Summary of Significant Accounting Policies and Basis of Presentation | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION Basis of Presentation/Estimates The accompanying unaudited interim condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) with respect to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements and the accompanying unaudited condensed balance sheet as of April 30, 2019 has been derived from the Company’s October 31, 2018 audited financial statements. In the opinion of management, the unaudited interim condensed financial statements furnished include all adjustments (consisting of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented. Operating results for interim periods are not necessarily indicative of the results to be expected for the full year. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Significant estimates include the timelines associated with revenue recognition on upfront payments received, fair value and recoverability of the carrying value of property and equipment and intangible assets, fair value of warrant liability, grant date fair value of options, deferred tax assets and any related valuation allowance and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, based on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results could materially differ from these estimates. These unaudited interim condensed financial statements should be read in conjunction with the financial statements of the Company as of and for the year ended October 31, 2018 and notes thereto contained in the Company’s annual report on Form 10-K, as filed with the SEC on January 11, 2019. Reclassification Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net loss. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentration of credit risk, consist principally of cash and cash equivalents. All of the Company’s cash and cash equivalents are deposited in accounts with financial institutions that management believes are of high credit quality and at times exceed the federally insured limits. The Company had not experienced losses in such accounts and believes it is not exposed to any significant credit risk. Restricted Cash and Letters of Credit During July 2017 and January 2018, the Company established two letters of credit with a financial institution as security for the purchase of custom equipment and as security for application fees associated with the Company’s Marketing Authorization Application (“MAA”) in Europe. The letters of credit were collateralized by cash which was unavailable for withdrawal or for usage for general obligations. During the six months ended April 30, 2019, the two letters of credit were terminated and as of April 30, 2019 the Company has no restricted cash balance. Revenue Recognition Effective November 1, 2018, the Company adopted ASC Topic 606, Revenue form Contracts with Customers (ASC 606), using the modified retrospective transition method. Under this method, results for reporting periods beginning on November 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC Topic 605, Revenue Recognition The Company enters into licensing agreements that are within the scope of ASC 606, under which it may exclusively license rights to research, develop, manufacture and commercialize its product candidates to third parties. The terms of these arrangements typically include payment to the Company of one or more of the following: non-refundable, upfront license fees; reimbursement of certain costs; customer option exercise fees; development, regulatory and commercial milestone payments; and royalties on net sales of licensed products. In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must use significant judgment to determine: (a) the number of performance obligations based on the determination under step (ii) above; (b) the transaction price under step (iii) above; and (c) the stand-alone selling price for each performance obligation identified in the contract for the allocation of transaction price in step (iv) above. The Company uses judgment to determine whether milestones or other variable consideration, except for royalties, should be included in the transaction price as described further below. The transaction price is allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. Amounts received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months following the balance sheet date are classified as current portion of deferred revenue in the accompanying consolidated balance sheets. Amounts not expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of current portion. Exclusive Licenses. Research and Development Services. Milestone Payments. Royalties. Collaborative Arrangements The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements Recent Accounting Standards In February 2016, the Financial Accounting Standards Board, (“FASB”), issued Accounting Standards Update, (“ASU”), No. 2016-02, Leases (Topic 842), which establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than 12 months. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted. A modified retrospective transition approach is required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, including a number of optional practical expedients that entities may elect to apply. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, an update which provides another transition method, in addition to the existing modified retrospective transition method, by allowing entities to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company is currently evaluating the impact of adopting ASU 2016-02 on the Company’s financial statements. Recently Adopted Accounting Standards In May 2014, FASB issued ASU No. 2014-09, which amends the guidance for accounting for revenue from contracts with customers. ASU No. 2014-09 superseded the revenue recognition requirements in ASC 605 and created ASC 606 described above. In 2015 and 2016, the FASB issued additional ASUs related to ASC 606 that delayed the effective date of the guidance and clarified various aspects of the new revenue guidance, including principal versus agent considerations, identifying performance obligations, and licensing, and they include other improvements and practical expedients. Effective November 1, 2018, the Company adopted ASC 606 using the modified retrospective transition method. As a result of adopting ASC 606, the Company made reclassifications to the balance sheet and income statement. Net income (loss) was not impacted by the adoption of ASC 606. A summary of the amount by which each financial statement line item was affected by the impact of the cumulative adjustment is set forth in the table below (in thousands): Impact of ASC 606 Adoption on Condensed Balance Sheet as of November 1, 2018 (in thousands) As reported under ASC 606 Adjustments Balances without adoption of ASC 606 Accounts receivable $ 1,664 $ 1,664 $ - Prepaid expenses and other current assets $ 1,611 $ (1,664 ) $ 3,275 A summary of the amount by which each financial statement line item was affected in the current reporting period by ASC 606 as compared with the guidance that was in effect prior to the adoption of ASC 606 is set forth in the tables below. Impact of ASC 606 Adoption on Condensed Balance Sheet as of April 30, 2019 (in thousands) As reported under ASC 606 Adjustments Balances without adoption of ASC 606 Accounts receivable $ - $ - $ - Prepaid expenses and other current assets $ 1,587 $ - $ 1,587 Impact of ASC 606 Adoption on Condensed Statement of Operations for the Three Months Ended April 30, 2019 (in thousands) As reported under ASC 606 Adjustments Balances without adoption of ASC 606 Revenue $ 1,188 $ 73 $ 1,115 Research and Development Expenses $ 6,327 $ 73 $ 6,254 Impact of ASC 606 Adoption on Condensed Statement of Operations for the Six Months Ended April 30, 2019 (in thousands) As reported under ASC 606 Adjustments Balances without adoption of ASC 606 Revenue $ 20,877 $ 1,960 $ 18,917 Research and Development Expenses $ 13,032 $ 1,960 $ 11,072 Impact of ASC 606 Adoption on Condensed Statement of Cash Flows for the Six Months Ended April 30, 2019 (in thousands) As reported under ASC 606 Adjustments Balances without adoption of ASC 606 Accounts receivable $ - $ - $ - Prepaid expenses and other current assets $ 1,587 $ - $ 1,587 The most significant change to the Company’s accounting for revenue as a result of the adoption of ASC 606 relates to its treatment of clinical development payments it receives in its collaboration and licensing agreement with Amgen, Inc. (“Amgen”). Under ASC 605, the Company accounted for the clinical development payments as a reduction of research and development expenses in the statement of operations. Under ASC 606, the Company accounted for the reimbursements for research and development costs as revenue. For further discussion of the adoption of this standard, see Note 9. In November 2018, the FASB issued ASU No. 2018-18, “Collaborative Arrangements (Topic 808)—Clarifying the Interaction between Topic 808 and Topic 606” (“ASU 2018-18”). The amendments in ASU 2018-18 make targeted improvements to generally accepted accounting principles (GAAP) for collaborative arrangements by clarifying that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied, including recognition, measurement, presentation, and disclosure requirements. In addition, unit-of-account guidance in Topic 808 was aligned with the guidance in Topic 606 (that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. ASU 2018-18 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. The amendments should be applied retrospectively to the date of initial application of Topic 606. The Company adopted this guidance effective November 1, 2018 using the modified retrospective approach. There was no impact on the Company’s financial statements. In June 2018, the FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718) —Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). The amendments in ASU 2018-07 expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted this guidance effective as of February 1, 2019. There was no impact on the Company’s financial statements. In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed financial statements. |