Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 26, 2015 | Jun. 28, 2013 | |
Document And Entity Information | |||
Entity Registrant Name | Echo Therapeutics, Inc. | ||
Entity Central Index Key | 1031927 | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Current Fiscal Year End Date | -19 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $24,732,724 | ||
Entity Common Stock, Shares Outstanding | 11,967,414 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2014 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current Assets: | ||
Cash and cash equivalents | $1,278,941 | $8,055,385 |
Cash restricted pursuant to letters of credit | 52,488 | 302,488 |
Current portion of deferred financing costs | 968,004 | |
Prepaid expenses and other current assets | 490,824 | 49,221 |
Total current assets | 1,822,253 | 9,375,098 |
Property and equipment, net | 1,138,593 | 1,495,807 |
Other assets: | ||
Intangible assets, net | 9,625,000 | 9,625,000 |
Deferred financing costs | 2,581,324 | |
Other assets | 9,990 | 12,066 |
Total other assets | 9,634,990 | 12,218,390 |
Total assets | 12,595,836 | 23,089,295 |
Current liabilities: | ||
Accounts payable | 1,801,469 | 1,036,320 |
Accrued and other current liabilities | 968,392 | 1,411,107 |
Deferred revenue from licensing arrangements, current portion | 76,428 | |
Current portion of capital lease obligation | 1,361 | |
Derivative warrant liability | 208,155 | 1,119,155 |
Total current liabilities | 2,978,016 | 3,644,371 |
Deferred revenue from licensing arrangements, net of current portion | 95,535 | 76,428 |
Total liabilities | 3,073,551 | 3,720,799 |
Stockholders' equity: | ||
Common stock, $0.01 par value, authorized 150,000,000 shares, issued and outstanding 11,776,578 and 4,437,346 shares at December 31, 2013 and 2012, respectively | 126,295 | 117,764 |
Additional paid-in capital | 137,292,157 | 132,192,648 |
Accumulated deficit | -127,932,066 | -112,969,412 |
Total stockholders' equity | 9,522,285 | 19,368,496 |
Total liabilities and stockholders' equity | 12,595,836 | 23,089,295 |
SeriesCPreferredStock [Member] | ||
Stockholders' equity: | ||
Preferred Stock, $0.01 par value; 40,000,000 shares authorized: C - 10,000 shares authorized; issued and outstanding 1,000 shares; D - 3,600,000 shares authorized; issued and outstanding 1,000,000 shares; E - 1,748,613 shares authorized, issued and outstanding; F - 5,000,000 shares authorized; issued and outstanding 840,336 shares | 10 | 10 |
SeriesDPreferredStock [Member] | ||
Stockholders' equity: | ||
Preferred Stock, $0.01 par value; 40,000,000 shares authorized: C - 10,000 shares authorized; issued and outstanding 1,000 shares; D - 3,600,000 shares authorized; issued and outstanding 1,000,000 shares; E - 1,748,613 shares authorized, issued and outstanding; F - 5,000,000 shares authorized; issued and outstanding 840,336 shares | 10,000 | 10,000 |
Series E Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred Stock, $0.01 par value; 40,000,000 shares authorized: C - 10,000 shares authorized; issued and outstanding 1,000 shares; D - 3,600,000 shares authorized; issued and outstanding 1,000,000 shares; E - 1,748,613 shares authorized, issued and outstanding; F - 5,000,000 shares authorized; issued and outstanding 840,336 shares | 17,486 | 17,486 |
Series F Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred Stock, $0.01 par value; 40,000,000 shares authorized: C - 10,000 shares authorized; issued and outstanding 1,000 shares; D - 3,600,000 shares authorized; issued and outstanding 1,000,000 shares; E - 1,748,613 shares authorized, issued and outstanding; F - 5,000,000 shares authorized; issued and outstanding 840,336 shares | $8,403 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Stockholders' Equity: | ||
Convertible Preferred Stock: par value | $0.01 | |
Common stock, par value | $0.01 | $0.00 |
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, outstanding | 12,629,695 | 12,629,695 |
Common stock, Share Issued | 12,629,695 | 12,629,695 |
SeriesCPreferredStock [Member] | ||
Stockholders' Equity: | ||
Convertible Preferred Stock: authorized | 10,000 | 10,000 |
Convertible Preferred Stock: outstanding | 1,000 | 9,974.18 |
SeriesDPreferredStock [Member] | ||
Stockholders' Equity: | ||
Convertible Preferred Stock: authorized | 3,600,000 | 3,600,000 |
Convertible Preferred Stock: outstanding | 1,000 | 3,006,000 |
Series E Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Convertible Preferred Stock: authorized | 1,748,613 | |
Series F Preferred Stock [Member] | ||
Stockholders' Equity: | ||
Convertible Preferred Stock: authorized | 5,000,000 | |
Convertible Preferred Stock: outstanding | 840,336 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Statement [Abstract] | ||
Licensing revenues | $57,321 | $27,600 |
Operating expenses: | ||
Research and development | 4,962,196 | 12,991,502 |
Selling, general and administrative | 7,415,049 | 6,680,983 |
Total operating expenses | 12,377,245 | 19,672,485 |
Loss from operations | -12,319,924 | -19,644,885 |
Other income (expense): | ||
Interest income | 978 | 3,052 |
Interest expense | -3,551,482 | -3,903,116 |
Other income | 1,888 | 11,566 |
Loss on disposals of assets | -1,114 | |
Gain on revaluation of derivative warrant liability | 911,000 | 4,465,986 |
Other income (expense), net | -2,638,730 | 577,488 |
Net loss before taxes | -14,958,654 | -19,067,397 |
State income taxes | 4,000 | |
Net loss | -14,962,654 | -19,067,397 |
Deemed dividend on beneficial conversion feature convertible preferred stock | -350,000 | -371,140 |
Net loss applicable to common shareholders | ($15,312,654) | ($19,438,537) |
Net loss per common share, basic and diluted | ($1.24) | ($2.33) |
Basic and diluted weighted average common shares outstanding | 12,308,254 | 8,359,837 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities: | ||
Net loss | ($14,962,654) | ($19,067,397) |
Depreciation and amortization | 392,727 | 391,595 |
Share-based compensation, net | 1,373,968 | 1,244,342 |
Fair value of common stock issued for services | 8,404 | 96,375 |
Gain on revaluation of derivative warrant liability | -911,000 | -4,465,986 |
Loss on disposals of assets | 1,114 | |
Amortization of discount on note payable | 2,879,166 | |
Amortization of deferred financing costs | 3,549,328 | 968,004 |
Prepaid expenses and other current assets | -441,603 | 26,405 |
Deposits and other assets | -1,500 | |
Accounts payable | 765,149 | -1,282,899 |
Deferred revenue from licensing arrangements | -57,321 | -27,600 |
Accrued and other liabilities | -442,715 | -170,341 |
Net cash used in operating activities | -10,724,603 | -19,409,836 |
Cash Flows from Investing Activities: | ||
Purchase of property and equipment | -36,627 | -249,007 |
Decrease in restricted cash | 250,000 | 104,975 |
Decrease in security deposit | 2,076 | |
Net cash provided by (used in) investing activities | 215,449 | -144,032 |
Cash Flows From Financing Activities: | ||
Repayment of credit facility | -3,000,000 | |
Proceeds from equity issuances | 3,293,397 | 26,864,570 |
Principal payments on capital lease obligations | -1,362 | -2,527 |
Capital contribution | 440,675 | |
Net cash provided by financing activities | 3,732,710 | 23,862,043 |
Net increase (decrease) in cash and cash equivalents | -6,776,444 | 4,308,175 |
Cash and cash equivalents, beginning of year | 8,055,385 | 3,747,210 |
Cash and cash equivalents, end of year | 1,278,941 | 8,055,385 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 2,154 | 275 |
Cash paid for income taxes | ||
Deemed dividend on beneficial conversion feature of convertible preferred stock | 350,000 | 371,140 |
Conversion of convertible preferred stock into Common Stock at par value | $20,150 |
CONSOLIDATED_STATEMENTS_OF_CHA
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (USD $) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, Value at Dec. 31, 2012 | $30,160 | $44,374 | $104,058,087 | ($93,902,015) | $10,230,606 |
Beginning balance, Shares at Dec. 31, 2012 | 3,015,974 | 4,437,346 | |||
Proceeds from issuance of Common Stock and warrants, net, Value | 61,963 | 21,902,607 | 21,964,570 | ||
Proceeds from issuance of Common Stock and warrants, net, Shares | 6,196,605 | ||||
Fair value of Common Stock issued for services, Value | 92 | 96,283 | 96,375 | ||
Fair value of Common Stock issued for services, Shares | 9,122 | ||||
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Value | 17,486 | 696 | 4,881,818 | 4,900,000 | |
Proceeds from issuance of Common Stock, Series E Preferred Stock and warrants, net of cash issuance cost, Shares | 1,748,613 | 69,569 | |||
Issuance of Series C and D Preferred Stock and warrants, net of cash issuance costs, Value | -20,150 | 10,980 | 9,170 | ||
Issuance of Series C and D Preferred Stock and warrants, net of cash issuance costs, Shares | -2,014,974 | 1,098,019 | |||
Share-based compensation, net of restricted stock cancellations, Value | -341 | 1,244,683 | 1,244,342 | ||
Share-based compensation, net of restricted stock cancellations, Shares | -34,083 | ||||
Net Loss | -19,067,397 | -19,067,397 | |||
Ending Balance at Dec. 31, 2013 | 27,496 | 117,764 | 132,192,648 | -112,969,412 | 19,368,496 |
Ending Balance, Shares at Dec. 31, 2013 | 2,749,613 | 11,776,578 | |||
Proceeds from issuance of Common Stock and warrants, net, Value | 8,727 | 2,341,273 | 2,350,000 | ||
Proceeds from issuance of Common Stock and warrants, net, Shares | 872,728 | ||||
Fair value of Common Stock issued for services, Value | 26 | 8,378 | 8,404 | ||
Fair value of Common Stock issued for services, Shares | 2,636 | ||||
Issuance of Series F Preferred Stock and warrants, net of cash issuance costs, Value | 8,403 | 934,993 | 943,396 | ||
Issuance of Series F Preferred Stock and warrants, net of cash issuance costs, Shares | 840,336 | ||||
Capital contribution | 440,675 | 440,675 | |||
Share-based compensation, net of restricted stock cancellations, Value | -222 | 1,374,190 | 1,373,968 | ||
Share-based compensation, net of restricted stock cancellations, Shares | -22,247 | ||||
Net Loss | -14,962,654 | -14,962,654 | |||
Ending Balance at Dec. 31, 2014 | $35,899 | $126,295 | $137,292,157 | ($127,932,066) | $9,522,285 |
Ending Balance, Shares at Dec. 31, 2014 | 3,589,949 | 12,629,695 |
ORGANIZATION_AND_BASIS_OF_PRES
ORGANIZATION AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
ORGANIZATION AND BASIS OF PRESENTATION | Echo Therapeutics, Inc. (the "Company") is a medical device company with expertise in advanced skin permeation technology. The Company is developing its non-invasive, wireless continuous glucose monitoring (CGM) system with potential use in the wearable-health consumer market and the diabetes outpatient market. A significant longer-term opportunity may also exist in the hospital setting. Echo has also developed its needle-free skin preparation device as a platform technology that allows for enhanced skin permeation enabling extraction of analytes, such as glucose, enhanced delivery of topical pharmaceuticals and other applications. |
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Sontra Medical, Inc., a Delaware corporation (and all significant intercompany balances have been eliminated by consolidation) and have been prepared on a basis assuming that the Company is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Certain amounts in prior periods have been reclassified to conform to current presentation. | |
On June 7, 2013, the Company effected a 1-for-10 reverse stock split of its common stock. All share and per share information was retroactively restated to reflect this reverse stock split. |
LIQUIDITY_AND_MANAGEMENTS_PLAN
LIQUIDITY AND MANAGEMENTS' PLANS | 12 Months Ended |
Dec. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
LIQUIDITY AND MANAGEMENTS' PLANS | The accompanying financial statements have been prepared on a basis that assumes that the Company will continue as a going concern and that contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As of December 31, 2014, the Company had cash of approximately $1,300,000, working capital deficit of approximately $1,156,000, and an accumulated deficit of approximately $128,000,000. The Company continues to incur recurring losses from operations. The Company will need to obtain proceeds under its current financing arrangement and secure additional capital to fund its product development, research, manufacturing and clinical programs in accordance with its current planned operations. The Company has funded its operations in the past primarily through debt and equity issuances. Management intends to utilize its current financing arrangement and will continue to pursue additional financing to fund its operations. Management believes that it will be successful in obtaining proceeds from their current financing arrangement and raising additional capital. No assurances can be given that additional capital will be available on terms acceptable to the Company. The accompanying financial statements do not include any adjustments that might result from the outcome of the uncertainty. |
Subsequent to December 31, 2014, the Company received cash proceeds of $1,500,000 from a $4,000,000 Equity financing it arranged in December 2014 ($1,000,000 was received in December 2014). See Note 8. | |
SUMMARY_OF_SIGNIFICANT_ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended | |
Dec. 31, 2014 | ||
Summary Of Significant Accounting Policies | ||
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | The accompanying consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. | |
Use of Estimates | ||
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management's estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for the valuation of intangible assets, derivatives, share based compensation and valuation allowances related to deferred income taxes. The Company periodically reviews these matters and reflects changes in estimates as appropriate. Actual results could materially differ from those estimates. | ||
Cash and Cash Equivalents | ||
The Company considers all highly liquid investments with maturities of ninety days or less to be cash equivalents. Cash equivalents consisted of money market funds at a major banking institution as of December 31, 2014 and 2013. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has never experienced any previous losses related to these uninsured balances. Restricted cash consists of a $52,488 letter of credit in favor of a landlord as of December 31, 2014 and additionally a $250,000 letter of credit issued in favor of one of the Company’s key product development vendors as of December 31, 2013, respectively. | ||
Intangible Assets and Other Long-Lived Assets | ||
The Company records acquired intangible assets at the acquisition date fair value. Intangible assets related to technology are expected to be amortized over the period of expected benefit and will commence upon revenue generation. | ||
The Company reviews intangible assets at least annually and whenever events or circumstances change that indicated impairment may have occurred to determine if any adverse conditions exist that would indicate impairment or a change in the remaining useful life of any intangible asset. Conditions that would indicate impairment and trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, or an adverse action or assessment by a regulator. While the Company uses available information to prepare estimates and to perform impairment evaluations, actual results could differ significantly from these estimates or related projections, resulting in impairment related to recorded balances. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. The Company performs a regular review of the underlying assumptions, circumstances, time projections and revenue and expense estimates to decide if there is a possible impairment. In reviewing the intangible assets as of December 31, 2014, the Company concluded that there was no impairment of the carrying value of such long-lived assets. | ||
For other long-lived assets, the Company evaluates quarterly whether events or circumstances have occurred that indicate that the carrying value of these assets may be impaired. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. | ||
No impairment losses were recorded for the years ended December 31, 2014 and 2013. | ||
Property and Equipment | ||
Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. The Company expenses normal maintenance and repair costs as incurred. Gain and loss on disposal of property and equipment is recognized in the period incurred. Leasehold improvements are amortized over the life of the lease or the related asset, whichever is shorter. | ||
Share-Based Payments | ||
The Company recognizes compensation costs, net of estimated forfeitures, resulting from the issuance of stock-based awards to employees and directors as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. The Company’s policy is to grant employee and director stock options with an exercise price equal to or greater than the fair value of the Common Stock at the date of grant. | ||
Forfeitures are initially estimated based on historical information and subsequently updated over the life of the awards to ultimately reflect actual forfeitures. As a result, changes in forfeiture activity can influence the amount of stock compensation cost recognized from period to period. | ||
The Company recognizes compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. | ||
The fair value of options is calculated primarily using the Black-Scholes option pricing model. This option valuation model requires input of assumptions including, among others, the volatility of our stock price, the expected life of the option and the risk-free interest rate. We estimate the volatility of our stock price using historical prices. We estimate the expected life of our option using the average of the vesting period and the contractual term of the option. The estimated forfeiture rate is based on historical forfeiture information as well as subsequent events occurring prior to the issuance of the financial statements. Because our stock options have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide a reliable single measure of fair value of our stock options. | ||
In calculating the compensation expense for certain more complex stock options granted, we utilize a binomial lattice-based valuation model. Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. | ||
Fair Values of Assets and Liabilities | ||
The Company groups its financial assets and financial 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. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. | |
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. This category generally includes certain private equity investments and long-term derivative contracts. | |
The Company's financial liabilities measured at fair value on December 31, 2014 and 2013 consists solely of a derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 7). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. These assumptions include the fair value of the underlying stock, risk-free interest rates, volatility, expected life and dividend rates. The Company has no financial assets measured at fair value. | ||
The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. There were no such adjustments in the years ended December 31, 2014 and 2013. | ||
Derivative Instruments | ||
The Company generally does not use derivative instruments to hedge exposures to cash-flow 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, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash 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 subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. | ||
Concentration of Credit Risk | ||
The Company has no significant off-balance-sheet risk. Financial instruments, which subject the Company to credit risk, principally consist of cash and cash equivalents. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high-quality financial institutions. | ||
Financial Instruments | ||
The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts payable and capital lease obligation, approximates their carrying value due to the short-term nature of these instruments and their market terms. | ||
Net Loss per Common Share | ||
Basic and diluted net loss per share of Common Stock has been computed by dividing the net loss applicable to common stockholders in each period by the weighted average number of shares of Common Stock outstanding during such period. For the periods presented, options, warrants and convertible securities were anti-dilutive and therefore excluded from diluted loss per share calculations. | ||
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 the development of transdermal skin permeation and diagnostic medical devices and specialty pharmaceutical drugs. As of December 31, 2014 and 2013, all of the Company’s assets were located in the United States. | ||
Research and Development Expenses | ||
The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costs of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs. | ||
Income Taxes | ||
The Company is primarily subject to U.S. federal, Massachusetts and Pennsylvania state income tax. Tax years subsequent to 2011 remain open to examination by U.S. federal and state tax authorities. | ||
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, since the Company cannot be assured of realizing the deferred tax asset, a full valuation allowance has been provided. | ||
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. There were no uncertain tax position liabilities recorded at December 31, 2014 and 2013. | ||
The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2014 and 2013, the Company had no accruals for interest or penalties related to income tax matters. | ||
Licensing and Other Revenue Recognition | ||
To date, the Company has generated revenue primarily from licensing agreements, including upfront, nonrefundable license fees, with collaborators and licensees. The Company recognizes revenue when the following criteria have been met: | ||
· persuasive evidence of an arrangement exists; | ||
· delivery has occurred and risk of loss has passed; | ||
· the price to the buyer is fixed or determinable; and | ||
· collectability is reasonably assured. | ||
From time to time, the Company receives upfront, nonrefundable payments for the licensing of its intellectual property upon the signing of a license agreement. The Company believes that these payments generally are not separable from the payments it receives for providing research and development services because the license does not have stand-alone value from the research and development services it provides under its agreements. Accordingly, the Company accounts for these elements as one unit of accounting and recognizes upfront, nonrefundable payments as revenue on a straight-line basis over its contractual or estimated performance period. Revenue from the reimbursement of research and development efforts is recognized as the services are performed based on proportional performance adjusted from time to time for any delays or acceleration in the development of the product and is included in Other Revenue. The Company determines the basis of the estimated performance period based on the contractual requirements of its collaboration agreements. At each reporting period, the Company evaluates whether events warrant a change in the estimated performance period. | ||
Distinguishment of Liabilities from Equity | ||
The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify convertible instruments, such as the Company’s preferred stock. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares. Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the preferred stock or other financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. | ||
Initial Measurement | ||
The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. For warrants that are recorded as equity, the Company uses a Black Scholes model. | ||
Subsequent Measurement | ||
The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income. The Company uses the Black Scholes pricing method, which is not materially different from a binomial lattice valuation methodology utilizing Level 3 inputs, to determine the fair value of derivative liabilities resulting from warrants that are recognized as liabilities. | ||
Recently Issued Accounting Pronouncements | ||
On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for public entities for annual reporting periods beginning after December 15, 2017. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should 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. ASU 2014-09 shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on the consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2018. | ||
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern—Disclosures of Uncertainties about an entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides new guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the impact of the requirements of ASU 2014-15. |
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended | |
Dec. 31, 2014 | ||
Property, Plant and Equipment [Abstract] | ||
PROPERTY AND EQUIPMENT | The accompanying consolidated financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. | |
Use of Estimates | ||
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management's estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for the valuation of intangible assets, derivatives, share based compensation and valuation allowances related to deferred income taxes. The Company periodically reviews these matters and reflects changes in estimates as appropriate. Actual results could materially differ from those estimates. | ||
Cash and Cash Equivalents | ||
The Company considers all highly liquid investments with maturities of ninety days or less to be cash equivalents. Cash equivalents consisted of money market funds at a major banking institution as of December 31, 2014 and 2013. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has never experienced any previous losses related to these uninsured balances. Restricted cash consists of a $52,488 letter of credit in favor of a landlord as of December 31, 2014 and additionally a $250,000 letter of credit issued in favor of one of the Company’s key product development vendors as of December 31, 2013, respectively. | ||
Intangible Assets and Other Long-Lived Assets | ||
The Company records acquired intangible assets at the acquisition date fair value. Intangible assets related to technology are expected to be amortized over the period of expected benefit and will commence upon revenue generation. | ||
The Company reviews intangible assets at least annually and whenever events or circumstances change that indicated impairment may have occurred to determine if any adverse conditions exist that would indicate impairment or a change in the remaining useful life of any intangible asset. Conditions that would indicate impairment and trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, or an adverse action or assessment by a regulator. While the Company uses available information to prepare estimates and to perform impairment evaluations, actual results could differ significantly from these estimates or related projections, resulting in impairment related to recorded balances. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. The Company performs a regular review of the underlying assumptions, circumstances, time projections and revenue and expense estimates to decide if there is a possible impairment. In reviewing the intangible assets as of December 31, 2014, the Company concluded that there was no impairment of the carrying value of such long-lived assets. | ||
For other long-lived assets, the Company evaluates quarterly whether events or circumstances have occurred that indicate that the carrying value of these assets may be impaired. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. | ||
No impairment losses were recorded for the years ended December 31, 2014 and 2013. | ||
Property and Equipment | ||
Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. The Company expenses normal maintenance and repair costs as incurred. Gain and loss on disposal of property and equipment is recognized in the period incurred. Leasehold improvements are amortized over the life of the lease or the related asset, whichever is shorter. | ||
Share-Based Payments | ||
The Company recognizes compensation costs, net of estimated forfeitures, resulting from the issuance of stock-based awards to employees and directors as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. The Company’s policy is to grant employee and director stock options with an exercise price equal to or greater than the fair value of the Common Stock at the date of grant. | ||
Forfeitures are initially estimated based on historical information and subsequently updated over the life of the awards to ultimately reflect actual forfeitures. As a result, changes in forfeiture activity can influence the amount of stock compensation cost recognized from period to period. | ||
The Company recognizes compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. | ||
The fair value of options is calculated primarily using the Black-Scholes option pricing model. This option valuation model requires input of assumptions including, among others, the volatility of our stock price, the expected life of the option and the risk-free interest rate. We estimate the volatility of our stock price using historical prices. We estimate the expected life of our option using the average of the vesting period and the contractual term of the option. The estimated forfeiture rate is based on historical forfeiture information as well as subsequent events occurring prior to the issuance of the financial statements. Because our stock options have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide a reliable single measure of fair value of our stock options. | ||
In calculating the compensation expense for certain more complex stock options granted, we utilize a binomial lattice-based valuation model. Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. | ||
Fair Values of Assets and Liabilities | ||
The Company groups its financial assets and financial 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. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. | |
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. This category generally includes certain private equity investments and long-term derivative contracts. | |
The Company's financial liabilities measured at fair value on December 31, 2014 and 2013 consists solely of a derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 7). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. These assumptions include the fair value of the underlying stock, risk-free interest rates, volatility, expected life and dividend rates. The Company has no financial assets measured at fair value. | ||
The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. There were no such adjustments in the years ended December 31, 2014 and 2013. | ||
Derivative Instruments | ||
The Company generally does not use derivative instruments to hedge exposures to cash-flow 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, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash 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 subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. | ||
Concentration of Credit Risk | ||
The Company has no significant off-balance-sheet risk. Financial instruments, which subject the Company to credit risk, principally consist of cash and cash equivalents. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high-quality financial institutions. | ||
Financial Instruments | ||
The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts payable and capital lease obligation, approximates their carrying value due to the short-term nature of these instruments and their market terms. | ||
Net Loss per Common Share | ||
Basic and diluted net loss per share of Common Stock has been computed by dividing the net loss applicable to common stockholders in each period by the weighted average number of shares of Common Stock outstanding during such period. For the periods presented, options, warrants and convertible securities were anti-dilutive and therefore excluded from diluted loss per share calculations. | ||
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 the development of transdermal skin permeation and diagnostic medical devices and specialty pharmaceutical drugs. As of December 31, 2014 and 2013, all of the Company’s assets were located in the United States. | ||
Research and Development Expenses | ||
The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costs of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs. | ||
Income Taxes | ||
The Company is primarily subject to U.S. federal, Massachusetts and Pennsylvania state income tax. Tax years subsequent to 2011 remain open to examination by U.S. federal and state tax authorities. | ||
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, since the Company cannot be assured of realizing the deferred tax asset, a full valuation allowance has been provided. | ||
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. There were no uncertain tax position liabilities recorded at December 31, 2014 and 2013. | ||
The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2014 and 2013, the Company had no accruals for interest or penalties related to income tax matters. | ||
Licensing and Other Revenue Recognition | ||
To date, the Company has generated revenue primarily from licensing agreements, including upfront, nonrefundable license fees, with collaborators and licensees. The Company recognizes revenue when the following criteria have been met: | ||
· persuasive evidence of an arrangement exists; | ||
· delivery has occurred and risk of loss has passed; | ||
· the price to the buyer is fixed or determinable; and | ||
· collectability is reasonably assured. | ||
From time to time, the Company receives upfront, nonrefundable payments for the licensing of its intellectual property upon the signing of a license agreement. The Company believes that these payments generally are not separable from the payments it receives for providing research and development services because the license does not have stand-alone value from the research and development services it provides under its agreements. Accordingly, the Company accounts for these elements as one unit of accounting and recognizes upfront, nonrefundable payments as revenue on a straight-line basis over its contractual or estimated performance period. Revenue from the reimbursement of research and development efforts is recognized as the services are performed based on proportional performance adjusted from time to time for any delays or acceleration in the development of the product and is included in Other Revenue. The Company determines the basis of the estimated performance period based on the contractual requirements of its collaboration agreements. At each reporting period, the Company evaluates whether events warrant a change in the estimated performance period. | ||
Distinguishment of Liabilities from Equity | ||
The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify convertible instruments, such as the Company’s preferred stock. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares. Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the preferred stock or other financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. | ||
Initial Measurement | ||
The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. For warrants that are recorded as equity, the Company uses a Black Scholes model. | ||
Subsequent Measurement | ||
The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income. The Company uses the Black Scholes pricing method, which is not materially different from a binomial lattice valuation methodology utilizing Level 3 inputs, to determine the fair value of derivative liabilities resulting from warrants that are recognized as liabilities. | ||
Recently Issued Accounting Pronouncements | ||
On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for public entities for annual reporting periods beginning after December 15, 2017. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should 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. ASU 2014-09 shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on the consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2018. | ||
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern—Disclosures of Uncertainties about an entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides new guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the impact of the requirements of ASU 2014-15. |
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
INTANGIBLE ASSETS | As of December 31, 2014 and 2013, intangible assets are summarized as follows: | ||||
Carrying Value | |||||
Technology related intangible assets: | |||||
Patents for the AzoneTS-based product candidates and formulation | 1,305,000 | ||||
Drug Master Files containing formulation, clinical and safety documentation used by the FDA | 1,500,000 | ||||
In-process pharmaceutical products for 2 indications | 6,820,000 | ||||
Total technology related intangible assets | $ | 9,625,000 | |||
Estimated amortization expense for each of the next five years is as follows: | |||||
Estimated | |||||
Amortization | |||||
Expense | |||||
2015 | $ | — | |||
2016 | — | ||||
2017 | 302,000 | ||||
2018 | 2,398,000 | ||||
2019 | 4,601,000 | ||||
Thereafter | 2,324,000 | ||||
Total | $ | 9,625,000 | |||
OPERATING_LEASE_COMMITMENTS
OPERATING LEASE COMMITMENTS | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Notes to Financial Statements | |||||
OPERATING LEASE COMMITMENTS | The Company leases approximately 37,000 square feet of manufacturing, laboratory and office space in a single-story building located in Franklin, Massachusetts under a lease expiring October 31, 2017. | ||||
The Company leased approximately 7,900 square feet of corporate office space in a multi-story building located in Philadelphia, Pennsylvania under a lease expiring May 31, 2017. The company terminated this lease early and moved to Iselin, New Jersey on January 15, 2015 where the Company has leased 2,800 square feet of office space for 38 months at a monthly rental of approximately $7,700. The Company posted a $77,000 Letter of Credit to secure the lease which is reduced to $38,500 after nineteen months of occupancy, assuming no defaults, as defined. | |||||
The Company leased a corporate apartment in Franklin, Massachusetts through September 2014 and a corporate apartment in Philadelphia, Pennsylvania on a month-to-month basis. | |||||
Future minimum lease payments for each of the next five years under these operating leases at December 31, 2014 are approximately as follows: | |||||
Franklin | |||||
Year Ending December 31, | |||||
2015 | $ | 444,000 | |||
2016 | 455,000 | ||||
2017 | 382,000 | ||||
Total | $ | 1,281,000 | |||
The Company’s facilities lease expense was approximately $514,000 and $677,000 for the years ended December 31, 2014 and 2013, respectively. | |||||
DERIVATIVE_WARRANT_LIABILITY
DERIVATIVE WARRANT LIABILITY | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
DERIVATIVE WARRANT LIABILITY | In August 2012, the Company and Platinum-Montaur Life Sciences, LLC (PM) entered into a Loan Agreement whereby PM agreed to provide a credit facility (CF) to the Company of up to $20,000,000 dependent on the achievement of certain clinical and regulatory milestones set forth in the Loan Agreement, with an initial available principal amount of $5,000,000 (the “Maximum Draw Amount”). The Company issued to PM a Promissory Note dated August 31, 2012 (the “Note”), with a maturity date of five years from the date of closing (the “Maturity Date”). The Company used the proceeds from the CF to fund its operations. As a result of the Company's 2013 financing transactions, this Credit Facility was only available at PM’s discretion. The draws under the agreement bore interest at 10% per annum. Obligations under the CF were guaranteed by the Company’s subsidiary, Sontra Medical, Inc. The CF was terminated on October 30, 2014. | ||||||||
The Loan Agreement called for each $1,000,000 of funds borrowed pursuant to the Credit Facility, the Company will would issue PM a warrant to purchase 100,000 shares of Common Stock, with a term of five years and an exercise price equal to 150% of the market price of the Common Stock at the time of the draw, but in no event less than $20.00 or more than $40.00 per share (together with the Commitment Warrant, the “Warrants”). All of the Warrants are immediately exercisable and will have a term of five years from the issue date. The exercise price of the Warrants is subject to adjustment for stock splits, combinations or similar events. An exercise under the Warrants may not result in the holder beneficially owning more than 4.99% or 9.99%, as applicable, of all of the Common Stock outstanding at the time; provided, however, that a holder may waive the 4.99% ownership limitation upon sixty-one (61) days’ advance written notice to the Company. Over a three month period beginning in September 2012, three separate draws totaling $3,000,000 were taken under the CF and five year warrants to purchase 300,000 shares of Common Stock were issued at prices ranging from $21.10 to $22.70. The warrants were valued at $3,455,000, with $455,000 charged to interest expense in 2012, and $3,000,000 recorded as a debt discount against the note and accreted to interest expense over the life of the draws. The warrants contained certain beneficial ownership blockers requested by PM. On March 1, 2013, the Company elected to prepay the $3,000,000 of principal and $113,166 of accrued and unpaid interest outstanding under the CF. After such date, no principal amount was outstanding under the CF. Concurrent with this prepayment, the Company recorded non-cash interest expense of $2,879,166 in 2013 relating to the unamortized debt discount on the outstanding draws paid off. | |||||||||
In connection with the CF, the Company issued PM a warrant to purchase 400,000 shares of its Common Stock, with a term of five years and an exercise price of $20.00 per share (the “Commitment Warrant” or “CW”). The CW was valued at $4,840,000 and recorded as a deferred financing asset and a derivative warrant liability. The deferred financing cost was then amortized over the life of the CF. $3,549,325 and $968,004 were charged to interest expense in 2014 and 2013, respectively. | |||||||||
The requisite accounting related to the derivative warrant liability requires the Company to remeasure the value of the underlying warrants and report the effect of the changes on our operations until the warrants expire. The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying common stock for each reporting period. | |||||||||
Changes in fair value of the derivative financial instruments are recognized currently in the Statements of Operations as a Gain (Loss) on Revaluation of Derivative Warrant Liability. The changes in the fair value of the derivative warrant liability for the years ended 2014 and 2013 resulted in gains of $911,000 and $4,465,986, respectively. | |||||||||
The table below presents the changes in the derivative warrant liability, which is measured at fair value on a recurring basis and classified as Level 3 in fair value hierarchy (see Note 3): | |||||||||
2014 | 2013 | ||||||||
Derivative warrant liability as of January 1 | $ | 1,119,155 | $ | 5,585,141 | |||||
Total unrealized losses included in net loss | 333,000 | 1,671,682 | |||||||
Total unrealized gains included in net loss | (1,244,000 | ) | (5,985,000 | ) | |||||
Total realized gains included in net loss | — | (152,668 | ) | ||||||
Gain on Revaluation | 911,000 | 4,465,986 | |||||||
Derivative warrant liability as of December 31 | $ | 208,155 | $ | 1,119,155 | |||||
None of the derivative warrants were exercised in 2014 or 2013 pursuant to cashless exercise provisions. | |||||||||
EQUITY_FINANCINGS
EQUITY FINANCINGS | 12 Months Ended |
Dec. 31, 2014 | |
Debt Disclosure [Abstract] | |
EQUITY FINANCINGS | 2013 Financings |
On January 31 and February 1, 2013 (First Financing) and June 13, 2013 (Second Financing), the Company entered into underwriting agreements (collectively, the “Underwriting Agreements”) with Aegis Capital Corp., as a representative of several underwriters, with respect to the issuance and sale in an underwritten public offering by the Company. In the First Financing, the Company issued an aggregate 1,567,855 shares of the Company’s Common Stock, at a price to the public of $7.50 per share (including 204,500 shares sold pursuant to the over-allotment option), and in the Second Financing, the Company issued an aggregate of 4,628,750 shares of the Company’s Common Stock (including 603,750 shares sold pursuant to the over-allotment option), at a price to the public of $2.70 per share. The net proceeds in the First Financing, after deducting the issuance costs for the underwriter’s discount and other offering expenses of $1,132,650, was approximately $10,626,000. The net proceeds in the Second Financing, after deducting the issuance costs for the underwriter’s discount and other offering expenses of $1,159,150, was approximately $11,338,000. | |
In December 2013, in connection with a licensing transaction, the Company entered into (i) a Securities Purchase Agreement with Platinum Partners Value Arbitrage Fund L.P. (PPVA) and Platinum Partners Liquid Opportunity Master Fund L.P. (PPLO, and together with PPVA, the “Platinum Partners”) (the “Platinum Securities Purchase Agreement”) and (ii) a Securities Purchase Agreement with Medical Technologies Innovation Asia, LTD. (“MTIA”) and Beijing Sino Tau Shang Pin Tech and Development Corp. (“MTIA Affiliate”, and together with MTIA, the “China Purchasers”) (the “MTIA Securities Purchase Agreement”, and together with the Platinum Securities Purchase Agreement, the “Securities Purchase Agreements” or “SPA”). | |
Pursuant to the Platinum SPA, the Platinum Partners purchased 69,569 shares of the Company’s Common Stock at $2.75 per share, a premium to the closing price of $2.71 per share on December 9, 2013. In addition, the Platinum Partners purchased a total of 1,748,613 shares of Series E at a purchase price of $2.75 per share, which, under certain conditions, are exchangeable into shares of the Company’s Common Stock on a one-for-one basis. The conversion of Preferred Stock into shares of Common Stock, however, is subject to a restriction, which prohibits the conversion of shares of Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by the Platinum Partners and their affiliates at such time, the number of shares of Common Stock which would result in Platinum Partners and their affiliates beneficially owning in excess of 19.99% of all of the Company’s Common Stock outstanding at such time. Under the terms of the Platinum SPA, the Platinum Partners also received 181,818 warrants, having a five-year term and an exercise price of $2.75 per warrant. The warrants are exercisable six months and one day following the issuance date thereof. Under the terms of the Platinum SPA, the Company has, at the request of the Platinum Partners, agreed to prepare a proxy statement and seek shareholder approval of the issuance of the Common Stock underlying the Preferred Stock and the warrants if Platinum Partners has a beneficial ownership greater than 19.9%. The Company received gross proceeds of $5,000,000 from the sale of the securities to the Platinum Partners on December 10, 2013 and incurred issuance costs of $100,000. | |
In connection with the issuance of this Series E, the conversion feature of Series E was considered beneficial, or “in the money”, at issuance due to a conversion rate that allows the investor to obtain the Common Stock at below market price. The Company recorded a deemed dividend on the beneficial conversion feature of $371,140. | |
Further, pursuant to the Platinum SPA and subject to certain conditions, the Company agreed to nominate and use its reasonable best efforts to cause to be elected and cause to remain as a director on the Company’s board of directors (the “Board”) until the Company’s 2014 annual meeting of stockholders, one individual designated by the Platinum Partners (“Platinum Partners Designee”). Additionally, subject to certain conditions, the Company agreed to nominate, and solicit for election by the stockholders, the Platinum Partners Designee at the Company’s 2014 annual meeting of stockholders. Under the terms of the MTIA Securities Purchase Agreement, as amended, upon the Company’s receipt of all of the proceeds from the China Purchasers, the Company will allow one individual designated by the China Purchasers to attend meetings of the Board as an observer until the date of the 2015 annual meeting of stockholders. | |
So long as the Platinum Partners hold at least ten percent (10%) of the outstanding Common Stock, they have a right, subject to certain conditions, to purchase debt or equity securities of any kind that the Company may determine to issue in the future. The China Purchasers have the same right. This subscription right terminates upon a consolidation, merger, restructuring, reorganization, recapitalization or other form of acquisition of or by the Company that result in a change of control. | |
The Platinum Partners and the China Purchasers are also entitled to certain piggy-back registration rights. | |
2014 Financings | |
Pursuant to the MTIA Securities Purchase Agreement in December 2013, the Company had intended to sell 1,818,182 shares of its Common Stock and issue Warrants to purchase 181,818 shares of its Common Stock to MTIA for an aggregate purchase price of $5,000,000. | |
As of June 30, 2014, the Company had not received the full proceeds of the sale of the securities from MTIA with the parties having previously extended the due date for the receipt of all such proceeds to March 27, 2014, from the original closing date of December 12, 2013. MTIA failed to provide funds in a timely manner, resulting in its material breach of the MTIA Stock Purchase Agreement. | |
Instead, the Company issued 872,728 shares of Common Stock and Warrants to purchase 87,274 shares of Common Stock in exchange for $2,400,000 in gross proceeds which were received between February and April 2014, of which the last installment was paid to the Company on April 15, 2014. The Company incurred issuance costs of $50,000. The relative fair value of Warrants issued to MTIA to purchase 87,274 shares of Common Stock was determined to be approximately $174,396 and was recorded as a debit and a credit to Additional Paid in Capital. | |
On December 18, 2014, Platinum Partners Value Arbitrage Fund L.P. (PPVA) agreed to purchase together with two other entities, and one individual, 840,336 shares of Series F Convertible Preferred Stock (Series F) for an aggregate purchase price of $1,000,000, net of $56,604 of deferred financing costs. Five year Series F warrants to purchase the same number of shares of our common stock with an exercise price of $3.00 per share were issued to the investors. Pursuant to a Letter of Agreement, settling certain board related matters under dispute, the investors further agreed to fund an additional $3,000,000 in 2015. The investors have funded $1,500,000 of that additional obligation through the date of this filing. The investors determined that the purchase price of the Series F shall be equal to the dollar amount of each investment divided by the lesser of (i) the closing bid price of the Common Stock immediately preceding each Installment, as the case may be, or (ii) $1.50, provided that the Series F and the Series F Warrants will not be convertible to the extent the conversion would result in the holder beneficially owning more than 19.9% of the then outstanding shares of the Issuer, unless stockholder approval has been obtained for the issuance of the shares of Common Stock issuable upon conversion of the Series F Preferred Stock or Warrants in accordance with Nasdaq rules. The Series F also contains customary provisions as well as an additional restriction on conversion such that the Series F or Series F Warrants will not be convertible if the conversion would result in the holder beneficially owning more than 9.9% of the then outstanding shares of the Issuer. | |
In connection with the issuance of this Series F, the conversion feature of Series F was considered beneficial, or “in the money”, at issuance due to a conversion rate that allows the investor to obtain the Common Stock at below market price. The Company recorded a deemed dividend on the beneficial conversion feature of $350,000. | |
Capital Contribution | |
Late in the third quarter of 2014 the research and development operations of the Company were suspended and key personnel were laid off. In October 2014, two of our directors received a non-recourse loan for $500,000 from PPVA. The purpose of the loan was to provide the directors monies to advance their plan for the Company and attempt to maintain its viability during the suspension of operations. $440,675 was expended in the fourth quarter by these directors primarily for salaries of key employees and targeted technology efforts focused on the wearable technology sector. The Company considered this expenditure by two of its directors a capital contribution since the funds were spent on matters specifically related to the operations of the Company. In February 2015, the $440,675 capital contribution together with the balance monies received in 2015, equivalent to the original $500,000 the two directors had received, was repaid by the Company to PPVA through the issuance of Series F and five-year Series F Warrants to purchase 333,333 shares of Common Stock at $3 per share. See Note 18. | |
Stock Issued in Exchange for Services | |
During the years ended December 31, 2014 and 2013, the Company issued 2,636 and 9,122 shares of Common Stock, respectively, with a fair value of $8,404 and $96,375, respectively, to vendors in exchange for their services. The Company recorded expense related to these issuances, which represents the fair value of the related stock. | |
CONVERTIBLE_PREFERRED_STOCK
CONVERTIBLE PREFERRED STOCK | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
CONVERTIBLE PREFERRED STOCK | Series C |
Each share of Series C is convertible into 100 shares of Common Stock, subject to adjustment for stock splits, combinations or similar events. Series C holders are entitled to dividends equivalent to those of common shareholders should a dividend be declared by the Board of Directors. Each holder who receives Series C may convert its Series C at any time following its issuance. The conversion of Preferred Stock into shares of Common Stock, however, is subject to a restriction, which prohibits the conversion of shares of Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, would cause such holder to beneficially own in excess of 9.99% of all of the Company’s Common Stock outstanding at such time. In the event of any Liquidation Event (as defined in the Series C Certificate), the holders of Series C will be entitled to receive (subject to the rights of any securities designated as senior to the Series C) a per share liquidation preference equal to an amount calculated by taking the total amount available for distribution to holders of all the Company’s outstanding Common Stock before deduction of any preference payments for the Series C, divided by the total of (x) all of the then outstanding shares of Common Stock, plus (y) all of the shares of Common Stock into which all of the outstanding shares of the Series C can be converted, in each case prior to any distribution to the holders of Common Stock or any other securities designated as junior to the Series C. | |
On December 23, 2013, an investor converted 8,974.185 shares of Series C into 897,419 shares of Common Stock. | |
Series D | |
Each share of Series D is convertible into 0.10 share of Common Stock subject to adjustments for stock splits, combinations, or similar events. The Series D does not pay a dividend and is not redeemable. Each holder who receives Series D may convert it at any time following its issuance. The conversion of Preferred Stock into shares of Common Stock, however, is subject to a restriction, which prohibits the conversion of shares of Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, would cause such holder to beneficially own in excess of 4.99% of all of the Company’s Common Stock outstanding at such time. The preference in liquidation is $1 per share, or $1,000,000 at December 31, 2014. | |
On December 19, 2013, an investor converted 2,006,000 shares of Series D into 200,600 shares of Common Stock. | |
Series E | |
Each share of Series E is initially convertible into one share of Common Stock, subject to adjustment for stock splits, combinations or similar events. The Series E does not pay a dividend and is not redeemable. Each holder who receives Series E may convert its Series E at any time following its issuance. The conversion of Preferred Stock into shares of Common Stock, however, is subject to a restriction, which prohibits the conversion of shares of Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, would cause such holder to beneficially own in excess of 19.99% of all of the Company’s Common Stock outstanding at such time. There is no liquidation preference with respect to Series E shares. | |
Series F | |
Each share of Series F is initially convertible into one share of Common Stock, subject to adjustment for stock splits, combinations or similar events. The Series F does not pay a dividend and is not redeemable. Each holder who receives Series F may convert its Series F at any time following its issuance. The conversion of Preferred Stock into shares of Common Stock, however, is subject to a restriction, which prohibits the conversion of shares of Preferred Stock if the number of shares of Common Stock to be issued pursuant to such conversion would exceed, when aggregated with all other shares of Common Stock owned by such holder at such time, would cause such holder to beneficially own in excess of 9.99% of all of the Company’s Common Stock outstanding at such time. There is no liquidation preference with respect to Series F shares. |
EQUITY_COMPENSATION_PLANS
EQUITY COMPENSATION PLANS | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||||||
EQUITY COMPENSATION PLAN | In March 2003, the Company’s shareholders approved its 2003 Stock Option and Incentive Plan (the “2003 Plan”). Pursuant to the 2003 Plan, the Company’s Board of Directors (or its committees and/or executive officers delegated by the Board of Directors) may grant incentive and nonqualified stock options, restricted stock, and other stock-based awards to the Company’s employees, officers, directors, consultants and advisors. As of December 31, 2014, there were 12,500 restricted shares of Common Stock issued and options to purchase an aggregate of 44,000 shares of Common Stock outstanding under the 2003 Plan and no shares are available for future grants due to the 2003 Plan’s expiration. | ||||||||||||
In May 2008, the Company’s shareholders approved the 2008 Equity Compensation Plan (the “2008 Plan”). The 2008 Plan provides for grants of incentive stock options to employees and nonqualified stock options and restricted stock to employees, consultants and non-employee directors of the Company. In May 2013, the Company’s shareholders approved an amendment to the 2008 Plan to fix the maximum number of shares available under the 2008 Plan at 10,000,000 shares following shareholder approval of a 1-for-10 reverse stock split effective June 7, 2013. As of December 31, 2014, there were restricted shares of Common Stock issued and options to purchase an aggregate of 984,873 shares of Common Stock outstanding under the 2008 Plan and 9,002,127 shares available for future grants. | |||||||||||||
The tables below show the remaining shares available for future grants for each plan and the outstanding shares. | |||||||||||||
Equity Compensation Plans | |||||||||||||
2003 Plan | 2008 Plan | ||||||||||||
Shares Available For Issuance | |||||||||||||
Total reserved for stock options and restricted stock | 160,000 | 10,000,000 | |||||||||||
Net restricted stock issued net of cancellations | (5,000 | ) | (36,473 | ) | |||||||||
Stock options granted | (154,449 | ) | (2,175,883 | ) | |||||||||
Add back options cancelled before exercise | 82,349 | 1,214,483 | |||||||||||
Less shares no longer available due to Plan expiration | (82,900 | ) | - | ||||||||||
Remaining shares available for future grants at December 31, 2014 | - | 9,002,127 | |||||||||||
Not Pursuant to a Plan | |||||||||||||
Stock options granted | 154,449 | 2,175,883 | 310,000 | ||||||||||
Less: Stock options cancelled | (82,349 | ) | (1,214,483 | ) | (188,333 | ) | |||||||
Stock options exercised | (35,600 | ) | (13,000 | ) | (66,667 | ) | |||||||
Net shares outstanding before restricted stock | 36,500 | 948,400 | 55,000 | ||||||||||
Net restricted stock issued net of cancellations | 5,000 | 36,473 | 6,485 | ||||||||||
Outstanding shares at December 31, 2014 | 41,500 | 984,873 | 61,485 | ||||||||||
STOCK_OPTIONS
STOCK OPTIONS | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Notes to Financial Statements | |||||||||||||||||
STOCK OPTIONS | For options issued and outstanding during the years ended December 31, 2014 and 2013, the Company recorded additional paid-in capital and non-cash compensation expense of $1,046,454 and $714,547, respectively, each net of estimated forfeitures. | ||||||||||||||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the options. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the consolidated financial statements, to estimate option exercise and employee termination within the valuation model. The expected term of options granted under the Company’s stock plans, all of which qualify as “plain vanilla,” is based on the average of the contractual term (generally 10 years) and the vesting period (generally 24 to 42 months) as permitted under SEC Staff Accounting Bulletin Nos. 107 and 110. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. Restricted stock grants are valued based on the closing market price for the Company’s Common Stock on the grant date. | |||||||||||||||||
The assumptions used principally for options granted to employees in the years ended December 31, 2014 and 2013 were as follows: | |||||||||||||||||
2014 | 2013 | ||||||||||||||||
Risk-free interest rate % | 1.45 - 1.90 | 0.10 - 2.71 | |||||||||||||||
Expected dividend yield | — | — | |||||||||||||||
Expected term in years | 4.5 - 6.5 | 10-Jan | |||||||||||||||
Forfeiture rate % (excluding fully vested options) | 7.5 - 15 | 15 | |||||||||||||||
Expected volatility % | 81 - 121 | 129 - 141 | |||||||||||||||
In December 2014, the Company issued stock options to purchase 475,000 shares of our Common Stock to its new CEO and CFO that contain certain stock price level attainment conditions that must be achieved before the stock options are permitted to vest. In calculating the compensation expense for these stock option grants, we utilize a binomial lattice-based valuation model. Assumptions utilized in the model, which are evaluated and revised, as necessary, to reflect market conditions and experience, were as follows: | |||||||||||||||||
2014 | |||||||||||||||||
Interest rate % | 2 | ||||||||||||||||
Weighted average interest rate | — | ||||||||||||||||
Dividend yield | — | ||||||||||||||||
Expected volatility | 1.05 | ||||||||||||||||
Weighted Average volatility | — | ||||||||||||||||
Expected life in years | 6.5 | ||||||||||||||||
A summary of option activity under the Company’s stock plans and options granted to officers of the Company outside any plan as of December 31, 2014 and changes during the year then ended is presented below: | |||||||||||||||||
Weighted- | |||||||||||||||||
Weighted- | Average | ||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||
Exercise | Contractual | Intrinsic | |||||||||||||||
Shares | Price | Term | Value | ||||||||||||||
Outstanding at January 1, 2014 | 1,455,432 | $ | 4.4 | — | — | ||||||||||||
Granted | 662,950 | 1.94 | — | — | |||||||||||||
Forfeited or expired | (1,078,482 | ) | 4.92 | — | — | ||||||||||||
Outstanding at December 31, 2014 | 1,039,900 | $ | 3 | 8.82 years | $ | — | |||||||||||
Exercisable at December 31, 2014 | 527,667 | $ | 3.9 | 8.10 years | $ | — | |||||||||||
The weighted-average grant-date fair value of options granted during the year ended December 31, 2014 was $3.05 per share. As of December 31, 2014, there was approximately $616,000 of total unrecognized compensation expense related to non-vested share-based option arrangements. With the exception of the unrecognized share-based compensation related to certain restricted stock grants to officers and employees that contain performance conditions related to United States Food and Drug Administration (FDA) approval for our CGM system or the sale of the Company, unrecognized compensation is expected to be recognized over the next 12 months. |
RESTRICTED_STOCK
RESTRICTED STOCK | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
RESTRICTED STOCK | Share-Based Compensation – Restricted Stock | ||||||||
For restricted stock issued and outstanding during the years ended December 31, 2014 and 2013, the Company incurred non-cash compensation expense of $335,918 and $529,795, respectively, each net of estimated forfeitures. | |||||||||
As of December 31, 2014, the Company had outstanding restricted stock grants of 47,958 shares with a weighted-average grant-date value of $9.74. A summary of the status of the Company’s non-vested restricted stock grants as of December 31, 2014, and changes during the year ended December 31, 2014 is presented below: | |||||||||
Weighted- | |||||||||
Average | |||||||||
Shares | Grant-Date | ||||||||
Fair Value | |||||||||
Non-vested shares at January 1, 2014 | 201,655 | $ | 10.66 | ||||||
Granted | 36,936 | $ | 2.85 | ||||||
Vested | (92,178 | ) | $ | 6.15 | |||||
Forfeited | (98,455 | ) | $ | 12.4 | |||||
Non-vested shares at December 31, 2014 | 47,958 | $ | 9.74 | ||||||
Of the 47,958 shares of non-vested restricted stock, the vesting criteria are as follows: | |||||||||
· 14,185 shares of restricted stock vest upon the FDA approval of our CGM system or the sale of the Company; | |||||||||
· 22,898 shares of restricted stock vest over 4 years, at each of the anniversary dates of the grants; and | |||||||||
· 10,875 shares of restricted stock vest over 1 year, at each of the anniversary dates of the grants. | |||||||||
As of December 31, 2014, there was approximately $121,000 of total unrecognized compensation expense related to non-vested share-based restricted stock arrangements granted under the Company’s equity compensation plans that vest over time in the foreseeable future. As of December 31, 2014, the Company cannot estimate the timing of completion of the performance vesting requirements required by certain of these restricted stock grant arrangements. Compensation expense related to these restricted share grants will be recognized when the Company concludes that achievement of the performance vesting conditions is probable. | |||||||||
WARRANTS
WARRANTS | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||
WARRANTS | The Company uses valuation methods 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 following assumptions were utilized by the Company: | |||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
Risk-free interest rate % | 1.57 – 1.77 | 0.65 - 1.85 | ||||||||||||||||||
Expected dividend yield | — | — | ||||||||||||||||||
Expected term in years (contractual term) | 5 | 0.33 - 5 | ||||||||||||||||||
Forfeiture rate % | — | — | ||||||||||||||||||
Expected volatility % | 78 - 102 | 122 - 123 | ||||||||||||||||||
Expected volatilities are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the warrant. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the warrant. | ||||||||||||||||||||
In the year ended December 31, 2014 and 2013, the Company issued warrants with a relative fair value of $350,000 and $371,140, respectively in connection with private placements of the Company’s Common Stock and Preferred Stock. | ||||||||||||||||||||
The following table summarizes data about outstanding warrants at December 31, 2014: | ||||||||||||||||||||
Type of Warrant/ Range of Exercise Prices | Expirations | Number Outstanding | Weighted- Average Remaining Contractual Life (years) | Weighted- Average Exercise Price | Number Exercisable | |||||||||||||||
Derivative: | ||||||||||||||||||||
$20.00 - $22.70 | 8/31/17 to 11/6/17 | 700,000 | 2.72 | $ | 20.71 | 700,000 | ||||||||||||||
Equity: | ||||||||||||||||||||
$2.75 - $3.00 | 12/10/18 to 12/18/19 | 1,109,428 | 4.75 | $ | 2.94 | 1,109,428 | ||||||||||||||
$22.50 | 2/9/15 to 3/18/15 | 37,638 | 0.11 | $ | 22.5 | 37,638 | ||||||||||||||
1,147,066 | 1,147,066 | |||||||||||||||||||
Total outstanding | 1,847,066 | 1,847,066 | ||||||||||||||||||
A summary of warrant activity in the year ended December 31, 2014 is as follows: | ||||||||||||||||||||
Weighted- | ||||||||||||||||||||
Average | ||||||||||||||||||||
Exercise | ||||||||||||||||||||
Warrants | Shares | Price | ||||||||||||||||||
Outstanding at January 31, 2013 | 1,254,004 | $ | 20.08 | |||||||||||||||||
Granted | 190,993 | $ | 3.22 | |||||||||||||||||
Forfeited or expired | (235,786 | ) | $ | 17.36 | ||||||||||||||||
Outstanding at December 31, 2013 | 1,209,211 | $ | 17.92 | |||||||||||||||||
Granted | 927,610 | $ | 2.98 | |||||||||||||||||
Forfeited or expired | (289,755 | ) | $ | 20.33 | ||||||||||||||||
Outstanding at December 31, 2014 | 1,847,066 | $ | 10.04 | |||||||||||||||||
The derivative warrants to purchase 700,000 shares of our Common Stock, at exercise prices ranging from $20 to $22.70 and expiring in 2017, are included in the outstanding warrants at December 31, 2014 and 2013. On February 12, 2015, these warrants were re-priced to $7.50 to compensate PPVA in connection with the Reimbursement Agreement reached between the Company and PPVA. See Subsequent Event Note 18 where the transaction is more fully described. | ||||||||||||||||||||
Exercise of Common Stock Warrants | ||||||||||||||||||||
During 2014 and 2013, there were no warrants exercised. |
INCOME_TAXES
INCOME TAXES | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Taxes | |||||||||
INCOME TAXES | No provision or benefit for federal or state income taxes has been recorded because the Company has incurred a net loss for all periods presented and has provided a valuation allowance against its deferred tax assets. A provision for minimum state income taxes of $4,000 has been recorded for the year ended December 31, 2014. | ||||||||
At December 31, 2014 and 2013, the Company had gross federal net operating loss carryforwards of approximately $98,462,000 and $89,600,000, respectively, which begin expiring in 2018. The Company had gross state net operating loss carryforwards of approximately $52,684,000 and $45,893,000, respectively which began to expire in 2014. The Company also had federal and state research and development tax credit carryforwards of approximately $3,048,000 which will begin to expire in 2018. The United States Tax Reform Act of 1986 contains provisions that may limit the Company’s net operating loss carryforwards available to be used in any given year in the event of significant changes in the ownership interests of significant stockholders, as defined in Internal Revenue Section 382. The effect of an ownership change would be the imposition of an annual limitation on the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate. | |||||||||
Significant components of the Company’s net deferred tax asset are as follows: | |||||||||
December 31, | |||||||||
2014 | 2013 | ||||||||
Deferred Tax Assets/(Liabilities): | |||||||||
Net operating loss carryforwards | $ | 34,500,000 | $ | 32,487,000 | |||||
Research credit carryforwards | 3,048,000 | 2,488,000 | |||||||
Acquired intangible assets, net | (3,697,000 | ) | (3,697,000 | ) | |||||
Restricted stock and warrants | 731,000 | 374,000 | |||||||
Other temporary differences | 50,000 | 207,000 | |||||||
Total deferred tax assets, net | 34,632,000 | 31,859,000 | |||||||
Valuation allowance | (34,632,000 | ) | (31,859,000 | ) | |||||
Net deferred tax asset | $ | — | $ | — | |||||
The Company has maintained a full valuation allowance against its deferred tax items in both 2014 and 2013. 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 realizing the net deferred tax asset, a full valuation allowance has been provided. In the years ended December 31, 2014 and 2013, the valuation allowance increased by $2,773,000 and $9,228,000, respectively. | |||||||||
The Company has no uncertain tax positions as of December 31, 2014 and 2013 that would affect its effective tax rate. The Company does not anticipate a significant change in the amount of unrecognized tax benefits over the next twelve months. Because the Company is in a loss carryforward position, the Company is generally subject to US federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available. If and when applicable, the Company will recognize interest and penalties as part of income tax expense. | |||||||||
Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following: | |||||||||
Years Ended December 31, | |||||||||
2014 | 2013 | ||||||||
% | % | ||||||||
Income taxes benefit (expense) at statutory rate | 34 | 34 | |||||||
State income tax, net of federal benefit | 2.76 | (4.40 | ) | ||||||
Permanent Differences: | |||||||||
Non-cash interest expense warrant | (8.07 | ) | — | ||||||
Gain/loss or revaluation of derivative warrant liability | 2.07 | 7.8 | |||||||
Stock-based compensation expense | (0.88 | ) | (1.30 | ) | |||||
Other | 0.01 | (1.70 | ) | ||||||
R&D credits | 1.21 | (4.70 | ) | ||||||
Change in valuation allowance | (31.13 | ) | (29.70 | ) | |||||
(0.03 | ) | — | |||||||
LITIGATION
LITIGATION | 12 Months Ended |
Dec. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | |
LITIGATION | From time to time, in addition to those identified below, we are subject to legal proceedings, claims, investigations, and proceedings in the ordinary course of business. In accordance with generally accepted accounting principles, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss or range of loss can be reasonably estimated. These provisions, if any, are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. We believe that we have valid defenses with respect to the legal matters pending against us and are vigorously defending these matters. Given the uncertainty surrounding litigation and our inability to assess the likelihood of a favorable or unfavorable outcome in the above noted matters and our inability to reasonably estimate the amount of loss or range of loss, it is possible that the resolution of one or more of these matters could have a material adverse effect on our consolidated financial position, cash flows or results of operations. At December 31, 2014, no litigation loss is deemed probable or reasonably estimated. |
In February 2014, Patrick T. Mooney, M.D., our former President and Chief Executive Officer, and his wife, Elizabeth Mooney, filed a complaint against the Company and certain of its directors and officers in the Court of Common Pleas in Philadelphia County. The complaint, which alleges (i) that Dr. Mooney’s termination was without cause so that he is entitled to certain severance benefits under his employment agreement and associated statutory remedies; (ii) that certain legally required disclosures by us and our General Counsel defamed Dr. Mooney; and (iii) that Dr. Mooney’s wife is entitled to damages under a theory of loss of consortium, seeks in excess of $20 million in damages. The Company has denied the allegations of the complaint and asserted counterclaims against Dr. Mooney based upon the same conduct which provided the cause for his termination. Thereafter, the Company restructured the counterclaims and affirmative defenses. The Company believes that it has strong defenses to the claims asserted and intends to defend them vigorously. | |
In July 2014, Dr. and Mrs. Mooney filed another complaint in the Court of Common Pleas in Philadelphia County against the Company, certain of its directors and Officers and a former Director and officer alleging (i) wrongful use of civil proceedings and (ii) abuse of process in the original filing of the counterclaims withdrawn in the earlier action. Mrs. Mooney also asserted another claim for loss of consortium. This complaint seeks in excess of $30 million in damages. The Company has denied the allegations. The Company believes that this action is without merit, that it acted lawfully and in good faith, and that it has strong defenses to the claims asserted. Accordingly, the Company intends to vigorously defend against this lawsuit. | |
In August 2014, Dr. Mooney filed a complaint in Delaware Chancery Court against the Company for advancement of defense costs related to his February 2014 complaint, many of which the Company had paid to date and the remainder of which were subject to a good faith dispute that counsel for the Company and Dr. Mooney had been attempting to amicably resolve. Dr. Mooney also demanded that the Company pay for his attorneys fees related to his July 2014 complaint against the Company, amongst other matters. The Company filed a Motion to Dismiss. A hearing on the merits was held on January 15, 2015 and we are awaiting the Courts ruling. | |
LICENSING_AND_OTHER_REVENUE
LICENSING AND OTHER REVENUE | 12 Months Ended |
Dec. 31, 2014 | |
Notes to Financial Statements | |
LICENSING AND OTHER REVENUE | Ferndale License of Skin preparation device — In May 2009, the Company entered into a License Agreement with Ferndale Pharma Group, Inc. (“Ferndale”) pursuant to which the Company granted Ferndale a license in North America and the United Kingdom to develop, assemble, use, market, sell and export it’s skin preparation device prior to the application of a topical analgesic or anesthetic cream for local dermal anesthesia or analgesia prior to a needle insertion or IV procedure (the “Ferndale License”). The Ferndale License has a minimum term of 10 years from the date of the first commercial sale of Prelude product components in North America or the United Kingdom. |
The Company received a non-refundable licensing fee of $750,000 upon execution of the Ferndale License which was recognized as revenue through December 31, 2011. In addition, the Company will receive a payment of $750,000 within ninety (90) days after receipt of the FDA’s 510(k) medical device clearance of its skin preparation device. Ferndale will pay the Company an escalating royalty on net sales of skin preparation product components. The Company will also receive milestone payments based on Ferndale’s achievement of certain net sales targets of the product components, as well as guaranteed minimum annual royalties. | |
Handok License of CGM — In June 2009, the Company entered into a License Agreement with Handok Pharmaceuticals Co., Ltd. (“Handok”) pursuant to which the Company granted Handok a license to develop, use, market, sell and import our CGM for continuous glucose monitoring for use by medical facilities and/or individual consumers in South Korea (the “Handok License”). The Handok License has a minimum term of 10 years from the date of the first commercial sale of our CGM in South Korea. | |
The Company received a non-refundable licensing fee of approximately $500,000 upon execution of the Handok License. In addition, the Company will receive milestone payments upon receipt of the FDA’s clearance of our CGM and upon the first commercial sale of our CGM in South Korea. Handok will also pay the Company a royalty on net sales of CGM. The Company also will receive milestone payments based on Handok’s achievement of certain other targets. | |
Approximately $57,000 and $28,000 of the non-refundable license revenue was recognized in the years ended December 31, 2014 and 2013, respectively, and $95,535 is currently included in deferred revenue. | |
MTIA License, Development and Commercialization Agreement — In December 2013, in connection with a capital raising transaction, the Company entered into a license, development and commercialization agreement with Medical Technologies Innovation Asia, Ltd. (“MTIA”). In this agreement the Company granted MTIA rights, under certain intellectual property and know-how that relate to our CGM, to (i) exclusively research, develop, manufacture, and use our CGM in connection with the development activities needed for regulatory approval in the People’s Republic of China, Hong Kong, Macau and Taiwan (the “Territory”), and (ii) exclusively make, have made, use, sell, have sold, offer for sale and import our CGM in the Territory once regulatory approval has been received. Additionally, subject to the terms and conditions set forth in the agreement, MTIA received the right to grant certain distribution rights to its affiliates or third parties. MTIA is responsible for conducting all required clinical trials and all development costs relating to regulatory approval of our CGM in the Territory, as well as manufacturing and marketing costs relating to commercialization of our CGM in the Territory. MTIA is also responsible for obtaining and maintaining all regulatory approvals from applicable authorities in the Territory. | |
Upon the earlier of regulatory approval of our CGM by the China Food and Drug Administration or Echo’s termination of the agreement, Echo is required, subject to certain terms and conditions, to reimburse MTIA up to $1,500,000 for development costs incurred by MTIA. The reimbursement will be in the form of Common Stock, valued at $2.71 per share, which was the NASDAQ closing price on December 9, 2013, the date prior to the date the parties entered into the agreement. Additionally, the Company and MTIA will share future net sales of our CGM generated within the Territory. The Company has the option, at its sole discretion, to enter into negotiations with MTIA for supply of our CGM in territories that are not licensed to MTIA under the agreement. The agreement has a term of ten years, subject to earlier termination rights including, but not limited to, for breach of the agreement, change of control events, and certain performance obligations. | |
On December 29, 2014 the MTIA agreement was amended to include an affiliate, Beijing Yi Tang Bio Technology, Ltd as a party to the Agreement. The Amendment also provides that MTIA may, without Echo’s consent: (i) sublicense any of the licenses and rights granted to MTIA under the Agreement to any of its Affiliates, and (ii) subcontract any of its obligations under the Agreement to any of its Affiliates. |
REVISION_OF_PRIOR_INTERIM_PERI
REVISION OF PRIOR INTERIM PERIOD FINANCIAL STATEMENTS | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||
REVISION OF PRIOR INTERIM PERIOD FINANCIAL STATEMENTS | For the 10-Q filed by the Company for the quarterly period ended September 30, 2014, the Company stated that due to its inability to cause Platinum Montaur to advance funds pursuant to the 2012 Credit Facility (described more fully in Note 7 herein), since draws were made at their discretion in accordance with the Loan Agreement, the Company elected to terminate the CF. Accordingly, on October 28, 2014, the Company notified PM that it was irrevocably canceling and terminating the CF effective as of October 30, 2014. In its third quarter of 2014 the Company fully amortized the remaining $2,823,325 of deferred financing costs related to the CF stating that since they weren’t able to borrow against the CF, they were terminating it shortly and therefore expensing all the related deferred financing costs. | ||||||||||||||||||||||||
In more closely examining the accounting pronouncements related to the write off of debt issuance costs, specifically ASC 405-20-40, we determined the deferred financing costs should not have been written off until the date the facility was actually extinguished, which occurred in October 2014, or the fourth quarter of 2014. | |||||||||||||||||||||||||
Below follows the revision necessary to be made to our financial statements for the third quarter of 2014. | |||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||
As Previously Recorded | Adjustment | As Revised | As Previously Recorded | Adjustment | As Revised | ||||||||||||||||||||
Licensing revenue | $ | 19,107 | $ | − | $ | 19,107 | $ | 57,321 | $ | − | $ | 57,321 | |||||||||||||
Total revenues | 19,107 | − | 19,107 | 57,321 | − | 57,321 | |||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||
Research and development | 1,200,590 | − | 1,200,590 | 4,348,752 | − | 4,348,752 | |||||||||||||||||||
Selling, general and administrative | 1,731,868 | − | 1,731,868 | 5,207,103 | − | 5,207,103 | |||||||||||||||||||
Total operating expenses | 2,932,458 | − | 2,932,458 | 9,555,855 | − | 9,555,855 | |||||||||||||||||||
Loss from operations | (2,913,351 | ) | − | (2,913,351 | ) | (9,498,534 | ) | − | (9,498,534 | ) | |||||||||||||||
Other Income (Expense): | |||||||||||||||||||||||||
Interest income | 181 | − | 181 | 915 | − | 915 | |||||||||||||||||||
Interest expense | (3,064,414 | ) | 2,823,325 | (241,089 | ) | (3,551,482 | ) | 2,823,325 | (728,157 | ) | |||||||||||||||
Gain on disposals of assets | − | − | − | 1,500 | − | 1,500 | |||||||||||||||||||
Gain (loss) on revaluation of derivative warrant liability | 473,000 | − | 473,000 | 1,006,000 | − | 1,006,000 | |||||||||||||||||||
Other income (expense), net | (2,591,233 | ) | 2,823,325 | 232,092 | (2,543,067 | ) | 2,823,325 | 280,258 | |||||||||||||||||
Net loss | $ | (5,504,584 | ) | $ | 2,823,325 | $ | (2,681,259 | ) | $ | (12,041,601 | ) | $ | 2,823,325 | $ | (9,218,276 | ) | |||||||||
Net loss per common share, basic and diluted | $ | (0.43 | ) | $ | 0.22 | $ | (0.21 | ) | $ | (0.99 | ) | $ | 0.23 | $ | (0.76 | ) | |||||||||
Basic and diluted weighted average common shares outstanding | 12,660,182 | 12,660,182 | 12,660,182 | 12,199,476 | 12,199,476 | 12,199,476 | |||||||||||||||||||
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 12 Months Ended | |
Dec. 31, 2014 | ||
Subsequent Events | ||
SUBSEQUENT EVENTS | Restart of Operations and related option grants | |
On January 2, 2015, in conjunction with restarting the operations of the Company, stock option grants to purchase 400,000 shares of Common Stock at an exercise price of $1.35 were issued to various employees primarily at our Franklin, Massachusetts research and development facility. On January 5, 2015, an additional stock option grant was made to purchase 50,000 shares of our Common stock at an exercise price of $1.48 to our new Manager of Business Development in Iselin, New Jersey. On March 2, 2015, we issued another stock option grant to purchase 20,000 shares of our Common Stock at $2.34 to a senior technician hired for our Franklin facility. All grants vest over a three years with 1/3 vesting immediately and the balance vesting equally at each of the two respective anniversary periods. All grants were made pursuant to the 2008 Plan. | ||
Board Matters | ||
On January 7, 2015, the Board realigned annual compensation at $30,000 per annum per director. Each director, other than our CEO whose employment agreement precluded him from receiving director compensation the first year, received a stock option to purchase 150,000 shares of our Common Stock at an exercise price of $1.62 vesting 25% immediately and then 25% at the beginning of each quarter thereafter. These options contain a condition where they are only exercisable after the average closing price of the Company’s common stock for the ten (10) days prior to exercise, equals or exceeds $7.50 per share. | ||
Exchange of Common Stock for Series F Preferred Stock | ||
On January 9, 2015 and again on March 31, 2015, Platinum Partners Value Arbitrage Fund, L.P. and Platinum Partners Liquid Opportunity Fund, L.P. swapped 843,526 and 208,884 and 356,474 and 91,116, respectively of their common shares held for Series F Preferred Stock. | ||
NASDAQ Compliance | ||
On January 30, 2015, the Company received a letter from NASDAQ, indicating that the Company no longer complies with NASDAQ’s audit committee requirements set forth in NASDAQ Listing Rule 5605. Such rule requires that the Audit Committee of the Company have a minimum of three members and be composed only of independent directors. On December 31, 2014, Vincent P. Enright, William F. Grieco and James F. Smith resigned from the Board of Directors of the Company, as well as its Audit Committee. As a result, the Audit Committee had no members as of Decembers 31, 2014. On January 5, 2015, the Board of Directors appointed Shepard Goldberg and Michael Goldberg to the Audit Committee, both of whom are independent directors. | ||
NASDAQ provided to the Company a cure period in order to regain compliance as follows: | ||
● | until the earlier of the Company’s next annual shareholders’ meeting or December 31, 2015; or | |
● | if the next annual shareholders’ meeting is held before June 29, 2015, then the Company must evidence compliance no later than June 29, 2015. | |
The Company intends to add at least one additional independent member to the Audit Committee by the date required by Nasdaq Listing Rule 5605. | ||
Settlement of Amounts Owed for Series F Preferred Stock and Warrants | ||
On September 23, 2014, the “Company announced that, as it believed that its current liquidity was insufficient to fund its needs beyond September 30, 2014, it was suspending its product development, research, manufacturing and clinical programs and operations to conserve its liquidity and capital resources. The workforce reduction due to the suspension of operations comprised approximately 70% of Echo’s workforce, leaving only administrative personnel. Affected employees were notified on September 23, 2014. The employees whose employment was terminated as part of the workforce reduction were not offered severance pay. The Company indicated that they could possibly incur additional costs not currently contemplated due to events that may occur as a result of, or that were associated with, the workforce reduction. | ||
At the time of the work force reduction announcement, Platinum Management (NY) LLC, together with its affiliates, a significant stockholder of the Company (“Platinum”), was in the process of engaging in a proxy contest with the Company pursuant to which it sought to ultimately remove three of the then-current directors of the Company. In conjunction therewith, Platinum provided $500,000 on a non-recourse basis to two of the Company’s directors whose removal Platinum was not seeking, namely Michael Goldberg and Shepard Goldberg, which was recorded as a capital contribution (“Contribution”) in 2014. Proceeds of the Contribution were utilized for retaining certain key employees and for research and technology initiatives, all for the benefit of the Company. A small portion of the monies was not disbursed, which was transferred to the Company. At the time of the Contribution, Shepard Goldberg and Michael Goldberg agreed that, should the Contribution ultimately benefit the Company, they would use their best efforts to cause the Company to issue equity to Platinum as consideration for making the Contribution. | ||
In December 2014, as part of a negotiated settlement agreement, the three directors, whom Platinum sought to remove, resigned as directors and Platinum agreed to make a direct investment in the Company. In connection with the proxy contest, Platinum expended $550,000 on legal representation and related expenses (the “Expenses”). In its proxy statement, Platinum advised stockholders that it would pay all the costs associated with the solicitation of proxies, but would seek reimbursement from the Company, and not submit such reimbursement to a vote of stockholders. | ||
On February 12, 2015, the Company agreed to reimburse Platinum for the Loan and the Expenses. In this regard, the Board of Directors of the Company determined that both the Loan and Expenses together resulted in the Company being able to continue operations and put into place a strong management team. Pursuant to a Reimbursement Agreement, dated February 12, 2015 (the “Reimbursement Agreement”), Platinum received 548,177 shares of Series F Convertible Preferred Stock and Warrants to purchase 333,333 shares of common stock of the Company. The Warrants expire in five years and have a $3.00 per share exercise price. Additionally, the Company agreed to re-price 700,000 warrants, originally disbursed to Platinum in connection with its August 31, 2012 Loan Agreement, currently priced in the $20.00 to $22.70 range per share, to $7.50 per share. |
SUMMARY_OF_SIGNIFICANT_ACCOUNT1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended | |
Dec. 31, 2014 | ||
Summary Of Significant Accounting Policies Policies | ||
Use of Estimates | The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities reported and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management's estimates are based on historical experience, facts and circumstances available at the time, and various other assumptions that are believed to be reasonable under the circumstances. Significant estimates include accounting for the valuation of intangible assets, derivatives, share based compensation and valuation allowances related to deferred income taxes. The Company periodically reviews these matters and reflects changes in estimates as appropriate. Actual results could materially differ from those estimates. | |
Cash and Cash Equivalents | The Company considers all highly liquid investments with maturities of ninety days or less to be cash equivalents. Cash equivalents consisted of money market funds at a major banking institution as of December 31, 2014 and 2013. The Company maintains its cash in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has never experienced any previous losses related to these uninsured balances. Restricted cash consists of a $52,488 letter of credit in favor of a landlord as of December 31, 2014 and additionally a $250,000 letter of credit issued in favor of one of the Company’s key product development vendors as of December 31, 2013, respectively. | |
Intangible Assets and Other Long-Lived Assets | The Company records acquired intangible assets at the acquisition date fair value. Intangible assets related to technology are expected to be amortized over the period of expected benefit and will commence upon revenue generation. | |
The Company reviews intangible assets at least annually and whenever events or circumstances change that indicated impairment may have occurred to determine if any adverse conditions exist that would indicate impairment or a change in the remaining useful life of any intangible asset. Conditions that would indicate impairment and trigger an impairment assessment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, or an adverse action or assessment by a regulator. While the Company uses available information to prepare estimates and to perform impairment evaluations, actual results could differ significantly from these estimates or related projections, resulting in impairment related to recorded balances. If the estimate of an intangible asset’s remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over the revised remaining useful life. The Company performs a regular review of the underlying assumptions, circumstances, time projections and revenue and expense estimates to decide if there is a possible impairment. In reviewing the intangible assets as of December 31, 2014, the Company concluded that there was no impairment of the carrying value of such long-lived assets. | ||
For other long-lived assets, the Company evaluates quarterly whether events or circumstances have occurred that indicate that the carrying value of these assets may be impaired. If the carrying value of an asset exceeds its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period identified. | ||
No impairment losses were recorded for the years ended December 31, 2014 and 2013. | ||
Property and equipment | Property and equipment are stated at cost. Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. The Company expenses normal maintenance and repair costs as incurred. Gain and loss on disposal of property and equipment is recognized in the period incurred. Leasehold improvements are amortized over the life of the lease or the related asset, whichever is shorter. | |
Share-Based Payments | The Company recognizes compensation costs, net of estimated forfeitures, resulting from the issuance of stock-based awards to employees and directors as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. The Company’s policy is to grant employee and director stock options with an exercise price equal to or greater than the fair value of the Common Stock at the date of grant. | |
Forfeitures are initially estimated based on historical information and subsequently updated over the life of the awards to ultimately reflect actual forfeitures. As a result, changes in forfeiture activity can influence the amount of stock compensation cost recognized from period to period. | ||
The Company recognizes compensation costs resulting from the issuance of stock-based awards to non-employees as an expense in the statement of operations over the service period based on a measurement of fair value for each stock award. | ||
The fair value of options is calculated primarily using the Black-Scholes option pricing model. This option valuation model requires input of assumptions including, among others, the volatility of our stock price, the expected life of the option and the risk-free interest rate. We estimate the volatility of our stock price using historical prices. We estimate the expected life of our option using the average of the vesting period and the contractual term of the option. The estimated forfeiture rate is based on historical forfeiture information as well as subsequent events occurring prior to the issuance of the financial statements. Because our stock options have characteristics significantly different from those of traded options, and because changes in the input assumptions can materially affect the fair value estimate, the existing model may not necessarily provide a reliable single measure of fair value of our stock options. | ||
In calculating the compensation expense for certain more complex stock options granted, we utilize a binomial lattice-based valuation model. Lattice-based option valuation models incorporate ranges of assumptions for inputs and those ranges are disclosed in the preceding table. Expected volatilities are based on a combination of historical volatility of our stock and implied volatilities of call options on our stock. We use historical data to estimate option exercise and employee termination patterns within the valuation model. The expected life of options granted is derived from the output of the option valuation model and represents the average period of time that options granted are expected to be outstanding. The interest rate for periods within the contractual life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. | ||
Fair Values of Assets and Liabilities | The Company groups its financial assets and financial 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. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. | |
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. This category generally includes certain private equity investments and long-term derivative contracts. | |
The Company's financial liabilities measured at fair value on December 31, 2014 and 2013 consists solely of a derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 7). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. These assumptions include the fair value of the underlying stock, risk-free interest rates, volatility, expected life and dividend rates. The Company has no financial assets measured at fair value. | ||
The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. There were no such adjustments in the years ended December 31, 2014 and 2013. | ||
Derivative Instruments | The Company generally does not use derivative instruments to hedge exposures to cash-flow 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, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash 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 subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. | |
Concentration of Credit Risk | The Company has no significant off-balance-sheet risk. Financial instruments, which subject the Company to credit risk, principally consist of cash and cash equivalents. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high-quality financial institutions. | |
Financial Instruments | The estimated fair value of the Company’s financial instruments, which include cash and cash equivalents, restricted cash, accounts payable and capital lease obligation, approximates their carrying value due to the short-term nature of these instruments and their market terms. | |
Net Loss per Common Share | Basic and diluted net loss per share of Common Stock has been computed by dividing the net loss applicable to common stockholders in each period by the weighted average number of shares of Common Stock outstanding during such period. For the periods presented, options, warrants and convertible securities were anti-dilutive and therefore excluded from diluted loss per share calculations. | |
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 the development of transdermal skin permeation and diagnostic medical devices and specialty pharmaceutical drugs. As of December 31, 2014 and 2013, all of the Company’s assets were located in the United States. | |
Research and Development Expenses | The Company charges research and development expenses to operations as incurred. Research and development expenses primarily consist of salaries and related expenses for personnel and outside contractor and consulting services. Other research and development expenses include the costs of materials and supplies used in research and development, prototype manufacturing, clinical studies, related information technology and an allocation of facilities costs. | |
Income Taxes | The Company is primarily subject to U.S. federal, Massachusetts and Pennsylvania state income tax. Tax years subsequent to 2011 remain open to examination by U.S. federal and state tax authorities. | |
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, since the Company cannot be assured of realizing the deferred tax asset, a full valuation allowance has been provided. | ||
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. There were no uncertain tax position liabilities recorded at December 31, 2014 and 2013. | ||
The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2014 and 2013, the Company had no accruals for interest or penalties related to income tax matters. | ||
Licensing and Other Revenue Recognition | To date, the Company has generated revenue primarily from licensing agreements, including upfront, nonrefundable license fees, with collaborators and licensees. The Company recognizes revenue when the following criteria have been met: | |
· persuasive evidence of an arrangement exists; | ||
· delivery has occurred and risk of loss has passed; | ||
· the price to the buyer is fixed or determinable; and | ||
· collectability is reasonably assured. | ||
From time to time, the Company receives upfront, nonrefundable payments for the licensing of its intellectual property upon the signing of a license agreement. The Company believes that these payments generally are not separable from the payments it receives for providing research and development services because the license does not have stand-alone value from the research and development services it provides under its agreements. Accordingly, the Company accounts for these elements as one unit of accounting and recognizes upfront, nonrefundable payments as revenue on a straight-line basis over its contractual or estimated performance period. Revenue from the reimbursement of research and development efforts is recognized as the services are performed based on proportional performance adjusted from time to time for any delays or acceleration in the development of the product and is included in Other Revenue. The Company determines the basis of the estimated performance period based on the contractual requirements of its collaboration agreements. At each reporting period, the Company evaluates whether events warrant a change in the estimated performance period. | ||
Distinguishment of Liabilities from Equity | The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify convertible instruments, such as the Company’s preferred stock. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares. Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the preferred stock or other financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. | |
Initial Measurement | ||
The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. For warrants that are recorded as equity, the Company uses a Black Scholes model. | ||
Subsequent Measurement | ||
The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income. The Company uses the Black Scholes pricing method, which is not materially different from a binomial lattice valuation methodology utilizing Level 3 inputs, to determine the fair value of derivative liabilities resulting from warrants that are recognized as liabilities. | ||
Recently Issued Accounting Pronouncements | On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is effective for public entities for annual reporting periods beginning after December 15, 2017. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle is that a company should 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. ASU 2014-09 shall be applied retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on the consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2018. | |
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern—Disclosures of Uncertainties about an entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 provides new guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards and to provide related footnote disclosures. This new guidance is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company is currently evaluating the impact of the requirements of ASU 2014-15. |
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||
Property and equipment | 2014 | 2013 | Estimated Useful Lives | ||||||||||
Computer equipment | $ | 334,865 | $ | 323,488 | 3 | ||||||||
Office and laboratory equipment | 740,177 | 728,152 | 5-Mar | ||||||||||
Furniture and fixtures | 755,444 | 755,444 | 7 | ||||||||||
Manufacturing equipment | 111,980 | 111,980 | 5 | ||||||||||
Leasehold improvements | 825,589 | 825,589 | 7-Mar | ||||||||||
Total property and equipment | 2,768,055 | 2,744,653 | |||||||||||
Less accumulated depreciation and amortization | 1,629,462 | 1,248,846 | |||||||||||
Property and equipment, net | $ | 1,138,593 | $ | 1,495,807 |
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Intangible Assets Tables | |||||
Intangible assets | Carrying Value | ||||
Technology related intangible assets: | |||||
Patents for the AzoneTS-based product candidates and formulation | 1,305,000 | ||||
Drug Master Files containing formulation, clinical and safety documentation used by the FDA | 1,500,000 | ||||
In-process pharmaceutical products for 2 indications | 6,820,000 | ||||
Total technology related intangible assets | $ | 9,625,000 | |||
Amortization expense | Estimated | ||||
Amortization | |||||
Expense | |||||
2015 | $ | — | |||
2016 | — | ||||
2017 | 302,000 | ||||
2018 | 2,398,000 | ||||
2019 | 4,601,000 | ||||
Thereafter | 2,324,000 | ||||
Total | $ | 9,625,000 |
OPERATING_LEASE_COMMITMENTS_Ta
OPERATING LEASE COMMITMENTS (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Operating Lease Commitments Tables | |||||
Future minimum lease payments | Franklin | ||||
Year Ending December 31, | |||||
2015 | $ | 444,000 | |||
2016 | 455,000 | ||||
2017 | 382,000 | ||||
Total | $ | 1,281,000 |
DERIVATIVE_WARRANT_LIABILITY_T
DERIVATIVE WARRANT LIABILITY (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Derivative Warrant Liability Tables | |||||||||
Derivative warrant liability | 2014 | 2013 | |||||||
Derivative warrant liability as of January 1 | $ | 1,119,155 | $ | 5,585,141 | |||||
Total unrealized losses included in net loss | 333,000 | 1,671,682 | |||||||
Total unrealized gains included in net loss | (1,244,000 | ) | (5,985,000 | ) | |||||
Total realized gains included in net loss | — | (152,668 | ) | ||||||
Gain on Revaluation | 911,000 | 4,465,986 | |||||||
Derivative warrant liability as of December 31 | $ | 208,155 | $ | 1,119,155 |
EQUITY_COMPENSATION_PLANS_Tabl
EQUITY COMPENSATION PLANS (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Compensation and Retirement Disclosure [Abstract] | |||||||||||||
Share based compensation options | Equity Compensation Plans | ||||||||||||
2003 Plan | 2008 Plan | ||||||||||||
Shares Available For Issuance | |||||||||||||
Total reserved for stock options and restricted stock | 160,000 | 10,000,000 | |||||||||||
Net restricted stock issued net of cancellations | (5,000 | ) | (36,473 | ) | |||||||||
Stock options granted | (154,449 | ) | (2,175,883 | ) | |||||||||
Add back options cancelled before exercise | 82,349 | 1,214,483 | |||||||||||
Less shares no longer available due to Plan expiration | (82,900 | ) | - | ||||||||||
Remaining shares available for future grants at December 31, 2014 | - | 9,002,127 | |||||||||||
Not Pursuant to a Plan | |||||||||||||
Stock options granted | 154,449 | 2,175,883 | 310,000 | ||||||||||
Less: Stock options cancelled | (82,349 | ) | (1,214,483 | ) | (188,333 | ) | |||||||
Stock options exercised | (35,600 | ) | (13,000 | ) | (66,667 | ) | |||||||
Net shares outstanding before restricted stock | 36,500 | 948,400 | 55,000 | ||||||||||
Net restricted stock issued net of cancellations | 5,000 | 36,473 | 6,485 | ||||||||||
Outstanding shares at December 31, 2014 | 41,500 | 984,873 | 61,485 |
STOCK_OPTIONS_Tables
STOCK OPTIONS (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||
Stock Options Tables | |||||||||||||||||
Assumption used for stock option granted | The assumptions used principally for options granted to employees in the years ended December 31, 2014 and 2013 were as follows: | ||||||||||||||||
2014 | 2013 | ||||||||||||||||
Risk-free interest rate % | 1.45 - 1.90 | 0.10 - 2.71 | |||||||||||||||
Expected dividend yield | — | — | |||||||||||||||
Expected term in years | 4.5 - 6.5 | 10-Jan | |||||||||||||||
Forfeiture rate % (excluding fully vested options) | 7.5 - 15 | 15 | |||||||||||||||
Expected volatility % | 81 - 121 | 129 - 141 | |||||||||||||||
In December 2014, the Company issued stock options to purchase 475,000 shares of our Common Stock to its new CEO and CFO that contain certain stock price level attainment conditions that must be achieved before the stock options are permitted to vest. In calculating the compensation expense for these stock option grants, we utilize a binomial lattice-based valuation model. Assumptions utilized in the model, which are evaluated and revised, as necessary, to reflect market conditions and experience, were as follows: | |||||||||||||||||
2014 | |||||||||||||||||
Interest rate % | 2 | ||||||||||||||||
Weighted average interest rate | — | ||||||||||||||||
Dividend yield | — | ||||||||||||||||
Expected volatility | 1.05 | ||||||||||||||||
Weighted Average volatility | — | ||||||||||||||||
Expected life in years | 6.5 | ||||||||||||||||
Stock option activity | Weighted- | ||||||||||||||||
Weighted- | Average | ||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||
Exercise | Contractual | Intrinsic | |||||||||||||||
Shares | Price | Term | Value | ||||||||||||||
Outstanding at January 1, 2014 | 1,455,432 | $ | 4.4 | — | — | ||||||||||||
Granted | 662,950 | 1.94 | — | — | |||||||||||||
Forfeited or expired | (1,078,482 | ) | 4.92 | — | — | ||||||||||||
Outstanding at December 31, 2014 | 1,039,900 | $ | 3 | 8.82 years | $ | — | |||||||||||
Exercisable at December 31, 2014 | 527,667 | $ | 3.9 | 8.10 years | $ | — | |||||||||||
RESTRICTED_STOCK_Tables
RESTRICTED STOCK (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Notes to Financial Statements | |||||||||
Nonvested restricted stock activity | Weighted- | ||||||||
Average | |||||||||
Shares | Grant-Date | ||||||||
Fair Value | |||||||||
Non-vested shares at January 1, 2014 | 201,655 | $ | 10.66 | ||||||
Granted | 36,936 | $ | 2.85 | ||||||
Vested | (92,178 | ) | $ | 6.15 | |||||
Forfeited | (98,455 | ) | $ | 12.4 | |||||
Non-vested shares at December 31, 2014 | 47,958 | $ | 9.74 |
WARRANTS_Tables
WARRANTS (Tables) | 12 Months Ended | |||||||||||||||||||
Dec. 31, 2014 | ||||||||||||||||||||
WarrantsTableTextBlockAbstract | ||||||||||||||||||||
Warrants assumptions utilized by the Company | 2014 | 2013 | ||||||||||||||||||
Risk-free interest rate % | 1.57 – 1.77 | 0.65 - 1.85 | ||||||||||||||||||
Expected dividend yield | — | — | ||||||||||||||||||
Expected term in years (contractual term) | 5 | 0.33 - 5 | ||||||||||||||||||
Forfeiture rate % | — | — | ||||||||||||||||||
Expected volatility % | 78 - 102 | 122 - 123 | ||||||||||||||||||
Outstanding Warrants | Type of Warrant/ Range of Exercise Prices | Expirations | Number Outstanding | Weighted- Average Remaining Contractual Life (years) | Weighted- Average Exercise Price | Number Exercisable | ||||||||||||||
Derivative: | ||||||||||||||||||||
$20.00 - $22.70 | 8/31/17 to 11/6/17 | 700,000 | 2.72 | $ | 20.71 | 700,000 | ||||||||||||||
Equity: | ||||||||||||||||||||
$2.75 - $3.00 | 12/10/18 to 12/18/19 | 1,109,428 | 4.75 | $ | 2.94 | 1,109,428 | ||||||||||||||
$22.50 | 2/9/15 to 3/18/15 | 37,638 | 0.11 | $ | 22.5 | 37,638 | ||||||||||||||
1,147,066 | 1,147,066 | |||||||||||||||||||
Total outstanding | 1,847,066 | 1,847,066 | ||||||||||||||||||
Warrant Activity | Weighted- | |||||||||||||||||||
Average | ||||||||||||||||||||
Exercise | ||||||||||||||||||||
Warrants | Shares | Price | ||||||||||||||||||
Outstanding at January 31, 2013 | 1,254,004 | $ | 20.08 | |||||||||||||||||
Granted | 190,993 | $ | 3.22 | |||||||||||||||||
Forfeited or expired | (235,786 | ) | $ | 17.36 | ||||||||||||||||
Outstanding at December 31, 2013 | 1,209,211 | $ | 17.92 | |||||||||||||||||
Granted | 927,610 | $ | 2.98 | |||||||||||||||||
Forfeited or expired | (289,755 | ) | $ | 20.33 | ||||||||||||||||
Outstanding at December 31, 2014 | 1,847,066 | $ | 10.04 |
INCOME_TAXES_Tables
INCOME TAXES (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Income Taxes Tables | |||||||||
Company's net deferred tax asset | December 31, | ||||||||
2014 | 2013 | ||||||||
Deferred Tax Assets/(Liabilities): | |||||||||
Net operating loss carryforwards | $ | 34,500,000 | $ | 32,487,000 | |||||
Research credit carryforwards | 3,048,000 | 2,488,000 | |||||||
Acquired intangible assets, net | (3,697,000 | ) | (3,697,000 | ) | |||||
Restricted stock and warrants | 731,000 | 374,000 | |||||||
Other temporary differences | 50,000 | 207,000 | |||||||
Total deferred tax assets, net | 34,632,000 | 31,859,000 | |||||||
Valuation allowance | (34,632,000 | ) | (31,859,000 | ) | |||||
Net deferred tax asset | $ | — | $ | — | |||||
Income taxes computed using the federal statutory income tax rate | Years Ended December 31, | ||||||||
2014 | 2013 | ||||||||
% | % | ||||||||
Income taxes benefit (expense) at statutory rate | 34 | 34 | |||||||
State income tax, net of federal benefit | 2.76 | (4.40 | ) | ||||||
Permanent Differences: | |||||||||
Non-cash interest expense warrant | (8.07 | ) | — | ||||||
Gain/loss or revaluation of derivative warrant liability | 2.07 | 7.8 | |||||||
Stock-based compensation expense | (0.88 | ) | (1.30 | ) | |||||
Other | 0.01 | (1.70 | ) | ||||||
R&D credits | 1.21 | (4.70 | ) | ||||||
Change in valuation allowance | (31.13 | ) | (29.70 | ) | |||||
(0.03 | ) | — |
REVISION_OF_PRIOR_INTERIM_PERI1
REVISION OF PRIOR INTERIM PERIOD FINANCIAL STATEMENTS (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Accounting Changes and Error Corrections [Abstract] | |||||||||||||||||||||||||
Revision or prior interim period financial statements | Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
As Previously Recorded | Adjustment | As Revised | As Previously Recorded | Adjustment | As Revised | ||||||||||||||||||||
Licensing revenue | $ | 19,107 | $ | − | $ | 19,107 | $ | 57,321 | $ | − | $ | 57,321 | |||||||||||||
Total revenues | 19,107 | − | 19,107 | 57,321 | − | 57,321 | |||||||||||||||||||
Operating Expenses: | |||||||||||||||||||||||||
Research and development | 1,200,590 | − | 1,200,590 | 4,348,752 | − | 4,348,752 | |||||||||||||||||||
Selling, general and administrative | 1,731,868 | − | 1,731,868 | 5,207,103 | − | 5,207,103 | |||||||||||||||||||
Total operating expenses | 2,932,458 | − | 2,932,458 | 9,555,855 | − | 9,555,855 | |||||||||||||||||||
Loss from operations | (2,913,351 | ) | − | (2,913,351 | ) | (9,498,534 | ) | − | (9,498,534 | ) | |||||||||||||||
Other Income (Expense): | |||||||||||||||||||||||||
Interest income | 181 | − | 181 | 915 | − | 915 | |||||||||||||||||||
Interest expense | (3,064,414 | ) | 2,823,325 | (241,089 | ) | (3,551,482 | ) | 2,823,325 | (728,157 | ) | |||||||||||||||
Gain on disposals of assets | − | − | − | 1,500 | − | 1,500 | |||||||||||||||||||
Gain (loss) on revaluation of derivative warrant liability | 473,000 | − | 473,000 | 1,006,000 | − | 1,006,000 | |||||||||||||||||||
Other income (expense), net | (2,591,233 | ) | 2,823,325 | 232,092 | (2,543,067 | ) | 2,823,325 | 280,258 | |||||||||||||||||
Net loss | $ | (5,504,584 | ) | $ | 2,823,325 | $ | (2,681,259 | ) | $ | (12,041,601 | ) | $ | 2,823,325 | $ | (9,218,276 | ) | |||||||||
Net loss per common share, basic and diluted | $ | (0.43 | ) | $ | 0.22 | $ | (0.21 | ) | $ | (0.99 | ) | $ | 0.23 | $ | (0.76 | ) | |||||||||
Basic and diluted weighted average common shares outstanding | 12,660,182 | 12,660,182 | 12,660,182 | 12,199,476 | 12,199,476 | 12,199,476 |
ORGANIZATION_AND_BASIS_OF_PRES1
ORGANIZATION AND BASIS OF PRESENTATION (Details Narrative) | 5 Months Ended |
Jun. 07, 2013 | |
Organization And Basis Of Presentation | |
Reverse stock split ratio | 1-for-10 |
LIQUIDITY_AND_MANAGEMENTS_PLAN1
LIQUIDITY AND MANAGEMENTS' PLANS (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | ||
Apr. 15, 2015 | Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Liquidity and Management's Plans | ||||
Cash | $1,278,941 | $8,055,385 | $3,747,210 | |
Working capital deficit | -1,156,000 | 5,731,000 | ||
Accumulated deficit | -128,000,000 | 112,969,000 | ||
Net cash proceeds from MTIA Common Stock financing | 1,500,000 | 1,000,000 | ||
Total MTIA investment | $4,000,000 |
SUMMARY_OF_SIGNIFICANT_ACCOUNT2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | Dec. 31, 2014 |
Landlord [Member] | |
Letter of credit issued | $52,488 |
Vendor 1 [Member] | |
Letter of credit issued | $250,000 |
PROPERTY_AND_EQUIPMENT_Details
PROPERTY AND EQUIPMENT (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property and equipment, gross | $2,768,055 | $2,744,653 |
Less accumulated depreciation and amortization | 1,629,462 | 1,248,846 |
Property and equipment, net | 1,138,593 | 1,495,807 |
Computer Equipment [Member] | ||
Property and equipment, gross | 34,865 | 323,488 |
Property and equipment, Useful Life | 3 years | |
Office and Lab Equip [Member] | ||
Property and equipment, gross | 740,177 | 728,152 |
Property and equipment, Useful Life | 3 years | |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | 755,444 | 755,444 |
Property and equipment, Useful Life | 7 years | |
Manufacturing Equipment [Member] | ||
Property and equipment, gross | 111,980 | 111,980 |
Property and equipment, Useful Life | 5 years | |
Leasehold Improvements [Member] | ||
Property and equipment, gross | $825,589 | $825,589 |
Property and equipment, Useful Life | 3 years | |
Office and Lab Equip Max [Member] | ||
Property and equipment, Useful Life | 5 years | |
Leasehold Improvements Max [Member] | ||
Property and equipment, Useful Life | 7 years |
PROPERTY_AND_EQUIPMENT_Details1
PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $392,727 | $391,595 |
INTANGIBLE_ASSETS_Details
INTANGIBLE ASSETS (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Intangible assets, carrying value | $9,625,000 | $9,625,000 |
Patents for the AzoneTS [Member] | ||
Intangible assets, carrying value | 1,305,000 | |
Drug Master Files [Member] | ||
Intangible assets, carrying value | 1,500,000 | |
In-process pharmaceutical [Member] | ||
Intangible assets, carrying value | $6,820,000 |
INTANGIBLE_ASSETS_Details_1
INTANGIBLE ASSETS (Details 1) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Estimated amortization expense | ||
2015 | ||
2016 | ||
2017 | 302,000 | |
2018 | 2,398,000 | |
2019 | 4,601,000 | |
Thereafter | 2,324,000 | |
Estimated amortization expense, total | $9,625,000 | $9,625,000 |
OPERATING_LEASE_COMMITMENTS_De
OPERATING LEASE COMMITMENTS (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
OPERATING LEASE COMMITMENTS | ||
Year ended December, 2015 | $444,000 | $635,000 |
Year ended December, 2016 | 455,000 | 651,000 |
Year ended December, 2017 | 382,000 | 464,000 |
Total | $1,281,000 |
OPERATING_LEASE_COMMITMENTS_De1
OPERATING LEASE COMMITMENTS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Operating Leased Assets [Line Items] | ||
Facilities lease expense | $514,000 | $677,000 |
IselinNJ [Member] | ||
Operating Leased Assets [Line Items] | ||
Facilities lease expense | 7,700 | |
Letter of credit issued | 77,000 | |
IselinNJ [Member] | Minimum [Member] | ||
Operating Leased Assets [Line Items] | ||
Letter of credit issued | $38,500 |
DERIVATIVE_WARRANT_LIABILITY_D
DERIVATIVE WARRANT LIABILITY (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
DERIVATIVE WARRANT LIABILITY | ||
Derivative warrant liability | $1,119,155 | $5,585,141 |
Total unrealized losses included in net loss | 333,000 | 1,671,682 |
Total unrealized gains included in net loss | -1,244,000 | -5,985,000 |
Total realized gains included in net loss | -152,668 | |
Gain on Revaluation | 911,000 | 4,465,986 |
Derivative warrant liability | $208,155 | $1,119,155 |
CONVERTIBLE_PREFERRED_STOCK_De
CONVERTIBLE PREFERRED STOCK (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Class of Stock [Line Items] | ||
Par value | $0.01 | |
Series C stock issued as part of Series B exchange | 1,830.89 | |
Series B Preferred Stock [Member] | ||
Class of Stock [Line Items] | ||
Authorized Preferred Stock | 40,000 | |
Par value | $0.01 | |
Shares surrendered | 170 | |
Redeemable value of shares surrendered | $1,701 | |
SeriesCPreferredStock [Member] | ||
Class of Stock [Line Items] | ||
Authorized Preferred Stock | 10,000 | 10,000 |
Issued and outstanding | 1,000 | 9,974.18 |
SeriesDPreferredStock [Member] | ||
Class of Stock [Line Items] | ||
Authorized Preferred Stock | 3,600,000 | 3,600,000 |
Issued and outstanding | 1,000 | 3,006,000 |
Series E Preferred Stock [Member] | ||
Class of Stock [Line Items] | ||
Authorized Preferred Stock | 1,748,613 |
EQUITY_COMPENSATION_PLANS_Deta
EQUITY COMPENSATION PLANS (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Shares Available For Issuance | ||
Add back options cancelled before exercise | -1,078,482 | |
Outstanding Options and Restricted Stock | ||
Ending Balance | 61,485 | |
Plan2003Member | ||
Shares Available For Issuance | ||
Total reserved for stock options and restricted stock | 160,000 | |
Net restricted stock issued net of cancellations | -5,000 | |
Stock options granted | -154,449 | |
Add back options cancelled before exercise | 82,349 | |
Options cancelled by plan vote | -82,900 | |
Remaining shares available for future grants | ||
Outstanding Options and Restricted Stock | ||
Total granted | 154,449 | |
Options cancelled | -82,349 | |
Options exercised | -35,600 | |
Net shares outstanding before restricted stock | 36,500 | |
Net restricted stock issued net of cancellations | 5,000 | |
Ending Balance | 41,500 | |
Plan2008Member | ||
Shares Available For Issuance | ||
Total reserved for stock options and restricted stock | 10,000,000 | |
Net restricted stock issued net of cancellations | -36,473 | |
Stock options granted | -2,175,883 | |
Add back options cancelled before exercise | -1,214,483 | |
Options cancelled by plan vote | ||
Remaining shares available for future grants | 9,002,127 | |
Outstanding Options and Restricted Stock | ||
Total granted | 2,175,883 | |
Options cancelled | -1,214,483 | |
Options exercised | -13,000 | |
Net shares outstanding before restricted stock | 948,400 | |
Net restricted stock issued net of cancellations | 36,473 | |
Ending Balance | 984,873 | |
NotPursuanttoaPlanMember | ||
Outstanding Options and Restricted Stock | ||
Total granted | 310,000 | |
Options cancelled | -188,333 | |
Options exercised | -66,667 | |
Net shares outstanding before restricted stock | 55,000 | |
Net restricted stock issued net of cancellations | 6,485 |
EQUITY_COMPENSATION_PLANS_Deta1
EQUITY COMPENSATION PLANS (Details Narrative) | Dec. 31, 2014 | Dec. 31, 2013 |
Stock Options And Restricted Stock | ||
Maximum authorized shares | 150,000,000 | 150,000,000 |
EqPlan 2003 [Member] | ||
Stock Options And Restricted Stock | ||
Restricted shares of Common Stock issued | 12,500 | |
Options to purchase an aggregate of shares | 44,000 | |
EqPlan 2008 [Member] | ||
Stock Options And Restricted Stock | ||
Restricted shares of Common Stock issued | 1,984,873 | |
Options to purchase an aggregate of shares | 984,873 | |
Maximum authorized shares | 10,000,000 | |
Shares Future grants | 9,002,127 |
STOCK_OPTIONS_Details_2
STOCK OPTIONS (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Shares | ||
Beginning Balance | 1,039,900 | |
Granted | 662,950 | |
Forfeited or expired | -1,078,482 | |
Ending Balance | 1,039,900 | |
Exercisable at June 30, 2013 | 527,667 | |
Weighted-Average Exercise Price | ||
Beginning Balance | $3 | |
Granted | $1.94 | |
Forfeited or expired | $4.92 | |
Ending Balance | $3 | |
Exercisable at June 30, 2013 | $3.90 | |
Weighted-Average Remaining Contractual Term | ||
Weighted-Average Remaining Contractual Term Outstanding | 8 years 9 months 25 days | |
Weighted-Average Remaining Contractual Term Exercisable | 8 years 1 month 6 days |
STOCK_OPTIONS_Details_Narrativ
STOCK OPTIONS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Stock Options And Restricted Stock | ||
Additional paid-in capital and non-cash compensation expense | $1,046,454 | $714,547 |
Weighted-average grant-date fair value of stock options granted | $3.05 | |
Total unrecognized compensation expense | $616,000 |
RESTRICTED_STOCK_Details
RESTRICTED STOCK (Details) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Shares | |
Nonvested at beginning of period | 47,958 |
Granted | 36,936 |
Vested | -92,178 |
Forfeited | -98,455 |
Nonvested at end of period | 47,958 |
Weighted- Average Grant-DateFair Value | |
Nonvested at beginning of period | $9.74 |
Granted | $2.85 |
Vested | $6.15 |
Forfeited | $12.40 |
Nonvested at end of period | $9.74 |
RESTRICTED_STOCK_Details_Narra
RESTRICTED STOCK (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Stock Options And Restricted Stock | ||
Non-cash compensation expense | $335,918 | $529,795 |
Outstanding restricted stock grants | 201,655 | |
Weighted average grant date value | $9.74 | |
Nonvested at end of period | 47,958 | 47,958 |
Shares of non-vested restricted stock | 201,655 | |
Total unrecognized compensation expense | $121,000 | |
FDA Approval [Member] | ||
Stock Options And Restricted Stock | ||
Restricted stock to vest upon FDA approval | 14,185 | |
One Year [Member] | ||
Stock Options And Restricted Stock | ||
Restricted stock to vest upon FDA approval | 22,898 | |
Four Years [Member] | ||
Stock Options And Restricted Stock | ||
Restricted stock to vest upon FDA approval | 10,875 |
WARRANTS_Details
WARRANTS (Details) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Warrants Details | ||
Risk-free interest rate | 1.57% | 0.65% |
Risk-free interest rate, maximum | 1.77% | 1.85% |
Expected term (contractual term) | 5 years | 0 years 0 months 22 days |
Expected term (contractual term), maximum | 5 years | 5 years |
Expected volatility | 78.00% | 122.00% |
Expected volatility, maximum | 102.00% | 123.00% |
WARRANTS_Details_1
WARRANTS (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Class of Warrant or Right [Line Items] | |
Warrants outstanding | 1,147,066 |
Number exercisable | 1847066 |
Derivative [Member] | |
Class of Warrant or Right [Line Items] | |
Date of Expiration | 8/31/17 to 11/6/17 |
Warrants outstanding | 700,000 |
Weighted-Average remaining contractual life | 2 years 8 months 25 days |
Weighted average exercise price | 20.71 |
Number exercisable | 700000 |
Derivative [Member] | Derivative [Member] | |
Class of Warrant or Right [Line Items] | |
Exercise Price | 20 |
Derivative [Member] | Maximum [Member] | |
Class of Warrant or Right [Line Items] | |
Exercise Price | 22.7 |
Equity [Member] | |
Class of Warrant or Right [Line Items] | |
Date of Expiration | 12/10/18 to 12/18/19 |
Warrants outstanding | 1,109,428 |
Weighted-Average remaining contractual life | 4 years 9 months |
Weighted average exercise price | 2.94 |
Number exercisable | 1109428 |
Equity [Member] | Derivative [Member] | |
Class of Warrant or Right [Line Items] | |
Exercise Price | 2.75 |
Equity [Member] | Maximum [Member] | |
Class of Warrant or Right [Line Items] | |
Exercise Price | 3 |
Equity 2 [Member] | |
Class of Warrant or Right [Line Items] | |
Date of Expiration | 2/9/15 to 3/18/15 |
Warrants outstanding | 37,638 |
Weighted-Average remaining contractual life | 1 month 22 days |
Weighted average exercise price | 22.5 |
Number exercisable | 37638 |
Equity 2 [Member] | Derivative [Member] | |
Class of Warrant or Right [Line Items] | |
Exercise Price | 22.5 |
Equity 2 [Member] | Maximum [Member] | |
Class of Warrant or Right [Line Items] | |
Exercise Price | 22.5 |
WARRANTS_Details_2
WARRANTS (Details 2) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Shares | ||
Beginning Balance | 1,209,211 | 1,254,004 |
Granted | 927,610 | 190,993 |
Forfeited or expired | -289,755 | -235,786 |
Ending Balance | 1,847,066 | |
Weighted-Average Exercise Price | ||
Beginning Balance | $10.04 | $20.08 |
Granted | 2.98 | 3.22 |
Forfeited or expired | 20.33 | 17.36 |
Ending Balance | $10.04 | $10.04 |
WARRANTS_Details_Narrative
WARRANTS (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Warrants Details Narrative | ||
Fair value warrants issued | $350,000 | $371,140 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Income Taxes Details | ||
Net operating loss carryforwards | $34,500,000 | $34,500,000 |
Research credit carryforward | 3,048,000 | 3,048,000 |
Acquired intangible assets, net | -3,697,000 | -3,697,000 |
Restricted stock and warrants | 731,000 | 731,000 |
Other temporary differences | 50,000 | 50,000 |
Total deferred tax assets, net | 34,632,000 | 34,632,000 |
Valuation allowance | -34,632,000 | -34,632,000 |
Net deferred tax asset |
INCOME_TAXES_Details_1
INCOME TAXES (Details 1) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details 1 | ||
Income taxes benefit (expense) at statutory rate | 34.00% | 34.00% |
State income tax, net of federal benefit | 2.76% | -4.40% |
Permanent Differences | ||
Gain/loss or revaluation of derivative warrant liability | 2.07% | 7.80% |
Stock-based compensation expense | -0.88% | -1.30% |
Other | 0.01% | -1.70% |
R&D credits | 1.21% | -4.70% |
Change in valuation allowance | -31.13% | -29.70% |
Income taxes rate differences | -3.00% |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details Narrative | ||
Income tax provision, state, minimum | $4,000 | |
Gross federal net operating loss carryforwards | 98,462,000 | |
Gross state net operating loss carryforwards | 52,684,000 | |
Federal research and development tax credit carryforwards | 3,048,000 | |
Increase in valuation allowance | $2,773,000 | $9,228,000 |
LITIGATION_Details_Narrative
LITIGATION (Details Narrative) (USD $) | 2 Months Ended | 7 Months Ended |
Feb. 28, 2014 | Jul. 31, 2014 | |
Litigation Details Narrative | ||
Mooney damages seeked in Court | $20,000,000 | $30,000,000 |
LICENSING_AND_OTHER_REVENUE_De
LICENSING AND OTHER REVENUE (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Apr. 15, 2015 | Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2012 | Dec. 31, 2013 | |
Licensing and Other Revenue | ||||||
Nonrefundable license revenue | $19,107 | $57,321 | ||||
Nonrefundable license revenue, recognizable | 61,000 | |||||
Deferred revenue recognized over next twelve months | 76,428 | |||||
Net cash proceeds from MTIA Common Stock financing | 1,500,000 | 1,000,000 | ||||
Total MTIA investment | 4,000,000 | |||||
Handok [Member] | ||||||
Licensing and Other Revenue | ||||||
Minimum licensing term | 10 years | |||||
Initial licensing fee | 750,000 | |||||
Nonrefundable license revenue, recognizable | 57,000 | 28,000 | ||||
License revenue recognized | 750,000 | |||||
Licensing fee relating to Handok | 500,000 | |||||
Deferred revenue recognized over next twelve months | 95,535 | |||||
Net cash proceeds from MTIA Common Stock financing | 1,904,793 | |||||
Total MTIA investment | $5,000,000 |
REVISION_OF_PRIOR_INTERIM_PERI2
REVISION OF PRIOR INTERIM PERIOD FINANCIAL STATEMENTS - Revision or prior interim period financial statements (Details) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Licensing revenue | $19,107 | $57,321 | ||
Revenues | 19,107 | 57,321 | 57,321 | 27,600 |
Operating Expenses: | ||||
Research and development | 1,200,590 | 4,348,752 | 4,962,196 | 12,991,502 |
Selling, general and administrative | 1,731,868 | 5,207,103 | 7,415,049 | 6,680,983 |
Total operating expenses | 2,932,458 | 9,555,855 | 12,377,245 | 19,672,485 |
Loss from operations | -2,913,351 | -9,498,534 | -12,319,924 | -19,644,885 |
Other Income (Expense): | ||||
Interest income | 181 | 915 | 978 | 3,052 |
Interest expense | -241,089 | -728,157 | -3,551,482 | -3,903,116 |
Gain on disposals of assets | 1,500 | -1,114 | ||
Gain (loss) on revaluation of derivative warrant liability | 473,000 | 1,006,000 | 911,000 | 4,465,986 |
Other income (expense), net | 232,092 | 280,258 | -2,638,730 | 577,488 |
Net loss | -2,681,259 | -9,218,276 | -14,962,654 | -19,067,397 |
Net loss per common share, basic and diluted | ($0.21) | ($0.76) | ($1.24) | ($2.33) |
Basic and diluted weighted average common shares outstanding | 12,660,182 | 12,199,476 | ||
Scenario, Previously Reported [Member] | ||||
Licensing revenue | 19,107 | 57,321 | ||
Revenues | 19,107 | 57,321 | ||
Operating Expenses: | ||||
Research and development | 1,200,590 | 4,348,752 | ||
Selling, general and administrative | 1,731,868 | 5,207,103 | ||
Total operating expenses | 2,932,458 | 9,555,855 | ||
Loss from operations | -2,913,351 | -9,498,534 | ||
Other Income (Expense): | ||||
Interest income | 181 | 915 | ||
Interest expense | -3,064,414 | -3,551,482 | ||
Gain on disposals of assets | 1,500 | |||
Gain (loss) on revaluation of derivative warrant liability | 473,000 | 1,006,000 | ||
Other income (expense), net | -2,591,233 | -2,543,067 | ||
Net loss | -5,504,584 | -12,041,601 | ||
Net loss per common share, basic and diluted | ($0.43) | ($0.99) | ||
Basic and diluted weighted average common shares outstanding | 12,660,182 | 12,199,476 | ||
Restatement Adjustment [Member] | ||||
Licensing revenue | ||||
Revenues | ||||
Operating Expenses: | ||||
Research and development | ||||
Selling, general and administrative | ||||
Total operating expenses | ||||
Loss from operations | ||||
Other Income (Expense): | ||||
Interest income | ||||
Interest expense | 2,823,325 | 2,823,325 | ||
Gain on disposals of assets | ||||
Gain (loss) on revaluation of derivative warrant liability | ||||
Other income (expense), net | 2,823,325 | 2,823,325 | ||
Net loss | $2,823,325 | $2,823,325 | ||
Net loss per common share, basic and diluted | $0.22 | $0.23 | ||
Basic and diluted weighted average common shares outstanding | 12,660,182 | 12,199,476 |
REVISION_OF_PRIOR_INTERIM_PERI3
REVISION OF PRIOR INTERIM PERIOD FINANCIAL STATEMENTS (Details Narrative) (USD $) | 3 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Accounting Changes and Error Corrections [Abstract] | |||
Amortization of deferred financing costs | $2,823,325 | $3,549,328 | $968,004 |