| ||
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
for the quarterly period ended | ||
OR | ||
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Delaware (State of incorporation) |
| |
400 E. Pratt Street, Suite 606 Baltimore, Maryland 21202 (Address of principal executive offices) |
| |
Large accelerated filer | Accelerated filer | ||||
Non-accelerated filer ¨ |
| Smaller reporting company | |||
Emerging growth company þ | |||||
2017
| ||||||||||
| Page | ||||||||||
Balance Sheets as of | ||||||||||
| 2016 | ||||||||||
| 2016 | ||||||||||
2
2
September 30, December 31, 2016 2015 (unaudited) Assets Current assets: Cash and cash equivalents $ $ Grants receivable — Prepaid expenses and other current assets Restricted cash, current portion Total current assets Property and equipment, net Restricted cash, net of current portion — Total assets $ $ Liabilities and stockholders’ equity Current liabilities: Current portion of long term debt, net of discount $ $ Accounts payable Accrued expenses and other current liabilities Warrant liability Unit purchase option liability Total current liabilities Long term debt, net of current portion and discount — Other long term liabilities Total liabilities Stockholders’ equity: Preferred stock—$0.001 par value; 5,000,000 shares authorized at September 30, 2016 and December 31, 2015; zero shares issued and outstanding at September 30, 2016 and December 31, 2015 — — Common stock—$0.001 par value; 200,000,000 shares authorized at September 30, 2016 and December 31, 2015; 9,075,143 and 8,650,143 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively Additional paid-in capital Accumulated deficit Total stockholders’ equity Total liabilities and stockholders’ equity $ $ 3 Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Grant revenue $ $ — $ $ — Operating expenses: Research and development General and administrative Loss from operations Other income (expense): Change in fair value of warrant liability, unit purchase option liability and investor rights obligation Interest expense, net Total other income (expense) Net loss $ $ $ $ Net loss per share of common stock, basic and diluted $ $ $ $ Weighted-average shares of common stock outstanding, basic and diluted 4 Nine Months Ended September 30, 2016 2015 Operating activities Net loss $ $ Adjustments to reconcile net loss to net cash used in operating activities: Depreciation Stock-based compensation expense Non-cash interest expense Change in fair value of warrant liability, unit purchase option liability and investor rights obligation Changes in assets and liabilities: Grants receivable — Prepaid expenses and other assets Restricted cash Accounts payable Accrued expenses and other liabilities Net cash used in operating activities Investing activities Purchase of property and equipment Net cash used in investing activities Financing activities Proceeds from sale of shares under common stock purchase agreement — Principal payments on term debt Payment of deferred financing costs Net cash used in financing activities Decrease in cash and cash equivalents Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period $ $ Supplemental disclosures of cash flow information Cash paid for interest $ $ Supplemental disclosures of noncash financing activities Accrued deferred financing costs $ $ 5 6 2016. These deposits are recorded as restricted cash, net of current portion on the balance sheet at June 30, 2017. (iii) recording derivative liabilities related to embedded features. For equity instruments, these costs are netted against the gross proceeds received from the issuance of the equity. deductible and the cumulative temporary differences related to certain research and patent costs, which have been charged to expense in the accompanying statements of operations but have been recorded as assets for income tax purposes. The portion of any deferred tax asset for which it is more likely than not that a tax benefit will not be realized must then be offset by recording a valuation allowance. A full valuation allowance has been established against all of the deferred tax assets as it is more likely than not that these assets will not be realized given the Company’s history of operating losses. The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position. The amount for which an exposure exists is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. revised. Segment Information Company’s current conclusions. 3. Net Loss Per Share of Common Stock, Basic and Diluted Three Months Ended Nine Months Ended September 30, September 30, Net loss per share, basic and diluted calculation: 2016 2015 2016 2015 Net loss $ $ $ $ Weighted-average common shares outstanding Net loss per share, basic and diluted $ $ $ $ September 30, September 30, 2016 2015 Series A convertible preferred stock — Series A-1 convertible preferred stock — Series B convertible preferred stock — Stock options Warrants on common stock Warrants on preferred stock — Investor rights obligation — Underwriters' unit purchase option — Level 1—inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market. Level 2—inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model‑derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability. Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability. The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s assets and liabilities that are measured at fair value on a recurring basis: The table presented below is a summary of changes of the Company’s Level 3 warrant liability and unit purchase option liability for the Warrant Unit purchase liability option liability Total Balance at December 31, 2015 $ $ $ Change in fair value Balance at September 30, 2016 $ $ $ 2017. September 30, December 31, 2016 2015 Compensation and benefits $ $ Research and development expenses General and administrative Accrued interest Total accrued expenses and other current liabilities $ $ commercialization, the Company is obligated to pay Merck milestone payments and royalties on net sales. of CERC-501. September 30, December 31, 2016 2015 Term loan $ $ Less: debt discount Term Loan, net of debt discount Less: current portion, net of debt discount Long term debt, net of current portion and debt discount $ — $ Initial Public Offering On the Class B Expiration Date, the Class B warrants ceased trading on the NASDAQ Capital Market. No Class B warrants were exercised prior to the Class B Expiration Date. stock at a price per share of $4.00, for gross proceeds of $1.0 Armistice converted all of the Series A Preferred Stock into 11,940,000 shares of common stock on July 6, 2017. Number of shares Exercise price Expiration underlying warrants per share date 109,976 $ February 2017 29,260 $ February 2017 90,529 $ March 2017 29,557 $ March 2017 130,233 $ April 2017 2,275,950 $ April 2017 20,000* $ April 2017 14,284 $ July 2017 80,966 $ August 2018 4,551,900 $ October 2018 40,000* $ October 2018 3,571 $ December 2018 22,328* $ October 2020 2,380 $ May 2022 7,400,934 The estimated grant date fair market value of the Company’s stock‑based awards is amortized ratably over the employees’ service periods, which is the period in which the awards vest. Three Months Ended Nine Months Ended September 30, September 30, 2016 2015 2016 2015 Research and development $ $ $ $ General and administrative Total stock-based compensation $ $ $ $ Options Outstanding Weighted average Fair value of remaining Number of Weighted‑average options contractual term shares exercise price granted (in years) Balance, December 31, 2015 $ Granted $ $ Balance, September 30, 2016 $ Vested or expected to vest at September 30, 2016 $ Exercisable at September 30, 2016 $ represents an option and, therefore, the ESPP is a compensatory plan under this guidance. Accordingly, stock-based compensation expense is determined based on the option’s grant-date fair value and is recognized over the requisite service period of the option. The Company used the Black-Scholes valuation model and recognized stock-based compensation expense of was as follows: Year ending December 31, 2016* $ 2017 2018 $ 2017 18 10, 2017. be well suited to address unmet medical needs in other neurologic indications. We are Epilepsy. candidates or be forced to cease our operations altogether. profitability. CERC-501. Internal costs include: personnel‑related expenses, including salaries, benefits and stock‑based compensation expense; consulting costs related to our internal research and development programs; allocated facilities, depreciation and other expenses, which include rent and utilities, as well as other supplies; and product liability insurance. 22 We made the final payment under this facility on August 1, 2017. directors. 2016 Three Months Ended September 30, 2016 2015 (in thousands) Grant revenue $ $ — Grant revenue under the NIAAA grant was current NIAAA grant compared to the NIDA grant. Three Months Ended September 30, 2016 2015 (in thousands) CERC-301 $ $ CERC-501 CERC-611 — COMTi Internal expenses not allocated to programs: Salaries, benefits and related costs Stock-based compensation expense Other $ $ rights to CERC-501 to Janssen. Three Months Ended September 30, 2016 2015 (in thousands) Salaries, benefits and related costs $ $ Legal, consulting and other professional expenses Stock-based compensation expense Other general and administrative expenses $ $ Change in Fair Value of Warrant Liability and Unit Purchase Option Liability previous quarter-end. We made the final payment under this term loan on August 1, 2017. 2016 Nine Months Ended September 30, 2016 2015 (in thousands) Grant revenue $ $ — current NIAAA grant compared to the NIDA grant. Nine Months Ended September 30, 2016 2015 (in thousands) CERC-301 $ $ CERC-501 CERC-611 — COMTi Internal expenses not allocated to programs: Salaries, benefits and related costs Stock-based compensation expense Other $ $ rights to CERC-501 to Janssen. Nine Months Ended September 30, 2016 2015 (in thousands) Salaries, benefits and related costs $ $ Legal, consulting and other professional expenses Stock-based compensation expense Other $ $ operating costs in order to preserve cash. previous year-end. We made the final payment under this term loan on August 1, 2017. exchange for initial gross proceeds of $25.0 million, of which $3.75 million was deposited into a twelve month escrow to secure certain indemnification obligations to Janssen. In addition to the initial proceeds, the terms of the agreement provide for a potential future $20 million regulatory milestone payment. Further, the terms of the agreement provide that Janssen will assume ongoing clinical trials and be responsible for any new development and commercialization of CERC-501. 2018. On August 1, 2017, we made the final payment of $494,231 under the loan, which included a termination fee of $187,500. Nine Months Ended September 30, 2016 2015 (in thousands) Net cash used in: Operating activities $ $ Investing activities Financing activities Net decrease in cash and cash equivalents $ $ $518,000. $1.8 million. $1.6 million. and other expenses that 30 regulations promulgated thereunder, including Regulation D. On 31 32 10.1.1 * 101.INS 101.SCH 101.CAL 101.DEF 101.LAB 101.PRE 338,815,177 21,161,967 379,256 210,023 401,550 87,882 58,832 9,492,338 21,622,349 40,393 35,216 50,001 9,582,732 21,657,565 3,189,793 3,208,074 809,151 678,109 3,361,189 1,885,458 44,992 27,606 90,780 50,571 7,495,905 5,849,818 2,353,482 1,500,000 370,538 8,995,905 8,573,838 9,075 8,650 68,974,131 66,638,557 (68,396,379) (53,563,480) 586,827 13,083,727 9,582,732 21,657,565 June 30,
2017 December 31,
2016 (unaudited) Assets Current assets: Cash and cash equivalents $ 5,460,699 $ 5,127,958 Grants receivable 75,242 132,472 Prepaid expenses and other current assets 402,294 391,253 Restricted cash, current portion 13,300 11,111 Total current assets 5,951,535 5,662,794 Property and equipment, net 33,355 43,243 Restricted cash, net of current portion 62,841 62,828 Total assets $ 6,047,731 $ 5,768,865 Liabilities and stockholders’ (deficit) equity Current liabilities: Term debt, net of discount $ 607,598 $ 2,353,667 Accounts payable 327,302 1,010,209 Accrued expenses and other current liabilities 720,134 942,435 Warrant liability 595 5,501 Unit purchase option liability 6,607 51 Total current liabilities 1,662,236 4,311,863 License obligations 1,250,000 1,250,000 Total liabilities 2,912,236 5,561,863 Stockholders’ equity: Preferred stock—$0.001 par value; 5,000,000 shares authorized at June 30, 2017 and December 31, 2016; 4,179 and zero shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 4 — Common stock—$0.001 par value; 200,000,000 shares authorized at June 30, 2017 and December 31, 2016; 14,114,859 and 9,434,141 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively 14,115 9,434 Additional paid-in capital 76,915,611 70,232,651 Accumulated deficit (73,794,235 ) (70,035,083 ) Total stockholders’ equity 3,135,495 207,002 Total liabilities and stockholders’ equity $ 6,047,731 $ 5,768,865 3321,497 971,985 4,581,605 1,237,375 9,376,633 4,835,981 1,703,188 721,658 5,989,053 2,498,475 (5,963,296) (1,959,033) (14,393,701) (7,334,456) (101,246) 1,465,422 (57,595) 1,127,683 (104,183) (197,470) (381,603) (634,772) (205,429) 1,267,952 (439,198) 492,911 (6,168,725) (691,081) (14,832,899) (6,841,545) (0.70) (1.06) (1.71) (10.53) 8,756,393 649,721 8,685,818 649,721 Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Grant revenue $ 157,800 $ 650,488 $ 542,006 $ 650,488 Operating expenses: Research and development 493,649 2,501,753 1,446,719 4,795,028 General and administrative 1,439,146 1,636,772 2,769,410 4,285,865 Loss from operations (1,774,995 ) (3,488,037 ) (3,674,123 ) (8,430,405 ) Other income (expense): Change in fair value of warrant liability and unit purchase option liability 2,111 90,754 (1,650 ) 43,651 Interest expense, net (25,631 ) (126,877 ) (83,379 ) (277,420 ) Total other expense (23,520 ) (36,123 ) (85,029 ) (233,769 ) Net loss $ (1,798,515 ) $ (3,524,160 ) $ (3,759,152 ) $ (8,664,174 ) Net loss per share of common stock, basic and diluted $ (0.14 ) $ (0.41 ) $ (0.32 ) $ (1.00 ) Weighted-average shares of common stock outstanding, basic and diluted 13,265,877 8,650,143 11,697,535 8,650,143 4(14,832,899) (6,841,545) 20,468 17,360 1,439,194 321,228 134,096 204,759 57,595 (1,127,683) (379,256) 191,527 255,248 (79,051) 58,333 109,908 318,218 2,478,234 178,982 (10,860,184) (6,615,100) (25,646) (19,984) (25,646) (19,984) 1,000,000 (2,459,493) (1,023,798) (1,467) (775,475) (1,460,960) (1,799,273) (12,346,790) (8,434,357) 21,161,967 11,742,349 8,815,177 3,307,992 287,841 434,971 101,728 1,104,316 Six Months Ended June 30, 2017 2016 Operating activities Net loss $ (3,759,152 ) $ (8,664,174 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 11,689 13,416 Stock-based compensation expense 587,963 1,151,420 Non-cash interest expense 21,352 97,150 Change in fair value of warrant liability and unit purchase option liability 1,650 (43,651 ) Changes in assets and liabilities: Grants receivable 57,230 (650,488 ) Prepaid expenses and other assets (11,040 ) 90,770 Restricted cash (2,202 ) — Accounts payable (682,907 ) 61,193 Accrued expenses and other liabilities (222,303 ) 518,138 Net cash used in operating activities (3,997,720 ) (7,426,226 ) Investing activities Purchase of property and equipment (1,801 ) (19,157 ) Net cash used in investing activities (1,801 ) (19,157 ) Financing activities Proceeds from sale of shares under common stock purchase agreements 1,693,498 — Proceeds from sale of shares pursuant to private placement, net 4,650,000 — Proceeds from sales of common stock under employee stock purchase plan 35,431 — Principal payments on term debt (1,767,421 ) (1,623,019 ) Payment of financing costs (279,246 ) (214,020 ) Net cash provided by (used in) financing activities 4,332,262 (1,837,039 ) Increase (decrease) in cash and cash equivalents 332,741 (9,282,422 ) Cash and cash equivalents at beginning of period 5,127,958 21,161,967 Cash and cash equivalents at end of period $ 5,460,699 $ 11,879,545 Supplemental disclosures of cash flow information Cash paid for interest $ 70,180 $ 208,537 Supplemental disclosures of noncash financing activities Accrued financing costs $ — $ 17,162 5clinical‑stage biopharmaceutical company that is developing innovative drug candidates to make a difference in the lives of patients with neurologicalneurologic and psychiatric disorders. The Company’s operations since inception have been limited to organizing and staffing the Company, acquiring rights to and developing certain product candidates, business planning and raising capital.a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments that might be necessary should the Company be unable to continue to fund its operations.an accrual basis. The Company has not generated any product revenues and has not yet achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and if achieved, could be sustained on a continuing basis.ninesix months ended SeptemberJune 30, 2016,2017, the Company incurred a net loss of $14.8$3.8 million and generated negative cash flows from operations of $10.9$4.0 million. As of SeptemberJune 30, 2016,2017, the Company had an accumulated deficit of $68.4 million.$73.8 million and a balance of $5.5 million in cash and cash equivalents. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to the clinical development of its product candidates, its preclinical programs, business development and its organizational infrastructure. The Company will require substantial additional financing to fund its operations and to continue to execute its strategy. The Company plans to meet its capital requirements primarily through a combination of equity andor debt financings, collaborations, or out-licensing arrangements, strategic alliances, federal and private grants, marketing, distribution or licensing arrangements and in the longer term, revenue from product sales to the extent its product candidates receive marketing approval and are commercialized. There can be no assurance, however, that the Company will be successful in obtaining financing at the level needed to sustain operations and develop its product candidates or on terms acceptable to the Company, or that the Company will obtain approvals necessary to market its products or achieve profitability or sustainable positive cash flow. TheIf the Company currently anticipates that current cash and cash equivalentsfails to raise capital or enter into any such arrangements, it will be sufficienthave to meetfurther delay, scale back or discontinue the development of one or more of its anticipated cash requirements throughproduct candidates or cease its operations altogether.end of 2016. These factors raise significant doubt about the Company’s abilityCompany received $5.0 million in gross proceeds pursuant to continuea securities purchase agreement with Armistice Capital Master Fund Ltd (“Armistice”) as a going concern.described in Note 11 (the "Armistice Private Placement.") The Company has the potential to raise additional cash through a common stock purchasean equity distribution agreement with Aspire Capital Fund,Maxim Group LLC (“Aspire Capital”("Maxim Group") as described in Note 8.20152016 has been derived from audited financial statements at that date. The interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the United States Securities and Exchange Commission (“SEC”).20152016 audited financial statements.6the investor rights obligation,and warrants on preferred stock and common stock, stock options and unvested restricted stock outstanding during the period calculated in accordance with the treasury stock method, although these shares and options are excluded if their effect is anti‑dilutive. In addition, the Company analyzes the potential dilutive effect of any outstanding preferred stock, the investor rights obligation, and warrants on preferred stock and common stock under the “if‑converted” method when calculating diluted earnings per share, in which it is assumed that the outstanding security converts into common stock at the beginning of the period. Because the impact of these items is generally anti‑dilutive during periods of net loss, there was no difference between basic and diluted net loss per share of common stock for the three and ninesix months ended SeptemberJune 30, 20162017 and 2015.During 2013,leasebank services pledge agreement with Silicon Valley Bank. In exchange for new office spacereceiving business credit card services from Silicon Valley Bank, the Company deposited $50,000 as collateral with Silicon Valley Bank. This amount will remain deposited with Silicon Valley Bank for its principal offices in Baltimore, Maryland. The Company initially provided the landlord with a letter ofduration the business credit in the amount of $175,000 as securitycard services are used by the Company of the Company’s obligations under the lease. The letter of credit is supported by funds that are invested in a certificate of deposit. Provided there has been no event of default byCompany. In addition, the Company the Company may request that the amount of the letter of credit be reduced by one‑third (approximately $58,000) at the end of each of the first three years of the lease term. At the expiration of the third year of the lease term, which will occur in the fourth quarter of 2016, the Company is required to deposithas deposited $13,000 with the landlord of the sum of $13,000Company's office space as a security deposit.creditworthy.credit worthy. The Company has no financial instruments with off‑balance sheet risk of loss.7TheseFor debt instruments, these costs are amortized over the life of the debt to In April 2016, the Company received a research and development grant from the National Institute on Drug Abuse at the National Institutes of Health to provide additional resources for the period from May 2016 through April 2017 for the Company’s ongoing Phase 2 clinical trial for CERC-501, “A Randomized, Double-Blind, Placebo-Controlled, Crossover Design Study of CERC-501 in a Human Laboratory Model of Smoking Behavior.” The amount of the award was $1.0 million. The Company recognizes revenue under grants in earnings on a systemic basis in the period the related expenditures for which the grants are intended to compensate are incurred. As such, the Company has recognized revenue in the amounts of $321,497 and $971,985 for the three and nine months ended September 30, 2016, respectively. As of September 30, 2016, the Company had received $592,729 of the revenue earned during the nine months ended September 30, 2016.8SeptemberJune 30, 2016,2017, the Company does not believe any material uncertain tax positions are present.net of estimated forfeitures, equal to the grant date fair value of stock options on a straight‑line basis over the requisite service period, which is generally the vesting term. Forfeitures are requiredrecorded as they are incurred as opposed to bebeing estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.909,9, Revenue From Contracts With Customers (“ASU 2014‑09”9”). Pursuant to this update, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue From Contracts With Customers (Topic 606), which delays the effective date of ASU 2014-09 by2014-9by one year. As a result, ASU 2014-092014-9 will be effective for annual reporting periods beginning after December 15, 2017 with early adoption permitted for annual reporting periods beginning after December 15, 2016. In March 2016, the FASB issued ASU No. 2016-08,2016-8, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) (“ASU 2016-08”2016-8”) and ASU No. 2016-10, Revenue From Contracts With Customers (Topic 606): Identifying Performance Obligations and Licensing(“ (“ASU 2016-10”), and in May 2016 the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients(“ (“ASU 2016-12”), each of which clarify the guidance in ASU 2014-092014-9 and have the same effective date as the original standard. The Company has not yet determinedcompleted it's2014-09,2014-9, ASU 2016-08,2016-8, ASU 2016-10, or ASU 2016-12 on the financial statements, although, the impact, if any, is not expected to be significant given the Company has not historically only recognized significant amounts of revenue.In August 2014,revenue from government grants. The Company plans to adopt the new standard effective January 1, 2018 using the modified retrospective transition method. The Company continues to monitor additional changes, modifications, clarifications or interpretations being undertaken by the FASB, issued ASU No. 2014‑15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments in this update will explicitly require a company’s management to assess an entity’s ability to continue as a going concern within one year afterwhich may impact the date the financial statements are issued, and to provide related footnote disclosures in certain circumstances. The new standard will be effective in the first annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The Company is currently evaluating the potential impact of the adoption of this standard, but believes its adoption will have no impact on its financial position, results of operations or cash flows.2016-02,2016-2, Leases (Topic 842).This guidance revises existing practice related to accounting for leases under ASC 840, Leases (“ASC 840”) for both lessees and lessors. The new guidance in ASU 2016-022016-2 requires lessees to recognize a right-of-use asset and a lease liability for nearly all leases (other than leases that meet the definition of a short-term lease). The lease liability will be equal to the present value of lease payments and the right-of-use asset will be based on the lease liability, subject to adjustment such as for initial direct costs. For income statement purposes, the new standard retains a dual model similar to ASC 840, requiring leases to be classified as either operating leases or capital leases. For lessees, operating leases will result in straight-line expense (similar to current accounting by lessees for operating leases under ASC 840) while capital leases will result in a front-loaded expense pattern (similar to current accounting by lessees for capital leases under ASC 840). The new standard is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its financial statements.2016-09,2016-9, Improvements to Employee Share-Based Payment Accounting. The guidance is intended to simplify several areas of accounting for share-based compensation, including income tax impacts, classification on the statement of cash flows and forfeitures. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted. The new guidance was adopted by the Company effective January 1, 2017 and its adoption did not have any impact on its financial position, results of operations or cash flows. In connection with adoption, the Company has elected to account for forfeitures as they occur as opposed to being estimated at the time of grant and revised.but believes its adoption will have no impact on its financial position, resultsstatements.operations orchanges in restricted cash on the statement of cash flows. The new standard requires that entities show the changes in the total of cash and cash equivalents, restricted cash and restricted cash equivalents on the statement of cash flows and no longer present transfers between cash and cash equivalents, restricted cash and restricted cash equivalents on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Company is currently evaluating the potential impact of the adoption of this standard on its financial statements.10ninesix months ended SeptemberJune 30, 20162017 and 2015:2016:(6,168,725) (691,081) (14,832,899) (6,841,545) 8,756,393 649,721 8,685,818 649,721 (0.70) (1.06) (1.71) (10.53) Three Months Ended Six Months Ended June 30, June 30, Net loss per share, basic and diluted calculation: 2017 2016 2017 2016 Net loss $ (1,798,515 ) $ (3,524,160 ) $ (3,759,152 ) $ (8,664,174 ) Weighted-average common shares outstanding 13,265,877 8,650,143 11,697,535 8,650,143 Net loss per share, basic and diluted $ (0.14 ) $ (0.41 ) $ (0.32 ) $ (1.00 ) SeptemberJune 30, 20162017 and 20152016 have been excluded from the computation of diluted weighted-average shares outstanding, as they would have beenare potentially anti‑dilutive:31,116,391 9,074,511 58,948,735 1,828,441 510,884 7,400,934 681,858 625,208 53,351,117 40,000 June 30,
2017 June 30,
2016Stock options 2,198,630 1,450,952 Warrants on common stock 19,001,143 7,400,934 Underwriters' unit purchase option 40,000 40,000 Convertible preferred shares 11,940,000 — ···SeptemberJune 30, 20162017 and December 31, 2015,2016, the Company’s financial instruments included cash and cash equivalents, restricted cash, accounts payable, accrued expenses and other current liabilities, long term debt, the term loan warrant liability and the underwriters’ unit purchase option liability. The carrying amounts reported in the accompanying financial statements for cash and cash equivalents, restricted cash, accounts payable, and accrued expenses and other current liabilities approximate their respective fair values because of the short‑term nature of these accounts. The estimated fair value of the Company’s term debt of $3.2$0.608 million as of SeptemberJune 30, 20162017 was based on current interest rates for similar types of borrowings and is in Level 2 of the fair value hierarchy.11September 30, 2016Fair Value Measurements UsingQuoted prices inSignificant otherSignificantactive markets forobservableunobservableidentical assetsinputsinputs(Level 1)(Level 2)(Level 3)AssetsInvestments in money market funds*$8,661,483$—$—LiabilitiesWarrant liability$—$—$44,992Unit purchase option liability$—$—$90,780December 31, 2015Fair Value Measurements UsingQuoted prices inSignificant otherSignificantactive markets forobservableunobservableidentical assetsinputsinputs(Level 1)(Level 2)(Level 3)AssetsInvestments in money market funds*$21,122,553$—$—LiabilitiesWarrant liability$—$—$27,606Unit purchase option liability$—$—$50,571 June 30, 2017 Fair Value Measurements Using Assets Investments in money market funds* $ 5,112,978 $ — $ — Liabilities Warrant liability $ — $ — $ 595 Unit purchase option liability $ — $ — $ 6,607 December 31, 2016 Fair Value Measurements Using Assets Investments in money market funds* $ 4,758,539 $ — $ — Liabilities Warrant liability $ — $ — $ 5,501 Unit purchase option liability $ — $ — $ 51 SeptemberJune 30, 2016,2017, include (i) volatility of 85%75%, (ii) risk free interest rate of 1.02%1.60%, (iii) strike price ($8.40), (iv) fair value of common stock ($4.23)0.57), and (v) expected life of 4.13.3 years.SeptemberJune 30, 2016,2017, include (i) volatility range of 65% to 95%75%, (ii) risk free interest rate range of 0.12%0.74% to 1.03%1.63%, (iii) unit strike price ($7.48), (iv) underwriters’ Class A warrant strike price ($5.23), (v) underwriters’ Class B warrant strike price ($4.49), (vi) fair value of underlying equity ($4.23)0.57), and (vii) optimal exercise point of immediately prior to the expiration of the underwriters’ Class B warrants, which occursoccurred on April 20, 2017. The increase in the fair value of underlying equity was the primary driver of the increase in fair value of the UPO liability from $50,571 as of December 31, 2015 to $90,780 as of September 30,122016. This $40,209 gain on the change in fair value of the UPO liability was recorded to other income in the accompanying statement of operations for the nine months ended September 30, 2016.ninesix months ended SeptemberJune 30, 2016:27,606 50,571 78,177 17,386 40,209 57,595 44,992 90,780 135,772 Total Balance at December 31, 2016 $ 5,501 $ 51 $ 5,552 Change in fair value (4,906 ) 6,556 1,650 Balance at June 30, 2017 $ 595 $ 6,607 $ 7,202 ninesix months ended SeptemberJune 30, 20162017 and no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy occurred during the ninesix months ended SeptemberJune 30, 2016.849,859 1,128,073 2,166,342 464,719 156,021 253,132 188,967 39,534 3,361,189 1,885,458 June 30,
2017 December 31,
2016Compensation and benefits $ 146,513 $ 272,601 Research and development expenses 265,016 315,937 General and administrative 116,564 160,116 Accrued interest 192,041 193,781 Total accrued expenses and other current liabilities $ 720,134 $ 942,435 iswas due within 30 days of the effective date of the license agreement, and the remaining balance of $1.25 million is due after the first subject is dosed with CERC-611 in a multiple ascending dose study. The Companystudy and is recorded as license obligations on the $2.0 upfront amount as a research and development expense in the accompanying statement of operations for the three and nine months ended Septemberbalance sheet at June 30, 2016.2017. Additional payments may be due upon achievement of development and commercialization milestones, including the first commercial sale. Upon commercialization, the Company is obligated to pay Lilly milestone payments and a royalty on net sales.which was recorded as a research and development expense in the Company’s statement of operations for the year ended December 31, 2013, and upon achievement of acceptance by the United States Food and Drug Administration, or FDA, of Merck pre-clinical data and FDA approval of a Phase 3 clinical trial the Company will pay an additional $750,000. Additional payments may be due upon achievement of development and regulatory milestones, including the first commercial sale. Upon13In 2015,acquiredsold all of its rights to CERC-501 through an exclusive, worldwide license from Lilly. Pursuantto Janssen in exchange for initial gross proceeds of $25.0 million, of which $3.75 million was deposited into a twelve month escrow to secure certain indemnification obligations to Janssen (see Note 11). In addition to the license agreement,initial proceeds, the Company paid $750,000 to Lilly within 30 daysterms of the executionagreement provide for a potential future $20 million regulatory milestone payment. Further, the terms of the license agreement which was recorded as researchprovide that Janssen will assume ongoing clinical trials and development expense in the accompanying statement of operationsbe responsible for the nine months ended September 30, 2015. Upon the Company undertaking a nine-month toxicology study of CERC-501 in non-human primates and delivering a final study report, the Company will be required to pay Lilly an additional $250,000. Additional payments may be due upon achievement ofany new development and regulatory milestones, including the first commercial sale. Upon commercialization the Company is obligated to pay Lilly milestone payments and royalties on net sales.COMTiCERC-406 LicenseMerck, which was recorded as research and development expense in the Company’s statement of operations for the year ended December 31, 2013.Merck. Additional payments may be due upon the achievement of development and regulatory milestones. Upon commercialization of a COMT product, the Company is required to pay Merck royalties on net sales.iswas secured by a lien on all of the Company’s assets, excluding intellectual property, which was subject to a negative pledge. The loan containscontained certain additional nonfinancial covenants. In connection with the loan agreement, the Company’s cash and investment accounts arewere subject to account control agreements with the finance company that givegave the finance company the right to assume control of the accounts in the event of a loan default. Loan defaults arewere defined in the loan agreement and include, among others, the finance company’s determination that there iswas a material adverse change in the Company’siswas at a rate of the greater of 7.95%, or 7.95% plus the prime rate as reported in The Wall Street Journal minus 3.25%. The interest rate effective from loan inception to December 16, 2015 was 7.95%. Effective December 17, 2015, the prime rate as reported by The Wall Street Journal increased 0.25% resulting in an increase to the current interest rate, which was 8.20%8.95% as of SeptemberJune 30, 2016.2017. The loan was interest‑only through May 2015, and iswas repayable in equal monthly payments of principal and interest of approximately $305,000 over 27 months, which began in June 2015. The loan matures in August 2017. Debt consisted of the following as of SeptemberJune 30, 20162017 and December 31, 2015:2016:3,228,763 5,688,256 (38,970) (126,700) 3,189,793 5,561,556 (3,189,793) (3,208,074) 2,353,482 June 30,
2017 December 31,
2016Term loan $ 609,572 $ 2,374,031 Less: debt discount (1,974 ) (20,364 ) Term Loan, net of debt discount $ 607,598 $ 2,353,667 $404,000$33,000 and $136,000 for the ninethree months ended SeptemberJune 30, 2017 and 2016, respectively, and $94,000 and $297,000 for the six months ended June 30, 2017 and 2016, respectively, in the accompanying statementstatements of operations.Interm loan,closing of its IPO. The amended and restated certificate of incorporation authorizes the Company issued warrants to purchase 625,208issue two classes of stock, common stock and preferred stock, and eliminates all references to the previously existing series of preferred stock. At June 30, 2017, the total number of shares of Series B convertiblecapital stock the Company was authorized to issue was 205,000,000 of which 200,000,000 was common stock and 5,000,000 was preferred stock. All shares of common and preferred stock at an exercise pricehave a par value of $0.2999$0.001 per share that is exercisable for a period endingshare. On April 27, 2017, the Company further amended its amended and restated certificate of incorporation in October 2020, which is five years followingconnection with the closing of the Company’s IPO. UponArmistice Private Placement with the closingfiling of a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock (“Series A Preferred Stock”) of Cerecor Inc. (the “Certificate of Designation”). The Certificate of Designation authorized the issuance of 4,179 shares of Series A Preferred Stock to Armistice with a stated value of $1,000 per share, convertible into 11,940,000 shares of the Company’s IPO, these warrants became warrants to purchase 22,328 shares of common stock at an exercisea conversion price of $8.40$0.35 per share, in accordance with their terms. The Company’s warrant to purchaseshare. On July 6, 2017, Armistice converted all of its outstanding shares of Series B convertible preferred stockA Preferred Stock into common stock.14
Common Stockrepresented a freestanding financial instrument that was indexed to an obligation of the Company to repurchase its Series B convertible preferred stock by transferring assets and, therefore, met the criteria to be classified as a liability under FASB ASC 480, Distinguishing Liabilities from Equity. The Company records the warrant liability at its fair value using the Black‑Scholes option pricing model and revalues the warrant at each reporting date (see Note 4).8. Capital Structureexpireexpired on April 20, 2017.2017 (the "Class B Expiration Date.") The closing of the IPO resulted in the sale of 4,000,000 units at an initial public offering price of $6.50 per unit for gross proceeds of $26.0 million. The net proceeds of the IPO, after underwriting discounts, commissions and expenses, and before offering expenses, to the Company were approximately $23.6 million. On November 13, 2015, the units separated into common stock, Class A warrants and Class B warrants and began trading separately on the NASDAQ Capital Market.a unit purchase option (the “UPO”)the right to purchase up to a total of 40,000 units (or 1% of the units sold in the IPO) exercisable at $7.48 per unit (or 115% of the public offering price per unit in the IPO). The units underlying the UPO will be, immediately upon exercise, separated into shares of common stock underwriters’ Class A warrants and underwriters’ Class B warrants (such warrants together referred to as the “Underwriters’ Warrants”)Underwriters’ Warrants such that, upon exercise, the holder of a UPO will not receive actual units but will instead receive the shares of common stock and Underwriters’ Warrants, to the extent that any portion of the Underwriters’ Warrants underlying such units have not otherwise expired. The exercise prices of the underwriters’ Class A warrants and underwriter’s Class B warrants underlying the UPO are $5.23 and $4.49, respectively. The UPO may be exercised for cash or on a cashless basis, at the holder’s option, and expires on October 14, 2020; provided, that,however, following the expiration of underwriters’ Class B warrants on April 20, 2017, the UPO will beis exercisable only for shares of common stock and underwriters’ Class A warrants at an exercise price of $7.475 per unit; provided further, that, following the expiration of underwriters’ Class A warrants on October 20, 2018, the UPO will be exercisable only for shares of common stock at an exercise price of $7.47. The Company classified the UPO as a liability as it is a freestanding marked-to-market derivative instrument that is precluded from being classified in stockholders’ equity. The fair value of the UPO is re-measured each reporting period and the change in fair value is recognized in the statement of operations (see Note 4).Under the Purchase Agreement, on any trading day selected by the Company on which the closing price of the Company’s common stock exceeds $0.50, the Company may, in its sole discretion, present a purchase notice directing Aspire Capital to purchase up to 50,000 shares of common stock per day, up to $15.0 million of the Company’s common stock in the aggregate at a per share price calculated by references to the prevailing market price of the Company’s common stock. Upon execution of the Purchase Agreement, the Company issued and sold to Aspire Capital 250,000 shares of common15million, and concurrently entered into a registration rights agreement with Aspire Capital registering the shares of the Company’s common stock that have been and may be issued to Aspire Capital under the Purchase Agreement.million. Additionally, as consideration for Aspire Capital entering into the Purchase Agreement, the Company issued 175,000 shares of common stock as a commitment fee. The net proceeds of the Aspire Capital transaction, after offering expenses, to the Company were approximately $900,000$1,900,000 for the three and nine monthsyear ended September 30,December 31, 2016. As of September 30,December 31, 2016, the Company had sold 250,000763,998 shares of common stock to Aspire Capital under the Purchase Agreement. Subsequent to SeptemberDuring the six months ended June 30, 2016,2017, the Company sold an additional 188,998965,165 shares of common stock to Aspire Capital under the terms of the Purchase Agreement for gross proceeds of approximately $700,000.$789,000. As of the date of this filing,Quarterly Report on Form 10-Q, the Company does not have any remaining shares available to issue under the purchase agreement. The Company may not issue any additional shares of common stock to Aspire Capital under the Purchase Agreement 1,115,165unless shareholder approval is obtained.SeptemberJune 30, 2016,2017, the following common stock purchase warrants were outstanding:28.00 14.00 28.00 14.00 28.00 3.90 4.49 28.00 28.00 4.55 5.23 28.00 8.40 8.68 Number of shares Exercise price Expiration underlying warrants per share date 14,284 $ 28.00 July 2017 80,966 $ 28.00 August 2018 4,551,900 $ 4.55 October 2018 40,000* $ 5.23 October 2018 3,571 $ 28.00 December 2018 22,328* $ 8.40 October 2020 2,380 $ 8.68 May 2022 14,285,714 $ 0.40 June 2022 19,001,143 SeptemberJune 30, 2016,2017, there were 691,987694,163 shares available for future issuance under the 2016 Plan.16 Stock‑based compensation expense recognized for the three and nine months ended September 30, 2016 and 2015 was as follows:43,861 13,986 95,013 57,353 243,913 15,029 1,344,181 263,875 287,774 29,015 1,439,194 321,228 During the first quarter of 2016, the Company modified stock options of its former chief executive officer by extending the life of the awards, which were set to expire in March 2016, to coincide with their original life. This modification resulted in the recording of $781,266 of compensation expense, which is included in general and administrative expenses for the nine months ended September 30, 2016 in the accompanying statement of operations.ninesix months ended SeptemberJune 30, 20162017 is as follows:959,188 7.68 869,253 3.48 2,124,922 1,828,441 5.68 8.54 1,828,441 5.68 8.54 657,099 8.19 7.10 Options Outstanding Balance, December 31, 2016 1,849,359 $ 5.57 Granted 367,662 $ 0.72 $ 192,470 Forfeited (18,391 ) $ 5.63 Balance, June 30, 2017 2,198,630 $ 4.76 8.20 Exercisable at June 30, 2017 1,271,031 $ 5.60 7.69 SeptemberJune 30, 2016, 500,0002017, 540,935 shares remained available for issuance.(“ (“ASC 718-50”), the ability to purchase shares of the Company’s common stock at the lower of the offering date price or the purchase date price17$36,690$12,992 and $43,213$37,003 for the three and ninesix months ended SeptemberJune 30, 2017.respectively. Three Months Ended Six Months Ended June 30, June 30, 2017 2016 2017 2016 Research and development $ 33,217 $ 27,711 $ 80,783 $ 51,152 General and administrative 222,526 186,402 507,180 1,100,268 Total stock-based compensation $ 255,743 $ 214,113 $ 587,963 $ 1,151,420 $106,000$85,000 for the ninesix months ended SeptemberJune 30, 20162017 and 2015.2016. Pursuant to the terms of such lease, the Company’s future lease obligation is as follows:38,471 154,845 158,716 352,032 Year ending December 31, 2017* $ 77,903 2018 158,716 $ 236,619 Three Six months remaining in 2016$1.7$1.1 million of future services under these agreements as of SeptemberJune 30, 2016.2017. The Company’s actual contractual obligations will vary depending upon several factors, including the progress and results of the underlying services.18 As of June 30, 2017 Actual Pro forma (unaudited) (unaudited) Cash and cash equivalents $ 5,460,699 $ 26,710,699 Escrow funds from the sale of asset — 3,750,000 Total assets 6,047,731 31,047,731 Total liabilities 2,912,236 3,037,236 Preferred stock 4 4 Common stock 14,115 14,115 Additional paid in capital 76,915,611 76,915,611 Accumulated deficit (73,794,235 ) (48,919,235 ) Total stockholders' equity 3,135,495 28,010,495 23, 201610, 2017 and in our other filings with the SEC. Statements made herein are as of the date of the filing of this Quarterly Report on Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.20152016 appearing in our Annual Report on Form 10-K filed with the SEC on March 23, 2016.clinical-stage biopharmaceutical company that is developing innovative drug candidates to make a difference in the lives of patients with neurologicalneurologic and psychiatric disorders. Our lead drug candidate is CERC-301, which we currently intend to explore as a novel treatment for orphan neurologic indications. We also have atwo pre-clinical stage compounds, CERC-611 and CERC-406.clinical and preclinical compounds that we believe are best-in-class due to their unique mechanism of action. We are currently pursuing the development of two clinical Phase 2-stage product candidates CERC-301 and CERC-501, as well as two earlier stage programs.CERC‑301 is currently in a Phase 2 clinical trial as an oral, adjunctive treatment for patients with severe major depressive disorder, or MDD, who are failing to achieve an adequate response to their current antidepressant treatment, with a rapid onset of effect. We expect top-line data from this trial in November 2016. We received fast track designation by the FDA in 2013 for CERC‑301 for the treatment of MDD. summarized below: or inhibitors, of the N‑methyl‑D‑aspartate, or NMDA, receptor, a receptor subtype of the glutamate neurotransmitter system that is responsible for controlling neurologicalneurologic adaptation. We believe CERC‑301 has the potential to be a first‑in‑class medication providing a significant reduction in depressive symptoms in a matter of days, as compared to weeks or months with conventional therapies, because it specifically blocks the NMDA receptor subunit 2B, or NR2B,NR2B. We have conducted two Phase 2 studies with this drug candidate as a potential adjunctive treatment for major depressive disorders, or MDD, in which we observed that CERC-301 was well tolerated, but these trials did not show significant efficacy in MDD. Given its specific mechanism of action and demonstrated tolerability profile, we believe CERC-301 may provide rapid and significant antidepressant activity without the adverse side effect profile of non-selective NMDA receptor antagonists.also currently developing CERC‑501, which isnow embarking on a pre-clinical and clinical program to explore the use of CERC-301 in a Phase 2 clinical trial for smoking cessation. We expect top-line data from this trialorphan neurologic conditions.December 2016. We intend to develop CERC‑501 for treatment of substance use disorders, such as nicotine, alcohol, and/or cocaine addiction, and as an adjunctive treatment of MDD. If we receive approval for CERC‑501 for treatment of substance use disorders and for adjunctive treatment of MDD, we plan to further develop CERC‑501 for the concurrent treatment of MDD and substance use disorders, or co‑occurring disorders. CERC‑501 is a potent and selective kappa opioid receptor, or KOR, antagonist. KORs are believed to play key roles in modulating stress, mood and addictive behaviors, which form the basis of co‑occurring disorders. We are planning to conduct a Phase 2 clinical trial in inadequately treated subjects with MDD currently on antidepressants. Thereafter we intend to pursue additional studies focused on the adjunctive treatment of MDD and substance use disorders for19registration and commercialization. We also intend to pursue studies of the treatment of the co-occurrence of MDD and substance use disorders.On September 22, 2016, we acquired exclusive, worldwide rights to CERC-611 from Eli Lilly and Company, or Lilly. CERC-611 is a potent and selective Transmembranetransmembrane AMPA Receptor Regulatory Proteins,receptor regulatory proteins, or TARP, γ-8-dependent αá -8-dependent á-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid,, or AMPA, receptor antagonist, or inhibitor. TARPs are a recently discovered family of proteins that have been found to associate with, and modulate the activity of, AMPA receptors. TARP ã-8-dependent AMPA receptors are localized primarily in developmentthe hippocampus, a region of the brain with importance in complex partial TARPs are fairly recently discovered family of proteins that have been found to associate with and modulate the activity of AMPA receptors. TARP γ-8-dependent AMPA receptors are localized primarily in the hippocampus, a region of importance in complex partial seizures and particularly relevant to seizure origination and/or propagation. Research suggests that selectively targeting individual TARPs may enable selective modulation of specific brain circuits without globally affecting synaptic transmission, which may lead to an attractive efficacy, safety and tolerability profile. We expect to file an investigational new drug application, or IND, with the FDA and, if clearance is received, commence Phase 1 development of CERC-611 in 2017.CERC‑406 is our lead preclinical candidate from our proprietary platform of compounds that inhibit catechol‑O‑methyltransferase,catechol-O-methyltransferase, or COMT, within the brain, which we refer to as our COMTi platform. We are anticipating developingbelieve CERC‑406 may have the potential to be developed for the treatment of residual cognitive impairment symptomssymptoms.patients with MDD.Developmentcash and cash equivalents and $1.6 million in current liabilities. In August 2017, we sold all of CERC-301 andour rights to a prior product candidate, CERC-501, beyond the two currently ongoing Phase 2 clinical trials,to Janssen in exchange for initial gross proceeds of $25.0 million, of which $3.75 million was deposited into a twelve month escrow to secure certain indemnification obligations to Janssen, as well as a potential future $20.0 million regulatory milestone payment.otherexisting product candidates will not be possible unlessor any new product candidates we secure additional funding. If we are unabledecide to raise capital when needed or on attractive terms, we will be forcedpursue. We intend to delay, reduce or eliminateseek future funding for our research and development programs or any future commercialization efforts. We will seek to fund ourand operations through the salefrom further offerings of equity or debt financingssecurities, non-dilutive financing arrangements such as federal grants, collaboration agreements or other sources, including potential collaborations and federal grants.out-licensing arrangements. However, we may be unable to raise additional funds or enter into such other agreements when neededor transactions on favorable terms, or at all. If we fail to raise capital or enter into such other arrangements as, and when, needed,or transactions, we may have to significantlyexperience a significant delay, scale backscale-back or discontinue the development and/or commercialization of one or more of our product candidates.SeptemberJune 30, 2016,2017, we had an accumulated deficit of $68.4$73.8 million. We expect to incur significant expenses and operating losses for the foreseeable future as we continue the development and clinical trials of and seek marketing approval for, our product candidates.Our recurring losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern and our ability to continue as a going concern will require us to obtain additional financing to fund our operations.and private placements of our common stock and convertible preferred stock.stock, and the issuance of debt. Our ability to become and remain profitable depends on our ability to generate product revenue. We do not expect to generate any product revenue unless, and until, we obtain marketing approval for, and commercialize, any of our product candidates. There can be no assurance as to whether or when we will achieve profitability. The Aspire Capital TransactionOn September 8, 2016,entered into a $15 million common stock purchase agreement, or the Purchase Agreement, with Aspire Capital Fund, LLC, or Aspire Capital, pursuant to which Aspire Capital committed to purchase up to an aggregate of $15 million of sharessold all of our common stock over the 30-month term of the Purchase Agreement. Under the Purchase Agreement, on any trading day that we select on which the closing price of our common stock exceeds $0.50, we may,rights to a prior product candidate, CERC-501, to Janssen in our discretion, present a purchase notice directing Aspire Capital to purchase up to 50,00020shares of common stock per day, up to $15 million of our common stock in the aggregate at a per share price calculated by reference to the prevailing market price of our common stock. Upon execution of the Purchase Agreement, we issued and sold to Aspire Capital 250,000 shares of common stock at a price per share of $4.00,exchange for initial gross proceeds of $1$25.0 million, and concurrently enteredof which $3.75 million was deposited into a registration rights agreement with Aspire Capital registering the shares of the Company’s common stock that have been and may be issuedtwelve month escrow to Aspire Capital under the Purchase Agreement. Additionally,secure certain indemnification obligations to Janssen, as consideration for Aspire Capital entering into the Purchase Agreement, we issued 175,000 shares of common stockwell as a commitment fee. The net proceeds of the initial purchase of common stock by Aspire Capital, after offering expenses, were approximately $900,000. As of September 30, 2016, we had sold 250,000 shares of common stock to Aspire Capital under the Purchase Agreement. Subsequent to September 30, 2016, we sold an additional 188,998 shares of common stock to Aspire Capital underpotential future $20.0 million regulatory milestone payment. Further, the terms of the Purchase Agreementagreement provide that Janssen will assume ongoing clinical trials and be responsible for gross proceeds of approximately $700,000. As of the date of this filing, we may issue to Aspire Capital under the Purchase Agreement 1,115,165 shares of common stock.License of CERC-611On September 22, 2016, we entered into an exclusive license,any new development and commercialization agreement, or the Exclusive License Agreement, with Lilly pursuant to which we received exclusive, global rights to develop and commercialize LY3130481, now designated as CERC-611. Our rights under the Exclusive License Agreement are exclusive, even as to Lilly, for the term of the Exclusive License Agreement, with the right to grant sublicenses through multiple tiers. Lilly retains rights for internal, non-clinical research purposes. We are obligated under the Exclusive License Agreement to use commercially reasonable efforts to develop and commercialize CERC-611 at our expense. If Lilly obtains a license for any future patent rights or know-how necessary for the development, commercialization or manufacture under the Exclusive License Agreement, we have the right, but not the obligation, to consent to include such patent rights or know-how, as well as the right to terminate any such license in our discretion.Pursuant to the Exclusive License Agreement, we paid an initial upfront payment of $750,000, and the remaining upfront payment of $1.25 million is due after the first subject is dosed with CERC-611 in a multiple ascending dose study. We recorded the upfront amount of $2.0 million as a research and development expense for the three and nine months ended September 30, 2016 in the accompanying statement of operations. The terms of the Exclusive License Agreement also require additional one-time payments be made upon achievement of development and commercialization milestones, including the first commercial sale, of up to $67.5 million. Upon commercialization, we are obligated to pay Lilly milestone payments and a royalty in the mid-single digits to low double digits based on net sales. Unless terminated earlier, the Exclusive License Agreement will remain in effect, on a country-by-country basis and product-by-product basis, until the parties’ royalty obligations end.·expenses incurred under agreements with third‑party contract research organizations and investigative sites that conduct our clinical trials, preclinical studies and regulatory activities;21
payments made to contract manufacturers for drug substance and acquiring, developing and manufacturing clinical trial materials; and·payments made to contract manufacturers for drug substance and acquiring, developing and manufacturing clinical trial materials; and·payments related to acquisitions of our product candidates and preclinical platform, milestone payments, and fees associated with the prosecution and maintenance of patents.···· development program and subsequently by product candidate once a product candidate has been selected for development. Product candidates in later stage clinical development generally have higher research and development expenses than those in earlier stages of development, primarily due to the increased size and duration of the clinical trials. As we advance our product candidates through clinical development, we expect that the amount of our research and development spending allocated to external spending relative to internal spending will continue to grow for the foreseeable future, while our internal research and development spending should grow at a slower and more controlled pace.SeptemberJune 30, 2016,2017, we had eight full‑timethree full-time employees who were primarily engaged in research and development. We anticipate that our research and development costs, including the need to hire additional research and development employees, may increase in the future.investor and public relations expensespatent costs and salaries, benefits and related costs for executive and other personnel, including stock‑based compensation and travel expenses. Other general and administrative expenses include facility‑related costs, communication expenses and professional fees for legal, including patent‑related expenses, consulting, and tax and accounting services, insurance, depreciation and general corporate expenses.We anticipate that our general and administrative expenses will increase in the future with continued research, development and potential commercialization of our existing and future product candidates and expanded compliance obligations of operating as a public company. These increases will likely include greater costs for insurance, costs related to the hiring of additional personnel, payments to outside consultants and investor relations providers, and costs for legal and accounting professionals, among other expenses. Additionally, if and when we believe a marketing approval of a product candidate appears likely, we anticipate an increase in payroll and expense as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of our product candidates.Change in Fair Value of Warrant Liability, Unit Purchase Option Liability and Investor Rights ObligationIn connection with the issuance of our term debt facility in August 2014, we issued warrants to purchase 625,208 shares of Series B convertible preferred stock. Upon the closing of our initial public offering, or IPO, in October222015, these warrants became warrants to purchase 22,328 shares of common stock, in accordance with their terms. These warrants represent a freestanding financial instrument that is indexed to an obligation, which we refer to as the Warrant Liability. These warrants are classified as a liability at fair value. This liability is remeasured at each balance sheet date and the change in fair value is recorded within our statement of operations.As part of our IPO, the underwriter of our IPO received a unit purchase option, or UPO, to purchase up to 40,000 units, with a unit consisting of one share of our common stock, one Class A warrant to purchase one share of our common stock and one Class B warrant to purchase one-half share of our common stock. The UPO is classified as a liability at its fair value. This liability is remeasured at each balance sheet date and the change in fair value is recorded within our statement of operations.Our obligation to issue additional shares of our Series B preferred stock as part of the Series B preferred stock offering was accounted for as a freestanding financial instrument, which we referred to as the Investor Rights Obligation. The Investor Rights Obligation expired upon the closing of our IPO in accordance with its terms, and the related liability was reduced to zero at that time.Interest Expense, Net During the nine months ended September 30, 2016, there were no material changes tocriticalsignificant accounting policies and use of estimates from those disclosedare more fully described in Item 7Note 2 to the audited financial statements appearing at the end of our Annual Report on Form 10-K, filedwe believe the following accounting policies are critical to the portrayal of our financial condition and results. We have reviewed these critical accounting policies and estimates with the SEC on March 23, 2016, except with respect toaudit committee of our grant revenue recognition policy, which we adopted in connection with our receiptboard of the grant awarded in April 2016 from the National Institute on Drug Abuse at the National Institutes of Health, which provided additional resources for our ongoing Phase 2 clinical trial of CERC-501, or the NIDA Grant.SeptemberJune 30, 20162017 and 2015SeptemberJune 30, 20162017 and 2015:2016:23 Three Months Ended June 30, 2017 2016 (in thousands) Grant revenue $ 158 $ 650 321 $321,000approximately $158,000 for the three months ended SeptemberJune 30, 2016. The2017. We recognized approximately $650,000 of grant revenue recognized duringfor the quarter was fromthree months ended June 30, 2016 for the NIDA Grant,grant. The Company's grant revenues are dependent upon the timing and progress of the underlying studies and development activities. We had a reduced level of research and development activities in the second quarter of 2017 compared to the prior year period, which provided additional resources for the ongoing Phase 2 clinical trial of CERC-501. We did not haveresulted in a reduction in grant revenue inunder the 2015 quarter.SeptemberJune 30, 20162017 and 2015:2016:1,142 650 896 94 2,019 17 42 400 350 44 14 64 87 4,582 1,237 Three Months Ended June 30, 2017 2016 (in thousands) CERC-301 $ 34 $ 677 CERC-501 185 1,270 CERC-611 9 — CERC-406 1 35 Internal expenses not allocated to programs: Salaries, benefits and related costs 199 433 Stock-based compensation expense 34 28 Other 32 59 $ 494 $ 2,502 $4.6 million$494,000 for the three months ended SeptemberJune 30, 2016, an increase2017, a decrease of approximately $3.3$2.0 million compared to the three months ended SeptemberJune 30, 2015. This increase was largely due to the $2.0 million total upfront payments recorded in connection with the license of CERC-611 in September 2016. Additionally, costsCosts for CERC-501 increasedCERC-301 decreased by $802,000,$643,000, primarily due to the significant enrollment activity experienced duringcompletion of the third quarter for our ongoing Phase 2 clinical trial for smoking cessation. Only limited expenses were incurredthe adjunctive treatment of MDD. Costs for CERC-501 indecreased by $1.1 million from the 2015prior year period as enrollment for our ongoing Phase 2 clinical trial with CERC-501 did not begin untilwas completed in the firstfourth quarter of 2016. Finally, costs for CERC-301 increased by $492,000, primarily dueSubsequent to the significant enrollment activity experienced during the third quarter forended June 30, 2017, we sold all of our ongoing Phase 2 clinical trial of CERC-301.556 403 725 194 244 15 178 110 1,703 722 Three Months Ended June 30, 2017 2016 (in thousands) Salaries, benefits and related costs $ 589 $ 603 Legal, consulting and other professional expenses 523 568 Stock-based compensation expense 222 186 Other general and administrative expenses 105 279 $ 1,439 $ 1,636 $1.7$1.4 million for the three months ended SeptemberJune 30, 2016, an increase2017, a decrease of $981,000$0.2 million compared to the three months ended SeptemberJune 30, 2015. Legal, consulting and other professional expenses increased by $531,000, attributable2016. This decrease was primarily to audit, legal, and other costs resulting from becoming a public company in October 2015, as well as certain financing expenses. Stock-based compensation expense increased by $229,000 due to a significant increaseefforts to reduce certain other operating costs in the number of options outstanding from September 30, 2015order to September 30,preserve cash.242016. Salaries, benefits and related costs increased by $153,000, attributable primarily to salary increases effected at the close of our IPO, as well as an increase in our headcount. and Investor Rights Obligationlossnet gain on the change in fair value of our warrant liability and UPO liability and investor rights obligation of $101,000$2,000 during the three months ended SeptemberJune 30, 20162017 compared to a net gain of $1.5 million during$91,000 for the three months ended SeptemberJune 30, 2015. 2016.loss on the change in fair value during the three months ended September 30, 2016 was due to the increase in fair value of our warrant liability and UPO liability, both attributable to the increase in our common stock price at September 30, 2016 compared to the previous quarter-end.The $1.5 million$91,000 gain on the change in fair value during the 2015 quarter2016 period was primarily due to the decreaseincrease in fair value of the investor rights obligation from $1.4 million as of June 30, 2015warrant liability and UPO liability. These increases were attributable to $0 as of September 30, 2015. The fair value ofa decrease in our common stock price compared to the investor rights obligation decreased to $0 as of September 30, 2015 due to our pending IPO. The investor rights obligation expired in October 2015 upon the closing of our IPO and does not affect any reporting periods thereafter.$93,000$101,000 for the three months ended SeptemberJune 30, 20162017 compared to the three months ended SeptemberJune 30, 2015.2016. The decrease was primarily due to a decrease in interest associated with a reduction in the principal balance of our secured term loan facility.NineSix Months Ended SeptemberJune 30, 20162017 and 2015ninethree months ended SeptemberJune 30, 2017 and 2016: Six Months Ended June 30, 2017 2016 (in thousands) Grant revenue $ 542 $ 650 and 2015:972 25Grant revenue was $972,000 for the nine months ended September 30, 2016. The revenue recognized during the period wasderived from the NIDA Grant.grant. Our grant revenues are dependent upon the timing and progress of the underlying studies and development activities. We did not havehad a reduced level of research and development activities in the current year period compared to the prior year period, which resulted in a reduction in grant revenue inunder the 2015 period.ninethree months ended SeptemberJune 30, 20162017 and 2015:2016:2,534 2,202 3,145 1,197 2,019 121 200 1,285 978 95 57 178 202 9,377 4,836 Six Months Ended June 30, 2017 2016 (in thousands) CERC-301 $ 122 $ 1,392 CERC-501 582 2,249 CERC-611 41 — CERC-406 2 104 Internal expenses not allocated to programs: Salaries, benefits and related costs 549 884 Stock-based compensation expense 83 51 Other 68 115 $ 1,447 $ 4,795 $9.4$1.4 million for the ninesix months ended SeptemberJune 30, 2016, an increase2017, a decrease of $4.5approximately $3.3 million compared to the ninesix months ended SeptemberJune 30, 2015. This increase was largely2016. Costs for CERC-301 decreased by $1.3 million from the prior year period, primarily due to the $2.0 million total upfront payment recorded in connection withcompletion of the license of CERC-611 in September 2016. Additionally, costs for CERC-501 increased by $1.9 million, driven by the significant enrollment activity experienced in the second and third quarters for our ongoing Phase 2 clinical trial for smoking cessation, offsetthe adjunctive treatment of MDD. Costs for CERC-501 decreased by $1.7 million from the $1.0 million of costs incurred in the 2015prior year period related to the in-licensing of CERC-501. Further, we experienced an increase in costs for CERC-301 of $332,000, driven by the significant enrollment activity experienced in the second and third quarters foras our ongoing Phase 2 clinical trial. We also experienced an increasetrial with CERC-501 was completed in the fourth quarter of $307,000 in salaries, benefits and related costs, driven primarily by salary increases effected at2016. Subsequent to the closequarter ended June 30, 2017, we sold all of our IPO and an increase in our headcount.The following table summarizes our general and administrative expenses for the nine months ended September 30, 2016 and 2015:1,808 1,264 2,186 665 1,344 264 651 305 5,989 2,498 Six Months Ended June 30, 2017 2016 (in thousands) Salaries, benefits and related costs $ 922 $ 1,252 Legal, consulting and other professional expenses 1,103 1,460 Stock-based compensation expense 505 1,100 Other general and administrative expenses 239 474 $ 2,769 $ 4,286 $6.0$2.8 million for the ninesix months ended SeptemberJune 30, 2016, an increase2017, a decrease of $3.5$1.5 million compared to the ninesix months ended SeptemberJune 30, 2015.2016. Salaries, benefits and related costs decreased by $330,000 primarily due to a temporary reduction in headcount and certain employee benefits. Legal, consulting and other professional expenses increaseddecreased by $1.5 million,$357,000, attributable primarily to audit, legal, and otherthe prior year costs resulting from becoming a public company in October 2015, as well as certain financing expenses.not recurring. Stock-based compensation expense increaseddecreased by $1.1 million,$595,000, which was primarily driven by the modification of grants made to our former chief executive officer in the first quarter of 2016 in which the exercise term was extended, as well as the significant increase in the number of options outstanding from September 30, 2015 to September 30, 2016. Salaries, benefits and related costs increased by $544,000,26attributable primarily to salary increases effected at the close of our IPO, as well as an increase in our headcount. Further, otherOther general and administrative expenses increaseddecreased by $346,000$235,000 due to business development expenses andefforts to reduce certain other costs. and Investor Rights Obligationand investor rights obligation of $58,000$2,000 during the ninesix months ended SeptemberJune 30, 20162017 compared to a net gain of $1.1 million during$44,000 for the ninesix months ended SeptemberJune 30, 2015. 2016.$58,000 loss on the change in fair value during the nine months ended September 30, 2016 was due to the increase in fair value of our warrant liability and UPO liability, both attributable to the increase in our common stock price at September 30, 2016 compared to December 31, 2015.The $1.1 million$44,000 gain on the change in fair value during the 20152016 period was primarily due to the decrease in fair value of the investor rights obligation from $1.1 million as of December 31, 2014warrant liability and UPO liability. These decreases were attributable to $0 as of September 30, 2015. The fair value ofa decrease in our common stock price compared to the investor rights obligation decreased to $0 as of September 30, 2015 due to our pending IPO. The investor rights obligation expired in October 2015 upon the closing of our IPO and does not affect any reporting periods thereafter.$253,000$194,000 for the ninesix months ended SeptemberJune 30, 20162017 compared to the ninesix months ended SeptemberJune 30, 2015.2016. The decrease was primarily due to a decrease in interest associated with a reduction in the principal balance of our secured term loan facility.$14.8$3.8 million and $6.8$5.1 million for the ninesix months ended SeptemberJune 30, 20162017 and 2015,2016, respectively. At SeptemberJune 30, 2016,2017 we had an accumulated deficit of $68.4$73.8 million, net working capital of $2.0$4.3 million and cash and cash equivalents of $8.8$5.5 million. To date, we have not generated any revenues from the sale of products and we do not anticipate generating any revenues from the sale of our product candidates for the foreseeable future. Historically, we have financed our operations principally through private and public placements of common andstock, private placements of convertible preferred stock and convertible and nonconvertible debt, as well asdebt. In April 2017, we raised gross proceeds of $5.0 million from a private placement of our IPOequity securities. On August 14. 2017, we sold all of our rights to CERC-501 to Janssen in October 2015.and to continue to execute our strategy. Development of CERC-301 and CERC-501 beyond the two ongoing Phase 2 clinical trials, as well as the development ofOur strategy is to seek funding for our other product candidates, will not be possible unless we secure additional funding. We anticipate funding our operations over the next several years from further offerings of equity or debt securities, as well as non-dilutive financing arrangements such as federal grants, collaboration agreements or collaboration agreements.out-licensing arrangements, and to explore strategic alternatives such as an acquisition, merger, or business combination. Based on our current research and development plans we expect that our existing cash and cash equivalents, together with the initial proceeds from the Janssen sale, will enable us to fund our operating expenses and capital expenditure requirements through the end of 2016. These factors raise significant doubt about our ability to continue as a going concern. We have the potential to raise additional cash through the Purchase Agreement with Aspire Capital.entered intoreceived a $7.5 million secured term loan from a finance company. The loan iswas secured by a lien on all of our assets, excluding intellectual property, which iswas subject to a negative pledge. The loan containsagreement contained certain additional nonfinancial covenants. In connection with the loan agreement, our cash and investment accounts arewere subject to account control agreements with the finance company that give the finance company the right to assume control of the accounts in the event of a loan default. Loan defaults arewere defined in the loan agreement and include, among others, the finance company’s determination that there iswas a material adverse change in our operations.operations, other than adverse results of clinical trials. Interest on the loan27is was at a rate of the greater of 7.95%, or 7.95% plus the prime rate as reported in The Wall Street Journaleffective from loan inception to December 16, 2015 was 7.95%. Effective December 17, 2015, the prime rate as reported by The Wall Street Journal increased 0.25% resulting in an increase to the current interest rate, which was 8.20% as of SeptemberJune 30, 2016.2017 was 8.95%. The loan was interest‑only through May 2015,for nine months, and iswas repayable in equal monthly payments of principal and interest of approximately $305,000 over 27 months, which began in June 2015. The loan matures in the third quarter of 2017 and had an outstanding balance as of SeptemberJune 30, 20162017 of $3.2$0.6 million.ninesix months ended SeptemberJune 30, 20162017 and 2015:2016:(10,860) (6,615) (26) (20) (1,461) (1,799) (12,347) (8,434) Six Months Ended June 30, 2017 2016 (in thousands) Net cash used in: Operating activities $ (3,998 ) $ (7,426 ) Investing activities (2 ) (19 ) Financing activities 4,333 (1,837 ) Net increase (decrease) in cash and cash equivalents $ 333 $ (9,282 ) $10.9$4.0 million for the ninesix months ended SeptemberJune 30, 2017 and consisted primarily of a net loss of $3.8 million and decreases of $683,000 and $222,000 in accounts payable and accrued expenses, respectively. These were offset by non‑cash stock-based compensation expense of $588,000.$14.8$8.7 million and an increase in grants receivable of $379,000,$650,000, offset by non‑cashnon-cash stock-based compensation expense of $1.4$1.2 million and an increase in accrued expenses and other liabilities of $2.5 million.used in operatingprovided by (used in) financing activities$6.6$4.3 million for the ninesix months ended SeptemberJune 30, 2015 and consisted primarily of a net loss of $6.8 million and a $1.1 million non-cash gain on the change in fair value of our warrant liability and investor rights obligation. These were offset by non-cash stock-based compensation expense of $321,000, non-cash interest expense of $205,000, an increase in accounts payable and accrued expenses and other liabilities of $497,000, and a decrease in prepaid expenses and other assets of $255,000.Net cash used in investing activitiesNet cash used in investing activities is limited to purchases of property and equipment consisting of computers and software and furniture and equipment. Our net cash used in investing activities was $26,000 for the nine months ended September 30, 2016 and $20,000 for the prior year period.Net cash used in financing activitiesNet cash used in financing activities was $1.5 million for the nine months ended September 30, 2016,2017, which consisted of gross proceeds of $1.7 million from the sale of common stock under an equity distribution agreement with the Maxim Group and $4.6 million, net from a private placement of equity securities to Armistice Capital Master Fund Ltd, offset by principal payments on our term loan of $2.5 million offset by gross proceeds from the sale of common stock to Aspire Capital under the Purchase Agreement.ninesix months ended SeptemberJune 30, 2015,2016, which consisted primarily of principal payments on our term loan of $1.0 million and the payment of offering costs related to our IPO of $775,000.our cash expenditures to increase in the near term as we fund the development of our programs. Following the closing of our IPO in October 2015, we expect to continue to incur significant legal, accounting28we were not previously requiredrelate to incur asbeing a privatepublic company. In addition, the Sarbanes‑Oxley Act, as well as rules adopted by the Securities and Exchange Commission, or SEC, and the NASDAQ Stock Market, requires public companies to implement specified corporate governance practices that were previouslyare inapplicable to us as a private company.companies. We expect these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time‑consuming and costly. We may also acquire or in‑license new product candidates. Based on our research and development plans, we expect that our existing cash and cash equivalents, together with the initial proceeds of $25.0 million from the Janssen sale, of which $3.75 million will be held in escrow for twelve months, which will enable us to fund our operating expenses and capital expenditure requirements through the end of 2016, which raises substantial doubt about our ability to continue as a going concern.2018. We will require substantial additional financing to fund our operations and to continue to executedevelop our strategy. Developmentproduct candidates. Our strategy is to seek funding for our operations from further offerings of CERC-301equity or debt securities, non-dilutive financing arrangements such as federal grants, collaboration agreements or out-licensing arrangements, and CERC-501 beyond the two currently ongoing Phase 2 clinical trials,to explore strategic alternatives such as well as the developmentan acquisition, merger, or business combination. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings, grant funding and exploring the possibility of entering into collaboration agreements.continue to executefurther develop our strategy. We plan to meetproduct candidates and we anticipate funding our capital requirements primarily through a combinationoperations from further offerings of equity andor debt financings, collaborations, strategic alliances,securities, non-dilutive financing arrangements such as federal grants, collaboration agreements or out-licensing arrangements, and marketing distributionto explore strategic alternatives such as an acquisition, merger, or licensing arrangements. Therebusiness combination. However, there can be no assurance that we will be able to obtain additional equity or debt financing, or strategic alternatives, on terms acceptable to us, if at all. If we raise additional funds through collaboration and licensing agreements with third parties, it may be necessary to relinquish valuable rights to our product candidates, technologies or future revenue streams or to grant licenses on terms that may not be favorable to us. There can also be no assurance that the exploration of strategic alternatives will result in any such transaction. Our future capital requirements will depend on many forward‑looking factors, including:·the progress and results of the Phase 2 clinical program for CERC‑301 and changes to our development plan with respect to CERC‑301, if any;·the progress and results of the clinical trials being conducted, or contemplated being conducted, for CERC‑501 and changes to our development plan with respect to CERC‑501, if any;·our plan and ability to enter into collaborative agreements for the development and commercialization of our product candidates;·the number and development requirements of any other product candidates that we may pursue;·the scope, progress, results and costs of researching and developing our product candidates or any future product candidates, both in the United States and in territories outside the United States;·the costs, timing and outcome of regulatory review of our product candidates or any future product candidates, both in the United States and in territories outside the United States;·the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution for any of our product candidates for which we receive marketing approval;·the costs and timing of any product candidate acquisition or in‑licensing opportunities;·any product liability or other lawsuits related to our products;·the expenses needed to attract and retain skilled personnel;29
the progress and results of any clinical trials for CERC-301
the number and development requirements of any other product candidates that we may pursue; ·the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; and
the scope, progress, results and costs of researching and developing our product candidates or any future product candidates, both in the United States and in territories outside the United States; ·the costs involved in preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending our intellectual property‑related claims, both in the United States and in territories outside the United States.off‑balanceoff-balance sheet arrangements as defined by applicable SEC rules and regulations.Further, in 2014 we entered into our term debt facility, which carries a variable interest rate that is the greater of 7.95%, or 7.95% plus the prime rate as reported in The Wall Street Journal minus 3.25%. As a result, increases in market interest rates would generally result in increased interest expense. Given the stable nature of prime rates, the Company does not expect our operating results or cash flows to be materially affected by changes in market interest rates through the date of the maturity of our term debt facility in August 2017. The interest rate effective as of September 30, 2016 was 8.20%.SeptemberJune 30, 20162017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.30 the risk factors stated below and the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015,2016, filed with the SEC on March 23, 2016,10, 2017, which could materially affect our business, financial condition or future results. Except as set forth below, ourOur risk factors as of the date of this Quarterly Report on Form 10-Q have not changed materially from those described in our Annual Report on Form 10-K. However, the risks described below and in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results of operations and the trading price of our common stock.Our recurring operating losses and negative cash flows from operations have raised substantial doubt regarding our ability to continue as a going concern.Our recurring operating losses and negative cash flows from operations raise substantial doubt about our ability to continue as a going concern. We have no current source of revenues to sustain our present activities, and we do not expect to generate revenues until, and unless, the FDA or other regulatory agencies approve our product candidates and we successfully commercialize any such product candidates. Accordingly, our ability to continue as a going concern will require us to obtain additional financing to fund our operations. The perception of our inability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence by investors, suppliers and employees.If we are unable to enroll appropriate subjects in clinical trials, we will be unable to complete these trials on a timely basis or at all.Identifying and qualifying subjects to participate in clinical trials of our product candidates is critical to our success. The timing of our clinical trials depends on the speed at which we can recruit appropriate subjects to participate in testing our product candidates as well as completion of required follow‑up periods. If subjects are unwilling to participate in our trials because of negative publicity from adverse events in the biotechnology industry or for other reasons, including competitive clinical trials for similar subject populations, the timeline for recruiting subjects, conducting trials and obtaining marketing approval of potential products may be delayed. For example, we have experienced delays in enrolling patients in our CERC-301 Phase 2 clinical trial, due in part we believe to the highly competitive environment for recruiting patients to clinical trials studying depression. In addition, we believe the decision by the National Institutes of Health to discontinue a Phase 2 trial for CERC-501 was due in part to difficulties experienced in enrolling patients into the trial.Difficulty or delays in patient recruitment into our trials could result in increased costs, delays in advancing our product development, delays in testing the effectiveness of our technology or termination of the clinical trials altogether. Many factors affect subject enrollment, including:the size and nature of the subject population;the number and location of clinical sites we enroll;31the proximity of subjects to clinical sites;perceived risks and benefits of the product candidate under trial;competition with other companies for clinical sites or subjects;competing clinical trials;the eligibility and exclusion criteria for the trial;the design of the clinical trial;effectiveness of publicity for the clinical trials;inability to obtain and maintain subject consents;risk that enrolled subjects will drop out or be withdrawn before completion; andclinicians’ and subjects’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.There is significant competition for recruiting subjects in clinical trials for product candidates for the treatment of depression, substance use disorders and impaired executive function, and we or our partners may be unable to enroll the subjects we need to complete clinical trials on a timely basis or at all. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials, and while we have agreements governing their committed activities, we have limited influence over their actual performance. If we are unable to enroll sufficient subjects in our clinical trials, if enrollment is slower than we anticipate, or if our clinical trials require more subjects than we anticipate, our clinical trials may be delayed or may not be completed. If we experience delays in our clinical trials, the commercial prospects of our product candidates will be harmed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.The sale of our common stock to Aspire Capital may cause substantial dilution to our existing stockholders and the sale of the shares of common stock acquired by Aspire Capital could cause the price of our common stock to decline.We have registered for sale the 175,000 commitment shares and the 250,000 initial purchase shares that we have issued, and 3,461,010 additional shares that we may sell, to Aspire Capital from time to time under the Purchase Agreement. Approximately $14 million, or up to 3,461,010 shares, remains available to be issued to Aspire Capital under the Purchase Agreement as of September 30, 2016. Depending on a variety of factors, including market liquidity of our common stock, the sale of shares under the Purchase Agreement may cause the trading price of our common stock to decline.Aspire Capital may ultimately purchase all, some or none of the common stock that can be sold under the Purchase Agreement. Aspire Capital may sell all, some or none of our shares that it holds or comes to hold under the Purchase Agreement. Sales by Aspire Capital of shares acquired pursuant to the Purchase Agreement may result in dilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock by Aspire Capital in such offering, or anticipation of such sales, could cause the trading price of our common stock to decline or make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire. However, we have the right under the Purchase Agreement to control the timing and32amount of sales of our shares to Aspire Capital, and the Purchase Agreement may be terminated by us at any time at our discretion without any penalty or cost to us.ProceedsUnregistered SalesProceeds.Equity SecuritiesOn September 8, 2016, we issuedour securities, consisting of 2,345,714 shares of our common stock at a purchase price of $0.35 per share and sold to Aspire Capital 250,0004,179 shares of our newly-created Series A Convertible Preferred Stock, or Series A Preferred Stock, which shares of preferred stock were convertible into 11,940,000 shares of common stock at a conversion price of $0.35 per share and have a stated value of $4.00, for gross proceeds$1,000 per share. The number of $1 million and issued to Aspire Capital 175,000 shares of common stock as a commitment fee as consideration for entering intothat were purchased in the Purchase Agreement, both in transactions exempt from registration under the Securities Act, in reliance on Section 4(a)(2) thereof and Rule 506 of Regulation D thereunder. Aspire Capital represented that it was an “accredited investor,” as defined in Regulation D, and was acquiring the Securities for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. On September 16, 2016, we filed a Registration Statement on Form S-1 (File No. 333-213676) that registered the aggregate of 425,000 sharesprivate placement constituted approximately 19.99% of our common stock sold to Aspire on September 8, 2016. This Registration Statement on Form S-1 was declared effective by the SEC on September 28, 2016.Use of Proceeds from Registered SecuritiesInitial Public OfferingPursuant to the Registration Statement on Form S-1 (File No. 333-204905), as amended, that was declared effective by the SEC on October 14, 2015, we registered the units to be sold in our IPO (including 600,000 units with respect to an over-allotment option granted by us to the underwriters in the offering). Each unit consisted of one shareoutstanding shares of common stock one Class A warrant immediately prior to the closing of the private placement. As part of this private placement, Armistice also received warrantsto purchase one shareup to 14,285,714 shares of our common stock at an exercise price of $4.55$0.40 per share and one Class B warrant to purchase one-half shareshare. Under the terms of the agreement, the Series A Preferred Stock were not convertible into common stock, at an exercise priceand the warrants were not exercisable until we received approval of $3.90 per full share (the “units”). Maxim Group LLC actedthe private placement by the our stockholders as required by the sole book-running manager,rules and Laidlaw ®ulations of the NASDAQ Capital Market. We received stockholder approval for this transaction on June 30, 2017. The Company (UK) acted as the lead manager.On October 20, 2015, we sold a total of 4,000,000 unitsreceived $4.65 million in the IPO at an initial public offering price of $6.50 per unit for gross proceeds of $26.0 million. The net proceeds from the private placement. The securities issued pursuant to the agreement were issued under the exemption from registration provided by Section 4(a)(2) of the IPO, after underwriting discounts, commissionsSecurities Act of 1933, as amended, and expenses,the rules and before offering expenses, were approximately $23.6 million.November 23, 2015, the underwriterJuly 6, 2017, Armistice converted all of the IPO exercised its over-allotment option for 20,000outstanding shares of Series A Preferred Stock into 11,940,000 shares of common stock, 551,900 Class A warrants to purchase one share of common stock and 551,900 Class B warrants to purchase one-half share of common stock for additional gross proceeds of $135,319.There have been no material changes in the planned use of proceeds from our IPO, as described in our final prospectus filed with the SEC on October 15, 2015 pursuant to Rule 424(b)(4) under the Securities Act related to the IPO.33Exhibit
NumberDescription of Exhibit 3.1 Amended and Restated Certificate of Incorporation of Cerecor Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on October 20, 2015). 3.2 3.1.1Form of Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible Preferred Stock of Cerecor Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on April 28, 2017). 3.2 Amended and Restated Bylaws of Cerecor Inc. (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Current Report on Form 8-K filed on October 20, 2015). 4.1 Second Amended and Restated Investors' Rights Agreement, dated as of July 11, 2014 (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1 filed on June 12, 2015). 4.2 Form of Warrant to Purchase Shares of Common Stock issued in connection with the sale of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 filed on June 12, 2015). 4.3 Form of Warrant to Purchase Shares of Common Stock issued in connection with the sale of Series A-1 Convertible Preferred Stock, as amended by the Amendment to Common Stock Warrants, dated as of July 11, 2014 (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-1 filed on June 12, 2015). 4.4 Form of Warrant to Purchase Shares of Common Stock, issued to CIFCO International Group and its affiliate (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-1 filed on June 12, 2015). 4.5 Form of Warrant to Purchase Shares of Common Stock issued in connection with the issuance of convertible promissory notes from April 2014 through June 2014 (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-1 filed on June 12, 2015). 4.6 Warrant Agreement, dated as of August 19, 2014, issued to Hercules Technology Growth Capital, Inc. (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-1 filed on June 12, 2015). 4.7 Form of Unit Purchase Option (incorporated by reference to Annex IV of Exhibit 1.1 to the Registration Statement on Form S-1 filed on June 12, 2015). 4.9 Form of Class A Warrant Agreement (incorporated by reference to Exhibit 4.9 to the Registration Statement on Form S-1 filed on October 13, 2015). 4.10 4.1Specimen Class A Warrant Certificate (incorporated by reference to Exhibit 4.10 to the Registration Statement on Form S-1 filed on October 13, 2015). 4.11 Form of Class B Warrant Agreement (incorporated by reference to Exhibit 4.11 to the Registration Statement on Form S-1 filed on October 13, 2015). 4.12 Specimen Class B Warrant Certificate (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form S-1 filed on October 13, 2015). 4.13 Specimen Unit Certificate (incorporated by reference to Exhibit 4.13 to the Registration Statement on Form S-1 filed on October 13, 2015). 344.14 4.14 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.3 to the Registration Statement on Form S-8 filed on May 20, 2016). 10.1 4.15†Exclusive LicenseForm of Warrant to Purchase Common Stock of Cerecor Inc. (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on April 28, 2017). 10.1 Securities Purchase Agreement, dated as of September 22, 2016,April 27, 2017 (incorporated by and between Cerecor Inc. and Eli Lilly and Company.reference to Exhibit 10.1 to the Current Report on Form 8-K filed on April 28, 2017).Addendum to Exclusive LicenseRegistration Rights Agreement, dated as of October 13, 2016,April 27, 2017 (incorporated by and between Cerecor Inc. and Eli Lilly and Company.reference to Exhibit 10.2 to the Current Report on Form 8-K filed on April 28, 2017).31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 *Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. XBRL Instance Document. XBRL Taxonomy Extension Schema Document. XBRL Taxonomy Extension Calculation Linkbase Document. XBRL Taxonomy Extension Definition Linkbase Document. XBRL Taxonomy Extension Label Linkbase Document. XBRL Taxonomy Extension Presentation Linkbase Document. † Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment pursuant to Rule 406 under the Securities Act of 1933.35Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.Cerecor Inc.SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Cerecor Inc. /s/ Uli Hacksell Uli Hacksell Date: August 14, 2017 Date: November 8, 2016/s/ Mariam E. Morris Mariam E. Morris Date: August 14, 2017 Date: November 8, 201636