront payment of $5.0 million that was paid at closing, (ii) milestone payments up to $135.0 million in the aggregate based on annual net sales of DOPTELET, and (iii) a commitment to negotiate in good faith to secure a long-term supply agreement with Eisai to govern manufacturing support and the purchase of DOPTELET from Eisai until the later of March 30, 2021 or the third anniversary of the commercialization of DOPTELET.

 

The transaction was accounted for as an asset acquisition pursuant to ASU 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business, as the majority of the fair value of the assets acquired was concentrated in a group of similar assets, and the acquired assets did not have outputs or employees. The assets acquired under the Purchase Agreement included a license to DOPTELET, other associated intellectual property, inventory, documentation and records, and related materials. Because DOPTELET had not yet received regulatory approval, the $5.0 million purchase price paid to date for these assets was expensed in the Company’s statement of operations for the period from Inception to December 31, 2016. In addition, the potential milestone payments based on annual net sales are not yet considered probable, and no milestone payments have been accrued at June 30, 2018.

 

Long-term supply agreement with Eisai

 

In June 2017, the Company entered into a supply agreement with Eisai, pursuant to which the Company agreed to purchase finished drug product of DOPTELET from Eisai and Eisai agreed to supply finished drug product of DOPTELET. The initial term of the agreement will terminate on the later of March 30, 2021 and the third anniversary of the Company’s first commercial sale of DOPTELET. After the initial term, the supply agreement may be renewed by mutual agreement of the parties. During the initial term, Eisai is the Company’s exclusive supplier of finished drug product of DOPTELET, except that the Company has the right to terminate the exclusivity early by payment to Eisai of a fee calculated based on the Company’s forecasted purchases of DOPTELET during the remainder of the initial term. In addition, in the event that Eisai fails to deliver substantially all of the finished drug product due to the Company under the agreement, the Company may elect to seek alternative supply arrangements so long as such failure remains uncured, subject to certain exceptions. The aggregate payments to Eisai under the supply agreement for finished drug product will be the greater of a fixed payment per tablet or a payment calculated in the mid-single digit percentages of net sales of DOPTELET.

 

Transition services agreement

 

In March 2016, in connection with the Company’s acquisition of the rights to DOPTELET, the Company entered into a transition services agreement with Eisai (“TSA”).  Pursuant to the terms and conditions of the TSA, Eisai agreed to manage clinical trials for the Company through regulatory approval of DOPTELET based on an agreed upon fee schedule for services plus reimbursement of certain out-of-pocket expenses. Services are being provided by Eisai’s full-time employees, its affiliates or third-party contractors. Payments due under this agreement that exceed $51.0 million would reduce any milestone payments due to Eisai under the Purchase Agreement. To date, the Company has incurred $31.1 million under this agreement. Pursuant to the TSA, payments due were financed under the Eisai note described below. The Company has final decision-making authority related to development of DOPTELET and the regulatory approval process.

 

Eisai note and security agreement

 

On March 30, 2016, the Company issued a Note to Eisai, which had an interest rate of 5% per annum, and enabled the Company to finance payments due to Eisai under the TSA for all costs incurred through December 31, 2017. The principal amount of the Note was increased on a quarterly basis by the amount of unpaid service fees and out-of-pocket expenses due and owed to Eisai under the TSA. The total aggregate spend through this Note was $31.1 million and on March 16, 2018, this principal balance along with accumulated

 

9



Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

interest of $1.3 million was repaid in full. The Note was secured by a blanket security interest on all of the assets of AkaRx, including the worldwide rights to DOPTELET, which was terminated and automatically released as of March 16, 2018. Payments due to Eisai under the Note were guaranteed by PBM Capital Investments, LLC.

 

License agreement with Astellas Pharma Inc.

 

The primary intellectual property related to DOPTELET is licensed from Astellas Pharma Inc. (“Astellas”) on an exclusive, worldwide basis under the terms of a license agreement that the Company acquired from Eisai under the Purchase Agreement. Under the terms of the license agreement, the Company is required to make payments upon the achievement of certain milestones. On September 21, 2017, upon the filing of the NDA, the Company became obligated to make a milestone payment of $1.0 million, which was expensed and included in Research and development — licenses acquired.  The Company will be required to make additional aggregate milestone payments of up to $4.0 million to Astellas if certain other regulatory milestones are achieved.  No amounts have been accrued for any potential milestone payments as the payments were not deemed probable.  In addition, the Company is required to pay Astellas tiered royalties ranging from the mid to high single digits on net sales of DOPTELET, which are recorded in cost of product sales. Unless earlier terminated, this license agreement with Astellas will expire on a country-by-country and product-by-product basis upon the latest of (i) the expiration of the last-to-expire claim of the licensed patents, (ii) the expiration of any government-granted marketing exclusivity period for DOPTELET, and (iii) 10 years after the last date of launch of DOPTELET to have occurred in any country. Thereafter, the term of the license agreement may be extended for successive one-year terms if the Company notifies Astellas in writing of its desire to extend such term at least three months before it is otherwise set to expire.

 

Note 4—Related party agreements

 

Dova and AkaRx management services agreements

 

On April 1, 2016, Dova and AkaRx each entered into a services agreement (each, a “SA”) with PBM Capital Group, LLC. Pursuant to the terms of each of the SAs, which have terms of twelve months each (and are automatically renewable for successive one-year periods), PBM Capital Group, LLC will render advisory and consulting services to Dova and AkaRx. Services provided under the SAs may include certain scientific and technical, accounting, operations and back office support services. In consideration for these services, Dova and AkaRx are each obligated to pay PBM Capital Group, LLC a monthly management fee of $25,000.  On March 30, 2018, the SA agreement between AkaRx and PBM Capital Group, LLC was terminated.  Effective April 1, 2018, the monthly management fee for the SA between Dova and PBM Capital Group, LLC was reduced to $17,400.

 

For the three months and six months ended June 30, 2018, the Company incurred expenses under the SAs of $52,200 and $202,200, respectively, which were included in selling, general and administrative expenses.

 

For the three months and six months ended June 30, 2017, the Company incurred expenses under the SAs of $150,000 and $300,000, respectively, which were included in selling, general and administrative expenses.

 

Note 5—Stockholders’ equity

 

Series A preferred stock

 

Between September 19, 2016 and November 18, 2016, the Company closed on the sale of an aggregate of 982,714 shares of Series A preferred stock for gross proceeds of $29.0 million. The Series A preferred stock was entitled to non-cumulative, non-compounding dividends at 8.0% per annum (based on the original issue price), when, and if any dividends are declared by the Board.

 

Each share of Series A preferred stock was convertible, at the option of the holder and at any time, into a number of fully paid and non-assessable shares of common stock determined by dividing the Series A Original Issue Price by the Series A Conversion Price in effect at the time of conversion. The Series A preferred stock was mandatorily convertible under certain conditions (i) when the Company issued shares of common stock in a public offering generating gross proceeds of at least $60.0 million to the Company, at a price per share of at least $17.88, or (ii) by majority vote of the then outstanding shares of Series A preferred stock. The Series A Conversion Price was $8.94 and was subject to adjustment based on events including the issuance of additional equity securities, certain dividends and distributions, mergers and reorganizations, and stock splits and combinations.

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

The Series A preferred stock was not mandatorily redeemable and did not embody an unconditional obligation to settle in a variable number of equity shares. As such, the Series A preferred stock is classified as permanent equity on the condensed consolidated balance sheet. The holders’ contingent redemption right in the event of certain deemed liquidation events did not preclude permanent equity classification.

 

Further, the Series A preferred stock is considered an equity-like host for purposes of assessing embedded derivative features for potential bifurcation. The embedded conversion feature is considered to be clearly and closely related to the associated preferred stock host instrument and therefore was not bifurcated from the equity host. The contingent put right upon certain deemed liquidation events was not clearly and closely related to the associated preferred stock host instrument but did not meet the definition of a derivative and therefore was not bifurcated from the equity host.

 

Upon the closing of the Company’s initial public offering (“IPO”) on July 5, 2017, all outstanding shares of the Company’s Series A convertible preferred stock were automatically converted into 3,242,950 shares of the Company’s common stock.

 

Common stock

 

On July 5, 2017, the Company closed its IPO, which resulted in the issuance and sale of 5,077,250 shares of its common stock at a public offering price of $17.00 per share, generating net proceeds of approximately $78.7 million after deducting underwriting discounts and commissions and other offering costs.

 

On February 27, 2018, the Company completed an underwritten public offering of 2,500,000 shares of its common stock at an offering price of $32.00 per share. Net proceeds raised by the Company from the offering were approximately $74.7 million, after deducting underwriting discounts and commissions and other offering expenses.

 

Note 6—Stock-based compensation

 

Options

 

The Company maintains the Amended and Restated 2017 Equity Incentive Plan ( “2017 Equity Incentive Plan”).  The 2017 Equity Incentive Plan provides for the grant of incentive stock options to employees, and for the grant of nonstatutory options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards and other forms of stock awards to employees, including officers, consultants and directors. The 2017 Equity Incentive Plan also provides for the grant of performance-based cash awards to employees, including officers, consultants and directors.  The Company’s stock options generally vest as follows: 25% after 12 months of continuous services and the remaining 75% on a ratable basis over a 36-month period from 12 months after the grant date. Stock options granted during the three and six months ended June 30, 2018 have a maximum contractual term of 10 years.

 

The Company initially reserved 4,285,250 shares of common stock for issuance under the 2017 Equity Incentive Plan.  The number of shares of common stock reserved for issuance under the 2017 Equity Incentive Plan automatically increases on January 1 each year, for a period of ten years, from January 1, 2018 through January 1, 2027, by 4% of the total number of shares of the Company’s common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Board.   As of June 30, 2018, 2,592,404 shares were reserved for grant under the 2017 Equity Incentive Plan.

 

Stock option valuation

 

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to nonemployees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Prior to the IPO, the fair values of the shares of common stock underlying the Company options were estimated on each grant date by the Company. In order

 

11



Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

to determine the fair value, the Company considered, among other things, contemporaneous valuations of the Company’s common stock and preferred stock, the Company’s business, financial condition and results of operations, including related industry trends affecting its operations; the likelihood of achieving a liquidity event, such as an IPO, or sale, given prevailing market conditions; the lack of marketability of the Company’s common stock; the market performance of comparable publicly traded companies; and U.S. and global economic and capital market conditions. Since the IPO, the fair value of the common stock underlying the Company’s options has been based upon the closing price of the Company’s common stock on the grant date.

 

Option awards

 

The fair value of the Company’s option awards was estimated using the assumptions below:

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Exercise price

 

$24.46-$33.47

 

$3.73-$7.32

 

$24.46-$33.47

 

$3.73-$7.32

 

Risk-free rate of interest

 

2.60%-3.02%

 

1.71%-1.96%

 

2.41%-3.02%

 

1.71%-1.96%

 

Expected term (years)

 

5.1-7.0

 

5.2-7.1

 

5.0-7.0

 

5.2-7.1

 

Expected stock price volatility

 

64%-65%

 

87%-88%

 

64%-88%

 

87%-88%

 

 

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2018:

 

 

 

 

 

Weighted-

 

Weighted-

 

Aggregate

 

 

 

 

 

Average

 

Average

 

Intrinsic

 

 

 

Number of Options

 

Exer. Price

 

Contractual Term

 

Value

 

Outstanding - December 31, 2017

 

2,128,641

 

7.90

 

9.4

 

$

44,481,000

 

Granted

 

834,150

 

29.24

 

9.6

 

$

1,036,000

 

Exercised

 

(49,809

)

4.52

 

 

 

 

 

Forfeited

 

(242,775

)

6.29

 

 

 

 

 

Outstanding - June 30, 2018

 

2,670,207

 

14.78

 

9.1

 

$

40,898,000

 

Options vested and exercisable - June 30, 2018

 

481,108

 

5.21

 

8.8

 

$

11,888,000

 

 

The aggregate intrinsic value in the above table is calculated as the difference between fair value of the Company’s closing common stock price on June 29, 2018, or $29.92 per share, and the exercise price of the stock options that had strike prices below $29.92 per share. The weighted average grant date fair value per share of options granted during six months ended June 30, 2018 was $20.17.

 

As of June 30, 2018, there was approximately $20.2 million of total unrecognized compensation expense, related to the unvested stock options shown in the table above, which is expected to be recognized over a weighted average period of 1.1 years.

 

Stock-based compensation expense has been reported in the Company’s consolidated statements of operations for the three and six months ended June 30, 2018 as follows (in thousands):

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2018

 

2017

 

2018

 

2017

 

Cost of product sales

 

$

292

 

$

 

$

292

 

$

 

Selling, general and administrative

 

3,318

 

489

 

5,703

 

489

 

Research and development

 

582

 

130

 

1,012

 

130

 

Total stock-based compensation

 

$

4,192

 

$

619

 

$

7,007

 

$

619

 

 

Note 7 — Significant agreements and contracts

 

Fosun Agreement

 

On March 16, 2018, the Company, through its wholly-owned subsidiary, AkaRx entered into an agreement by which it granted Shanghai Fosun Pharmaceutical Industrial Development Co., Ltd., a wholly owned subsidiary of Shanghai Fosun Pharmaceutical (Group) Co., Ltd., (collectively, “Fosun”) the exclusive development and distribution rights of DOPTELET in mainland China and Hong Kong (“territory”). Under the terms of the agreement, Fosun will have the right to exclusively commercialize and to assist the Company with the registration of DOPTELET in the territory.  Fosun is solely responsible for commercialization activities in the territory and associated expenses. The Company is responsible for supplying product at a fixed price to Fosun for the distribution of product upon approval.

 

The agreement between Fosun and the Company is governed by a joint steering committee comprised of equal representation by the Company and Fosun and operated on a consensus basis. In the event that the parties do not agree, the Company will have deciding authority, except with respect to matters that solely affect the territory.

 

Under the agreement, the Company received a non-refundable upfront payment of $4.5 million during the second quarter of 2018, which consisted of an upfront payment of $5.0 million, less $0.5 million that was withheld in accordance with tax withholding requirements in China and recorded as an expense during the three and six months ended June 30, 2018.  The Company is also eligible to receive additional future payments upon the achievement of certain regulatory milestones. The Company assessed this arrangement in accordance with ASC Topic 606 and concluded that the contract counterparty, Fosun, is a customer.  The Company determined the distinct, material performance obligations within this agreement consist of (1) the exclusive right to develop and commercialize DOPTELET for multiple indications in the territory, (2) the delivery of certain indication specific information, and (3) manufacture and supply of commercial product.

 

The transaction price includes the $5.0 million up-front consideration. None of the regulatory milestones have been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and Fosun’s efforts.

 

During the three and six months ended June 30, 2018, the Company recognized $2.6 million related to the up-front payment as other revenue in connection with the Fosun agreement. The amount of revenue recognized in connection with this agreement is commensurate with the deliverables provided by the Company to Fosun in achieving the performance obligation. The remaining transaction price of $2.4 million is recorded in deferred revenue as of June 30, 2018, on the condensed consolidated balance sheet and will be recognized upon the delivery of certain information packages for indications which are currently in development.

 

Integrated Commercial Solutions, LLC (“ICS”)

 

On March 1, 2018, the Company entered into a Commercial Outsourcing Master Services Agreement with ICS, a division of AmerisourceBergen Specialty Group, a subsidiary of AmerisourceBergen, pursuant to which ICS is the exclusive provider of various third-party logistics services to support the Company’s distribution of DOPTELET in the United States. The key services provided by ICS include logistics, warehousing, returns and inventory management, contract administration and chargebacks processing and accounts receivable management.

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Effective March 1, 2018, the Company also entered into a first amendment to the Commercial Outsourcing Master Services Agreement in order for ICS to purchase and sell DOPTELET to the Company’s customers in the United States.  Pursuant to the amendment, ICS will only make shipments to customers who have an executed contract with the Company.  Under this arrangement, ICS places orders with the Company to maintain an appropriate level of inventory.  ICS assumes all inventory risk and has sole responsibility for determining the prices at which it sells these products, subject to specified limitations in the amendment. The agreement will terminate on a date that is mutually agreed upon, in good faith, between ICS and the Company.  If the Company does not attain all regulatory approvals and licenses to sell and distribute DOPTELET within one calendar year from the effective date, ICS may terminate the agreement upon 30 days written notice.  Upon termination of this arrangement, ICS will be allowed to return one hundred percent of all inventory and revert to be the Company’s third-party logistics provider.

 

Note 8 — Debt

 

On April 17, 2018, the Company and its wholly owned subsidiary, AkaRx (collectively “Co-Borrowers”), entered into a Loan and Security Agreement with Silicon Valley Bank (“Term Loan”) pursuant to which the Co-Borrowers borrowed $20.0 million.  The loan matures on April 17, 2021 unless the Company achieves a specified revenue milestone in which case the maturity date will be extended to April 17, 2022. The Co-Borrowers are only required to make monthly interest payments until April 30, 2019 unless the Company achieves the specified revenue milestone in which case the interest-only period will be extended until October 31, 2019.  Following the interest-only period, the Co-Borrowers will be required to also make equal monthly payments of principal and interest for the remainder of the term. The Co-Borrowers will also be required to pay an additional final payment at maturity equal to $2.0 million if the term loan is repaid after the interest-only period or a final payment of $0.6 million if the term loan is repaid during the interest-only period.  The final payment amount of $2.0 million has been recorded as a debt discount and is being accreted to the carrying value of the debt using the effective interest method.  In addition, at its option, the Co-Borrowers may prepay all amounts owed under the Loan and Security Agreement (including all accrued and unpaid interest), subject to a prepayment charge if the loan has been outstanding for less than one year, which prepayment charge of 4% of the outstanding principal amount on the date the loan is prepaid. All obligations under this agreement are guaranteed by all the assets of the Co-Borrowers, except for intellectual property and certain other assets. The agreement bears interest at the WSJ prime rate plus 1.25% per annum.  In connection with the Loan and Security Agreement, the Company incurred debt issuance costs totaling approximately $38,000. These costs are being amortized over the estimated term of the debt using the effective interest method. The Company deducted the debt issuance costs from the carrying amount of the debt as of June 30, 2018. As of June 30, 2018, the carrying value of the term loan was approximately $20.2 million, of which $1.7 million was due within 12 months and $18.5 million was due in greater than 12 months.

 

The Term Loan also provides for standard indemnification of Silicon Valley Bank and contains representations, warranties and certain covenants of the Co-Borrowers. While any amounts are outstanding under the Loan and Security Agreement, the Co-Borrowers are subject to a number of affirmative and negative covenants, including covenants regarding dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. The Co-Borrowers are also restricted from paying dividends or making other distributions or payments on their capital stock, subject to limited exceptions.

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

As of June 30, 2018, annual principal payments due under the Term Loan are as follows:

 

 

 

Aggregate
Minimum
Payments

 

Year

 

(in thousands)

 

2019

 

6,667

 

2020

 

10,000

 

2021

 

5,333

 

Total

 

$

22,000

 

Less unamortized debt issuance costs and final payment

 

(1,850

)

Total

 

$

20,150

 

 

Note 9—Commitments and contingencies

 

Office lease

 

On May 22, 2018, the Company entered into an Office Lease Agreement (the “Lease”) with Pine Forest 240 TT, LLC, a Delaware limited liability company (the “Landlord”), under which the Company will lease 21,745 square feet of space for its corporate headquarters located at 240 Leigh Farm Road, Durham, North Carolina. Pursuant to the Lease, the Company will effectively renew the Company’s lease of its existing 14,378 square feet of office space (the “Existing Office Space”) that the Company currently subleases from Paidian Research, Inc. pursuant to a sublease agreement, which is scheduled to expire on April 30, 2020, effective May 1, 2020. The Company will also lease an additional 1,961 square feet of office space (“Suite 200”), which the Landlord has agreed to use commercially reasonable efforts to deliver on or before September 1, 2018, and 5,406 square feet of office space (“Suite 215”), which the Landlord has agreed to use commercially reasonable efforts to deliver on or before August 1, 2019.

 

Under the Lease, subject to specified exceptions, the Company will pay an initial annual base rent of (i) $51,476, or $4,290 per month, for Suite 200, subject to an increase of approximately 2.7% per year, (ii) $145,800, or $12,150 per month, for Suite 215, subject to an increase of approximately 2.7% per year and (iii) $387,774, or $32,315 per month, for the Existing Office Space, subject to an increase of approximately 2.7% per year. In addition, the Company will pay its proportionate share of the Landlord’s annual operating expenses associated with the premises.

 

The term of the Lease will continue until September 30, 2023. The Company has an option to renew the Lease for one additional term of five years. If exercised, rent during the renewal term will be at the fair market rental rate as defined in the Lease.

 

The lease provides for a tenant improvement allowance of approximately $264,090. As of June 30, 2018, none of the allowance was utilized.

 

We incurred rent expense of $71,600 and $177,000 for the three and six months ended June 30, 2018.  There was no rent expense for the three and six months ended June 30, 2017.

 

Current future minimum lease payments under the Company’s lease obligations are $152,000, $310,000 and $104,000 for the remainder of 2018, 2019 and 2020, respectively.

 

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Table of Contents

 

Dova Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Purchase commitments

 

As noted in Note 3, the Company has an agreement with Eisai for the commercial supply of DOPTELET. Under the terms of the agreement, the Company will supply Eisai with non-cancelable firm commitment purchase orders.  Future minimum purchase obligations are $1.8 million for the remainder of 2018 and $1.3 million for 2019.

 

The Company has also entered into other agreements with certain vendors for the provision of services, including services related to data access and packaging, under which the Company is contractually obligated to make certain payments to the vendors. The Company enters into contracts in the normal course of business that include, among others, arrangements with clinical research orgnanizations for clinical trials, vendors for preclinical research, and vendors for manufacturing. These contracts generally provide for termination upon notice, and therefore the Company believes that its obligations under these agreements are not material.

 

Litigation

 

The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

 

Note 10—Income taxes

 

The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2018 as the Company incurred losses for the three and six months ended June 30, 2018 and is forecasting additional losses through the fourth quarter of 2018, resulting in an estimated net loss for both financial statement and tax purposes for the year ending December 31, 2018. Therefore, no federal or state income taxes are expected and none have been recorded at this time. Income taxes have been accounted for using the liability method in accordance with ASC 740.

 

Due to the Company’s history of losses since inception, 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 its net deferred tax asset.

 

At June 30, 2018, the Company had no unrecognized tax benefits that would reduce the Company’s effective tax rate if recognized.

 

Note 11—Employee benefit plan

 

The Company maintains a defined contribution 401(k) plan, under which employee contributions are voluntary and are determined on an individual basis, limited by the maximum amounts allowable under federal tax regulations. The Company provides an automatic matching contribution of $0.50 per $1.00 of employee contribution into the plan up to a maximum deferral per employee of 4% of the employee’s salary. The Company’s matching contributions totaled approximately $72,000 and $109,000 during the three and six months ended June 30, 2018, respectively.  There were no such contributions for the three and six month ended June 30, 2017.

 

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Item 2. Financial Information.

 

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

 

The following discussion and analysis of our financial condition, results of operations and cash flows should be read in conjunction with (1) the unaudited interim condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q, and (2) the audited consolidated financial statements and notes thereto for the year ended December 31, 2017 and the related management’s discussion and analysis of financial condition and results of operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2017.

 

Forward-looking statements

 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are often identified by the use of words such as “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” and similar expressions, although not all forward-looking statements contain these identifying words. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to significant risks and uncertainties and we can give no assurances that our expectations will prove to be correct. Actual results could differ materially from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described in our Annual Report on Form 10-K for the year ended December 31, 2017 under Part I - Item 1A “Risk Factors” filed with the Securities and Exchange Commission on February 16, 2018, in this Quarterly Report under Part II - Item 1A “Risk Factors,” and in our other filings with the SEC. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.

 

Overview

 

We are a pharmaceutical company focused on acquiring, developing and commercializing drug candidates for diseases that are treated by specialist physicians, with an initial focus on addressing thrombocytopenia, a disorder characterized by a low blood platelet count. On May 21, 2018, the U.S. Food and Drug Administration (“FDA”) approved DOPTELET (avatrombopag), which is an orally administered thrombopoietin receptor agonist for the treatment of thrombocytopenia in adult patients with chronic liver disease (“CLD”) who are scheduled to undergo a procedure.  On April 27, 2018, we also submitted a marketing authorization application with the European Medicines Agency for this same indication.

 

We are also evaluating the use of DOPTELET in patients with thrombocytopenia regardless of disease etiology undergoing surgery, or pre-surgery trial (“PST”) and initiated an open-label Phase 3 clinical trial during the first quarter of 2018.  In addition, we also initiated a Phase 3 clinical trial in the second quarter of 2018 to evaluate DOPTELET for the treatment of patients who have developed chemotherapy-induced thrombocytopenia (“CIT”).

 

We have global intellectual property rights to DOPTELET. Our intent is to initially build a hepatology-focused sales organization in the United States. We intend to primarily target hepatologists, most of whom are working at one of the approximately 150 liver transplant centers in the United States.

 

We have a limited operating history as we were formed on March 24, 2016. Since our inception, our operations have focused on acquiring rights to DOPTELET, organizing and staffing our company, business planning, raising capital, establishing our intellectual property portfolio, conducting clinical trials, preparing for and submitting an NDA for DOPTELET and building a sales organization. We have funded our operations primarily through the sale of preferred and common stock and the incurrence of debt. On July 5, 2017, we closed our IPO of common stock, which resulted in the issuance and sale of 5,077,250 shares of common stock at a public offering price of $17.00 per share, resulting in net proceeds of approximately $78.7 million after deducting underwriting discounts and commissions and other offering costs. Upon the closing of the IPO, all outstanding shares of our Series A convertible preferred stock were automatically converted into 3,242,950 shares of common stock.   In addition, on February 27, 2018, we completed an underwritten public offering of 2,500,000 shares of our common stock. The shares were sold to the public at an offering price of $32.00 per share. Net proceeds raised from the offering were approximately $74.7 million, after deducting underwriting discounts and commissions and other offering expenses.  On April 17, 2018, we, along with our wholly owned subsidiary, AkaRx, (collectively the “Co-Borrowers”), entered in to a Loan and Security Agreement with Silicon Valley Bank, pursuant to which we borrowed $20.0 million (“term loan”) maturing up to 48 months from the closing.   We believe that our existing cash and equivalents, will enable us to fund our operating expenses, debt service obligations and capital expenditure requirements for at least the next 12 months.

 

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Since inception, we have incurred significant operating losses. For the six months ended June 30, 2018 and for the year ended December 31, 2017, our net loss was $33.4 million and $30.0 million, respectively. As of June 30, 2018, we had an accumulated deficit of $90.6 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

 

·                  continue to invest in the preclinical and clinical development of DOPTELET for the treatment of other thrombocytopenia indications;

·                  continue the commercialization of DOPTELET;

·                  manufacture DOPTELET under our supply agreement with Eisai;

·                  maintain, expand and protect our intellectual property portfolio;

·                  evaluate opportunities for development of additional drug candidates; and

·                  incur additional costs associated with operating as a public company.

 

DOPTLET Key Short-Term Launch Metrics

 

·                  A total of 148 health care professionals have prescribed DOPTELET to their patients since launch with an increasing number using DOPTELET for multiple patients within their practice.

·                  For prescriptions that have completed the adjudication process with payers, we have seen greater than 80% of those prescriptions approved by the payer with an average approval time of 6.9 days.

·                  We have made significant progress in its outreach efforts to target prescribers having reached 62% of top hepatologists an average of 3.1 times since launch.

 

Stock purchase agreement with Eisai

 

In March 2016, we entered into the stock purchase agreement with Eisai, (the “Eisai stock purchase agreement”), pursuant to which we acquired the worldwide rights to DOPTELET. The terms of the Eisai stock purchase agreement included (i) an upfront payment of $5.0 million, (ii) milestone payments up to $135.0 million in the aggregate based on annual net sales of DOPTELET and (iii) a commitment to negotiate in good faith to secure a long-term supply agreement with Eisai to purchase supplies of DOPTELET from Eisai. See Note 3 “The purchase agreement and related transactions” in the accompanying notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

 

Transition services agreement with Eisai

 

In March 2016, in connection with our acquisition of the rights to DOPTELET, we entered into a transition services agreement with Eisai (the “TSA”).  Pursuant to the terms and conditions of the TSA, Eisai agreed to manage clinical trials for us through regulatory approval of DOPTELET based on an agreed upon fee schedule for services plus reimbursement of certain out-of-pocket expenses. Services are being provided by Eisai’s full-time employees, its affiliates or third-party contractors. Payments due under this agreement that exceeds $51.0 million reduce any milestone payments due to Eisai under the Eisai stock purchase agreement. To date, we have incurred $31.1 million under this agreement which were financed under the Eisai note described below. We have final decision-making authority related to development of DOPTELET and the regulatory approval process.

 

Supply agreement with Eisai

 

In June 2017, we entered into a supply agreement with Eisai, pursuant to which we agreed to purchase finished drug product of DOPTELET from Eisai and Eisai agreed to supply finished drug product of DOPTELET to us. The initial term of the agreement will terminate on the later of March 30, 2021 or the third anniversary of our first commercial sale of DOPTELET. After the initial term, the supply agreement may be renewed by mutual agreement of the parties. During the initial term, Eisai is our exclusive supplier of finished drug product of DOPTELET except that we have the right to terminate the exclusivity early by payment to Eisai of a fee calculated based on our forecasted purchases of DOPTELET during the remainder of the initial term. In addition, in the event that Eisai fails to deliver substantially all of the finished drug product due to us under the agreement, we may elect to seek alternative supply arrangements so long as such failure remains uncured, subject to certain exceptions. The aggregate payments to Eisai under the supply agreement for finished drug product will be the greater of a fixed payment per tablet or a payment calculated in the mid-single digit percentages of net sales of DOPTELET.

 

Eisai note and security agreement

 

On March 30, 2016, we issued a secured promissory note to Eisai (“Note”), which had an interest rate of 5% per annum, and enabled us to finance payments due to Eisai under the TSA for all costs incurred through December 31, 2017. The principal amount of the Note was increased on a quarterly basis by the amount of unpaid service fees and out-of-pocket expenses due and owed to Eisai under the TSA. The total aggregate spend through this Note was $31.1 million and on March 16, 2018, we repaid in full this principal balance along with accumulated interest of $1.3 million. The Note was secured by a blanket security interest on all of the assets of AkaRx, including the worldwide rights to DOPTELET, which was terminated and automatically released as of March 16, 2018. Payments due to Eisai under the Note were guaranteed by PBM Capital Investments, LLC.

 

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License agreement with Astellas

 

The primary intellectual property related to DOPTELET is licensed to us from Astellas on an exclusive, worldwide basis under the terms of a license agreement we acquired from Eisai in connection with our acquisition of the rights to DOPTELET from Eisai. Under the terms of the license agreement, we are required to make payments upon the achievement of certain milestones. On September 21, 2017, upon the filing of the NDA, we became obligated to make a milestone payment of $1.0 million.  We will be required to make additional aggregate milestone payments of up to $4.0 million to Astellas if certain other regulatory milestones are achieved. In addition, we will be required to pay Astellas tiered royalties in the mid to high single-digit percentages on net sales of DOPTELET. No amounts have been accrued for any potential future milestone payments as such payments have not been deemed probable. See Note 3 “The purchase agreement and related transactions” in the accompanying notes to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for additional information.

 

Services agreements with PBM Capital Group, LLC

 

On April 1, 2016, Dova and AkaRx each entered into a services agreement (each, a “SA”) with PBM Capital Group, LLC. Pursuant to the terms of each of the SAs, which have terms of twelve months each (and are automatically renewable for successive one-year periods), PBM Capital Group, LLC has rendered advisory and consulting services to Dova and AkaRx. Services provided under the SAs include certain scientific and technical, accounting, operations and back office support services. In consideration for these services, Dova and AkaRx were each obligated to pay PBM Capital Group, LLC a monthly management fee of $25,000.  On March 30, 2018, the SA agreement between AkaRx and PBM Capital Group, LLC was terminated.  Effective April 1, 2018, the monthly management fee for the SA between Dova and PBM Capital Group, LLC was reduced to $17,400.

 

Commercial outsourcing agreement

 

On March 1, 2018, we entered into a Commercial Outsourcing Master Services Agreement with Integrated Commercial Solutions, LLC (“ICS”), a division of AmerisourceBergen Specialty Group, a subsidiary of AmerisourceBergen, pursuant to which ICS is the exclusive provider of various third-party logistics services to support our distribution of DOPTELET in the United States. The key services provided by ICS include logistics, warehousing, returns and inventory management, contract administration and chargebacks processing and accounts receivable management.

 

Effective March 1, 2018, we also entered into a first amendment to the Commercial Outsourcing Master Services Agreement to in order for ICS to purchase and sell DOPTELET to our customers in the United States.  ICS will only make shipments to customers who have an executed contract with us.  Under this amendment, ICS places orders with us to maintain an appropriate level of inventory.  ICS assumes all inventory risk, and has sole responsibility for determining the prices at which it sells these products, subject to specified limitations in the amendment.  The agreement will terminate on a date that is mutually agreed upon, in good faith, between ICS and us.  If the Company does not attain all regulatory approvals and licenses to sell and distribute DOPTELET within one calendar year from the effective date, ICS may terminate the agreement within 30 days written notice.  Upon termination of this arrangement, ICS will be allowed to return one hundred percent of all inventory and revert to be our third-party logistics provider.

 

Critical accounting policies and significant judgments and estimates

 

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the dates of the balance sheets and the reported amounts of expenses during the reporting periods. In accordance with U.S. GAAP, we evaluate our estimates and judgments on an ongoing basis.

 

Significant estimates include assumptions used in the determination of net revenue generated from product sales, revenue recognized upon the satisfaction of performance obligations under our strategic agreements, of share-based compensation and some of our research and development expenses. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

We discussed accounting policies and assumptions that involve a higher degree of judgment and complexity in Note 2 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 16,

 

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2018. There have been no material changes during the three months ended June 30, 2018 to our critical accounting policies, significant judgments and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017, except for the addition of a revenue recognition policy as discussed in Note 2 of our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

 

Components of results of operations

 

Revenue

 

Product sales, net consist of sales of DOPTELET, which was approved by the FDA on May 21, 2018.

 

In addition, we recognized $2.6 million of the upfront payment received from our development and distribution agreement with Shanghai Fosun Pharmaceutical Industrial Development Co., Ltd., a wholly owned subsidiary of Shanghai Fosun Pharmaceutical (Group) Co., Ltd., (collectively, “Fosun”).

 

Cost of product sales

 

Cost of product sales consist primarily of direct and indirect costs related to the manufacturing of DOPTELET sold, including third-party manufacturing costs, packaging services, freight, royalty payments to Astellas in addition to inventory adjustment charges. We began capitalizing commercial inventory manufactured upon FDA approval of DOPTELET. We recorded inventory acquired prior to the regulatory approvals as research and development expense.

 

Research and development expense

 

Research and development expense consists of costs incurred in connection with our research activities, most of which to-date have been incurred under the TSA and include costs associated with clinical trials, consultants, clinical trial materials, regulatory filings, facilities, laboratory expenses and other supplies.

 

Research and development costs are expensed as incurred. Costs for certain activities, such as manufacturing and preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and collaborators.

 

We expect our research and development expense will increase for the foreseeable future as we pursue additional indications for DOPTELET. Drug candidates in later stages of clinical development, such as DOPTELET, generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Additionally, we are hiring internal resources to lead and take over development work that has historically been handled by Eisai personnel under the TSA.

 

The duration, costs and timing of additional clinical trials for DOPTELET and any other drug candidates will depend on a variety of factors that include, but are not limited to, the following:

 

·             number of trials required for approval;

·             delays in reaching, or failing to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites or prospective contract research organizations, the terms of which can be subject to extensive negotiation and may vary significantly among different contract research organizations and trial sites;

·             clinical trials of our drug candidates producing negative or inconclusive results, including failure to demonstrate statistical significance;

·             per patient trial costs, including based on number of doses that patients receive;

·             the number of patients that participate in the trials and then drop-out or discontinuation rates of patients;

·             the number of sites included in the trials;

·             the countries in which the trial is conducted;

·             the length of time required to enroll eligible patients;

·             potential additional safety monitoring or other studies requested by regulatory agencies;

·             undesirable side effects or other unexpected characteristics, causing us or our investigators, regulators or institutional review boards to suspend or terminate the trials;

·             the duration of patient follow-up;

·             timing and receipt of regulatory approvals;

 

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·             the efficacy and safety profile of the drug candidate;

·             third-party contractors failing to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or at all;

·            whether and how many post-approval trials are required;

·             regulators or institutional review boards requiring that we or our investigators suspend or terminate clinical development for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; and

·             the insufficiency or inadequacy of the supply or quality of our drug candidates or other materials necessary to conduct clinical trials of our drug candidates.

 

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of DOPTELET. We are also unable to predict when, if ever, material net cash inflows will commence from sales of DOPTELET. This is due to the numerous risks and uncertainties associated with developing and commercializing DOPTELET, including the uncertainty of:

 

·           achieving successful enrollment and completion of additional clinical trials and achieving regulatory approval of DOPTELET for the treatment of thrombocytopenia beyond its initial indication;

·           establishing an appropriate safety profile;

·           establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers that provide for commercial quantities of DOPTELET manufactured at acceptable cost levels and quality standards;

·            whether any indication approved by regulatory authorities is narrower than we expect;

·            compliance with ongoing regulatory review by the FDA, European Medicines Agency, or any comparable foreign regulatory authorities;

·            the efficacy and safety of DOPTELET and potential advantages compared to alternative treatments, notwithstanding success in meeting or exceeding clinical trial endpoints;

·            the size of the markets for approved indications in territories in which we receive regulatory approval, if any;

·            the ability to set an acceptable price for DOPTELET and obtain coverage and adequate reimbursement from third-party payors and develop and implement viable patient assistance programs;

·            the acceptance by the prescribing community of DOPTELET

·            the degree of competition we face from competitive therapies;

·            the ability to add operational, financial, management and information systems personnel, including personnel to support our clinical, manufacturing and planned future commercialization efforts and operations as a public company;

·            retention of key research and development personnel;

·            the ability to continue to build out and retain an experienced management and advisory team;

·            the ability to maintain, expand and protect our intellectual property portfolio, including any licensing arrangements with respect to our intellectual property; and

·            the ability to avoid and defend against third-party infringement and other intellectual property related claims.

 

A change in the outcome of any of these variables with respect to the development of our drug candidate would significantly change the costs, timing and viability associated with the development of that drug candidate.

 

Selling, general and administrative expense

 

Selling, general and administrative expense consists primarily of salaries and other related costs, stock compensation expense, recruiting fees, professional fees for accounting and legal services, as well as increasingly the costs associated with supporting the commercialization of DOPTELET.

 

We expect our selling, general and administrative expense will increase for the foreseeable future to support the commercialization of DOPTELET for its initial indication and other indications, if these other indications gain marketing approval, and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Additionally, we have begun to incur increased costs associated with maintaining compliance with NASDAQ listing rules and SEC requirements, insurance and investor relations costs. In addition, we expect to incur, at an increased rate compared to prior periods, significantly higher expenses associated with building and maintaining

 

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a sales and marketing team in connection with the commercialization of DOPTELET. As a result, we expect to report significantly higher general and administrative expenses over the next several fiscal quarters compared to prior periods.

 

Results of operations for the three months ended June 30, 2018 and 2017

 

The following table sets forth our selected statements of operations data for the three ended June 30, 2018 and 2017 (in thousands):

 

 

 

Three Months Ended June 30,

 

 

 

2018

 

2017

 

Revenue

 

 

 

 

 

Product sales, net

 

$

1,957

 

$

 

Other revenue

 

2,627

 

 

Total revenue, net

 

4,584

 

 

Operating expenses:

 

 

 

 

 

Cost of product sales

 

 

519

 

 

 

Research and development

 

4,508

 

3,293

 

Selling, general and administrative

 

18,565

 

1,905

 

Total operating expenses

 

23,592

 

5,198

 

Loss from operations

 

(19,008

)

(5,198

)

 

 

 

 

 

 

Interest income and other income (expense), net

 

(195

)

(14

)

Interest expense

 

(454

)

(295

)

Total other expenses, net

 

(649

)

(309

)

Net loss

 

$

(19,657

)

$

(5,507

)

 

Revenue

 

During the three months ended June 30, 2018, product sales, net consist of sales of DOPTELET, which was approved by the FDA on May 21, 2018. The majority of product sales, net recognized related to the initial stocking of DOPTELET at the specialty pharmacies. In addition, we recognized the $2.6 million of the upfront payment received from our development and distribution agreement with Fosun.  We did not recognize any revenue during the three months ended June 30, 2017.

 

Cost of product sales

 

Cost of product sales of $0.5 million for the three months ended June 30, 2018 consists of the cost of inventory that was purchased from Eisai that was sold after FDA approval, royalty payments to Astellas and certain distribution and overhead costs.  In addition, for the three months ended June 30, 2018, cost of product sales included $0.3 million related to a one-time stock-based compensation charge.

 

Research and development expense

 

Research and development expenses increased by $1.2 million, from $3.3 million for the three months ended June 30, 2017 to $4.5 million for the three months ended June 30, 2018, primarily driven by the initiation of clinical trials to evaluate DOPTELET for the treatment of a broader population of PST patients as well as for CIT, partially offset by the completion of the clinical trials in 2017 of DOPTELET for the treatment of thrombocytopenia in patients with CLD, scheduled to undergo a procedure.

 

For the three months ended June 30, 2018, we recorded approximately $3.2 million of product development expenses, $0.7 million of payroll-related expenses, and $0.6 million of stock-based compensation expense.

 

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For the three months ended June 30, 2017, we recorded approximately $2.3 million of costs under the TSA, $0.4 million of consulting costs associated with the preparation of the NDA and planning for additional clinical development of a DOPTELET, $0.3 million of payroll-related expenses and $0.1 million of stock-based compensation expense.

 

Selling, general and administrative expense

 

For the three months ended June 30, 2018, selling, general and administrative expenses increased by $16.7 million, which was primarily driven by the increased level of headcount and sales and marketing activities to support the commercial launch of DOPTELET, increased corporate infrastructure and additional costs associated with operating as a public entity.

 

For the three months ended June 30, 2018, selling, general and administrative expenses consisted of $7.0 million of commercial related expenses $6.6 million of payroll-related expenses, $3.3 million of stock-based compensation expenses, $0.8 million of office operations-related expenses, $0.7 million in professional and consulting fees, and $0.2 million in sponsorship and grants.

 

For the three months ended June 30, 2017, selling, general and administrative expenses were $1.9 million, and were primarily attributable to $0.5 million of stock-based compensation expenses, $0.4 million of payroll-related expenses, $0.3 million of consulting fees, $0.2 million of recruiting fees, $0.2 million of office operations related expenses and $0.2 million of fees under the SAs with PBM Capital Group, LLC.

 

Other expenses, net

 

Other expenses, net for the three months ended June 30, 2018 consisted primarily of $0.4 million of interest expense and amortization of debt issuance costs and accretion expense for the final payment related to our loan with Silicon Valley Bank, $0.5 million of withholding taxes related to the $5.0 upfront payment received from Fosun, and $0.2 million of various state franchise taxes, partially offset by $0.5 million of income on our money market accounts.

 

Other expenses, net for the three months ended June 30, 2017 consisted primarily of $0.3 million of interest expense related to the Eisai note.

 

Results of operations for the sixmonths ended June 30, 2018 and 2017

 

The following table sets forth our selected statements of operations data for the six months ended June 30, 2018 and 2017 (in thousands):

 

 

 

Six Months Ended June 30,

 

 

 

2018

 

2017

 

Revenue

 

 

 

 

 

Product sales, net

 

$

1,957

 

$

 

Other revenue

 

2,627

 

 

Total revenue, net

 

4,584

 

 

Operating expenses:

 

 

 

 

 

Cost of product sales

 

 

519

 

 

 

Research and development

 

7,924

 

7,569

 

Selling, general and administrative

 

28,826

 

2,860

 

Total operating expenses

 

37,269

 

10,429

 

Loss from operations

 

(32,685

)

(10,429

)

 

 

 

 

 

 

Interest income and other income (expense), net

 

27

 

19

 

Interest expense

 

(769

)

(521

)

Total other expenses, net

 

(742

)

(502

)

Net loss

 

$

(33,427

)

$

(10,931

)

 

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Revenue

 

During the six months ended June 30, 2018, product sales, net consist of sales of DOPTELET, which was approved by the FDA on May 21, 2018. The majority of product sales, net recognized related to the initial stocking of DOPTELET at the specialty pharmacies. In addition, we recognized the $2.6 million of the upfront payment received from our development and distribution agreement with Fosun.  We did not recognize any revenue during the three or six months ended June 30, 2017.

 

Cost of product sales

 

Cost of product sales of $0.5 million for the six months ended June 30, 2018, consists of the cost of inventory that was purchased from Eisai that was sold after FDA approval, royalty payments to Astellas and certain distribution and overhead costs.  In addition, for the three and six months ended June 30, 2018, cost of product sales included $0.3 million related to a one-time stock-based compensation charge.

 

Research and development expense

 

Research and development expenses increased by $0.3 million, from $7.6 million for the six months ended June 30, 2017 to $7.9 million for the six months ended June 30, 2018, primarily driven by the initiation of clinical trials to evaluate DOPTELET for the treatment of a broader population of PST patients as well as for CIT, partially offset by the completion of the clinical trials in 2017 of DOPTELET for the treatment of thrombocytopenia in patients with CLD, scheduled to undergo a procedure.

 

For the six months ended June 30, 2018, research and development expenses included $5.6 million of clinical development costs associated with the clinical trials initiated to evaluate DOPTELET for the treatment of PST and CIT, $1.3 million of payroll-related expenses and $1.0 million of stock-based compensation expense. For the six months ended June 30, 2017, we recorded $6.6 million of costs under the TSA, $0.6 million of consulting fees, $0.3 million of payroll-related expenses and $0.1 million of stock-based compensation expense.

 

Selling, general and administrative expense

 

For the six months ended June 30, 2018, selling, general and administrative expenses increased by $25.9 million, which was primarily driven by the increased level of headcount and sales and marketing activities to support the commercial launch of DOPTELET, increased corporate infrastructure and additional costs associated with operating as a public entity.

 

For the six months ended June 30, 2018, selling, general and administrative expenses of $28.8 million, consists primarily of $9.9million of payroll-related expenses, $7.0 million of commercial related expenses, $5.7 million of stock-based compensation expenses, $4.0 million of professional and consulting fees, $1.6 million of office operations-related expenses and $0.6 million in sponsorship and grants.

 

For the six months ended June 30, 2017, selling, general and administrative expenses were $2.9 million, and were primarily attributable to $0.6 million of payroll-related expenses, $0.6 million of professional and consulting fees, $0.5 million of stock-based compensation expenses, $0.2 million of employee recruiting expenses, $0.2 million of office operations related expenses, $0.2 million of travel and $0.3 million of fees under the SAs with PBM Capital Group, LLC.

 

Other expenses, net

 

Other expenses, net for the six months ended June 30, 2018 consists primarily of $0.4 million of interest expense, amortization of debt issuance costs and accretion expense for the final payment related to our loan with Silicon Valley Bank, $0.5 million of withholding taxes related to the $5.0 upfront payment received from Fosun, $0.3 million of interest expense related to the Eisai Note, and $0.4 million of various state franchise taxes partially offset by $0.9 million of income on our money market accounts. Other expenses, net for the six months ended June 30, 2017 consisted primarily of $0.5 million of interest expense related to the Eisai note.

 

Liquidity and capital resources

 

We have funded our operations primarily through sales of preferred stock and common stock as well as through the incurrence of debt. On July 5, 2017, we closed our IPO, which resulted in the issuance and sale of 5,077,250 shares of our common stock at a public offering price of $17.00 per share, resulting in net proceeds of $78.7 million after deducting underwriting discounts and commissions and other offering costs. On February 27, 2018, we completed an underwritten public offering of 2,500,000 shares of our common stock at an

 

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offering price of $32.00 per share. Net proceeds raised from the offering were approximately $74.7 million, after deducting underwriting discounts and commissions and other offering expenses. In addition, on April 17, 2018, we borrowed $20.0 million from Silicon Valley Bank pursuant to the Loan and Security Agreement.

 

We commercially launched DOPTELET in May 2018. Prior to the generation of revenue from DOPTELET, we had not generated any commercial revenue from the sale of our products. We expect to incur substantial and increasing losses for the foreseeable future. Our principal sources of liquidity were our cash and cash equivalents, which totaled $134.7 million and $94.8 million at June 30, 2018 and December 31, 2017, respectively.

 

The following table shows a summary of our cash flows for each of the periods shown below (in thousands):

 

 

 

Six months ended June 30,

 

 

 

2018

 

2017

 

Cash and equivalents at the beginning of the period

 

$

94,846

 

$

28,709

 

Net cash used in operating activities

 

(23,652

)

(3,011

)

Net cash used in investing activities

 

(239

)

(34

)

Net cash provided by (used in) financing activities

 

63,740

 

(902

)

Cash and equivalents at the end of the period

 

$

134,695

 

$

24,762

 

 

Operating activities

 

Operating activities used $23.7 million of cash during the six months ended June 30, 2018, primarily for clinical development fees related to the initiation of the PST program, consulting fees primarily related to our commercial readiness activities, partially offset by the receipt of a $4.5 million upfront payment from our strategic alliance with Fosun. Operating cash flows also included payroll, office operational expenses, recruiting and legal fees.

 

Operating activities used $3.0 million of cash during the six months ended June 30, 2017, primarily for consulting fees, payroll related expenses, office operational expenses, recruiting, professional and legal fees, travel and expenses under the SAs with PBM Capital Group, LLC.

 

Investing activities

 

Net cash used in investing activities related primarily for the purchases of equipment during the six months ended June 30, 2018.  Investing activities during the six months ended June 30, 2017 were insignificant.

 

Financing activities

 

For the six months ended June 30, 2018, financing activities provided $63.7 million of cash, consisting primarily of net proceeds of $74.7 million from the issuance of common stock from our underwritten offering completed on February 27, 2018 and $20.0 million that was borrowed from Silicon Valley Bank under the Loan and Security Agreement, partially offset by the payment in full of the Eisai Note of $31.1 million and $37,705 in debt issuance costs to secure the new loan.

 

Financing activities used $0.9 million of cash during the six months ended June 30, 2017, primarily for offering costs associated with the sale of Series A preferred stock and for payments made to professionals working on our IPO.

 

Funding requirements

 

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue to build out our commercial organization including the sales leadership, marketing and market access functions and expand our commercialization activities. As we seek to obtain marketing approval for DOPTELET in other indications, we will incur additional costs around clinical trials and research and development. In addition, if we obtain FDA approval for DOPTELET in other indication or any other drug candidates, we expect to incur significant commercialization expenses. Furthermore, we have begun and will continue to incur costs as a public company that we did not previously incur or have previously incurred at lower rates as a private company.  We expect that, based on our current operating plans, our existing cash and equivalents as of June 30, 2018 will be sufficient to fund our current planned operations for at least the next 12 months. We have based this estimate on assumptions that could prove to be wrong and we could use our capital resources sooner than planned.

 

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Our future funding requirements will depend on many factors, including:

 

·            costs of continued commercial activities, including product sales, marketing, manufacturing and distribution, for DOPTELET in CLD and other indications, if approved;

·            the scope, progress, results and costs of clinical trials;

·            the scope, prioritization and number of our research and development programs;

·            the costs, timing and outcome of regulatory review of our drug candidates;

·            our ability to establish and maintain collaborations on favorable terms, if at all;

·            the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under collaboration agreements, if any;

·            the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

·            the costs of retaining key research and development, sales and marketing personnel;

·            the costs of building out internal accounting, legal, compliance and other operational and administrative functions;

·            the timing and size of any milestone payments required under our existing or future arrangements;

·            the extent to which we acquire or in-license other drug candidates and technologies; and

·            the costs of establishing sales and marketing capabilities if we obtain regulatory approvals to market our drug candidates.

 

Clinical trial development is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval of and achieve sales of DOPTELET in other indications or other drug candidates. In addition, DOPTELET or any other drug candidates, if approved, may not achieve commercial success or may be limited in approved indications. Our commercial revenues will initially only be derived from sales of DOPTELET for the treatment of thrombocytopenia in adult patients with CLD who are scheduled to undergo a procedure. Accordingly, we may need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

 

If we are unable to raise capital or otherwise obtain funding when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

 

We will seek to obtain additional capital through the sale of debt or equity financings or other arrangements such as, collaborations, strategic alliances and licensing arrangements to fund operations; however, there can be no assurance that we will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Debt securities issued or other debt financing incurred may contain covenants and limit our ability to pay dividends or make other distributions to stockholders. If we are unable to obtain such additional financing, future operations would need to be scaled back or discontinued.

 

Contractual Obligations and Commitments

 

The following table discloses aggregate information about our contractual obligations and the periods in which payments are due as of June 30, 2018 (in thousands):

 

 

 

Payments due by Period

 

 

 

 

 

Less Than

 

1-3

 

4-5

 

More than

 

 

 

Total

 

1 Year

 

Years

 

Years

 

5 Years

 

 

 

(in thousands)

 

Long term debt obligations (including interest)(1)

 

$

22,000

 

$

1,667

 

$

20,333

 

$

 

$

 

Operating lease obligations (2)

 

540

 

305

 

235

 

 

 

Supply agreement with Eisai

 

3,131

 

3,131

 

 

 

 

 

 

Total

 

$

25,671

 

$

5,103

 

$

20,568

 

$

 

$

 

 


(1)         Represents the contractually required principal payments on our Loan Security Agreement in accordance with the required payment schedule and the $2.0 million final payment to Silicon Valley Bank on April 17, 2022.

(2)         Represents the contractually required payments under our operating lease obligations in existence as of June 30, 2018 in accordance with the required payment schedule. No assumptions were made with respect to renewing the lease terms at the expiration date of their initial terms.

 

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Off-balance sheet arrangements

 

We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

 

Recent accounting pronouncements

 

See Note 2 to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements.

 

JOBS Act transition period

 

In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

 

We are in the process of evaluating the benefits of relying on other exemptions and reduced reporting requirements under the JOBS Act. Subject to certain conditions, as an emerging growth company, we may rely on certain of these exemptions, including without limitation, (i) not providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) not complying with any requirement that may be adopted by the Public Company Accounting Oversight Board. We will remain an emerging growth company until the earliest of the following to occur of (1) the last day of the fiscal year (a) ending December 31, 2022, which is the end of the fiscal year following the fifth anniversary of the completion our IPO, (b) in which we have total annual gross revenues of at least $1.07 billion or (c) in which we are deemed to be a “large accelerated filer” under the rules of the U.S. Securities and Exchange Commission, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

 

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash equivalents, are in the form of a money market fund. In addition, as discussed in Note 3 in the accompanying notes to the condensed consolidated financial statements included in this Quarterly Report, our Eisai Note had an interest rate of 5% per annum. If market rates were to decline, our required payments would have exceeded those based on the current market rate.

 

Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations for the three and six months ended June 30, 2018.

 

We contract with clinical research organizations globally. We may be subject to fluctuations in foreign currency rates in connection with certain of these agreements. Transactions denominated in currencies other than the U.S. dollar are recorded based on exchange rates at the time such transactions arise. As of June 30, 2018, substantially all of our total liabilities were denominated in the U.S. dollar.

 

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Item 4.  Controls and Procedures

 

Disclosure Controls and Procedures

 

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, to allow timely decisions regarding required disclosure.

 

The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

 

With respect to the quarter ended June 30, 2018, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

 

Management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

 

Changes in Internal Control over Financial Reporting:

 

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fiscal quarter ended June 30, 2018 which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

Part II.  Other Information

 

Item 1. Legal Proceedings.

 

We are not involved in any litigation that we believe could have a material adverse effect on our financial position or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers, threatened against or affecting our company or our officers or directors in their capacities as such.

 

Item 1A. Risk Factors

 

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities.  Except for the risk factors set forth immediately below, our risk factors have not changed materially from those described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the SEC on February 16, 2018.

 

We may not be able to generate sufficient cash to service our indebtedness, which currently consists of our loan from Silicon Valley Bank.

 

We have entered into a loan and security agreement with Silicon Valley Bank, pursuant to which we have borrowed an aggregate of $20.0 million. Our obligations under the loan and security agreement are secured by substantially all of our assets except for our intellectual property and certain other assets, and we may not encumber our intellectual property without Silicon Valley Bank’s prior written consent. The loan and security agreement contains a number of affirmative and negative covenants, including covenants regarding dispositions of property, business combinations or acquisitions, incurrence of additional indebtedness and transactions with affiliates, among other customary covenants. We are also restricted from paying dividends or making other distributions or payments on our capital stock, subject to limited exceptions. Our obligations under the loan agreement are subject to acceleration upon the occurrence of specified events of default, including a material adverse change in our business, operations or financial or other condition. We were in compliance with these covenants as of June 30, 2018. We may also enter into other debt agreements in the future which may contain similar or more restrictive terms.

 

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Our ability to make scheduled monthly payments or to refinance our debt obligations depends on numerous factors, including the amount of our cash reserves and our actual and projected financial and operating performance. These amounts and our performance are subject to certain financial and business factors, as well as prevailing economic and competitive conditions, some of which may be beyond our control. We cannot assure you that we will maintain a level of cash reserves or cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our existing or future indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, or that these actions would permit us to meet our scheduled debt service obligations. Failure to comply with the conditions of the loan and security agreement could result in an event of default, which could result in an acceleration of amounts due under the loan and security agreement. We may not have sufficient funds or may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments, and Silicon Valley Bank could seek to enforce security interests in the collateral securing such indebtedness, which would harm our business.

 

Our distribution agreements with ICS to market DOPTELET may not be successful.

 

We have entered into a distribution agreement with ICS to distribute DOPTELET in the United States. Under this agreement, ICS will generally be responsible for the warehousing, distribution, order management, and data management for DOPTELET. Although ICS has the exclusive right to distribute DOPTELET in the United States, the agreement does not require ICS to sell our products exclusively, and therefore, ICS is free to sell potentially competitive products. Because we are still relatively early in our commercial launch, we are not yet able to fully assess ICS’s performance in distributing DOPTELET in the United States, and it may take an extended period of time for us to accurately assess its performance under the agreement. Additionally, because the agreement with ICS is exclusive, we may be entirely dependent on ICS for sales in the United States for the duration of the agreement. If ICS fails to perform satisfactorily under the agreement, our ability to successfully commercialize DOPTELET would be adversely affected.

 

Item 2. Recent Sales of Unregistered Securities and Use of Proceeds.

 

(b) Use of IPO Proceeds

 

On June 28, 2017, our registration statement on Form S-1, as amended (File No 333-218479) was declared effective by the SEC in connection with our IPO, pursuant to which we sold 5,077,250 shares of common stock, $0.001 par value per share at a public offering price of $17.00 per share, including the full exercise by the underwriters of their option to purchase additional shares.

 

On July 5, 2017, we received net proceeds of $78.7 million, after deducting underwriting discounts and commissions and offering expenses borne by us. None of the expenses incurred by us were direct or indirect payments to any of (i) our directors or officers or their associates, (ii) persons owning 10 percent or more of our common stock, or (iii) our affiliates. The joint book-running underwriters of the IPO were J.P. Morgan Securities LLC, Jefferies LLC and Leerink Partners LLC.

 

There has been no material change in the planned use of proceeds from our IPO from that described in the final prospectus related to the offering, dated June 28, 2017, as filed with the SEC on June 30, 2017.

 

Item 6. Exhibits

 

Exhibit No.

 

Description

3.1*

 

Amended and Restated Certificate of Incorporation (previously filed as Exhibit 3.3 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-218479), filed with the Commission on June 9, 2017, and incorporated by reference herein.)

3.2*

 

Amended and Restated Bylaws (previously filed as Exhibit 3.4 to Amendment No. 1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-218479), filed with the Commission on June 9, 2017, and incorporated by reference herein)

10.1#+

 

Loan and Security Agreement, dated as of April 17, 2018, by and between the Registrant, AkaRx, Inc. and Silicon Valley Bank.

10.2*

 

Office Lease Agreement, dated as of May 22, 2018, by and between the Registrant and Pine Forest 240 TT, LLC (previously filed as Exhibit 10.1 to the Registrants Current Report on Form 8-K (File No. 001-38135), filed with the Commission on May 24, 2018, and incorporated by reference herein)

 

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Exhibit No.

 

Description

10.3#+

 

Commercial Outsourcing Master Services Agreement, dated as of March 1, 2018, by and between the Registrant and Integrated Commercialization Solutions, LLC, as amended

31.1#

 

Certification of Principal Executive Officer of Dova Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2#

 

Certification of Principal Financial Officer of Dova Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1#++

 

Certifications of Principal Executive Officer and Principal Financial Officer of Dova Pharmaceuticals, Inc. pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101#

 

The following financial information from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations, (iii) the Condensed Consolidated Statement of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) Notes to the Condensed Consolidated Financial Statements (filed herewith).

 


+ Confidential treatment has been requested with respect to portions of this exhibit, indicated by asterisks, which has been filed separately with the SEC.

# Filed herewith.

* Previously filed.

++These certifications are being furnished solely to accompany this Quarterly Report pursuant to 18 U.S.C. Section 1350,and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

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SIGNATURES

 

Pursuant to the requirements of the Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Dova Pharmaceuticals, Inc.

 

 

 

 

Date: August 9, 2018

By:

/s/ Alex Sapir

 

Alex Sapir

 

President and Chief Executive Officer

 

(Principal Executive Officer)

 

 

Date: August 9, 2018

By:

/s/ Mark W. Hahn

 

Mark W. Hahn

 

Chief Financial Officer

 

(Principal Financial Officer)

 

31


Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) is dated and is effective as of April 17, 2018 (the “Effective Date”) between SILICON VALLEY BANK, a California corporation (“Bank”), and DOVA PHARMACEUTICALS, INC., a Delaware corporation (“Dova”) and AKARX, INC., a Delaware corporation (“Akarx” and together with Dova, each a “Co-Borrower” and collectively “Co-Borrowers”), provides the terms on which Bank shall lend to Co-Borrowers and Co-Borrowers shall repay Bank.  The parties agree as follows:

 

1                                         ACCOUNTING AND OTHER TERMS

 

Accounting terms not defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made following GAAP.  Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement, unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.

 

2                                         LOAN AND TERMS OF PAYMENT

 

2.1                               Promise to Pay.  Co-Borrowers hereby unconditionally promise to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.

 

2.1.1                     Term Loan.

 

(a)                                 Availability.  Subject to and upon the terms and conditions of this Agreement, Bank shall make a term loan to Co-Borrowers in a principal amount equal to Twenty Million Dollars ($20,000,000) (the “Term Loan”) on the Effective Date or as soon thereafter as all conditions precedent to the making thereof have been met.

 

(b)                                 Repayment.  The Term Loan shall be “interest-only” during the Interest-Only Period, with interest due and payable in accordance with Section 2.3(d) hereof.  Thereafter, the Term Loan shall be payable in (i) the Applicable Number of equal monthly installments of principal plus (ii) monthly payments of accrued and unpaid interest (each, a “Term Loan Payment”) beginning on the Amortization Start Date and continuing on the same day of each month thereafter.  Borrower’s final Term Loan Payment, due on the Term Loan Maturity Date, shall include all outstanding principal and accrued and unpaid interest with respect to the Term Loan and the Final Payment.  After repayment, the Term Loan may not be reborrowed.

 

(c)                                  Prepayment.

 

(i)                                     Voluntary Prepayment.  Co-Borrowers shall have the option to prepay all, but not less than all, of the Term Loan advanced by Bank under this Agreement, provided that Co-Borrowers (a) deliver written notice to Bank of their election to prepay such Term Loan at least ten (10) Business Days prior to such prepayment, and (b) pay, on the date of such prepayment (w) all outstanding principal due in connection with the Term Loan, plus accrued and unpaid interest thereon, (x) the Final Payment, (y) the Prepayment Fee (if applicable) and (z) all other sums, if any, that shall have become due and payable hereunder in connection with the Term Loan.

 

(ii)                                  Mandatory Prepayment Upon an Acceleration.  If the Term Loan has become due and payable according to the terms hereof due to the occurrence and continuance of an Event of Default, Co-Borrowers shall immediately pay to Bank an amount equal to the sum of (a) all outstanding principal, due in connection with the Term Loan, plus accrued and unpaid interest thereon, (b) the Final Payment, (c) the Prepayment Fee (if applicable), and (d) all other sums, if any, that shall have become due and payable hereunder in connection with the Term Loan.

 

2.2                               Intentionally Omitted.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 



 

2.3                               Payment of Interest on the Credit Extensions.

 

(a)                                 Interest Rate.  Subject to Section 2.3(b), the principal amount outstanding under the Term Loan shall accrue interest at a floating per annum rate equal to the Prime Rate plus one and one quarter percentage points (1.25%), which interest shall be payable monthly in arrears in accordance with Section 2.3(d) below; provided, however, during a Cash Collateralization Period, the principal amount outstanding under the Term Loan shall accrue interest at a floating per annum rate equal to the Prime Rate.

 

(b)                                 Default Rate.  Immediately upon the occurrence and during the continuance of an Event of Default, Obligations shall bear interest at a rate per annum which is three percentage points (3.0%) above the rate that is otherwise applicable thereto (the “Default Rate”).  Fees and expenses which are required to be paid by Co-Borrowers pursuant to the Loan Documents (including, without limitation, Bank Expenses) but are not paid when due shall bear interest until paid at a rate equal to the highest rate applicable to the Obligations.  Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.

 

(c)                                  Adjustment to Interest Rate.  Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.

 

(d)                                 Payment; Interest Computation.  Interest is payable monthly on the thirteenth (13) calendar day of each month and shall be computed on the basis of a 360-day year for the actual number of days elapsed.  In computing interest, (i) all payments received after 2:00 p.m. Eastern time on any day shall be deemed received at the opening of business on the next Business Day, and (ii) the date of the making of any Credit Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension.

 

2.4                               Fees.  Co-Borrowers shall pay to Bank:

 

(a)                                 Final Payment.  The Final Payment, when due hereunder; provided, however, that Bank shall use commercially reasonable efforts to refinance the cash flow impact of the Final Payment if Borrower refinances the Term Loan with Bank;

 

(b)                                 Prepayment Fee.  The Prepayment Fee, if and when due pursuant to the terms of Section 2.1.1(c); provided, however, that that Bank shall waive the Prepayment Fee if Borrower refinances the Term Loan with Bank; and

 

(c)                                  Bank Expenses.  All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this Agreement) incurred through and after the Effective Date, when due (or, if no stated due date, upon demand by Bank).

 

(d)                                 Fees Fully Earned.  Unless otherwise provided in this Agreement or in a separate writing by Bank, Co-Borrowers shall not be entitled to any credit, rebate, or repayment of any fees earned by Bank pursuant to this Agreement notwithstanding any termination of this Agreement or the suspension or termination of Bank’s obligation to make loans and advances hereunder.  Bank may deduct amounts owing by Co-Borrowers under the clauses of this Section 2.4 pursuant to the terms of Section 2.5(c).  Bank shall provide Co-Borrowers written notice of deductions made from the Designated Deposit Account pursuant to the terms of the clauses of this Section 2.4.

 

2.5                               Payments; Application of Payments; Debit of Accounts.

 

(a)                                 All payments to be made by Co-Borrowers under any Loan Document shall be made in immediately available funds in Dollars, without setoff or counterclaim, before 2:00 p.m. Eastern time on the date

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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when due.  Payments of principal and/or interest received after 2:00 p.m. Eastern time are considered received at the opening of business on the next Business Day.  When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable, shall continue to accrue until paid.

 

(b)                                 Bank has the exclusive right to determine the order and manner in which all payments with respect to the Obligations may be applied.  Co-Borrowers shall have no right to specify the order or the accounts to which Bank shall allocate or apply any payments required to be made by Co-Borrowers to Bank or otherwise received by Bank under this Agreement when any such allocation or application is not specified elsewhere in this Agreement.

 

(c)                                  Bank may debit any of Co-Borrowers’ deposit accounts, including the Designated Deposit Account, for principal and interest payments or any other amounts Co-Borrowers owe Bank when due.  These debits shall not constitute a set-off.

 

2.6                               Withholding.  Payments received by Bank from Co-Borrowers under this Agreement will be made free and clear of and without deduction for any and all present or future taxes, levies, imposts, duties, deductions, withholdings, assessments, fees or other charges imposed by any Governmental Authority (including any interest, additions to tax or penalties applicable thereto).  Specifically, however, if at any time any Governmental Authority, applicable law, regulation or international agreement requires Co-Borrowers to make any withholding or deduction from any such payment or other sum payable hereunder to Bank, Co-Borrowers hereby covenant and agree that the amount due from Co-Borrowers with respect to such payment or other sum payable hereunder will be increased to the extent necessary to ensure that, after the making of such required withholding or deduction, Bank receives a net sum equal to the sum which it would have received had no withholding or deduction been required, and Co-Borrowers shall pay the full amount withheld or deducted to the relevant Governmental Authority.  Co-Borrowers will, upon request, furnish Bank with proof reasonably satisfactory to Bank indicating that Co-Borrowers have made such withholding payment; provided, however, that Co-Borrowers need not make any withholding payment if the amount or validity of such withholding payment is contested in good faith by appropriate and timely proceedings and as to which payment in full is bonded or reserved against by Co-Borrowers.  The agreements and obligations of Co-Borrowers contained in this Section 2.6 shall survive the termination of this Agreement.

 

3                                         CONDITIONS OF LOANS

 

3.1                               Conditions Precedent to Initial Credit Extension.  Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate, including, without limitation:

 

(a)                                 duly executed original signatures to the Loan Documents;

 

(b)                                 each Co-Borrower’s Operating Documents and long-form good standing certificates of each Co-Borrower and its Subsidiaries certified by the Secretary of State (or equivalent agency) of such Co-Borrower and such Subsidiaries’ jurisdiction of organization or formation and each jurisdiction in which such Co-Borrower and each Subsidiary is qualified to conduct business, each as of a date no earlier than thirty (30) days prior to the Effective Date;

 

(c)                                  duly executed original signatures to the completed Borrowing Resolutions for each Co-Borrower;

 

(d)                                 certified copies, dated as of a recent date, of financing statement searches, as Bank may request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements constitute Permitted Liens;

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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(e)                                  the Perfection Certificates of Co-Borrowers, together with the duly executed original signatures thereto;

 

(f)                                   timely receipt of an executed Payment/Advance Form; and

 

(g)                                  payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.

 

3.2                               Conditions Precedent to all Credit Extensions.  Bank’s obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following conditions precedent:

 

(a)                                 the representations and warranties in this Agreement shall be true, accurate, and complete in all material respects on the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no Event of Default shall have occurred and be continuing or result from the Credit Extension.  Each Credit Extension is Co-Borrowers’ representation and warranty on that date that the representations and warranties in this Agreement remain true, accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and

 

(b)                                 Bank determines to its satisfaction that there has not been a Material Adverse Change.

 

3.3                               Covenant to Deliver.  Co-Borrowers agree to deliver to Bank each item required to be delivered to Bank under this Agreement as a condition precedent to any Credit Extension.  Co-Borrowers expressly agree that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Co-Borrowers’ obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.

 

3.4                               Post-closing Conditions.  No later than thirty (30) days after the Effective Date, Co-Borrowers shall have delivered to Bank (i) a long-form good standing certificate issued by the Georgia Secretary of State to Dova Pharmaceuticals, Inc. and (ii) evidence satisfactory to Bank that the insurance policies and endorsements required by Section 6.5 hereof are in full force and effect, together with appropriate evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank.

 

4                                         CREATION OF SECURITY INTEREST

 

4.1                               Grant of Security Interest.  Co-Borrowers hereby grant Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof.

 

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash.  Upon payment in full in cash of the Obligations and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at Co-Borrowers’ sole cost and expense, release its Liens in the Collateral and all rights therein shall revert to Co-Borrowers.

 

4.2                               Priority of Security Interest.  Co-Borrowers represent, warrant, and covenant that the security interest granted herein is and shall at all times continue to be a first priority perfected security interest in the Collateral (subject only to Permitted Liens that are permitted pursuant to the terms of this Agreement to have superior priority to Bank’s Lien under this Agreement).  If any Co-Borrower acquires a commercial tort claim, such Co-Borrower shall promptly notify Bank in a writing signed by Co-Borrower of the general details thereof and grant

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Bank.

 

4.3                               Authorization to File Financing Statements.  Co-Borrowers hereby authorize Bank to file financing statements, without notice to Co-Borrowers, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a notice that any disposition of the Collateral, by Co-Borrowers or any other Person, shall be deemed to violate the rights of Bank under the Code.  Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.

 

5                                         REPRESENTATIONS AND WARRANTIES

 

Each Co-Borrower represents and warrants as follows:

 

5.1                               Due Organization, Authorization; Power and Authority.  Co-Borrower is duly existing and in good standing as a Registered Organization in its jurisdiction of formation and is qualified and licensed to do business and is in good standing in any jurisdiction in which the conduct of its business or its ownership of property requires that it be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Co-Borrower’s business.  In connection with this Agreement, Co-Borrower has delivered to Bank a completed certificate signed by Co-Borrower, entitled “Perfection Certificate”.  Co-Borrower represents and warrants to Bank that (a) Co-Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Co-Borrower is an organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Co-Borrower’s organizational identification number or accurately states that Co-Borrower has none; (d) the Perfection Certificate accurately sets forth Co-Borrower’s place of business, or, if more than one, its chief executive office as well as Co-Borrower’s mailing addresses (if different than their chief executive office); (e) Co-Borrower (and each of their predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other information set forth on the Perfection Certificate pertaining to Co-Borrower and each of its Subsidiaries is accurate and complete in all material respects (it being understood and agreed that Co-Borrower may from time to time update certain information in the Perfection Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement).  If Co-Borrower is not now a Registered Organization but later becomes one, Co-Borrower shall promptly notify Bank of such occurrence and provide Bank with Co-Borrower’s organizational identification number.

 

The execution, delivery and performance by Co-Borrower of the Loan Documents to which it is a party have been duly authorized, and do not (i) conflict with any of Co-Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Co-Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect or (v) conflict with, contravene, constitute a default or breach under, or result in or permit the termination or acceleration of, any material agreement by which Co-Borrower is bound.  Co-Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on Co-Borrower’s business.

 

5.2                               Collateral.  Co-Borrower has good title to, rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens.  Co-Borrower has no Collateral Accounts at or with any bank or financial institution other than Bank or Bank’s Affiliates except for the Collateral Accounts described in the Perfection Certificate delivered to Bank in connection herewith and which Co-Borrower has taken such actions as are necessary to give Bank a perfected security interest therein, pursuant to the term of Section 6.6.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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The Collateral is not in the possession of any third party bailee (such as a warehouse) except as otherwise provided in the Perfection Certificate.  None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.

 

Co-Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Co-Borrower and noted on the Perfection Certificate.  Each Patent which it owns or purports to own and which is material to Co-Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Co-Borrowers own or purport to own and which is material to Co-Borrower’s business has been judged invalid or unenforceable, in whole or in part.  To the best of Co-Borrower’s knowledge, no claim has been made that any part of the Intellectual Property violates the rights of any third party except to the extent such claim would not reasonably be expected to have a material adverse effect on Co-Borrower’s business.

 

Except as noted on the Perfection Certificate, Co-Borrower is not a party to, nor is it bound by, any Restricted License.

 

5.3                               Intentionally Omitted.

 

5.4                               Litigation.  There are no actions or proceedings pending or, to the knowledge of any Responsible Officer, threatened in writing by or against Co-Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Two Hundred Thousand Dollars ($200,000).

 

5.5                               Financial Statements; Financial Condition.  All consolidated financial statements for Co-Borrower and any of its Subsidiaries delivered to Bank fairly present in all material respects Co-Borrower’s consolidated financial condition and Co-Borrower’s consolidated results of operations.  There has not been any material deterioration in Co-Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank.

 

5.6                               Solvency.  The fair salable value of Co-Borrower’s consolidated assets (including goodwill minus disposition costs) exceeds the fair value of Co-Borrower’s liabilities; Co-Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Co-Borrower is able to pay its debts (including trade debts) as they mature.

 

5.7                               Regulatory Compliance.  Co-Borrower is not an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended.  Co-Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors).  Co-Borrower (a) has complied in all material respects with all Requirements of Law, and (b) has not violated any Requirements of Law the violation of which could reasonably be expected to have a material adverse effect on its business.  None of Co-Borrower’s or any of its Subsidiaries’ properties or assets have been used by Co-Borrower or any Subsidiary or, to the best of Co-Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than legally.  Co-Borrower and each of its Subsidiaries has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Government Authorities that are necessary to continue their respective businesses as currently conducted.

 

5.8                               Subsidiaries; Investments.  Co-Borrower does not own any stock, partnership, or other ownership interest or other equity securities except for Permitted Investments.

 

5.9                               Tax Returns and Payments; Pension Contributions.  Co-Borrower has timely filed all required tax returns and reports, and Co-Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Co-Borrower except to the extent such taxes are being contested in good faith by appropriate proceedings promptly instituted and diligently conducted, so long as such reserve or other appropriate provision, if any, as shall be required in conformity with GAAP shall have been made therefor.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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To the extent Co-Borrower defers payment of any contested taxes, Co-Borrower shall (i) notify Bank in writing of the commencement of, and any material development in, the proceedings, and (ii) post bonds or take any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted Lien.”  Co-Borrower is unaware of any claims or adjustments proposed for any of Co-Borrower’s prior tax years which could result in additional taxes becoming due and payable by Co-Borrower.  Co-Borrower has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Co-Borrower has not withdrawn from participation in, and has not permitted partial or complete termination of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Co-Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

5.10                        Use of Proceeds.  Co-Borrower shall use the proceeds of the Credit Extensions solely as working capital, and to fund its general business requirements and not for personal, family, household or agricultural purposes.

 

5.11                        Full Disclosure.  No written representation, warranty or other statement of Co-Borrower in any certificate or written statement given to Bank, as of the date such representation, warranty, or other statement was made, taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Co-Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).

 

5.12                        Definition of “Knowledge.”  For purposes of the Loan Documents, whenever a representation or warranty is made to Co-Borrower’s knowledge or awareness, to the “best of” Co-Borrower’s knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of any Responsible Officer.

 

6                                         AFFIRMATIVE COVENANTS

 

Co-Borrowers shall do all of the following:

 

6.1                               Government Compliance.

 

(a)                                 Maintain their and all their Subsidiaries’ legal existence and good standing in their respective jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on a Co-Borrower’s business or operations.  Each Co-Borrower shall comply, and have each Subsidiary comply, in all material respects, with all laws, ordinances and regulations to which it is subject.

 

(b)                                 Obtain all of the Governmental Approvals necessary for the performance by a Co-Borrower of its obligations under the Loan Documents to which it is a party and the grant of a security interest to Bank in the Collateral, including without limitation, the Governmental Approvals from the Food and Drug Administration (the “FDA”).  Co-Borrowers shall promptly provide copies of any such obtained Governmental Approvals to Bank.

 

6.2                               Financial Statements, Reports, Certificates.  Provide Bank with the following:

 

(a)                                 Company Prepared Financial Statements.  As soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated and consolidating balance sheet and income statement covering Co-Borrowers’ and each of their Subsidiary’s operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “Company Prepared Financial Statements”); provided however (i) for March, June and September, such Company Prepared Financial Statements shall be delivered to

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Bank no later than forty five (45) days after the last day of each such month and (ii) for December, such Company Prepared Financial Statements shall be delivered to Bank no later than ninety (90) days after the last day of such month

 

(b)                                 Compliance Certificate.  Within thirty (30) days after the last day of each month and together with the Company Prepared Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Co-Borrowers were in full compliance with all of the terms and conditions of this Agreement, and setting forth such other information as Bank may reasonably request; provided however (i) for March, June and September, such Compliance Certificate shall be delivered to Bank no later than forty five (45) days after the last day of each such month and (ii) for December, such Compliance Certificate shall be delivered to Bank no later than ninety (90) days after the last day of such month.

 

(c)                                  Annual Operating Budget and Financial Projections.  Within thirty (30) days after the end of Co-Borrowers’ fiscal year and contemporaneously with any updates or amendments thereto, (i) annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year, and (ii) annual financial projections for the following fiscal year (on a quarterly basis) as approved by each Co-Borrower’s board of directors, together with any related business forecasts used in the preparation of such annual financial projections;

 

(d)                                 Annual Audited Financial Statements.  As soon as available, but no later than one hundred eighty (180) days after the last day of Co-Borrowers’ fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; it being agreed and acknowledged that Ernst & Young is acceptable to Bank;

 

(e)                                  Other Statements.  Within ten (10) days of delivery, copies of all statements, reports and notices made available to each Co-Borrower’s security holders or to any holders of Subordinated Debt;

 

(f)                                   SEC Filings.  Within ten (10) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by such Co-Borrower with the SEC, any Governmental Authority succeeding to any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be.  Documents required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date on which such Co-Borrower posts such documents, or provides a link thereto, on such Co-Borrower’s website on the Internet at such Co-Borrower’s website address; provided, however, Co-Borrower shall promptly notify Bank in writing (which may be by electronic mail) of the posting of any such documents;

 

(g)                                  Legal Action Notice.  A prompt report of any legal actions pending or threatened in writing against a Co-Borrower or any of its Subsidiaries that could result in damages or costs to a Co-Borrower or any of its Subsidiaries of, individually or in the aggregate, Two Hundred Thousand Dollars ($200,000) or more; and

 

(h)                                 Other Financial Information.  Other financial information reasonably requested by Bank.

 

6.3                               Inventory; Returns.  Keep all Inventory in good and marketable condition, free from material defects.  Returns and allowances between a Co-Borrower and its Account Debtors shall follow such Co-Borrower’s customary practices as they exist at the Effective Date.  Co-Borrowers must promptly notify Bank of all returns, recoveries, disputes and claims that involve more than Two Hundred Thousand Dollars ($200,000).

 

6.4                               Taxes; Pensions.  Timely file, and require each of their Subsidiaries to timely file, all required tax returns and reports and timely pay, and require each of their Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by a Co-Borrower and each of its Subsidiaries, except for deferred payment of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms.

 

6.5                               Insurance.

 

(a)                                 Keep their business and the Collateral insured for risks and in amounts standard for companies in Co-Borrowers’ industry and location and as Bank may reasonably request.  Insurance policies shall be in a form, with financially sound and reputable insurance companies that are not Affiliates of Co-Borrowers, and in amounts that are reasonably satisfactory to Bank.  All property policies shall have a lender’s loss payable endorsement showing Bank as lender loss payee.  All liability policies shall show, or have endorsements showing, Bank as an additional insured.  Bank shall be named as lender loss payee and/or additional insured with respect to any such insurance providing coverage in respect of any Collateral.

 

(b)                                 Ensure that proceeds payable under any property policy are, at Bank’s option, payable to Bank on account of the Obligations.  Notwithstanding the foregoing, (a) so long as no Event of Default has occurred and is continuing, Co-Borrowers shall have the option of applying the proceeds of any casualty policy up to Two Hundred Thousand Dollars ($200,000) in the aggregate for all losses under all casualty policies in any one year, toward the replacement or repair of destroyed or damaged property; provided that any such replaced or repaired property (i) shall be of equal or like value as the replaced or repaired Collateral and (ii) shall be deemed Collateral in which Bank has been granted a first priority security interest, and (b) after the occurrence and during the continuance of an Event of Default, all proceeds payable under such casualty policy shall, at the option of Bank, be payable to Bank on account of the Obligations.

 

(c)                                  At Bank’s request, Co-Borrowers shall deliver certified copies of insurance policies and evidence of all premium payments.  Each provider of any such insurance required under this Section 6.5 shall agree, by endorsement upon the policy or policies issued by it or by independent instruments furnished to Bank, that it will give Bank thirty (30) days prior written notice before any such policy or policies shall be materially altered or canceled.  If Co-Borrowers fail to obtain insurance as required under this Section 6.5 or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this Section 6.5, and take any action under the policies Bank deems prudent.

 

6.6                               Operating Accounts. Maintain their and their Subsidiaries’ operating and other deposit accounts and securities accounts with Bank and Bank’s Affiliates provided however, until May 13, 2018, Borrower may maintain its existing depository accounts at Wells Fargo not subject to a Control Agreement.

 

6.7                               FDA Approval.  If Borrower fails to achieve the FDA Milestone on or prior to September 30, 2018, Co-Borrowers shall immediately cash secure one hundred percent (100%) of the principal balance of all outstanding Indebtedness under the Term Loan in the Pledged Account (a “Cash Collateralization”) until such time that Co-Borrowers achieve the FDA Milestone (the “Cash Collateralization Period”).  Co-Borrowers hereby authorize and direct Bank to transfer to the Pledged Account an amount equal to one hundred percent (100%) of the principal balance of all outstanding Indebtedness under the Term Loan if Co-Borrowers fail to achieve the FDA Milestone on or prior to September 30, 2018 it being understood that the foregoing authorization shall constitute an immediate Cash Collateralization, irrespective of any delay by Bank in effecting such transfer, to the extent that sufficient Co-Borrower funds are then available for Bank to effect such transfer.

 

6.8                               Protection of Intellectual Property Rights.

 

(a)                                 (i) Protect, defend and maintain the validity and enforceability of all Intellectual Property material to Co-Borrower’s business; (ii) promptly advise Bank in writing of material infringements or any other event that could reasonably be expected to materially and adversely affect the value of its Intellectual Property; and (iii) not allow any Intellectual Property material to a Co-Borrower’s business to be abandoned, forfeited or dedicated to the public without Bank’s written consent.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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(b)                                 Provide written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public).  Co-Borrowers shall take such steps as Bank reasonably requests to attempt to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Bank’s rights and remedies under this Agreement and the other Loan Documents.

 

6.9                               Litigation Cooperation.  From the date hereof and continuing through the termination of this Agreement, make available to Bank, during normal business hours, without expense to Bank, Co-Borrowers and their officers, employees and agents and Co-Borrowers’ books and records, to the extent that Bank may deem them reasonably necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to a Co-Borrower.

 

6.10                        Access to Collateral; Books and Records.  At reasonable times, on five (5) Business Days’ notice (provided no notice is required if an Event of Default has occurred and is continuing), allow Bank, or its agents, to inspect the Collateral and audit and copy any Co-Borrower’s Books.  Such inspections or audits shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing in which case such inspections and audits shall occur as often as Bank shall determine is necessary.  The foregoing inspections and audits shall be at Co-Borrowers’ expense, and the charge therefor shall be One Thousand Dollars ($1,000) per person per day (or such higher amount as shall represent Bank’s then-current standard charge for the same), plus reasonable out-of-pocket expenses.  In the event a Co-Borrower and Bank schedule an audit more than ten (10) days in advance, and such Co-Borrower cancels or seeks to reschedule the audit with less than ten (10) days written notice to Bank, then (without limiting any of Bank’s rights or remedies), such Co-Borrower shall pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated costs and expenses of the cancellation or rescheduling.

 

6.11                        Formation or Acquisition of Subsidiaries.  Notwithstanding and without limiting the negative covenants contained in Sections 7.3 and 7.7 hereof, at the time that a Co-Borrower forms any direct or indirect Subsidiary or acquires any direct or indirect Subsidiary after the Effective Date, such Co-Borrower shall (a) cause any such new Subsidiary that is a Domestic Subsidiary to provide to Bank a joinder to the Loan Agreement to cause any such new Subsidiary that is a Domestic Subsidiary to become a Co-Borrower hereunder, together with such appropriate financing statements and/or Control Agreements, all in form and substance satisfactory to Bank (including being sufficient to grant Bank a first priority Lien (subject to Permitted Liens) in and to the assets of such newly formed or acquired Domestic Subsidiary), (b) provide to Bank appropriate certificates and powers and financing statements, pledging all of the direct or beneficial ownership interest (to the extent constituting Collateral hereunder) in such new Subsidiary, in form and substance satisfactory to Bank, and (c) provide to Bank all other documentation in form and substance reasonably satisfactory to Bank, which is reasonably requested in connection with the execution and delivery of the applicable documentation referred to above.  Any document, agreement, or instrument executed or issued pursuant to this Section 6.11 shall be a Loan Document.

 

6.12                        Further Assurances.  Execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement.  Deliver to Bank, within ten (10) days after the same are sent or received, copies of all correspondence, reports, documents and other filings with any Governmental Authority regarding compliance with or maintenance of Governmental Approvals or Requirements of Law or that could reasonably be expected to have a material effect on any of the Governmental Approvals or otherwise on the operations of Co-Borrowers or any of their Subsidiaries.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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7                                         NEGATIVE COVENANTS

 

No Co-Borrower shall do any of the following without Bank’s prior written consent:

 

7.1                               Dispositions.  Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively, “Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment that is, in the reasonable judgment of Co-Borrower, no longer economically practicable to maintain or useful in the ordinary course of business of Co-Borrower; (c) consisting of Permitted Liens and Permitted Investments; (d) consisting of the sale or issuance of any stock of Co-Borrower permitted under Section 7.2 of this Agreement; (e) consisting of Co-Borrower’s use or transfer of money or Cash Equivalents in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents; and (f) of non-exclusive licenses for the use of the property of Co-Borrower or its Subsidiaries in the ordinary course of business and licenses that could not result in a legal transfer of title of the licensed property but that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States.

 

7.2                               Changes in Business, Management, Control, or Business Locations.  (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by each Co-Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or dissolve; (c) (i) fail to provide notice to Bank of any Key Person departing from or ceasing to be employed by such Co-Borrower within ten (10) days after his or her departure from Co-Borrower; or (d) permit or suffer any Change in Control.

 

Co-Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations, including warehouses (unless such new offices or business locations contain less than Two Hundred Thousand Dollars ($200,000) in Co-Borrower’s assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Two Hundred Thousand Dollars ($200,000) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization.  If Co-Borrower intends to deliver any portion of the Collateral valued, individually or in the aggregate, in excess of Two Hundred Thousand Dollars ($200,000) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Co-Borrower intends to deliver the Collateral, then Co-Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank.

 

7.3                               Mergers or Acquisitions.  Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person (including, without limitation, by the formation of any Subsidiary).  A Subsidiary may merge or consolidate into another Subsidiary or into Co-Borrower.

 

7.4                               Indebtedness.  Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted Indebtedness.

 

7.5                               Encumbrance.  Create, incur, allow, or suffer any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, except for Permitted Liens, permit any Collateral not to be subject to the first priority security interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Co-Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Co-Borrower’s or any Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of “Permitted Liens” herein.

 

7.6                               Maintenance of Collateral Accounts.  Maintain any Collateral Account except pursuant to the terms of Section 6.6 hereof.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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7.7                               Distributions; Investments.  (a) Pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock provided that (i) Co-Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange thereof, (ii) Co-Borrower may pay dividends solely in common stock; and (iii) Co-Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided that the aggregate amount of all such repurchases does not exceed Two Hundred Thousand Dollars ($200,000) per fiscal year; or (b) directly or indirectly make any Investment (including, without limitation, by the formation of any Subsidiary) other than Permitted Investments, or permit any of its Subsidiaries to do so.

 

7.8                               Transactions with Affiliates.  Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Co-Borrower, except for transactions that are in the ordinary course of Co-Borrower’s business, upon fair and reasonable terms that are no less favorable to Co-Borrower than would be obtained in an arm’s length transaction with a non-affiliated Person.

 

7.9                               Subordinated Debt.  (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any document relating to the Subordinated Debt which would increase the amount thereof, provide for earlier or greater principal, interest, or other payments thereon, or adversely affect the subordination thereof to Obligations owed to Bank.

 

7.10                        Compliance.  Become an “investment company” or a company controlled by an “investment company”, under the Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds of any Credit Extension for that purpose; fail to (a) meet the minimum funding requirements of ERISA, (b) prevent a Reportable Event or Prohibited Transaction as defined in ERISA, or (c) comply with the Federal Labor Standards Act, the failure of any of the conditions in clauses (a) through (c) which could reasonably be expected to have a material adverse effect on Co-Borrower’s business, or violate any other law or regulation, if the violation could reasonably be expected to have a materials adverse effect on Co-Borrower’s business or permit any Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which could reasonably be expected to result in any liability of Co-Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

8                                         EVENTS OF DEFAULT

 

Any one of the following shall constitute an event of default (an “Event of Default”) under this Agreement:

 

8.1                               Payment Default.  Co-Borrowers fail to (a) make any payment of principal or interest on any Credit Extension when due, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to payments due on the Term Loan Maturity Date).  During the cure period, the failure to make or pay any payment specified under clause (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);

 

8.2                               Covenant Default.

 

(a)                                 Co-Borrowers fail or neglect to perform any obligation in Sections 3.4, 6.2, 6.4, 6.5, 6.6, 6.7, 6.8, 6.11, 6.12 or violate any covenant in Section 7; or

 

(b)                                 Co-Borrowers fail or neglect to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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cured, have failed to cure the default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Co-Borrowers be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Co-Borrowers shall have an additional period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period).  Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants set forth in clause (a) above;

 

8.3                               Material Adverse Change.  A Material Adverse Change occurs;

 

8.4                               Attachment; Levy; Restraint on Business.

 

(a)                                 (i) The service of process seeking to attach, by trustee or similar process, any funds of a Co-Borrower or of any entity under the control of a Co-Borrower (including a Subsidiary) with a value in excess of One Hundred Thousand Dollars ($100,000), or (ii) a notice of lien or levy is filed against any of a Co-Borrower’s assets with a value in excess of One Hundred Thousand Dollars ($100,000) by any Governmental Authority, and the same under subclauses (i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten (10) day cure period; or

 

(b)                                 (i) any material portion of a Co-Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents a Co-Borrower from conducting all or any material part of its business;

 

8.5                               Insolvency.  (a) A Co-Borrower or any of its Subsidiaries is unable to pay its debts (including trade debts) as they become due or otherwise becomes insolvent; (b) a Co-Borrower or any of its Subsidiaries begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against a Co-Borrower or any of its Subsidiaries and is not dismissed or stayed within thirty (30) days (but no Credit Extensions shall be made while any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);

 

8.6                               Other Agreements.  There is, under any agreement to which a Co-Borrower or any Guarantor is a party with a third party or parties, (a) any default resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Two Hundred Thousand Dollars ($200,000); or (b) any breach or default by a Co-Borrower or Guarantor, the result of which could have a material adverse effect on a Co-Borrower’s or any Guarantor’s business;

 

8.7                               Judgments; Penalties.  One or more fines, penalties or final judgments, orders or decrees for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred Thousand Dollars ($200,000) (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) shall be rendered against a Co-Borrower by any Governmental Authority, and the same are not, within ten (10) days after the entry, assessment or issuance thereof, discharged, satisfied, or paid, or after execution thereof, stayed or bonded pending appeal, or such judgments are not discharged prior to the expiration of any such stay (provided that no Credit Extensions will be made prior to the satisfaction, payment, discharge, stay, or bonding of such fine, penalty, judgment, order or decree);

 

8.8                               Misrepresentations.  A Co-Borrower or any Person acting for a  Co-Borrower makes any representation, warranty, or other statement now or later in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made;

 

8.9                               Subordinated Debt.  Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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or obligation thereunder, or the Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement; or

 

8.10                        Governmental Approvals.  Any Governmental Approval shall have been (a) revoked, rescinded, suspended, modified in an adverse manner or not renewed in the ordinary course for a full term or (b) subject to any decision by a Governmental Authority that designates a hearing with respect to any applications for renewal of any of such Governmental Approval or that could result in the Governmental Authority taking any of the actions described in clause (a) above, and such decision or such revocation, rescission, suspension, modification or non-renewal (i) cause, or could reasonably be expected to cause, a Material Adverse Change, or (ii) adversely affects the legal qualifications of a Co-Borrower or any of its Subsidiaries to hold such Governmental Approval in any applicable jurisdiction and such revocation, rescission, suspension, modification or non-renewal could reasonably be expected to affect the status of or legal qualifications of a Co-Borrower or any of its Subsidiaries to hold any Governmental Approval in any other jurisdiction.

 

9                                         BANK’S RIGHTS AND REMEDIES

 

9.1                               Rights and Remedies.  Upon the occurrence and during the continuance of an Event of Default, Bank may, without notice or demand, do any or all of the following:

 

(a)                                 declare all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);

 

(b)                                 stop advancing money or extending credit for Co-Borrowers’ benefit under this Agreement or under any other agreement between Co-Borrowers and Bank;

 

(c)                                  demand that Co-Borrower (i) deposit cash with Bank in an amount equal to (x) if such Letters of Credit are denominated in Dollars, then at least one hundred five percent (105.0%); and (y) if such Letters of Credit are denominated in a Foreign Currency, then at least one hundred ten percent (110.0%), of the Dollar Equivalent of the aggregate face amount of all Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of Credit, and Co-Borrowers shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit;

 

(d)                                 terminate any FX Contracts;

 

(e)                                  verify the amount of, demand payment of and performance under, and collect any Accounts and General Intangibles, settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable, and notify any Person owing a Co-Borrower money of Bank’s security interest in such funds;

 

(f)                                   make any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral.  Co-Borrowers shall assemble the Collateral if Bank requests and make it available as Bank designates.  Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred.  Each Co-Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;

 

(g)                                  apply to the Obligations any (i) balances and deposits of a Co-Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of a Co-Borrower;

 

(h)                                 ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, a Co-Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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names, Trademarks, and advertising matter, or any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Co-Borrowers’ rights under all licenses and all franchise agreements inure to Bank’s benefit;

 

(i)                                     place a “hold” on any account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;

 

(j)                                    demand and receive possession of a Co-Borrower’s Books; and

 

(k)                                 exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the Code (including disposal of the Collateral pursuant to the terms thereof).

 

9.2                               Power of Attorney.  Each Co-Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to:  (a) endorse Co-Borrower’s name on any checks or other forms of payment or security; (b) sign Co-Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust all claims under Co-Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits.  Each Co-Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Co-Borrower’s name on any documents necessary to perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as each Co-Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation to provide Credit Extensions terminates.

 

9.3                               Protective Payments.  If a Co-Borrower fails to obtain the insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which such Co-Borrower is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Bank may obtain such insurance or make such payment, and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral.  Bank will use commercially reasonable efforts to provide Co-Borrowers with notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter.  No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.

 

9.4                               Application of Payments and Proceeds Upon Default.  If an Event of Default has occurred and is continuing, Bank shall have the right to apply in any order any funds in its possession, whether from Co-Borrowers’ account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations.  Bank shall pay any surplus to Co-Borrowers by credit to the Designated Deposit Account or to other Persons legally entitled thereto; Co-Borrowers shall remain liable to Bank for any deficiency.  If Bank, directly or indirectly, enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Bank of cash therefor.

 

9.5                               Bank’s Liability for Collateral.  So long as Bank complies with reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person.  Co-Borrowers bear all risk of loss, damage or destruction of the Collateral.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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9.6                               No Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to require strict performance by Co-Borrowers of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless signed by the party granting the waiver and then is only effective for the specific instance and purpose for which it is given.  Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative.  Bank has all rights and remedies provided under the Code, by law, or in equity.  Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and Bank’s waiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.

 

9.7                               Demand Waiver.  Each Co-Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which such Co-Borrower is liable.

 

9.8                               Co-Borrower Liability.  Either Co-Borrower may, acting singly, request Advances hereunder.  Each Co-Borrower hereby appoints the other as agent for the other for all purposes hereunder, including with respect to requesting Advances hereunder.  Each Co-Borrower hereunder shall be jointly and severally obligated to repay all Advances made hereunder, regardless of which Co-Borrower actually receives said Advance, as if each Co-Borrower hereunder directly received all Advances.  Each Co-Borrower waives (a) any suretyship defenses available to it under the Code or any other applicable law, including, without limitation, the benefit of California Civil Code Section 2815 permitting revocation as to future transactions and the benefit of California Civil Code Sections 1432, 2809, 2810, 2819, 2839, 2845, 2847, 2848, 2849, 2850, and 2899 and 3433, and (b) any right to require Bank to: (i) proceed against any Co-Borrower or any other person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy.  Bank may exercise or not exercise any right or remedy it has against any Co-Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Co-Borrower’s liability.  Notwithstanding any other provision of this Agreement or other related document, each Co-Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Co-Borrower to the rights of Bank under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Co-Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Co-Borrower with respect to the Obligations in connection with this Agreement or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Co-Borrower with respect to the Obligations in connection with this Agreement or otherwise.  Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 9.8 shall be null and void.  If any payment is made to a Co-Borrower in contravention of this Section 9.8., such Co-Borrower shall hold such payment in trust for Bank and such payment shall be promptly delivered to Bank for application to the Obligations, whether matured or unmatured.

 

10                                  NOTICES

 

All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested, with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated below.  Bank or Co-Borrowers may change their mailing or electronic mail address or facsimile number by giving the other party written notice thereof in accordance with the terms of this Section 10.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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If to Co-Borrowers:

 

 

 

 

DOVA PHARMACEUTICALS, INC., on behalf of all Co-Borrowers

 

 

240 Leigh Farm Road, Suite 245

 

 

Durham, NC 27707

 

 

Attn:  Mark Hahn, CFO

 

 

Email:  mhahn@dova.com

 

 

 

With a copy to:

 

DOVA PHARMACEUTICALS, INC., on behalf of all Co-Borrowers

 

 

240 Leigh Farm Road, Suite 245

 

 

Durham, NC 27707

 

 

Attn:  General Counsel

 

 

 

If to Bank:

 

SILICON VALLEY BANK

 

 

3475 Piedmont Road, Suite 560

 

 

Atlanta, GA 30305

 

 

Attn:  Scott McCarty

 

 

Email:  smccarty@svb.com

 

11                                  CHOICE OF LAW, VENUE, JURY TRIAL WAIVER, AND JUDICIAL REFERENCE

 

Except as otherwise expressly provided in any of the Loan Documents, California law governs the Loan Documents without regard to principles of conflicts of law.  Co-Borrowers and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall be deemed to operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank.  Each Co-Borrower expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and each Co-Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court.  Each Co-Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees that service of such summons, complaints, and other process may be made by registered or certified mail addressed to such Co-Borrower at the address set forth in, or subsequently provided by such Co-Borrower in accordance with, Section 10 of this Agreement and that service so made shall be deemed completed upon the earlier to occur of such Co-Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH CO-BORROWER AND BANK WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.  EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the parties hereto agree that any and all disputes or controversies of any nature between them arising at any time shall be decided by a reference to a private judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby submit to the jurisdiction of such court.  The reference proceedings shall be conducted pursuant to and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1, inclusive.  The private judge shall have the power, among others, to grant provisional relief, including without limitation, entering temporary restraining orders, issuing preliminary and permanent injunctions and appointing receivers.  All such proceedings shall be closed to the public and confidential and all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party desires to seek provisional relief, but a judge has not been

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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appointed at that point pursuant to the judicial reference procedures, then such party may apply to the Santa Clara County, California Superior Court for such relief.  The proceeding before the private judge shall be conducted in the same manner as it would be before a court under the rules of evidence applicable to judicial proceedings.  The parties shall be entitled to discovery which shall be conducted in the same manner as it would be before a court under the rules of discovery applicable to judicial proceedings.  The private judge shall oversee discovery and may enforce all discovery rules and orders applicable to judicial proceedings in the same manner as a trial court judge.  The parties agree that the selected or appointed private judge shall have the power to decide all issues in the action or proceeding, whether of fact or of law, and shall report a statement of decision thereon pursuant to California Code of Civil Procedure § 644(a).  Nothing in this paragraph shall limit the right of any party at any time to exercise self-help remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all issues relating to the applicability, interpretation, and enforceability of this paragraph.

 

This Section 11 shall survive the termination of this Agreement.

 

12                                  GENERAL PROVISIONS

 

12.1                        Termination Prior to Term Loan Maturity Date; Survival.  All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has terminated pursuant to its terms and all Obligations have been satisfied.  So long as Co-Borrowers have satisfied their Obligations (other than inchoate indemnity obligations, and any other obligations which, by their terms, are to survive the termination of this Agreement), this Agreement may be terminated prior to the Term Loan Maturity Date by Co-Borrowers, effective three (3) Business Days after written notice of termination is given to Bank.  Those obligations that are expressly specified in this Agreement as surviving this Agreement’s termination shall continue to survive notwithstanding this Agreement’s termination.

 

12.2                        Successors and Assigns.  This Agreement binds and is for the benefit of the successors and permitted assigns of each party.  No Co-Borrower may assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s discretion).  Bank has the right, without the consent of or notice to Co-Borrowers, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement and the other Loan Documents; provided that so long as no Event of Default has occurred and is continuing, Bank shall not assign its rights hereunder to (i) a direct competitor of Co-Borrowers (as determined by the mutual agreement of Co-Borrowers and Bank) or (ii) a hedge or private equity fund that primarily invests in distressed debt.

 

12.3                        Indemnification.  Co-Borrowers agree to indemnify, defend and hold Bank and its directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against:  (i) all obligations, demands, claims, and liabilities (collectively, “Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (ii) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Co-Borrowers (including reasonable attorneys’ fees and expenses), except for Claims and/or losses directly caused by such Indemnified Person’s gross negligence or willful misconduct.

 

This Section 12.3 shall survive until all statutes of limitation with respect to the Claims, losses, and expenses for which indemnity is given shall have run.

 

12.4                        Time of Essence.  Time is of the essence for the performance of all Obligations in this Agreement.

 

12.5                        Severability of Provisions.  Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision.

 

12.6                        Correction of Loan Documents.  Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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12.7                        Amendments in Writing; Waiver; Integration.  No purported amendment or modification of any Loan Document, or waiver, discharge or termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought.  Without limiting the generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan Document.  Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or commitment to grant any further waiver.  The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of the Loan Documents merge into the Loan Documents.

 

12.8                        Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.

 

12.9                        Confidentiality.  In handling any confidential information, Bank shall exercise the same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, “Bank Entities”); (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best efforts to obtain any prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a confidentiality agreement with Bank with terms no less restrictive than those contained herein.  Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of the public domain (other than as a result of its disclosure by Bank in violation of this Agreement) after disclosure to Bank; or (ii) disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information.

 

Bank Entities may use anonymous forms of confidential information for aggregate datasets, for analyses or reporting, and for any other uses not expressly prohibited in writing by Co-Borrowers.  The provisions of the immediately preceding sentence shall survive termination of this Agreement.

 

12.10                 Attorneys’ Fees, Costs and Expenses.  In any action or proceeding between Co-Borrowers and Bank arising out of or relating to the Loan Documents, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in addition to any other relief to which it may be entitled.

 

12.11                 Electronic Execution of Documents.  The words “execution,” “signed,” “signature” and words of like import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.

 

12.12                 Captions.  The headings used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.

 

12.13                 Construction of Agreement.  The parties mutually acknowledge that they and their attorneys have participated in the preparation and negotiation of this Agreement.  In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.

 

12.14                 Relationship.  The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement.  The parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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12.15                 Third Parties.  Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.

 

13                                  DEFINITIONS

 

13.1                        Definitions.  As used in the Loan Documents, the word “shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting amounts that are set off in brackets are negative.  As used in this Agreement, the following capitalized terms have the following meanings:

 

Account” is any “account” as defined in the Code with such additions to such term as may hereafter be made, and includes, without limitation, all accounts receivable and other sums owing to Co-Borrowers.

 

Account Debtor” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.

 

Affiliate” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s managers and members.

 

Agreement” is defined in the preamble hereof.

 

Amortization Start Date” is May 13, 2019; provided, however, if Co-Borrowers achieve the Revenue Milestone, then the Amortization Start Date shall automatically, and with no further action required by the parties hereto, be extended to November 13, 2019.

 

Applicable Number” is twenty four (24); provided, however, if Co-Borrowers achieves the Revenue Milestone, then the Applicable Number shall automatically, with no further action required by the parties hereto, be increased to thirty (30).

 

Authorized Signer” is any individual listed in a Co-Borrower’s Borrowing Resolution who is authorized to execute the Loan Documents on behalf of Co-Borrowers.

 

Bank” is defined in the preamble hereof.

 

Bank Entities” is defined in Section 12.9.

 

Bank Expenses” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses) for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Co-Borrowers.

 

Borrowing Resolutions” are, with respect to any Person, those resolutions substantially in the form attached hereto.

 

Business Day” is any day that is not a Saturday, Sunday or a day on which Bank is closed, and if any determination of a “Business Day” shall relate to an FX Contract, the term “Business Day” shall mean a day on which dealings are carried on in the country of settlement of the Foreign Currency.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue; and (d) money market funds at least ninety-five percent (95%) of the assets of which constitute Cash Equivalents of the kinds described in clauses (a) through (c) of this definition.

 

Change in Control” means (a) at any time, any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of twenty-five percent (25%) or more of the ordinary voting power for the election of directors of Co-Borrower (determined on a fully diluted basis) other than by the sale of Co-Borrower’s equity securities in a public offering or to venture capital or private equity investors so long as Co-Borrower identifies to Bank the venture capital or private equity investors at least seven (7) Business Days prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction; (b) during any period of twelve (12) consecutive months, a majority of the members of the board of directors or other equivalent governing body of Co-Borrower cease to be composed of individuals (i) who were members of that board or equivalent governing body on the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; (c) at any time, Co-Borrower shall cease to own and control, of record and beneficially, directly or indirectly, one hundred percent (100)% of each class of outstanding capital stock of each Subsidiary of each Co-Borrower free and clear of all Liens (except Liens created by this Agreement).

 

Claims” is defined in Section 12.3.

 

Co-Borrower(s)” is defined in the preamble hereof.

 

Co-Borrower’s Books” are all of a Co-Borrower’s books and records including ledgers, federal and state tax returns, records regarding such Co-Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

 

Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of California; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.

 

Collateral” is any and all properties, rights and assets of Co-Borrowers described on Exhibit A.

 

Collateral Account” is any Deposit Account, Securities Account, or Commodity Account.

 

Commodity Account” is any “commodity account” as defined in the Code with such additions to such term as may hereafter be made.

 

Company Prepared Financial Statements” is defined in Section 6.2(a).

 

Compliance Certificate” is that certain certificate in the form attached hereto as Exhibit B.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Contingent Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.

 

Control Agreement” is any control agreement entered into among the depository institution at which a Co-Borrower maintains a Deposit Account or the securities intermediary or commodity intermediary at which a Co-Borrower maintains a Securities Account or a Commodity Account, such Co-Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such Deposit Account, Securities Account, or Commodity Account.

 

Copyrights” are any and all copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.

 

Credit Extension” is the Term Loan or any other extension of credit by Bank for Co-Borrowers’ benefit.

 

Default Rate” is defined in Section 2.3(b).

 

Deposit Account” is any “deposit account” as defined in the Code with such additions to such term as may hereafter be made.

 

Designated Deposit Account” is the multicurrency account denominated in Dollars, account number XXXXXXXXXX, maintained by Dova with Bank.

 

Dollars,” “dollars” or use of the sign “$” means only lawful money of the United States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.

 

Dollar Equivalent” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and (b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the Foreign Currency for transfer to the country issuing such Foreign Currency.

 

Domestic Subsidiary” means a Subsidiary organized under the laws of the United States or any state or territory thereof or the District of Columbia.

 

Effective Date” is defined in the preamble hereof.

 

Equipment” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

ERISA” is the Employee Retirement Income Security Act of 1974, and its regulations.

 

Event of Default” is defined in Section 8.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

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Exchange Act” is the Securities Exchange Act of 1934, as amended.

 

FDA” means the Food and Drug Administration.

 

FDA Milestone” means Co-Borrowers delivery of evidence to Bank in a manner satisfactory to Bank in its reasonable discretion that Dova has received full regulatory approval for the initial chronic liver disease indication for the New Drug Application submission of Avatrombopag.

 

Final Payment” is a payment (in addition to and not a substitution for the Term Loan Payments) due on the earliest to occur of (a) the Term Loan Maturity Date, (b) the acceleration of the Term Loan, or (c) the prepayment of the Term Loan, equal to the original aggregate principal amount of the Term Loan multiplied by the Final Payment Percentage.

 

Final Payment Percentage” is (i) three percent (3.00%) if the Term Loan is repaid on or prior to the Amortization Start Date, or (ii) ten percent (10.00%) if the Term Loan is not repaid on or prior to the Amortization Start Date.

 

Foreign Currency” means lawful money of a country other than the United States.

 

Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

 

Funding Date” is any date on which a Credit Extension is made to or for the account of Co-Borrowers which shall be a Business Day.

 

FX Contract” is any foreign exchange contract by and between a Co-Borrower and Bank under which Co-Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.

 

GAAP” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination.

 

General Intangibles” is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds, security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

 

Governmental Approval” is any consent, authorization, approval, order, license, franchise, permit, certificate, accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.

 

Governmental Authority” is any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization.

 

Guarantor” is any Person providing a Guaranty in favor of Bank.

 

Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

23



 

Indemnified Person” is defined in Section 12.3.

 

Insolvency Proceeding” is any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief.

 

Intellectual Property” means, with respect to any Person, means all of such Person’s right, title, and interest in and to the following:

 

(a)                                 its Copyrights, Trademarks and Patents;

 

(b)                                 any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating manuals;

 

(c)                                  any and all internet domain names;

 

(d)                                 any and all source code;

 

(e)                                  any and all design rights which may be available to such Person;

 

(f)                                   any and all claims for damages by way of past, present and future infringement of any of the foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above;

 

(g)                                  all registrations, applications, amendments, renewals and extensions of any of the Copyrights, Trademarks, Patents, or other Intellectual Property; and

 

(h)                                 any and all goodwill of the Co-Borrowers connected with any of the foregoing.

 

Interest-Only Period” is the period of time from the Effective Date through April 30, 2019; provided, however, if Co-Borrowers achieve the Revenue Milestone, then the Interest-Only Period shall automatically, with no further action required by the parties hereto, be extended through October 31, 2019.

 

Inventory” is all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of a Co-Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

 

Investment” is any beneficial ownership interest in any Person (including stock, partnership interest or other securities), and any loan, advance or capital contribution to any Person.

 

Key Person” is any of a Co-Borrower’s (a) Chief Executive Officer, who is Alex Sapir as of the Effective Date, and (b) Chief Financial Officer, who is Mark Hahn as of the Effective Date.

 

Lien” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.

 

Loan Documents” are, collectively, this Agreement and any schedules, exhibits, certificates, notices, and any other documents related to this Agreement, the Pledge Agreement, any subordination agreement, any note, or notes or guaranties executed by a Co-Borrower or any Guarantor, and any other present or future agreement by a Co-Borrower and/or any Guarantor with or for the benefit of Bank in connection with this Agreement, all as amended, restated, or otherwise modified.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

24



 

Material Adverse Change” is (a) a material impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of a Co-Borrower; or (c) a material impairment of the prospect of repayment of any portion of the Obligations.

 

Obligations” are Co-Borrowers’ obligations to pay when due any debts, principal, interest, fees, Bank Expenses, and other amounts Co-Borrowers owe Bank now or later, whether under this Agreement, the other Loan Documents, or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Co-Borrowers assigned to Bank, and to perform Co-Borrowers’ duties under the Loan Documents.

 

Operating Documents” are, for any Person, such Person’s formation documents, as certified by the Secretary of State (or equivalent agency) of such Person’s jurisdiction of organization on a date that is no earlier than thirty (30) days prior to the Effective Date, and, (a) if such Person is a corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar agreement), each of the foregoing with all current amendments or modifications thereto.

 

Patents” means all patents, patent applications and like protections including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same.

 

Payment/Advance Form” is that certain form attached hereto as Exhibit C.

 

Perfection Certificate” is defined in Section 5.1.

 

Permitted Indebtedness” is:

 

(a)                                 Co-Borrowers’ Indebtedness to Bank under this Agreement and the other Loan Documents;

 

(b)                                 Indebtedness existing on the Effective Date and shown on the Perfection Certificate;

 

(c)                                  Subordinated Debt;

 

(d)                                 unsecured Indebtedness to trade creditors incurred in the ordinary course of business;

 

(e)                                  Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;

 

(f)                                   Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of “Permitted Liens” hereunder;

 

(g)                                  Unsecured Indebtedness with respect to American Express corporate credit cards not exceeding Six Hundred Thousand Dollars ($600,000) in the aggregate outstanding at any time;

 

(h)                                 other Indebtedness not otherwise permitted by Section 7.4 not exceeding Two Hundred Thousand Dollars ($200,000) in the aggregate outstanding at any time; and

 

(i)                                     extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (h) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon a Co-Borrower or its Subsidiary, as the case may be.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

25



 

Permitted Investments” are:

 

(a)                                 Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate;

 

(b)                                 Investments consisting of Cash Equivalents;

 

(c)                                  Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of a Co-Borrower;

 

(d)                                 Investments consisting of deposit accounts in which Bank has a perfected security interest;

 

(e)                                  Investments accepted in connection with Transfers permitted by Section 7.1;

 

(f)                                   Investments consisting of the creation of a Subsidiary for the purpose of consummating a merger transaction permitted by Section 7.3 of this Agreement, which is otherwise a Permitted Investment;

 

(g)                                  Investments (i) by a Co-Borrower in another Co-Borrower, (ii) by a Co-Borrower in Subsidiaries not to exceed Two Hundred Thousand Dollars ($200,000) in the aggregate in any fiscal year and (iii) by Subsidiaries in other Subsidiaries not to exceed Two Hundred Thousand Dollars ($200,000) in the aggregate in any fiscal year or in a Co-Borrower;

 

(h)                                 Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of a Co-Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by such Co-Borrower’s Board of Directors;

 

(i)                                     Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business;

 

(j)                                    Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (j) shall not apply to Investments of a Co-Borrower in any Subsidiary; and

 

(k)                                 other Investments not otherwise permitted by Section 7.7 not exceeding Two Hundred Thousand Dollars ($200,000) in the aggregate outstanding at any time.

 

Permitted Liens” are:

 

(a)                                 Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;

 

(b)                                 Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being contested in good faith and for which a Co-Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted thereunder;

 

(c)                                  purchase money Liens (i) on Equipment (other than Financed Equipment) acquired or held by a Co-Borrower incurred for financing the acquisition of the Equipment securing no more than Two Hundred Thousand Dollars ($200,000) in the aggregate amount outstanding, or (ii) existing on Equipment (other than Financed Equipment) when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment;

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

26



 

(d)                                 Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed Two Hundred Thousand Dollars ($200,000) and which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject thereto;

 

(e)                                  Liens to secure payment of workers’ compensation, employment insurance, old-age pensions, social security and other like obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);

 

(f)                                   Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;

 

(g)                                  leases or subleases of real property granted in the ordinary course of a Co-Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), and leases, subleases, non-exclusive licenses or sublicenses of personal property (other than Intellectual Property) granted in the ordinary course of a Co-Borrower’s business (or, if referring to another Person, in the ordinary course of such Person’s business), if the leases, subleases, licenses and sublicenses do not prohibit granting Bank a security interest therein;

 

(h)                                 non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business, and licenses of Intellectual Property that could not result in a legal transfer of title of the licensed property that may be exclusive in respects other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States;

 

(i)                                     Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under Sections 8.4 and 8.7; and

 

(j)                                    Liens in favor of other financial institutions arising in connection with a Co-Borrower’s deposit and/or securities accounts held at such institutions, provided that Bank has a perfected security interest in the amounts held in such deposit and/or securities accounts.

 

Person” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.

 

Pledged Account” is the restricted account number XXXXXXXXXX, maintained by Dova with Bank and subject to the Pledge Agreement.

 

Pledge Agreement” means that certain Bank Services Cash Pledge Agreement executed by Dova in favor of Bank dated as of the Effective Date.

 

Prepayment Fee” shall be an additional fee, payable to Bank, with respect to the Term Loan, upon the prepayment of the Term Loan in an amount equal to (a) four percentage points (4.00%) of the outstanding principal amount of the Term Loan prepaid if the prepayment is made prior to the first anniversary of the Effective Date and when a Cash Collateralization Period is not in effect, or (b) zero percentage points (0.00%) of the outstanding principal amount the Term Loan prepaid if the prepayment is made (i) after the first anniversary of the Effective Date or (ii) during the Cash Collateralization Period; provided however, Bank shall waive the Prepayment Fee if the Term Loan is refinanced with another credit facility with Bank.

 

Prime Rate” is the rate of interest per annum from time to time published in the money rates section of The Wall Street Journal or any successor publication thereto as the “prime rate” then in effect; provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement; and provided further that if such rate of interest, as set forth from time to time in the money rates section of The Wall

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

27



 

Street Journal, becomes unavailable for any reason as determined by Bank, the “Prime Rate” shall mean the rate of interest per annum announced by Bank as its prime rate in effect at its principal office in the State of California (such Bank announced Prime Rate not being intended to be the lowest rate of interest charged by Bank in connection with extensions of credit to debtors); provided that, in the event such rate of interest is less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

Registered Organization” is any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.

 

Requirement of Law” is as to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

 

Responsible Officer” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of each Co-Borrower.

 

Restricted License” is any material license or other agreement with respect to which a Co-Borrower is the licensee (a) that prohibits or otherwise restricts a Co-Borrower from granting a security interest in such Co-Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could interfere with the Bank’s right to sell any Collateral.

 

Revenue Milestone” means Dova’s delivery of evidence to Bank, satisfactory to Bank in its sole discretion, that Dova has achieved at least [***] in net revenue (determined in accordance with GAAP) for any trailing [***].

 

SEC” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental Authority.

 

Securities Account” is any “securities account” as defined in the Code with such additions to such term as may hereafter be made.

 

Subordinated Debt” is indebtedness incurred by a Co-Borrower subordinated to all of such Co-Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.

 

Subsidiary” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person.  Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of a Co-Borrower or Guarantor.

 

Term Loan” is defined in Section 2.1.1(a).

 

Term Loan Maturity Date” is April 13, 2021; provided, however, if Co-Borrowers achieve the Revenue Milestone, then the Term Loan Maturity Date shall automatically, with no further action required by the parties hereto, be extended to April 13, 2022.

 

Term Loan Payment” is defined in Section 2.1.1(b).

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

28



 

Trademarks” means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of a Co-Borrower connected with and symbolized by such trademarks.

 

Transfer” is defined in Section 7.1.

 

[Balance of Page Intentionally Left Blank]

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 

29



 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the Effective Date.

 

BORROWERS:

 

 

 

DOVA PHARMACEUTICALS, INC.

 

 

 

By

/s/ Mark Hahn

 

Name:

Mark Hahn

 

Title:

CFO

 

 

 

AKARX, INC.

 

 

 

By

/s/ Mark Hahn

 

Name:

Mark Hahn

 

Title:

Treasurer

 

 

 

BANK:

 

 

 

SILICON VALLEY BANK

 

 

 

By

/s/ Nathan Meaux

 

Name:

Nathan Meaux

 

Title:

Vice President

 

 

[Signature Page to Loan and Security Agreement]

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 



 

EXHIBIT A

 

COLLATERAL DESCRIPTION

 

The Collateral consists of all of Co-Borrowers’ right, title and interest in and to the following personal property:

 

All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures, letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property, supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and

 

all Co-Borrowers’ Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.

 

Notwithstanding the foregoing, the Collateral does not include (i) any equity securities of AKARX, Inc owned by DOVA PHARMACEUTICALS, INC., (ii) more than 65% of the presently existing and hereafter arising issued and outstanding shares of capital stock owned by Co-Borrowers of any Foreign Subsidiary which shares entitle the holder thereof to vote for directors or any other matter, (iii) any interest of Co-Borrowers as lessees or sublessees under a real property lease or an Equipment lease if Co-Borrowers are prohibited by the terms of such lease from granting a security interest in such lease or under which such an assignment or Lien would cause a default to occur under such lease (but only to the extent that such prohibition is enforceable under all applicable laws including, without limitation, the Code); provided, however, that upon termination of such prohibition, such interest shall immediately become Collateral without any action by Co-Borrowers or Bank or (iv) any Intellectual Property; provided, however, the Collateral shall include all Accounts and all proceeds of Intellectual Property.  If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in such Accounts and such other property of Co-Borrowers that are proceeds of the Intellectual Property.

 

Pursuant to the terms of a certain negative pledge arrangement with Bank, Co-Borrowers have agreed not to encumber any of their Intellectual Property without Bank’s prior written consent.

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 



 

EXHIBIT B

COMPLIANCE CERTIFICATE

 

TO:

SILICON VALLEY BANK

Date:

 

 

FROM:

DOVA PHARMACEUTICALS, INC., on behalf of all Co-Borrowers

 

 

The undersigned authorized officer of DOVA PHARMACEUTICALS, INC., on behalf of all Co-Borrowers (“Co-Borrowers”) certifies that under the terms and conditions of the Loan and Security Agreement between Co-Borrowers and Bank (the “Agreement”):

 

(1) Co-Borrowers are in complete compliance for the period ending                 with all required covenants except as noted below; (2) there are no Events of Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; (4) Co-Borrowers, and each of their Subsidiaries, has timely filed all required tax returns and reports, and Co-Borrowers have timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Co-Borrowers except as otherwise permitted pursuant to the terms of Section 5. 9 of the Agreement; and (5) no Liens have been levied or claims made against Co-Borrowers or any of their Subsidiaries relating to unpaid employee payroll or benefits of which Co-Borrowers have not previously provided written notification to Bank.

 

Attached are the required documents supporting the certification.  The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes.  The undersigned acknowledges that no borrowings may be requested at any time or date of determination that Co-Borrowers are not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered.  Capitalized terms used but not otherwise defined herein shall have the meanings given them in the Agreement.

 

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenants

 

Required

 

Complies

 

 

 

 

 

Company Prepared Financial Statements with Compliance Certificate

 

Monthly within 30 days*

 

Yes    No

Annual financial statement (CPA Audited) + CC

 

FYE within 180 days

 

Yes    No

10-Q, 10-K and 8-K

 

Within 5 days after filing with SEC

 

Yes    No

Board approved projections

 

FYE within 30 days and as amended/updated

 

Yes    No

 


* provided however (i) for March, June and September, such items shall be delivered to Bank no later than forty five (45) days after the last day of each such month and (ii) for December, such items shall be delivered to Bank no later than ninety (90) days after the last day of such month.

 

Other Matters

 

Have there been any amendments of or other changes to the capitalization table of Co-Borrowers and to the Operating Documents of Co-Borrowers or any of their Subsidiaries? If yes, provide copies of any such amendments or changes with this Compliance Certificate.

 

Yes

 

No

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 



 

The following are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions to note.”)

 

 

DOVA PHARMACEUTICALS, INC.

BANK USE ONLY

 

 

 

Received by:

 

By:

 

 

 

AUTHORIZED SIGNER

Name:

 

 

Date:

 

Title:

 

 

 

 

 

Verified:

 

 

 

AUTHORIZED SIGNER

 

Date:

 

 

 

 

 

 

Compliance Status:

Yes

No

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 



 

EXHIBIT C — LOAN PAYMENT/ADVANCE REQUEST FORM

 

DEADLINE FOR SAME DAY PROCESSING IS NOON EASTERN TIME

 

Fax To:

Date:

 

 

LOAN PAYMENT:

DOVA PHARMACEUTICALS, INC.; on behalf of all Co-Borrowers

 

 

From Account #

 

 

To Account #

 

(Deposit Account #)

(Loan Account #)

Principal $

 

 

and/or Interest $

 

 

 

Authorized Signature:

 

 

Phone Number:

 

Print Name/Title:

 

 

 

 

LOAN ADVANCE:

 

Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.

 

From Account #

 

 

To Account #

 

(Loan Account #)

(Deposit Account #)

 

 

Amount of Term Loan $

 

 

 

 

 

All Co-Borrowers’ representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date:

 

 

Authorized Signature:

 

 

Phone Number:

 

 

 

Print Name/Title:

 

 

 

 

OUTGOING WIRE REQUEST:

Complete only if all or a portion of funds from the loan advance above is to be wired.

Deadline for same day processing is noon, Eastern Time

 

Beneficiary Name:

 

 

Amount of Wire: $

 

Beneficiary Bank:

 

 

Account Number:

 

City and State:

 

 

 

 

 

Beneficiary Bank Transit (ABA) #:

 

 

Beneficiary Bank Code (Swift, Sort, Chip, etc.):

 

 

(For International Wire Only)

 

 

Intermediary Bank:

 

 

Transit (ABA) #:

 

 

 

For Further Credit to:

 

 

Special Instruction:

 

 

 

By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me (us).

 

 

Authorized Signature:

 

 

2nd Signature (if required):

 

 

 

Print Name/Title:

 

 

Print Name/Title:

 

 

 

Telephone #:

 

 

Telephone #:

 

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 



 

BORROWING RESOLUTIONS

 

 

CORPORATE BORROWING CERTIFICATE

 

BORROWER:

DOVA PHARMACEUTICALS, INC.

DATE:

April 13, 2018

BANK:

SILICON VALLEY BANK

 

 

 

I hereby certify as follows, as of the date set forth above:

 

1.     I am the Secretary, Assistant Secretary or other officer of Borrower.  My title is as set forth below.

 

2.     Borrower’s exact legal name is set forth above.  Borrower is a corporation existing under the laws of the State of Delaware.

 

3.     Attached hereto are true, correct and complete copies of Borrower’s Certificate of Incorporation (including amendments), as filed with the Secretary of State of the state in which Borrower is incorporated as set forth above.  Such Certificate of Incorporation have not been amended, annulled, rescinded, revoked or supplemented, and remain in full force and effect as of the date hereof.

 

4.     The following resolutions were duly and validly adopted by Borrower’s Board of Directors at a duly held meeting of such directors (or pursuant to a unanimous written consent or other authorized corporate action).  Such resolutions are in full force and effect as of the date hereof and have not been in any way modified, repealed, rescinded, amended or revoked, and Silicon Valley Bank (“Bank”) may rely on them until Bank receives written notice of revocation from Borrower.

 

RESOLVED, that any one of the following officers or employees of Borrower, whose names, titles and signatures are below, may act on behalf of Borrower:

 

Name

 

Title

 

Signature

 

Authorized
to Add or
Remove
Signatories

 

 

 

 

 

 

o

 

 

 

 

 

 

o

 

 

 

 

 

 

o

 

 

 

 

 

 

o

 

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH OMITS THE INFORMATION SUBJECT TO A CONFIDENTIALITY REQUEST. OMISSIONS ARE DESIGNATED [***]. A COMPLETE VERSION OF THIS EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

 



 

RESOLVED FURTHER, that any one of the persons designated above with a checked box beside his or her name may, from time to time, add or remove any individuals to and from the above list of persons authorized to act on behalf of Borrower.

 

RESOLVED FURTHER, that such individuals may, on behalf of Borrower:

 

Borrow Money.  Borrow money from Bank.

 

Execute Loan Documents.  Execute any loan documents Bank requires.

 

Grant Security.  Grant Bank a security interest in any of Borrower’s assets.

 

Negotiate Items.  Negotiate or discount all drafts, trade acceptances, promissory notes, or other indebtedness in which Borrower has an interest and receive cash or otherwise use the proceeds.

 

Apply for Letters of Credit.  Apply for letters of credit from Bank.

 

Enter Derivative Transactions.  Execute spot or forward foreign exchange contracts, interest rate swap agreements, or other derivative transactions.

 

Further Acts.  Designate other individuals to request advances, pay fees and costs and execute other documents or agreements (including documents or agreement that waive Borrower’s right to a jury trial) they believe to be necessary to effect these resolutions.

 

RESOLVED FURTHER, that all acts authorized by the above resolutions and any prior acts relating thereto are ratified.

 

5.     The persons listed above are Borrower’s officers or employees with their titles and signatures shown next to their names.

 

 

By:

 

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

*** If the Secretary, Assistant Secretary or other certifying officer executing above is designated by the resolutions set forth in paragraph 4 as one of the authorized signing officers, this Certificate must also be signed by a second authorized officer or director of Borrower.

 

I, the                            of Borrower, hereby certify as to paragraphs 1 through 5 above, as of the date set forth above.

 

 

By:

 

 

 

 

 

Name: