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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

FORM 10-Q

_______________________________

(Mark One)

x

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

For the quarterly period ended June 30, 2020

or

 

¨

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

For transition period from                      to                     .

Commission File Number: 001-37841

Kadmon Holdings, Inc.

(Exact name of registrant as specified in its charter)

_______________________________

Delaware

(State or other jurisdiction of
incorporation or organization)

27-3576929

(I.R.S. Employer
Identification No.)

450 East 29th Street, New York, NY

(Address of principal executive offices)

10016

(Zip Code)

(833900-5366

(Registrant’s telephone number, including area code)

_______________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes x     No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x     No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated Filer ¨

 

Accelerated Filer x

 

Non-accelerated Filer ¨

 

Smaller reporting company x

 

Emerging growth company x

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.001 per share

KDMN

The New York Stock Exchange

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

The number of shares of the registrant’s common stock outstanding as of August 3, 2020 was 171,137,067.

2


Kadmon Holdings, Inc.

Form 10-Q

Table of Contents

Page

PART I – Financial Information

Item 1

Consolidated financial statements:

5

Consolidated balance sheets as of June 30, 2020 (unaudited) and December 31, 2019

5

Consolidated statements of operations
    for the three and six months ended June 30, 2020 and 2019 (unaudited)

6

Consolidated statements of stockholders’ equity
    for the three and six months ended June 30, 2020 and 2019 (unaudited)

7

Consolidated statements of cash flows
    for the six months ended June 30, 2020 and 2019 (unaudited)

9

Notes to consolidated financial statements (unaudited)

10

Item 2

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

22

Item 3

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4

Controls and Procedures

27

PART II – Other Information

Item 1

Legal Proceedings

28

Item 1A

Risk Factors

28

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

30

Item 3

Defaults Upon Senior Securities

30

Item 4

Mine Safety Disclosures

30

Item 5

Other Information

30

Item 6

Exhibits

30

Signatures

32

 


3


FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. Statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, including, among others, statements regarding future expenditures, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions.

Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We believe that these factors include, but are not limited to, the following:

the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;

our ability to advance product candidates into, and successfully complete, clinical trials;

the impact of the COVID-19 pandemic on our business, workforce, patients, collaborators and suppliers, including delays in anticipated timelines and milestones of our clinical trials and on various government agencies who we interact with and/or are governed by;

our reliance on the success of our product candidates;

the timing or likelihood of regulatory filings and approvals, especially in light of the COVID-19 pandemic;

our ability to expand our sales and marketing capabilities;

the commercialization, pricing and reimbursement of our product candidates, if approved;

the implementation of our business model, strategic plans for our business, product candidates and technology;

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights and proprietary technology of third parties;

cost associated with defending or enforcing, if any, intellectual property infringement, misappropriation or other intellectual property violation, product liability and other claims;

regulatory and governmental policy developments in the United States, Europe and other jurisdictions;

the potential benefits of strategic collaboration agreements and our ability to enter into strategic arrangements;

our ability to maintain and establish collaborations;

the rate and degree of market acceptance, if any, of our product candidates, if approved;

developments relating to our competitors and our industry, including competing therapies;

our ability to effectively manage our anticipated growth;

our ability to attract and retain qualified employees and key personnel;

our ability to achieve cost savings and benefits from our efforts to streamline our operations and to not harm our business with such efforts;

our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act;

statements and estimates regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements, needs for additional financing and share performance;

litigation, including costs associated with prosecuting or defending pending or threatened claims and any adverse outcomes or settlements not covered by insurance;

our expected use of cash and cash equivalents and other sources of liquidity;

the future trading price of the shares of our common stock and the impact of securities analysts’ reports on these prices;

the future trading price of our investments and our potential inability to sell those securities;

our ability to apply unused federal and state net operating loss carryforwards against future taxable income; and

other risks and uncertainties, including those listed under the caption “Risk Factors.”

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions, and we may not actually achieve the plans, intentions or expectations included in our forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

4


PART I. FINANCIAL INFORMATION

Kadmon Holdings, Inc.

Consolidated balance sheets

(in thousands, except share and per share amounts)

 

June 30,

December 31,

  

2020

2019

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

169,803

  

$

139,597 

Accounts receivable, net

396

  

954 

Inventories, net

116

  

640 

Investment, equity securities

12,492

41,997 

Prepaid expenses and other current assets

2,639

  

1,416 

Total current assets

185,446

  

184,604 

Fixed assets, net

1,877

  

2,444 

Right of use lease asset

17,902

19,651 

Goodwill

3,580

  

3,580 

Restricted cash

2,117

  

2,116 

Investment, at cost

2,300

  

2,300 

Other noncurrent assets

22

103 

Total assets

$

213,244

  

$

214,798 

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

11,674

  

$

9,043 

Accrued expenses

11,410

  

14,248 

Term debt - current

1,359

Lease liability - current

4,077

  

3,966 

Warrant liabilities

1,618

  

1,485 

Total current liabilities

30,138

  

28,742 

Lease liability - noncurrent

17,689

  

19,759 

Deferred tax liability

461

  

461 

Term debt - noncurrent

1,699

Other long term liabilities

  

101 

Total liabilities

49,987

  

49,063 

Commitments and contingencies (Note 12)

 

 

Stockholders’ equity:

Convertible preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2020 and December 31, 2019; 28,708 shares issued and outstanding at June 30, 2020 and December 31, 2019.

43,468

  

42,433 

Common stock, $0.001 par value; 400,000,000 shares authorized at June 30, 2020 and December 31, 2019; 171,097,067 and 159,759,996 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively

171 

  

160 

Additional paid-in capital

510,171

  

456,211 

Accumulated deficit

(390,553)

(333,069)

Total stockholders’ equity

163,257

165,735 

Total liabilities and stockholders’ equity

$

213,244

$

214,798 

 

See accompanying notes to consolidated financial statements (unaudited)

5


Kadmon Holdings, Inc.

Consolidated statements of operations (unaudited)

(in thousands, except share and per share amounts)

   

Three Months Ended

Six Months Ended

June 30,

June 30,

2020

2019

2020

2019

Revenues:

Net sales

$

299

$

47

$

888

$

114

Other revenue

149

179

6,295

353

Total revenue

448

226

7,183

467

Cost of sales

162

45

490

76

Write-down of inventory

622

932

906

932

Gross profit

(336)

(751)

5,787

(541)

Operating expenses:

Research and development

16,516

15,108

29,390

30,099

Selling, general and administrative

10,068

8,981

19,434

16,927

Total operating expenses

26,584

24,089

48,824

47,026

Loss from operations

(26,920)

(24,840)

(43,037)

(47,567)

Other (expense) income:

Interest income

128

548

594

1,204

Interest expense

(5)

(936)

(5)

(1,868)

Change in fair value of warrant liabilities

(289)

280

(133)

56

Realized gain on equity securities

15,510

15,510

Unrealized (loss) gain on equity securities

(15,702)

34,110

(29,505)

60,938

Other income (expense)

126

(2)

127

(11)

Total other (expense) income

(232)

34,000

(13,412)

60,319

(Loss) income before income tax expense

(27,152)

9,160

(56,449)

12,752

Income tax expense

Net (loss) income

$

(27,152)

$

9,160

$

(56,449)

$

12,752

Deemed dividend on convertible preferred stock

518

508

1,035

1,023

Net (loss) income attributable to common stockholders

$

(27,670)

$

8,652

$

(57,484)

$

11,729

Basic net (loss) income per share of common stock

$

(0.17)

$

0.07

$

(0.36)

$

0.09

Diluted net (loss) income per share of common stock

$

(0.17)

$

0.07

$

(0.36)

$

0.09

Weighted average basic shares of common stock outstanding

162,416,059

129,080,221

161,101,923

127,713,099

Weighted average diluted shares of common stock outstanding

162,416,059

129,090,983

161,101,923

127,750,765

See accompanying notes to consolidated financial statements (unaudited)

 


6


Kadmon Holdings, Inc.

Consolidated statements of stockholders’ equity (unaudited)

(in thousands, except share amounts)

For the Three Months Ended June 30, 2020

Preferred stock

Common stock

Additional
paid-in

Accumulated

Shares

Amount

Shares

Amount

capital

Deficit

Total

Balance, April 1, 2020

28,708

$

42,950

159,830,774

$

160

$

458,539

$

(362,883)

$

138,766

Share-based compensation expense

2,621

2,621

Common stock issued in public offering, net

11,060,786

11

48,430

48,441

Common stock issued under ESPP plan

98,840

216

216

Common stock issued for warrant exercises

Common stock issued for option exercises

106,667

365

365

Beneficial conversion feature on convertible preferred stock

104

(104)

Accretion of dividends on convertible preferred stock

414

(414)

Net loss

(27,152)

(27,152)

Balance, June 30, 2020

28,708

$

43,468

171,097,067

$

171

$

510,171

$

(390,553)

$

163,257

For the Three Months Ended June 30, 2019

Preferred stock

Common stock

Additional
paid-in

Accumulated

Shares

Amount

Shares

Amount

capital

Deficit

Total

Balance, April 1, 2019

30,000

$

42,746

126,909,522

$

127

$

346,901

$

(266,566)

$

123,208

Share-based compensation expense

1,969

1,969

Common stock issued in public offering, net

2,538,100

3

6,644

6,647

Common stock issued under ESPP plan

32,273

73

73

Beneficial conversion feature on convertible preferred stock

102

(102)

Accretion of dividends on convertible preferred stock

406

(406)

Common stock issued upon conversion of convertible preferred stock

(1,292)