Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 06, 2020 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2020 | |
Entity File Number | 001-34236 | |
Entity Registrant Name | BIOSPECIFICS TECHNOLOGIES CORP | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 11-3054851 | |
Entity Address, Address Line One | 2 Righter Parkway, Suite 200 | |
Entity Address, City or Town | Wilmington | |
Entity Address, State or Province | DE | |
Entity Address, Postal Zip Code | 19803 | |
City Area Code | 302 | |
Local Phone Number | 842.8450 | |
Title of 12(b) Security | Common Stock, $0.001 par value per share | |
Trading Symbol | BSTC | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Central Index Key | 0000875622 | |
Entity Common Stock, Shares Outstanding | 7,344,955 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q3 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 2,873,726 | $ 4,999,183 |
Short term investments | 83,844,739 | 84,239,918 |
Accounts receivable | 13,593,641 | 19,065,919 |
Prepaid expenses and other current assets | 1,757,250 | 966,456 |
Total current assets | 102,069,356 | 109,271,476 |
Long-term investments | 34,321,898 | 16,569,024 |
Property and equipment, net | 61,366 | |
Operating lease right-of-use asset | 181,783 | 239,491 |
Patent costs, net | 511,345 | 573,277 |
Other assets | 124,348 | |
Total assets | 137,270,096 | 126,653,268 |
Current liabilities: | ||
Accounts payable and accrued expenses | 1,461,380 | 998,409 |
Income tax payable | 354,984 | |
Current portion of lease obligation | 79,770 | 69,099 |
Total current liabilities | 1,541,150 | 1,422,492 |
Lease obligation | 106,500 | 167,014 |
Deferred tax liability, net | 307,457 | 572,660 |
Total Liabilities | 1,955,107 | 2,162,166 |
Commitments and contingencies (Note 10) | ||
Stockholders' equity: | ||
Series A Preferred stock, $.50 par value, 700,000 shares authorized; none outstanding | ||
Common stock, $0.001 par value; 15,000,000 shares authorized; 7,826,180 and 7,813,230 shares issued, 7,344,955 and 7,339,578 shares outstanding as of September 30, 2020 and December 31, 2019, respectively | 7,826 | 7,813 |
Additional paid-in capital | 40,591,223 | 39,355,797 |
Retained earnings | 106,647,736 | 96,646,527 |
Treasury stock, 481,225 and 473,652 shares at cost as of September 30, 2020 and December 31, 2019, respectively | (11,931,796) | (11,519,035) |
Total stockholders' equity | 135,314,989 | 124,491,102 |
Total liabilities and stockholders' equity | $ 137,270,096 | $ 126,653,268 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Stockholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
Preferred stock, authorized (in shares) | 700,000 | 700,000 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 15,000,000 | 15,000,000 |
Common stock, issued (in shares) | 7,826,180 | 7,813,230 |
Common stock, outstanding (in shares) | 7,344,955 | 7,339,578 |
Treasury stock, shares (in shares) | 481,225 | 473,652 |
Series A Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock, authorized (in shares) | 150,000 | 150,000 |
Series C Preferred Stock | ||
Stockholders' equity: | ||
Preferred stock, authorized (in shares) | 10,000 | 10,000 |
Consolidated Statements of Inco
Consolidated Statements of Income - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues: | ||||
Total revenues | $ 11,255,864 | $ 9,442,253 | $ 24,827,933 | $ 26,424,380 |
Costs and expenses: | ||||
Research and development | 179,450 | 143,185 | 461,881 | 454,042 |
General and administrative | 3,064,484 | 1,978,078 | 10,226,391 | 6,613,362 |
Milestone fee | 1,500,000 | 1,500,000 | ||
Restructuring charges | 1,146,045 | |||
Total Costs and Expenses | 4,743,934 | 2,121,263 | 13,334,317 | 7,067,404 |
Operating income | 6,511,930 | 7,320,990 | 11,493,616 | 19,356,976 |
Other income: | ||||
Interest income | 264,641 | 504,909 | 1,135,238 | 1,471,489 |
Income before income tax expense | 6,776,571 | 7,825,899 | 12,628,854 | 20,828,465 |
Provision for income tax expense | (1,389,964) | (1,552,966) | (2,627,645) | (3,712,477) |
Net income | $ 5,386,607 | $ 6,272,933 | $ 10,001,209 | $ 17,115,988 |
Earnings per common share: | ||||
Basic (in dollars per share) | $ 0.73 | $ 0.86 | $ 1.36 | $ 2.34 |
Diluted (in dollars per share) | $ 0.73 | $ 0.85 | $ 1.36 | $ 2.33 |
Shares used in calculation of net income per common share: | ||||
Basic (in shares) | 7,344,955 | 7,334,212 | 7,340,046 | 7,306,665 |
Diluted (in shares) | 7,366,768 | 7,359,034 | 7,363,373 | 7,347,701 |
Royalties | ||||
Revenues: | ||||
Total revenues | $ 9,255,864 | $ 9,442,253 | $ 22,827,933 | $ 26,424,380 |
License Revenues | ||||
Revenues: | ||||
Total revenues | $ 2,000,000 | $ 2,000,000 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock | Additional Paid in Capital | Retained Earnings | Treasury Stock | Total |
Balances at Dec. 31, 2018 | $ 7,738 | $ 36,302,446 | $ 72,176,719 | $ (10,898,383) | $ 97,588,520 |
Balances (in shares) at Dec. 31, 2018 | 7,738,167 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock upon stock option exercise | $ 73 | 2,133,323 | 2,133,396 | ||
Issuance of common stock upon stock option exercise (in shares) | 73,063 | ||||
Stock compensation expense | 520,387 | 520,387 | |||
Repurchases of common stock | (357,289) | (357,289) | |||
Net income | 17,115,988 | 17,115,988 | |||
Balances at Sep. 30, 2019 | $ 7,811 | 38,956,156 | 89,292,707 | (11,255,672) | 117,001,002 |
Balances (in shares) at Sep. 30, 2019 | 7,811,230 | ||||
Balances at Jun. 30, 2019 | $ 7,796 | 38,299,800 | 83,019,774 | (11,016,949) | 110,310,421 |
Balances (in shares) at Jun. 30, 2019 | 7,796,230 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock upon stock option exercise | $ 15 | 396,435 | 396,450 | ||
Issuance of common stock upon stock option exercise (in shares) | 15,000 | ||||
Stock compensation expense | 259,921 | 259,921 | |||
Repurchases of common stock | (238,723) | (238,723) | |||
Net income | 6,272,933 | 6,272,933 | |||
Balances at Sep. 30, 2019 | $ 7,811 | 38,956,156 | 89,292,707 | (11,255,672) | 117,001,002 |
Balances (in shares) at Sep. 30, 2019 | 7,811,230 | ||||
Balances at Dec. 31, 2019 | $ 7,813 | 39,355,797 | 96,646,527 | (11,519,035) | $ 124,491,102 |
Balances (in shares) at Dec. 31, 2019 | 7,813,230 | 7,339,578 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock upon vesting of restricted stock units | $ 11 | (11) | |||
Issuance of common stock upon vesting of restricted stock units (in shares) | 11,450 | ||||
Issuance of common stock upon stock option exercise | $ 2 | 61,723 | $ 61,725 | ||
Issuance of common stock upon stock option exercise (in shares) | 1,500 | ||||
Stock compensation expense | 1,173,714 | 1,173,714 | |||
Repurchases of common stock | (412,761) | (412,761) | |||
Net income | 10,001,209 | 10,001,209 | |||
Balances at Sep. 30, 2020 | $ 7,826 | 40,591,223 | 106,647,736 | (11,931,796) | $ 135,314,989 |
Balances (in shares) at Sep. 30, 2020 | 7,826,180 | 7,344,955 | |||
Balances at Jun. 30, 2020 | $ 7,826 | 40,080,279 | 101,261,129 | (11,931,796) | $ 129,417,438 |
Balances (in shares) at Jun. 30, 2020 | 7,826,180 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock compensation expense | 510,944 | 510,944 | |||
Net income | 5,386,607 | 5,386,607 | |||
Balances at Sep. 30, 2020 | $ 7,826 | $ 40,591,223 | $ 106,647,736 | $ (11,931,796) | $ 135,314,989 |
Balances (in shares) at Sep. 30, 2020 | 7,826,180 | 7,344,955 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 10,001,209 | $ 17,115,988 |
Adjustments to reconcile net income to net cash provided in operating activities: | ||
Depreciation and amortization | 70,037 | 256,610 |
Stock-based compensation expense | 1,173,714 | 520,387 |
Deferred tax expense (benefit) | (265,203) | 199,908 |
Non-cash lease expense | 57,708 | |
(Accretion) amortization of bond (discount) premium | 790,006 | (53,735) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 5,472,278 | (1,250,070) |
Income tax payable | (354,984) | (949,791) |
Prepaid expenses and other current assets | (915,142) | (189,959) |
Patent costs | (189,704) | |
Accounts payable, accrued expenses and lease obligation | 413,127 | (921,360) |
Net cash provided by operating activities | 16,442,750 | 14,538,274 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (69,470) | |
Maturities of marketable securities | 87,283,693 | 76,636,059 |
Purchases of marketable securities | (105,431,394) | (93,357,599) |
Net cash used in investing activities | (18,217,171) | (16,721,540) |
Cash flows from financing activities: | ||
Proceeds from stock option exercises | 61,725 | 2,133,396 |
Payments for repurchases of common stock | (412,761) | (357,289) |
Net cash (used in) provided by financing activities | (351,036) | 1,776,107 |
Decrease in cash and cash equivalents | (2,125,457) | (407,159) |
Cash and cash equivalents at beginning of year | 4,999,183 | 13,176,452 |
Cash and cash equivalents at end of period | 2,873,726 | 12,769,293 |
Cash paid during the year for: | ||
Taxes | $ 3,473,278 | $ 4,462,362 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2020 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | 1. ORGANIZATION AND DESCRIPTION OF BUSINESS We are a biopharmaceutical company involved in the development of an injectable collagenase clostridium histolyticum (“CCH”) for multiple indications. We maintain intellectual property with respect to injectable CCH that treats, among other indications, Dupuytren’s contracture (“DC”), Peyronie’s disease (“PD”), cellulite, frozen shoulder syndrome, plantar fibromatosis, and uterine fibroids. Injectable CCH currently is approved and marketed in the U.S. under the trademark XIAFLEX® for the treatment of both DC and PD. We generate revenue primarily from our license agreement with Endo, under which we receive license, sublicense income, royalties, milestones, and mark-up on cost of goods sold payments related to the sale, regulatory submissions, and approval of XIAFLEX®. Endo has filed a biologics license application for CCH for the treatment of cellulite with the FDA. On July 6, 2020, Endo announced that it received FDA approval of Qwo™ (collagenase clostridium histolyticum-aaes) for the treatment of moderate to severe cellulite in the buttocks of adult women. Endo anticipates Qwo™ to be available commercially in the U.S. starting in spring 2021. In July 2020, Endo dosed the first patient in a clinical trial in plantar fibromatosis in June 2020 and adhesive capsulitis, also known as frozen shoulder. Adhesive capsulitis is an inflammation and thickening of the shoulder capsule due to collagen, which causes decreased motion in the shoulder. Plantar fibromatosis is a non-malignant thickening of the feet’s deep connective tissue or fascia. There are currently no FDA-approved pharmaceutical therapies available to treat either condition. We have developed injectable CCH for 12 clinical indications to date. Under our license agreement with Endo, Endo has the right to further develop CCH for frozen shoulder and plantar fibromatosis, as well as certain other licensed indications. Endo has a right to opt-in for use of CCH in the treatment of uterine fibroids. On August 31, 2011, we entered into the Second Amended and Restated Development and License Agreement (as amended, the “License Agreement”) with Auxilium Pharmaceuticals, Inc. (“Auxilium”), an entity that was acquired by Endo in 2015. The License Agreement originally was entered into in June 2004 to obtain exclusive worldwide rights to develop, market, and sell certain products containing our enzyme CCH, which Endo markets for approved indications under the trademark XIAFLEX®. Endo’s licensed rights concern the development and commercialization of products, other than dermal formulations labeled for topical administration. Currently, Endo’s licensed rights cover the indications of DC, PD, cellulite, frozen shoulder, plantar fibromatosis, and other potential indications. We and Endo may further expand the License Agreement to cover other indications as they are developed. On February 26, 2019, we entered into the Second Amendment to the Second Amended and Restated Development and License Agreement (the “Second Amendment”) (effective as of January 1, 2019) to amend certain provisions of the License Agreement to, among other things, require Endo to provide timely estimates of royalties to assist us in complying with our financial reporting obligations. Pursuant to the terms of the Second Amendment, we have consented to the assignment of the License Agreement by Endo Global Ventures to Endo Global Aesthetics Limited, an Irish private company and an affiliate of Endo Global Ventures that is indirectly wholly-owned by Endo. Under the License Agreement, Endo is responsible, at its own cost and expense, for developing the formulation and finished dosage form of products and arranging for the clinical supply of products. Endo has the option to license development and marketing rights to these indications based on a full analysis of the data from the clinical trials, which would transfer responsibility for the future development costs to Endo and trigger opt-in payments and potential future milestone and royalty payments to us. The License Agreement extends, on a country-by-country and product-by-product basis, for the longer of the patent life, the expiration of any regulatory exclusivity period or twelve years from the effective date. Either party may terminate the License Agreement as a result of the other party’s breach or bankruptcy. Endo must pay us on a country-by-country and product-by-product basis a specified percentage, which typically is in the low double digits, of net sales for products covered by the License Agreement. This royalty applies to net sales by Endo or its sublicensees. Endo also is obligated to pay a percentage of any future regulatory or commercial milestone payments received from such sublicensees. In addition, Endo and its affiliates pay us an amount equal to a specified mark-up on certain cost of goods related to supply of XIAFLEX® (which mark-up is capped at a specified percentage of the cost of goods of XIAFLEX®) for products sold by Endo and its affiliates. Endo previously collaborated with partners to commercialize XIAFLEX® and Xiapex® outside of the United States; however, Endo terminated third party partnership agreements for markets outside of the United States, which will reduce the amount of royalty revenues received by us. We do not believe that this reduction will have a material effect on our future consolidated statements of operations. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Except as detailed below, there have been no material changes to the Company’s significant accounting policies during the nine Basis of Presentation The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) that we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules The information included in this Quarterly Report on Form Principles of Consolidation The condensed consolidated financial statements include the accounts of the BioSpecifics and its subsidiary, Advance Biofactures Corp. All intercompany balances and transactions have been eliminated. Risks and Uncertainties We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. While we expect that COVID-19 will impact our business to some degree, the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and business closures, the effectiveness of actions taken to contain the disease, and other unforeseeable consequences. Critical Accounting Policies, Estimates and Assumptions The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of management’s estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company makes certain assumptions and estimates for its revenues, income taxes, and third-party royalties. We base our estimates on historical experience, and other relevant data including interim data provided by Endo and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. For further details, see notes “Revenue Recognition,” “Provision for Income Taxes,” and “Third-Party Royalties.” Revenue Recognition Under Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), we recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation(s). Revenues, and their respective treatment for financial reporting purposes under ASC 606 and our License Agreement with Endo, are as follows: Royalty / Mark-Up on Cost of Goods Sold We receive royalty revenues on net sales and mark-up on cost of goods sold revenue in the U.S. under our License Agreement with Endo. These are presented in “Royalties” in our consolidated statements of income. We do not have future performance obligations under this revenue stream. In accordance with ASC 606, we record these revenues based on estimates of the net sales that occurred during the relevant period. The relevant period estimates of these royalties are based on data provided by Endo and analysis of historical royalties and mark-up on cost of goods sold revenue that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. The royalties payable by Endo to us are subject to set-off for certain patent costs. Licensing Revenue We include revenue recognized from upfront licensing, sublicensing, and milestone payments in “License Revenues” in our consolidated statements of income. The Company recognizes licensing revenues generated through development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; sublicensing; development and commercial milestone payments; development activities; and royalties on net sales of licensed products. Each of these types of payments results in licensing revenues except for revenues from royalties on net sales of licensed products and the mark-up of cost of goods sold revenues which are classified as royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer. For each development and/or commercialization agreement that result in revenues, the Company identifies all performance , aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities, and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Development and Regulatory Milestone Payments Depending on facts and circumstances, the Company may conclude that it is appropriate to include the milestone, representing variable consideration, in the estimated total transaction price, or that it is appropriate to fully constrain the milestone. The Company may include revenues from certain milestones in the total transaction price in a reporting period before the milestone is achieved if the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such development milestones and any related constraint each reporting period. The Company adjusts its estimate of the total transaction price, including the amount of revenue that it has recorded, if necessary. Recent Accounting Pronouncements Accounting Pronouncements Adopted We adopted ASU No. 2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement Accounting Pronouncements Not Yet Adopted In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes. Cash, Cash Equivalents, and Investments Cash equivalents include only securities having a maturity of 90 days or less at the time of purchase. Investments are stated on an amortized cost basis. The Company limits its credit risk associated with cash, cash equivalents, and investments by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds, certificates of deposit, commercial paper, U.S. government agency bonds, municipal bonds, and corporate bonds. All investments are classified as held to maturity. As of September 30, 2020, and December Fair Value Measurements Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held-to-maturity investments, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the duration of those instruments. As of September 30, 2020, and December The schedule of maturities as of September 30, 2020 and December Maturities as of Maturities as of September 30, 2020 December 31, 2019 1 Year or Less Greater than 1 Year 1 Year or Less Greater than 1 Year Municipal bonds $ 12,596,326 $ 2,512,697 $ 11,341,249 $ — Government agency bonds 1,158,191 3,500,000 11,950,738 6,231,804 US Treasury bonds 6,006,593 — — — Corporate bonds 60,012,228 27,812,183 57,321,784 6,675,958 Certificates of deposit 4,071,401 497,018 3,626,147 3,661,262 Total $ 83,844,739 $ 34,321,898 $ 84,239,918 $ 16,569,024 The authoritative literature for fair value measurements established a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. These tiers are as follows: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than the quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs (entity developed assumptions) in which little or no market data exists. As of September 30, 2020, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of September 30, 2020 and December September 30, 2020 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 253,460 $ 253,460 $ — $ — Investments Certificates of Deposit 4,568,419 4,568,419 — — Investments Municipal Bonds 15,109,023 — 15,109,023 — Investments Government Agency Bonds 4,658,191 — 4,658,191 — Investments US Treasury Bonds 6,006,593 — 6,006,593 — Investments Corporate Bonds 87,824,411 — 87,824,411 — December 31, 2019 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 950,658 $ 950,658 $ — $ — Investments Certificates of Deposit 7,287,409 7,287,409 — — Investments Municipal Bonds 11,341,249 — 11,341,249 — Investments Government Agency Bonds 18,182,542 — 18,182,542 — Investments Corporate Bonds 63,997,742 — 63,997,742 — Concentration of Credit Risk and Major Customers The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. The Company maintains investments in FDIC insured certificates of deposits, municipal bonds, and corporate bonds. The Company is currently dependent on one customer, Endo, which generates almost all the Company’s revenues. For the three and nine months ended September 30, 2020, licensing, sublicensing, milestones, and royalty revenues under the License Agreement with Endo were $11.3 million and $24.8 million, respectively and for the three and nine months ended September 30, 2019, licensing, sublicensing, milestones and royalty revenues under the License Agreement with Endo were $9.4 million and $26.4 million, respectively. At September 30, 2020 and December Treasury Stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the nine months ended September 30, 2020, we repurchased 7,573 shares at an average price of $54.50. For the nine months ended September 30, 2019, there were 6,209 shares repurchased at an average price of $57.54. The stock repurchase program terminated in May 2020. Receivables and Doubtful Accounts Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Our accounts receivable balance is typically due from Endo, our single large specialty pharmaceutical customer. Endo has historically paid timely and has been a financially stable organization. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of Endo were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At September 30, 2020 and December Third-Party Royalties We have entered into licensing and royalty agreements with third parties and agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement. No assumptions should be made that any disclosed royalty rate payable to a particular third party is the same or similar with respect to any royalty rate payable to any other third parties. We accrue third-party royalty expenses on net sales reported to us by Endo. Third-party royalty costs are generally expensed under general and administrative in the quarter that the net sales have occurred. For the three and nine months ended September 30, 2020, third-party royalty expenses on royalty revenue were $0.2 million and $0.4 million, respectively. For the three and nine months ended September 30, 2019, third-party royalty expenses on royalty revenue were $0.2 million and $0.7 million, respectively. In addition, the Company incurred a milestone fee of $1.5 million on license revenue in the third quarter 2020 upon the FDA approval of Qwo™ (collagenase clostridium histolyticum-aaes) for the treatment of cellulite. Research and Development Expenses R&D expenses include, but are not limited to, internal costs, such as salaries and benefits, costs of materials, lab expense, facility costs, and overhead. R&D expenses also consist of third-party costs, such as medical professional fees, product costs used in clinical trials, consulting fees, and costs associated with clinical study arrangements. We may fund R&D at medical research institutions under agreements that are generally cancelable. All of these costs are charged to R&D as incurred, which may be measured by percentage of completion, contract milestones, patient enrollment, or the passage of time. Clinical Trial Expenses Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research organizations. In the normal course of business, we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. Stock-Based Compensation ASC 718, Compensation - Stock Compensation Under the Company ’ s 2019 Omnibus Incentive Compensation Plan (the “ Plan ” ), grants to employees, key advisors, on non-employee directors may consist of incentive stock options, non-qualified stock options, stock appreciation rights, Plan Plan Grants under the Plan vest over periods ranging from one to four years and expire ten years from date of grant. 2019 Omnibus Incentive Compensation Plan (2019 Plan) Restricted Stock Awards A summary of the restricted stock awards Weighted- Average Grant Date Fair Value Restricted Stock Per Share Nonvested at December 31, 2019 10,450 $ 60.47 Issued 13,666 62.62 Vested (11,450) 59.60 Forfeited — — Nonvested at September 30, 2020 12,666 $ 63.58 Stock-based compensation expense related to restricted stock awards recognized in general and administrative expense was $178,000 and $515,000 for the three month and nine months ended September 30, 2020, respectively, and $146,000 for both the three and nine months ended September 30, 2019 As of September 30, 2020, there was $578,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to restricted stock. This cost is expected to be recognized over the vesting periods of the restricted stock, with a weighted-average period of 1.00 year. Stock Option Activity For the nine months ended September 30, 2020, we granted a total of 202,000 stock options with a weighted average grant date fair value of $61.92 per share. The assumptions used in the valuation of stock options granted during the nine months ended September 30, 2020 were as follows: Nine Months Ended September 30, 2020 Risk-free interest rate Expected term of option Expected stock price volatility Expected dividend yield $ 0.0 A summary of our stock option activity during the nine months ended September 30, 2020 is presented below: Weighted Weighted Average Aggregate Average Remaining Intrinsic Shares Exercise Price Contractual Term Value Outstanding at December 31, 2019 189,187 $ 46.79 8.62 $ 1,920,684 Grants 202,000 61.92 — — Exercised (1,500) 41.15 — — Forfeited (147,500) 56.51 — — Outstanding at September 30, 2020 242,187 $ 56.49 8.35 $ — Exercisable at September 30, 2020 42,687 $ 33.45 2.77 $ 827,256 During the nine months ended September 30, 2020 and 2019, the Company received $0.1 million and $2.1 million, respectively, from stock options exercised by option holders. Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $52.83 on September 30, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. We have $4.4 million in unrecognized compensation cost related to stock options outstanding as of September 30, 2020, which we expect to recognize over the next 8.35 years. Stock-based compensation expense related to stock options recognized in general and administrative expenses was $333,000 for the three months ended September 30, 2020 and $469,000 for the nine months ended September 30, 2020, and $114,000 and $374,000 for the three and nine months ended September 30, 2019, respectively. Stock compensation expense related to restructuring associated with the acceleration of vesting of certain stock options and restricted stock units was $190,000 for the nine months ended September 30, 2020 (see Note 7). Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture fixtures and autos five Comprehensive Income For each of the three and nine months ended September 30, 2020 and 2019, we had no components of other comprehensive income other than net income itself. Provision for Income Taxes We use the asset and liability method of accounting for income taxes, as set forth in ASC 740-10-25-2. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods when the differences are expected to reverse. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of September 30, 2020 and December Commitments and Contingencies We determine if an arrangement includes a lease at inception. Right-of-use lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use lease asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. We apply a portfolio approach to the property leases to apply an incremental borrowing rate to leases with similar lease terms. The lease terms may include options to extend or terminate the lease. We recognize the options to extend the lease as part of the right-of-use lease assets and lease liabilities only if it is reasonably certain that the option would be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements for the nine months ended September 30, 2019 due to the short-term nature of our then-existing lease in Lynbrook, New York. In December 2019, we recorded a right-of-use lease asset of $243,000, a short-term lease liability of $76,000, and a long-term lease liability of $167,000 associated with the lease of our new headquarters in Wilmington, Delaware. The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our balance sheet as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 2020 $ 20,605 $ 75,352 2021 84,893 84,893 2022 87,428 87,428 Total lease payments 192,926 247,673 Less: interest (6,656) (11,560) Total lease obligation $ 186,270 $ 236,113 On January Total operating lease expenses amounted to $21,000 and $101,000 for the three and nine months ended September 30, 2020 and $34,000 and $101,000 for the three and nine months ended September 30, 2019, respectively. Since XIAFLEX® is used primarily in elective procedures, which have been curtailed during the outbreak, and based on public statements made by Endo, the Company believes that the COVID-19 outbreak may have a material adverse effect on its business and financial results until the easing of the restrictions that have been imposed as a result of the outbreak. On June 12, 2020, the Company filed an arbitration demand against the Research Foundation of the State University of New York for and on behalf of Stony Brook University (“Research Foundation”) seeking a declaration that one of its former employees is a co-inventor of the Research Foundation’s patent for the treatment of cellulite (U.S. Patent No. 10,123,959, which has an expiration date of February 7, 2027), and challenging the Research Foundation’s prospective rights to royalties under the Cellulite License Agreement dated August 23, 2007, which is described in the Company’s most recent annual report on Form 10-K. This is a private and confidential arbitration administered by the American Arbitration Association. On July 9, 2020, the Research Foundation filed a response, denying the allegations of the demand and making a counterclaim alleging principally that the Company is in breach of its obligations under the Cellulite License Agreement. The Company has responded to the counterclaim, denying the allegations and requesting judgment in its favor on all claims. However, should the Research Foundation prevail in this arbitration, it could have a material adverse effect on the Company’s future financial results. See Note 8 “Subsequent Events” for disclosure regarding litigation related to the Merger Agreement. Stockholders’ Equity At the Company’s annual meeting of stockholders held on June 12, 2020 (the “2020 Annual Meeting”), the stockholders approved an amendment to the Company’s Certificate of Incorporation, as amended, to increase the authorized number of shares of common stock from 10,000,000 shares to 15,000,000 shares. On April 10, 2020, the Board approved an amendment to the Company's Rights Agreement, dated as of May 14, 2002 and amended June 19, 2003, February 3, 2011, March 5, 2014, May 27, 2016, and May 11, 2018 (the “Original Rights Agreement”), by and between the Company and Worldwide Stock Transfer, LLC (successor in interest to OTC Corporate Transfer Service Company), as rights agent (the “Rights Agent”). The amendment, which was subsequently executed on that date by the Company and the Original Rights Agent, changes the Final Expiration Date (as defined in the Original Rights Agreement) of the rights under the Original Rights Agreement (the “Original Rights”) from the close of business on May 31, 2020 to the close of business on April 10, 2020. As a result, the Original Rights have expired, and the Original Rights Agreement terminated. Also, on April 10, 2020, the Board approved and adopted a Rights Agreement, dated as of April 10, 2020 (the “Rights Agreement”), by and between the Company and the Rights Agent. Pursuant to the Rights Agreement, the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of common stock, par value $0.001, of the Company (each, a “Common Share" and, collectively, the “Common Shares”). The Rights are distributable to stockholders of record as of the close of business on April 21, 2020 (the “Record Date”). One Right also will be issued together with each Common Share issued by the Company after April 21, 2020, but before the Distribution Date (as defined in the Rights Agreement) (or the earlier redemption or expiration of the Rights) and, in certain circumstances, after the Distribution Date. Generally, the Rights Agreement works by causing substantial dilution to any person or group that acquires beneficial ownership of twenty percent (20%) or more of the Common Shares without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. The Rights Agreement is not intended to interfere with any merger, tender or exchange offer or other business combination approved by the Board. The Rights Agreement also does not prevent the Board from considering any offer that it considers to be in the best interest of its stockholders. A proposal to ratify the adoption by the Board of the Rights Agreement was approved by the stockholders at the Company’s 2020 Annual Meeting. The Rights Agreement was amended on October 19, 2020; see Note 8 “Subsequent Events” for disclosure relating to the Rights Agreement amendment. Shelf Registration Statement On June 26, 2020, we filed a shelf registration statement on Form S-3, which we subsequently amended on July 15, 2020, relating to the sale, from time to time, in one or more transactions, of up to $200,000,000 of common stock, preferred stock, debt securities, warrants, and units (the “Shelf Registration Statement”). The Shelf Registration Statement was declared effective on July 17, 2020. As of September 30, 2020, $200,000,000 remained available for issuance under the Shelf Registration Statement. As set forth in the Shelf Registration Statement, the Company expects to use a substantial portion of the net proceeds from the sale of securities under the Shelf Registration Statement for general corporate purposes; the Company, however, has not allocated the net proceeds for any specific purposes. At-The-Market Equity Offering Sales Agreement On August 31, 2020, the Company entered into an At-The-Market Equity Sales Agreement (the “ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”) and Oppenheimer & Co. Inc. (“Oppenheimer” and, together with Stifel, the “Agents”) pursuant to which the Company may issue and sell, from time to time, at its option, shares of its common stock, $0.001 par value per share, having an aggregate offering price of up to $75,000,000 (the “ATM Shares”) through the Agents, as its sales agents. Subject to the terms and conditions of the ATM Agreement, the Agents will use their commercially reasonable efforts to sell the ATM Shares from time to time, based upon the Company’s instructions, by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Company has agreed to pay the Agents’ commissions for their services in acting as the Company’s agents in the sale of the ATM Shares in the amount of 3.0% of gross proceeds from the sale of the ATM Shares pursuant to the ATM Agreement. The Company also has agreed to provide the Agents with customary indemnification and contribution rights. The offering of the ATM Shares will terminate upon the earliest of (a) the sale of the maximum number or amount of the ATM Shares permitted to be sold under the ATM Agreement and (b) the termination of the ATM Agreement by the parties thereto. During the |
NET INCOME PER SHARE
NET INCOME PER SHARE | 9 Months Ended |
Sep. 30, 2020 | |
NET INCOME PER SHARE | |
NET INCOME PER SHARE | 3. NET INCOME PER SHARE In accordance with ASC 260, Earnings Per Share There were 60,500 and 60,000 stock options and restricted stock awards to purchase shares excluded from the calculation of diluted net income per share for the three and nine months ended September 30, 2019, respectively, because their effects are anti-dilutive. |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 9 Months Ended |
Sep. 30, 2020 | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: September 30, December 31, 2020 2019 Trade accounts payable $ 98,665 $ 197,077 Accrued legal and other professional fees 526,099 330,787 Accrued payroll, severance, and related costs 591,116 209,330 Third-party royalties 156,000 228,000 Restructuring accrual 10,000 — Other accruals 79,500 33,215 Total $ 1,461,380 $ 998,409 5. |
PATENT COSTS
PATENT COSTS | 9 Months Ended |
Sep. 30, 2020 | |
PATENT COSTS | |
PATENT COSTS | 5. PATENT COSTS We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from two No costs were capitalized during ended September 30, 2020, as compared to for three and nine months ended September 30, 2019, September 30, December 31, 2020 2019 Patents $ 1,272,625 $ 1,272,625 Accumulated amortization (761,280) (699,348) $ 511,345 $ 573,277 The amortization expense for patents for the three and nine months ended September 30, 2020 was respectively, and for the three and nine months ended September 30, 2019 was October 1, 2020 – December 31, 2020 $ 20,644 2021 65,427 2022 65,427 2023 65,427 2024 65,427 Thereafter 228,993 6. |
PROVISION FOR INCOME TAXES
PROVISION FOR INCOME TAXES | 9 Months Ended |
Sep. 30, 2020 | |
PROVISION FOR INCOME TAXES | |
PROVISION FOR INCOME TAXES | 6. Our deferred tax liabilities and deferred tax assets are impacted by events and transactions arising in the ordinary course of business, R&D activities, vesting of nonqualified options and other items. The provision for income taxes is based on an estimated effective tax rate derived from our consolidated earnings before taxes, adjusted for nondeductible expenses and other permanent differences for the fiscal year. The provision for income taxes for the three and nine months ended September 30, 2020 was $1.4 million and $2.6 million, respectively, and for the three and nine months ended September 30, 2019 was $1.6 million and $3.7 million, respectively. As of September 30, 2020 and December The estimated effective tax rate for both the three and nine months ended September 30, 2020 was The estimated effective tax rate for the three and nine months ended September 30, 2019 was 20% and 18% , respectively, of pre-tax income reported in the period, calculated based on the estimated annual effective rate anticipated for the year ending December 31, 2019 plus the effects, if any, of certain discrete items occurring in 2019. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act made various tax law changes including, among other things, (i) increasing the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest, (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k) and (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid taxes. The income tax provisions of the CARES Act had limited applicability to the Company as of September 30, 2020, and therefore, the enactment of the CARES Act did not have a material impact on the Company’s consolidated financial statements as of, and for the three and nine months ended, September 30, 2020. We will continue to evaluate the impact of tax legislation and will update our disclosures as additional information and interpretative guidance becomes available. |
RESTRUCTURING AND SEPARATION CO
RESTRUCTURING AND SEPARATION COSTS | 9 Months Ended |
Sep. 30, 2020 | |
RESTRUCTURING AND SEPARATION COSTS | |
RESTRUCTURING AND SEPARATION COSTS | 7. RESTRUCTURING AND SEPARATION COSTS On January 7, 2020, we announced that we would be relocating our corporate headquarters from Lynbrook, New York to Wilmington, Delaware as of April 7, 2020. On January 6, 2020, in connection with this relocation, we notified five employees and one consultant that their services would no longer be required effective March 31, 2020. On March 23, 2020, the five employees and one consultant were given separation agreements detailing the termination benefits to which they would be entitled. As a result, we recorded a one-time restructuring charge of $1.1 million in the first quarter of fiscal 2020. The restructuring charge is associated with $0.9 million of one-time termination benefits that we expect to pay out in cash over a period of nine months and $0.2 million of one-time non-cash termination expenses associated with the acceleration of vesting of certain stock options and restricted stock units. The estimated liability for termination benefits was recorded at fair value during the first quarter of 2020 as a current liability in the consolidated balance sheet. These termination benefits consist of severance payments, reimbursement of benefits payments, and guaranteed consulting payments. Total charges and payments related to the restructuring plan recognized in the consolidated statement of operations are as follows: Nine Months Ended September 30, 2020 Restructuring accrual, January 1, 2020 $ — Termination costs 1,070,024 Facility exit costs 76,020 Payments (945,612) Stock compensation expense charged to additional paid-in-capital (190,432) Restructuring accrual, September 30, 2020 $ 10,000 On April 6, 2020, the Company and Mr. J. Kevin Buchi mutually agreed that Mr. Buchi would step down as Chief Executive Officer and as a director of the Company, effective immediately. The Company and Mr. Buchi have entered into a separation agreement that details the termination benefits to which he is entitled. The Company recorded zero |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2020 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 8. SUBSEQUENT EVENTS Merger Agreement On October 19, 2020, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Endo, and Beta Acquisition Corp., a Delaware corporation and wholly-owned indirect subsidiary of Endo (“Purchaser”). Pursuant to the Merger Agreement, and on the terms and subject to the conditions thereof, Purchaser commenced a tender offer on November 2, 2020 (the “Offer”) to acquire all of the Company’s issued and outstanding shares of common stock (the “Company Shares”) at a purchase price of $88.50 per share, net to the holder thereof in cash, subject to reduction for any applicable withholding taxes and without interest. The Offer will initially remain open for 20 business days from the date of commencement of the Offer. Under certain circumstances as set forth in the Merger Agreement, Purchaser may be required to extend, or may elect to extend, the Offer on one or more occasions. Following the consummation of the Offer and subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, Purchaser will merge with and into the Company, with the Company surviving as a wholly-owned subsidiary of Endo, pursuant to Section 251(h) of the General Corporation Law of the State of Delaware without a vote of the Company stockholders (the “Merger”). At the effective time of the Merger (the “Effective Time”), and without any action on the part of the holders of any Company Shares, each Company Share, other than any Company Shares (i) owned at the commencement of the Offer and immediately prior to the Effective Time by Parent, Purchaser, or the Company or any direct or indirect wholly-owned subsidiary thereof, (ii) irrevocably accepted for purchase pursuant to the Offer, or (iii) owned by Company stockholders who are entitled to demand and have properly and validly demanded their appraisal rights under Delaware law, will be automatically converted into the right to receive an amount in cash equal to the Offer Price, subject to reduction for any applicable withholding taxes and without interest. We expect the Merger to be completed in December 2020. Schedule 14D-9 and Schedule TO In connection with the Merger, the Company filed a Solicitation/Recommendation Statement on Schedule 14D-9 (the “Schedule 14D-9”) with the SEC by the Company in connection with the proposed Merger on November 2, 2020. Also on November 2, 2020 and in connection with the Merger, Endo filed a Tender Offer Statement on Schedule TO (the “Schedule TO”). Amendment to Rights Agreement On October 19, 2020, in connection with the execution of the Merger Agreement, the Company and Worldwide Stock Transfer, LLC (the “Rights Agent”) entered into Amendment No. 1 to Rights Agreement (the “Rights Amendment”) to the Rights Agreement, for the purpose of amending the Rights Agreement to render it inapplicable to the Merger Agreement, the execution thereof, and the performance or consummation of the transactions contemplated thereby, including, without limitation, the Merger and the Offer. In particular, the Amendment provides that (i) none of the approval, adoption, execution, delivery, and/or amendment of the Merger Agreement, the public announcement and/or public disclosure by any person of the Merger Agreement or any of the transactions contemplated thereby, including, without limitation, the Merger and the Offer, or the performance and/or consummation of any of the transactions contemplated by the Merger Agreement, including, without limitation, the Merger and the Offer, will result in (A) any of Endo or Purchaser, or any of their respective affiliates or associates, either individually or together, being deemed to be an Acquiring Person, Beneficial Owner of or of Beneficially Owning (each as defined in the Rights Agreement) the Company’s common stock or other securities, (B) the occurrence of a Triggering Event (as defined in the Rights Agreement), (C) the occurrence of a Distribution Date (as defined in the Rights Agreement), (D) the occurrence of a Shares Acquisition Date (as defined in the Rights Agreement), or (E) the occurrence of a Section 11(a)(ii) Event or a Section 13 Event (each as defined in the Rights Agreement), and (ii) if they have not previously expired, the Rights (as defined in the Rights Agreement) expire immediately prior to the Effective Time of the Merger, but only if such Effective Time shall occur. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) that we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules The information included in this Quarterly Report on Form |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the BioSpecifics and its subsidiary, Advance Biofactures Corp. All intercompany balances and transactions have been eliminated. |
Risks and Uncertainties | Risks and Uncertainties We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. While we expect that COVID-19 will impact our business to some degree, the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and business closures, the effectiveness of actions taken to contain the disease, and other unforeseeable consequences. |
Critical Accounting Policies, Estimates and Assumptions | Critical Accounting Policies, Estimates and Assumptions The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the use of management’s estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company makes certain assumptions and estimates for its revenues, income taxes, and third-party royalties. We base our estimates on historical experience, and other relevant data including interim data provided by Endo and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. For further details, see notes “Revenue Recognition,” “Provision for Income Taxes,” and “Third-Party Royalties.” |
Revenue Recognition | Revenue Recognition Under Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), we recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation(s). Revenues, and their respective treatment for financial reporting purposes under ASC 606 and our License Agreement with Endo, are as follows: Royalty / Mark-Up on Cost of Goods Sold We receive royalty revenues on net sales and mark-up on cost of goods sold revenue in the U.S. under our License Agreement with Endo. These are presented in “Royalties” in our consolidated statements of income. We do not have future performance obligations under this revenue stream. In accordance with ASC 606, we record these revenues based on estimates of the net sales that occurred during the relevant period. The relevant period estimates of these royalties are based on data provided by Endo and analysis of historical royalties and mark-up on cost of goods sold revenue that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. The royalties payable by Endo to us are subject to set-off for certain patent costs. Licensing Revenue We include revenue recognized from upfront licensing, sublicensing, and milestone payments in “License Revenues” in our consolidated statements of income. The Company recognizes licensing revenues generated through development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; sublicensing; development and commercial milestone payments; development activities; and royalties on net sales of licensed products. Each of these types of payments results in licensing revenues except for revenues from royalties on net sales of licensed products and the mark-up of cost of goods sold revenues which are classified as royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer. For each development and/or commercialization agreement that result in revenues, the Company identifies all performance , aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities, and/or transition activities. In order to determine the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the contract. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Development and Regulatory Milestone Payments Depending on facts and circumstances, the Company may conclude that it is appropriate to include the milestone, representing variable consideration, in the estimated total transaction price, or that it is appropriate to fully constrain the milestone. The Company may include revenues from certain milestones in the total transaction price in a reporting period before the milestone is achieved if the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such development milestones and any related constraint each reporting period. The Company adjusts its estimate of the total transaction price, including the amount of revenue that it has recorded, if necessary. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounting Pronouncements Adopted We adopted ASU No. 2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement Accounting Pronouncements Not Yet Adopted In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes. |
Cash, Cash Equivalents and Investments | Cash, Cash Equivalents, and Investments Cash equivalents include only securities having a maturity of 90 days or less at the time of purchase. Investments are stated on an amortized cost basis. The Company limits its credit risk associated with cash, cash equivalents, and investments by placing its investments with banks it believes are highly creditworthy and with highly rated money market funds, certificates of deposit, commercial paper, U.S. government agency bonds, municipal bonds, and corporate bonds. All investments are classified as held to maturity. As of September 30, 2020, and December |
Fair Value Measurements | Fair Value Measurements Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held-to-maturity investments, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the duration of those instruments. As of September 30, 2020, and December The schedule of maturities as of September 30, 2020 and December Maturities as of Maturities as of September 30, 2020 December 31, 2019 1 Year or Less Greater than 1 Year 1 Year or Less Greater than 1 Year Municipal bonds $ 12,596,326 $ 2,512,697 $ 11,341,249 $ — Government agency bonds 1,158,191 3,500,000 11,950,738 6,231,804 US Treasury bonds 6,006,593 — — — Corporate bonds 60,012,228 27,812,183 57,321,784 6,675,958 Certificates of deposit 4,071,401 497,018 3,626,147 3,661,262 Total $ 83,844,739 $ 34,321,898 $ 84,239,918 $ 16,569,024 The authoritative literature for fair value measurements established a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. These tiers are as follows: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than the quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs (entity developed assumptions) in which little or no market data exists. As of September 30, 2020, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of September 30, 2020 and December September 30, 2020 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 253,460 $ 253,460 $ — $ — Investments Certificates of Deposit 4,568,419 4,568,419 — — Investments Municipal Bonds 15,109,023 — 15,109,023 — Investments Government Agency Bonds 4,658,191 — 4,658,191 — Investments US Treasury Bonds 6,006,593 — 6,006,593 — Investments Corporate Bonds 87,824,411 — 87,824,411 — December 31, 2019 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 950,658 $ 950,658 $ — $ — Investments Certificates of Deposit 7,287,409 7,287,409 — — Investments Municipal Bonds 11,341,249 — 11,341,249 — Investments Government Agency Bonds 18,182,542 — 18,182,542 — Investments Corporate Bonds 63,997,742 — 63,997,742 — |
Concentration of Credit Risk and Major Customers | Concentration of Credit Risk and Major Customers The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. The Company maintains investments in FDIC insured certificates of deposits, municipal bonds, and corporate bonds. The Company is currently dependent on one customer, Endo, which generates almost all the Company’s revenues. For the three and nine months ended September 30, 2020, licensing, sublicensing, milestones, and royalty revenues under the License Agreement with Endo were $11.3 million and $24.8 million, respectively and for the three and nine months ended September 30, 2019, licensing, sublicensing, milestones and royalty revenues under the License Agreement with Endo were $9.4 million and $26.4 million, respectively. At September 30, 2020 and December |
Treasury Stock | Treasury Stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the nine months ended September 30, 2020, we repurchased 7,573 shares at an average price of $54.50. For the nine months ended September 30, 2019, there were 6,209 shares repurchased at an average price of $57.54. The stock repurchase program terminated in May 2020. |
Receivables and Doubtful Accounts | Receivables and Doubtful Accounts Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Our accounts receivable balance is typically due from Endo, our single large specialty pharmaceutical customer. Endo has historically paid timely and has been a financially stable organization. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of Endo were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At September 30, 2020 and December |
Third Party Royalties | Third-Party Royalties We have entered into licensing and royalty agreements with third parties and agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement. No assumptions should be made that any disclosed royalty rate payable to a particular third party is the same or similar with respect to any royalty rate payable to any other third parties. We accrue third-party royalty expenses on net sales reported to us by Endo. Third-party royalty costs are generally expensed under general and administrative in the quarter that the net sales have occurred. For the three and nine months ended September 30, 2020, third-party royalty expenses on royalty revenue were $0.2 million and $0.4 million, respectively. For the three and nine months ended September 30, 2019, third-party royalty expenses on royalty revenue were $0.2 million and $0.7 million, respectively. In addition, the Company incurred a milestone fee of $1.5 million on license revenue in the third quarter 2020 upon the FDA approval of Qwo™ (collagenase clostridium histolyticum-aaes) for the treatment of cellulite. |
Research and Development Expenses | |
Clinical Trial Expenses | Clinical Trial Expenses Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research organizations. In the normal course of business, we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. |
Stock-Based Compensation | Stock-Based Compensation ASC 718, Compensation - Stock Compensation Under the Company ’ s 2019 Omnibus Incentive Compensation Plan (the “ Plan ” ), grants to employees, key advisors, on non-employee directors may consist of incentive stock options, non-qualified stock options, stock appreciation rights, Plan Plan Grants under the Plan vest over periods ranging from one to four years and expire ten years from date of grant. 2019 Omnibus Incentive Compensation Plan (2019 Plan) Restricted Stock Awards A summary of the restricted stock awards Weighted- Average Grant Date Fair Value Restricted Stock Per Share Nonvested at December 31, 2019 10,450 $ 60.47 Issued 13,666 62.62 Vested (11,450) 59.60 Forfeited — — Nonvested at September 30, 2020 12,666 $ 63.58 Stock-based compensation expense related to restricted stock awards recognized in general and administrative expense was $178,000 and $515,000 for the three month and nine months ended September 30, 2020, respectively, and $146,000 for both the three and nine months ended September 30, 2019 As of September 30, 2020, there was $578,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to restricted stock. This cost is expected to be recognized over the vesting periods of the restricted stock, with a weighted-average period of 1.00 year. Stock Option Activity For the nine months ended September 30, 2020, we granted a total of 202,000 stock options with a weighted average grant date fair value of $61.92 per share. The assumptions used in the valuation of stock options granted during the nine months ended September 30, 2020 were as follows: Nine Months Ended September 30, 2020 Risk-free interest rate Expected term of option Expected stock price volatility Expected dividend yield $ 0.0 A summary of our stock option activity during the nine months ended September 30, 2020 is presented below: Weighted Weighted Average Aggregate Average Remaining Intrinsic Shares Exercise Price Contractual Term Value Outstanding at December 31, 2019 189,187 $ 46.79 8.62 $ 1,920,684 Grants 202,000 61.92 — — Exercised (1,500) 41.15 — — Forfeited (147,500) 56.51 — — Outstanding at September 30, 2020 242,187 $ 56.49 8.35 $ — Exercisable at September 30, 2020 42,687 $ 33.45 2.77 $ 827,256 During the nine months ended September 30, 2020 and 2019, the Company received $0.1 million and $2.1 million, respectively, from stock options exercised by option holders. Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $52.83 on September 30, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. We have $4.4 million in unrecognized compensation cost related to stock options outstanding as of September 30, 2020, which we expect to recognize over the next 8.35 years. Stock-based compensation expense related to stock options recognized in general and administrative expenses was $333,000 for the three months ended September 30, 2020 and $469,000 for the nine months ended September 30, 2020, and $114,000 and $374,000 for the three and nine months ended September 30, 2019, respectively. Stock compensation expense related to restructuring associated with the acceleration of vesting of certain stock options and restricted stock units was $190,000 for the nine months ended September 30, 2020 (see Note 7). |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture fixtures and autos five |
Comprehensive Income | Comprehensive Income For each of the three and nine months ended September 30, 2020 and 2019, we had no components of other comprehensive income other than net income itself. |
Provision for Income Taxes | Provision for Income Taxes We use the asset and liability method of accounting for income taxes, as set forth in ASC 740-10-25-2. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods when the differences are expected to reverse. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of September 30, 2020 and December |
Commitments and Contingencies | Commitments and Contingencies We determine if an arrangement includes a lease at inception. Right-of-use lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use lease asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. We apply a portfolio approach to the property leases to apply an incremental borrowing rate to leases with similar lease terms. The lease terms may include options to extend or terminate the lease. We recognize the options to extend the lease as part of the right-of-use lease assets and lease liabilities only if it is reasonably certain that the option would be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements for the nine months ended September 30, 2019 due to the short-term nature of our then-existing lease in Lynbrook, New York. In December 2019, we recorded a right-of-use lease asset of $243,000, a short-term lease liability of $76,000, and a long-term lease liability of $167,000 associated with the lease of our new headquarters in Wilmington, Delaware. The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our balance sheet as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 2020 $ 20,605 $ 75,352 2021 84,893 84,893 2022 87,428 87,428 Total lease payments 192,926 247,673 Less: interest (6,656) (11,560) Total lease obligation $ 186,270 $ 236,113 On January Total operating lease expenses amounted to $21,000 and $101,000 for the three and nine months ended September 30, 2020 and $34,000 and $101,000 for the three and nine months ended September 30, 2019, respectively. Since XIAFLEX® is used primarily in elective procedures, which have been curtailed during the outbreak, and based on public statements made by Endo, the Company believes that the COVID-19 outbreak may have a material adverse effect on its business and financial results until the easing of the restrictions that have been imposed as a result of the outbreak. On June 12, 2020, the Company filed an arbitration demand against the Research Foundation of the State University of New York for and on behalf of Stony Brook University (“Research Foundation”) seeking a declaration that one of its former employees is a co-inventor of the Research Foundation’s patent for the treatment of cellulite (U.S. Patent No. 10,123,959, which has an expiration date of February 7, 2027), and challenging the Research Foundation’s prospective rights to royalties under the Cellulite License Agreement dated August 23, 2007, which is described in the Company’s most recent annual report on Form 10-K. This is a private and confidential arbitration administered by the American Arbitration Association. On July 9, 2020, the Research Foundation filed a response, denying the allegations of the demand and making a counterclaim alleging principally that the Company is in breach of its obligations under the Cellulite License Agreement. The Company has responded to the counterclaim, denying the allegations and requesting judgment in its favor on all claims. However, should the Research Foundation prevail in this arbitration, it could have a material adverse effect on the Company’s future financial results. |
Stockholders' Equity | Stockholders’ Equity At the Company’s annual meeting of stockholders held on June 12, 2020 (the “2020 Annual Meeting”), the stockholders approved an amendment to the Company’s Certificate of Incorporation, as amended, to increase the authorized number of shares of common stock from 10,000,000 shares to 15,000,000 shares. On April 10, 2020, the Board approved an amendment to the Company's Rights Agreement, dated as of May 14, 2002 and amended June 19, 2003, February 3, 2011, March 5, 2014, May 27, 2016, and May 11, 2018 (the “Original Rights Agreement”), by and between the Company and Worldwide Stock Transfer, LLC (successor in interest to OTC Corporate Transfer Service Company), as rights agent (the “Rights Agent”). The amendment, which was subsequently executed on that date by the Company and the Original Rights Agent, changes the Final Expiration Date (as defined in the Original Rights Agreement) of the rights under the Original Rights Agreement (the “Original Rights”) from the close of business on May 31, 2020 to the close of business on April 10, 2020. As a result, the Original Rights have expired, and the Original Rights Agreement terminated. Also, on April 10, 2020, the Board approved and adopted a Rights Agreement, dated as of April 10, 2020 (the “Rights Agreement”), by and between the Company and the Rights Agent. Pursuant to the Rights Agreement, the Board declared a dividend of one preferred share purchase right (each, a “Right”) for each outstanding share of common stock, par value $0.001, of the Company (each, a “Common Share" and, collectively, the “Common Shares”). The Rights are distributable to stockholders of record as of the close of business on April 21, 2020 (the “Record Date”). One Right also will be issued together with each Common Share issued by the Company after April 21, 2020, but before the Distribution Date (as defined in the Rights Agreement) (or the earlier redemption or expiration of the Rights) and, in certain circumstances, after the Distribution Date. Generally, the Rights Agreement works by causing substantial dilution to any person or group that acquires beneficial ownership of twenty percent (20%) or more of the Common Shares without the approval of the Board. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a merger, tender or exchange offer or other business combination involving the Company that is not approved by the Board. The Rights Agreement is not intended to interfere with any merger, tender or exchange offer or other business combination approved by the Board. The Rights Agreement also does not prevent the Board from considering any offer that it considers to be in the best interest of its stockholders. A proposal to ratify the adoption by the Board of the Rights Agreement was approved by the stockholders at the Company’s 2020 Annual Meeting. The Rights Agreement was amended on October 19, 2020; see Note 8 “Subsequent Events” for disclosure relating to the Rights Agreement amendment. |
Shelf Registration Statement | Shelf Registration Statement On June 26, 2020, we filed a shelf registration statement on Form S-3, which we subsequently amended on July 15, 2020, relating to the sale, from time to time, in one or more transactions, of up to $200,000,000 of common stock, preferred stock, debt securities, warrants, and units (the “Shelf Registration Statement”). The Shelf Registration Statement was declared effective on July 17, 2020. As of September 30, 2020, $200,000,000 remained available for issuance under the Shelf Registration Statement. As set forth in the Shelf Registration Statement, the Company expects to use a substantial portion of the net proceeds from the sale of securities under the Shelf Registration Statement for general corporate purposes; the Company, however, has not allocated the net proceeds for any specific purposes. |
At-The-Market Equity Offering Sales Agreement | At-The-Market Equity Offering Sales Agreement On August 31, 2020, the Company entered into an At-The-Market Equity Sales Agreement (the “ATM Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”) and Oppenheimer & Co. Inc. (“Oppenheimer” and, together with Stifel, the “Agents”) pursuant to which the Company may issue and sell, from time to time, at its option, shares of its common stock, $0.001 par value per share, having an aggregate offering price of up to $75,000,000 (the “ATM Shares”) through the Agents, as its sales agents. Subject to the terms and conditions of the ATM Agreement, the Agents will use their commercially reasonable efforts to sell the ATM Shares from time to time, based upon the Company’s instructions, by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Company has agreed to pay the Agents’ commissions for their services in acting as the Company’s agents in the sale of the ATM Shares in the amount of 3.0% of gross proceeds from the sale of the ATM Shares pursuant to the ATM Agreement. The Company also has agreed to provide the Agents with customary indemnification and contribution rights. The offering of the ATM Shares will terminate upon the earliest of (a) the sale of the maximum number or amount of the ATM Shares permitted to be sold under the ATM Agreement and (b) the termination of the ATM Agreement by the parties thereto. During the third quarter, the Company did not make any sales under the ATM Agreement. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of maturities | The schedule of maturities as of September 30, 2020 and December Maturities as of Maturities as of September 30, 2020 December 31, 2019 1 Year or Less Greater than 1 Year 1 Year or Less Greater than 1 Year Municipal bonds $ 12,596,326 $ 2,512,697 $ 11,341,249 $ — Government agency bonds 1,158,191 3,500,000 11,950,738 6,231,804 US Treasury bonds 6,006,593 — — — Corporate bonds 60,012,228 27,812,183 57,321,784 6,675,958 Certificates of deposit 4,071,401 497,018 3,626,147 3,661,262 Total $ 83,844,739 $ 34,321,898 $ 84,239,918 $ 16,569,024 |
Schedule of certain investments measured at fair value on a recurring basis | As of September 30, 2020, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of September 30, 2020 and December September 30, 2020 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 253,460 $ 253,460 $ — $ — Investments Certificates of Deposit 4,568,419 4,568,419 — — Investments Municipal Bonds 15,109,023 — 15,109,023 — Investments Government Agency Bonds 4,658,191 — 4,658,191 — Investments US Treasury Bonds 6,006,593 — 6,006,593 — Investments Corporate Bonds 87,824,411 — 87,824,411 — December 31, 2019 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 950,658 $ 950,658 $ — $ — Investments Certificates of Deposit 7,287,409 7,287,409 — — Investments Municipal Bonds 11,341,249 — 11,341,249 — Investments Government Agency Bonds 18,182,542 — 18,182,542 — Investments Corporate Bonds 63,997,742 — 63,997,742 — |
Schedule of restricted stock awards activity | A summary of the restricted stock awards Weighted- Average Grant Date Fair Value Restricted Stock Per Share Nonvested at December 31, 2019 10,450 $ 60.47 Issued 13,666 62.62 Vested (11,450) 59.60 Forfeited — — Nonvested at September 30, 2020 12,666 $ 63.58 |
Schedule of assumptions used in the valuation of stock options granted | The assumptions used in the valuation of stock options granted during the nine months ended September 30, 2020 were as follows: Nine Months Ended September 30, 2020 Risk-free interest rate Expected term of option Expected stock price volatility Expected dividend yield $ 0.0 |
Schedule of stock option activity | A summary of our stock option activity during the nine months ended September 30, 2020 is presented below: Weighted Weighted Average Aggregate Average Remaining Intrinsic Shares Exercise Price Contractual Term Value Outstanding at December 31, 2019 189,187 $ 46.79 8.62 $ 1,920,684 Grants 202,000 61.92 — — Exercised (1,500) 41.15 — — Forfeited (147,500) 56.51 — — Outstanding at September 30, 2020 242,187 $ 56.49 8.35 $ — Exercisable at September 30, 2020 42,687 $ 33.45 2.77 $ 827,256 |
Schedule of maturity of lease obligations | The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our balance sheet as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 2020 $ 20,605 $ 75,352 2021 84,893 84,893 2022 87,428 87,428 Total lease payments 192,926 247,673 Less: interest (6,656) (11,560) Total lease obligation $ 186,270 $ 236,113 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | |
Schedule of accounts payable and accrued expenses | Accounts payable and accrued expenses consisted of the following: September 30, December 31, 2020 2019 Trade accounts payable $ 98,665 $ 197,077 Accrued legal and other professional fees 526,099 330,787 Accrued payroll, severance, and related costs 591,116 209,330 Third-party royalties 156,000 228,000 Restructuring accrual 10,000 — Other accruals 79,500 33,215 Total $ 1,461,380 $ 998,409 |
PATENT COSTS (Tables)
PATENT COSTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
PATENT COSTS | |
Schedule of net patent costs | Patent costs may be creditable against future royalty revenues. For each period presented below, net patent costs consisted of: September 30, December 31, 2020 2019 Patents $ 1,272,625 $ 1,272,625 Accumulated amortization (761,280) (699,348) $ 511,345 $ 573,277 |
Schedule of aggregate amortization expense | The aggregate amortization expense for the remaining three months of 2020 and each of the October 1, 2020 – December 31, 2020 $ 20,644 2021 65,427 2022 65,427 2023 65,427 2024 65,427 Thereafter 228,993 |
RESTRUCTURING COSTS (Tables)
RESTRUCTURING COSTS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
RESTRUCTURING AND SEPARATION COSTS | |
Schedule of total charges and payments related to the restructuring plan | Total charges and payments related to the restructuring plan recognized in the consolidated statement of operations are as follows: Nine Months Ended September 30, 2020 Restructuring accrual, January 1, 2020 $ — Termination costs 1,070,024 Facility exit costs 76,020 Payments (945,612) Stock compensation expense charged to additional paid-in-capital (190,432) Restructuring accrual, September 30, 2020 $ 10,000 |
ORGANIZATION AND DESCRIPTION _2
ORGANIZATION AND DESCRIPTION OF BUSINESS (Details) | Oct. 19, 2020$ / shares |
Subsequent Event | Plan of Merger Agreement | Plan of Merger Agreement | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | |
Purchase price per share | $ 88.50 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Cash, Cash Equivalents and Investments (Details) - USD ($) $ in Millions | Sep. 30, 2020 | Dec. 31, 2019 |
Cash, Cash Equivalents and Investments [Abstract] | ||
Aggregate fair value of investments | $ 118.2 | $ 100.8 |
Held-to-maturity securities, unrecognized gain | 0 | 0 |
Held-to-maturity securities, unrecognized (loss) | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Fair Value Measurements (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Fair Value Measurements [Abstract] | ||
Held-to-maturity securities, unrecognized gain | $ 0 | $ 0 |
Held-to-maturity securities, unrecognized (loss) | 0 | 0 |
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 83,844,739 | 84,239,918 |
Held-to-maturity securities, noncurrent | 34,321,898 | 16,569,024 |
Recurring | Institutional Money Market | ||
Assets at fair value | ||
Cash equivalents | 253,460 | 950,658 |
Recurring | Certificates of deposit | ||
Assets at fair value | ||
Investments | 4,568,419 | 7,287,409 |
Recurring | Municipal bonds | ||
Assets at fair value | ||
Investments | 15,109,023 | 11,341,249 |
Recurring | Government agency bonds | ||
Assets at fair value | ||
Investments | 4,658,191 | 18,182,542 |
Recurring | US Treasury bonds | ||
Assets at fair value | ||
Investments | 6,006,593 | |
Recurring | Corporate bonds | ||
Assets at fair value | ||
Investments | 87,824,411 | 63,997,742 |
Recurring | Level 1 | Institutional Money Market | ||
Assets at fair value | ||
Cash equivalents | 253,460 | 950,658 |
Recurring | Level 1 | Certificates of deposit | ||
Assets at fair value | ||
Investments | 4,568,419 | 7,287,409 |
Recurring | Level 2 | Municipal bonds | ||
Assets at fair value | ||
Investments | 15,109,023 | 11,341,249 |
Recurring | Level 2 | Government agency bonds | ||
Assets at fair value | ||
Investments | 4,658,191 | 18,182,542 |
Recurring | Level 2 | US Treasury bonds | ||
Assets at fair value | ||
Investments | 6,006,593 | |
Recurring | Level 2 | Corporate bonds | ||
Assets at fair value | ||
Investments | 87,824,411 | 63,997,742 |
Municipal bonds | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 12,596,326 | 11,341,249 |
Held-to-maturity securities, noncurrent | 2,512,697 | |
Government agency bonds | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 1,158,191 | 11,950,738 |
Held-to-maturity securities, noncurrent | 3,500,000 | 6,231,804 |
US Treasury bonds | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 6,006,593 | |
Corporate bonds | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 60,012,228 | 57,321,784 |
Held-to-maturity securities, noncurrent | 27,812,183 | 6,675,958 |
Certificates of deposit | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 4,071,401 | 3,626,147 |
Held-to-maturity securities, noncurrent | $ 497,018 | $ 3,661,262 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concentration of Credit Risk and Major Customers (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)customer | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)customer | Sep. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
Concentration of Credit Risk and Major Customers | |||||
Accounts receivable | $ 13,593,641 | $ 13,593,641 | $ 19,065,919 | ||
Total Revenues | 11,255,864 | $ 9,442,253 | 24,827,933 | $ 26,424,380 | |
Royalties | |||||
Concentration of Credit Risk and Major Customers | |||||
Total Revenues | 9,255,864 | 9,442,253 | 22,827,933 | 26,424,380 | |
Endo | |||||
Concentration of Credit Risk and Major Customers | |||||
Accounts receivable | 13,600,000 | 13,600,000 | $ 19,100,000 | ||
Total Revenues | $ 11,300,000 | $ 9,400,000 | $ 24,800,000 | $ 26,400,000 | |
Endo | Revenues | Customer Concentration Risk | |||||
Concentration of Credit Risk and Major Customers | |||||
Number of customers | customer | 1 | 1 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Treasury Stock, Receivables and Deferred Revenue (Details) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020USD ($)customer | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($)customer$ / sharesshares | Sep. 30, 2019USD ($)$ / sharesshares | Dec. 31, 2019USD ($)customer | |
Treasury Stock | |||||
Treasury stock purchased (in shares) | shares | 7,573 | 6,209 | |||
Average price of share (in dollars per share) | $ / shares | $ 54.50 | $ 57.54 | |||
Receivables and Doubtful Accounts | |||||
Allowance for doubtful accounts | $ 0 | $ 0 | |||
Accounts receivable | 13,593,641 | 13,593,641 | $ 19,065,919 | ||
Third-Party Royalties | |||||
Royalty expenses | 200,000 | $ 200,000 | 400,000 | $ 700,000 | |
Milestone fee | 1,500,000 | 1,500,000 | |||
Endo | |||||
Receivables and Doubtful Accounts | |||||
Accounts receivable | $ 13,600,000 | $ 13,600,000 | $ 19,100,000 | ||
Accounts Receivable | Customer Concentration Risk | Endo | |||||
Receivables and Doubtful Accounts | |||||
Number of Customers | customer | 1 | 1 | 1 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Stock-Based Compensation (Details) - shares | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Stock options | ||
Share Based Compensation | ||
Outstanding options (in shares) | 242,187 | 189,187 |
Restricted stock awards | ||
Share Based Compensation | ||
Outstanding awards (in shares) | 12,666 | 10,450 |
2019 Plan | ||
Share Based Compensation | ||
Award expiry period | 10 years | |
Number of shares remaining available for issuance (in shares) | 1,079,982 | |
2019 Plan | Minimum | ||
Share Based Compensation | ||
Award vesting period | 1 year | |
2019 Plan | Maximum | ||
Share Based Compensation | ||
Award vesting period | 4 years | |
2019 Plan | Stock options | ||
Share Based Compensation | ||
Outstanding options (in shares) | 242,187 | |
2019 Plan | Restricted stock awards | ||
Share Based Compensation | ||
Outstanding awards (in shares) | 12,666 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Stock-Based Compensation, Restricted Stock Awards (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Restricted stock awards | ||||
Restricted Stock Awards | ||||
Nonvested, Beginning balance (in shares) | 10,450 | |||
Granted (in shares) | 13,666 | |||
Vested (in shares) | (11,450) | |||
Nonvested, Ending balance (in shares) | 12,666 | 12,666 | ||
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||||
Nonvested, Beginning of period (in dollars per share) | $ 60.47 | |||
Granted (in dollars per share) | 62.62 | |||
Vested (in dollars per share) | 59.60 | |||
Nonvested, Ending of period (in dollars per share) | $ 63.58 | $ 63.58 | ||
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount | $ 578 | $ 578 | ||
Recognized compensation period | 1 year | |||
Restricted stock awards | General and Administrative | ||||
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||||
Stock-based compensation expense | 178 | $ 146 | $ 515 | $ 146 |
Stock options | ||||
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||||
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount | 4,400 | $ 4,400 | ||
Recognized compensation period | 8 years 4 months 6 days | |||
Stock options | General and Administrative | ||||
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||||
Stock-based compensation expense | $ 333 | $ 114 | $ 469 | $ 374 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Revenue Recognition, Cumulative Effect (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Balance Sheets [Abstract] | ||
Accounts receivable | $ 13,593,641 | $ 19,065,919 |
Income tax payable | 354,984 | |
Retained earnings adjustment | 106,647,736 | 96,646,527 |
Endo | ||
Balance Sheets [Abstract] | ||
Accounts receivable | $ 13,600,000 | $ 19,100,000 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Stock-Based Compensation, Stock Option Activity (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Assumptions used to estimate the fair values of the stock options granted [Abstract] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate | 0.00% | ||||
Additional Disclosures [Abstract] | |||||
Proceeds from stock option exercises | $ 61,725 | $ 2,133,396 | |||
Minimum | |||||
Assumptions used to estimate the fair values of the stock options granted [Abstract] | |||||
Risk-free interest rate | 0.29% | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term | 5 years 6 months | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 39.50% | ||||
Maximum | |||||
Assumptions used to estimate the fair values of the stock options granted [Abstract] | |||||
Risk-free interest rate | 1.61% | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Term | 6 years 3 months | ||||
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 41.50% | ||||
Stock Options and Restricted Stock Awards | Restructuring | |||||
Additional Disclosures [Abstract] | |||||
Stock-based compensation expense | $ 190,000 | ||||
Restricted stock awards | |||||
Additional Disclosures [Abstract] | |||||
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount | $ 578,000 | $ 578,000 | |||
Recognized compensation period | 1 year | ||||
Restricted stock awards | General and Administrative | |||||
Additional Disclosures [Abstract] | |||||
Stock-based compensation expense | $ 178,000 | $ 146,000 | $ 515,000 | 146,000 | |
Stock options | |||||
Stock Options Activity [Roll Forward] | |||||
Outstanding, beginning of period (in shares) | 189,187 | ||||
Grants (in shares) | 202,000 | ||||
Exercised (in shares) | (1,500) | ||||
Cancelled (in shares) | (147,500) | ||||
Outstanding, end of period (in shares) | 242,187 | 242,187 | 189,187 | ||
Exercisable, end of period (in shares) | 42,687 | 42,687 | |||
Weighted Average Exercise Price [Roll Forward] | |||||
Outstanding, beginning of period (in dollars per share) | $ 46.79 | ||||
Grants (in dollars per share) | 61.92 | ||||
Exercised (in dollars per share) | 41.15 | ||||
Cancelled (in dollars per share) | 56.51 | ||||
Outstanding at end of year (in dollars per share) | $ 56.49 | 56.49 | $ 46.79 | ||
Exercisable, end of period (in dollars per share) | $ 33.45 | $ 33.45 | |||
Weighted Average Remaining Contractual Term [Roll Forward] | |||||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term | 8 years 4 months 6 days | 8 years 7 months 13 days | |||
Exercisable | 2 years 9 months 7 days | ||||
Aggregate Intrinsic Value [Roll Forward] | |||||
Outstanding, beginning of period | $ 1,920,684 | ||||
Outstanding, end of period | $ 0 | 0 | $ 1,920,684 | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value | $ 827,256 | $ 827,256 | |||
Additional Disclosures [Abstract] | |||||
Weighted average grant date fair value of stock granted (in dollars per share) | $ 61.92 | ||||
Proceeds from stock option exercises | $ 100,000 | 2,100,000 | |||
Closing price of common stock (in dollars per share) | $ 52.83 | $ 52.83 | |||
Share-based Payment Arrangement, Nonvested Award, Option, Cost Not yet Recognized, Amount | $ 4,400,000 | $ 4,400,000 | |||
Recognized compensation period | 8 years 4 months 6 days | ||||
Stock options | General and Administrative | |||||
Additional Disclosures [Abstract] | |||||
Stock-based compensation expense | $ 333,000 | $ 114,000 | $ 469,000 | $ 374,000 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Property and Equipment, Comprehensive Income and Provision for Income Taxes (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Property and Equipment [Abstract] | |||||
Property and equipment, net | $ 61,366 | $ 61,366 | |||
Comprehensive Income | |||||
Other comprehensive income | 0 | $ 0 | 0 | $ 0 | |
Income Taxes [Abstract] | |||||
Unrecognized tax benefits | 0 | $ 0 | $ 0 | ||
Machinery and Equipment | Minimum | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 5 years | ||||
Machinery and Equipment | Maximum | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 10 years | ||||
Furniture and Fixtures | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 5 years | ||||
Property and equipment, net | $ 69,000 | $ 69,000 | |||
Furniture and Fixtures | Minimum | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 5 years | ||||
Furniture and Fixtures | Maximum | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 10 years | ||||
Autos | Minimum | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 5 years | ||||
Autos | Maximum | |||||
Property and Equipment [Abstract] | |||||
Estimated useful life | 10 years |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Lease Obligation (Details) - USD ($) | Jan. 07, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 15, 2019 |
Leases | |||||||
Operating lease right-of-use asset | $ 181,783 | $ 181,783 | $ 239,491 | $ 243,000 | |||
Short-term lease liability | 79,770 | 79,770 | 69,099 | 76,000 | |||
Long-term lease liability | 106,500 | 106,500 | 167,014 | $ 167,000 | |||
Maturity of Lease Obligations [Abstract] | |||||||
Remainder of fiscal year | 20,605 | 20,605 | |||||
Year 1 | 84,893 | 84,893 | 75,352 | ||||
Year 2 | 87,428 | 87,428 | 84,893 | ||||
Year 3 | 87,428 | ||||||
Total lease payments | 192,926 | 192,926 | 247,673 | ||||
Less: Interest | (6,656) | (6,656) | (11,560) | ||||
Total lease obligation | 186,270 | 186,270 | $ 236,113 | ||||
Notice period to cancel lease agreements | 3 months | ||||||
Operating lease expenses | $ 21,000 | $ 34,000 | $ 101,000 | $ 101,000 |
SUMMARY OF SIGNIFICANT ACCOU_14
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Stockholders' Equity (Details) | Apr. 21, 2020Right | Apr. 10, 2020Right$ / shares | Sep. 30, 2020$ / sharesshares | Jun. 12, 2020shares | Jun. 11, 2020shares | Dec. 31, 2019$ / sharesshares |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ||||||
Common stock, authorized (in shares) | shares | 15,000,000 | 15,000,000 | 10,000,000 | 15,000,000 | ||
Dividend of preferred share purchase right | 1 | |||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | $ 0.001 | |||
Number of rights to be issued with each common share issued | 1 | |||||
Ownership percentage acquired that would trigger the Rights Agreement | 20 |
SUMMARY OF SIGNIFICANT ACCOU_15
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Shelf Registration Statement (Details) - USD ($) | Jul. 17, 2020 | Sep. 30, 2020 |
Stockholders' Equity | ||
Amount of equity available for issuance under the Shelf Registration Statement | $ 200,000,000 | |
Maximum | ||
Stockholders' Equity | ||
Amount of sale of common stock, preferred stock, debt securities, warrants, and units | $ 200,000,000 |
SUMMARY OF SIGNIFICANT ACCOU_16
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - At-The-Market Equity Offering Sales Agreement (Details) - USD ($) | Aug. 31, 2020 | Sep. 30, 2020 | Apr. 10, 2020 | Dec. 31, 2019 |
Subsidiary, Sale of Stock [Line Items] | ||||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 | $ 0.001 | |
At-The-Market Equity Offering | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Common stock, par value (in dollars per share) | $ 0.001 | |||
Percentage of commission on sale proceeds of stock | 3.00% | |||
Maximum | At-The-Market Equity Offering | ||||
Subsidiary, Sale of Stock [Line Items] | ||||
Aggregate offering price | $ 75,000,000 |
NET INCOME PER SHARE (Details)
NET INCOME PER SHARE (Details) - Stock Options and Restricted Stock Awards - shares | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Net Income Per Share [Abstract] | ||||
Incremental Common Shares Attributable to Dilutive Effect of Share-based Payment Arrangements | 21,813 | 24,822 | 23,327 | 41,036 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 200,630 | 60,500 | 176,389 | 60,000 |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Accounts payable and accrued expenses [Abstract] | ||
Trade accounts payable | $ 98,665 | $ 197,077 |
Accrued legal and other professional fees | 526,099 | 330,787 |
Accrued payroll and related costs | 591,116 | 209,330 |
Third party royalties | 156,000 | 228,000 |
Restructuring accrual | 10,000 | |
Other accruals | 79,500 | 33,215 |
Total | $ 1,461,380 | $ 998,409 |
PATENT COSTS (Details)
PATENT COSTS (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Net Patent Costs [Abstract] | |||||
Net Patent Costs | $ 511,345 | $ 511,345 | $ 573,277 | ||
Patents | |||||
Finite-lived Intangible Assets | |||||
Impairment | 0 | 0 | |||
Increase in capitalized patent costs | 0 | $ 97,000 | 0 | $ 190,000 | |
Net Patent Costs [Abstract] | |||||
Patents | 1,272,625 | 1,272,625 | 1,272,625 | ||
Accumulated amortization | (761,280) | (761,280) | (699,348) | ||
Net Patent Costs | 511,345 | 511,345 | $ 573,277 | ||
Amortization expense for patents | 21,000 | $ 29,000 | 62,000 | $ 72,000 | |
Estimated aggregate amortization expense | |||||
July 1, 2020 - December 31, 2020 | 20,644 | 20,644 | |||
2021 | 65,427 | 65,427 | |||
2022 | 65,427 | 65,427 | |||
2023 | 65,427 | 65,427 | |||
2024 | 65,427 | 65,427 | |||
Thereafter | $ 228,993 | $ 228,993 | |||
Patents | Minimum | |||||
Finite-lived Intangible Assets | |||||
Amortization period for intangible assets | 2 years | ||||
Patents | Maximum | |||||
Finite-lived Intangible Assets | |||||
Amortization period for intangible assets | 10 years |
PROVISION FOR INCOME TAXES (Det
PROVISION FOR INCOME TAXES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
PROVISION FOR INCOME TAXES | |||||
Provision for income taxes | $ 1,389,964 | $ 1,552,966 | $ 2,627,645 | $ 3,712,477 | |
Deferred Income Tax Liabilities, Net | $ 307,457 | $ 307,457 | $ 572,660 | ||
Effective Income Tax Rate Reconciliation, Percent | 21.00% | 20.00% | 21.00% | 18.00% |
RESTRUCTURING AND SEPARATION _2
RESTRUCTURING AND SEPARATION COSTS (Details) | Mar. 23, 2020employee | Mar. 23, 2020item | Jan. 06, 2020employee | Jan. 06, 2020item | Sep. 30, 2020USD ($) | Mar. 31, 2020USD ($) | Sep. 30, 2019USD ($) | Sep. 30, 2020USD ($) | Sep. 30, 2019USD ($) |
Restructuring and separation costs | |||||||||
Number of positions terminated | 5 | 1 | |||||||
Number of positions given separation agreements | 5 | 1 | |||||||
Restructuring charges | $ 1,100,000 | $ 1,146,045 | |||||||
Restructuring Reserve [Roll Forward] | |||||||||
Stock compensation expense charged to additional paid-in-capital | $ (510,944) | $ (259,921) | (1,173,714) | $ (520,387) | |||||
Restructuring accrual, end of period | 10,000 | 10,000 | |||||||
One-time Termination Benefits | |||||||||
Restructuring and separation costs | |||||||||
Restructuring charges | 900,000 | ||||||||
Restructuring Reserve [Roll Forward] | |||||||||
Restructuring accrual, beginning of period | |||||||||
Severance Costs | 1,070,024 | ||||||||
Facility exit costs | 76,020 | ||||||||
Payments | (945,612) | ||||||||
Stock compensation expense charged to additional paid-in-capital | (190,432) | ||||||||
Restructuring accrual, end of period | 10,000 | 10,000 | |||||||
One-time Non-cash Termination Expenses | |||||||||
Restructuring and separation costs | |||||||||
Restructuring charges | $ 200,000 | ||||||||
One-time Non-cash Termination Expenses | Accounts Payable and Accrued Liabilities | |||||||||
Restructuring and separation costs | |||||||||
Restructuring and Related Cost, Expected Cost Remaining | 300,000 | 300,000 | |||||||
One-time Non-cash Termination Expenses | General and Administrative | |||||||||
Restructuring and separation costs | |||||||||
Restructuring and Related Costs, Incurred Cost, Total | $ 0 | $ 600,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent Event - Endo, and Beta Acquisition Corp. - Plan of Merger Agreement | Oct. 19, 2020$ / shares |
Subsequent Event [Line Items] | |
Purchase price per share | $ 88.50 |
Initial offer term (in days) | 20 days |