lens-10q_20150930.htm

 

UNITED STATES

SECURITIES and EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-Q

 

x

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

For the quarterly period ended September 30, 2015

or

o

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

Commission file number: 001-36824

 

Presbia PLC

(Exact name of registrant as specified in its charter)

 

 

Ireland

98-1162329

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

 

120/121 Baggot Street Lower, Dublin 2 Ireland

(Address of principal executive offices)

(Zip Code)

 

+353 (1) 659 9446

(Registrant’s telephone number, including area code)

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

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

 

Large accelerated filer

o

Accelerated filer

o

 

 

 

 

Non-accelerated filer

x  (Do not check if a smaller reporting company)

Small reporting company

o

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

The number of outstanding shares of the Registrant’s ordinary shares as of October 27, 2015 was 13,355,477 shares.

 

 

 

 


PRESBIA PLC

TABLE OF CONTENTS

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2015

 

Item

 

Page

 

 

 

 

PART I.  FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014

2

 

 

 

 

Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2015 and 2014

3

 

 

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014

4

 

 

 

 

Notes to Consolidated Financial Statements

5

 

 

 

Item 2.

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

16

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

21

 

 

 

Item 4.

Controls and Procedures

21

 

 

 

 

PART II.  OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

22

 

 

 

Item 1A.

Risk Factors

22

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

 

 

 

Item 3.

Defaults Upon Senior Securities

23

 

 

 

Item 4.

Mine and Safety Disclosure

23

 

 

 

Item 5.

Other Information

23

 

 

 

Item 6.

Exhibits

24

 

 

 

 

Signatures

25

 

 

 


Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” and or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report on Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

 

the initiation, timing, progress and results of our clinical trials, our regulatory submissions and our research and development programs;

 

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

 

our ability to obtain pre-market approvals;

 

the commercialization of our products;

 

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

 

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

 

estimates of our expenses, future revenues, capital requirements and our needs for additional financing;

 

the timing or likelihood of regulatory filings and approvals;

 

our financial performance; and

 

developments relating to our competitors and our industry.

You should refer to “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission on March 30, 2015, “Part II, Item 1A. Risk Factors” of our Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30, 2015, filed with the Securities and Exchange Commission on May 15 and August 6, 2015, respectively, and “Part II, Item 1A. Risk Factors” elsewhere in the report for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements.  As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete discussion of all potential risks or uncertainties that may substantially impact our business. Moreover, we operate in a competitive and rapidly changing environment. New factors emerge from time to time and it is not possible to predict the impact of all of these factors on our business, financial condition or results of operations.

Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

You should read this Quarterly Report on Form 10-Q and any documents that we reference in this report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

 

1

 


PART I.  FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

PRESBIA PLC

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

(Unaudited)

 

 

 

September 30, 2015

 

 

December 31, 2014

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash

 

$

25,371

 

 

$

138

 

Accounts receivable

 

 

34

 

 

 

25

 

Inventory, net

 

 

419

 

 

 

378

 

Prepaid expenses and other current assets

 

 

287

 

 

 

122

 

Total current assets

 

 

26,111

 

 

 

663

 

Property and equipment, net

 

 

784

 

 

 

747

 

Intangible asset

 

 

36

 

 

 

46

 

Other assets

 

 

47

 

 

 

886

 

Total assets

 

$

26,978

 

 

$

2,342

 

Liabilities and shareholders’ equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,290

 

 

$

1,882

 

Due to related parties

 

 

53

 

 

 

12

 

Other current liabilities

 

 

705

 

 

 

700

 

Total current liabilities

 

 

2,048

 

 

 

2,594

 

Payable due to the Parent

 

 

 

 

 

417

 

Deferred rent

 

 

26

 

 

 

37

 

Total liabilities

 

 

2,074

 

 

 

3,048

 

Commitments and contingencies (note 10)

 

 

 

 

 

 

 

 

Shareholders' equity (deficit)

 

 

 

 

 

 

 

 

Common Ordinary Shares

 

 

 

 

 

 

 

 

$0.001 par value, 350,000,000 shares authorized; 13,355,477 and

   -0- shares issued and outstanding at September 30, 2015 and

   December 31, 2014, respectively

 

 

13

 

 

 

 

Deferred Ordinary Shares

 

 

 

 

 

 

 

 

One Euro (US$1.35) par value, 39,994 and 40,000 shares authorized, issued and outstanding at September 30, 2015 and December 31, 2014, respectively

 

 

54

 

 

 

54

 

Additional paid-in capital

 

 

77,035

 

 

 

36,626

 

Accumulated deficit

 

 

(52,198

)

 

 

(37,386

)

Total shareholders' equity (deficit)

 

 

24,904

 

 

 

(706

)

Total liabilities and shareholders’ equity (deficit)

 

$

26,978

 

 

$

2,342

 

 

The accompanying notes are an integral part of these unaudited

consolidated financial statements.

 

 

 

2

 


PRESBIA PLC

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Revenues

 

$

10

 

 

$

38

 

 

$

125

 

 

$

125

 

Cost of goods sold

 

 

34

 

 

 

6

 

 

 

95

 

 

 

45

 

Gross profit (loss)

 

 

(24

)

 

 

32

 

 

 

30

 

 

 

80

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

2,333

 

 

 

1,016

 

 

 

6,611

 

 

 

3,423

 

Sales and marketing

 

 

760

 

 

 

463

 

 

 

2,113

 

 

 

1,106

 

General and administrative

 

 

1,762

 

 

 

882

 

 

 

6,088

 

 

 

6,529

 

Total operating expenses

 

 

4,855

 

 

 

2,361

 

 

 

14,812

 

 

 

11,058

 

Operating loss

 

 

(4,879

)

 

 

(2,329

)

 

 

(14,782

)

 

 

(10,978

)

Interest expense

 

 

 

 

 

719

 

 

 

 

 

 

1,736

 

Other (income) expense

 

 

12

 

 

 

 

 

 

12

 

 

 

(6

)

Loss before income tax provision

 

 

(4,891

)

 

 

(3,048

)

 

 

(14,794

)

 

 

(12,708

)

Income tax provision

 

 

9

 

 

 

5

 

 

 

18

 

 

 

10

 

Net loss

 

$

(4,900

)

 

$

(3,053

)

 

$

(14,812

)

 

$

(12,718

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

$

(4,900

)

 

$

(3,053

)

 

$

(14,812

)

 

$

(12,718

)

Net loss per share-basic and diluted

 

$

(0.37

)

 

$

(0.33

)

 

$

(1.16

)

 

$

(1.39

)

Shares used to compute basic and diluted

   net loss per share

 

 

13,335

 

 

 

9,167

 

 

 

12,815

 

 

 

9,167

 

 

The accompanying notes are an integral part of these unaudited

consolidated financial statements.

 

 

 

 

3

 


PRESBIA PLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

Cash flow from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(14,812

)

 

$

(12,718

)

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

 

 

 

 

 

 

 

 

Depreciation

 

 

119

 

 

 

100

 

Amortization

 

 

6

 

 

 

3

 

Inventory provisions

 

 

87

 

 

 

35

 

Write-off of deferred offering costs

 

 

 

 

 

3,369

 

Share-based compensation (including allocation from Presbia Holdings)

 

 

1,837

 

 

 

308

 

Non-cash interest expense on funding from the Presbia Holdings

 

 

1

 

 

 

1,736

 

Non-cash operating expenses allocated from the Presbia Holdings

 

 

182

 

 

 

183

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(9

)

 

 

(2

)

Inventory

 

 

(127

)

 

 

(139

)

Prepaid expenses and other current assets

 

 

(166

)

 

 

89

 

Other assets

 

 

(10

)

 

 

(9

)

Accounts payable and other current liabilities

 

 

731

 

 

 

(240

)

Income taxes payable

 

 

16

 

 

 

10

 

Deferred rent

 

 

(11

)

 

 

7

 

Due to related parties

 

 

70

 

 

 

(107

)

Net cash used in operating activities

 

 

(12,086

)

 

 

(7,375

)

Cash flow from investing activities:

 

 

 

 

 

 

 

 

Website development costs

 

 

4

 

 

 

(32

)

Purchase of property and equipment

 

 

(156

)

 

 

(129

)

Net cash used in investing activities

 

 

(152

)

 

 

(161

)

Cash flow from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of ordinary shares upon initial public offering, net of

   underwriting costs

 

 

38,750

 

 

 

 

Deferred offering costs

 

 

(2,420

)

 

 

(1,605

)

Capitalization of Presbia PLC

 

 

 

 

 

54

 

Funding from the Parent

 

 

1,141

 

 

 

8,750

 

Net cash provided by financing activities

 

 

37,471

 

 

 

7,199

 

Net increase(decrease) in cash

 

 

25,233

 

 

 

(337

)

Cash balance at beginning of period

 

 

138

 

 

 

584

 

Cash balance at end of period

 

$

25,371

 

 

$

247

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

3

 

 

$

5

 

 

 

 

 

 

 

 

 

 

Supplemental disclosures of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Deferred offering costs included in accounts payable and other current liabilities

 

$

 

 

$

1,100

 

Deferred offering costs included in Due to Presbia Holdings

 

$

 

 

$

650

 

Allocated operating expenses funded by the Presbia Holdings

 

$

182

 

 

$

183

 

Capitalization of amounts due to Presbia Holdings persuant to the 2015 Debt Conversion

 

$

1,559

 

 

$

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

 

4

 


PRESBIA PLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2015

(Unaudited)

(1)  Basis of Presentation

Principles of Consolidation.  The accompanying consolidated financial statements have been derived from the historical cost basis of the assets and liabilities, financial condition and cash flows of Presbia PLC and Presbia Ireland, Limited, both organized in Ireland, Presbia Investments, a direct subsidiary of Presbia PLC organized in the Cayman Islands, and Presbia Ireland, Limited’s subsidiaries, Presbia USA, Inc., and OPL, LLC. Presbia USA, Inc. and OPL, LLC are both entities organized in the United States, and include Presbia USA, Inc.’s subsidiaries, Visitome, Inc. and PresbiBio, LLC, both organized in the United States, and OPL, LLC’s direct and indirect subsidiaries, PIP Holdings, C.V and Presbia Cooperatief U.A., both organized in the Netherlands, and PresbiOptical LLC, organized in the United States (collectively, including Presbia PLC, the “Company”).  The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).  The Company’s fiscal year ends on December 31. The entities presented in the consolidated financial statements have been under common control during the periods presented. All intercompany accounts have been eliminated in consolidation.

2013 Restructuring and Formation of Presbia PLC.  Presbia PLC, an Irish public limited company, was formed on February 6, 2014 through the issuance of 40,000 shares for 40,000 Euro (approximately $54,000) for the purpose of consummating an initial public offering of its ordinary shares. Presbia PLC’s ultimate controlling shareholder, Presbia Holdings (the “Parent”), was organized in the Cayman Islands in 2007 as an exempted company with limited liability. On October 21, 2013, the Parent completed a restructuring (the “2013 Restructuring”) which involved the formation on September 13, 2013 of an interim holding company, Presbia Ireland, Limited, and the contribution by the Parent of 100% of its direct and indirect ownership interests in its business, assets and subsidiaries to Presbia Ireland, Limited. At the time of the 2013 Restructuring, Presbia Ireland, Limited was wholly-owned by Presbia Holdings and certain intercompany debt was owed to Presbia Holdings by certain of its other subsidiaries. As part of the 2013 Restructuring, approximately $12.2 million of such outstanding intercompany debt owed to Presbia Holdings was converted to equity of such subsidiaries.

2014 Debt Conversion.  On November 30, 2014, Presbia Holdings converted all the remaining indebtedness owed to Presbia Holdings by certain subsidiaries of Presbia Ireland, Limited at that time to equity (“2014 Debt Conversion”). In the 2014 Debt Conversion, approximately $23.5 million of outstanding intercompany debt owed to Presbia Holdings was converted to equity of Presbia Ireland, Limited.

2015 Debt Conversion.  On January 14, 2015, the Parent converted all the remaining indebtedness owed to the Parent by a subsidiary of Presbia Ireland, Limited at that time to equity (the “2015 Debt Conversion”) in the amount of approximately $1.6 million.  See Note 4 for additional discussion.

2015 Capital Contribution.  On January 14, 2015, the Parent contributed all the share capital in issue in Presbia Ireland, Limited to Presbia PLC (the “2015 Capital Contribution”) in exchange for 9,166,667 ordinary shares of Presbia PLC.  See Note 4 for additional discussion.

Initial Public Offering.  On February 3, 2015, Presbia PLC completed its initial public offering (“IPO”) of 4,166,667 of its ordinary shares at a price to the public of $10.00 per ordinary share and commenced trading on The NASDAQ Global Market under the symbol LENS.  The Parent acquired 500,000 ordinary shares in the public offering.  The net proceeds from the IPO consisted of aggregate gross proceeds of approximately $41.7 million, less underwriting discounts and commissions of approximately $2.9 million and other issuance costs of approximately $2.0 million, resulting in net proceeds of approximately $36.8 million.

Liquidation of Presbia Holdings. On May 13, 2015 the board of directors and shareholders of Presbia Holdings approved a voluntary liquidation and distribution of the assets of Presbia Holdings consisting primarily of 9,666,667 shares of Presbia PLC shares, of which 500,000 shares were acquired during the initial public offering and 9,166,667 were acquired pursuant to the 2015 Capital Contribution, to its ordinary shareholders. On May 13, 2015, the shareholders also approved a plan that would immediately fully vest all outstanding options and restricted share awards and, in the case of the options, accelerate the expiration date of all such options to June 15, 2015. On August 3, 2015, the distribution of the 9,666,667 shares of Presbia Holdings was completed. See Note 6 and for further discussion.

 

5

 


Basis of Presentation.  The accompanying unaudited consolidated financial statements as of September 30, 2015 and for the three months and nine months ended September 30, 2015 and 2014 have been prepared in accordance with the requirements of Form 10-Q and Article 10 of the Securities and Exchange Commission Regulation S-X and therefore do not include all information and notes which would be presented were such consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).  These consolidated financial statements should be read in conjunction with the audited consolidated financial statements presented in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.  Amounts related to disclosures of December 31, 2014 balances within these interim consolidated financial statements were derived from the aforementioned Form 10-K.  In the opinion of management, the accompanying consolidated financial statements reflect all adjustments which are necessary for a fair presentation of the results of operations and cash flows for the periods presented.  The results of operations for such interim periods are not necessarily indicative of results of operations to be expected for the full year.

References to amounts in the consolidated financial statement sections are in thousands, except per share data, unless otherwise specified.

Liquidity

The Company has incurred significant operating losses since inception and had relied on funding from the Parent to fund operations prior to its IPO on February 3, 2015.  At September 30, 2015, the Company has an accumulated deficit of $52.2 million.  As the Company continues to incur losses, its transition to profitability will depend on the following commercial milestones to achieve sufficient resources to support its cost structure: presently, the successful development, approval and commercialization of its product outside the United States, and secondarily, if approval is received from the FDA, the commercialization of its product within the United States. The Company may never achieve profitability, and unless and until it does, it will need to continue to raise additional capital.  Management expects that existing cash as of September 30, 2015 will be sufficient to fund the Company’s operations for at least twelve months from the balance sheet date.

 

 

(2)  Summary of Significant Accounting Policies

Revenue Recognition

The Company recognizes revenue when there is persuasive evidence that an arrangement exists with the customer, selling prices are fixed or determinable, title or risk of loss has passed, and collection is reasonably assured. Revenue is recognized upon shipment and payments are either received in advance, or net 30 days.  As of September 30, 2015, the Company was not authorized to manufacture or sell any of its products or services within the United States and, as a result, all of the Company’s revenues are derived from foreign customers.

Clinical Trials

During 2014, the Company received approval from the United States Food and Drug Administration (“FDA”) to commence a staged-enrollment pivotal FDA clinical trial of its microlens involving the implantation of presbyopic patients. The first staged-enrollment commenced during the first quarter of 2014, and during these trials, the Company incurred costs for patient recruiting, acquisition of clinical test equipment to be used in the trials, outside experts to read and interpret the results of the studies and third parties to monitor the investigational sites and perform data collection activities and surgeon costs, as well as patient fees in connection with the surgical procedures and follow-up visits.  In February 2015, the Company received approval from the FDA to commence second stage enrollment in this trial.  The Company’s policy with respect to the recognition of these costs is to record such costs as research and development expense in the consolidated statements of operations and comprehensive loss in the period in which the services are provided.  The Company will evaluate the purchases of clinical test equipment, on a case by case basis, to determine if there exists an alternative use for the equipment following the clinical trials. In the event that the Company determines that there is no alternative use for the test equipment, that cost will be expensed as part of research and development expense.

Deferred Offering Costs

During the three months ended March 31, 2015, the Company incurred approximately $1.2 million, related to its IPO which was completed on February 3, 2015.  Upon completion of the IPO, the Company netted approximately $2.0 million in offering costs, including approximately $0.8 million recorded as other assets on the balance sheet as of December 31, 2014, against the gross proceeds in shareholders’ deficit. During the nine months ended September 30, 2014, the

 

6

 


Company wrote-off approximately $3.4 million in previously deferred offering costs due to delays beyond 90 days in the launch of its initial public offering.

Fair Value of Financial Instruments

The carrying values of certain of the Company’s financial instruments, such as prepaid expenses, accounts payable and accrued expenses, approximate fair value due to their short maturities. Amounts payable to related parties, which has no fixed maturity or expiration date, do not have readily determinable fair values.

 

Recent Accounting Pronouncements  

In May 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting standard which will supersede existing revenue recognition guidance under current U.S. GAAP. The new standard is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. In doing so, among other things, companies will generally need to use more judgment and make more estimates than under the current guidance. The standard permits the use of either a retrospective or cumulative effect transition method. In August 2015, the FASB deferred the effective date of the standard by an additional year; however, it provided companies the option to adopt one year earlier, commensurate with the original effective date. Accordingly, the standard will be effective for Presbia PLC in the fiscal year beginning July 1, 2018, with an option to adopt the standard for the fiscal year beginning July 1, 2017. We are currently evaluating this standard and have not yet selected a transition method or the effective date on which we plan to adopt the standard, nor have we determined the effect of the standard on our financial statements and related disclosures.

In August 2014, the FASB issued a new standard that will require management of an entity to assess, for each annual and interim period, if there is substantial doubt about the entity’s ability to continue as a going concern within one year of the financial statement issuance date. The definition of substantial doubt within the new standard incorporates a likelihood threshold of “probable” similar to the use of that term under current U.S. GAAP for loss contingencies. Certain disclosures will be required if conditions give rise to substantial doubt. The standard will be effective for Presbia PLC in the fiscal year beginning July 1, 2016. Early adoption is permitted. We are currently evaluating the impact of this standard on our financial statements and related disclosures.

In July 2015, the FASB issued final guidance that simplifies the subsequent measurement of inventory for which cost is determined by methods other than last-in first-out (“LIFO”) and the retail inventory method. For inventory within the scope of the new guidance, entities will be required to compare the cost of inventory to only one measure, its net realizable value, and not the three measures required by the existing guidance. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The new guidance does not change how entities initially measure the cost of inventory. Presbia PLC adopted this guidance in the fiscal year beginning July 1, 2015. Such adoption did not have a material impact on our financial statements.

 

 

(3)  Composition of Certain Financial Statement Captions

Inventory, net is summarized as follows:

 

 

 

September 30,

2015

 

 

December 31,

2014

 

Lenses

 

 

321

 

 

$

371

 

Accessories

 

 

98

 

 

 

7

 

Total

 

$

419

 

 

$

378

 

 

 

7

 


Property and equipment is summarized as follows:

 

 

 

September 30,

2015

 

 

December 31,

2014

 

 

 

 

 

 

 

 

 

 

Office equipment and computers

 

$

74

 

 

$

51

 

Leasehold improvements

 

 

142

 

 

 

132

 

Production equipment and facilities

 

 

743

 

 

 

682

 

Software

 

 

23

 

 

 

7

 

Construction in process

 

 

21

 

 

 

0

 

Furniture and vehicles

 

 

156

 

 

 

155

 

 

 

 

1,159

 

 

 

1,027

 

Less: accumulated depreciation

 

 

(375

)

 

 

(280

)

Property & Equipment, net

 

$

784

 

 

$

747

 

 

Other assets are summarized as follows:

 

 

 

September 30,

2015

 

 

December 31,

2014

 

Prepaid rent and other

 

$

47

 

 

$

47

 

Deferred costs related to IPO

 

 

 

 

 

839

 

Total

 

$

47

 

 

$

886

 

 

Other current liabilities are summarized as follows:

 

 

 

September 30,

2015

 

 

December 31,

2014

 

Costs related to the IPO

 

$

 

 

$

327

 

Accrued professional fees

 

 

160

 

 

 

20

 

Accrued payroll & vacation

 

 

131

 

 

 

114

 

Other accrued liabilities

 

 

414

 

 

 

239

 

Total

 

$

705

 

 

$

700

 

 

 

(4)  Shareholders’ Equity (Deficit)

Common Ordinary Shares and Deferred Ordinary Shares

As of September 30, 2015, the share capital of Presbia PLC was $400,000 and €40,000, divided into: 350,000,000 ordinary shares of $0.001 each (the “Ordinary Shares”), 13,355,477 of which were outstanding as of September 30, 2015; 50,000,000 preferred shares of $0.001 (the “Preferred Shares”) each, all of which are authorized but unissued; and 39,994 deferred ordinary shares of €1.00 each (the “Deferred Ordinary Shares”), all of which are issued and outstanding as of September 30, 2015. The aggregate 9,166,667 ordinary shares of Presbia PLC have been reflected as issued and outstanding as of the earliest date of the periods presented for purposes of computation of comparable basic and diluted net loss per share.  

The rights and restrictions attached to the Ordinary Shares are as follows: the right to attend and speak at any general meeting of the Company and to exercise one vote per Ordinary Share held at any general meeting of the Company; the right to participate pro rata in all dividends declared by the Company; and the right, in the event of the Company’s winding up, to participate pro rata in the total assets of the Company.

The Deferred Ordinary Shares were initially issued as 40,000 ordinary shares of one Euro each on February 6, 2014 in connection with the formation of Presbia PLC. On January 14, 2015, the Company amended its memorandum and articles of association, resulting in the re-designation of such shares as deferred ordinary shares. The rights and restrictions attached to the Deferred Ordinary Shares are as follows:

Income:  The holder of a Deferred Ordinary Share shall not be entitled to receive any dividend or distribution declared, made or paid or any return of capital (save as provided below) and a Deferred Ordinary Share shall not entitle its holder to any further or other right of participation in the assets of the Company;

 

8

 


Capital:  On a winding up of, or other return of capital (other than on a redemption of any class of shares in the capital of the Company) by the Company, the holders of Deferred Ordinary Shares shall be entitled to participate in such return of capital or winding up of the Company, such entitlement to be limited to the repayment of the amount paid up or credited as paid up on such Deferred Ordinary Shares and shall be paid only after the holders of Ordinary Shares shall have received payment in respect of such amount as is paid up or credited as paid up on those Ordinary Shares held by them at that time, plus the payment in cash of $5,000,000 on each such Ordinary Share.

Acquisition of Deferred Ordinary Shares:  The Company as agent for the holders of Deferred Ordinary Shares shall have the irrevocable authority to authorize and instruct the Company’s secretary (or any other person appointed for the purpose by the Company’s board of directors) to acquire, or to accept the surrender of, the Deferred Ordinary Shares for no consideration and to execute on behalf of such holders such documents as are necessary in connection with such acquisition or surrender, and pending such acquisition or surrender to retain the certificates, to the extent issued, for such Deferred Ordinary Shares.

Voting:   The holders of Deferred Ordinary Shares shall not be entitled to receive notice of, nor attend, speak or vote at, any general meeting.

On August 3, 2015, upon completion of the distribution of the assets of Presbia Holdings to its ordinary shareholders, six shares of the Deferred Ordinary Shares were acquired for nil consideration and cancelled and 39,994 shares were issued to the Company’s largest shareholder.

The rights attached to the Preferred Shares will be determined by the Company’s board of directors. The directors are authorized to issue all or any of the authorized but unissued Preferred Shares from time to time in one or more classes or series, and to fix for each such class or series such voting power, full or limited, or no voting power, and such designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such class or series, including, without limitation, the authority to provide that any such class or series may be: redeemable at the option of the Company, or the holders, or both, with the manner of the redemption to be set by the Company’s board of directors, and redeemable at such time or times, including upon a fixed date, and at such price or prices, as shall be determined by the Board; entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes of shares or any other series all as shall be determined by the Board; entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Company, as shall be determined by the Board; or convertible into, or exchangeable for, shares of any other class or classes of shares, or of any other series of the same or any other class or classes of shares, of the Company, at such price or prices or at such rates of exchange and with such adjustments as the Company’s board of directors determines.

Additional Paid-in Capital

On January 14, 2015, the Parent entered into a Debt Conversion Agreement pursuant to which all outstanding amounts owed to the Parent under the Interest Rate Agreement governing such debt at that time were contributed to paid-in capital of certain of the Parent’s subsidiaries.

Additional paid-in capital was $77.1 million as of September 30, 2015, compared to $36.7 million as of December 31, 2014. The change consists of a contribution of approximately $1.5 million pursuant to the Debt Conversion Agreement, share-based compensation of $1.8 million, payments of $0.2 million of bonuses paid by Presbia Holdings on behalf of the Company and net proceeds of $36.8 million from the Company’s IPO.

 

9

 


The following table sets forth the changes in shareholders’ equity (deficit) for the nine-months ended September 30, 2015 in thousands of U.S. Dollars (except share values).

 

 

Common Stock

 

 

Deferred

 

 

Additional Paid-In

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Capital

 

 

Deficit

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

-

 

 

$

-

 

 

 

40,000

 

 

$

36,680

 

 

$

(37,386

)

 

$

(706

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine-Months Ended September 30, 2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capitalization of amounts due to Parent pursuant to 2015 Debt Conversion of Presbia Holdings

 

 

 

 

 

 

 

 

 

 

1,559

 

 

 

 

 

 

1,559

 

Initial public offering, net of issuance costs

 

13,333,334

 

 

 

13

 

 

 

 

 

 

36,830

 

 

 

 

 

 

36,843

 

Stock-based compensation (including allocation from the Parent)

 

 

 

 

 

 

 

 

 

 

1,837

 

 

 

 

 

 

1,837

 

Cancellation of deferred shares pursuant to distribution of Parent's assets

 

 

 

 

 

 

 

(6

)

 

 

 

 

 

 

 

 

 

Issuance of restricted shares

 

22,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bonus payments by Parent on behalf of Parent

 

 

 

 

 

 

 

 

 

 

183

 

 

 

 

 

 

183

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,812

)

 

 

(14,812

)

Balance, September 30, 2015

 

13,355,477

 

 

$

13

 

 

 

39,994

 

 

$

77,089

 

 

$

(52,198

)

 

$

24,904

 

 

 

 

(5)  Loss per Share

Basic net loss per ordinary share is calculated by dividing net loss allocated to ordinary shareholders by the weighted average number of ordinary shares outstanding during the reporting period.  Diluted net loss allocated to ordinary shareholders per share is calculated based on the weighted average number of Ordinary Shares and dilutive potential Ordinary Shares outstanding during the period.  Dilutive potential ordinary shares consist of the shares issuable upon the exercise of options and upon the vesting of restricted shares under the treasury stock method.  In net loss periods, basic and diluted net loss per share are identical since the effect of potential ordinary shares is anti-dilutive and therefore excluded.

Basic and diluted loss per share were calculated as follows:

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Basic and diluted net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(4,900

)

 

$

(3,053

)

 

$

(14,812

)

 

$

(12,718

)

Net loss allocated to common shareholders

 

$

(4,900

)

 

$

(3,053

)

 

$

(14,812

)

 

$

(12,718

)

Weighted average shares outstanding - Basic and

   diluted

 

 

13,335

 

 

 

9,167

 

 

 

12,815

 

 

 

9,167

 

Basic and diluted net loss per share

 

$

(0.37

)

 

$

(0.33

)

 

$

(1.16

)

 

$

(1.39

)

 

The aggregate 9,166,667 Ordinary Shares of the Company as discussed in Note 4 have been reflected as issued and outstanding as September 30, 2014 for purposes of computation of basic and diluted net loss per share.  Antidilutive securities, which consist of options and restricted shares that are not included in the diluted net loss per share calculation, consisted of an aggregate of approximately 1,094,974 and 924,660 weighted average shares for the three and nine months ended September 30, 2015, respectively.

 

 

(6)  Share Based Awards

Equity Issued by Parent

Prior to January 14, 2015 and the Company’s IPO, the Parent granted options to purchase its ordinary shares and granted awards of restricted ordinary shares, to both employees and non-employees of the Company and share-based

 

10

 


compensation related to such awards is recognized as expense in the accompanying consolidated statements of Operation and Comprehensive Loss.  Information regarding prior period awards is available in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014. No new options or restricted shares were granted by the Parent during the nine month period ended September 30, 2015.

On May 13, 2015, the shareholders of the Parent approved a plan in which all options and unvested restricted shares outstanding as of that date were to become fully vested and, in the case of the options, the expiration date of the options were accelerated to September 15, 2015. On May 13, 2015, approximately 4.7 million options were outstanding and 1.4 million restricted shares were unvested. During the prescribed exercise period, 3,785,000 options were exercised at an exercise price of $0.08 and 956,250 options were cancelled or forfeited at an average exercise price of $0.24 per option. Stock-based compensation expense of approximately $21,000 was recorded in the nine month period ended September 30, 2015 in connection with the acceleration of the vesting periods for 665,000 unvested options.

The following table sets forth the Parent’s option activity for the nine months ended September 30, 2015:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Number Of

 

 

Exercise

 

 

Aggregate

 

 

 

Parent's

 

 

PricePer

 

 

Intrinsic

 

Parent

 

Shares

 

 

Share

 

 

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

 

4,835,000

 

 

$

0.11

 

 

 

 

 

Granted

 

 

 

 

$

 

 

 

 

 

Exercised

 

 

(3,860,000

)

 

$

0.08

 

 

$

656

 

Forfeited/cancelled

 

 

(975,000

)

 

$

0.24

 

 

 

 

 

Balance, September 30, 2015

 

 

 

 

$

 

 

 

 

 

 

Restricted Shares

No restricted shares were granted by the Parent during the nine months ended September 30, 2015.  As of May 13, 2015, there were 1,400,000 unvested restricted shares of the Parent with a weighted average grant date fair value of $0.30 per share. Pursuant to the plan to immediately accelerate the vesting periods of the restricted shares adopted on May 13, 2015, approximately $104,000, using a fair value of $0.26 per ordinary share, was recognized as stock-based compensation in the nine months ended September 30, 2015 in connection with 400,000 unvested shares. The other 1.0 million unvested restricted shares had been fully expensed at the time of grant in 2013.

Unrecognized Share-based Compensation

As of September 30, 2015, there was no unrecognized stock-based compensation expense related to the awards issued by the Parent.

Equity Issued by Presbia PLC

Presbia Incentive Plan

On January 14, 2015, the Company approved a compensation incentive plan (the “Presbia Incentive Plan”). The Presbia Incentive Plan permits the Company to grant awards of options, restricted shares, share appreciation rights, restricted share units, performance shares, performance share units, dividend equivalent rights in respect of awards and other share-based and cash-based awards, including annual and long-term cash incentive awards.  A total of 1,800,000 ordinary shares are authorized for issuance under the Presbia Incentive Plan of which approximately 701,000 were available on September 30, 2015 for future grants and awards.  The exercise price of each option award shall be determined by the Board of Directors (or a committee thereof) at the date of grant in accordance with the terms of the 2005 Plan, and under the Presbia Incentive Plan awards generally vest 20% annually over a five-year period and expire no later than 10 years from the grant date.  The Presbia Incentive Plan terminates on January 14, 2025, unless terminated earlier by the board of directors.  Awards under the Presbia Incentive Plan may be granted to employees, directors, consultants and other persons who perform services for the Company or a subsidiary of the Company.

 

 

 

11

 


The following table shows share-based compensation expense included in the consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2015 and 2014.

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Research and development

 

$

54

 

 

$

81

 

 

$

161

 

 

$

216

 

General and administrative

 

 

334

 

 

 

29

 

 

 

1,554

 

 

 

78

 

Sales and marketing

 

 

46

 

 

 

4

 

 

 

122

 

 

 

14

 

Total

 

$

434

 

 

$

114

 

 

$

1,837

 

 

$

308

 

 

 

Options

The following table sets forth the Company’s option activity for the nine months ended September 30, 2015:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

Exercise

 

 

 

Number Of

 

 

Price Per

 

 

 

Shares

 

 

Share

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

 

 

 

$

 

Granted

 

 

1,103,000

 

 

$

9.74

 

Forfeited/cancelled

 

 

(19,667

)

 

$

9.09

 

Balance, September 30, 2015

 

 

1,083,333

 

 

$

9.76

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest, September 30, 2015

 

 

988,636

 

 

$

9.76

 

Exercisable, September 30, 2015

 

 

90,000

 

 

$

10.00

 

 

 

Employee Options

The Company utilizes the Black-Scholes valuation model for estimating the fair value of share-based compensation with the following assumptions.  The Company estimated expected life utilizing the simplified method because of its limited history of option exercise activity and its options meet the criteria of the "plain-vanilla" options as defined by the Securities Exchange Commission. Due to its limited stock price volatility history, the Company uses a peer group average under ASC 718 consistent with the expected term of the stock options in effect at the time of the grants. The risk-free rate is based on the U.S. Treasury yield consistent with the expected term of the stock options at the time of the grant. The simplified method calculates the expected term as the average of the vesting and contractual terms of the award. The following table presents the grant date assumptions used in the Black-Scholes model for determining the fair value of 1,027,500 employee options issued during the nine months ended September 30, 2015:

 

 

 

Three Months Ended

September 30, 2015

 

Nine Months Ended

September 30, 2015

Expected life

 

6.5 years

 

5.5-6.5 years

Expected volatility

 

84.5%

 

76.8% - 84.5%

Expected dividends

 

0%

 

0%

Risk-free rate

 

2.0%

 

1.3% - 2.0%

 

The weighted-average grant date fair value of the employee options granted during the nine months ended September 30, 2015 was $6.98 per share. For those options granted to employees, stock-based compensation expense is based upon the fair value of the option as of the grant-date and attributed to future reporting periods on a straight-line basis over the vesting period, or the requisite service period. A 5% forfeiture rate assumption was applied, which reduces the amount of expense recognized each period anticipating that a portion of all options granted will, more likely than not, be cancelled prior to the dates of its vesting periods. The forfeiture rate is subject to review and may be adjusted based upon experience.

 

 

12

 


Non-Employee Options

During the nine months ended September 30, 2015, 75,500 options were granted to non-employee consultants and medical advisors in which the following assumptions were used in the Black-Scholes valuation model to determine the option fair values:

 

 

 

Three Months Ended

September 30, 2015

 

Nine Months Ended

September 30, 2015

Expected life

 

9.5-9.8 yrs.

 

9.5-9.8 yrs.

Expected volatility

 

78.8%

 

78.80%

Expected dividends

 

0%

 

0%

Risk-free rate

 

2.1%

 

1.9% - 2.4%

 

In contrast to the determination of the fair value of options granted to employees, which are determined based upon the grant-date assumptions and applying the Black-Scholes model, the fair values for non-employee options and the related stock-based compensation expense are remeasured each financial reporting period based upon the assumptions applicable on the dates in which the financial statements are prepared. Because the performance criteria of these grants is based solely upon a requisite service period, but are subject to forfeiture if the service conditions are not met, stock-based compensation expense is determined by a straight-line attribution of the remeasured expense (mark-to-market) over the requisite service period subject to a forfeiture rate of 5%.

Restricted Shares

On March 16, 2015, the Company’s board of directors approved grants of 9,270 restricted ordinary shares of the Company each to Robert J. Cresci and to Dr. Mark Blumenkranz, both of whom were at that time board members.  On August 3, 2015, in connection with the appointment of Dr. Gerd Auffarth to the board of directors, the Company’s board approved a grant of 11,019 restricted ordinary shares of the Company to Dr. Auffarth and cancelled, as a result of the resignation from the board of directors of Dr. Blumenkranz, 7,416 restricted ordinary shares. Also on August 3, 2015, the remaining 1,854 restricted shares held by Dr. Blumenkranz were fully vested. The aggregate grants of 29,559 shares vest in five equal, annual installments commencing one year after the date of grant. The weighted-average grant date fair value for the restricted shares was estimated using the market price of the ordinary shares on the date of grant ($8.63 per share on March 16, 2015 and $7.26 on August 3, 2015).

As of September 30, 2015, there were 20,289 unvested restricted shares of the Company outstanding with a weighted average grant date fair value of $7.89 per share. The Company recorded compensation expense related to restricted shares of approximately $17,900 and $27,200 for the three months and nine months ended September 30, 2015, respectively. The following table sets forth the Company’s restricted share activity for the nine months ended September 30, 2015:

 

 

 

 

 

 

 

Weighted

 

 

 

Unvested

 

 

Average

 

 

 

Number Of

 

 

Fair Value

 

 

 

Shares

 

 

Per Share

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2014

 

 

 

 

$

 

Granted

 

 

29,559

 

 

$

8.12

 

Vested

 

 

(1,854

)

 

$

8.63

 

Forfeited/cancelled

 

 

(7,416

)

 

$

8.63

 

Unvested, September 30, 2015

 

 

20,289

 

 

$

7.89

 

 

 

 

 

 

 

 

 

 

Vested and expected to vest, September 30, 2015

 

 

22,143

 

 

$

7.95

 

Vested, September 30, 2015

 

 

1,854

 

 

$

8.63

 

 

Unrecognized Share-based Compensation

As of September 30, 2015, there was $4.7 million and $0.3 million of unrecognized compensation expense related to employee and non-employee options of the Company, respectively, which collectively is expected to be recognized by the Company over the weighted average vesting period of 3.9 years.  Unrecognized compensation expense related to restricted shares was $130,000 as of September 30, 2015 and is expected to be recognized over the weighted average vesting period of 4.7 years.

 

13

 


 

 

(7)  Related Party Transactions

The following table sets forth the amounts due to related parties reflected in the accompanying consolidated balance sheets:

 

 

September 30,

2015

 

 

December 31,

2014

 

 

 

 

 

 

 

 

 

Payable to related parties—current:

 

 

 

 

 

 

 

Management services provided by related parties

$

53

 

 

$

12

 

 

 

 

 

 

 

 

 

Total

$

53

 

 

$

12

 

 

 

 

 

 

 

 

 

Payable due to the Parent—noncurrent:

 

 

 

 

 

 

 

Principal amounts due to the Parent

$

 

 

$

417

 

Accrued interest due to the Parent

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

 

 

$

417

 

 

 

(8)  Concentration of Credit Risk

The Company had cash of $25.4 million and $0.1 million as of September 30, 2015 and December 31, 2014, respectively, which consists of checking account deposits. The Company maintains cash balances at financial institutions located in the United States and secured by the Federal Deposit Insurance Corporation up to $250,000.

 

 

(9)  Operating Segments and Geographic Information

The Company has one reportable segment that is evaluated regularly by its chief decision making group in deciding how to allocate resources and in assessing performance.

The following tables set forth the Company’s revenues generated from external customers located in foreign countries and long-lived assets by area:

 

 

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

REVENUES

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Ireland

 

$

4

 

 

$

32

 

 

$

61

 

 

$

113

 

Korea

 

 

 

 

 

 

 

 

36

 

 

 

 

UK

 

 

 

 

 

 

 

 

2

 

 

 

 

Italy

 

 

 

 

 

4

 

 

 

 

 

 

4