| Summary of Significant Accounting Policies | Use of Estimates The preparation of financial statements in conformity
with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities,
the 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. Actual results could differ from those estimates. Significant estimates include
those relating to revenue recognition, share-based compensation, right-of-use assets and lease liabilities and assumptions that
have been used historically to value warrants and warrant modifications. Revenue Recognition We generate revenue from collaborative research
and development arrangements, licensing and technology transfer agreements, including strategic licenses or sublicenses, and government
grants. We expect that our primary source of revenue beginning in the second fiscal quarter of our current fiscal year will be
from the EverInsight Agreement involving clinical development and commercialization of PH94B for acute treatment of anxiety in
adults with SAD, and potentially other anxiety-related disorders, in Greater China, South Korea, and Southeast Asia, which is described
in more detail in Note 11, Sublicensing and Collaboration Agreements. Sublicensing and Collaborative Agreements Under Accounting Standards Codification ( ASC Revenue from Contracts with Customers (Topic 606) Performance Obligations We assess whether each promised good or service
is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations
and requires judgments about the individual promised goods or services and whether such components are separable from the other
aspects of the contractual relationship. In assessing whether a promised good or service is distinct in the evaluation of a collaboration
arrangement subject to Topic 606, we consider factors such as the research, manufacturing and commercialization capabilities of
the collaboration partner and the availability of the associated expertise in the general marketplace. Collaboration arrangements can have several
promised goods or services including a license for our intellectual property, product supply and development and regulatory services.
When the customer could not obtain the intended benefit of the contract from a promised good or service without one or more other
promises in the contract, the promise is determined to be not distinct in the context of the contract and is combined with other
promises until the combined promises are distinct to identify performance obligations. We have determined that the Everinsight
Agreement includes a single combined performance obligation that includes both the license to intellectual property and development
and regulatory services. Arrangements can include promises for optional
additional items, which are considered marketing offers and are accounted for as separate contracts when the customer elects such
options. Arrangements that include a promise for future supply of product for either clinical development or commercial supply
and optional research and development services at the customer’s or the Company’s discretion are generally considered
as options. We assess whether these options provide a material right to the customer and if so, such material rights are accounted
for as separate performance obligations. When the customer exercises an option, any additional payments related to the option are
recorded in revenue when the customer obtains control of the goods or services. Transaction Price Arrangements may have both fixed and variable
consideration. For collaboration agreements, the non-refundable upfront fees and product supply selling prices are considered fixed,
while milestone payments are considered variable consideration when determining the transaction price. At the inception of each
arrangement, we evaluate whether the development milestones are considered probable of being achieved and estimate an amount to
be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal
would not occur, the value of the associated milestone is included in the transaction price. Milestone payments that are not within
our control or the licensee’s control, such as approvals from regulators, are generally not considered probable of being
achieved until such approvals are received. For sales-based royalties, including commercial
milestone payments based on the level of sales, for which the license is deemed to be the predominant item to which the royalties
relate, we recognize revenue at the later of when (a) the related sales occur, or (b) the performance obligation to which some
or all of the royalty has been allocated has been satisfied (or partially satisfied). In determining the transaction price, we adjust
consideration for the effects of the time value of money if the timing of payments provides us with a significant benefit of financing.
We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that
the period between payment by the licensee and the transfer of the promised goods or services to the licensee will be one year
or less. Allocation of Consideration As part of the accounting for collaboration
arrangements, we must develop assumptions that require judgment to determine the stand-alone selling price of each performance
obligation identified in the contract. The transaction price is allocated to the identified performance obligations in proportion
to their stand-alone selling prices ( SSP Timing of Recognition Significant management judgment is required
to determine the level of effort required under collaboration arrangements and the period over which we expect to complete our
performance obligations under the arrangement. The performance period or measure of progress is estimated at the inception of the
arrangement and re-evaluated in each reporting period. This re-evaluation may shorten or lengthen the period over which revenue
is recognized. Changes to these estimates are recorded on a cumulative catch up basis. Revenue is recognized for products at a
point in time and for licenses of functional intellectual property at the point in time the customer can use and benefit from the
license. For performance obligations that are services, revenue is recognized over time using an output or input method. For performance
obligations that are a combination of licenses to intellectual property and interdependent services, the nature of the combined
performance obligation is considered when determining the method and measure of progress that best represents the satisfaction
of the performance obligation. For the single combined performance obligation of the EverInsight Agreement, the measure of progress
is stand-ready straight-line over the period in which we expect to perform the services related to the license of PH94B. We have recorded no receivables, contract assets,
or contract liabilities as of June 30, 2020 related to the EverInsight Agreement, as there are no rights and obligations as of
that date. In subsequent periods, the difference between revenue recognized to-date and the consideration invoiced to-date will
be recognized as either a contract asset/unbilled revenue (revenue earned exceeds invoices) or a contract liability/deferred revenue
(invoices exceed revenue earned). Contract Costs Subsequent to June 30, 2020, we expect to make
cash payments aggregating $345,000 for sublicense fees which we are obligated to make pursuant to our PH94B license from Pherin,
and fees for consulting services exclusively related to the EverInsight Agreement. Additionally, on June 24, 2020, we issued 233,645
unregistered shares of our common stock, valued at $125,000, as partial compensation for consulting services exclusively related
to the EverInsight Agreement. These sublicense fees and consulting payments were incurred solely as a result of obtaining the EverInsight
Agreement, and will, accordingly, be capitalized as contract acquisition costs. Capitalized contract acquisition costs are amortized
over the period in which we expect to satisfy the performance obligations under the arrangement and will be included in general
and administrative expenses. At June 30, 2020, the $125,000 fair value of the common stock issued has been recorded as a prepaid
asset. In subsequent periods, the aggregate costs of $470,000 incurred to obtain the EverInsight Agreement will be capitalized
as contract acquisition costs and amortized as indicated. In the quarter ended June 30, 2020, no amounts were amortized to expense,
as services have not yet commenced under the arrangement. Research and Development Expenses Research and development expenses are composed
of both internal and external costs. Internal costs include salaries and employment-related expenses, including stock-based
compensation expense, of scientific personnel and direct project costs. External research and development expenses consist
primarily of costs associated with clinical and non-clinical development of PH94B, PH10, AV-101, and stem cell research and development
costs, and costs related to the application and prosecution of patents related to those product candidates and, to a lesser extent,
our stem cell technology platform. All such costs are charged to expense as incurred. We also record accruals for estimated ongoing
clinical trial costs. Clinical trial costs represent costs incurred by contract research organizations ( CRO Stock-Based Compensation We recognize compensation cost for all stock-based
awards to employees and non-employee consultants based on the grant date fair value of the award. We record non-cash,
stock-based compensation expense over the period during which the employee or other grantee is required to perform services in
exchange for the award, which generally represents the scheduled vesting period. We have not granted restricted stock
awards to employees nor do we have any awards with market or performance conditions. Non-cash expense attributable to compensatory
grants of shares of our common stock to non-employees is determined by the quoted market price of the stock on the date of grant
and is either recognized as fully-earned at the time of the grant or amortized ratably over the term of the related service agreement,
depending on the terms of the specific agreement. The table below summarizes stock-based compensation
expense included in the accompanying Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months
ended June 30, 2020.
Three Months Ended June 30,
2020 2019
Research and development expense $ 226,600 $ 390,600
General and administrative expense 448,000 672,400
Total stock-based compensation expense $ 674,600 $ 1,063,000 Expense amounts reported above include $2,500
and $1,500 in research and development expense and general and administrative expense, respectively, attributable to our 2019 Employee
Stock Purchase Plan for the quarter ended June 30, 2020. During the quarter ended June 30, 2020, we granted
from our 2019 Omnibus Equity Incentive Plan (the 2019 Plan
Assumption: Weighted Average Range
Market price per share at grant date $ 0.41 $ 0.40 to 0.54
Exercise price per share $ 0.41 $ 0.40 to 0.55
Risk-free interest rate 0.39 % 0.35% to 0.44 %
Expected term in years 5.36 5.20 to 5.94
Volatility 84.10 % 82.93% to 85.85 %
Dividend rate 0.0 % 0.0 %
Shares 1,945,000
Fair Value per share $ 0.28 At June 30, 2020, there were stock options outstanding
under our 2016 Equity Incentive Plan (the 2016 Plan Leases, Right-of-Use Assets and Lease Liabilities On April 1, 2019, we adopted Financial Accounting
Standards Board ( FASB ASU Leases ASC Leases (Topic 842): ASC 842 We determine whether an arrangement is an operating
or financing lease at contract inception. Operating lease assets represent our right to use an underlying asset for the lease term
and operating lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease assets
and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease
term. When determining the lease term, we include options to extend or terminate the lease when it is reasonably certain that we
will exercise that option. In determining the present value of the lease payments, we use the interest rate implicit in the lease
when it is readily determinable and we use our estimated incremental borrowing rate based upon information available at the commencement
date when the implicit rate is not readily determinable. The lease payments used to determine our operating
lease assets include lease incentives and stated rent increases and may include escalation or other clauses linked to rates of
inflation or other factors when determinable and are recognized in our operating lease assets in our condensed consolidated balance
sheets. Our operating leases are reflected in right
of use asset – operating leases, other current liabilities and non-current operating lease liability in our condensed consolidated
balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term
leases, defined as leases that have a lease term of 12 months or less at the commencement date, are excluded from this treatment
and are recognized on a straight-line basis over the term of the lease. Our accounting for financing leases, previously
referred to as “capital leases” under earlier guidance, remained substantially unchanged with our adoption of ASC 842.
Financing leases are included in property and equipment, net and as current and non-current financing lease liabilities in our
condensed consolidated balance sheets. Refer to Note 10, Commitments and Contingencies, Comprehensive Loss We have no components of other comprehensive
loss other than net loss, and accordingly our comprehensive loss is equivalent to our net loss for the periods presented. Loss per Common Share Basic net loss attributable to common stockholders
per share of common stock excludes the effect of dilution and is computed by dividing net loss increased by the accrual of dividends
on outstanding shares of our Series B 10% Convertible Preferred Stock ( Series B Preferred As a result of our net loss for all periods
presented, potentially dilutive securities were excluded from the computation of diluted net loss per share, as their effect would
be antidilutive. Potentially dilutive securities excluded in determining diluted net loss attributable to common stockholders per
common share are as follows:
At June 30, At March 31,
2020 2020
Series A Preferred stock issued and outstanding (1) 750,000 750,000
Series B Preferred stock issued and outstanding (2) 1,160,240 1,160,240
Series C Preferred stock issued and outstanding (3) 2,318,012 2,318,012
Outstanding options under the Company's Amended and Restated 2016 (formerly 2008) Stock Incentive Plan and 2019 Omnibus Equity Incentive Plan 11,948,088 10,003,088
Outstanding warrants to purchase common stock 26,589,834 26,555,281
Total 42,766,174 40,786,621
____________ (1) Assumes exchange under the terms of the October 11, 2012 Note
Exchange and Purchase Agreement, as amended (2) Assumes exchange under the terms of the Certificate of Designation
of the Relative Rights and Preferences of the Series B 10% Convertible Preferred Stock, effective May 5, 2015; excludes shares
of unegistered common stock issuable in payment of dividends on Series B Preferred upon conversion (3) Assumes exchange under the terms of the Certificate of Designation
of the Relative Rights and Preferences of the Series C Convertible Preferred Stock, effective January 25, 2016 Fair Value Measurements We do not use derivative instruments for hedging
of market risks or for trading or speculative purposes. We carried no assets or liabilities that are measured on a recurring basis
at fair value at June 30, 2020 or March 31, 2020. Recent Accounting Pronouncements Other than as described in our Form 10-K for
our fiscal year ended March 31, 2020, we do not expect that accounting standards that have been issued or proposed by the Financial
Accounting Standards Board (FASB |
