Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 09, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Cocrystal Pharma, Inc. | |
Entity Central Index Key | 1,412,486 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 29,923,076 | |
Trading Symbol | COCP | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 6,841 | $ 748 |
Restricted cash | 29 | 29 |
Prepaid expenses and other current assets | 229 | 105 |
Mortgage note receivable, current portion | 1,294 | |
Total current assets | 7,099 | 2,176 |
Property and equipment, net | 95 | 119 |
Deposits | 31 | 31 |
In process research and development | 53,905 | 53,905 |
Goodwill | 65,195 | 65,195 |
Total assets | 126,325 | 121,426 |
Current liabilities: | ||
Accounts payable and accrued expenses | 765 | 837 |
Derivative liabilities | 288 | 569 |
Total current liabilities | 1,053 | 1,406 |
Long-term liabilities | ||
Deferred rent | 17 | 31 |
Convertible notes payable | 1,007 | |
Deferred tax liability | 12,609 | 13,582 |
Total long-term liabilities | 12,626 | 14,620 |
Total liabilities | 13,679 | 16,026 |
Commitments and contingencies (Note 10) | ||
Common stock, $0.001 par value; 800,000 shares authorized; 29,923 and 24,275 issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 30 | 24 |
Additional paid-in capital | 253,556 | 243,419 |
Accumulated deficit | (140,940) | (138,043) |
Total stockholders' equity | 112,646 | 105,400 |
Total liabilities and stockholders' equity | $ 126,325 | $ 121,426 |
Condensed Consolidated Balance3
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 800,000,000 | 800,000,000 |
Common stock, shares issued | 29,923,000 | 24,275,000 |
Common stock, shares outstanding | 29,923,000 | 24,275,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Operating expenses | ||||
Research and development | $ 1,119 | $ 1,255 | $ 1,997 | $ 3,325 |
General and administrative | 1,013 | (55) | 2,205 | 996 |
Total operating expenses | 2,132 | 1,200 | 4,202 | 4,321 |
Loss from operations | (2,132) | (1,200) | (4,202) | (4,321) |
Other income (expense) | ||||
Interest income/(expense) | (24) | (55) | 1 | |
Gain on disposal of mortgage note | 106 | |||
Change in fair value of derivative liabilities | 259 | 198 | 281 | 769 |
Total other income (expense), net | (235) | 198 | 332 | 770 |
Loss before income taxes | (1,897) | (1,002) | (3,870) | (3,551) |
Income tax benefit | 554 | 973 | ||
Net loss and comprehensive loss | $ (1,343) | $ (1,002) | $ (2,897) | $ (3,551) |
Net loss per common share: | ||||
Loss per share, basic | $ (0.05) | $ (0.04) | $ (0.11) | $ (0.15) |
Weighted average common shares outstanding, basic | 27,716,000 | 24,154,000 | 26,050,000 | 23,978,000 |
Loss per share, fully diluted | $ (0.05) | $ (0.04) | $ (0.11) | $ (0.15) |
Weighted average common shares outstanding, diluted | 27,716,000 | 24,154,000 | 26,050,000 | 23,978,000 |
Condensed Consolidated Stateme5
Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2018 - USD ($) $ in Thousands | Common Stock [Member] | Additional Paid- in Capital [Member] | Accumulated Deficit [Member] | Total |
Beginning balance at Dec. 31, 2017 | $ 24 | $ 243,419 | $ (138,043) | $ 105,400 |
Beginning balance, shares at Dec. 31, 2017 | 24,275,000 | |||
Sale of common shares and issuance of warrants, value | $ 5 | 7,679 | 7,684 | |
Sale of common shares and issuance of warrants | 4,435,000 | |||
Stock-based compensation | 212 | 212 | ||
Convertible debt instruments | $ 1 | 2,061 | 2,062 | |
Convertible debt instruments, shares | 1,085,000 | |||
Exercise of common stock options | 185 | $ 185 | ||
Exercise of common stock options, shares | 128,000 | (128,000) | ||
Net loss | (2,897) | $ (2,897) | ||
Ending Balance at Jun. 30, 2018 | $ 30 | $ 253,556 | $ (140,940) | $ 112,646 |
Ending Balance, shares at Jun. 30, 2018 | 29,923,000 |
Condensed Consolidated Stateme6
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Operating activities: | ||
Net loss | $ (2,897) | $ (3,551) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 29 | 52 |
Stock-based compensation | 212 | 268 |
Interest expense | 55 | |
Gain on mortgage note receivable | (106) | |
Change in deferred income tax | (973) | |
Change in fair value of derivative liabilities | (281) | (769) |
Change in deferred rent | (14) | (9) |
Changes in operating assets and liabilities: | ||
Prepaid expenses and other current assets | (124) | 342 |
Accounts payable and accrued expenses | (72) | 530 |
Net cash used in operating activities | (4,171) | (3,137) |
Investing activities: | ||
Purchase of fixed assets | (5) | (40) |
Long-term deposits | (12) | |
Proceeds from mortgage note receivable | 1,400 | |
Net cash provided by (used in) investing activities | 1,395 | (52) |
Financing activities: | ||
Proceeds from issuance of common stock and warrants | 7,684 | 3,000 |
Proceeds from issuance of notes payable | 1,000 | |
Proceeds from exercise of stock options | 185 | |
Net cash provided by financing activities | 8,869 | 3,000 |
Net increase (decrease) in cash and cash equivalents | 6,093 | (189) |
Cash and cash equivalents at beginning of period | 777 | 3,640 |
Cash and cash equivalents at end of period | 6,870 | 3,451 |
Non-cash financing activity: | ||
Issuance of commons stock upon conversion of notes payable | $ 2,062 |
Organization and Significant Ac
Organization and Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Organization and Significant Accounting Policies | Note 1- Organization and Significant Accounting Policies Overview Cocrystal Pharma, Inc. (“the Company”) has been developing novel technologies and approaches to create first-in-class and best-in-class antiviral drug candidates since its initial funding in 2008. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of viral diseases in humans. By concentrating our research and development efforts on viral replication inhibitors, we plan to leverage our infrastructure and expertise in these areas. The Company was formerly incorporated in Nevada under the name Biozone Pharmaceuticals, Inc. On January 2, 2014, Biozone Pharmaceuticals, Inc. sold substantially all of its assets to MusclePharm Corporation (“MusclePharm”), and, on the same day, merged with Cocrystal Discovery, Inc. in a transaction accounted for as a reverse merger. Following the merger, the Company assumed Cocrystal Discovery, Inc.’s business plan and operations. On March 18, 2014, the Company reincorporated in Delaware under the name Cocrystal Pharma, Inc. Effective November 25, 2014, Cocrystal Pharma, Inc. and affiliated entities completed a series of merger transactions as a result of which Cocrystal Pharma, Inc. merged with RFS Pharma, LLC, a Georgia limited liability company (“RFS Pharma”). We refer to the surviving entity of this merger as “Cocrystal” or the “Company.” Cocrystal is a biotechnology company that develops novel medicines for use in the treatment of human viral diseases. Cocrystal has developed proprietary structure-based drug design technology and antiviral nucleoside chemistry to create antiviral drug candidates. Our focus is to pursue the development and commercialization of broad-spectrum antiviral drug candidates that will transform the treatment and prophylaxis of hepatitis C, influenza, and norovirus. By concentrating our research and development efforts on viral replication inhibitors, we plan to leverage our infrastructure and expertise in these areas. The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making. The Company’s activities since inception have consisted principally of acquiring product and technology rights, raising capital, and performing research and development. Successful completion of the Company’s development programs, obtaining regulatory approvals of its products and, ultimately, the attainment of profitable operations is dependent on future events, including, among other things, its ability to access potential markets, secure financing, develop a customer base, attract, retain and motivate qualified personnel, and develop strategic alliances. Through June 30, 2018, the Company has primarily funded its operations through equity offerings. The Company’s historical operating results indicate substantial doubt exists related to the Company’s ability to continue as a going concern. As of June 30, 2018, the Company had an accumulated deficit of $140,940. During the three and six month period ended June 30, 2018, the Company had a loss from operations of $2,132 and $4,202, respectively. Cash used in operating activities was approximately $4,171 for the six months ended June 30, 2018. The Company has not yet established an ongoing source of revenue sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. The Company can give no assurances that any additional capital that it is able to obtain, if any, will be sufficient to meet its needs, or that any such financing will be obtainable on acceptable terms. If the Company is unable to obtain adequate capital, it could be forced to cease operations or substantially curtail its drug development activities. The Company expects to continue to incur substantial operating losses and negative cash flows from operations over the next several years during its pre-clinical and clinical development phases. In July 2018, the Company entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”), Barrington Research Associates, Inc. (“Barrington”), and AGP (AGP, Ladenburg and Barrington, together the “Sales Agents”), pursuant to which and at the Company’s sole discretion, may issue and sell over time and from time to time, to or through the Sales Agents, up to $10,000,000 of shares of the Company’s common stock. The Sales Agents will use commercially reasonable efforts to sell on our behalf all of the shares requested to be sold by the Company, consistent with their normal trading and sales practices, subject to the terms of the Distribution Agreement. As of the filing date of this report, we have not sold any shares of common stock under the Distribution Agreement. If we are able to raise at least $2 million from the efforts of the Sales Agents under the Distribution Agreement, we believe we will have sufficient capital to fund operations for more than 12 months. On January 18, 2018, the Board of Directors of the Company filed an amendment (the “Amendment”) with the Delaware Secretary of State to affect a one-for-thirty reverse split (the “Reverse Stock Split”) of the Company’s class of Common Stock. The Amendment took effect on January 24, 2018. The Reverse Stock Split did not change the authorized number of shares of Common Stock. Pursuant to the terms of the Company’s previously outstanding convertible notes (See Note 3 - Convertible Notes Payable), its options and warrants have been proportionately adjusted to reflect the Reverse Stock Split, and, pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under all of the Company’s outstanding stock options, convertible notes and warrants to Common Stock, and the number of shares reserved for issuance pursuant to the Company’s equity compensation plans have been reduced proportionately. All per share amounts and number of shares in the consolidated financial statements and related notes have been retroactively restated to reflect the Reverse Stock Split. Segments The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making. Basis of Presentation and Significant Accounting Policies The accompanying condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year. All intercompany accounts and transactions have been eliminated in consolidation. Reference is made to the audited annual financial statements of Cocrystal Pharma, Inc. included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed on March 21, 2018 (“Annual Report”), which contain information useful to understanding the Company’s business and financial statement presentations. The condensed consolidated balance sheet as of December 31, 2017 was derived from the Company’s most recent audited financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet. Our significant accounting policies and practices are presented in Note 2 to the financial statements included in the Form 10-K. Use of Estimates Preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. We continually evaluate estimates used in the preparation of the condensed consolidated financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the deferred tax valuation allowance, estimating accrued clinical expenses, the inputs in determining the fair value of the in-process research and development (“IPR&D”) and goodwill as part of the annual impairment analysis, the inputs in determining the fair value of equity-based awards and warrants issued as well as the values ascribed to assets acquired and liabilities assumed in business combinations. Actual results may differ from estimates made. Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash. Risks and Uncertainties The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, regulatory approvals, competition from current treatments and therapies and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals. Products developed by the Company will require approvals from the U.S. Food and Drug Administration (the “FDA”) and other international regulatory agencies prior to commercial sales in their respective markets. The Company’s products may not receive the necessary clearances and if they are denied clearance, clearance is delayed or the Company is unable to maintain clearance, the Company’s business could be materially adversely impacted. Property and Equipment Property and equipment, which consists of lab equipment, computer equipment, and office equipment, are stated at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method. Goodwill and In-Process Research and Development The Company’s intangible assets determined to have indefinite useful lives including in-process research and development (“IPR&D”) and goodwill, are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. Such circumstances could include but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. IPR&D acquired in a business combination is capitalized as an intangible asset and tested for impairment at least annually until commercialization, after which time the IPR&D is amortized over its estimated useful life. The Company has established November 30 th The impairment test of goodwill requires us to compare the estimated fair value of the reporting unit to its carrying value. If the carrying value of the reporting unit is lower than its estimated fair value, no further evaluation is required. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment charge is recorded for that excess, limited to the total amount of goodwill allocated to that reporting unit. The indefinite-life intangible asset impairment test consists of a comparison of the fair value of the indefinite-life intangible asset with its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying amount, the indefinite-life intangible asset is not considered impaired. As of June 30, 2018, the Company had a goodwill balance of $65 million. The Company’s annual impairment assessment date is November 30, 2017. The decline in the Company’s market capitalization during the quarter ended June 30, 2018 was identified as an indicator of possible impairment and resulted in the Company performing an interim assessment for goodwill impairment. The Company engaged an outside valuation firm to assist management with performing the assessment as of June 30, 2018. The results of management’s assessment were that the Company’s fair market value exceeded its book value by approximately $25 million as of June 30, 2018. As a result, the Company concluded that its goodwill was not impaired as of June 30, 2018. Long-Lived Assets The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist, which warrant adjustments to the carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value. Mortgage Note Receivable As discussed in Note 8 – Mortgage Note Receivable, the Company’s mortgage note receivable was collected in full during the three months ended March 31, 2018. The Company recorded its mortgage note receivable at the amount advanced to the borrower, which included the stated principal amount and certain loan origination and commitment fees that are recognized over the term of the mortgage note. Interest income was accrued as earned over the term of the mortgage note. The Company evaluated the collectability of both interest and principal of the note to determine whether it is impaired. The note would have been considered to be impaired if, based on current information and events, the Company determined that it was probable that it would be unable to collect all amounts due according to the existing contractual terms. Upon determination that the note was impaired, the amount of loss would have been calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the note’s effective interest rate or to the fair value of the Company’s interest in the underlying collateral, less the cost to sell. Research and Development Expenses All research and development costs are expensed as incurred. Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense. Stock-Based Compensation The Company recognizes compensation expense using a fair-value-based method for costs related to stock-based payments, including stock options. The fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option pricing model and is recognized as expense over the requisite service period on a straight-line basis. Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility of its own. The expected term of the options is estimated by using the Securities and Exchange Commission Staff Bulletin No. 107’s Simplified Method for Estimate Expected Term Convertible Notes Payable The Company accounts for convertible notes payable (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options Common Stock Purchase Warrants and Other Derivative Financial Instruments We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40, Contracts in Entity’s Own Equity Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases Leases In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment In March 2018, the FASB issued ASU No. 2018-05, Income Taxes In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting |
Fair Value Measurements
Fair Value Measurements | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | Note 2 – Fair Value Measurements FASB Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following: Level 1 — quoted prices in active markets for identical assets or liabilities. Level 2 — other significant observable inputs for the assets or liabilities through corroboration with market data at the measurement date. Level 3 — significant unobservable inputs that reflect management’s best estimate of what market participants would use to price the assets or liabilities at the measurement date. The Company categorizes its cash equivalents as Level 1 fair value measurements. The Company categorizes its warrants potentially settleable in cash as Level 3 fair value measurements. The warrants potentially settleable in cash are measured at fair value on a recurring basis and are being marked to fair value at each reporting date until they are completely settled or meet the requirements to be accounted for as component of stockholders’ equity. The warrants are valued using the Black-Scholes option-pricing model as discussed in Note 5 below. The following table presents a summary of fair values of assets and liabilities that are re-measured at fair value at each balance sheet date as of June 30, 2018 and December 31, 2017, and their placement within the fair value hierarchy as discussed above (in thousands): Quoted Prices in Active Markets Significant Other Observable Inputs Unobservable Inputs Description June 30, 2018 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ 6,870 $ 6,870 $ - $ - Total assets $ 6,870 $ 6,870 $ - $ - Liabilities: Warrants potentially settleable in cash $ 288 $ - $ - $ 288 Total liabilities $ 288 $ - $ - $ 288 Quoted Prices in Active Markets Significant Other Observable Inputs Unobservable Inputs Description December 31, 2017 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ 777 $ 777 $ - $ - Total assets $ 777 $ 777 $ - $ - Liabilities: Warrants potentially settleable in cash $ 569 $ - $ - $ 569 Total liabilities $ 569 $ - $ - $ 569 The Company has not transferred any financial instruments into or out of Level 3 classification during the six months ended June 30, 2018 or 2017. A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 2018 and 2017 is as follows (in thousands): Fair Value Measurements Using Significant Unobservable Inputs (Level 3) June 30, 2018 June 30, 2017 Balance, January 1, $ 569 $ 1,476 Change in fair value of warrants (281 ) (769 ) Balance at June 30, $ 288 $ 707 |
Convertible Notes Payable
Convertible Notes Payable | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Notes Payable | Note 3 – Convertible Notes Payable On November 24, 2017, the Company entered into a Securities Purchase Agreement with two accredited investors, including the Company’s Chairman of the Board, pursuant to which the Company sold an aggregate principal amount of $1,000,000 of its 8% convertible notes (“Nov 2017 Notes”) due November 24, 2019. At the option of the Purchaser, the Nov 2017 Notes were convertible at $8.10 per share. In the event the Company completed a financing in which the Company receives at least $10,000,000 in gross proceeds and issued common stock or common stock equivalents to the investor (a “Financing”) or there is a change of control of the Company (or sale of substantially all of the Company’s assets), the outstanding principal amount of the Nov 2017 Notes would automatically convert. Upon the closing of a Financing, the conversion price of the Nov 2017 Notes shall be the lesser of (i) $8.10 per share or (ii) the price per share of the securities sold in the Financing. On January 31, 2018, the Company, entered into a Securities Purchase Agreement (the “SPA”) with OPKO Health, Inc. (the “Purchaser”), pursuant to which the Company borrowed $1,000,000 from the Purchaser in exchange for issuing the Purchaser an 8% Convertible Note (the “Note”) due January 31, 2020. At the option of the Purchaser, the Note was convertible at $8.10 per share. In the event the Company completed a financing in which the Company receives at least $10,000,000 in gross proceeds and issues common stock or common stock equivalents to the investor (a “Financing”) or there is a change of control of the Company (or sale of substantially all of the Company’s assets), the outstanding principal amount of the Note would automatically convert. Upon the closing of a Financing, the conversion price of the Note shall be the lesser of (i) $8.10 per share and (ii) the price per share of the securities sold in the Financing. The Company evaluated the embedded conversion features within the above convertible notes under ASC 815-15 and ASC 815-40 to determine if they required bifurcation as a derivative instrument. The Company determined the embedded conversion features do not meet the definition of a derivative liability, and therefore, do not require bifurcation from the host instrument. In addition, the down-round provision under which the conversion price could be affected by future equity offerings, qualified for a scope exception from derivative accounting with the Company’s early adoption of ASU 2017-11, Simplifying Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity Debt with Conversion and Other Options Although the gross proceeds in the recent public offering were not $10 million, in May 2018, the Company issued a total of 1,085,105 of common stock upon conversion of all of the outstanding 8% convertible notes payable at $1.90 per share, which was the offering price in our recently closed public offering. The number of shares was based on the aggregate amount of the principal and accrued interest of $2,062,000 as of the date of the conversion. The conversion was approved by disinterested members of our Board of Directors. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | Note 4 – Stockholders’ equity The Company has authorized up to 800 million shares of common stock at June 30, 2018, $0.001 par value per share, and had 29,923,076 shares issued and outstanding as of June 30, 2018. Subsequently on August 6, 2018, the Company held its 2018 Annual Meeting of Shareholders and voted to reduce the number of shares of common stock, $0.001 par value per share, authorized from 800 million to 100 million shares. On January 18, 2018, the Board of Directors of the Company filed an amendment (the “Amendment”) with the Delaware Secretary of State to effect a one-for-thirty reverse split of the Company’s class of Common Stock. The Amendment took effect on January 24, 2018. No fractional shares will be issued or distributed as a result of the Amendment. There was no change in the par value of our common stock. On May 3, 2018, the Company closed a public offering for gross proceeds and net proceeds of approximately $8 million and $7.7 million, respectively. The Company sold 4,210,527 shares of common stock to the underwriter at approximately $1.767 per share, which the underwriter sold to the public at $1.90 per share, and issued the underwriter a warrant to purchase 84,211 shares of common stock at $2.09 per share over a four year period beginning October 27, 2018. On May 14, 2018, the underwriter exercised the option to purchase an additional 225,000 shares of common stock solely to cover overallotments. As of June 30, 2018, the underwriter has no further option to purchase additional shares. On May 21, 2018, the Company issued a total of 1,085,105 of common stock upon conversion of all of our outstanding 8% convertible notes. See Note 3 - Convertible Notes Payable. Shares of common stock authorized for future issuance are as follows as of June 30, 2018 (in thousands): As of June 30, 2018 Stock options issued and outstanding 426 Authorized for future option grants 1,813 Warrants outstanding 243 Total 2,482 |
Warrants
Warrants | 6 Months Ended |
Jun. 30, 2018 | |
Warrants | |
Warrants | Note 5 – Warrants The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2018 (in thousands): Warrants accounted for as: Equity Warrants accounted for as: Liabilities May 2018 warrants April 2013 warrants October 2013 Series A warrants January 2014 warrants Total Outstanding, December 31, 2017 - 50 26 133 209 Warrants Issued 84 - - - 84 Warrants Expired - (50 ) - - (50 ) Warrants exercised - - - - - Outstanding, June 30, 2018 84 - 26 133 243 Expiration date October 27, 2022 April 25, 2018 October 24, 2023 January 16, 2024 Warrants consist of warrants potentially settleable in cash, which are liability-classified warrants, and equity-classified warrants. Warrants classified as liabilities Liability-classified warrants consist of warrants issued in connection with equity financings in October 2013 and January 2014. The outstanding warrants are potentially settleable in cash and were determined not to be indexed to the Company’s own stock and are therefore accounted for as liabilities. The estimated fair value of outstanding warrants accounted for as liabilities is determined at each balance sheet date. Any decrease or increase in the estimated fair value of the warrant liability since the most recent balance sheet date is recorded in the consolidated statement of comprehensive loss as changes in fair value of derivative liabilities. The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of June 30, 2018: October 2013 warrants January 2014 warrants Strike price $ 15.00 $ 15.00 Expected term (years) 5.32 5.55 Cumulative volatility % 88.17 % 88.59 % Risk-free rate % 2.74 % 2.75 % The Company’s expected volatility is based on a combination of the Company’s own historical volatility and the implied volatilities of similar publicly traded entities given that the Company has limited history of its own observable stock price. The expected life assumption is based on the remaining contractual terms of the warrants. The risk-free rate is based on the zero coupon rates in effect at the balance sheet date. The dividend yield used in the pricing model is zero, because the Company has no present intention to pay cash dividends. Warrants classified as equity Warrants that were recorded in equity at fair value upon issuance, and are not reported as liabilities on the balance sheet, are included in the above table which shows all warrants. |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock-Based Compensation | Note 6 – Stock-based compensation The Company recorded approximately $107,000 and $212,000 of stock-based compensation related to employee stock options for the three and six months ended June 30, 2018 and $54,000 and $268,000 for the three and six months ended June 30, 2017, respectively. As of June 30, 2018, there was $334,000 of unrecognized compensation cost related to outstanding options that is expected to be recognized as a component of the Company’s operating expenses over a weighted average period of 0.8 years. As of June 30, 2018, an aggregate of 2,239,000 shares of common stock were reserved for issuance under the Company’s Equity Incentive Plans, including 426,000 shares subject to outstanding common stock options granted under the plan and 1,813,000 shares available for future grants. The administrator of the plan determines the times when an option may become exercisable at the time of grant. Vesting periods of options granted to date have not exceeded five years. The options generally will expire, unless previously exercised, no later than ten years from the grant date. The Company is using unissued shares for all shares issued for options and restricted share awards. The following schedule presents activity in the Company’s outstanding stock options for the six months ended June 30, 2018 (in thousands, except per share amounts): Number of Shares available for Grant Total Options Outstanding Weighted Average Exercise Price Aggregate Intrinsic Value Balance at December 31, 2017 1,656 711 $ 8.39 $ 1,640 Exercised - (128 ) 1.45 - Granted - - - - Cancelled 157 (157 ) 3.01 - Balance at June 30, 2018 1,813 426 $ 12.44 $ 1,192 As of June 30, 2018, options to purchase 425,637 shares of common stock, with an aggregate intrinsic value of $57,000, were outstanding that were fully vested or expected to vest with a weighted average remaining contractual term of 2.8 years. As of June 30, 2018, options to purchase 411,052 shares of common stock, with an intrinsic value of 57,000 were exercisable with a weighted average exercise price of $11.64 per share and a weighted average remaining contractual term of 2.6 years. The aggregate intrinsic value of outstanding and exercisable options at June 30, 2018 was calculated based on the closing price of the Company’s common stock as reported on the NASDAQ markets on June 29, 2018 of $3.66 per share less the exercise price of the options. The aggregate intrinsic value is calculated based on the positive difference between the closing fair market value of the Company’s common stock and the exercise price of the underlying options. |
Net Loss Per Share
Net Loss Per Share | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | Note 7 – Net Loss per Share The Company accounts for and discloses net loss per common share in accordance with FASB ASC Topic 260, Earnings Per Share The following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because their inclusion would be anti-dilutive (in thousands): For the three months ended June 30 For the six months ended June 30 2018 2017 2018 2017 Options to purchase common stock 426 768 426 768 Warrants to purchase common stock 243 209 243 209 Total 669 977 669 977 |
Mortgage Note Receivable
Mortgage Note Receivable | 6 Months Ended |
Jun. 30, 2018 | |
Receivables [Abstract] | |
Mortgage Note Receivable | Note 8 - Mortgage Note Receivable In June 2014, the Company acquired a mortgage note from a bank for $2,626,290 which was collateralized by, among other things, the underlying real estate and related improvements. The property subject to the mortgage was owned by an entity managed by Daniel Fisher, one of the founders of Biozone, the property was also under lease to MusclePharm. The mortgage note had a maturity date of August 1, 2032 and bears an interest rate of 7.24%. Shortly thereafter in 2014, Daniel Fisher and his affiliate, 580 Garcia Properties LLC (the primary obligor of the note), brought multiple lawsuits against the Company involving its predecessors and subsidiaries. The lawsuits were later settled and the complaints dismissed, without the Company making any payments to either Mr. Fisher or 580 Garcia Properties LLC. At the time of the note’s acquisition, 580 Garcia Properties LLC was delinquent in its obligation to make monthly payments. In December 2015, the Company proceeded in accordance with rights of a secured real estate creditor under California law, to initiate private foreclosure proceedings. During 2017, the court enjoined the Company from proceeding with the foreclosure sale pending further developments in the litigation. In February 2018, the Company, Daniel Fisher, and 580 Garcia Properties LLC resolved all outstanding claims and disputes. As part of this settlement, the Company received a payment of $1.4 million in exchange for the release of the aforementioned note and deed of trust. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | N ote 9 – Income Taxes Deferred income tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. As a result of the Company’s cumulative losses, management has concluded that a full valuation allowance against the Company’s net deferred tax assets is appropriate. The Company has recorded a net deferred tax liability of $12,609,000 as of June 30, 2018 and $13,582,000 December 31, 2017, which is related to acquired in-process research and development considered to be an indefinite-lived intangible. The Company’s effective income tax rate was 25% and 0% for the six-months ended June 30, 2018 and June 30, 2017, respectively. The primary driver of the effective tax rate for the six months ended June 30 2018 is the 21% federal tax rate for corporations (see discussion below). The primary driver of the effective tax rate for the six months ended June 30, 2017 is the valuation allowance offsetting the Company’s net deferred tax assets. Management assesses its deferred tax assets quarterly to determine whether all or any portion of the asset is more likely than not unrealizable under ASC 740. The Company is required to establish a valuation allowance for any portion of the asset that management concludes is more likely than not to be unrealizable. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company’s assessment considers all evidence, both positive and negative, including the nature, frequency and severity of any current and cumulative losses, taxable income in carryback years, the scheduled reversal of deferred tax liabilities, tax planning strategies, and projected future taxable income in making this assessment. FASB ASC Topic 740, Income Taxes The Company currently files income tax returns in the United States federal and various state jurisdictions. The Company is not currently under examination in any jurisdiction. In December 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal revenue Code including a permanent reduction to the US corporate statutory rate from 35% to 21% effective for tax years beginning after December 31, 2017. In accordance with ASU 2018-05 and SAB 118, the Company recognized the provisional tax impacts to the re-measurement of our deferred tax assets and liabilities during the year ended December 31, 2017. As of June 30, 2018, we have not made any additional measurement-period adjustments related to these items. Such adjustments may be necessary in future periods due to, among other things, the significant complexity of the Act and anticipated actions the Company may take as a result of the Act. We are continuing to gather information and assess the application of the Act and expect to complete our analysis with the filing of our 2017 income tax returns. |
Contingencies
Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | Note 10 - Contingencies From time to time, the Company is a party to, or otherwise involved in, legal proceedings arising in the normal course of business. As of the date of this report, except as described below, the Company is not aware of any proceedings, threatened or pending, against it which, if determined adversely, would have a material effect on its business, results of operations, cash flows or financial position. |
Transactions with Related Parti
Transactions with Related Parties | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Transactions with Related Parties | Note 11 - Transactions with Related Parties Since November 2014, the Company has leased its Tucker, Georgia facility from a limited liability company owned by one of Cocrystal’s directors and principal shareholder, Dr. Raymond Schinazi. Currently, this facility is being leased on a month-to-month basis. On an annualized basis, rent expense for this location would be approximately $44,000. The total rent expense was $22,000 and $111,000 for the six months ended June 30, 2018 and 2017, respectively. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 12 – Subsequent Events Equity Distribution Agreement On July 19, 2018, Cocrystal Pharma, Inc. (the “Company”) entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Ladenburg Thalmann & Co. Inc. (“Ladenburg”), Barrington Research Associates, Inc. (“Barrington”), and A.G.P./Alliance Global Partners (“AGP,” and together with Ladenburg and Barrington, the “Sales Agents”), pursuant to which the Company may issue and sell over time and from time to time, to or through the Sales Agents, up to $10,000,000 of shares of the Company’s common stock (the “Shares”). Sales of the Shares, if any, may be made in negotiated transactions or transactions that are deemed to be an “at-the-market offering”. |
Organization and Significant 19
Organization and Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Segments | Segments The Company operates in only one segment. Management uses cash flow as the primary measure to manage its business and does not segment its business for internal reporting or decision-making. |
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies The accompanying condensed consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures, normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), have been condensed or omitted pursuant to those rules and regulations. We believe disclosures made are adequate to make the information presented not misleading. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary to fairly state the financial position, results of operations and cash flows with respect to the interim condensed consolidated financial statements have been included. The results of operations for the interim periods are not necessarily indicative of the results of operations for the entire fiscal year. All intercompany accounts and transactions have been eliminated in consolidation. Reference is made to the audited annual financial statements of Cocrystal Pharma, Inc. included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed on March 21, 2018 (“Annual Report”), which contain information useful to understanding the Company’s business and financial statement presentations. The condensed consolidated balance sheet as of December 31, 2017 was derived from the Company’s most recent audited financial statements, but does not include all disclosures required by GAAP for a year-end balance sheet. Our significant accounting policies and practices are presented in Note 2 to the financial statements included in the Form 10-K. |
Use of Estimates | Use of Estimates Preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. We continually evaluate estimates used in the preparation of the condensed consolidated financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the deferred tax valuation allowance, estimating accrued clinical expenses, the inputs in determining the fair value of the in-process research and development (“IPR&D”) and goodwill as part of the annual impairment analysis, the inputs in determining the fair value of equity-based awards and warrants issued as well as the values ascribed to assets acquired and liabilities assumed in business combinations. Actual results may differ from estimates made. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash. |
Risks and Uncertainties | Risks and Uncertainties The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, regulatory approvals, competition from current treatments and therapies and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals. Products developed by the Company will require approvals from the U.S. Food and Drug Administration (the “FDA”) and other international regulatory agencies prior to commercial sales in their respective markets. The Company’s products may not receive the necessary clearances and if they are denied clearance, clearance is delayed or the Company is unable to maintain clearance, the Company’s business could be materially adversely impacted. |
Property and Equipment | Property and Equipment Property and equipment, which consists of lab equipment, computer equipment, and office equipment, are stated at cost and depreciated over the estimated useful lives of the assets (three to five years) using the straight-line method. |
Goodwill and In-Process Research and Development | Goodwill and In-Process Research and Development The Company’s intangible assets determined to have indefinite useful lives including in-process research and development (“IPR&D”) and goodwill, are tested for impairment annually, or more frequently if events or circumstances indicate that the assets might be impaired. Such circumstances could include but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. IPR&D acquired in a business combination is capitalized as an intangible asset and tested for impairment at least annually until commercialization, after which time the IPR&D is amortized over its estimated useful life. The Company has established November 30 th The impairment test of goodwill requires us to compare the estimated fair value of the reporting unit to its carrying value. If the carrying value of the reporting unit is lower than its estimated fair value, no further evaluation is required. If the carrying value of the reporting unit exceeds its estimated fair value, an impairment charge is recorded for that excess, limited to the total amount of goodwill allocated to that reporting unit. The indefinite-life intangible asset impairment test consists of a comparison of the fair value of the indefinite-life intangible asset with its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. If the fair value exceeds its carrying amount, the indefinite-life intangible asset is not considered impaired. As of June 30, 2018, the Company had a goodwill balance of $65 million. The Company’s annual impairment assessment date is November 30, 2017. The decline in the Company’s market capitalization during the quarter ended June 30, 2018 was identified as an indicator of possible impairment and resulted in the Company performing an interim assessment for goodwill impairment. The Company engaged an outside valuation firm to assist management with performing the assessment as of June 30, 2018. The results of management’s assessment were that the Company’s fair market value exceeded its book value by approximately $25 million as of June 30, 2018. As a result, the Company concluded that its goodwill was not impaired as of June 30, 2018. |
Long-Lived Assets | Long-Lived Assets The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist, which warrant adjustments to the carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objective. Should an impairment exist, the impairment loss would be measured based on the excess of the carrying amount over the asset’s fair value. |
Mortgage Note Receivable | Mortgage Note Receivable As discussed in Note 8 – Mortgage Note Receivable, the Company’s mortgage note receivable was collected in full during the three months ended March 31, 2018. The Company recorded its mortgage note receivable at the amount advanced to the borrower, which included the stated principal amount and certain loan origination and commitment fees that are recognized over the term of the mortgage note. Interest income was accrued as earned over the term of the mortgage note. The Company evaluated the collectability of both interest and principal of the note to determine whether it is impaired. The note would have been considered to be impaired if, based on current information and events, the Company determined that it was probable that it would be unable to collect all amounts due according to the existing contractual terms. Upon determination that the note was impaired, the amount of loss would have been calculated by comparing the recorded investment to the value determined by discounting the expected future cash flows at the note’s effective interest rate or to the fair value of the Company’s interest in the underlying collateral, less the cost to sell. |
Research and Development Expenses | Research and Development Expenses All research and development costs are expensed as incurred. |
Income Taxes | Income Taxes The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to be recovered or settled. Realization of deferred tax assets is dependent upon future taxable income. A valuation allowance is recognized if it is more likely than not that some portion or all of a deferred tax asset will not be realized based on the weight of available evidence, including expected future earnings. The Company recognizes an uncertain tax position in its financial statements when it concludes that a tax position is more likely than not to be sustained upon examination based solely on its technical merits. Only after a tax position passes the first step of recognition will measurement be required. Under the measurement step, the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon effective settlement. This is determined on a cumulative probability basis. The full impact of any change in recognition or measurement is reflected in the period in which such change occurs. The Company elects to accrue any interest or penalties related to income taxes as part of its income tax expense. |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes compensation expense using a fair-value-based method for costs related to stock-based payments, including stock options. The fair value of options awarded to employees is measured on the date of grant using the Black-Scholes option pricing model and is recognized as expense over the requisite service period on a straight-line basis. Use of the Black-Scholes option pricing model requires the input of subjective assumptions including expected volatility, expected term, and a risk-free interest rate. The Company estimates volatility using a blend of its own historical stock price volatility as well as that of market comparable entities since the Company’s common stock has limited trading history and limited observable volatility of its own. The expected term of the options is estimated by using the Securities and Exchange Commission Staff Bulletin No. 107’s Simplified Method for Estimate Expected Term |
Convertible Notes Payable | Convertible Notes Payable The Company accounts for convertible notes payable (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with ASC 470-20, Debt with Conversion and Other Options |
Common Stock Purchase Warrants and Other Derivative Financial Instruments | Common Stock Purchase Warrants and Other Derivative Financial Instruments We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40, Contracts in Entity’s Own Equity |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases Leases In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment In March 2018, the FASB issued ASU No. 2018-05, Income Taxes In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Fair Value Disclosures [Abstract] | |
Summary of Fair Values of Assets and Liabilities Measured at Fair Value on Recurring and Nonrecurring Basis | The following table presents a summary of fair values of assets and liabilities that are re-measured at fair value at each balance sheet date as of June 30, 2018 and December 31, 2017, and their placement within the fair value hierarchy as discussed above (in thousands): Quoted Prices in Active Markets Significant Other Observable Inputs Unobservable Inputs Description June 30, 2018 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ 6,870 $ 6,870 $ - $ - Total assets $ 6,870 $ 6,870 $ - $ - Liabilities: Warrants potentially settleable in cash $ 288 $ - $ - $ 288 Total liabilities $ 288 $ - $ - $ 288 Quoted Prices in Active Markets Significant Other Observable Inputs Unobservable Inputs Description December 31, 2017 (Level 1) (Level 2) (Level 3) Assets: Cash and cash equivalents $ 777 $ 777 $ - $ - Total assets $ 777 $ 777 $ - $ - Liabilities: Warrants potentially settleable in cash $ 569 $ - $ - $ 569 Total liabilities $ 569 $ - $ - $ 569 |
Schedule of Reconciliation of Beginning and Ending Level 3 Liabilities | The Company has not transferred any financial instruments into or out of Level 3 classification during the six months ended June 30, 2018 or 2017. A reconciliation of the beginning and ending Level 3 liabilities for the six months ended June 30, 2018 and 2017 is as follows (in thousands): Fair Value Measurements Using Significant Unobservable Inputs (Level 3) June 30, 2018 June 30, 2017 Balance, January 1, $ 569 $ 1,476 Change in fair value of warrants (281 ) (769 ) Balance at June 30, $ 288 $ 707 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Schedule of Common Stock Reserved Future Issuance | Shares of common stock authorized for future issuance are as follows as of June 30, 2018 (in thousands): As of June 30, 2018 Stock options issued and outstanding 426 Authorized for future option grants 1,813 Warrants outstanding 243 Total 2,482 |
Warrants (Tables)
Warrants (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Warrants | |
Summary of Warrant Activity | The following is a summary of activity in the number of warrants outstanding to purchase the Company’s common stock for the six months ended June 30, 2018 (in thousands): Warrants accounted for as: Equity Warrants accounted for as: Liabilities May 2018 warrants April 2013 warrants October 2013 Series A warrants January 2014 warrants Total Outstanding, December 31, 2017 - 50 26 133 209 Warrants Issued 84 - - - 84 Warrants Expired - (50 ) - - (50 ) Warrants exercised - - - - - Outstanding, June 30, 2018 84 - 26 133 243 Expiration date October 27, 2022 April 25, 2018 October 24, 2023 January 16, 2024 |
Schedule of Fair Value of Warrants Classified as Liabilities | The fair value of the warrants classified as liabilities is estimated using the Black-Scholes option-pricing model with the following inputs as of June 30, 2018: October 2013 warrants January 2014 warrants Strike price $ 15.00 $ 15.00 Expected term (years) 5.32 5.55 Cumulative volatility % 88.17 % 88.59 % Risk-free rate % 2.74 % 2.75 % |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Share-based Compensation, Stock Options, Activity | The following schedule presents activity in the Company’s outstanding stock options for the six months ended June 30, 2018 (in thousands, except per share amounts): Number of Shares available for Grant Total Options Outstanding Weighted Average Exercise Price Aggregate Intrinsic Value Balance at December 31, 2017 1,656 711 $ 8.39 $ 1,640 Exercised - (128 ) 1.45 - Granted - - - - Cancelled 157 (157 ) 3.01 - Balance at June 30, 2018 1,813 426 $ 12.44 $ 1,192 |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Earnings Per Share [Abstract] | |
Schedule of Antidilutive Securities Excluded from Calculations of Net Loss Per Share | The following table sets forth the number of potential common shares excluded from the calculations of net loss per diluted share because their inclusion would be anti-dilutive (in thousands): For the three months ended June 30 For the six months ended June 30 2018 2017 2018 2017 Options to purchase common stock 426 768 426 768 Warrants to purchase common stock 243 209 243 209 Total 669 977 669 977 |
Organization and Significant 25
Organization and Significant Accounting Policies (Details Narrative) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)Segment | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Accumulated deficit | $ 140,940 | $ 140,940 | $ 138,043 | ||
Loss from operations | 2,132 | $ 1,200 | 4,202 | $ 4,321 | |
Cash used in operating activities | 4,171 | 3,137 | |||
Proceeds from sale of common stock | $ 7,684 | $ 3,000 | |||
Number of operating segment | Segment | 1 | ||||
Goodwill | $ 65,195 | $ 65,195 | $ 65,195 | ||
Market value exceeded book value | $ 25,000 | ||||
Maximum [Member] | |||||
Property and equipment, estimated useful lives | 5 years | ||||
Minimum [Member] | |||||
Property and equipment, estimated useful lives | 3 years | ||||
Equity Distribution Agreement [Member] | Sales Agents [Member] | |||||
Proceeds from sale of common stock | $ 2,000 | ||||
July 2018 [Member] | Equity Distribution Agreement [Member] | Maximum [Member] | |||||
Number of common stock shares sold | $ 10,000 |
Fair Value Measurements - Summa
Fair Value Measurements - Summary of Fair Values of Assets and Liabilities Measured at Fair Value on Recurring and Nonrecurring Basis (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Cash and cash equivalents | $ 6,870 | $ 777 |
Total assets | 6,870 | 777 |
Warrants potentially settleable in cash | 288 | 569 |
Total liabilities | 288 | 569 |
Quoted Prices in Active Markets Level 1 [Member] | ||
Cash and cash equivalents | 6,870 | 777 |
Total assets | 6,870 | 777 |
Warrants potentially settleable in cash | ||
Total liabilities | ||
Significant Other Observable Inputs Level 2 [Member] | ||
Cash and cash equivalents | ||
Total assets | ||
Warrants potentially settleable in cash | ||
Total liabilities | ||
Unobservable Inputs Level 3 [Member] | ||
Cash and cash equivalents | ||
Total assets | ||
Warrants potentially settleable in cash | 288 | 569 |
Total liabilities | $ 288 | $ 569 |
Fair Value Measurements - Sched
Fair Value Measurements - Schedule of Reconciliation of Beginning and Ending Level 3 Liabilities (Details) - Unobservable Inputs Level 3 [Member] - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Balance - January 1, | $ 569 | $ 1,476 |
Change in fair value of warrants | (281) | (769) |
Balance at June 30, | $ 288 | $ 707 |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | May 21, 2018 | May 03, 2018 | Jan. 31, 2018 | Nov. 24, 2017 | May 31, 2018 | Jun. 30, 2018 | Jun. 30, 2017 |
Convertible note interest rate, percentage | 8.00% | ||||||
Gross proceeds from convertible debt | $ 7,684 | $ 3,000 | |||||
Proceeds from public offering | $ 8,000 | ||||||
Debt conversion converted instrument, shares issued | 1,085,105 | ||||||
Board of Directors [Member] | |||||||
Convertible note interest rate, percentage | 8.00% | ||||||
Debt conversion price per share | $ 1.90 | ||||||
Proceeds from public offering | $ 10,000 | ||||||
Debt conversion converted instrument, shares issued | 1,085,105 | ||||||
Accrued interest | $ 2,062 | ||||||
Securities Purchase Agreement [Member] | Convertible Notes Payable [Member] | OPKO Health, Inc. [Member] | |||||||
Debt instrument, principal amount | $ 1,000 | ||||||
Convertible note interest rate, percentage | 8.00% | ||||||
Debt maturity date | Jan. 31, 2020 | ||||||
Debt conversion price per share | $ 8.10 | ||||||
Gross proceeds from convertible debt | $ 10,000 | ||||||
Securities Purchase Agreement [Member] | Two Accredited Investors [Member] | Convertible Notes [Member] | |||||||
Debt instrument, principal amount | $ 1,000 | ||||||
Convertible note interest rate, percentage | 8.00% | ||||||
Debt maturity date | Nov. 24, 2019 | ||||||
Debt conversion price per share | $ 8.10 | ||||||
Gross proceeds from convertible debt | $ 10,000 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | May 21, 2018 | May 03, 2018 | Jan. 18, 2018 | May 31, 2018 | Jun. 30, 2018 | May 14, 2018 | Dec. 31, 2017 |
Common stock authorized | 800,000,000 | 800,000,000 | |||||
Common stock par value | $ 0.001 | $ 0.001 | |||||
Common stock issued | 29,923,000 | 24,275,000 | |||||
Common stock outstanding | 29,923,000 | 24,275,000 | |||||
Gross proceeds from public offering | $ 8,000 | ||||||
Net proceeds from public offering | $ 7,700 | ||||||
Debt conversion converted instrument, shares issued | 1,085,105 | ||||||
Convertible note interest rate, percentage | 8.00% | ||||||
Underwriter [Member] | Over-Allotment Option [Member] | |||||||
Number of warrants issued to purchase common shares | 225,000 | ||||||
October 27, 2018 [Member] | Underwriter [Member] | |||||||
Number of common shares sold | 4,210,527 | ||||||
Sale of stock price per share | $ 1.767 | ||||||
Number of warrants issued to purchase common shares | 84,211 | ||||||
Warrant exercise price per share | $ 2.09 | ||||||
Board of Directors [Member] | |||||||
Common stock reverse stock split | one-for-thirty reverse split | ||||||
Gross proceeds from public offering | $ 10,000 | ||||||
Debt conversion converted instrument, shares issued | 1,085,105 | ||||||
Convertible note interest rate, percentage | 8.00% | ||||||
Public [Member] | October 27, 2018 [Member] | Underwriter [Member] | |||||||
Sale of stock price per share | $ 1.90 | ||||||
August 6, 2018 [Member] | |||||||
Common stock authorized | 100,000,000 | ||||||
Common stock par value | $ 0.001 |
Stockholders' Equity - Schedule
Stockholders' Equity - Schedule of Common Stock Reserved Future Issuance (Details) | Jun. 30, 2018shares |
Equity [Abstract] | |
Stock options issued and outstanding | 426,000 |
Authorized for future option grants | 1,813,000 |
Warrants outstanding | 243,000 |
Total | 2,482,000 |
Warrants (Details Narrative)
Warrants (Details Narrative) | 6 Months Ended |
Jun. 30, 2018 | |
Risk Free Interest Rate [Member] | |
Fair value assumptions, percentage | 0.00% |
Expected Dividend Rate [Member] | |
Fair value assumptions, percentage | 0.00% |
Warrants - Summary of Warrant A
Warrants - Summary of Warrant Activity (Details) | 6 Months Ended |
Jun. 30, 2018shares | |
Warrants [Member] | |
Number of warrants outstanding, beginning | 209,000 |
Number of warrants issued | 84,000 |
Number of warrants expired | (50,000) |
Number of warrants exercised | |
Number of warrants outstanding, ending | 243,000 |
May 2018 Warrants [Member] | Equity [Member] | |
Number of warrants outstanding, beginning | |
Number of warrants issued | 84,000 |
Number of warrants expired | |
Number of warrants exercised | |
Number of warrants outstanding, ending | 84,000 |
Warrant expiration date | Oct. 27, 2022 |
April 2013 Warrants [Member] | Equity [Member] | |
Number of warrants outstanding, beginning | 50,000 |
Number of warrants issued | |
Number of warrants expired | (50,000) |
Number of warrants exercised | |
Number of warrants outstanding, ending | |
Warrant expiration date | Apr. 25, 2018 |
October 2013 Series A Warrants [Member] | Liabilities [Member] | |
Number of warrants outstanding, beginning | 26,000 |
Number of warrants issued | |
Number of warrants expired | |
Number of warrants exercised | |
Number of warrants outstanding, ending | 26,000 |
Warrant expiration date | Oct. 24, 2023 |
January 2014 Warrants [Member] | Liabilities [Member] | |
Number of warrants outstanding, beginning | 133,000 |
Number of warrants issued | |
Number of warrants expired | |
Number of warrants exercised | |
Number of warrants outstanding, ending | 133,000 |
Warrant expiration date | Jan. 16, 2024 |
Warrants - Schedule of Fair Val
Warrants - Schedule of Fair Value of Warrants Classified as Liabilities (Details) | 6 Months Ended |
Jun. 30, 2018$ / shares | |
Strike price | $ 3.66 |
Risk Free Interest Rate [Member] | |
Fair value assumptions, percentage | 0.00% |
October 2013 Warrants [Member] | |
Strike price | $ 15 |
October 2013 Warrants [Member] | Expected Term [Member] | |
Fair value assumptions, term | 5 years 3 months 26 days |
October 2013 Warrants [Member] | Cumulative Volatility [Member] | |
Fair value assumptions, percentage | 88.17% |
October 2013 Warrants [Member] | Risk Free Interest Rate [Member] | |
Fair value assumptions, percentage | 2.74% |
January 2014 Warrants [Member] | |
Strike price | $ 15 |
January 2014 Warrants [Member] | Expected Term [Member] | |
Fair value assumptions, term | 5 years 6 months 18 days |
January 2014 Warrants [Member] | Cumulative Volatility [Member] | |
Fair value assumptions, percentage | 88.59% |
January 2014 Warrants [Member] | Risk Free Interest Rate [Member] | |
Fair value assumptions, percentage | 2.75% |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Stock-based compensation related to employee | $ 107 | $ 54 | $ 212 | $ 268 |
Unrecognized compensation expense | $ 334 | $ 334 | ||
Stock-based compensation weighted average period | 9 months 18 days | |||
Shares reserved for issuance | 2,482,000 | 2,482,000 | ||
Stock option outstanding vested or expected to vest | 425,637 | 425,637 | ||
Aggregate intrinsic value of stock option | $ 57 | $ 57 | ||
Weighted average remaining contractual term | 2 years 9 months 18 days | |||
Stock option to purchase common stock | 411,052 | |||
Aggregate intrinsic value exercisable | $ 57 | $ 57 | ||
Weighted average exercise price | $ 11.64 | $ 11.64 | ||
Weighted average exercisable contractual term | 2 years 7 months 6 days | |||
Share price | $ 3.66 | $ 3.66 | ||
Equity Incentive Plans [Member] | ||||
Shares reserved for issuance | 2,239,000 | 2,239,000 | ||
Stock option granted | 426,000 | |||
Shares available for future issuance | 1,813,000 | 1,813,000 | ||
Equity Incentive Plans [Member] | Maximum [Member] | ||||
Shares vesting period | 5 years |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Share-based Compensation, Stock Options, Activity (Details) $ / shares in Units, $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | |
Number of shares available for grant, ending | 1,813,000 |
Total options outstanding, Exercised | (128,000) |
Weighted Average Exercise Price, ending | $ / shares | $ 11.64 |
Aggregate Intrinsic Value, ending | $ | $ 57 |
Stock Option [Member] | |
Number of shares available for grant, beginning | 1,656,000 |
Number of shares available for grant, Exercised | |
Number of shares available for grant, Granted | |
Number of shares available for grant, Cancelled | 157,000 |
Number of shares available for grant, ending | 1,813,000 |
Total options outstanding, beginning | 711,000 |
Total options outstanding, Exercised | (128,000) |
Total options outstanding, Granted | |
Total options outstanding, Cancelled | (157,000) |
Total options outstanding, ending | 426,000 |
Weighted Average Exercise Price, outstanding | $ / shares | $ 8.39 |
Weighted Average Exercise Price, Exercised | $ / shares | 1.45 |
Weighted Average Exercise Price, Granted | $ / shares | |
Weighted Average Exercise Price, Cancelled | $ / shares | 3.01 |
Weighted Average Exercise Price, ending | $ / shares | $ 12.44 |
Aggregate Intrinsic Value, outstanding | $ | $ 1,640 |
Aggregate Intrinsic Value, ending | $ | $ 1,192 |
Net Loss Per Share - Schedule o
Net Loss Per Share - Schedule of Antidilutive Securities Excluded from Calculations of Net Loss Per Share (Details) - shares | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Anti-dilutive securities | 669,000 | 977,000 | 669,000 | 977,000 |
Options to Purchase Common Stock [Member] | ||||
Anti-dilutive securities | 426,000 | 768,000 | 426,000 | 768,000 |
Warrants to Purchase Common Stock [Member] | ||||
Anti-dilutive securities | 243,000 | 209,000 | 243,000 | 209,000 |
Mortgage Note Receivable (Detai
Mortgage Note Receivable (Details Narrative) - Mortgage Note [Member] - USD ($) | 1 Months Ended | |
Feb. 28, 2018 | Jun. 30, 2014 | |
Mortgage note receivable | $ 2,626,290 | |
Debt instrument maturity date | Aug. 1, 2032 | |
Debt instrument interest rate | 7.24% | |
Proceeds from related party | $ 1,400,000 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) $ in Thousands | 6 Months Ended | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Deferred tax liabilities | $ 12,609 | $ 13,582 | |
Effective income tax rate | 25.00% | 0.00% | |
Income tax rate reconciliation, description | In December 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed into law making significant changes to the Internal revenue Code including a permanent reduction to the US corporate statutory rate from 35% to 21% effective for tax years beginning after December 31, 2017. | ||
US corporate statutory rate | 35.00% | ||
Corporation [Member] | |||
Effective income tax rate | 21.00% | ||
Effective After December 31, 2017 [Member] | |||
US corporate statutory rate | 21.00% |
Transactions with Related Par39
Transactions with Related Parties (Details Narrative) - USD ($) $ in Thousands | 1 Months Ended | 6 Months Ended | |
Nov. 30, 2014 | Jun. 30, 2018 | Jun. 30, 2017 | |
Rent expenses | $ 22 | $ 111 | |
Dr. Raymond Schinazi [Member] | |||
Rent expenses | $ 44 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) $ in Thousands | Jul. 19, 2018USD ($) |
Subsequent Event [Member] | Equity Distribution Agreement [Member] | Maximum [Member] | |
Number of common stock shares sold, value | $ 10,000 |