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TABLE OF CONTENTS
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2014
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 00052089
INVIVO THERAPEUTICS HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
Nevada
(State or other jurisdiction of
incorporation or organization)
One Kendall Square,
Suite B14402, Cambridge,
Massachusetts
(Address of principal executive offices)
364528166
(I.R.S. Employer
Identification No.)
02139
(Zip Code)
(617) 8635500
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.00001 per share
Indicate by check mark if the registrant is a wellknown seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes No
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 No
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 ST (§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 No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation SK is not contained herein,
and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10K or any amendment to this Form 10K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a nonaccelerated filer, or a
smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting
company" in Rule 12b2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Nonaccelerated filer
(Do not check if a
smaller reporting company)
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b2 of the Act). Yes No
The aggregate market value of the voting and nonvoting common equity held by nonaffiliates of the registrant as of
June 30, 2014 was $97,155,701, based on a per share price of $1.04, the closing price of the registrant's common stock on the
OTCQB on June 30, 2014.
As of March 5, 2015, the number of shares outstanding of the registrant's common stock, $0.00001 par value per share,
was 102,410,850
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for its 2015 Annual Meeting of Stockholders are incorporated by
reference into Part III of this Annual Report on Form 10K to the extent stated herein. Such proxy statement will be filed with
the Securities and Exchange Commission within 120 days of the registrant's fiscal year ended December 31, 2014.
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INVIVO THERAPEUTICS HOLDINGS CORP.
ANNUAL REPORT ON FORM 10K
FOR THE YEAR ENDED DECEMBER 31, 2014
TABLE OF CONTENTS
ITEM
Page
1.
1A.
1B.
2.
3.
4.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
5.
6.
7.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of
Operations
7A.
8.
9.
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
9A.
9B.
Controls and Procedures
Other Information
PART III
10.
11.
12.
13.
14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
15.
Exhibits, Financial Statement Schedules
2
4
13
29
29
29
29
30
32
35
40
41
64
64
67
67
67
67
67
67
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PART I
SPECIAL NOTE REGARDING FORWARDLOOKING STATEMENTS
This Annual Report on Form 10K contains "forwardlooking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Statements, other than statements of historical facts, contained in this Annual Report on
Form 10K regarding future events, our strategy, future operations, future financial position, future revenues, projected costs,
prospects, plans and objectives of management, are forwardlooking statements. In some cases, you can identify forward
looking statements by terminology such as "may," "might," "will," "should," "intends," "expects," "plans," "goals," "projects,"
"anticipates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these terms or other comparable
terminology, and include statements about the market potential for treatment of acute and chronic spinal cord injury, the
sufficiency of our existing capital resources for continuing operations in 2015, the safety, feasibility, and clinical
effectiveness of our NeuroSpinal Scaffold, our pilot clinical study of our NeuroSpinal Scaffold and its related clinical
development, and our ability to develop collaborations and partnerships to support our business plan. These forwardlooking
statements are only predictions, are uncertain and involve substantial known and unknown risks, uncertainties and other
factors which may cause our actual results, levels of activity or performance to be materially different from any future results,
levels of activity or performance expressed or implied by these forwardlooking statements. Such factors include, among
others, the following:
•
•
•
•
•
•
•
•
•
our limited operating history and history of net losses;
our ability to raise substantial additional capital to finance our planned operations;
our ability to successfully commercialize our current and future product candidates, including our Neuro
Spinal Scaffold and our Bioengineered Neural Tissue, which is comprised of our NeuroSpinal Scaffold plus
neural stem cells;
our ability to successfully complete clinical trials and obtain and maintain regulatory approval of our product
candidates;
our ability to protect and maintain our intellectual property and licensing arrangements;
market acceptance of our technology and products;
our ability to promote, manufacture and sell our products, either directly or through collaborative and other
arrangements with third parties;
our ability to attract and retain key personnel; and
other factors set forth in the "Risk Factors" section of this Annual Report on Form 10K and in subsequent
filings we make with the Securities and Exchange Commission.
We cannot guarantee future results, levels of activity or performance. You should not place undue reliance on these
forwardlooking statements, which speak only as of the date of this Annual Report on Form 10K. These cautionary
statements should be considered with any written or oral forwardlooking statements that we may issue in the future. Except
as required by applicable law, including the securities laws of the United States, we do not intend to update any of the
forwardlooking statements to conform these statements to reflect actual results, later events or circumstances or to reflect the
occurrence of unanticipated events.
As used herein, "we," "us," "our" or the "Company" means InVivo Therapeutics Holdings Corp., together with its
consolidated subsidiaries, unless otherwise noted.
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Item 1. BUSINESS
Overview
We are a research and clinicalstage biomaterials and biotechnology company with a focus on treatment of spinal cord
injuries. Our proprietary technologies incorporate intellectual property licensed under an exclusive, worldwide license from
Boston Children's Hospital ("BCH") and the Massachusetts Institute of Technology ("MIT"), and intellectual property that
has been developed internally, including in collaboration with our advisors and partners. We intend to leverage our platform
technology to develop our novel NeuroSpinal Scaffold, an investigational bioresorbable polymer scaffold that is designed
for implantation at the site of injury within a spinal cord contusion and is intended to treat acute spinal cord injury, or SCI.
We believe our NeuroSpinal Scaffold will be the foundation of effective therapy for both acute and chronic SCI, and we are
continually evaluating other technologies and therapeutics that may be complementary and that offer the potential to bring
us closer to our goal of redefining the life of the SCI patient.
Market Opportunity
Our clinical program is intended to address the lack of successful treatments for SCIs. The current management of acute
SCI is a surgical approach consisting of spine stabilization and a decompression procedure of uncertain value.. Our mission is
to redefine the life of the SCI patient. We are developing treatment options intended to provide meaningful improvement in
patient outcomes following SCI. Our approach to treating SCIs is based on our investigational NeuroSpinal Scaffold, which
we believe is the only SCI therapy in development focused solely on treating SCI directly at the epicenter of the injury.
We believe the market opportunity for our NeuroSpinal Scaffold and our technology is significant. It is estimated that
approximately 276,000 people are currently living in the United States with paralysis due to spinal cord injury, and
approximately 12,500 individuals in the United States will become fully or partially paralyzed each year. SCI can lead to
permanent paralysis, sensory impairment, and autonomic, bowel, bladder, and sexual dysfunction.
Since 1973, the National Spinal Cord Injury Statistical Center ("NSCISC") at the University of Alabama has been
commissioned by the U.S. government to maintain a national database of spinal cord injury statistics. The financial impact of
spinal cord injuries, as reported by the NSCISC, is substantial. Direct costs, which include hospital and medical expenses,
modification of the home, and personal assistance, are highest in the first year after injury. According to the fact sheet
published by NSCISC titled "Spinal Cord Injury—Facts and Figures at a Glance" in conjunction with its 2014 Annual
Report, (i) during the first year, average "cost of care" ranges from $342,112 to $1,048,259, depending on the severity of the
injury, (ii) the net present value ("NPV") to maintain a quadriplegic injured at age 25 for life is $4,651,158, and (iii) the NPV
to maintain a paraplegic injured at age 25 for life is $2,274,396. These costs place a tremendous financial burden on families,
insurance providers, and government agencies. Moreover, despite such a significant financial investment, the patient often
remains disabled for life because current medical interventions address only the symptoms of SCI rather than the underlying
neurological cause. We believe our approach could represent an important advance in the treatment of SCIs.
Our Products
We currently have a clinical development program for acute SCI and a preclinical development program for chronic
SCI.
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NeuroSpinal Scaffold
Our leading product is our NeuroSpinal Scaffold, an investigational bioresorbable polymer scaffold that is designed for
implantation at the site of injury within a spinal cord contusion. The NeuroSpinal Scaffold is surgically implanted at the
epicenter of the wound and acts as a physical substrate for nerve sprouting. Appositional healing to spare spinal cord tissue,
decrease posttraumatic cyst formation and decreased spinal cord tissue pressure have been demonstrated in preclinical
models of spinal cord contusion injury . The NeuroSpinal Scaffold is composed of two biocompatible and bioresorbable
polymers:
•
•
Poly lacticcoglycolic acid (PLGA), a polymer that is widely used in resorbable sutures and provides the
biocompatible support for NeuroSpinal Scaffold; and
PolyLLysine (PLL), a positively charged polymer commonly used to coat surfaces in order to promote
cellular attachment .
These two polymers are cast to form a highly porous scaffold that is conducive to cellular attachment and neurite
outgrowth. The NeuroSpinal Scaffold is intended to provide structural support and an environment supportive of cell
survival and/or growth, and the device will degrade over several months. Surgical implantation of the NeuroSpinal Scaffold
is intended to mitigate tissue damage resulting from some of the critical pathophysiological events that occurs during the
acute phase of SCI, such as increases in tissue pressure, hemorrhaging, and edema. Our research has shown that when the
NeuroSpinal Scaffold is placed at the epicenter of the contusion injury, it modulates the healing process by providing a
biocompatible and cellularadhesive support that promotes appositional healing.
Because of the complexity of spinal cord injuries, it is likely that multimodal therapies will be required in order to
maximize positive outcomes in SCI patients. In the future, we may attempt to further enhance the performance of our Neuro
Spinal Scaffold by multiple combination strategies involving electrostimulation devices, additional biomaterials, drugs
approved by the U.S. Food & Drug Administration ("FDA"), or growth factors.
Regulatory Pathway of NeuroSpinal Scaffold
Our NeuroSpinal Scaffold is expected to be regulated by the FDA as a Class III medical device. A Class III medical
device typically will require FDA approval of a PreMarket Approval (PMA) Application before we can begin selling the
product in the United States. A PMA application must be supported by extensive data including, but not limited to, technical
information regarding device design and development, preclinical and clinical trials, data and manufacturing and labeling
to support the FDA's determination that there is reasonable assurance that the device is safe and effective for its intended use.
Alternatively, a Class III device may qualify for FDA approval to be distributed under a Humanitarian Device Exemption
(HDE) rather than a PMA. In order for a device to be eligible for an HDE, it must be first designated by the FDA as a
Humanitarian Use Device (HUD) intended to benefit patients in the treatment or diagnosis of a disease or condition that
affects fewer than 4,000 individuals in the United States per year. The HDE also requires there must be no other comparable
device available to provide therapy for this condition. An HDE application is similar in form and content to a PMA
application and,although exempt from the effectiveness requirements of a PMA, an HDE does require sufficient information
for FDA to determine that the device does not pose an unreasonable or significant risk of illness or injury, and that the
probable benefit to health outweighs the risk of injury or illness from its use.
Upon receipt of a PMA or HDE application, the FDA makes a threshold determination as to whether the application is
sufficiently complete to permit a substantive review. If the FDA makes this determination, it will accept the application for
filing. Once the submission is accepted for filing, the
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FDA begins an indepth review of the application. An FDA review of a PMA application generally takes one to three years
from the date the application is accepted for filing, though it may take significantly longer; review of an HDE application can
be shorter than a PMA. The review period is often significantly extended by requests for more information or clarification of
information already provided in the submission. During the review period, the submission may be sent to an FDAselected
scientific advisory panel composed of physicians and scientists with expertise in the particular field. The FDA scientific
advisory panel issues a recommendation to the FDA that may include conditions for approval. The FDA is not bound by the
recommendations of the advisory panel. Toward the end of the PMA or HDE application review process, the FDA will
conduct an inspection of the manufacturer's facilities to ensure that the facilities are in compliance with Quality System
Regulations, or QSRs. If the FDA evaluations of both the PMA/HDE application and the manufacturing facilities are
favorable, the FDA will issue a letter approving the application. This letter often contains a number of conditions, which must
be met in order to commercialize the device for specified indications and intended uses.
Regulatory approvals, if granted, may include significant labeling limitations and limitations on the indicated uses for
which the product may be marketed. Conditions of approval for a PMA/HDE application also often include the requirement
to conduct a postmarket study or studies. In addition, to obtain regulatory approvals and clearances, the FDA imposes
numerous other requirements with which medical device manufacturers must comply. Any products we manufacture or
distribute under FDA clearances or approvals are subject to pervasive and continuing regulation by the FDA.
We are required to conduct human clinical trials to obtain evidence of safety and the probable benefit to health before an
HDE can be submitted to the FDA. Before clinical studies can commence, an Investigational Device Exemption application
(IDE) must be submitted to and approved by the FDA. The completion of the human clinical studies and obtaining the FDA
approval of an HDE could take between three to five years depending on a number of factors including the FDA review and
approval process for the IDE and the clinical trial designs, the amount of time it will take to enroll and treat patients in the
studies, and the FDA review and approval process for the HDE. In 2013, the FDA approved our IDE application for the pilot
study and granted HUD designation for our NeuroSpinal Scaffold.
In the future, if our NeuroSpinal Scaffold is approved via either the PMA or HDE pathway, modifications or
enhancements that could significantly affect the safety or effectiveness of the device or that constitute a major change to the
intended use of the device will require new PMA or HDE application and approval. Other changes may require a supplement
or other change notification that must be reviewed and approved by the FDA. Modified devices for which a new PMA or HDE
application, supplement or notification is required cannot be distributed until the application is approved by the FDA. An
adverse determination or a request for additional information could delay the market introduction of new products, which
could have a material adverse effect on our business, financial condition and results of operations. We may not be able to
obtain PMA or HDE approval in a timely manner, if at all, for the NeuroSpinal Scaffold or any future devices or
modifications to NeuroSpinal Scaffold or such devices for which we may submit a PMA or HDE application.
PreClinical and NonClinical Studies
SCI can result in permanent paralysis, sensory impairment, and autonomic, bowel, bladder, and sexual dysfunction.
These functional deficits result from damage to or loss of cells (neurons and glia) in the affected region of the spinal cord,
either from the initial mechanical trauma or through secondary mechanisms that persists for several weeks. The ability of
potential treatments for SCI to mitigate loss of function or promote recovery can be evaluated with nonclinical models using
different species and different methods of inducing SCI. In our preclinical studies, we utilized rat, nonhuman primate, and
pig models because each exhibits a pattern of neuropathology following SCI that is similar to human SCI. Hemisection injury
models, in which sections of spinal cord are surgically removed, are useful in
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the evaluation of treatment strategies that involve device implantation. Unilateral hemisection models preserve function on
one side of the cord, resulting in improved recovery of bladder and bowel function. We, therefore, evaluated the
bioresorbable polymer scaffold device in both rats and nonhuman primates with unilateral hemisection injury. Because most
human SCIs are nonpenetrating contusion injuries resulting from rapid compression of spinal tissue by intrusion of bone or
disc material following mechanical disruption of the vertebral column, we also evaluated the bioresorbable polymer scaffold
device in rat and pig models of spinal contusion injury.
The first nonclinical study was conducted by founding scientists of our whollyowned subsidiary in rats with surgically
induced unilateral spinal cord hemisection injury. This study (see Teng, Y. D., Lavik, E. B., Qu, X., Park, K. I., Ourednik, J.,
Zurakowski, D., Langer, R., and Snyder, E. Y., Functional recovery following traumatic spinal cord injury mediated by a
unique polymer scaffold seeded with neural stem cells, Proceedings of the National Academy of Sciences 99, pg. 30243029,
2002) demonstrated the baseline safety and efficacy of porous, biodegradable scaffolds fabricated from PLGAPLL polymer.
Subsequently, the safety and efficacy of implantation of the bioresorbable polymer scaffold device was evaluated in rats with
spinal cord contusion injury. Initial studies indicated that 24 hours after contusion injury was an appropriate time for device
implantation based on both histological evaluation and ex vivo MRI techniques. Based on these results, larger rat contusion
studies were performed in our laboratory. Functional recovery was evaluated with the 21point Basso, Beattie, and Bresnahan
(BBB) locomotor rating scale to assess open field locomotion. In this model, the BBB score was not improved by the scaffold
device. However, implantation of the bioresorbable polymer scaffold device into the necrotic zone of the injured spinal cord
resulted in appositional healing and tissue remodeling that preserved spinal cord architecture. Morphometric analysis of
spinal sections stained with hematoxylin & eosin revealed that nonimplanted rats with contusion injury developed large
cavities surrounded by a thin rim of spared white matter. In contrast, rats treated with the implanted bioresorbable polymer
scaffold device demonstrated decreased cavity volume along with increased amounts of spared and remodeled tissue at the
lesion epicenter. Cavitation following spinal contusion injury, particularly if progressive, can impair recovery and result in
serious clinical symptoms. These results indicate that implantation of the bioresorbable polymer scaffold device in the
acutely injured rat spinal cord can provide the benefit of preserving spinal cord architecture through reduced cavitation, and
promotion of white matter sparing and tissue remodeling.
The spinal cord anatomy of nonhuman primates is very similar to that of humans. We performed a series of studies in
African green monkeys in order to evaluate the bioresorbable polymer scaffold device in a nonhuman primate. Our first
study in African green monkeys established that unilateral thoracic hemisection SCI (a new model in this species) produced a
consistent functional deficit, and we observed a consistently positive response to scaffold implantation (see Pritchard, C. D.,
Slotkin, J. R., Yu, D., Dai, H., Lawrence, M. S., Bronson, R. T., Reynolds, F. M., Teng, Y. D., Woodard, E. J., and Langer, R. S.
Establishing a model spinal cord injury in the African green monkey for the preclinical evaluation of biodegradable
polymer scaffolds seeded with human neural stem cells, Journal of Neuroscience Methods 188, pg. 258269, 2010). We then
conducted two larger studies evaluating the safety and efficacy of the bioresorbable polymer scaffold device in the African
green monkey. The extent and time course of functional recovery in biopolymer implant treated primates was assessed with
video capture and KinemaTracer evaluation of locomotor behavior with synchronous EMG recording along with locomotor
observation rating. When the results of these two studies were combined and analyzed together, we found that implantation
of the bioresorbable polymer scaffold device resulted in an increase in remodeled tissue in the region of the hemisection
compared to nonimplant controls, and improved recovery of locomotion in subjects with full unilateral hemisection lesions.
The pig has been used as a large animal model of spinal cord contusion injury due to similarities in size and structure to
the human spinal cord. We evaluated the surgical feasibility of implanting the bioresorbable polymer scaffold device in a
spinal cord after a contusion injury in the pig model. Severe
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contusion injuries were created in Gottingen pigs with a weight drop apparatus. At approximately 4, 6, and 24 hours after
contusion injury, pigs underwent the bioresorbable polymer scaffold device surgical implantation procedure. At each time
point, a large volume of necrohemorrhagic fluid and debris rapidly effluxed from the injury site, releasing builtup pressure
and resulting in a substantial cavity in the center of the spinal cord. Bioresorbable polymer scaffold devices were easily
placed into the resulting contusioninduced spinal cord cavity. Increased spinal tissue pressure after contusion injury results
in reduced blood perfusion and ischemia in damaged spinal tissue, and is an important contributor to the pathophysiology of
spinal cord injury. We measured intraspinal pressure (using catheter pressure probes) at the contusion epicenter in the pigs
before, during, and after the surgical procedure. As expected, contusion injury elevated intraspinal tissue pressure compared
to normal values. Surgical implantation of the bioresorbable polymer scaffold device resulted in a return of intraspinal tissue
pressure to physiologically normal levels.
Taken together, the results from these nonclinical studies in two rat spinal cord injury models, in the African green
monkey unilateral hemisection injury model, and the pig contusion injury model, demonstrate that the bioresorbable
polymer scaffold device, surgically implanted at the epicenter of the wound after an acute spinal cord injury, acts by
appositional healing to spare spinal cord tissue, decrease posttraumatic cyst formation, and decrease spinal cord tissue
pressure in preclinical models of spinal cord contusion injury.
Pilot Study
Our NeuroSpinal Scaffold is currently being studied in an early feasibility, five subject pilot study under our approved
IDE application for the treatment of complete traumatic acute spinal cord injury. The FDA approved the study which is
intended to capture safety and feasibility of the NeuroSpinal Scaffold for the treatment of complete functional spinal cord
injury, as well as to gather preliminary evidence of the clinical effectiveness of the NeuroSpinal Scaffold.
The pilot study was initially approved for up to three clinical sites across the United States, and as of October 2014, the
number of allowable clinical sites was increased to up to 20. The FDA also approved various changes to the protocol for the
study related to the broadening of the study's eligibility criteria. In October 2014, we also announced that the first subject
was enrolled in our pilot study at the Barrow Neurological Institute in Phoenix, Arizona. Under the conditions of the FDA's
approval of our IDE application, our pilot study was initially staggered such that each patient that meets the eligibility
criteria would be followed for three months prior to enrolling the next patient in the study. In December 2014, barring
significant safety issues, the FDA approved an expedited enrollment plan. In January 2015, about three months after the first
subject was enrolled, we opened enrollment and our second subject was enrolled subsequently thereafter. We intend to
submit one month of safety data for that subject to the FDA together with the previous subject's data, and we will then be able
to have concurrent enrollment for the remaining three subjects. There will be no additional mandatory holds between
enrollment of the final three subjects.
We anticipate full enrollment of five patients in the pilot study in 2015. If our pilot study is successful, we then expect to
conduct a pivotal study to show safety and probable benefit in order to obtain FDA approval to commence
commercialization under a HDE. We currently expect the pivotal study will begin in 2016, with estimated completion in
2017. However, even if we are able to obtain FDA approval of our NeuroSpinal Scaffold, because the NeuroSpinal Scaffold
is new, unproven technology, we will have to demonstrate the clinical utility of the product and gain acceptance from
physicians and obtain thirdparty reimbursement for our product and there can be no assurance that we will be able to do so.
For major markets outside the United States, we would be required to seek regulatory approvals in those markets after the
clinical studies or trials are conducted in the United States.
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NeuroSpinal Scaffold Plus Neural Stem Cells (Bioengineered Neural Tissue)
We are also developing a version of our NeuroSpinal Scaffold that is combined with neural stem cells for the treatment
of chronic SCI. It is well known that for neural stem cells to appropriately differentiate and project neural processes, a solid
support is required. The NeuroSpinal Scaffold was designed as a carrier for neural stem cells that promotes attachment,
sprouting, and survival. As opposed to other neural stem cell therapies that involve the injection of suspensions of neural
stem cells around the glial scar, our approach is to predifferentiate neural stem cells on a scaffold, creating a "bioengineered
neural tissue," and then to have neurosurgeons surgically remove the glial scar to create a welldefined bed into which the
Bioengineered Neural Tissue can be implanted. We believe that this Bioengineered Neural Tissue will promote the
generation of new neural circuitry, bridging the gap between neural networks above and below the level of injury. Currently,
we have evaluated Bioengineered Neural Tissue in two nonclinical experiments and further study is ongoing.
Regulatory Pathway of NeuroSpinal Scaffold Plus Neural Stem Cells
Our NeuroSpinal Scaffold Plus Neural Stem Cells is expected to be regulated as a combination product. Combination
products are therapeutic and diagnostic products that combine drugs, devices, and/or biological products. Because
combination products involve components that would normally be regulated under different types of regulatory authorities,
and frequently by different centers of the FDA, they raise challenging regulatory, policy, and review management challenges.
Differences in regulatory pathways for each component of the product can impact the regulatory processes for all aspects of
product development and management, including preclinical testing, clinical investigation, marketing applications,
manufacturing and quality control, adverse event reporting, promotion and advertising, and postapproval modifications.
A combination product is assigned to an FDA Agency Center or alternative organizational component that will have
primary jurisdiction for its premarket review and regulation. Under section 503(g)(1) of the FDCA, assignment to a center
with primary jurisdiction, or a lead center, is based on a determination of the "primary mode of action," or PMOA, of the
combination product. Stem cellbased therapies are regulated under the jurisdiction of Center for Biologics Evaluation and
Research (CBER) typically requiring an Investigational New Drug (IND) application and a Biologics License Application
(BLA) for marketing approval. The formal jurisdiction assignment process is achieved through the request for designation
(RFD) process. We expect to submit a RFD to the Office of Combination Products (OCP) for their jurisdictional determination
for the lead center and applicable regulatory pathway for our NeuroSpinal Scaffold Plus Neural Stem Cells.
Bioresorbable Hydrogels
We are also evaluating a family of resorbable hydrogels for localized cell therapies for spinal cord injury.
Intellectual Property
We rely on a combination of patents, licenses, trade secrets and nondisclosure agreements to develop, protect and
maintain our intellectual property. Our patent portfolio includes patents and patent applications. We seek to develop or
obtain intellectual property that we believe might be useful or complementary with our products and technologies, including
by way of licenses or acquisitions of other companies or intellectual property from third parties.
We hold an exclusive worldwide license to a broad suite of patents coowned by BCH and MIT covering the use of a
wide range of polymers to treat SCI, and to promote the survival and proliferation of human stem cells in the spinal cord (the
"BCH License"). Issued patents and pending patent applications licensed under the BCH License cover the technology
underlying our NeuroSpinal
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Scaffold and the use of a wide range of biomaterial scaffolding for treating SCI by itself or in combination with drugs, growth
factors or human stem cells. The BCH License covers 7 issued United States patents and 20 issued international patents
expiring between 2015 and 2026, and two pending United States patents and 12 pending international patents.
The BCH License has a 15year term, or as long as the life of the last expiring patent right, whichever is longer, unless
terminated earlier by BCH. In connection with our acquisition of the BCH License, we submitted to a 5year development
plan to BCH and MIT that includes certain targets and projections related to the timing of product development and
regulatory approvals. We are required to either meet the stated targets and projections in the plan, or notify BCH and revise
the plan. BCH has the right to terminate the BCH License for failure by us to either meet the targets and projections in the
plan or our failure submit an acceptable revision to the plan within a 60day cure period after notification by BCH that we are
not in compliance with the plan. We are currently in compliance with our plan.
We have the right to sublicense the patents covered by the BCH License, and have full control and authority over the
development and commercialization of any products that use the licensed technology, including clinical trial design,
manufacturing, marketing, and regulatory filings. We also own the rights to the data generated pursuant to the BCH License.
We have the first right of negotiation for a 30day period to any improvements to the intellectual property covered by the
BCH License.
We are required to pay certain fees and royalties under the BCH License. We paid an initial fee upon execution of the
BCH License and are required to pay an amendment fee if we expand the field of use under the BCH License. We are also
required to make milestone payments upon completing various phases of product development, including upon (i) filing
with the FDA of the first investigational new drug application and IDE application for a product that uses the licensed
technology; (ii) enrollment of the first patient in Phase II testing for a product that uses the licensed technology;
(iii) enrollment of the first patient in Phase III testing for a product that uses the licensed technology; (iv) FDA approval of
first new drug application or related application for a product that uses the licensed technology, and (v) first market approval
in any country outside the United States for a product that uses the licensed technology. Each year prior to the release of a
licensed product, we are also required to pay a maintenance fee for the BCH License. Further, we are required to make
ongoing payments based on any sublicenses we grant to manufacturers and distributors. Following commercialization, we are
required to make ongoing royalty payments equal to a percentage of net sales of any product that uses the licensed
technology.
Research and Development Expenditures
Our research and development expenditures, which include research and development related to our product candidates,
were $10,273,000, $10,533,000 and $6,376,000 in 2014, 2013 and 2012, respectively.
Competition
We have many potential competitors, including major drug companies, specialized biotechnology firms, academic
institutions, government agencies and private and public research institutions. Many of these competitors have significantly
greater financial and technical resources than us, and superior experience and expertise in research and development,
preclinical testing, design and implementation of clinical trials, regulatory processes and obtaining regulatory approval for
products, production and manufacturing, and sales and marketing of approved products. Smaller or earlystage companies
and research institutions may also prove to be significant competitors, particularly if they have collaborative arrangements
with larger and more established biotechnology companies. We will also face competition
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from these parties in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites
and registering subjects for clinical trials.
In order to compete effectively, we will have to make substantial investments in development, clinical testing,
manufacturing and sales and marketing, or partner with one or more established companies. There is no assurance that we will
be successful in having any of our products approved or gaining significant market share for any of our products. Our
technologies and products also may be rendered obsolete or noncompetitive as a result of products introduced by our
competitors.
Manufacturing
We have developed a proprietary manufacturing process to build our NeuroSpinal Scaffold. We manufacture our
scaffolds following FDA regulations for design controls using two fully operational manufacturing cleanrooms located at our
facility in Cambridge, Massachusetts. These two cleanrooms are validated to ISO 146441 Class ISO7 (Class 10k) and Class
ISO8 (Class 100k) cleanroom standards, respectively. In addition, the manufacturing process contains numerous quality
control steps including inprocess and final inspection. Currently, we are working with two preferred vendors for our critical
raw materials; however, these materials are also available from other vendors. We are currently manufacturing our Neuro
Spinal Scaffold to support our pilot clinical study.
Sales and Marketing
If we obtain approval from the FDA, or another foreign regulatory body, to commercialize our products, we plan to
establish a direct sales force to sell our products to major markets in the United States and to sell through distributors in
foreign markets. We anticipate the direct sales force, once and if established, would focus its efforts on maximizing revenue
through product training, placement and support. We would also seek to establish strong relationships with orthopedic spine
surgeons and neurosurgeons and would expect to provide a high level of service for the products including providing onsite
assistance and service during procedures. In addition, we expect to implement medical education programs intended for
outreach to practitioners in physical medicine and rehabilitation centers and patient advocacy groups. We may also seek
corporate partners with expertise in commercialization.
Compliance with Environmental, Health and Safety Laws
In addition to FDA regulations discussed above, we are also subject to evolving federal, state and local environmental,
health and safety laws and regulations. In the past, compliance with environmental, health and safety laws and regulations
has not had a material effect on our capital expenditures. We believe that we comply in all material respects with existing
environmental, health and safety laws and regulations applicable to us.
Employees
As of December 31, 2014, we had 31 employees. None of our employees is represented by a labor union, and we consider
our employee relations to be good. We also utilize a number of consultants to assist with research and development and
regulatory activities. We believe that our future success will depend in part on our continued ability to attract, hire and retain
qualified personnel.
Corporate Information
We incorporated under the laws of the state of Nevada on April 2, 2003 as Design Source, Inc. On October 26, 2010, we
acquired the business of InVivo Therapeutics Corporation, which was founded in 2005, and are continuing the existing
business operations of InVivo Therapeutics Corporation as our
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whollyowned subsidiary. We changed our name to InVivo Therapeutics Holdings Corp. in connection with the transaction.
Our offices are located at One Kendall Square, Suite B14402, Cambridge, Massachusetts 02139, and our telephone
number is 6178635500. Our website is www.invivotherapeutics.com. Information contained on, or accessible through, our
website is not a part of, and is not incorporated by reference into, this Annual Report.
Available Information
We make available free of charge on or through the Investor Relations link on our website, www.invivotherapeutics.com,
all materials that we file electronically with the Securities and Exchange Commission ("SEC"), including our annual reports
on Form 10K, quarterly reports on Form 10Q, current reports on Form 8K and amendments to those reports. Information
appearing on our website is not a part of, and is not incorporated in, this Annual Report.
You may also read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549, and you may obtain information on the operation of the Public Reference Room by calling
the SEC in the United States at 1800SEC0330. In addition, the SEC maintains an Internet website at www.sec.gov that
contains reports, proxy and information statements and other information that we file electronically with the SEC.
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Item 1A. RISK FACTORS
Certain factors may have a material adverse effect on our business, financial condition, and results of operations. You
should consider carefully the risks and uncertainties described below, in addition to other information contained in this
Annual Report on Form 10K, including our consolidated financial statements and related notes. The risks and
uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or
that we currently believe are not material, may also become important factors that adversely affect our business. If any of
the following risks actually occurs, our business, financial condition, results of operations, and future prospects could be
materially and adversely affected.
Risks Related to Our Business
We have a limited operating history and have incurred significant losses since our inception.
We have incurred net losses each year since our inception, including net losses of $18.3 million for the year ended
December 31, 2014, and $38.7 million for the year ended December 31, 2013. As of December 31, 2014, we had an
accumulated deficit of $100.3 million. To date, we have not commercialized any products or generated any revenues from the
sale of products, and we do not expect to generate any product revenues in the foreseeable future. We do not know whether or
when we will generate revenue or become profitable.
We have devoted most of our financial resources to research and development, including our clinical and preclinical
development activities related to our NeuroSpinal Scaffold. Overall, we expect our research and development expenses to be
substantial and to increase for the foreseeable future as we continue the development and clinical investigation of our current
and future products. Our lead product candidate, NeuroSpinal Scaffold, is currently being studied in a pilot study and, as a
result, we expect that it will be several years, if ever, before we have a product candidate ready for commercialization. Even if
we obtain regulatory approval to market our NeuroSpinal Scaffold or other products, our future revenues will depend upon
the size of any markets in which our products have received approval, our ability to achieve sufficient market acceptance,
reimbursement from thirdparty payors and other factors.
We anticipate that we will continue to incur substantial losses for the foreseeable future and may never achieve or maintain
profitability.
We expect to continue to incur significant expenses and increasing net losses for at least the next several years. We
expect our expenses will increase substantially in connection with our ongoing activities, as we:
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continue our pilot study and if successful, prepare for a pivotal study of NeuroSpinal Scaffold;
continue the research and development of our other product candidates;
have our product candidates manufactured for clinical trials and for commercial sale;
establish a sales, marketing and distribution infrastructure to commercialize any products for which we may
obtain marketing approval;
maintain, protect and expand our intellectual property portfolio; and
continue our research and development efforts for new product opportunities.
To become and remain profitable, we must succeed in developing and commercializing our product candidates with
significant market potential. This will require us to be successful in a range of challenging activities, including completing
preclinical testing and clinical trials of our product candidates, developing additional product candidates, obtaining
regulatory approval for these product
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candidates and manufacturing, marketing and selling any products for which we may obtain regulatory approval. We are only
in the initial stages of most of these activities. We may never succeed in these activities and, even if we do, may never
generate revenues that are significant enough to achieve profitability.
Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
Our failure to become and remain profitable could depress the value of our Company and could impair our ability to raise
capital, expand our business, maintain our research and development efforts, diversify our product offerings or even continue
our operations. A decline in the value of our Company could cause you to lose all or part of your investment.
We will need additional funding in the future. If we are unable to raise capital when needed, we could be forced to delay,
reduce or eliminate our product development programs or commercialization efforts.
We expect our expenses to increase in connection with our ongoing activities, particularly as we conduct our clinical
studies of, and seek regulatory approval for, our NeuroSpinal Scaffold. In addition, if we obtain regulatory approval for any
of our product candidates, we expect to incur significant commercialization expenses related to manufacturing, marketing,
sales and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing
operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or
eliminate our research and development programs or any future commercialization efforts.
As of December 31, 2014, our consolidated cash balance was approximately $13.5 million. In addition, as a result of a
January 2015 financing that provided us with $11 million in net proceeds, we believe our current cash and cash equivalents
are adequate to fund our operations into the fourth quarter of 2016. Our future funding requirements, both near and long
term, will depend on many factors, including, but not limited to:
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the scope, progress, results and costs of preclinical development, laboratory testing and clinical studies for our
NeuroSpinal Scaffold and any other product candidates that we may develop or acquire;
future clinical trial results of our NeuroSpinal Scaffold;
the timing of, and the costs involved in, obtaining regulatory approvals for the NeuroSpinal Scaffold if our
pilot and pivotal studies are successful, and the outcome of regulatory review of the NeuroSpinal Scaffold;
the cost and timing of future commercialization activities for our products, if any of our product candidates are
approved for marketing, including product manufacturing, marketing, sales and distribution costs;
the revenue, if any, received from commercial sales of our product candidates for which we receive marketing
approval;
the cost of having our product candidates manufactured for clinical trials in preparation for regulatory
approval and in preparation for commercialization;
the cost and delays in product development as a result of any changes in regulatory oversight applicable to
our product candidates;
our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial
terms of such agreements;
the cost and timing of establishing sales, marketing and distribution capabilities;
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the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual
property portfolio;
the efforts and activities of competitors and potential competitors;
the effect of competing technological and market developments; and
the extent to which we acquire or invest in businesses, products and technologies.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a timeconsuming,
expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results
required to obtain regulatory approval and achieve product sales. In addition, our product candidates, if approved, may not
achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to
be commercially available for several years, if at all. Accordingly, we will need to continue to rely on additional financing to
achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all. In
addition, we may seek additional capital due to favorable market conditions or strategic considerations, even if we believe
we have sufficient funds for our current or future operating plans.
Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights
to our product candidates on unfavorable terms to us.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a
combination of equity offerings, debt financings and other thirdparty funding alternatives including license and
collaboration agreements. To raise additional capital or pursue strategic transactions, we may in the future sell additional
shares of our common stock or other securities convertible into or exchangeable for our common stock which will dilute the
ownership interest of our current stockholders, and the terms of these securities may include liquidation or other preferences
that adversely affect the rights of our current stockholders. If we raise additional funds through collaborations, strategic
alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to
our product candidates, future revenue streams or research programs, or grant licenses on terms that may not be favorable to
us or that may reduce the value of our common stock. If we are unable to raise additional funds when needed, we may be
required to delay, limit, reduce or terminate our product development or commercialization efforts for our NeuroSpinal
Scaffold or any other product candidates that we develop or acquire.
We license certain technology underlying the development of our NeuroSpinal Scaffold from BCH and MIT, and the loss
of the license would result in a material adverse effect on our business, financial position and operating results and cause
the market value of our common stock to decline.
We license technology from BCH and MIT that is integrated into our NeuroSpinal Scaffold under an exclusive license.
Under the license agreement, we have agreed to milestone payments and to meet certain reporting obligations. In the event
that we were to breach any of the obligations under the agreement and fail to timely cure, BCH and MIT would have the right
to terminate the agreement upon notice. In addition, BCH and MIT have the right to terminate our license upon the
bankruptcy or receivership of the Company. If we are unable to continue to use or license this technology on reasonable
terms, or if this technology fails to operate properly, we may not be able to secure alternatives in a timely manner and our
ability to develop our products could be harmed.
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We depend heavily on the success of one product candidate, NeuroSpinal Scaffold, which is currently being studied in a
pilot study. Even if we obtain favorable clinical results, we may not be able to obtain regulatory approval for, or
successfully commercialize, our NeuroSpinal Scaffold.
We currently have only one product candidate, NeuroSpinal Scaffold, in clinical development, and our business
depends almost entirely on the successful clinical development, regulatory approval and commercialization of that product
candidate, which may never occur. We currently have no products available for sale, generate no revenues from sales of any
products, and we may never be able to develop marketable products. Our NeuroSpinal Scaffold, which is currently being
studied in an ongoing pilot study, will require substantial additional clinical development, testing, manufacturing process
development, and regulatory approval before we are permitted to commence its commercialization. Our other product
candidate, Bioengineered Neural Tissue, is in preclinical development. The clinical trials of our product candidates are, and
the manufacturing and marketing of our product candidates will be, subject to extensive and rigorous review and regulation
by numerous government authorities in the United States and in other countries where we intend to test and, if approved,
market any product candidates. Before obtaining regulatory approval via the HDE pathway for the commercial sale of any
product candidate, we must demonstrate through extensive preclinical testing and clinical trials, at least that the product
candidate does not pose an unreasonable or significant risk of illness or injury, and that the probable benefit to health
outweighs the risk of injury or illness from its use, taking into account the probable risks and benefits of currently available
devices or alternative forms of treatment. Alternatively, if we were to seek PMA approval for our product candidates, that
would require demonstration that the product is safe and effective for use in each target indication. This process can take
many years. Of the large number of medical devices in development in the United States, only a small percentage
successfully complete the FDA regulatory approval process and are commercialized. Accordingly, even if we are able to
obtain the requisite capital to continue to fund our development and clinical programs, we may be unable to successfully
develop or commercialize our NeuroSpinal Scaffold.
We may experience delays in our ongoing pilot study for our NeuroSpinal Scaffold, and we do not know whether future
clinical trials of our NeuroSpinal Scaffold, or other future product candidates, will begin on time, need to be redesigned,
enroll patients on time or be completed on schedule, if at all.
Before we can obtain regulatory approval for the sale of our NeuroSpinal Scaffold, we must complete pilot and pivotal
clinical studies. Our NeuroSpinal Scaffold is currently being studied in an early feasibility, five subject pilot study under our
approved IDE application for the treatment of complete traumatic acute spinal cord injury. Our preclinical testing to date has
been limited in nature and we cannot predict whether more extensive clinical testing will obtain similar results. Even if the
initial results of our clinical studies in humans are promising, our results may subsequently fail to meet the safety and
efficacy standards required to obtain regulatory approvals. Our pilot clinical study may not be successfully completed or may
take longer than anticipated because of any number of factors, including potential delays in the enrollment of subjects in the
study, the availability of scaffolds to supply to our clinical sites, failure to demonstrate safety and efficacy of our Neuro
Spinal Scaffold, lack of adequate funding to continue the clinical trial, or unforeseen safety issues.
In additional, clinical trials can be delayed or aborted for a variety of reasons, including delay or failure to:
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obtain regulatory approval to commence a clinical trial;
reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical
trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among
different CROs and trial sites;
obtain institutional review board, or IRB, approval at each site;
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recruit, enroll and retain patients through the completion of clinical trials;
maintain clinical sites in compliance with trial protocols through the completion of clinical trials;
address any patient safety concerns that arise during the course of the trial;
initiate or add a sufficient number of clinical trial sites; or
manufacture sufficient quantities of our product candidate for use in clinical trials.
We could encounter delays if a clinical trial is suspended or terminated by us, by the relevant IRBs at the sites at which
such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other
regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including
failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the
clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold,
unforeseen safety issues or adverse side effects, or changes in laws or regulations. Any delays in completing our clinical trials
will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to
commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and
prospects significantly.
We may find it difficult to enroll patients in our clinical studies, which could delay or prevent clinical studies of our
product candidates.
Identifying and qualifying patients to participate in clinical studies of our product candidates is critical to our success.
The timing of our clinical studies depends on the speed at which we can recruit patients to participate in testing our product
candidates. If we have difficulty enrolling a sufficient number of patients to conduct our clinical studies as planned, we may
need to delay, limit or terminate ongoing or planned clinical studies, any of which would have an adverse effect on our
business.
Patient enrollment is affected by a number of factors including:
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severity of the disease or condition under investigation;
design of the study protocol;
size and nature of the patient population;
eligibility criteria for and design of the study in question;
perceived risks and benefits of the product candidate under study;
proximity and availability of clinical study sites for prospective patients;
availability of competing therapies and clinical studies;
efforts to facilitate timely enrollment in clinical studies;
patient referral practices of physicians; and
ability to monitor patients adequately during and after treatment.
We may not be able to initiate or continue clinical studies if we cannot enroll a sufficient number of eligible patients to
participate in the clinical studies required by regulatory agencies. If we have difficulty enrolling a sufficient number of
patients to conduct our clinical studies as planned, we may need to delay, limit or terminate ongoing or planned clinical
studies, any of which would have an adverse effect on our business.
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Clinical trials involve a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials
may not be predictive of future trial results.
The results of preclinical studies and early clinical trials of new medical devices do not necessarily predict the results of
laterstage clinical trials. The design of our clinical trials is based on many assumptions about the expected effects of our
product candidates, and if those assumptions are incorrect, the trials may not sufficiently produce results to support
regulatory applications. We are currently pursuing marketing approval via HDE which requires us to show the device doesn't
pose an unreasonable or significant risk of illness or injury, and that the probable benefit of health outweighs the risk of
injury or illness from its use. Preliminary results may not be confirmed upon full analysis of the detailed results of an early
clinical trial. Product candidates in later stages of clinical trials may fail to show safety and probable benefit sufficient to
support intended use claims despite having progressed through initial clinical testing. The data collected from clinical trials
of our product candidates may not be sufficient to obtain regulatory approval in the United States or elsewhere. It is also
possible that patients enrolled in clinical trials will experience adverse side effects that are not currently part of the product
candidate's profile. Because of the uncertainties associated with clinical development and regulatory approval, we cannot
determine if or when we will have an approved product for commercialization or achieve sales or profits.
We must obtain FDA approval before we can sell any of our products in the United States and approval of similar
regulatory authorities in countries outside the United States before we can sell our products in such countries. We may
incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and
commercialization of our products if such approval is denied or delayed.
The development, manufacture and marketing of our products are subject to government regulation in the United States
and other countries. In the United States and most foreign countries, we must complete rigorous preclinical testing and
extensive human clinical trials that demonstrate the safety and efficacy of a product in order to apply for regulatory approval
to market the product.
Our NeuroSpinal Scaffold is expected to be regulated as a Class III medical device by the FDA. The FDAapproval
process is expensive and can take many years to complete, and we may not be able to demonstrate the safety and efficacy of
the NeuroSpinal Scaffold to the satisfaction of the FDA or the regulatory authorities of other countries. Regulatory agencies
may require us to delay, restrict or discontinue clinical trials on various grounds, including a finding that the subjects or
patients are being exposed to an unacceptable health risk, or may also require additional testing. Delays in regulatory
approval can be extremely costly in terms of losing any potential marketing advantage of being early to market. Moreover, if
the FDA grants regulatory approval of a product, the approval may be limited to specific indications or limited with respect
to its distribution. Expanded or additional indications for approved devices may not be approved, which could limit our
potential revenues. Foreign regulatory authorities may apply similar limitations or may refuse to grant any approval.
Consequently, even if we believe that preclinical and clinical data are sufficient to support regulatory approval for our
products, the FDA and foreign regulatory authorities may not ultimately grant approval for commercial sale in any
jurisdiction. If our products are not approved, our ability to generate revenues will be limited and our business will be
adversely affected.
There are risks associated with pursuing FDA approval via an HDE pathway, including the possibility that the approval
could be withdrawn in the future, as well as limitations on the ability to profit from sales of the product.
Our NeuroSpinal Scaffold is expected to be regulated by the FDA as a Class III medical device, requiring either PMA or
HDE approval. A HUD designation was granted for the NeuroSpinal Scaffold in 2013, opening the HDE pathway. The FDA's
approval of an HDE to treat that qualifying patient population then requires demonstration that the device is safe for its
intended application, that
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it is potentially effective, and that the probable benefits outweigh the associated risks. If a competitor device subsequently
becomes available through the PMA process that addresses the same patient population as the HDE device, the HDE device
may need to be withdrawn from the U.S. market.
In addition, except in certain circumstances, products approved under an HDE cannot be sold for an amount that exceeds
the costs of research and development, fabrication, and distribution of the device (i.e., for profit). Currently, a product is only
eligible to be sold for profit after receiving HDE approval if the device (1) is intended for the treatment or diagnosis of a
disease or condition that occurs in pediatric patients or in a pediatric subpopulation, and such device is labeled for use in
pediatric patients or in a pediatric subpopulation in which the disease or condition occurs; or (2) is intended for the treatment
or diagnosis of a disease or condition that does not occur in pediatric patients or that occurs in pediatric patients in such
numbers that the development of the device for such patients is impossible, highly impracticable, or unsafe. If an HDE
approved device does not meet either of the eligibility criteria, the device cannot be sold for profit.
Our medical device products and operations are subject to extensive governmental regulation both in the United States
and abroad, and our failure to comply with applicable requirements could cause our business to suffer.
Our medical device products and operations are subject to extensive regulation by the FDA and various other federal,
state and foreign governmental authorities. Government regulation of medical devices is meant to assure their safety and
effectiveness, and includes regulation of, among other things:d
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design, development and manufacturing;
testing, labeling, content and language of instructions for use and storage;
clinical trials;
product safety;
marketing, sales and distribution;
regulatory clearances and approvals including premarket clearance and approval;
conformity assessment procedures;
product traceability and record keeping procedures;
advertising and promotion;
product complaints, complaint reporting, recalls and field safety corrective actions;
postmarket surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were
to recur, could lead to death or serious injury;
postmarket studies; and
product import and export.
The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory
changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower
than anticipated sales.
Before we can market or sell a new regulated product in the United States, we must obtain clearance under Section 510(k)
of the Federal Food, Drug and Cosmetic Act (FDCA), approval of a PMA application, or approval of a HDE, unless the device
is specifically exempt from premarket review. Our NeuroSpinal Scaffold is expected to be regulated by the FDA as a Class III
medical
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device, requiring either PMA or HDE approval. A HUD designation was granted for the NeuroSpinal Scaffold in 2013,
opening the HDE pathway.
In the PMA approval process, the FDA must determine that a proposed device is safe and effective for its intended use
based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing and
labeling data. Modifications to products that are approved through a PMA application generally need FDA approval. The
process of obtaining a PMA is costly and generally takes from one to three years, or even longer, from the time the
application is submitted to the FDA until an approval is obtained.
An HDE application is similar in form and content to a PMA application and, although exempt from the effectiveness
requirements of a PMA, an HDE does require sufficient information for FDA to determine that the device does not pose an
unreasonable or significant risk of illness or injury, and that the probable benefit to health outweighs the risk of injury or
illness from its use.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:
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we may not be able to demonstrate to the FDA's satisfaction that our products are safe and effective for their
intended uses;
the data from our preclinical studies and clinical trials may be insufficient to support clearance or approval,
where required; and
the manufacturing process or facilities we use may not meet applicable requirements.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing
regulations, or take other actions that may prevent or delay approval or clearance of our products under development or
impact our ability to modify our currently approved or cleared products on a timely basis. For example, in 2011, the FDA
announced a Plan of Action to modernize and improve the FDA's premarket review of medical devices, and has implemented,
and continues to implement, reforms intended to streamline the premarket review process. In addition, as part of the Food and
Drug Administration Safety and Innovation Act of 2012, or FDASIA, Congress enacted several reforms entitled the Medical
Device Regulatory Improvements and additional miscellaneous provisions which will further affect medical device
regulation both pre and postapproval. Any change in the laws or regulations that govern the clearance and approval
processes relating to our current and future products could make it more difficult and costly to obtain clearance or approval
for new products, or to produce, market and distribute existing products.
In addition, even after we have obtained the proper regulatory clearance or approval to market a product, the FDA has the
power to require us to conduct postmarketing studies. Failure to conduct required studies in a timely manner could result in
the revocation of approval for the product that is subject to such a requirement and could also result in the recall or
withdrawal of the product, which would prevent us from generating sales from that product in the United States.
Failure to comply with applicable laws and regulations could jeopardize our ability to sell our products and result in
enforcement actions such as:
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warning letters;
fines;
injunctions;
civil penalties;
termination of distribution;
recalls or seizures of products;
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delays in the introduction of products into the market;
total or partial suspension of production;
refusal of the FDA or other regulator to grant future clearances or approvals;
withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of our
products; and/or
in the most serious cases, criminal penalties.
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material
adverse effect on our reputation, business, results of operations and financial condition.
If we or our suppliers fail to comply with ongoing FDA regulatory requirements, or if we experience unanticipated
problems with our products, these products could be subject to restrictions or withdrawal from the market.
Any product for which we obtain clearance or approval, and the manufacturing processes, reporting requirements, post
approval clinical data and promotional activities for such product, will be subject to continued regulatory review, oversight
and periodic inspections by the FDA. In particular, we and our thirdparty suppliers will be required to comply with the FDA's
QSRs. These FDA regulations cover the methods and documentation of the design, testing, production, control, quality
assurance, labeling, packaging, sterilization, storage and shipping of products. Compliance with applicable regulatory
requirements is subject to continual review and is monitored rigorously through periodic inspections by the FDA. If we, or
our manufacturers, fail to adhere to QSR requirements, this could delay production of our product candidates and lead to
fines, difficulties in obtaining regulatory clearances, recalls, enforcement actions, including injunctive relief or consent
decrees, or other consequences, which could, in turn, have a material adverse effect on our financial condition or results of
operations.
In addition, the FDA audits compliance with the QSR through periodic announced and unannounced inspections of
manufacturing and other facilities. The failure by us or one of our suppliers to comply with applicable statutes and
regulations administered by the FDA, or the failure to timely and adequately respond to any adverse inspectional
observations or product safety issues, could result in any of the following enforcement actions:
•
•
•
•
•
•
•
•
untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
unanticipated expenditures to address or defend such actions;
customer notifications or repair, replacement, refunds, recall, detention or seizure of our products;
operating restrictions or partial suspension or total shutdown of production;
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified
products;
withdrawing 510(k) clearances or PMA approvals that have already been granted;
refusal to grant export approval for our products; or
criminal prosecution.
Any of these sanctions could have a material adverse effect on our reputation, business, results of operations and
financial condition. Furthermore, our key component suppliers may not currently be or
21
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may not continue to be in compliance with all applicable regulatory requirements, which could result in our failure to
produce our products on a timely basis and in the required quantities, if at all.
If we cannot protect, maintain and, if necessary, enforce our intellectual property rights, our ability to develop and
commercialize products will be adversely impacted.
Our success, in large part, depends on our ability to protect and maintain the proprietary nature of our technology. We
and our licensors must prosecute and maintain our existing patents and obtain new patents. Some of our proprietary
information may not be patentable, and there can be no assurance that others will not utilize similar or superior solutions to
compete with us. We cannot guarantee that we will develop proprietary products that are patentable, and that if issued, any
patent will give a competitive advantage or that such patent will not be challenged by third parties. The process of obtaining
patents can be time consuming with no certainty of success, as a patent may not issue or may not have sufficient scope or
strength to protect the intellectual property it was intended to protect. We cannot assure you that our means of protecting our
proprietary rights will suffice or that our others will not independently develop competitive technology or design around
patents or other intellectual property rights issued to us. Even if a patent is issued, it does not guarantee that it is valid or
enforceable. Any patents that we or our licensors have obtained or obtain in the future may be challenged, invalidated or
unenforceable. If necessary, we may initiate actions to protect our intellectual property, which can be costly and time
consuming.
If third parties successfully claim that we infringe their intellectual property rights, our ability to continue to develop and
commercialize products could be delayed or prevented.
Third parties may claim that we or our licensors are infringing on or misappropriating their proprietary information.
Other organizations are engaged in research and product development efforts that may overlap with our products. Such third
parties may currently have, or may obtain in the future, legally blocking proprietary rights, including patent rights, in one or
more products or methods under development or consideration by us. These rights may prevent us from commercializing
products, or may require us to obtain a license from the organizations to use the technology. We may not be able to obtain
any such licenses that may be required on reasonable financial terms, if at all, and cannot be sure that the patents underlying
any such licenses will be valid or enforceable. There may be rights that we are not aware of, including applications that have
been filed but not published that, when issued, could be asserted against us. These third parties could bring claims against us
that would cause us to incur substantial expenses and, if successful, could cause us to pay substantial damages. Further, if a
patent infringement suit were brought against us, we could be forced to stop or delay research and development of the
product that is the subject of the suit. Furthermore, because of the substantial amount of discovery required in connection
with intellectual property litigation, there is a risk that some of our trade secrets or other confidential information could be
compromised by disclosure during this type of litigation.
We will face substantial competition, which may result in others discovering, developing or commercializing products
before or more successfully than we do.
In general, the biotechnology industry is subject to intense competition and rapid and significant technological change.
We have many potential competitors, including major drug companies, specialized biotechnology firms, academic
institutions, government agencies and private and public research institutions. Many of these competitors have significantly
greater financial and technical resources than us, and superior experience and expertise in research and development,
preclinical testing, design and implementation of clinical trials, regulatory processes and approval for products, production
and manufacturing, and sales and marketing of approved products.
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Large and established companies compete in the biotechnology market. In particular, these companies have greater
experience and expertise in securing government contracts and grants to support their research and development efforts,
conducting testing and clinical trials, obtaining regulatory approvals to market products, manufacturing such products on a
broad scale and marketing approved products. Smaller or earlystage companies and research institutions may also prove to
be significant competitors, particularly if they have collaborative arrangements with larger and more established
biotechnology companies. We will also face competition from these parties in recruiting and retaining qualified scientific
and management personnel, establishing clinical trial sites and registering subjects for clinical trials.
In order to effectively compete, we will have to make substantial investments in development, clinical testing,
manufacturing and sales and marketing, or partner with one or more established companies. There is no assurance that we will
be successful in having our products approved or gaining significant market share for any of our products. Our technologies
and products also may be rendered obsolete or noncompetitive as a result of products introduced by our competitors.
We will depend upon strategic relationships to develop, exploit and manufacture our products. If these relationships are
not successful, we may not be able to capitalize on the market potential of these products.
The near and longterm viability of our products will depend, in part, on our ability to successfully establish new
strategic collaborations with biotechnology companies, hospitals, insurance companies and government agencies.
Establishing strategic collaborations is difficult and timeconsuming. Potential collaborators may reject collaborations based
upon their assessment of our financial, regulatory or intellectual property position. If we fail to establish a sufficient number
of collaborations on acceptable terms, we may not be able to commercialize our products or generate sufficient revenue to
fund further research and development efforts.
Even if we establish new collaborations, these relationships may never result in the successful development or
commercialization of any of our product candidates for reasons both within and outside of our control.
We have limited experience manufacturing our NeuroSpinal Scaffold for clinicalstudy scale and no experience for
commercial scale.
To date, we have manufactured our NeuroSpinal Scaffold on a small scale, including sufficient supply that is needed for
our clinical studies. We may encounter unanticipated problems in the scaleup process that will result in delays in the
manufacturing of the NeuroSpinal Scaffold, and therefore, delay our clinical studies. During our clinical trials, we are subject
to FDA regulations requiring manufacturing of our scaffolds with the FDA requirements of Design Controls and subject to
inspections by regulatory agencies. Our failure to comply with applicable regulations may result in delays and interruptions
to our product supply while we seek to secure another supplier that meets all regulatory requirements. If we are unable to
scale up our manufacturing to meet requirements for our clinical studies, we may be required to rely on contract
manufacturers. Reliance on thirdparty manufacturers entails risks to which we would not be subject if we manufactured the
product ourselves, including the possible breach of the manufacturing agreements by the third parties because of factors
beyond our control, and the possibility of termination or nonrenewal of the agreements by the third parties because of our
breach of the manufacturing agreement or based on their own business priorities.
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There are a limited number of suppliers that can provide materials to us. Any problems encountered by such suppliers may
detrimentally impact us.
We rely on thirdparty suppliers and vendors for certain of the materials used in the manufacture of our products or other
of our product candidates. Any significant problem experienced by one of our suppliers could result in a delay or interruption
in the supply of materials to us until such supplier resolves the problem or an alternative source of supply is located. Any
delay or interruption could negatively affect our operations.
We rely upon third parties for laboratory testing, animal and human clinical studies, which exposes us to increased risk.
We have been, and will continue to be, dependent on thirdparty CROs to conduct certain of our laboratory testing,
animal and human clinical studies. These third parties may not complete testing activities on schedule. We are responsible
for confirming that each of our clinical trials is conducted in accordance with our approved plan and protocol. Moreover, the
FDA and foreign regulatory agencies require us to comply with regulations and standards, commonly referred to as good
clinical practices, for conducting, recording and reporting the results of clinical trials to assure that data and reported results
are credible and accurate and that the trial participants are adequately protected. Our reliance on these third parties does not
relieve us of these responsibilities and requirements. If these third parties do not successfully carry out their contractual
duties or regulatory obligations or meet expected deadlines, if the third parties need to be replaced or if the quality or
accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory
requirements or for other reasons, our preclinical development activities or clinical trials may be extended, delayed,
suspended or terminated, and we may not be able to obtain regulatory approval for our product candidates.
We may encounter difficulties in managing our growth and expanding our operations successfully.
As we seek to advance our product candidates through clinical trials and commercialization, we will need to expand our
development, regulatory, manufacturing, marketing and sales capabilities or contract with third parties to provide these
capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various
strategic collaborators, suppliers and other third parties. Future growth will impose significant added responsibilities on
members of our management. Our future financial performance and our ability to commercialize our NeuroSpinal Scaffold, if
approved, and any other product candidates, and to compete effectively will depend, in part, on our ability to manage any
future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively and
hire, train and integrate additional management, administrative and, if necessary, sales and marketing personnel. We may not
be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our
Company.
If approved, our products will require market acceptance to be successful. Failure to gain market acceptance would impact
our revenues and may materially impair our ability to continue our business.
Even if we receive regulatory approvals for the commercial sale of our products, the commercial success of our products
will depend on, among other things, their acceptance by physicians, patients, thirdparty payors such as health insurance
companies and other members of the medical community as a therapeutic and costeffective alternative to competing
products and treatments. Physicians and hospitals will need to establish training and procedures to utilize and implement our
NeuroSpinal Scaffold, and there can be no assurance that these parties will adopt the use of our device or develop sufficient
training and procedures to properly utilize it. Market acceptance of, and demand for, any product that we may develop and
commercialize will depend on many factors, both within and outside of our control. If our product candidates fail to gain
market acceptance, we may be unable to earn sufficient revenue to continue our business.
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If we obtain approval for our products, their commercial success will depend in part upon the level of reimbursement we
receive from third parties for the cost of our products to users.
The commercial success of any product will depend, in part, on the extent to which reimbursement for the costs of our
products and related treatments will be available from thirdparty payors such as government health administration
authorities, private health insurers, managed care programs, and other organizations. Adequate thirdparty insurance coverage
may not be available for us to establish and maintain price levels that are sufficient for us to continue our business or for
realization of an appropriate return on investment in product development.
Acquisitions of companies, businesses or technologies may substantially dilute our stockholders and increase our
operating losses.
We may make acquisitions of businesses, technologies or intellectual property rights that we believe would to be
necessary, useful or complementary to our current business. Any such acquisition may require assimilation of the operations,
products or product candidates and personnel of the acquired business and the training and integration of its employees, and
could substantially increase our operating costs, without any offsetting increase in revenue. Acquisitions may not provide the
intended technological, scientific or business benefits and could disrupt our operations and divert our limited resources and
management's attention from our current operations, which could harm our existing product development efforts. While we
may use cash or equity to finance a future acquisition, it is likely we would issue equity securities as a portion or all of the
consideration in any acquisition. The issuance of equity securities for an acquisition could be substantially dilutive to our
stockholders. Any investment made in, or funds advanced to, a potential acquisition target could also significantly adversely
affect our results of operation and could further reduce our limited capital resources. Any acquisition or action taken in
anticipation of a potential acquisition or other change in business activities could substantially depress the price of our
stock. In addition, our results of operations may suffer because of acquisition related costs or the postacquisition costs of
funding the development of an acquired technology or product candidates or operation of the acquired business, or due to
amortization or impairment costs for acquired goodwill and other intangible assets.
Our success depends on our ability to retain our management and other key personnel.
We depend on our senior management as well as key scientific personnel. The loss of any of these individuals could
harm our business and significantly delay or prevent the achievement of research, development or business objectives.
Competition for qualified employees is intense among biotechnology companies, and the loss of qualified employees, or an
inability to attract, retain and motivate additional highly skilled employees could hinder our ability to successfully develop
marketable products.
Our future success also depends on our ability to identify, attract, hire, train, retain and motivate other highly skilled
scientific, technical, marketing, managerial and financial personnel. Although we will seek to hire and retain qualified
personnel with experience and abilities commensurate with our needs, there is no assurance that we will succeed despite our
collective efforts. The loss of the services of any of our senior management or other key personnel could hinder our ability to
fulfill our business plan and further develop and commercialize our products and services. Competition for personnel is
intense, and any failure to attract and retain the necessary technical, marketing, managerial and financial personnel would
have a material adverse effect on our business, prospects, financial condition and results of operations.
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We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed
confidential information of third parties.
We have received confidential and proprietary information from collaborators, prospective licensees and other third
parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical
companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently
or otherwise used or disclosed confidential information of these third parties or our employees' former employers. We may
also be subject to claims that former employees, collaborators or other third parties have an ownership interest in our patents
or other intellectual property. We may be subject to ownership disputes in the future arising, for example, from conflicting
obligations of consultants or others who are involved in developing our product candidates. Litigation may be necessary to
defend against these claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose
valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an
outcome could have a material adverse effect on our business. Even if we are successful in defending against these claims,
litigation could result in substantial cost and be a distraction to our management and employees.
We are subject to a pending securities class action and related shareholder demands, which could divert management's
attention and harm our business.
We are the subject of a securities class action lawsuit. The lawsuit, filed in July 2014, alleges violations of the Securities
Exchange Act of 1934 in connection with allegedly false and misleading statements related to the timing and completion of
the clinical study of our NeuroSpinal Scaffold. In January 2015, we received a purported shareholder demand alleging
breach of fiduciary duties allegedly related to the claimed false and misleading statements that are the subject of the
securities class action. We believe that this action is without merit and intend to defend it vigorously. No assurance can be
provided that we will be successful in defending this claim or that insurance proceeds will be sufficient to cover any liability
under such claims. Further, the amount of time that will be required to resolve these lawsuits is unpredictable and these
actions may divert management's attention from the daytoday operations of our business, which could adversely affect our
business, results of operations and cash flows.
We face potential product liability claims, and, if successful claims are brought against us, we may incur substantial
liability and costs.
We will have exposure to claims for product liability. Product liability coverage for the healthcare industry is expensive
and sometimes difficult to obtain. We may not be able to maintain such insurance on acceptable terms or be able to secure
increased coverage if the commercialization of our products progresses, nor can we be sure that existing or future claims
against us will be covered by our product liability insurance. Moreover, the existing coverage of our insurance policy or any
rights of indemnification and contribution that we may have may not be sufficient to offset existing or future claims. A
successful claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable
items, if at all. Even if a claim is not successful, defending such a claim would be timeconsuming and expensive, may
damage our reputation in the marketplace, and would likely divert our management's attention.
We are subject to environmental, health and safety laws. Failure to comply with such environmental, health and safety laws
could cause us to become subject to fines or penalties or incur costs that could have a material adverse effect on the success
of our business.
We are subject to various environmental, health and safety laws and regulations, including those relating to safe working
conditions, laboratory and manufacturing practices, the experimental use of
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animals and humans, emissions and wastewater discharges, and the use and disposal of hazardous or potentially hazardous
substances used in connection with our research. Any of these laws or regulations could cause us to incur additional expense
or restrict our operations. Compliance with environmental laws and regulations may be expensive, and current or future
environmental regulations may impair our research and development efforts.
Risks Related to Investment in Our Securities
"Penny stock" rules may make buying or selling our securities difficult which may make our stock less liquid and make it
harder for investors to buy and sell our securities.
Trading in our securities is subject to the SEC's "penny stock" rules and it is anticipated that trading in our securities will
continue to be subject to the penny stock rules for the foreseeable future. The SEC has adopted rules which generally
establish the definition of a "penny stock" to be any equity security that has a market price of less than $5.00 per share or
with an exercise price of less than $5.00 per share, subject to certain exceptions. These rules require that any brokerdealer
who recommends our securities to persons other than prior customers and accredited investors must, prior to the sale, make a
special written suitability determination for the purchaser and receive the purchaser's written agreement to execute the
transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock
market. In addition, brokerdealers must disclose commissions payable to both the brokerdealer and the registered
representative and current quotations for the securities they offer. The additional burdens imposed upon brokerdealers by
these requirements may discourage brokerdealers from recommending transactions in our securities, which could severely
limit the liquidity of our securities and consequently adversely affect the market price for our securities.
Our common stock is quoted on the OTCQB, which may limit the liquidity and price of our common stock more than if our
common stock quoted or listed on or a national securities exchange.
Our common stock is currently quoted on the OTCQB tier of OTC Markets Group, Inc., an interdealer automated
quotation system for equity securities not listed on a national securities exchange. Quotation of our common stock on the
OTCQB may limit the liquidity and price of our common stock more than if our common stock was quoted or listed on a
national securities exchange. Some investors may perceive our common stock to be less attractive because they are traded in
the overthecounter market. In addition, as an OTCQB company, we do not attract the extensive analyst coverage that
accompanies companies listed on a national securities exchange. Further, institutional and other investors may have
investment guidelines that restrict or prohibit investing in securities traded in the overthecounter market. In addition,
holders of our common stock may face restrictions on the resale of our common stock due to state "blue sky" laws. These
factors may have an adverse impact on the trading and price of our common stock.
The price of our common stock may become volatile, which could lead to losses by investors and costly securities litigation.
The trading price of our common stock is likely to be highly volatile and could fluctuate in response to factors such as:
•
•
•
•
the status, completion and/or results of our clinical trials;
actual or anticipated variations in our operating results;
announcements of developments by us or our competitors;
regulatory actions regarding our products;
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•
•
•
•
•
announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or
capital commitments;
adoption of new accounting standards affecting our industry;
additions or departures of key personnel;
sales of our common stock or other securities in the open market; and
other events or factors, many of which are beyond our control.
The stock market is subject to significant price and volume fluctuations. In the past, following periods of volatility in the
market price of a company's securities, securities class action litigation has often been initiated against such company.
Litigation initiated against us, whether or not successful, could result in substantial costs and diversion of our management's
attention and resources, which could harm our business and financial condition.
Investors may experience dilution of their ownership interests because of the future issuance of additional shares of our
common stock.
As of December 31, 2014, there were outstanding warrants to purchase 10,208,849 shares of our common stock, and
outstanding options to purchase 10,445,662 shares of our common stock. We expect to issue additional equity awards to
compensate employees, consultants and directors, and may issue additional shares to raise capital, to acquire other companies
or technologies, to pay for services, or for other corporate purposes. Any such issuances will have the effect of diluting the
interest of current stockholders. The future issuance of any such additional shares of common stock may create downward
pressure on the trading price of the common stock. There can be no assurance that we will not be required to issue additional
shares, warrants or other convertible securities in the future in conjunction with any capital raising efforts, including at a
price (or exercise prices) below the price at which shares of our common stock are currently quoted on the OTCQB.
Antitakeover effects of certain provisions of our articles of incorporation and Nevada state law may discourage or prevent
a takeover.
Our articles of incorporation divide our Board of Directors into three classes, with threeyear staggered terms. The
classified board provision could increase the likelihood that, in the event an outside party acquired a controlling block of our
stock, incumbent directors nevertheless would retain their positions for a substantial period, which may have the effect of
discouraging, delaying or preventing a change in control. In addition, Nevada has a business combination law, which
prohibits certain business combinations between Nevada corporations and "interested stockholders" for three years after the
interested stockholder first becomes an interested stockholder, unless the corporation's board of directors approves the
combination in advance. In addition, we may become subject to Nevada's control share laws. A corporation is subject to
Nevada's control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents
of Nevada, and if the corporation does business in Nevada, including through an affiliated corporation. This control share law
may have the effect of discouraging corporate takeovers. Currently, we believe that we have less than 100 stockholders of
record who are residents of Nevada, and are therefore not subject to the control share laws.
The provisions of our articles of incorporation and Nevada's business combination and control share laws make it more
difficult for a third party to acquire us and make a takeover more difficult to complete, even if such a transaction were in our
stockholders' interest or might result in a premium over the market price for our common stock.
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Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
We lease approximately 26,150 square feet of office, laboratory and manufacturing space in Cambridge, Massachusetts.
The lease commenced in November 2011, and is for an initial term of six years and three months, with one fiveyear
extension. We believe the facility is adequate to meet our current needs and that additional space will be available on
commercially reasonable terms as needed.
Item 3. LEGAL PROCEEDINGS
Lawsuit with Former Employee
In November 2013, we filed a lawsuit against Francis Reynolds, our former Chairman, Chief Executive Officer and Chief
Financial Officer, in Middlesex Superior Court, Middlesex County, Massachusetts (InVivo Therapeutics Holdings Corp. v.
Reynolds, Civil Action No. 135004). The complaint alleges breaches of fiduciary duties, breach of contract, conversion,
misappropriation of corporate assets, unjust enrichment, corporate waste, and seeks monetary damages and an accounting.
The lawsuit involves approximately $500,000 worth of personal and/or exorbitant expenses that we allege Mr. Reynolds
inappropriately caused us to pay while he was serving as our Chief Executive Officer, Chief Financial Officer, President and
Chairman of our Board of Directors. On December 6, 2013, Mr. Reynolds answered the complaint, and filed counterclaims
against us and our Board of Directors. The counterclaims allege two counts of breach of contract, two counts of breach of the
covenant of good faith and fairdealing, and tortious interference with a contract, and seek monetary damages and a
declaratory judgment. The counterclaims involve Mr. Reynolds's allegations that we and the Board interfered with the
performance of his duties under the terms of his employment agreement, and that Mr. Reynolds was entitled to additional
shares upon the exercise of certain stock options. On January 9, 2014, we, along with the directors named in the
counterclaims, filed our answer. The parties are currently conducting pretrial discovery. No judgments or rulings are pending
at this stage.
Shareholder Matters and Investigations
On July 31, 2014, a putative securities class action lawsuit was filed in the United States District Court for the District of
Massachusetts, naming the Company and Mr. Reynolds, as defendants (the "Securities Class Action"). The lawsuit alleges
violations of the Securities Exchange Act of 1934 in connection with allegedly false and misleading statements related to the
timing and completion of the clinical study of our NeuroSpinal Scaffold. The plaintiff seeks class certification for purchasers
of our common stock during the period from April 5, 2013 through August 26, 2013 and unspecified damages. On
December 12, 2014, we moved to dismiss this lawsuit, and a hearing on that motion is scheduled for March 24, 2015. We
intend to vigorously defend the lawsuit.
On January 23, 2015, Shawn Luger, a purported shareholder of the Company, sent us a letter demanding that the Board
of Directors take action to remedy purported breaches of fiduciary duties allegedly related to the claimed false and
misleading statements that are the subject of the Securities Class Action (the "Shareholder Demand"). The Board of Directors
is currently considering this demand.
In addition to the Securities Class Action and the Shareholder Demand, we have received investigation subpoenas from
the Boston Regional Office of the Securities and Exchange Commission and the Massachusetts Securities Division of the
Secretary of the Commonwealth of Massachusetts requesting corporate documents also concerning, among other topics, the
allegations raised Securities Class Action and the Shareholder Demand. We are currently cooperating with these
investigations.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
Market Information
Our Common Stock is quoted on the OTCQB under the symbol "NVIV." The following table shows the high and low bid
prices for our Common Stock based upon quotations on the OTCQB for each quarter in the periods presented:
Fiscal Quarter Ended
December 31, 2013
September 30, 2013
June 30, 2013
March 31, 2013
Fiscal Quarter Ended
December 31, 2014
September 30, 2014
June 30, 2014
March 31, 2014
High Bid Low Bid
1.08
$
0.94
$
2.20
$
1.61
$
2.49 $
6.20 $
4.75 $
2.59 $
High Bid Low Bid
0.49
$
0.47
$
0.93
$
1.49
$
1.60 $
1.21 $
2.25 $
2.67 $
These overthecounter market quotations reflect interdealer prices, without retail markup, markdown or commissions
and may not necessarily represent actual transactions. The high and low bid prices listed have been rounded up to the next
two decimal places.
Dividends
We have never declared or paid cash dividends. We do not intend to pay cash dividends on our Common Stock for the
foreseeable future, but currently intend to retain any future earnings to fund the development and growth of our business. The
payment of cash dividends if any, on the Common Stock will rest solely within the discretion of our Board of Directors and
will depend, among other things, upon our earnings, capital requirements, financial condition, and other relevant factors.
Holders
As of March 5, 2015, we had approximately 377 stockholders of record. This figure does not reflect persons or entities
that hold their stock in nominee or "street" name through various brokerage firms.
Equity Compensation Plans
The information required to be disclosed by Item 201(d) of Regulation SK, "Securities Authorized for Issuance Under
Equity Compensation Plans," is incorporated herein by reference. Refer to Item 12 of Part III of this Annual Report on
Form 10K for additional information.
Recent Sales of Unregistered Securities
None.
Issuer Repurchases of Equity Securities
None.
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Performance Graph
The following performance graph and related information shall not be deemed to be "soliciting material" or to be
"filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act,
each as amended, except to the extent that we specifically incorporate it by reference into such filing.
The following graph compares our cumulative 50Month cumulative total shareholder return on common stock with the
cumulative total returns of the NASDAQ Composite Index and the NASDAQ Biotechnology Index from October 29, 2010 to
December 31, 2014. The comparison assumes $100 was invested on October 29, 2010 and in each of the foregoing indices
and assumes reinvestment of dividends, if any. The points on the graph are as of December 31st of the year indicated.
COMPARISON OF 50 MONTH CUMULATIVE TOTAL RETURN*
Among InVivo Therapeutics Holdings Corp, the NASDAQ Composite Index,
and the NASDAQ Biotechnology Index
*
$100 invested on 10/29/10 in stock or 10/31/10 in index, including reinvestment of dividends.
Fiscal year ending December 31.
10/29/10
2010
2011
December 31,
2012
2013
2014
InVivo Therapeutics
Holdings Corp
48.89
NASDAQ Composite Index $ 100.00 $ 105.54 $ 106.11 $ 123.88 $ 175.53 $ 200.78
NASDAQ Biotechnology
83.33 $ 101.85 $
$ 100.00 $
64.44 $
85.04 $
Index
$ 100.00 $ 100.90 $ 114.21 $ 152.38 $ 259.25 $ 358.99
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Item 6. SELECTED FINANCIAL DATA
The selected financial data presented below is derived from our audited consolidated financial statements. You should
read the selected historical combined financial data set forth below in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Item 7 of Part II to this Annual Report. Unless otherwise
indicated, all amounts in this Item 6 are presented in thousands, except share and pershare data.
InVivo Therapeutics Holdings Corp.
Consolidated Balance Sheets
2014
2013
December 31,
2012
2011
2010
ASSETS :
Current assets:
Cash and cash equivalents
Restricted cash
Prepaid expenses and other
$
current assets
Total current assets
Property and equipment, net
Other assets
Total assets
LIABILITIES AND
$
STOCKHOLDERS' EQUITY
(DEFICIT):
Current liabilities:
Accounts payable
Loan payablecurrent portion
Note payablecurrent portion
Capital lease payablecurrent
$
portion
Derivative warrant liability
Accrued expenses
Total current liabilities
Loan payableless current
portion
Note payableless current portion
Capital lease payableless
current portion
Total liabilities
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $0.00001 par
value(1)
Additional paidin capital
Accumulated deficit
Total stockholders' equity
(deficit)
Total liabilities and
stockholders' equity
(deficit)
13,459 $ 13,980 $ 12,825 $
602
422
601
1,072
14,953
1,605
135
20
14,602
2,337
157
16,693 $ 17,096 $ 16,062 $
144
13,570
2,312
180
4,364 $
548
8,964
—
104
5,016
520
166
5,702 $
81
9,045
280
54
9,379
569 $
320
18
899 $
—
74
1,152 $
—
—
567 $
51
—
337
—
—
—
7,224
1,044
9,175
1,600
—
—
10,775
3
—
1,292
2,268
1,920
18
—
4,206
33
14,585
1,021
16,791
1,578
—
31
35,473
618
36,740
84
—
—
10,647
248
11,232
—
—
3
18,372
38
36,862
—
11,232
1
106,172
(100,255)
1
94,798
(81,909)
1
40,842
(43,153)
1
16,656
(47,817)
1
11,235
(13,089)
5,918
12,890
(2,310)
(31,160)
(1,853)
$
16,693 $ 17,096 $ 16,062 $
5,702 $
9,379
(1)
Authorized—200,000,000 shares; issued and outstanding—93,812,000, 78,773,736, and 65,881,122 at
December 31, 2014, 2013 and 2012, respectively. Authorized—100,000,000 shares; issued and
outstanding—53,760,471 and 51,647,171 shares at December 31, 2011 and 2010, respectively.
32
Table of Contents
Operating
expenses:
Research and
InVivo Therapeutics Holdings Corp.
Consolidated Statement of Operations
2014
2013
Years Ended December 31,
2012
2011
2010
development
$
10,273 $
10,533 $
6,376 $
4,103 $
1,673
7,566
8,472
6,403
4,556
1,724
17,839
(17,839)
19,005
(19,005)
12,779
(12,779)
8,659
(8,659)
3,397
(3,397)
5
(136)
15
(130)
35
(72)
—
(765)
—
9
(13)
—
3
(564)
—
(376)
(18,871)
17,480
(26,065)
(3,953)
General and
administrative
Total
operating
expenses
Operating loss
Other income
(expense):
Interest income
Interest expense
Modification of
warrants
Derivatives gain
(loss)
Other income
(expense),
net
Net income (loss)
Net income (loss)
(507)
(18,346) $
(19,751)
(38,756) $
17,443
4,664 $
(26,069)
(34,728) $
(4,514)
(7,911)
$
per share, basic $
(0.21) $
(0.52) $
0.07 $
(0.67) $
(0.24)
Net income (loss)
per share,
diluted
Weighted average
number of
common shares
outstanding,
basic
Weighted average
number of
common shares
outstanding,
diluted
$
(0.21) $
(0.52) $
0.06 $
(0.67) $
(0.24)
88,323,044
73,991,686
63,226,899
51,894,871
33,367,239
88,323,044
73,991,686
71,919,419
51,894,871
33,367,239
We have derived our statements of operations data for the years ended December 31, 2010 and 2011 and our balance
sheet data as of December 31, 2012, 2011 and 2010 from our audited financial statements which are not included in this
Annual Report. We have derived our statements of operations data for the years ended December 31, 2014, 2013 and 2012
and our balance sheet data as of December 31, 2014 and 2013 from our audited financial statements appearing elsewhere in
this Annual Report on Form 10K. Our audited financial information is prepared and presented in accordance with generally
accepted accounting principles in the U.S. (U.S. GAAP).
33
Table of Contents
Supplementary Quarterly Financial Data (Unaudited—In thousands)
$
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income (expense):
Interest income
Interest expense
Derivatives gain (loss)
Other income (expense), net
Net loss
$
Quarter Ended
December 31,
2014
September 30,
2014
June 30,
2014
March 31,
2014
1,595 $
2,249
3,844
(3,844)
1
(33)
(4,508)
(4,540)
(8,384) $
2,385 $
1,800
4,185
(4,185)
3,051 $
1,688
4,739
(4,739)
2
(35)
1
(35)
3,005
2,972
(1,213) $ (3,646) $
1,127
1,093
3,242
1,829
5,071
(5,071)
1
(33)
—
(32)
(5,103)
$
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income (expense):
Interest income
Interest expense
Modification of warrants
Derivatives loss
Other expense, net
Net loss
$
December 31,
2013
September 30,
2013
June 30,
2013
March 31,
2013
Quarter Ended
3,021 $
2,386
5,407
(5,407)
2,591 $
2,481
5,072
(5,072)
1,213
1,638
2,851
(2,851)
4
(34)
—
—
(30)
3
6
(29)
(33)
—
(765)
(10,449)
(8,422)
(10,475)
(9,214)
(5,437) $ (14,286) $ (13,326)
3,707 $
1,968
5,675
(5,675)
2
(34)
—
—
(32)
(5,707) $
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our consolidated financial statements and related notes
appearing elsewhere in this Annual Report on Form 10K. The following discussion contains forwardlooking statements
that involve risks and uncertainties that could cause actual results or events to differ materially from those expressed or
implied by such forwardlooking statements as a result of many important factors, including those set forth in Part I of this
Annual Report on Form 10K under the caption "Risk Factors." Please see "Special Note Regarding ForwardLooking
Statements" in Part I above. We do not undertake any obligation to update forwardlooking statements to reflect events or
circumstances occurring after the date of this Annual Report on Form 10K.
Introduction
This Management's Discussion and Analysis of our financial condition and results of operations are based on our
financial statements, which management has prepared in accordance with U.S. generally accepted accounting principles. The
preparation of these financial statements requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements,
as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate such estimates
and judgments, including those described in greater detail below. We base estimates on historical experience and on various
other factors that management believes are reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
Business Overview
We are a research and clinicalstage biomaterials and biotechnology company with a focus on treatment of spinal cord
injuries. Our proprietary technologies incorporate intellectual property licensed under an exclusive, worldwide license from
Boston Children's Hospital ("BCH") and the Massachusetts Institute of Technology ("MIT"), and intellectual property that
has been developed internally, including in collaboration with our advisors and partners. We intend to leverage our platform
technology to develop our novel NeuroSpinal Scaffold, an investigational bioresorbable polymer scaffold that is designed
for implantation at the site of injury within a spinal cord contusion and is intended to treat acute SCI. We believe our Neuro
Spinal Scaffold will be the foundation of effective therapy for both acute and chronic SCI, and we are continually evaluating
other technologies and therapeutics that may be complementary and that offer the potential to bring us closer to our goal of
redefining the life of the SCI patient.
Overall, we expect our R&D expenses to be substantial and to increase for the foreseeable future as we continue the
development and clinical investigation of our current and future products. However, expenditures on R&D programs are
subject to many uncertainties, including whether we develop our products with a partner or independently or acquire
products. At this time, due to the uncertainties and inherent risks involved in our business, we cannot estimate in a
meaningful way the duration of, or the costs to complete, our R&D programs or whether, when or to what extent we will
generate revenues or cash inflows from the commercialization and sale of any of our products. While we are currently focused
on advancing our NeuroSpinal Scaffold, our future R&D expenses will depend on the determinations we make as to the
scientific and clinical prospects of each product candidate, as well as our ongoing assessment of the regulatory requirements
and each product's commercial potential. In addition, we may make acquisitions of businesses, technologies or intellectual
property rights that we believe would be necessary, useful or complementary to our current business. Any investment made in
a potential acquisition could affect our results of operations and reduce our limited
35
Table of Contents
capital resources, and any issuance of equity securities in connection with a potential acquisition could be substantially
dilutive to our stockholders.
There can be no assurance that we will be able to successfully develop or acquire any product, or that we will be able to
recover our development or acquisition costs, whether upon commercialization of a developed product or otherwise. We
cannot provide assurance that any of our programs under development or any acquired technologies or products will result in
products that can be marketed or marketed profitably. If our developmentstage programs or any acquired products or
technologies do not result in commercially viable products, our results of operations could be materially adversely affected.
We were incorporated on April 2, 2003, under the name of Design Source, Inc. On October 26, 2010, we acquired the
business of InVivo Therapeutics Corporation, which was founded in 2005, and continued the existing business operations of
InVivo Therapeutics Corporation as our whollyowned subsidiary. As a result of the merger and related transactions, InVivo
Therapeutics Corporation was considered the accounting acquirer and therefore the historical financial results of InVivo
Therapeutics Corporation are considered the financial results of the Company on a historical and goingforward basis.
Critical Accounting Policies and Estimates
Our consolidated financial statements, which appear in Item 8 of this Annual Report on Form 10K, have been prepared
in accordance with accounting principles generally accepted in the United States, which require that the management make
certain assumptions and estimates and, in connection therewith, adopt certain accounting policies. Our significant
accounting policies are set forth in Note 2 in the Notes to Consolidated Financial Statements. Of those policies, we believe
that the policies discussed below may involve a higher degree of judgment and may be more critical to an accurate reflection
of our financial condition and results of operations.
ShareBased Compensation
Stock options are granted with an exercise price at fair market value at the date of the grant. The stock options generally
expire ten years from the date of grant. Stock option awards vest upon terms determined by our Board of Directors.
We recognize compensation costs resulting from the issuance of stockbased awards to employees, nonemployees and
directors as an expense in the statement of operations over the service period based on a measurement of fair value for each
stockbased award. The fair value of each option grant was estimated as of the date of grant using the BlackScholes option
pricing model. The fair value is amortized as compensation cost on a straightline basis over the requisite service period of
the awards, which is generally the vesting period. Due to our limited operating history and limited number of sales of our
Common Stock, we estimated our volatility in consideration of a number of factors including the volatility of our stock as
well as that of comparable public companies. We use historical data, as well as subsequent events occurring prior to the
issuance of the consolidated financial statements, to estimate option exercise and employee departure within the valuation
model. The expected term of options granted under our stock plans is based on the average of the contractual term (generally,
10 years) and the vesting period (generally, 48 months). The riskfree rate is based on the yield of a U.S. Treasury security
with a term consistent with the option. See Note 13, "Stock Options," in the Notes to Consolidated Financial Statements in
Item 8 of this Annual Report on Form 10K for more information about the assumptions underlying these estimates.
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Table of Contents
Derivative Instruments
Certain of our issued and outstanding warrants to purchase Common Stock contain antidilution provisions. These
warrants do not meet the requirements for classification as equity and are recorded as derivative warrant liabilities. We used
valuation methods and assumptions that consider among other factors the fair value of the underlying stock, riskfree interest
rate, volatility, expected life and dividend rates consistent with those discussed in Note 12, "Derivative Instruments" in the
Notes to Consolidated Financial Statements in Item 8 of this Annual Report on Form 10K in estimating the fair value for
these warrants. Such derivative warrant liabilities are initially recorded at fair value with subsequent changes in fair value
charged (credited) to operations in each reporting period. The fair value of the derivative warrant liability is most sensitive to
changes in the fair value of the underlying Common Stock and the estimated volatility of our Common Stock.
Research and Development and General and Administrative Expenses
Research and development expenses consist primarily of payroll and payments to contract research and development
companies and payroll. General and administrative expenses consist primarily of payroll, rent and professional services.
Recent Accounting Pronouncements
In June 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU")
201410, "Development Stage Entities", Topic 915. The objective of the ASU is to improve financial reporting by reducing
the cost and complexity associated with the incremental reporting requirements for development stage entities. The ASU
removes Topic 915, Development Stage Entities in its entirety from FASB Accounting Standards Codification ("ASC"). The
ASU removes all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the
inceptiontodate information and certain other disclosures. It also eliminates the guidance in ASC 810 on how to assess
whether a development stage entity has sufficient equity at risk in the evaluation of whether the development stage entity is a
variable interest entity. Additionally, the ASU clarifies that all entities, including entities that have not begun operations,
should provide the risk and uncertainty disclosures required in ASC 275. We have elected to early adopt as permitted by
ASU 201410 and, therefore, have omitted the incremental development stage reporting requirements.
Results of Operations
Comparison of the Years Ended December 31, 2014 and 2013 (in thousands, except share and per share amounts)
Research and Development Expenses
Research and development expenses, as reported, decreased by $260 to $10,273 for the year ended December 31, 2014
from $10,533 for the year ended December 31, 2013. After adjusting for the insurance settlements related to business
interruption, ($621 for 2014 and $1,100 for 2013), the research and development expenses were $10,894 and $11,633 for
2014 and 2013 respectively. The decrease in adjusted research and development expenses for 2014 of $739 is primarily
attributable to lower compensation and stock compensation expenses of $777 related to the reduction in force during the
second quarter of 2014, lower consulting costs of $190, reduction in lab supplies of $142, and other various expenses of $23
which were partly offset by increases in our clinical trial costs of $347.
General and Administrative Expenses
General and administrative expenses decreased by $906 to $7,566 for the year ended December 31, 2014 from $8,472 for
the year ended December 31, 2013. The decrease in general and administrative
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expenses for 2014 is primarily attributable to lower travel and entertainment expenses of $341, lower recruiting fees of $329,
lower facilities costs of $216, lower consulting expenses of $159 and lower donation expenses of $100 and a decrease in
other various expenses of $140. These cost reductions were partly offset by higher stock compensation expense of $252 and
higher insurance premiums of $127.
Interest Expense
Interest expense increased by $6 to $136 for the year ended December 31, 2014 from $130 for the year ended
December 31, 2013. The increase in interest expense is due to an increase in borrowing under the loans payable.
Derivatives Gain (Loss)
Derivative losses decreased by $18,495 to a loss of $376 for the year ended December 31, 2014 from a loss of $18,871
for the year ended December 31, 2013. The 2014 loss of $376 reflects the increase in the fair value of derivative warrant
liability which is due primarily to the increase in the fair value of the underlying Common Stock. The 2013 loss of $18,871
was related to the redemption of the investor warrants from offerings prior to 2013.
Loss from Modification of Warrants
The loss from modification of warrants was $765 for the year ended December 31, 2013. No such modification occurred
in the year ended December 31, 2014.
Comparison of the Years Ended December 31, 2013 and 2012 (in thousands, except share and per share amounts)
Research and Development Expenses
Research and development expenses increased by $4,157 to $10,533 for the year ended December 31, 2013 from $6,376
for the year ended December 31, 2012. The increase for 2013 is primarily attributable to increased research and development
activities, which resulted in increased compensation costs of $1,447 due to additional staffing and salary increases, an
increase in stock option expense of $1,693, an increase in rent and facility costs of $605, and higher preclinical testing costs
of $880 and other various expenses of $632. The 2013 research and development expenses were favorably impacted by
insurance payments related to business interruption claims of $1,100.
General and Administrative Expenses
General and administrative expenses increased by $2,069 to $8,472 for the year ended December 31, 2013 from $6,403
for the year ended December 31, 2012. The increase in expenses for 2013 is primarily attributable to higher legal costs of
$1,179, an increase in compensation costs related to staffing and salary increases of $391, an increase in stock compensation
costs of $210 and an increase in rent and facilities costs of $344. Such expenses were partly offset by a reduction in other
spending in the amount of $55.
Interest Expense
Interest expense increased by $58 to $130 for the year ended December 31, 2013 from $72 for the year ended
December 31, 2012. The increase in interest expense for 2013 is due to an increase in borrowing under the loans payable.
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Derivatives Gain (Loss)
Derivatives loss increased by $36,351 to a loss of $18,871 for the year ended December 31, 2013 from a gain of $17,480
for the year ended December 31, 2012. The increase in this noncash loss during the year ended December 31, 2013 reflected
the increase in the fair value of derivative warrant liability, prior to reclassification to additional paidin capital, due
primarily to the increase in the fair value of the underlying Common Stock.
Loss from Modification of Warrants
The loss from modification of warrants was $765 for the year ended December 31, 2013, and is attributable to an increase
in the fair value of warrants that resulted from the modification of the terms of warrants in May 2013.
Liquidity and Capital Resources
Since inception, we have devoted substantially all of our efforts to business planning, research and development,
recruiting management and technical staff, acquiring operating assets and raising capital. At December 31, 2014, our
accumulated deficit was $100,255.
At December 31, 2014, we had total assets of $16,693 and total liabilities of $10,775, resulting in stockholders' equity of
$5,918, and had a net loss of $18,346. We have not achieved profitability and may not be able to realize sufficient revenue to
achieve or sustain profitability in the future. We do not expect to be profitable in the next several years, but rather expect to
incur additional operating losses. We have limited liquidity and capital resources and must obtain significant additional
capital resources in order to sustain our product development efforts, for acquisition of technologies and intellectual property
rights, for preclinical and clinical testing of our anticipated products, pursuit of regulatory approvals, acquisition of capital
equipment, laboratory and office facilities, establishment of production capabilities, for selling, general and administrative
expenses and other working capital requirements. We also expect that we will need additional capital to fund our operations,
which we may raise through a combination of equity offerings, debt financings, other third party funding, marketing and
distribution arrangements and other collaborations, strategic alliances and licensing arrangements
Since our inception, we have historically financed our operations primarily through the sale of equityrelated securities.
At December 31, 2014, our consolidated cash balance was $13,459. In January 2015, we closed a registered direct offering of
an aggregate of 8 million shares of our common stock, resulting in net proceeds of approximately $11 million. We believe
our current cash and cash equivalents are adequate to fund our operations into the fourth quarter of 2016.
Net cash used in operating activities for the year ended December 31, 2014 was $15,284, and the most significant drivers
of which were our net loss of $18,346 and offsetting noncash stock share based compensation of $2,730.
Net cash used in investing activities for the year ended December 31, 2014 totaled $2 for purchases and disposals of
capital equipment.
Net cash provided by financing activities for the year ended December 31, 2014 was $14,765, due mainly to proceeds
from the issuance of common stock and warrants of $14,618.
The source, timing and availability of any future financing will depend principally upon market conditions, interest rates
and, more specifically, on our progress in our exploratory, preclinical and future clinical development programs. Funding
may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us, among other
things, to delay, scale back or eliminate some or all of our research and product development programs, planned clinical
trials, and our capital expenditures or to license our potential products or technologies to third parties.
39
Table of Contents
We intend to pursue opportunities to obtain additional financing in the future through equity and/or debt financings. We
have filed with the SEC, and the SEC declared effective, a universal shelf registration statement which permits us to issue up
to $100 million worth of registered equity securities. Under this effective shelf registration, we have the flexibility to issue
registered securities, from time to time, in one or more separate offerings or other transactions with the size, price and terms to
be determined at the time of issuance. Registered securities issued using this shelf may be used to raise additional capital to
fund our working capital and other corporate needs, for future acquisitions of assets, programs or businesses, and for other
corporate purposes.
Off Balance Sheet Arrangements
We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future material
effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources.
Contractual Obligations
The following summarizes our significant contractual obligations at December 31, 2014, and the effects such obligations
are expected to have on our liquidity and cash flows in future periods:
Contractual Obligations
Longterm debt
Operating lease payments
Total
Commitments
Total
$ 1,920 $
4,856
$ 6,776 $
Less than
1 year
Payments Due
1 3 years
3 5 years
More than
5 years
320 $
1,243
1,563 $
1,280 $
3,613
4,893 $
320 $
—
320 $
—
—
—
See Note 17, "Commitments and Contingencies," in the Notes to Consolidated Financial Statements in Item 8 of this
Annual Report on Form 10K for information.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk related to changes in interest rates. We do not use derivative financial instruments for
speculative or trading purposes. Our interestearning assets consist of cash and cash equivalents of $13,459, or 81% of our
total assets at December 31, 2014, and $13,980, or 82% of our total assets at December 31, 2013. Interest income earned on
these assets was $5 in 2014 and $15 in 2013. Our interest income is sensitive to changes in the general level of interest rates,
primarily U.S. interest rates. At December 31, 2014, our cash equivalents were primarily composed of money market accounts
comprised of U.S. Treasury debt securities and repurchase agreements.
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Table of Contents
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
41
Page
42
43
44
45
46
47
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of InVivo Therapeutics Holdings Corp.:
We have audited the accompanying consolidated balance sheets of InVivo Therapeutics Holdings Corp. as of
December 31, 2014 and 2013, and the related consolidated statements of operations, changes stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December 31, 2014. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of InVivo Therapeutics Holdings Corp. as of December 31, 2014 and 2013, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally
accepted accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), InVivo Therapeutics Holdings Corp.'s internal control over financial reporting as of December 31, 2014, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (1992 Framework), and our report dated March 11, 2015 expressed an unqualified opinion on the
effectiveness of InVivo Therapeutics Holdings Corp.'s internal control over financial reporting.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
March 11, 2015
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InVivo Therapeutics Holdings Corp.
Consolidated Balance Sheets
(In thousands, except share and pershare data)
ASSETS:
Current assets:
Cash and cash equivalents
Restricted cash
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable
Loan payablecurrent portion
Note payablecurrent portion
Capital lease payable
Derivative warrant liability
Accrued expenses
Total current liabilities
Loan payableless current portion
Note payableless current portion
Total liabilities
Commitments and contingencies
Stockholders' equity:
$
$
$
December 31,
2014
2013
422
1,072
14,953
1,605
135
13,459 $ 13,980
602
20
14,602
2,337
157
16,693 $ 17,096
569 $
320
18
—
7,224
1,044
9,175
1,600
—
10,775
899
—
74
3
—
1,292
2,268
1,920
18
4,206
Common stock, $0.00001 par value, authorized—200,000,000
shares; issued and outstanding—93,812,000 and 78,773,736
shares at December 31, 2014 and 2013, respectively
Additional paidin capital
Accumulated deficit
Total stockholders' equity
Total liabilities and stockholders' equity
1
106,172
(100,255)
5,918
1
94,798
(81,909)
12,890
16,693 $ 17,096
$
See notes to the consolidated financial statements.
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Table of Contents
InVivo Therapeutics Holdings Corp.
Consolidated Statements of Operations
(In thousands, except share and pershare data)
Operating expenses:
Research and development
General and administrative
Total operating expenses
Operating loss
Other income (expense):
Interest income
Interest expense
Modification of warrants
Derivative gain (loss)
Other income (expense), net
Net income (loss)
Net income (loss) per share, basic
Net income (loss) per share, diluted
Weighted average number of common shares
2014
Years Ended December 31,
2013
2012
$
$
$
$
10,273 $
7,566
17,839
(17,839)
5
(136)
—
(376)
(507)
(18,346) $
(0.21) $
(0.21) $
10,533 $
8,472
19,005
(19,005)
15
(130)
(765)
(18,871)
(19,751)
(38,756) $
(0.52) $
(0.52) $
6,376
6,403
12,779
(12,779)
35
(72)
—
17,480
17,443
4,664
0.07
0.06
outstanding, basic
88,323,044
73,991,686
63,226,899
Weighted average number of common shares
outstanding, diluted
88,323,044
73,991,686
71,919,419
See notes to the consolidated financial statements.
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InVivo Therapeutics Holdings Corp.
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Common Stock
Shares
Amount
Additional
Paidin
Capital
Accumulated
Deficit
Total
Stockholders'
Equity (Deficit)
Balance as of December 31,
2011
53,760,471
1
16,657
(47,817)
(31,159)
Sharebased compensation
expense
Issuance of common stock
—
in public offering
9,523,810
Issuance of common stock
for services
Issuance of common stock
15,000
upon exercise of warrants
1,779,716
Issuance of common stock
upon exercise of stock
options
Issuance of common stock
to 401(k) plan
Fair value of warrants issued
for services
Fair value of derivative
warrant liability
reclassified to additional
paidin capital
Net income
Balance as of December 31,
755,020
47,105
—
—
—
—
—
—
—
—
—
—
—
—
1,233
18,155
25
1,129
111
91
32
—
—
—
—
—
—
—
1,233
18,155
25
1,129
111
91
32
3,409
—
—
4,664
3,409
4,664
2012
65,881,122
1
40,842
(43,153)
(2,310)
Sharebased compensation
expense
Issuance of common stock
—
upon exercise of warrants
12,224,846
Issuance of common stock
upon exercise of stock
options
Issuance of common stock
to 401(k) plan
Fair value of derivative
warrant liability
reclassified to additional
paidin capital
Incremental fair value from
warrant modification
Net loss
Balance as of December 31,
588,884
78,884
—
—
—
—
—
—
—
—
—
—
3,136
15,952
455
192
33,456
765
—
—
—
—
—
—
—
(38,756)
3,136
15,952
455
192
33,456
765
(38,756)
2013
78,773,736
1
94,798
(81,909)
12,890
Sharebased compensation
expense
Issuance of common stock
—
in public offering
14,001,250
Issuance of common stock
—
—
2,730
7,770
—
—
2,730
7,770
for services
Issuance of common stock
298,505
upon exercise of warrants
39,900
Issuance of common stock
upon exercise of stock
options
Issuance of common stock
to 401(k) plan
Net loss
Balance as of December 31,
531,598
167,011
—
—
—
—
—
—
477
12
212
173
—
—
—
—
—
(18,346)
477
12
212
173
(18,346)
2014
93,812,000
1
106,172
(100,255)
5,918
See notes to the consolidated financial statements.
45
Table of Contents
InVivo Therapeutics Holdings Corp.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used
$ (18,346) $ (38,756) $
4,664
Years Ended December 31,
2013
2014
2012
in operating activities:
Depreciation and amortization expense
Noncash derivative (gain) losses
Noncash interest expense
Noncash loss from modification of warrants
Common stock issued to 401(k) plan
Common stock issued for services
Sharebased compensation expense
Changes in operating assets and liabilities:
Restricted cash
Prepaid expenses
Insurance receivable
Other assets
Accounts payable
Accrued expenses
Net cash used in operating activities
Cash flows from investing activities:
Noncash disposals of property and equipment
Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from exercise of stock options
Proceeds from exercise of warrants, net
Proceeds from issuance of note payable
Repayment of note payable
Principal payments on capital lease obligation
Proceeds from loans payable
Repayment of loans payable
Proceeds from issuance of common stock and warrants
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information and
noncash investing and financing activities:
Cash paid for interest
Fair value of warrants issued in connection with
752
376
—
—
173
477
2,730
740
18,871
—
765
192
—
3,136
180
(363)
(689)
4
(330)
(248)
(15,284)
—
124
—
5
(254)
271
(14,906)
367
(17,480)
22
—
92
25
1,233
(54)
(61)
—
—
585
403
(10,204)
45
(47)
(2)
—
(749)
(749)
—
(2,141)
(2,141)
212
12
—
(56)
(21)
—
—
14,618
14,765
111
456
1,129
15,952
—
150
—
(57)
(33)
(33)
1,747
342
(303)
—
18,155
—
20,806
16,810
8,461
1,155
4,364
12,825
$ 13,459 $ 13,980 $ 12,825
13,980
(521)
$
132 $
125 $
50
—
32
underwriting agreement
$
6,848 $
— $
Fair value of warrants issued in connection with loan
agreement
Reclassification of derivative warrant liability to
additional paidin capital
$
$
— $
— $
— $ 33,456 $
3,409
See notes to the consolidated financial statements.
46
Table of Contents
1. NATURE OF OPERATIONS
Business
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements
(In thousands, except share and pershare data)
InVivo Therapeutics Corporation ("InVivo") is a pioneering biomaterials and biotechnology company with a focus on
the treatment of spinal cord injuries. Its proprietary technologies incorporate intellectual property that is licensed under an
exclusive, worldwide license from Boston Children's Hospital and the Massachusetts Institute of Technology, as well as
intellectual property that has been developed internally in collaboration with its advisors and partners.
Since its inception, InVivo has devoted substantially all of its efforts to business planning, research and development,
recruiting management and technical staff, acquiring operating assets and raising capital.
2. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies followed by the Company in the preparation of the financial
statements is as follows:
Use of estimates
The process of preparing financial statements in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of assets and liabilities at the date of financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates and changes in estimates may occur.
Basis of presentation and principles of consolidation
The consolidated financial statements include the accounts of InVivo Therapeutics Holdings Corp. and its wholly
owned subsidiary, InVivo Therapeutics Corporation. All significant intercompany balances and transactions have been
eliminated in consolidation.
Cash and cash equivalents
The Company considers only those investments that are highly liquid, readily convertible to cash, and that mature
within three months from date of purchase to be cash equivalents. Marketable investments are those with original maturities
in excess of three months.
At December 31, 2014 and 2013, cash equivalents were comprised of money market funds. The Company had no
marketable investments at December 31, 2014 and 2013.
Cash and cash equivalents consist of the following:
December 31,
2014
2013
Cash on deposit
Money market fund
Total cash and cash equivalents
47
$
269 $
219
13,761
$ 13,459 $ 13,980
13,190
Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Restricted cash
At December 31, 2014 and 2013, the restricted cash of $422 and $602, respectively, represents a $111 and $291,
respectively, security deposit related to the Company's credit card account, and, for each year, a $311 standby letter of credit
in favor of a landlord (see Note 17).
Financial instruments
The carrying amounts reported in the Company's consolidated balance sheet for cash and cash equivalents and accounts
payable approximate fair value based on the shortterm nature of these instruments. The carrying value of note and loans
payable approximates their fair value due to the market terms.
Property and equipment
Property and equipment are carried at cost. Depreciation and amortization expense is provided over the estimated useful
lives of the assets using the straightline method. A summary of the estimated useful lives is as follows:
Classification
Computer hardware
Software
Office furniture and equipment
Research and lab equipment
Leasehold improvements
Estimated Useful Life
5 years
3 years
5 years
5 years
Remaining life of lease
Depreciation and amortization expense for the years ended December 31, 2014, 2013, and 2012 was $752, $740 and
$367, respectively. Maintenance and repairs are charged to expense as incurred, while any additions or improvements are
capitalized. During 2014, the Company had disposals of $47.
Research and development expenses
Costs incurred for research and development are expensed as incurred.
Concentrations of credit risk
The Company may from time to time have cash in banks in excess of FDIC insurance limits.
Segment information
Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision maker, or decision making group, in making decisions regarding
resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as
principally one operating segment, which is developing and commercializing biopolymer scaffolding devices for the
treatment of spinal cord injuries. As of December 31, 2014 and 2013, all of the Company's assets were located in the United
States.
48
Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income taxes
For federal and state income taxes, deferred tax assets and liabilities are recognized based upon temporary differences
between the financial statement and the tax basis of assets and liabilities. Deferred income taxes are based upon prescribed
rates and enacted laws applicable to periods in which differences are expected to reverse. A valuation allowance is recorded
when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, the
Company provides a valuation allowance, if necessary, to reduce deferred tax assets to amounts that are realizable. Tax
positions taken or expected to be taken in the course of preparing the Company's tax returns are required to be evaluated to
determine whether the tax positions are "morelikelythannot" of being sustained by the applicable tax authority.
Tax positions not deemed to meet a morelikelythannot threshold would be recorded as a tax expense in the current
year. There were no uncertain tax positions that require accrual or disclosure to the financial statements as of December 31,
2014 or 2013. Tax years subsequent to 2010 remain open to examination by U.S. federal and state tax authorities.
Impairment of longlived assets
The Company continually monitors events and changes in circumstances that could indicate that carrying amounts of
longlived assets may not be recoverable. An impairment loss is recognized when expected cash flows are less than an asset's
carrying value. Accordingly, when indicators of impairment are present, the Company evaluates the carrying value of such
assets in relation to the operating performance and future undiscounted cash flows of the underlying assets. The Company's
policy is to record an impairment loss when it is determined that the carrying value of the asset may not be recoverable. No
impairment charges were recorded for the years ended December 31, 2014, 2013 and 2012.
Sharebased payments
The Company recognizes compensation costs resulting from the issuance of stockbased awards to employees, non
employees and directors as an expense in the Company's statement of operations over the service period based on a
measurement of fair value for each stockbased award. The fair value of each option grant is estimated as of the date of grant
using the BlackScholes optionpricing model. The fair value is amortized as compensation cost on a straightline basis over
the requisite service period of the awards, which is generally the vesting period.
Derivative instruments
The Company generally does not use derivative instruments to hedge exposures to cashflow or market risks; however,
certain warrants to purchase Common Stock that do not meet the requirements for classification as equity are classified as
liabilities. In such instances, netcash settlement is assumed for financial reporting purposes, even when the terms of the
underlying contracts do not provide for a netcash settlement. Such financial instruments are initially recorded at fair value
with subsequent changes in fair value charged (credited) to operations in each reporting period. If these instruments
49
Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity.
Net income (loss) per common share
Basic net income (loss) per share of Common Stock has been computed by dividing net income (loss) by the weighted
average number of shares outstanding during the period. Diluted net income per share of Common Stock has been computed
by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding
stock options, warrants and convertible securities. Diluted net loss per share of Common Stock has been computed by
dividing the net loss for the period by the weighted average number of shares of Common Stock outstanding during such
period. In a net loss period, options, warrants and convertible securities are antidilutive and therefore excluded from diluted
loss per share calculations.
Recent accounting pronouncements
In June 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU")
201410, "Development Stage Entities", Topic 915. The objective of the ASU is to improve financial reporting by reducing
the cost and complexity associated with the incremental reporting requirements for development stage entities. The ASU
removes Topic 915, Development Stage Entities in its entirety from FASB Accounting Standards Codification ("ASC"). The
ASU removes all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the
inceptiontodate information and certain other disclosures. It also eliminates the guidance in ASC 810 on how to assess
whether a development stage entity has sufficient equity at risk in the evaluation of whether the development stage entity is a
variable interest entity. Additionally, the ASU clarifies that all entities, including entities that have not begun operations,
should provide the risk and uncertainty disclosures required in ASC 275. The Company has elected to early adopt as
permitted by ASU 201410 and, therefore, has omitted inceptiontodate information and certain other disclosures.
3. PROPERTY AND EQUIPMENT
Property and equipment, net consisted of the following:
Computer software and hardware
Research and lab equipment
Leasehold improvements
Office Equipment
Less accumulated depreciation and amortization
Property and equipment, net
50
2014
$
562 $
1,873
390
790
(2,010)
1,605 $
$
2013
560
1,881
381
791
(1,276)
2,337
Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
4. INTANGIBLE ASSETS
Intangible assets, included in "other assets," consisted of patent licensing fees paid to license intellectual property (see
Note 16). The Company is amortizing the license fee as a research and development expense over the 15year term of the
license.
Patent licensing fee
Accumulated amortization
2014
2013
$ 200 $ 200
(86)
(69)
$ 114 $ 131
For each of the years ended December 31, 2014, 2013, and 2012, the amortization expense was $18. Amortization
expense in each of the next five years is also expected to be $18 per year.
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
Accrued bonus
Accrued payroll
Deferred rent payable
Accrued vacation
Accrued legal
Other accrued expenses
6. NOTE PAYABLE
December 31,
2014
2013
$
— $
49
505
72
360
58
566
101
553
23
—
49
$ 1,044 $ 1,292
In May 2013, the Company entered into a contract for the purchase of an enterprise resource planning ("ERP") system for
$150. The total cost for the ERP system, including interest, is $159, with an implicit interest rate of approximately 6%.
Pursuant to the terms of this noncancelable purchase agreement in effect at December 31, 2014, the future minimum
principal payments are as follows:
Year Ended December 31,
2015
Total
18
$ 18
In the third quarter of 2013, the Company decided to abandon the implementation of the ERP system. As such, the ERP
system cost of $150 was fully expensed in 2013. The Company reserves the right to implement the ERP system at a future
date.
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Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
7. FAIR VALUES OF ASSETS AND LIABILITIES
The Company groups its assets and liabilities generally measured at fair value in three levels, based on the markets in
which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1—Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and
liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained
from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2—Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by
observable market data for substantially the full term of the assets or liabilities.
Level 3—Valuation is based on unobservable inputs that are supported by little or no market activity and that are
significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value
is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for
which the determination of fair value requires significant management judgment or estimation.
The Company uses valuation methods and assumptions that consider among other factors the fair value of the
underlying stock, riskfree interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants
considered to be derivative instruments.
Assets and liabilities measured at fair value on a recurring basis are summarized below:
Liabilities:
Derivative warrant liability
$ — $ 7,224 $ — $
7,224
At December 31, 2014
Level 1
Level 2
Level 3
Fair Value
There were no assets or liabilities measured at fair value on a recurring basis at December 31, 2013, and there were no
assets or liabilities measured at fair value on a nonrecurring basis at December 31, 2014 and 2013.
8. CAPITAL LEASE PAYABLE
In February 2011, the Company entered into a capital lease agreement under which the Company leased certain
laboratory equipment. Capital lease obligation consisted of the following:
Capital lease payable
Less: current portion
52
December 31,
2014
$ —
—
$ —
2013
$
3
(3)
$ —
Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
8. CAPITAL LEASE PAYABLE (Continued)
The total value of the laboratory equipment acquired under this capital lease agreement was $124 including a down
payment of $31. The capital lease is payable in monthly installments of $3 payable over thirtysix months and the final
payment was made in January 2014. For the years ended December 31, 2014 and 2013, interest expense recorded on the
capital lease was $0 and $1, respectively. For each of the years ended December 31, 2014, 2013 and 2012, depreciation
expense on the assets under capital lease was $25. The net book value at December 31, 2014 and 2013 amounted to $27 and
$52, respectively.
9. LOAN PAYABLE
In October 2012, the Company entered into a loan agreement with the Massachusetts Development Finance Agency
("MassDev"). The loan agreement provided the Company with a $2,000 line of credit from the Commonwealth of
Massachusetts's Emerging Technology fund, with $200 to be used for working capital purposes and the remainder to be used
for the purchase of capital equipment. The annual interest rate is fixed at 6.5% with interestonly payments for the first thirty
months, commencing on November 1, 2012, and then equal interest and principal payments over the next fiftyfour months,
with the final maturity of the loan on October 5, 2019. Based on the $1,920 balance outstanding as of December 31, 2014,
equal monthly principal payments of $36 will be due commencing on May 1, 2015. Therefore, for the years ending
December 31, 2015, 2016, 2017, 2018, and 2019, principal payments of $320, $427, $426, $427, and $320, respectively, will
be due. In September 2012, the Company was assessed commitment fees totaling $15, which was charged to the Company as
interest expense. In October 2012, as part of the commitment fee, the Company issued MassDev a warrant for the purchase of
36,145 shares of its Common Stock. The warrant has a sevenyear term and is exercisable at $1.66 per share. The fair value of
the warrant was determined to be $32 and was recorded as a deferred financing cost, and is being amortized to interest
expense over a sevenyear period commencing in October 2012. Amortization of the deferred financing cost for the years
ended December 31, 2014 and 2013 was $5, and was included in interest expense in the Company's consolidated statements
of operations. The equipment line of credit is secured by substantially all the assets of the Company, excluding intellectual
property. During 2013, the Company drew on the line and received proceeds of $342, for capital equipment. Interest expense
related to this loan was $127 for the year ended December 31, 2014 and $120 for the year ended December 31, 2013.
In June 2011, the Company entered into a loan agreement with a bank for a $1,000 line of credit used for the purchase of
certain capital equipment. The annual interest rate was the greater of 6.75% or 3.50% above the prime rate as set forth in the
agreement. Borrowings were repayable in equal monthly installments over a thirtysix month period. The Company was
assessed commitment fees totaling $10 and issued the bank a warrant for the purchase of 16,071 shares of Common Stock.
The warrant has a sevenyear term and is exercisable at $1.40 per share. The fair value of the warrant was determined to be
$10, and was recorded as a deferred financing cost that was being amortized to interest expense over the life of the loan.
Under the terms of the MassDev loan disclosed above, in October 2012, the Company repaid the outstanding balance of $134
due to the bank and wrote off the remaining deferred financing costs. Amortization of deferred financing costs on this loan for
the year ended December 31, 2012 was $6, and was included in interest expense. Interest expense related to the loan payable
to the bank was $16 for the year ended December 31, 2012.
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Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
9. LOAN PAYABLE (Continued)
At December 31, loans payable consisted of the following:
Equipment Loan
Less: current portion
10. INCOME TAXES
December 31,
2014
2013
$ 1,920 $ 1,920
—
$ 1,600 $ 1,920
320
No provision or benefit for federal or state income taxes has been recorded, as the Company has incurred a net loss for all
of the periods presented, and the Company has provided a full valuation allowance against its deferred tax assets.
At December 31, 2014, the Company had U.S. federal and Massachusetts net operating loss carryforwards of $58,293 and
$50,568, respectively, of which federal carryforwards will expire in varying amounts beginning in 2026. Massachusetts net
operating losses began to expire in 2011. Utilization of net operating losses may be subject to substantial annual limitations
due to the "change in ownership" provisions of the Internal Revenue Code, and similar state provisions. The annual
limitations may result in the expiration of net operating losses before utilization. The Company also had research and
development tax credit carryforwards at December 31, 2014 of $867 which will begin to expire in 2021 unless previously
utilized.
Significant components of the Company's net deferred tax asset are as follows:
December 31,
2014
2013
Net operating loss carryforward
Research and development credit carryforward
Stockbased compensation
Depreciation and amortization
Accrued expenses
Charitable contributions
Subtotal
Valuation allowance
Net deferred taxes
$ 22,490 $ 16,032
625
2,411
(149)
449
112
19,480
(19,480)
—
801
2,265
(124)
226
112
25,770
(25,770)
— $
$
The Company has maintained a full valuation allowance against its deferred tax assets in all periods presented. A
valuation allowance is required to be recorded when it is more likely than not that some portion or all of the net deferred tax
assets will not be realized. Since the Company cannot be assured of generating taxable income and thereby realizing the net
deferred tax assets, a full valuation allowance has been provided. In the years ended December 31, 2014 and 2013, the
valuation allowance increased by $6,290 and $7,738, respectively.
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Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
10. INCOME TAXES (Continued)
The Company has no uncertain tax positions at December 31, 2014 and 2013 that would affect its effective tax rate. The
Company does not anticipate a significant change in the amount of uncertain tax positions over the next twelve months.
Since the Company is in a loss carryforward position, the Company is generally subject to U.S. federal and state income tax
examinations by tax authorities for all years for which a loss carryforward is available.
Income tax benefits computed using the federal statutory income tax rate differs from the Company's effective tax rate
primarily due to the following:
Statutory rate
State taxes, net of benefit
Permanent differences:
Derivative losses
Other
R&D tax credit
True up, past year
Increase in valuation reserve
Effective tax rate
2014
December 31,
2013
2012
(34.0)% (34.0)%
(2.6)%
(4.8)%
34.0%
(14.2)%
0.7% 17.1% (127.4)%
(1.9)%
0.0%
2.6%
7.0%
(0.4)%
(1.0)%
0.0%
0.0%
2.2%
34.3% 19.9% 102.5%
0.0%
0.0%
0.0%
11. COMMON STOCK
The Company has authorized 200,000,000 shares of Common Stock, $0.00001 par value per share, of which 93,812,000,
shares were issued and outstanding as of December 31, 2014 and 78,773,736 shares were issued and outstanding as of
December 31, 2013.
During the year ended December 31, 2014, the Company issued an aggregate of 531,598 shares of Common Stock upon
the exercise of stock options and received cash proceeds of $212.
During the year ended December 31, 2014, the Company issued an aggregate of 39,900 shares of Common Stock upon
the exercise of warrants, including warrants to purchase 62,620 shares of Common Stock exercised through cashless exercise
provisions resulting in the issuance of 27,610 shares of common stock and warrants to purchase 12,290 shares of Common
Stock exercised for cash, providing cash proceeds of $12.
During the year ended December 31, 2014, the Company issued an aggregate of 167,011 shares of Common Stock with a
fair value of $173 to the Company's 401(k) plan as a matching contribution.
In January 2014, the Company issued 108,848 and 22,374 shares of Common Stock to Michael J. Astrue, the Company's
thenInterim Chief Executive Officer, and Gregory D. Perry, the Company's thenInterim Chief Financial Officer, respectively,
in lieu of executive cash bonuses. Such shares had an aggregate fair value of approximately $282.
In December 2014, the Company issued 167,283 shares of Common Stock to certain employees of the Company in lieu
of cash bonuses. Such shares had an aggregate fair value of approximately $195.
55
Table of Contents
InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
11. COMMON STOCK (Continued)
During the year ended December 31, 2014, the Company closed an underwritten public offering of an aggregate of
14,001,250 shares of common stock and warrants to purchase up to an aggregate of 7,000,625 shares of common stock, at a
price to the public of $1.15 per share of common stock and $0.00001 per warrant. The net proceeds to the Company, after
deducting underwriting discounts and offering expenses, were approximately $14,600. The warrants have a per share price of
$1.4375, or 125% of the public offering of the common stock, and expire on May 9, 2019.
During the year ended December 31, 2013, the Company issued an aggregate of 588,884 shares of Common Stock upon
the exercise of stock options and received cash proceeds of $456.
During the year ended December 31, 2013, the Company issued an aggregate of 12,224,846 shares of Common Stock
upon the exercise of warrants, including warrants to purchase 627,036 shares of Common Stock exercised through cashless
exercise provisions and warrants to purchase 11,813,334 shares of Common Stock exercised for cash, providing cash
proceeds of $15,952.
During the year ended December 31, 2012, the Company issued 15,000 unregistered shares of Common Stock with a fair
value of $25 to an investor relations firm in exchange for services provided.
During the year ended December 31, 2012, the Company issued an aggregate of 755,020 shares of Common Stock upon
the exercise of stock options and received cash proceeds of $111.
During the year ended December 31, 2012, the Company issued an aggregate of 1,779,716 shares of Common Stock
upon the exercise of warrants, including warrants to purchase 1,865,670 shares of Common Stock exercised through cashless
exercise provisions and warrants to purchase 852,946 shares of Common Stock exercised for cash, providing cash proceeds of
$1,129.
During the year ended December 31, 2012, the Company completed a public offering of Common Stock and issued
9,523,810 shares of its Common Stock at a purchase price of $2.10 per share. The offering raised gross proceeds of
approximately $20,000, and the Company received net proceeds of $18,155, after deducting underwriter discounts and
offering expenses.
Common Stock Reserves
As of December 31, 2014, the Company had the following reserves established for the future issuance of Common Stock
as follows:
Reserves for the exercise of warrants
Reserves for the exercise of stock options
Total Reserves
10,208,849
12,361,445
22,570,294
12. DERIVATIVE INSTRUMENTS
Certain warrants issued to investors and the placement agent warrants in the fourth quarter of 2010 had provisions that
included antidilution protection and, under certain conditions, granted the right to the holder to require the Company to
repurchase the warrant. Accordingly through March 2013, these warrants were accounted for as derivative liabilities. In the
quarter ended March 31, 2013, $476 was reclassified from Derivative warrant liability to Additional paidin capital related to
warrants
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
12. DERIVATIVE INSTRUMENTS (Continued)
exercised. In May 2013 outstanding investor warrants totaling 11,726,343 warrants, were exercised and the fair value of
$25,241was reclassified from Derivative warrant liability to Additional paidin capital.
On May 17, 2013, the Company completed its offer to exchange certain of its outstanding warrants to purchase shares of
the Company's common stock (the "Eligible Warrants") for new warrants (the "New Warrants") with the same terms except
(i) the expiration date of the New Warrants was extended two years and (ii) weighted average antidilution provisions were
removed from the New Warrants (the "Offer"). The Eligible Warrants consisted of (i) warrants to purchase common stock dated
October 26, 2010, issued in connection with the closing of a merger (the "Merger Warrants") and (ii) warrants to purchase
common stock issued to the placement agent as compensation for services in connection with each closing of a private
placement which occurred on October 26, 2010, November 10, 2010 and December 3, 2010 (the "Placement Agent
Warrants"). In connection with the Offer, Merger Warrants to purchase 255,000 shares of the Company's common stock and
Placement Agent Warrants to purchase 3,064,091 shares of the Company's common stock were tendered and accepted for
exchange for New Warrants to purchase an aggregate of 3,319,091 shares of the Company's common stock. Due to the
modification of the terms, the Eligible Warrants were revalued prior to modification and immediately after modification as of
May 17, 2013. This resulted in a noncash charge of $765 which was recorded in Other expense as Loss from modification of
warrants. Since the New Warrants are not accounted for as derivative liabilities, the fair value of these warrants after
modification of $7,738 was reclassified from Derivative warrant liability to Additional paidin capital.
The warrants issued in connection with the May 2014 public offering to purchase 7,000,625 shares of the Common
Stock (see Note 11) have antidilution protection provisions and, under certain conditions, grant the right to the holder to
require the Company to reprice the warrant. Accordingly these warrants are accounted for as derivative liabilities. The
Company used the BlackScholes option pricing model and assumptions that consider, among other factors, the fair value of
the underlying stock, riskfree interest rate, volatility, expected life and dividend rates in estimating fair value for the
warrants considered to be derivative instruments. Changes in fair value of the derivative financial instruments are recognized
in the Company's consolidated statement of operations as a derivative gain or loss. The warrant derivative gains (losses) are
noncash income (expenses); and for the 12 months ended December 31, 2014, 2013 and 2012, a gain (loss) of $(376) and
$(18,871) and $17,480, respectively, were included in other income (expense) in the Company's consolidated statement of
operations.
The Company uses the BlackScholes option pricing model and assumptions that consider among other factors the fair
value of the underlying stock, risk free interest rate, volatility, expected life and dividend rates in estimating fair value for
the warrants considered to be derivative instruments. The fair value of these derivative instruments at December 31, 2014 and
2013 was $7,224 and $0, respectively, and was included as a derivative warrant liability, a current liability. Changes in fair
value of the derivative financial instruments are recognized currently in the statement of operations as a derivative gain or
loss.
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
12. DERIVATIVE INSTRUMENTS (Continued)
The assumptions used principally in determining the fair value of warrants were as follows:
Year Ended December 31,
Risk free interest rate
Expected dividend yield
Contractual term
Expected volatility
2014
1.47%
0%
4.4 years
119%
2012
0.32 0.35%
0%
2013
N/A
N/A
N/A 2.7 2.9 years
N/A
73%
The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying Common
Stock for each reporting period.
The table below presents the changes in derivative warrant liability during the years ended December 31, 2014, 2013,
and 2012:
Year Ended December 31,
2014
2013
2012
Balance at beginning of year
Issuance of warrants
Increase (decrease) in the fair value of the
warrants
Fair value of derivative warrant liability
reclassified to additional paid in capital
Balance at end of year
$
— $ 14,585 $ 35,473
—
—
6,848
376
18,871
(17,480)
—
$ 7,224 $
(33,456)
(3,408)
— $ 14,585
13. STOCK OPTIONS
In 2007, the Company adopted the 2007 Employee, Director and Consultant Stock Plan (the "2007 Plan"). Pursuant to
the 2007 Plan, the Company's Board of Directors (or committees and/or executive officers delegated by the Board of
Directors) may grant incentive and nonqualified stock options to the Company's employees, officers, directors, consultants
and advisors. As of December 31, 2014, an aggregate of 1,692,309 shares of Common Stock were outstanding under the 2007
Plan and no shares were available for future grants under the 2007 Plan.
On October 26, 2010, the Company's Board of Directors adopted, and the Company's shareholders subsequently
approved, the 2010 Equity Incentive Plan (as subsequently amended, the "2010 Plan"). The 2010 Plan provides for grants of
incentive stock options to employees, and nonqualified stock options and restricted Common Stock to employees,
consultants and nonemployee directors of the Company. As of December 31, 2014, the number of shares authorized for
issuance under the 2010 Plan, as amended, was 11,000,000 shares. As of December 31, 2014, an aggregate of 8,753,353
shares of Common Stock were outstanding under the 2010 Plan and 1,748,500 shares were available for future grants under
the 2010 Plan.
Options issued under the 2007 Plan and the 2010 Plan (collectively, the "Plans") are exercisable for up to 10 years from
the date of issuance.
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
13. STOCK OPTIONS (Continued)
Sharebased compensation
For stock options issued and outstanding for the years ended December 31, 2014, 2013 and 2012, the Company recorded
noncash, stockbased compensation expense of $2,730, $3,136 and $1,233, respectively, net of forfeitures.
The fair value of each option award is estimated on the date of grant using the BlackScholes option pricing model that
uses the assumptions noted in the following table. Due to its limited operating history and limited number of sales of its
Common Stock, the Company estimated its volatility in consideration of a number of factors including the volatility of
comparable public companies. The Company uses historical data, as well as subsequent events occurring prior to the issuance
of the financial statements, to estimate option exercises and employee terminations within the valuation model. The expected
term of options granted under the Plans, all of which qualify as "plain vanilla," is based on the average of the contractual term
(10 years) and the vesting period (generally, 48 months). For nonemployee options, the expected term is the contractual
term. The riskfree rate is based on the yield of a U.S. Treasury security with a term consistent with the option.
The assumptions used principally in determining the fair value of options granted were as follows:
Riskfree interest rate
Expected dividend yield
Expected term (employee grants)
Expected volatility
2014
December 31,
2013
2012
1.62 2.06% 0.77 2.52% 0.62 1.23%
0%
6.03 years
124%
0%
6.25 years
102%
0%
6.25 years
75%
A summary of option activity as of December 31, 2014 and changes for the year then ended are presented below:
Options
Outstanding at December 31,
2013
Granted
Forfeited
Exercised
Outstanding at December 31,
2014
Vested at December 31, 2014
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Term in Years
Aggregate
Intrinsic
Value
Shares
8,055,522 $
4,711,250 $
(1,770,948) $
(550,162) $
10,445,662 $
3,960,662 $
1.55
1.75
1.86
0.42
1.65
1.28
7.61 $
5.16 $
2,569
1,986
The weighted average grantdate fair value of options granted during years ended December 31, 2014, 2013 and 2012
was $1.54, $2.04, and $1.28 per share, respectively. The total fair value of options that vested in years ended December 31,
2014, 2013, and 2012 was $2,329, $1,985 and $1,186, respectively. As of December 31, 2014, there was $5,750 of total
unrecognized compensation expense,
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
13. STOCK OPTIONS (Continued)
related to nonvested sharebased option compensation arrangements. The unrecognized compensation expense is estimated
to be recognized over a period of 2.91 years at December 31, 2014.
14. WARRANTS
The following table presents information about warrants to purchase Common Stock issued and outstanding at
December 31, 2014:
Year Issued
2010
2010
2011
2011
2012
2014
Total
Weighted average exercise price
Weighted average life in years
Classification
Equity
Equity
Equity
Equity
Equity
Liability
Number of
Warrants
Exercise
Price
Date of Expiration
1,494,603 $
1,318,268 $
16,071 $
343,137 $
36,145 $
7,000,625 $
10,208,849
1.40 10/26/2017 12/3/2017
9/26/2015 12/3/2015
1.00
6/17/2018
1.40
12/21/2016
3.06
10/5/2019
1.66
5/9/2019
1.44
$
1.43
3.81
15. EMPLOYEE BENEFIT PLAN
In November 2006, the Company adopted a 401(k) plan (the "Plan") covering all employees. Employees must be
21 years of age in order to participate in the Plan. Under the Plan, the Company has the option to make matching
contributions. For the years ended December 31, 2014, 2013 and 2012, the Company made matching contributions in the
form of shares of Common Stock. For the years ended December 31, 2014, 2013, and 2012, the Company issued 167,011,
78,884, and 47,105 shares of Common Stock, respectively, with related fair values of $173, $192, and $92, respectively, were
recorded as expense in the statement of operations.
16. INTELLECTUAL PROPERTY LICENSE
In July 2007, the Company entered into a worldwide exclusive license (the "BCH License") for patents coowned by
BCH and MIT initially covering the use of biopolymers to treat spinal cord injuries, and to promote the survival and
proliferation of human stem cells in the spinal cord. During 2011, the BCH License was amended, and the Company obtained
additional rights for use in the field of peripheral nerve injuries. The BCH License, as amended, has a 15year term, or as long
as the life of the last expiring patent right, whichever is longer, unless terminated earlier by the licensor, under certain
conditions as defined in the related license agreement. In connection with the BCH License, the Company paid an initial $75
licensing fee and is required to pay certain annual maintenance fees, milestone payments and royalties. During 2011, the
Company paid $75 to expand the license and, at December 31, 2011, accrued $50 for a milestone payment. License fees and
milestone payments are capitalized and total $200 at December 31, 2014 (see Note 4). Maintenance and royalty costs are
expensed as incurred.
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
17. COMMITMENTS AND CONTINGENCIES
Leases
On November 30, 2011 and as amended on September 17, 2012, the Company entered into a commercial lease for
26,150 square feet of office, laboratory and manufacturing space in Cambridge, Massachusetts (as amended, the "Cambridge
Lease"). The term of the Cambridge Lease is six years and three months, with one fiveyear extension option. The terms of the
Cambridge Lease require a standby letter of credit in the amount of $311 (see Note 2).
The Cambridge Lease contains rent holidays and rent escalation clauses. The Company recognizes rent expense on a
straightline basis over the term of the Cambridge Lease and records the difference between the amount charged to expense
and the rent paid as a deferred rent liability. As of December 31, 2014, the amount of deferred rent liability is $505 and is
included in accrued expenses.
It is the Company's policy to assess whether improvements made to the space rented under operating leases should be
accounted for as "lessor" or "lessee" assets. In connection with the Cambridge Lease, the Company paid for lessor assets and
was not reimbursed through construction allowances. Such costs are recorded as leasehold improvements, which are
amortized to rent expense over the term of the Cambridge Lease. As of December 31, 2014, such leasehold improvements
totaled $390 and are $249, net of accumulated depreciation.
Pursuant to the terms of the noncancelable lease agreements in effect at December 31, 2014, the future minimum rent
commitments are as follows:
Year Ended December 31,
2015
2016
2017
2018
Total
$ 1,243
1,269
1,295
1,049
$ 4,856
Total rent expense for the years ended December 31, 2014, 2013, and 2012, including monthtomonth leases, was
$1,148, $1,125 and $758, respectively.
On September 4, 2013, the Company entered into a legal settlement agreement for $286, in connection with the
Cambridge Lease. The settlement has been included in the deferred rent liability and the benefit will be amortized over the
remainder of the term of the Cambridge Lease.
Litigation
Lawsuit with Former Employee
In November 2013, we filed a lawsuit against Francis Reynolds, our former Chairman, Chief Executive Officer and Chief
Financial Officer, in Middlesex Superior Court, Middlesex County, Massachusetts (InVivo Therapeutics Holdings Corp. v.
Reynolds, Civil Action No. 135004). The complaint alleges breaches of fiduciary duties, breach of contract, conversion,
misappropriation of corporate assets, unjust enrichment, corporate waste, and seeks monetary damages and an accounting.
The lawsuit involves approximately $500 worth of personal and/or exorbitant expenses that we allege
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
17. COMMITMENTS AND CONTINGENCIES (Continued)
Mr. Reynolds inappropriately caused us to pay while he was serving as our Chief Executive Officer, Chief Financial Officer,
President and Chairman of our Board of Directors. On December 6, 2013, Mr. Reynolds answered the complaint, and filed
counterclaims against us and our Board of Directors. The counterclaims allege two counts of breach of contract, two counts of
breach of the covenant of good faith and fairdealing, and tortious interference with a contract, and seek monetary damages
and a declaratory judgment. The counterclaims involve Mr. Reynolds's allegations that we and the Board interfered with the
performance of his duties under the terms of his employment agreement, and that Mr. Reynolds was entitled to additional
shares upon the exercise of certain stock options. On January 9, 2014, we, along with the directors named in the
counterclaims, filed our answer. The parties are currently conducting pretrial discovery. No judgments or rulings are pending
at this stage.
Shareholder Matters and Investigations
On July 31, 2014, a putative securities class action lawsuit was filed in the United States District Court for the District of
Massachusetts, naming the Company and Mr. Reynolds, as defendants (the "Securities Class Action"). The lawsuit alleges
violations of the Securities Exchange Act of 1934 in connection with allegedly false and misleading statements related to the
timing and completion of the clinical study of the Company's NeuroSpinal Scaffold. The plaintiff seeks class certification for
purchasers of the Company's common stock during the period from April 5, 2013 through August 26, 2013 and unspecified
damages. On December 12, 2014, the Company moved to dismiss this lawsuit, and a hearing on that motion is scheduled for
March 11, 2015. The Company intends to vigorously defend the lawsuit.
On January 23, 2015, Shawn Luger, a purported shareholder of the Company, sent the Company a letter demanding that
the Board of Directors take action to remedy purported breaches of fiduciary duties allegedly related to the claimed false and
misleading statements that are the subject of the Securities Class Action (the "Shareholder Demand"). The Board of Directors
is currently considering this demand.
In addition to the Securities Class Action and the Shareholder Demand, the Company has received investigation
subpoenas from the Boston Regional Office of the Securities and Exchange Commission and the Massachusetts Securities
Division of the Secretary of the Commonwealth of Massachusetts requesting corporate documents also concerning, among
other topics, the allegations raised Securities Class Action and the Shareholder Demand. The Company is currently
cooperating with these investigations.
18. INSURANCE CLAIM
During the year ended December 31, 2014, the Company settled an insurance claim of $621 for business interruption
that covered the disruption of the Company's operations at its facility in Cambridge, Massachusetts caused by water damage
that occurred in September 2014. The insurance settlement reimburses the Company for costs incurred as a result of the
disruption and is included as reduction of research and development expense in the consolidated statement of operations for
the year ended December 31, 2014. The settlement receivable is included in other current asset in the 2014 financial
statements.
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InVivo Therapeutics Holdings Corp.
Notes to Consolidated Financial Statements (Continued)
(In thousands, except share and pershare data)
18. INSURANCE CLAIM (Continued)
During the year ended December 31, 2013, the Company received insurance proceeds of approximately $1,100 from the
settlement of a business interruption claim that covered the disruption of the Company's operations at its facility in
Cambridge, Massachusetts caused by water damage that occurred in November 2012. The insurance settlement reimbursed
the Company for costs incurred as a result of the disruption is included as reduction of research and development expense in
the consolidated statement of operations for the year ended December 31, 2013.
19. SUBSEQUENT EVENTS
In January 2015, the Company closed a registered direct offering of an aggregate of 8 million shares of common stock,
resulting in net proceeds of approximately $11,000.
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Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Our Disclosure Controls
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time
periods specified in the SEC's rules and forms, and (ii) such information is accumulated and communicated to our
management, our chief executive officer and our chief financial officer, to allow timely decisions regarding required
disclosure. As of the end of the period covered by this Annual Report on Form 10K, we carried out an evaluation, under the
supervision and with the participation of our management, including our principal executive and principal financial officer,
of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a 15(e) under
the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer concluded that, as
of December 31, 2014, our disclosure controls and procedures were effective.
Management's Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our
internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial
reporting and the preparation of our consolidated financial statements in accordance with U.S. generally accepted accounting
principles, or GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may
deteriorate.
With the participation of our chief executive officer and our chief financial officer, our management conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2014 based on the
framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (1992 Framework) ("COSO"). Based upon our assessment and the COSO criteria, management concluded that
our internal control over financial reporting was effective as of December 31, 2014.
Limitations on Effectiveness of Controls and Procedures
Our management, including our chief executive officer and our chief financial officer, does not expect that our disclosure
controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
These inherent limitations include, but are not limited to, the realities that judgments in decisionmaking can be faulty and
that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual
acts of some persons, by collusion of two or more people, or by management override of the control. The design of any
system of controls is also based, in part. upon certain assumptions about the likelihood of future events and there can be no
assurance that any design will succeed in achieving its stated goals under all
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potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of
compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a costeffective control
system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Controls over Financial Reporting
During the fiscal quarter ended December 31, 2014, there have been no changes in our internal control over financial
reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial
reporting.
Independent Public Accounting Firm's Report on Internal Control over Financial Reporting
Wolf & Company, P.C., the independent registered public accounting firm that audited our consolidated financial
statements included in this Annual Report on Form 10K, has issued its report on the effectiveness of our internal control over
financial reporting, which is included herein.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of InVivo Therapeutics Holdings Corp.:
We have audited InVivo Therapeutics Holdings Corp.'s (the "Company") internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (1992 Framework). The Company's management is responsible for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control
over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company's internal control over financial reporting includes those policies and
procedures that (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (b) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2014, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (1992 Framework).
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of the Company as of December 31, 2014 and 2013, and the related consolidated
statements of operations, changes stockholders' equity (deficit) and cash flows for each of the three years in the period ended
December 31, 2014, and our report dated March 11, 2015, expressed an unqualified opinion.
/s/ Wolf & Company, P.C.
Boston, Massachusetts
March 11, 2015
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Item 9B. OTHER INFORMATION
None.
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required under this Item is incorporated herein by reference to the information regarding directors,
executive officers and corporate governance included in our proxy statement for our 2015 Annual Meeting of Stockholders.
Code of Ethics
We previously adopted a Code of Business Conduct and Ethics that applies to all employees, officers and directors of
our Company, including our principal executive officer, principal financial officer and principal accounting officer or
controller, or persons performing similar functions. Our Code of Business Conduct and Ethics is available in the "Investor
Relations" section of our website at www.invivotherapeutics.com. A copy of our Code of Business Conduct and Ethics can
also be obtained free of charge by contacting our Secretary, c/o InVivo Therapeutics Holdings Corp., One Kendall Square,
Suite B14402, Cambridge, Massachusetts 02139. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8
K regarding any amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such
information on our website.
Item 11. EXECUTIVE COMPENSATION
The information required under this Item is incorporated herein by reference to the information regarding executive
compensation included in our proxy statement for our 2015 Annual Meeting of Stockholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required under this Item is incorporated herein by reference to the information regarding security
ownership of certain beneficial owners and management and related stockholder matters included in our proxy statement for
our 2015 Annual Meeting of Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required under this Item is incorporated herein by reference to the information regarding certain
relationships and related transactions and director independence included in our proxy statement for our 2015 Annual
Meeting of Stockholders.
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required under this Item is incorporated herein by reference to the information regarding principal
accounting fees and services included in our proxy statement for our 2015 Annual Meeting of Stockholders.
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Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Financial Statements.
PART IV
The financial statements listed in the Index to Consolidated Financial Statements appearing in Item 8 are filed as part of
this report.
Financial Statement Schedules.
All financial statement schedules have been omitted as they are either not required, not applicable, or the information is
otherwise included.
Exhibits.
The exhibits listed in the Exhibit Index immediately preceding the exhibits are filed as part of this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 11, 2015
By: /s/ STEVEN F. MCALLISTER
INVIVO THERAPEUTICS HOLDINGS CORP.
Name: Steven F. McAllister
Title: Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ MARK D. PERRIN
Chief Executive Officer and Chairman
March 11, 2015
Mark D. Perrin
of the Board (Principal Executive
Officer)
/s/ STEVEN F. MCALLISTER
Steven F. McAllister
Chief Financial Officer (Principal
Financial and Accounting Officer)
March 11, 2015
/s/ JOHN A. MCCARTHY, JR.
Director
March 11, 2015
John A. McCarthy, Jr.
/s/ KENNETH DIPIETRO
Director
March 11, 2015
Kenneth DiPietro
/s/ DANIEL R. MARSHAK
Director
March 11, 2015
Daniel R. Marshak
/s/ C. ANN MERRIFIELD
Director
March 11, 2015
C. Ann Merrifield
/s/ RICHARD J. ROBERTS
Director
March 11, 2015
Richard J. Roberts
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EXHIBIT INDEX
2.1 Agreement and Plan of Merger, dated October 4, 2010, by and between Design
Source, Inc. and InVivo Therapeutics Holdings Corp. (incorporated by reference from
Exhibit 2.2 to the Company's Current Report on Form 8K, as filed with the SEC on
October 6, 2010).
2.2 Agreement and Plan of Merger and Reorganization, dated as of October 26, 2010, by
and among InVivo Therapeutics Holdings Corp. (f/k/a Design Source, Inc.), a Nevada
corporation, InVivo Therapeutics Acquisition Corp., a Delaware corporation and
InVivo Therapeutics Corporation, a Delaware corporation (incorporated by reference
from Exhibit 2.1 to the Company's Current Report on Form 8K, as filed with the SEC
on November 1, 2010).
3.1 Articles of Incorporation of InVivo Therapeutics Holdings Corp., as amended
(incorporated by reference from Exhibit 3.1 to the Company's Quarterly Report on
Form 10Q for the quarter ended September 30, 2011, as filed with the SEC on
November 14, 2011).
3.2 Amended and Restated Bylaws of InVivo Therapeutics Holdings Corp. (incorporated
by reference from Exhibit 3.1 to the Company's Current Report on Form 8K, as filed
with the SEC on April 24, 2012).
4.1 Form of Bridge Warrant of InVivo Therapeutics Corporation (incorporated by
reference from Exhibit 4.1 to the Company's Current Report on Form 8K, as filed with
the SEC on November 1, 2010).
4.2 Form of Investor Warrant of InVivo Therapeutics Holdings Corp. (incorporated by
reference from Exhibit 4.3 to the Company's Current Report on Form 8K, as filed with
the SEC on November 1, 2010).
4.3(i) Form of Warrant of InVivo Therapeutics Holdings Corp. ($1.00 exercise price) issued
to Placement Agent (incorporated by reference from Exhibit 4.2 to the Company's
Current Report on Form 8K, as filed with the SEC on December 9, 2010).
4.3(ii) Form of Warrant of InVivo Therapeutics Holdings Corp. ($1.40 exercise price) issued
to Placement Agent (incorporated by reference from Exhibit 4.3 to the Company's
Current Report on Form 8K, as filed with the SEC on December 9, 2010).
4.4 Form of Warrant of InVivo Therapeutics Holdings Corp. issued to Bridge Lenders
(incorporated by reference from Exhibit 4.5 to the Company's Current Report on
Form 8K, as filed with the SEC on November 1, 2010).
4.5 Warrant dated June 17, 2011 issued to Square 1 Bank (incorporated by reference from
Exhibit 4.7 to the Company's Annual Report on Form 10K for the fiscal year ended
December 31, 2011, as filed with the SEC on March 15, 2012).
4.6 Specimen Common Stock Certificate (incorporated by reference from Exhibit 4.8 to
the Company's Annual Report on Form 10K for the fiscal year ended December 31,
2011, as filed with the SEC on March 15, 2012).
4.7 Warrant dated October 5, 2012 issued to Massachusetts Development Finance Agency
(incorporated by reference from Exhibit 4.1 to the Company's Current Report on
Form 8K, as filed with the SEC on October 9, 2012).
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4.8 Form of New Warrant issued on May 17, 2013 in exchange for Merger Warrants
(incorporated by reference from Exhibit (a)(1)(D)(1) to the Company's Tender Offer
Statement on Schedule TO (File No. 00585686), as filed with the SEC on April 8,
2013).
4.9 Form of New Warrant issued on May 17, 2013 in exchange for Placement Agent
Warrants (incorporated by reference from Exhibit (a)(1)(D)(3) to the Company's
Tender Offer Statement on Schedule TO (File No. 00585686), as filed with the SEC
on April 8, 2013)
10.1 Form of Securities Purchase Agreement between InVivo Therapeutics Corporation and
the Bridge Lenders (incorporated by reference from Exhibit 10.1 to the Company's
Current Report on Form 8K, as filed with the SEC on November 1, 2010).
10.2 Form of Registration Rights Agreement, by and between InVivo Therapeutics
Holdings Corp. and the investors in the offering (incorporated by reference from
Exhibit 10.4 to the Company's Current Report on Form 8K, as filed with the SEC on
November 1, 2010.
10.3 Form of Subscription Agreement, by and between InVivo Therapeutics Holdings
Corp. and the investors in the offering (incorporated by reference from Exhibit 10.1 to
the Company's Current Report on Form 8K, as filed with the SEC on December 9,
2010).
10.4* InVivo Therapeutics Corp. 2007 Employee, Director and Consultant Stock Plan
(incorporated by reference from Exhibit 10.9 to the Company's Current Report on
Form 8K, as filed with the SEC on November 1, 2010).
10.5(i)* Form of Incentive Stock Option Agreement by and between InVivo Therapeutics
Corp. and participants under the 2007 Employee, Director and Consultant Stock Plan
(incorporated by reference from Exhibit 10.11(i) to the Company's Current Report on
Form 8K, as filed with the SEC on November 1, 2010).
10.5(ii)* Form of NonQualified Stock Option Agreement by and between InVivo Therapeutics
Corp. and participants under the 2007 Employee, Director and Consultant Stock Plan
(incorporated by reference from Exhibit 10.11(ii) to the Company's Current Report on
Form 8K, as filed with the SEC on November 1, 2010).
10.6* InVivo Therapeutics Holdings Corp. 2010 Equity Incentive Plan, as amended
(incorporated by reference to Appendix A to the Company's Schedule 14A Proxy
Statement, as filed with the SEC on April 19, 2013).
10.7(i)* Form of Incentive Stock Option Agreement by and between InVivo Therapeutics
Holdings Corp. and participants under the 2010 Equity Incentive Plan (incorporated
by reference from Exhibit 10.12(i) to the Company's Annual Report on Form 10K for
the fiscal year ended December 31, 2010, as filed with the SEC on March 24, 2011).
10.7(ii)* Form of NonQualified Stock Option Agreement by and between InVivo Therapeutics
Holdings Corp. and participants under the 2010 Equity Incentive Plan (incorporated
by reference from Exhibit 10.12(ii) to the Company's Annual Report on Form 10K for
the fiscal year ended December 31, 2010, as filed with the SEC on March 24, 2011).
10.8 Form of Scientific Advisory Board Agreement entered into by InVivo Therapeutics
Corp. (incorporated by reference from Exhibit 10.13 to the Company's Current Report
on Form 8K, as filed with the SEC on November 1, 2010).
10.9 Exclusive License Agreement dated July 2007 between InVivo Therapeutics
Corporation and Children's Medical Center Corporation (incorporated by reference
from Exhibit 10.1 to Amendment No. 2 to the Company's Quarterly Report on
Form 10Q/A for the quarter ended March 31, 2011, as filed with the SEC on July 18,
2011).
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10.10 Amendment One to the Exclusive License, dated May 12, 2011, by and between
Children's Medical Center Corporation and InVivo Therapeutics Corporation
(incorporated by reference from Exhibit 10.22 to the Amendment No. 4 to the
Company's Registration Statement on Form S1/A (File No. 333171998), as filed with
the SEC on July 19, 2011).
10.11 Form of Indemnification Agreement (for directors and officers) (incorporated by
reference from Exhibit 10.19 to the Company's Registration Statement on Form S1
(File No. 333171998), as filed with the SEC on February 1, 2011).
10.12 Lease Agreement, dated November 30, 2011, between InVivo Therapeutics
Corporation and RB Kendall Fee, LLC (incorporated by reference from Exhibit 10.25
to the Company's Registration Statement on Form S1 (File No. 333178584), as filed
with the SEC on December 16, 2011).
10.13 Lease Guaranty, dated November 30, 2011, by InVivo Therapeutics Holdings Corp.
(incorporated by reference from Exhibit 10.26 to the Company's Registration
Statement on Form S1 (File No. 333178584), as filed with the SEC on December 16,
2011).
10.14 First Amendment of Lease between InVivo Therapeutics Corporation and RB Kendall
Fee, LLC, dated September 17, 2012 (incorporated by reference from Exhibit 10.31 to
the Company's Annual Report on Form 10K for the fiscal year ended December 31,
2012, as filed with the SEC on March 12, 2013).
10.15 Securities Purchase Agreement, dated December 21, 2011, by and between the
Company and Ingenieria E Inversiones Ltda. (incorporated by reference from
Exhibit 10.1 to the Company's Current Report on Form 8K, as filed with the SEC on
December 22, 2011).
10.16 Common Stock Purchase Warrant dated December 21, 2011 and issued by the
Company to Ingenieria E Inversiones Ltda. (incorporated by reference from
Exhibit 10.2 to the Company's Current Report on Form 8K, as filed with the SEC on
December 22, 2011).
10.17* InVivo Therapeutics Holdings Corp. Annual Cash Bonus Plan for Executive Officers
(incorporated by reference from Exhibit 10.2 to the Company's Current Report on
Form 8K, as filed with the SEC on March 8, 2012).
10.18 Promissory Note dated October 5, 2012 in favor of Massachusetts Development
Finance Agency (incorporated by reference from Exhibit 10.1 to the Company's
Current Report on Form 8K, as filed with the SEC on October 9, 2012).
10.19* Employment Agreement, dated as of August 22, 2013, between the Company and
Michael J. Astrue (incorporated by reference from Exhibit 10.26 to the Company's
Annual Report on Form 10K for the fiscal year ended December 31, 2013, as filed
with the SEC on March 17, 2014).
10.20* Employment Agreement, dated as of September 16, 2013, between the Company and
Gregory D. Perry (incorporated by reference from Exhibit 10.27 to the Company's
Annual Report on Form 10K for the fiscal year ended December 31, 2013, as filed
with the SEC on March 17, 2014).
10.21* Employment Agreement, dated as of December 23, 2013, between the Company and
Mark D. Perrin (incorporated by reference from Exhibit 10.28 to the Company's
Annual Report on Form 10K for the fiscal year ended December 31, 2013, as filed
with the SEC on March 17, 2014).
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10.22* Employment Agreement, dated as of December 31, 2013, between the Company and
Steven F. McAllister (incorporated by reference from Exhibit 10.29 to the Company's
Annual Report on Form 10K for the fiscal year ended December 31, 2013, as filed
with the SEC on March 17, 2014).
10.23* Amendment to the December 31, 2013 Employment Agreement, dated as of April 29,
2014, between the Company and Steven F. McAllister.
10.24* Amended and Restated Employment Agreement, dated as of May 30, 2014, between
the Company and Steven F. McAllister (incorporated by reference from Exhibit 10.1
to the Company's Current Report on Form 8K, as filed with the SEC on May 30,
2014).
10.25* Second Amended and Restated Employment Agreement, dated as of June 17, 2014,
between the Company and Steven F. McAllister (incorporated by reference from
Exhibit 10.1 to the Company's Current Report on Form 8K, as filed with the SEC on
June 23, 2014).
10.26 Letter Agreement, dated as of December 10, 2014, between the Company and H.C.
Wainwright & Co., LLC (incorporated by reference from Exhibit 10.1 to the
Company's Current Report on Form 8K, as filed with the SEC on January 29, 2015).
10.27 Securities Purchase Agreement, dated as of January 28, 2015, between the Company
and the purchasers signatory thereto (incorporated by reference from Exhibit 10.1 to
the Company's Current Report on Form 8K/A, as filed with the SEC on January 29,
2015).
21 Subsidiaries of InVivo Therapeutics Holdings Corp. (incorporated by reference from
Exhibit 21.1 to the Company's Current Report on Form 8K, as filed with the SEC on
November 1, 2010).
23.1 Consent of Wolf & Company, P.C.
31.1 Certification by the Principal Executive Officer pursuant to Section 302 of the
SarbanesOxley Act of 2002.
31.2 Certification by the Principal Financial Officer pursuant to Section 302 of the
SarbanesOxley Act of 2002.
32.1 Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes
Oxley Act of 2002.
32.2 Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes
Oxley Act of 2002.
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Calculation Linkbase Document.
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB XBRL Taxonomy Label Linkbase Document.
101.PRE XBRL Taxonomy Presentation Linkbase Document.
*
Management contract or compensatory plan or arrangement filed in response to Item 15(a)(3) of Form 10
K.
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