| Organization and Summary of Significant Accounting Policies | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Apricus Biosciences, Inc. and Subsidiaries (“Apricus” or the “Company”) is a Nevada corporation that was initially formed in 1987. The Company is a biopharmaceutical company focused on the development of innovative product candidates in the areas of urology and rheumatology. The Company has two product candidates currently in development. Vitaros is a product candidate in the United States for the treatment of erectile dysfunction (“ED”), which the Company in-licensed from Warner Chilcott Company, Inc., now a subsidiary of Allergan plc (“Allergan”). RayVa is the Company’s product candidate in Phase 2 development for the treatment of Raynaud’s Phenomenon, secondary to scleroderma, for which the Company owns worldwide rights. Basis of Presentation and Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. On October 21, 2016, the Company effected a one-for-ten (1: 10 ) reverse stock split whereby the Company (i) decreased the number of authorized shares of Common Stock by a ratio equal to one-for-ten (1:10) (the “Reverse Split Ratio”), and (ii) correspondingly and proportionately decreased, by a ratio equal to the Reverse Split Ratio, the number of issued and outstanding shares of Common Stock (the “Reverse Stock Split”). Under Nevada law, because the Reverse Stock Split was approved by the Board of Directors in accordance with Nevada Revised Statutes (“NRS”) Section 78.207, no stockholder approval was required. NRS Section 78.207 provides that the Company may effect the Reverse Stock Split without stockholder approval if (x) both the number of authorized shares of Common Stock and the number of outstanding shares of Common Stock are proportionally reduced as a result of the Reverse Stock Split, (y) the Reverse Stock Split does not adversely affect any other class of stock of the Company and (z) the Company does not pay money or issue scrip to stockholders who would otherwise be entitled to receive a fractional share as a result of the Reverse Stock Split. As described herein, the Company has complied with these requirements. The Reverse Stock Split was effected by the Company filing a Certificate of Change pursuant to NRS Section 78.209 with the Secretary of State of the State of Nevada on October 21, 2016, which became effective at 5 p.m. PST on October 21, 2016. Upon effectiveness of the Reverse Stock Split, the number of shares of the Company’s common stock (x) issued and outstanding decreased from approximately 77.3 million shares (as of October 21, 2016) to approximately 7.7 million shares; (y) reserved for issuance upon exercise of outstanding options, restricted stock units and warrants decreased from approximately 4.9 million , 1.2 million and 23.2 million shares, respectively, to approximately 0.5 million , 0.1 million and 2.3 million shares, respectively, and (z) reserved but unallocated under the Company’s current equity incentive plans decreased from approximately 0.1 million common shares to approximately 0.01 million common shares. In connection with the Reverse Stock Split, the Company’s total number of authorized shares of common stock decreased from 150.0 million to 15.0 million . The number of authorized shares of preferred stock remained unchanged at 10.0 million shares. Following the Reverse Stock Split, certain reclassifications have been made to prior period financial statements to conform to the current period's presentation. The Reverse Stock Split was applied retroactively to both periods presented to adjust the number and per share amounts of common stock shares, options, restricted stock units and warrants for the Company’s common stock. The Company adjusted shareholders’ equity to reflect the Reverse Stock Split by reclassifying an amount equal to the par value of the shares eliminated by the split from common stock to additional paid-in capital, resulting in no net impact to shareholders' equity on the Company’s consolidated balance sheets for both periods presented. The Company’s shares of common stock commenced trading on a split-adjusted basis on October 24, 2016. Proportional adjustments for the reverse stock split were made to the Company's outstanding stock options, warrants and equity incentive plans for both periods presented. Use of Estimates The preparation of these consolidated financial statements in conformity with generally accepted accounting principles (“GAAP”) requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. The Company’s most significant estimates relate to whether revenue recognition criteria have been met, accounting for clinical trials, the valuation of stock based compensation, the valuation of its warrant liabilities, the impairment of long-lived assets and valuation allowances for the Company’s deferred tax assets. The Company’s actual results may differ from these estimates under different assumptions or conditions. Liquidity The accompanying consolidated financial statements have been prepared on a basis which assumes the Company is a going concern and that contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company had an accumulated deficit of approximately $316.3 million and negative working capital of $7.7 million as of December 31, 2016 and reported a net loss of approximately $7.4 million and negative cash flows from operations for the year ended December 31, 2016 . These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company has principally been financed through the sale of its common stock and other equity securities, debt financings, up-front payments received from commercial partners for the Company’s products under development, and through the sale of assets. As of December 31, 2016 , the Company had cash and cash equivalents of approximately $2.1 million . On March 8, 2017 , the Company entered into the an asset purchase agreement (the “Ferring Asset Purchase Agreement”) with Ferring International Center S.A. (“Ferring’), pursuant to which it sold to Ferring its assets and rights related to Vitaros outside of the United States for approximately $11.5 million . In addition to the upfront payment received, Ferring will pay the Company up to $0.7 million for the delivery of certain product-related inventory. The Company is also eligible to receive two additional quarterly payments totaling $0.5 million related to transition services, subject to certain limitations. The Company has retained the U.S. development and commercialization rights for Vitaros, which the Company has licensed from Allergan. The Company used approximately $6.6 million of the proceeds from the sale to repay all outstanding amounts due and owed, including applicable termination fees, under its Loan and Security Agreement (the “Credit Facility”) with Oxford Finance LLC (“Oxford”) and Silicon Valley Bank (“SVB”) (Oxford and SVB are referred to together as the “Lenders”). In September 2016, the Company completed a registered direct offering of 1,082,402 shares of common stock for gross proceeds of approximately $3.7 million (the “September 2016 Financing”). Concurrently in a private placement, for each share of common stock purchased by an investor, such investor received from the Company an unregistered warrant to purchase three quarters of a share of common stock. See note 7 for further description. Under the terms of the securities purchase agreement entered into with such investors, the Company agreed not to sell any shares of common stock or common stock equivalents for a period of 90 days, which expired on December 27, 2016. In July 2016, the Company and Aspire Capital Fund, LLC (“Aspire Capital”) entered into a Common Stock Purchase Agreement (the “Aspire Purchase Agreement”), which provides that Aspire Capital is committed to purchase, if the Company chooses to sell and at the Company’s discretion, an aggregate of up to $7.0 million of shares of the Company’s common stock over the 24 -month term of the Aspire Purchase Agreement. The Aspire Purchase Agreement can be terminated at any time by the Company by delivering notice to Aspire Capital. On July 5, 2016 (the “Aspire Closing Date”), the Company delivered to Aspire Capital a commitment fee of 151,899 shares of the Company’s common stock at a value of $0.6 million (the “Commitment Shares”) in consideration for Aspire Capital entering into the Aspire Purchase Agreement. Additionally, on the Aspire Closing Date, the Company sold 253,165 shares of the Company’s common stock to Aspire Capital for proceeds of $1.0 million . Through December 31, 2016 , 455,064 shares of the Company’s common stock have been sold for gross proceeds of $1.2 million . However, in connection with the September 2016 Financing, the Company agreed to not make any further sales under the Aspire Purchase Agreement for a period of twelve months following the date of the September 2016 Financing. Pursuant to the Aspire Purchase Agreement, the Company and Aspire Capital terminated the prior Common Stock Purchase Agreement, dated August 12, 2014, between the parties. See note 7 for additional discussion of the Aspire Purchase Agreement. In January 2016, the Company entered into subscription agreements with certain purchasers pursuant to which it agreed to sell an aggregate of 1,136,364 shares of its common stock and warrants to purchase up to an additional 568,184 shares of its common stock to the purchasers for an aggregate offering price of $10.0 million , to take place in separate closings. Each share of common stock was sold at a price of $8.80 and included one half of a warrant to purchase a share of common stock. The warrants have an exercise price of $8.80 per share, became exercisable six months and one day after the date of issuance and will expire on the seventh anniversary of the date of issuance. During the first closing in January 2016, the Company sold an aggregate of 252,842 shares and warrants to purchase up to 126,421 shares of common stock for gross proceeds of $2.2 million . The remaining shares and warrants were sold in a subsequent closing in March 2016 for gross proceeds of $7.8 million following stockholder approval at a special meeting on March 2, 2016. The Company currently has an effective shelf registration statement on Form S-3 (No. 333-198066) filed with the Securities and Exchange Commission (“SEC”) under which it may offer from time to time any combination of debt securities, common and preferred stock and warrants. As of December 31, 2016 , the Company had approximately $74.1 million available under its Form S-3 shelf registration statement. Under current SEC regulations, at any time during which the aggregate market value of the Company’s common stock held by non-affiliates (“public float”), is less than $75.0 million , the amount it can raise through primary public offerings of securities in any twelve-month period using shelf registration statements, including sales under the Aspire Purchase Agreement, is limited to an aggregate of one-third of the Company’s public float. SEC regulations permit the Company to use the highest closing sales price of the Company’s common stock (or the average of the last bid and last ask prices of the Company’s common stock) on any day within 60 days of sales under the shelf registration statement. As the Company’s public float was less than $75.0 million as of December 31, 2016 , the Company’s usage of its S-3 shelf registration statement is limited. The Company still maintains the ability to raise funds through other means, such as through the filing of a registration statement on Form S-1 or in private placements. The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities, or may affect the timing of and amounts it can raise by undertaking such activities. The accompanying consolidated financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern. The Company’s future liquidity and capital funding requirements will depend on numerous factors, including: • its ability to raise additional funds to finance its operations; • its ability to maintain compliance with the listing requirements of The NASDAQ Capital Market; • the timing and outcome of the Company’s NDA resubmission for Vitaros, and any additional development requirements imposed by the FDA in connection with such resubmission; • the outcome, costs and timing of clinical trial results for its product candidates; • the extent and amount of any indemnification claims made by Ferring under the Ferring Asset Purchase Agreement; • the emergence and effect of competing or complementary products; • its ability to maintain, expand and defend the scope of its intellectual property portfolio, including the amount and timing of any payments the Company may be required to make, or that it may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights; • its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel; • the terms and timing of any collaborative, licensing or other arrangements that it has or may establish; • the trading price of the Company’s common stock being above the $1.00 closing floor price that is required for the Company to use the committed equity financing facility with Aspire Capital and the restrictions from using such facility from its September 2016 Financing; • the trading price of its common stock; and • its ability to increase the number of authorized shares outstanding to facilitate future financing events. On May 10, 2016, the Company received a written notification from NASDAQ indicating that it was not in compliance with NASDAQ Listing Rule 5550(a)(2), as the closing bid price for its Common Stock had been below $1.00 per share for 30 consecutive business days. Pursuant to NASDAQ Listing Rule 5810(c)(3)(A), the Company was granted a 180 calendar day compliance period, or until November 7, 2016, to regain compliance with the minimum bid price requirement. During the compliance period, its shares of common stock continued to be listed and traded on NASDAQ. To regain compliance, the closing bid price of the Company’s shares of common stock needed to meet or exceed $1.00 per share for at least 10 consecutive business days during the 180 calendar day compliance period, which was accomplished through a 1-for-10 reverse stock split of its common stock, effected on October 21, 2016. On November 8, 2016, the Company received a letter from NASDAQ confirming that it is in compliance with NASDAQ Listing Rule 5550(a)(2). On June 2, 2016, the Company received a notice from NASDAQ stating that the Company was not in compliance with NASDAQ Listing Rule 5550(b)(2) because the market value of the Company’s listed securities (“MVLS”) was below $35 million for the previous thirty (30) consecutive business days. In accordance with NASDAQ Marketplace Rule 5810(c)(3), the Company was granted a 180 calendar day compliance period until November 29, 2016, to regain compliance with the minimum MVLS requirement. Compliance can be achieved by meeting the $35 million MVLS requirement for a minimum of 10 consecutive business days during the 180 calendar day compliance period, maintaining a stockholders’ equity value of at least $2.5 million, or meeting the requirement of net income of at least $500,000 for two of the last three fiscal years. On February 8, 2017, the Company was notified that the Company’s request for continued listing on NASDAQ pursuant to an extension through May 30, 2017 to evidence compliance with all applicable criteria for continued listing on NASDAQ was granted. If the Company is not within compliance by May 30, 2017, NASDAQ will provide notice that shares of the Company’s Common Stock will be subject to delisting. Notwithstanding the proceeds from the closing of the Ferring Asset Purchase Agreement, in order to fund its operations during the next twelve months from the issuance date, the Company will need to raise substantial additional funds through one or more of the following: issuance of additional debt or equity, accessing additional capital under its committed equity financing facility with Aspire Capital, as described above or the completion of a licensing transaction for one or more of the Company’s pipeline assets. Specifically, expenses will be significantly reduced as a result of the closing of the Ferring Asset Purchase Agreement. Management has a future operating plan in place that will focus almost entirely on the resubmission of the NDA during the third quarter of 2017. As part of this plan, there would be minimal expenditures for ongoing scientific research, product development or clinical research. While management is actively pursuing it’s near term financial and strategic alternatives it is also, in parallel, continuing to evaluate the timing of implementation of the alternative operating plan and the initiation of the identified reductions. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development activities, such as the resubmission of the Vitaros NDA as well as future clinical studies for RayVa. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all. Additionally, equity or debt financings may have a dilutive effect on the holdings of the Company’s existing stockholders. Fair Value of Financial Instruments The Company’s financial instruments consist principally of cash, accounts receivable, accounts payable, accrued expenses, and historically, its Credit Facility with the Lenders. The carrying amounts of financial instruments such as accounts receivable, accounts payable and accrued expenses approximate their related fair values due to the short-term nature of these instruments. Further, based on the borrowing rates currently available for loans with similar terms, the Company believes the carrying amount of its Credit Facility as of December 31, 2016 approximated its relative fair value. Cash Equivalents Cash equivalents represent all highly liquid investments with an original maturity date of three months or less from the purchase date. Restricted Cash Short term restricted cash of $0.3 million as of December 31, 2015 was primarily restricted cash held in escrow for environmental remediation services to be performed and for taxes in connection with the sale of our New Jersey facility, both of which are the obligation of the Company. The Company recorded a liability for the environmental remediation as well as tax liabilities, both of which were included in accrued liabilities as of December 31, 2015. These obligations were classified as current restricted cash and current liabilities as of December 31, 2015, respectively and were satisfied and released from restricted cash and current liabilities during 2016. Concentration of Credit Risk From time to time, the Company maintains cash in bank accounts that exceed the FDIC insured limits. The Company has not experienced any losses on its cash accounts. It performs credit evaluations of its customers, but generally does not require collateral to support accounts receivable. Ferring and Laboratories Majorelle ("Majorelle") accounted for approximately 67% and 11% and of its total revenues, respectively, during the year ended December 31, 2016 . Majorelle comprised 26% of the Company’s accounts receivable balance as of December 31, 2016 . Hexal AG, an affiliate with the Sandoz Division of the Novartis Group of Companies (“Sandoz”) and Ferring accounted for approximately 36% and 47% of its total revenues, respectively, during the year ended December 31, 2015 . Sandoz comprised 13% of the Company’s accounts receivable as of December 31, 2015 . Historically, the Company’s revenues have been primarily generated from its foreign commercialization partners and its foreign manufacturers, which subjected it to various risks, including but not limited to currency exchange fluctuations, longer payment cycles, and greater difficulty in accounts receivable collection. The Company is also subject to general geopolitical risks, such as political, social and economic instability, and changes in diplomatic and trade relations. Inventory Valuation Inventories are stated at the lower of cost or net realizable value on a first in, first out basis. These inventories consisted of the different component parts for commercialization of Vitaros. Historically, the Company has capitalized inventory costs associated with its products after regulatory approval when, based on management's judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Otherwise, such costs are expensed as research and development. If applicable, the Company will periodically analyze its inventory levels to identify inventory that may expire prior to expected sale or has a cost basis in excess of its estimated realizable value, and will write-down such inventories as appropriate. Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. The Company estimates useful lives as follows: • Machinery and equipment: three to five years • Furniture and fixtures: ten years • Computer software: five years Amortization of leasehold improvements and capital lease equipment is provided on a straight-line basis over the shorter of their estimated useful lives or the lease term. The costs of additions and betterments are capitalized, and repairs and maintenance costs are charged to operations in the periods incurred (see note 5 for further details). Leases Leases are reviewed and classified as capital or operating at their inception. The Company records rent expense associated with its operating lease on a straight-line basis over the term of the lease. The difference between rent payments and straight-line rent expense is recorded as deferred rent in accrued liabilities. Fair Value Measurements The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company’s common stock warrant liabilities are measured and disclosed at fair value on a recurring basis, and are classified within the Level 3 designation. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis (in thousands) as of December 31, 2016 and 2015, respectively: Warrant liabilities Quoted Market Prices for Identical Assets Significant Other Significant Total Balance as of December 31, 2016 $ — $ — $ 846 $ 846 Balance as of December 31, 2015 — $ — $ 1,841 $ 1,841 The common stock warrant liabilities are recorded at fair value using the Black-Scholes option pricing model. The following assumptions were used in determining the fair value of the common stock warrant liabilities valued using the Black-Scholes option pricing model for 2016 and 2015 : December 31, December 31, Risk-free interest rate 1.64%-1.99% 1.82 % Volatility 77.25%-81.03% 83.00 % Dividend yield — % — % Expected term 4.75-6.17 6.13 Weighted average fair value $ 0.49 $ 6.09 The following table is a reconciliation for the common stock warrant liabilities measured at fair value using Level 3 unobservable inputs (in thousands): Warrant liabilities Balance as of December 31, 2015 $ 1,841 Issuance of warrants in connection with January 2016 financing 4,807 Issuance of warrants in connection with September 2016 financing 1,677 Change in fair value measurement of warrant liability (8,155 ) Repricing of February 2015 warrants in connection with January 2016 financing 676 Balance as of December 31, 2016 $ 846 Of the inputs used to value the outstanding common stock warrant liabilities as of December 31, 2016 , the most subjective input is the Company’s estimate of expected volatility of its common stock. Impairment of Long-Lived Assets The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. If such assets are considered impaired, the amount of the impairment loss recognized is measured as the amount by which the carrying value of the asset exceeds the fair value of the asset, fair value being determined based upon future cash flows or appraised values, depending on the nature of the asset. The Company recognized no impairment losses during either of the periods presented within its financial statements. Debt Issuance Costs Historically, amounts paid related to debt financing activities are presented in the current balance sheet as a direct deduction from the debt liability. Warrant Liabilities The Company’s outstanding common stock warrants issued in connection with its February 2015, January 2016 and September 2016 financings are classified as liabilities in the accompanying consolidated balance sheets as they contain provisions that are considered outside of the Company’s control, such as requiring the Company to maintain active registration of the shares underlying such warrants. The warrants were recorded at fair value using the Black-Scholes option pricing model. The fair value of these warrants is re-measured at each financial reporting period with any changes in fair value being recognized as a component of other income (expense) in the accompanying consolidated statements of operations. Revenue Recognition Historically, the Company has generated revenues from licensing technology rights and the sale of products. The Company recognizes revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the Company’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Payments received under commercial arrangements, such as licensing technology rights, may include non-refundable fees at the inception of the arrangements, milestone payments for specific achievements designated in the agreements, and royalties on the sale of products. The Company considers a variety of factors in determining the appropriate method of accounting under its license agreements, including whether the various elements can be separated and accounted for individually as separate units of accounting. Multiple Element Arrangements Deliverables under the arrangement will be separate units of accounting, provided (i) a delivered item has value to the customer on a standalone basis; and (ii) the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the Company’s control. The Company accounts for revenue arrangements with multiple elements by separating and allocating consideration according to the relative selling price of each deliverable. If an element can be separated, an amount is allocated based upon the relative selling price of each element. The Company determines the relative selling price of a separate deliverable using the price it charges other customers when it sells that product or service separately. If the product or service is not sold separately and third party pricing evidence is not available, the Company will use its best estimate of selling price. Milestones Revenue is recognized when earned, as evidenced by written acknowledgment from the collaborator or other persuasive evidence that the milestone has been achieved, provided that the milestone event is substantive. A milestone event is considered to be substantive if its achievability was not reasonably assured at the inception of the arrangement and the Company’s efforts led to the achievement of the milestone (or if the milestone was due upon the occurrence of a specific outcome resulting from the Company’s performance). Events for which the occurrence is either contingent solely upon the passage of time or the result of a counterparty’s performance are not considered to be milestone events. If both of these criteria are not met, the milestone payment is recognized over the remaining minimum period of the Company’s performance obligations under the arrangement, if any. The Company assesses whether a milestone is substantive at the inception of each arrangement. License Fee Revenue The Company defers recognition of non-refundable upfront license fees if it has continuing performance obligations, without which the licensed data, technology, or product has no utility to the licensee separate and independent of its performance under the other elements of the applicable arrangement. Non-refundable, up-front fees that are not contingent on any future performance by the Company and require no consequential continuing involvement on the Company’s part are recognized as revenue when the license term commences and the last element of the licensed data, technology or product is delivered. The specific methodology for the recognition of the revenue is determined on a case-by-case basis according to the facts and circumstances of the applicable agreement. Product Sales Revenue Historically, the Company’s product sales revenue was comprised of two components: sales of Vitaros to its former commercialization partners and sales of component inventory to its former manufacturing partners. The supply and manufacturing agreements that existed as of December 31, 2016 with certain of its former commercialization partners for the manufacture and delivery of Vitaros did not permit the Company’s former commercialization partners to return product, unless the product sold to the licensee partner was delivered with a short-dated shelf life as specified in each respective license agreement, if applicable. In those cases, the Company deferred revenue recognition until the right of return no longer existed, which was the earlier of: (i) evidence that the product had been sold to an end customer or (ii) the right of return had expired. As such, the Company did not have a sales and returns allowance recorded as of December 31, 2016 and December 31, 2015. Historically, sales of component inventory to the former manufacturing partners was accounted for on a net basis since these products were ultimately returned to the Company as finished goods and were then sold onto commercialization partners. Beginning in 2016, the majority of the |
