| 2 |
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report and certain information incorporated herein by reference contain forward-looking statements, which are provided under the “safe harbor” protection of the Private Securities Litigation Reform Act of 1995. These statements relate to future events, results or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or events to be materially different from any future results, performance or events expressed or implied by the forward-looking statements. Forward-looking statements in this report include, but are not limited to, statements regarding:
In some cases, you can identify these statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or the negative of those terms, and similar expressions. These forward-looking statements reflect our management’s beliefs and views with respect to future events and are based on estimates and assumptions as of the date of this Annual Report and are subject to risks and uncertainties. We discuss many of these risks in greater detail in the section entitled “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. Given these uncertainties, you should not place undue reliance on these forward-looking statements.
This Annual Report on Form 10-K includes trademarks and registered trademarks of AmpliPhi Biosciences Corporation. Products or service names of other companies mentioned in this Annual Report on Form 10-K may be trademarks or registered trademarks of their respective owners.
As used in this Annual Report, unless the context requires otherwise, the “Company,” “we,” “us” and “our” refer to AmpliPhi Biosciences Corporation and its wholly-owned subsidiaries.
| 3 |
EXPLANATORY NOTE
Note Regarding Restatement of Previously Issued Consolidated Financial Statements
In this Annual Report on Form 10-K, we have restated historical financial statements for the year ended, December 31, 2014, three and six months ended June 30, 2014, three and nine months ended September 30, 2014 and three months ended June 30, 2015 to reflect a revision in accounting for basic and diluted earnings per share.
The error relates to the misapplication of Accounting Standards Codification No. 260, “Earnings Per Share,” or ASC 260, for two matters.
First, we did not properly consider the fact that outstanding shares of our Series B redeemable convertible preferred stock, in certain limited circumstances, have the right to receive additional dividends beyond their accruing dividends, which makes them participating securities. Therefore, consideration of this component of the preferred stock terms is included in computing basic earnings per share pursuant to the two-class method. The Company failed to make such adjustments to the basic income (loss) per share calculations for the prior periods discussed above.
Second, we did not properly account for the adjustments required to net income (loss) attributable to common stockholders in the calculation of diluted net income (loss) per share. The calculation of diluted net income (loss) per share requires that, to the extent that such securities are dilutive to income (loss) per share for the period, an adjustment to net income (loss) used in the calculation is required to remove the change in fair value of the liability classified warrants from the numerator for the period. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares. Similarly, the diluted income (loss) per share calculation also requires an adjustment to net income (loss) used in the calculation to remove the change in the fair value of the Series B redeemable convertible preferred stock embedded derivative (if the Series B redeemable convertible preferred stock is dilutive), including any applicable accretion, and an adjustment to the denominator is required to reflect the related dilutive securities. The Company failed to make such adjustments to the diluted income (loss) per share calculations for the prior periods discussed above.
During the preparation process for this Annual Report on Form 10-K, we recomputed the basic and diluted income (loss) per share amounts for all periods to conform with the provisions of ASC 260.
In connection with this restatement, we revised our consolidated statement of operations for the year ended December 31, 2014, and applicable interim periods in 2014 and 2015 to reflect revised basic and diluted income (loss) per share. This adjustment had no impact on our balance sheets, reported loss from operations, net income (loss) attributable to common stockholders, statements of redeemable convertible preferred stock and stockholders’ equity, or our statements of cash flows and our cash and cash equivalents balances are unchanged for such periods.
Throughout this Annual Report on Form 10-K, amounts presented from current periods and prior period comparisons have been revised and labeled as “restated” and reflect the amounts on a restated basis.
Tables summarizing the effect of the restatement on the specific line items presented in our historical financial statements for the periods indicated are included in Note 3 – Significant Accounting Policies and Note 17 – Quarterly Financial Data of the notes to our consolidated financial statements included with this Annual Report on Form 10-K.
| 4 |
Company History
We were incorporated under the laws of the State of Washington in March 1989 as a wholly owned subsidiary of Immunex Corporation and began operations as an independent company in 1992 as Targeted Genetics Corporation.
In January 2011, we completed the acquisition of Biocontrol Ltd, which we refer to as Biocontrol, an antimicrobial biotechnology company based in the United Kingdom, with the goal of developing their phage therapy programs using funding from the sale of our legacy gene therapy assets.
On February 22, 2011, we changed our name to “AmpliPhi Biosciences Corporation.”
In November 2012, we completed the acquisition of Special Phage Holdings Pty Ltd, a company based in Australia, which we refer to as SPH, with the goal of combining SPH’s research on addressing the rapidly escalating problem of antibiotic resistance through the development of a series of bacteriophage-based treatments into our own development program.
In November 2015, our board of directors approved a plan for us to reincorporate as AmpliPhi Biosciences Corporation in the State of Delaware, subject to the approval of our stockholders. We may decide to abandon our plan to reincorporate in the State of Delaware at our election.
Company Overview
We are a biotechnology company focused on the discovery, development and commercialization of novel phage therapeutics. Phage therapeutics use bacteriophages, a family of viruses, to kill pathogenic bacteria. Phages have powerful and highly selective mechanisms of action that permit them to target and kill specific bacteria. We believe that phages represent a promising means to treat bacterial infections, especially those that have developed resistance to current therapies, including the so-called multi-drug-resistant or “superbug” strains of bacteria.
Our goal is to be the leading developer of phage therapeutics. We are combining our expertise in the manufacture of drug-quality bacteriophages and our proprietary approach and expertise in identifying, characterizing and developing naturally occurring bacteriophages with that of our collaboration partners in bacteriophage biology, synthetic biology and manufacturing, to develop second-generation bacteriophage products.
The extensive use of antibiotics since their discovery in the 1940s has resulted in drug resistance among many disease-causing bacteria. According to the U.S. Centers for Disease Control and Prevention, or CDC, resistance to antibiotics threatens to reverse many of the key medical advances of the last half-century. Examples of clinically important microbes that are rapidly developing resistance to available antimicrobials include bacteria that cause skin, bone, lung and bloodstream infections (e.g., S. aureus and methicillin-resistant S. aureus, or MRSA), pneumonia and lung infections in both community and hospital settings and cystic fibrosis patients (e.g., A. baumanii, P. aeruginosa, and K. pneumoniae), meningitis (e.g., S. pneumonia), urinary tract and gastrointestinal infections (e.g., E. coli and C. difficile). As phages kill bacteria in ways entirely unlike the mechanisms used by traditional antibiotics, we believe that multi-drug resistant bacteria will be susceptible to phage therapy. Furthermore, should resistant bacteria emerge, we believe it will remain possible to identify phages that can effectively kill these resistant bacteria.