It has been well over a year since NovaDel Pharma Inc. (OTC Pink: NVDL) announced the sale of its ZolpiMist assets to Amherst Pharmaceuticals, LLC. Compensation for the deal basically consisted Amherst assuming all of NovaDel’s FDA liabilities associated with ZolpiMist which at the time totaled approximately $2.2 million. In addition, Amherst agreed to pay NovaDel a 10% royalty on the sales of ZolpiMist up to an aggregated maximum of $500,000 with an annual minimum payment of $150,000. Now over a year later, Amherst has struck a payment deal with the FDA and has assumed these liabilities from NovaDel finally completing this chapter in the company’s history.
The question is where does NovaDel go from here? According to management, the company has approximately $1.7 million in net assets which is mainly cash and a potentially valuable $60 million in Federal Net Operating Loss Carryforwards (NOLS). Management has stated it will evaluate it options over the next few months and take appropriate action by the middle of 2016. Appropriate action is likely one of two scenarios.
First, would be to liquidate the company and lose the value of any NOLs. This would give investors safe return of their capital. At last count on October 25, 2011, there was approximately 134,890,615 which would value its net assets at approximately $0.0126 per share. There were also approximately 76,869,369 outstanding warrants, but all with exercise prices substantially above the current market value and some have theoretically expired. The warrants did have down-round provisions, but since the company has not reported since 2011, it is unclear how this impacted the outstanding warrants. According to the 10-Q, these down-round provisions would only be triggered if the company either issues equity shares for a price that is lower than the exercise price of those instruments, or issues new warrants or convertible instruments that have a lower exercise price. It is not believed this occurred, but again, the company has been dark since 2011.
The second and potentially offering the highest return for shareholders, may be to preserve the value of the NOLs by acquiring another profitable company that could take advantage of this asset. Of course this only works for investors if they are not significantly diluted and a change in control is avoided as it can negate the NOLs.
In either case, there could be an opportunity in NovaDel going forward, however investors should proceed with extreme caution as current financial information is not available.
Disclosure: The author owned shares in NVDL at the time this article was published.