| Organization and Summary of Significant Accounting Policies | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2016 included in the Apricus Biosciences, Inc. and subsidiaries (the “Company”) Annual Report on Form 10-K (“Annual Report”) filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 13, 2017. The accompanying financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, the accompanying condensed consolidated financial statements for the periods presented reflect all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state the Company’s financial position, results of operations and cash flows. Certain prior year items have been reclassified to conform to the current year presentation. The December 31, 2016 condensed consolidated balance sheet was derived from audited financial statements, but does not include all GAAP disclosures. The unaudited condensed consolidated financial statements for the interim periods are not necessarily indicative of results for the full year. The preparation of these unaudited condensed consolidated financial statements requires the Company to make estimates and judgments that affect the amounts reported in the financial statements and the accompanying notes. The Company’s actual results may differ from these estimates under different assumptions or conditions. Liquidity The accompanying condensed 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 $313.5 million and working capital of $6.9 million as of September 30, 2017 and reported net income of approximately $2.8 million and negative cash flows from operations for the nine months ended September 30, 2017 . While the Company believes it has enough cash to fund its current operating plans through the fourth quarter of 2018 , the Company’s history and other 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 September 30, 2017 , the Company had cash and cash equivalents of approximately $8.5 million . On September 10, 2017, the Company entered into a Securities Purchase Agreement (the “September 2017 SPA”) with certain accredited investors for net proceeds of approximately $3.1 million , after deducting commissions and estimated offering expenses payable by the Company. Pursuant to the agreement, the Company sold 2,136,614 shares of the Company’s common stock at a purchase price of $1.73 per share, and warrants to purchase up to 1,068,307 shares of common stock in a private placement. The warrants were exercisable upon closing, or on September 13, 2017 , at an exercise price equal to $1.67 per share of common stock and are exercisable for two and one half years from that date. In addition, the Company issued warrants to purchase up to 106,831 shares of common stock (the “September 2017 Placement Agent Warrants”) to H.C. Wainwright & Co., LLC (“H.C. Wainwright”). The September 2017 Placement Agent Warrants were exercisable upon closing at an exercise price of $2.16 per share, and also expire two and one half years from the closing date. On April 26, 2017, the Company completed an underwritten public offering (the “April 2017 Financing”) for net proceeds of approximately $5.9 million , after deducting the underwriting discounts and commissions and offering expenses payable by the Company. Pursuant to the underwriting agreement with H.C. Wainwright, the Company sold to H.C. Wainwright an aggregate of 5,030,000 units. Each unit consisted of one share of common stock and one warrant to purchase 0.75 of a share of common stock, sold at a public offering price of $1.40 per unit. At the time of the offering closing, the Company did not have a sufficient number of authorized common stock to cover shares of common stock issuable upon the exercise of the warrants. The sufficient number of authorized common stock became available on May 17, 2017 when the Company received stockholder approval of the proposed amendment to the Company’s Amended and Restated Articles of Incorporation to increase the number of authorized shares of common stock (the “Charter Amendment”) and the Charter Amendment became effective on that date. The warrants will expire five years from May 17, 2017, the date the warrants became exercisable, and the exercise price of the warrants is $1.55 per share of common stock. In connection with this transaction, the Company issued to H.C. Wainwright warrants to purchase up to 251,500 shares of common stock (the “Underwriter Warrants”). The Underwriter Warrants have substantially the same terms as the warrants sold concurrently to the investors in the offering, except that the Underwriter Warrants have a term of five years from the effective date of the related prospectus, or April 20, 2017, and an exercise price of $1.75 per share. The common shares, warrants and warrant shares were issued and sold pursuant to an effective registration statement on Form S-1, which was previously filed with the SEC and declared effective on April 20, 2017 (File No. 333-217036), and a related prospectus. On April 20, 2017, the Company entered into a warrant amendment with the holders of the Company’s warrants to purchase common stock of the Company, issued in a financing in September 2016, pursuant to which, among other things, (i) the exercise price of the warrants was reduced to $1.55 per share (the exercise price of the warrants sold in the April 2017 Financing), and (ii) the date upon which such warrants became exercisable was changed to the effective date of the Charter Amendment, or May 17, 2017. On March 8, 2017 , the Company entered into 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 up to approximately $12.7 million . In addition to an upfront payment of $11.5 million , Ferring paid the Company approximately $0.7 million for the delivery of certain product-related inventory and $0.5 million related to transition services. The Company has retained the U.S. development and commercialization rights for Vitaros, which the Company has in-licensed from Allergan plc (“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”). The Company has filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”), which if declared effective by the SEC, will allow the Company to offer from time to time any combination of debt securities, common and preferred stock and warrants. The Company has registered $100.0 million in aggregate securities which will be available for sale under its Form S-3 shelf registration statement if and when declared effective by the SEC. However, 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 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 the date the Company filed the Form S-3 registration statement, the Company’s usage of such shelf registration statement will be 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 condensed 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 outcome of the Company’s new drug application (“NDA”) resubmission for Vitaros, and any additional development requirements imposed by the U.S. Food and Drug Administration (“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 its common stock; and • its ability to increase the number of authorized shares outstanding to facilitate future financing events. In May 2016, the Company received notice from NASDAQ indicating that it was not in compliance with NASDAQ Listing Rule 5550(a)(2) because the closing bid price for its Common Stock had been below $1.00 per share for the previous thirty (30) consecutive business days. In October 2016, the Company regained compliance with NASDAQ Listing Rule 5550(a)(2) by effecting a 1-for-10 reverse stock split of its common stock. In June 2016, the Company received notice from NASDAQ indicating that it 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 and in November 2016, the Company received a further notice from NASDAQ that it was subject to delisting for failing to meet the continued listing requirements in Rule 5550(b)(2). Such delisting was stayed when the Company requested a hearing with the NASDAQ hearings panel, after which the Company was granted a grace period to regain compliance. Under Rule 5550(b)(2), compliance can be achieved in several ways, including meeting the $35 million MVLS requirement, maintaining a stockholder’s equity value of at least $2.5 million or having net income of at least $500,000 for two of the last three fiscal years. On May 2, 2017, the Company was notified that it had evidenced full compliance with all criteria for continued listing on the NASDAQ Capital Market, including the minimum stockholders’ equity requirement. Notwithstanding the proceeds from the closing of the Ferring Asset Purchase Agreement and the proceeds from the April 2017 and September 2017 financings, in order to fund its operations during the next twelve months from the issuance date of the quarterly financial statements contained herein, the Company may need to raise substantial additional funds through one or more of the following: issuance of additional debt or equity, or the completion of a licensing transaction for one or more of the Company’s pipeline assets. 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 and business activities, such as potential commercialization activities for Vitaros in the United States and potential 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. Warrant Liabilities The Company’s outstanding common stock warrants issued in connection with its February 2015 and January 2016 financings are classified as liabilities in the accompanying condensed 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 condensed consolidated statements of operations. The warrants issued in connection with the September 2016 financing were reclassified from warrant liabilities to stockholders’ equity as a result of an amendment to such warrants executed as part of the April 2017 Financing. The warrants issued in September 2016 were amended so that, under no circumstance or by any event outside of the Company’s control, can these awards be cash settled. As a result, such warrants are no longer accounted for as liabilities. The Company has issued other warrants that have similar terms whereas under no circumstance may the shares be settled in cash. As such, these warrants are equity-classified. See note 6 for further details. 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 its warrant liabilities measured at fair value on a recurring basis (in thousands) as of September 30, 2017 and December 31, 2016 : Quoted Market Prices for Identical Assets Significant Other Significant Total Warrant liabilities Balance as of September 30, 2017 $ — $ — $ 636 $ 636 Balance as of December 31, 2016 $ — $ — $ 846 $ 846 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 as of September 30, 2017 and December 31, 2016 : September 30, 2017 December 31, 2016 Risk-free interest rate 1.93%-1.94% 1.64%-1.99% Volatility 87.72%-88.33% 77.25%-81.03% Dividend yield — % — % Expected term 5.29-5.42 4.75-6.17 Weighted average fair value $ 0.73 $ 0.49 The following table is a reconciliation for all liabilities measured at fair value using Level 3 unobservable inputs (in thousands): Warrant liabilities Balance as of December 31, 2016 $ 846 Change in fair value measurement of warrant liability 588 Warrant liability reclassified to stockholders' equity (798 ) Balance as of September 30, 2017 $ 636 Of the inputs used to value the outstanding common stock warrant liabilities as of September 30, 2017 , the most subjective input is the Company’s estimate of expected volatility. Income (Loss) Per Common Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the same period. Diluted net income (loss) per share is computed by dividing net loss by the weighted average number of common shares and common equivalent shares outstanding during the same period. Common equivalent shares may be related to stock options, restricted stock, or warrants. The Company excludes common stock equivalents from the calculation of diluted net loss per share when the effect is anti-dilutive. As of September 30, 2017 2016 Outstanding stock options 391 490 Outstanding warrants 7,270 2,318 Restricted stock 721 116 Stock-Based Compensation The estimated grant date fair value of stock options granted to employees and directors is calculated based upon the closing stock price of the Company’s common stock on the date of the grant and recognized as stock-based compensation expense over the expected service period, which is typically approximated by the vesting period. The Company estimates the fair value of each option award on the date of grant using the Black-Scholes option pricing model. The table below presents the weighted average assumptions used by the Company to estimate the fair value of stock option grants using the Black-Scholes option-pricing model, as well as the resulting weighted average fair values at their issuance dates during the nine months ended September 30, 2016 . No stock options were granted during the first nine months of 2017. September 30, 2016 Risk-free interest rate 1.36%-1.78% Volatility 72.35%-80.02% Dividend yield — % Expected term 5.25-6.08 years Forfeiture rate 11.33 % Weighted average grant date fair value $ 7.23 A summary of the Company’s stock option activity under its stock option plans during the nine months ended September 30, 2017 is as follows (share amounts in thousands): Number of Weighted Outstanding as of December 31, 2016 415 $ 17.23 Cancelled (24 ) $ 15.32 Outstanding as of September 30, 2017 391 $ 17.34 A summary of the Company’s restricted stock unit activity under its stock option plans during the nine months ended September 30, 2017 is as follows (share amounts in thousands): Number of Weighted Average Grant Date Fair Value Unvested as of December 31, 2016 115 $ 5.11 Granted 873 $ 1.13 Vested (211 ) $ 1.70 Forfeited (56 ) $ 1.45 Unvested as of September 30, 2017 721 $ 1.57 The Company grants restricted stock units (“RSUs”) to its employees in order to retain and incentivize its employees to achieve its strategic objectives. During the first quarter of 2017, the Company granted approximately 0.5 million RSUs, one half of which will vest if the Company receives marketing approval of Vitaros in the United States by the FDA and the remaining half will vest on November 2018. During the second quarter of 2017, the Company granted approximately 0.4 million RSUs to its employees, one half of which vested upon the first open trading window in September 2017, following resubmission of the NDA to the FDA in August 2017, and the remaining half will vest if the Company receives marketing approval of Vitaros in the United States by the FDA. The RSUs are subject to the employee’s continued employment with the Company through the applicable date and subject to accelerated vesting upon a change in control of the Company. The RSUs granted to the Company’s officers are also subject to accelerated vesting pursuant to the terms of their existing employment agreements. The Company records expense related to its performance RSUs based on the probability of occurrence, which is reassessed each quarter. The following table summarizes the total stock-based compensation expense resulting from share-based awards recorded in the Company’s condensed consolidated statements of operations (in thousands): Three Months Ended Nine Months Ended 2017 2016 2017 2016 Research and development $ 57 $ 54 $ 193 $ 479 General and administrative 275 279 710 948 Total $ 332 $ 333 $ 903 $ 1,427 Segment Information The Company operates under one segment which develops pharmaceutical products. Recent Accounting Pronouncements In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting , which provided clarity on which changes to the terms or conditions of share-based payment awards require an entity to apply the modification accounting provisions required in Topic 718. The standard is effective for all entities for annual periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company does not expect the adoption of this ASU will have a material impact on its consolidated financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which clarifies the treatment of several cash flow categories. In addition, ASU 2016-15 clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use. This update is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted, including adoption in an interim period. The Company is currently evaluating whether the adoption of the new standard will have a material effect on its condensed consolidated financial statements and related disclosure. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers , the amendment of which addressed narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition as well as providing a practical expedient for contract modifications. In April 2016 and March 2016, the FASB issued ASU No. 2016-10 and ASU No. 2016-08, respectively, the amendments of which further clarified aspects of Topic 606: identifying performance obligations and the licensing and implementation guidance and intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations. The FASB issued the initial release of Topic 606 in ASU No. 2014-09, which requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. On July 9, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after that date. Early adoption of ASU 2016-10 is permitted but not before the original effective date (annual periods beginning after December 15, 2017). The Company plans to adopt the standard using a modified retrospective approach with the cumulative effect of adopting the standard recognized at the date of initial application. Due to the Company’s sale of certain assets and rights to Ferring in March 2017 (see note 2), the Company does not currently have a revenue stream. Accordingly, the adoption of this update on January 1, 2018 is not expected to have a material effect on its condensed consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 2016-2, Leases . The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating whether the adoption of the new standard will have a material effect on its condensed consolidated financial statements and related disclosures. |
