Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Sep. 30, 2015 | Dec. 01, 2015 | Mar. 31, 2015 | |
Document And Entity Information | |||
Entity Registrant Name | Citius Pharmaceuticals, Inc. | ||
Entity Central Index Key | 1,506,251 | ||
Document Type | S1 | ||
Document Period End Date | Sep. 30, 2015 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --09-30 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | Yes | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 6,640,797 | ||
Entity Common Stock, Shares Outstanding | 34,701,220 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2015 | Sep. 30, 2014 |
Current Assets | ||
Cash and cash equivalents | $ 676,137 | $ 1,552,060 |
Prepaid expenses | 60,000 | |
Total Current Assets | 736,137 | $ 1,552,060 |
Other Assets | ||
Trademarks | 5,401 | 5,401 |
Total Other Assets | 5,401 | 5,401 |
Total Assets | 741,538 | 1,557,461 |
Current liabilities: | ||
Accounts payable | 559,150 | 106,169 |
Accrued expenses | $ 8,260 | 60,317 |
Accrued interest | 25,833 | |
Promissory notes | 600,000 | |
Derivative warrant liability | $ 738,955 | 1,450,943 |
Due to related party | 70,386 | 56,134 |
Total Current Liabilities | $ 1,376,751 | $ 2,299,396 |
Commitments and contingencies | ||
Stockholders' Deficit | ||
Preferred stock - $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding | ||
Common stock - $0.001 par value; 90,000,000 shares authorized; 34,117,886 and 30,025,295 shares issued and outstanding at September 30, 2015 and 2014, respectively | $ 34,118 | $ 30,025 |
Additional paid-in capital | 8,371,218 | 5,366,321 |
Accumulated deficit | (9,040,549) | (6,138,281) |
Total Stockholders' Deficit | (635,213) | (741,935) |
Total Liabilities and Stockholders' Deficit | $ 741,538 | $ 1,557,461 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2015 | Sep. 30, 2014 |
Consolidated Balance Sheets | ||
Preferred Stock Par Value | $ 0.001 | $ 0.001 |
Preferred Stock Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock Shares Issued | 0 | 0 |
Preferred Stock Shares Outstanding | 0 | 0 |
Common Stock Par Value | $ 0.001 | $ 0.001 |
Common Stock Shares Authorized | 90,000,000 | 90,000,000 |
Common Stock Shares Issued | 34,117,886 | 30,025,295 |
Common Stock Shares Outstanding | 34,117,886 | 30,025,295 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2013 | |
Consolidated Statements Of Operations | |||
Revenues | |||
Operating Expenses | |||
Research and development | $ 574 | $ 1,797,045 | $ 492,136 |
General and administrative | 183,044 | 946,613 | $ 690,396 |
Stock-based compensation - general and administrative | 470,185 | 486,271 | |
Total Operating Expenses | 653,803 | 3,229,929 | $ 1,182,532 |
Operating Loss | (653,803) | (3,229,929) | $ (1,182,532) |
Other Income (Expense), Net: | |||
Interest income | 555 | 3,066 | |
Gain on revaluation of derivative warrant liability | 8,588 | 332,095 | |
Interest expense | (93,067) | (7,500) | $ (105,471) |
Total Other Income (Expense), Net | (83,924) | 327,661 | (105,471) |
Loss before Income Taxes | $ (737,727) | $ (2,902,268) | $ (1,288,003) |
Income tax benefit | |||
Net Loss | $ (737,727) | $ (2,902,268) | $ (1,288,003) |
Net Loss Per Share - Basic and Diluted | $ (0.04) | $ (0.09) | $ (0.07) |
Weighted Average Common Shares Outstanding Basic and diluted | 19,322,206 | 31,835,440 | 17,757,333 |
CONSOLIDATED STATEMENTS OF CHAN
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, Amount at Dec. 31, 2012 | $ 17,757 | $ 2,481,043 | $ (4,112,551) | $ (1,613,751) | |
Beginning balance, Shares at Dec. 31, 2012 | 17,757,342 | ||||
Stock-based compensation | |||||
Net loss | (1,288,003) | $ (1,288,003) | |||
Ending balance, Amount at Dec. 31, 2013 | $ 17,757 | 2,481,043 | $ (5,400,554) | (2,901,754) | |
Ending balance, Shares at Dec. 31, 2013 | 17,757,342 | ||||
Issuance of common stock, Amount | $ 200 | 49,800 | 50,000 | ||
Issuance of common stock, Shares | 200,000 | ||||
Conversion of subordinated convertible promissory note and accrued interest, Amount | $ 607 | 393,638 | $ 394,245 | ||
Conversion of subordinated convertible promissory note and accrued interest, Shares | 606,531 | ||||
Issuance of common stock in reverse acquisition, Amount | $ 5,000 | (5,000) | |||
Issuance of common stock in reverse acquisition, Shares | 5,000,000 | ||||
Conversion of promissory notes and accrued interest, Amount | $ 3,061 | 1,833,752 | $ 1,836,813 | ||
Conversion of promissory notes and accrued interest, Shares | 3,061,355 | ||||
Issuance of common stock in private placement, net of costs, Amount | $ 3,400 | 142,903 | 146,303 | ||
Issuance of common stock in private placement, net of costs, Shares | 3,400,067 | ||||
Stock-based compensation | 470,185 | 470,185 | |||
Net loss | $ (737,727) | (737,727) | |||
Ending balance, Amount at Sep. 30, 2014 | $ 30,025 | 5,366,321 | $ (6,138,281) | (741,935) | |
Ending balance, Shares at Sep. 30, 2014 | 30,025,295 | ||||
Reclassification of derivative warrant liability to additional paid-in capital, Amount | 1,148,328 | 1,148,328 | |||
Conversion of promissory notes and accrued interest, Amount | $ 1,056 | 632,277 | 633,333 | ||
Conversion of promissory notes and accrued interest, Shares | 1,055,554 | ||||
Issuance of common stock in private placement, net of costs, Amount | $ 3,037 | 738,021 | 741,058 | ||
Issuance of common stock in private placement, net of costs, Shares | 3,037,037 | ||||
Stock-based compensation | 486,271 | 486,271 | |||
Net loss | $ (2,902,268) | (2,902,268) | |||
Ending balance, Amount at Sep. 30, 2015 | $ 34,118 | $ 8,371,218 | $ (9,040,549) | $ (635,213) | |
Ending balance, Shares at Sep. 30, 2015 | 34,117,886 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2013 | |
Cash flows from operating activities: | |||
Net loss | $ (737,727) | $ (2,902,268) | $ (1,288,003) |
Adjustments to reconcile net loss to net cash used in operating activities: | |||
Amortization of debt issuance costs | 14,000 | $ 28,000 | |
Stock-based compensation expense | 470,185 | $ 486,271 | |
Gain on revaluation of derivative warrant liability | (8,588) | (332,095) | |
Changes in operating assets and liabilities: | |||
Prepaid expenses | 9,174 | (60,000) | $ (9,174) |
Accounts payable | (66,320) | 452,981 | 75,097 |
Accrued expenses | 56,764 | (52,057) | 3,033 |
Accrued interest | 79,067 | 7,500 | 77,472 |
Due to related party | 281 | 14,252 | 18,309 |
Net Cash Used In Operating Activities | $ (183,164) | $ (2,385,416) | (1,095,266) |
Cash flows from financing activities: | |||
Proceeds from convertible promissory notes | 225,000 | ||
Proceeds from promissory notes | 600,000 | ||
Proceeds from subordinated convertible promissory note | $ 350,000 | ||
Proceeds from issuance of common stock | $ 50,000 | ||
Net proceeds from private placement | $ 1,630,834 | $ 1,509,493 | |
Deferred offering costs | $ (25,000) | ||
Debt issuance costs | (42,000) | ||
Net Cash Provided by Financing Activities | $ 1,680,834 | $ 1,509,493 | 1,108,000 |
Increase (Decrease) in Cash and Cash Equivalents | 1,497,670 | (875,923) | 12,734 |
Cash and Cash Equivalents - Beginning of Period | 54,390 | 1,552,060 | 41,656 |
Cash and Cash Equivalents - End of Period | $ 1,552,060 | $ 676,137 | $ 54,390 |
Supplemental Disclosures of Cash Flow Information and Non-cash Transactions: | |||
Interest paid | |||
Income taxes paid | |||
Fair value of warrants issued in connection with private placement and recorded as derivative warrant liability | $ 1,459,531 | $ 768,435 | |
Reclassification of derivative warrant liability to additional paid-in capital | 1,148,328 | ||
Conversion of promissory notes and accrued interest into common stock | $ 633,333 | ||
Conversion of convertible promissory notes and accrued interest into common stock | $ 1,836,813 | ||
Conversion of subordinated convertible promissory note and accrued interest into common stock | $ 394,245 |
NATURE OF OPERATIONS AND BASIS
NATURE OF OPERATIONS AND BASIS OF PRESENTATION | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION | Business Citius Pharmaceuticals, Inc. ("Citius" or the "Company") is a pharmaceutical company headquartered in Maynard, Massachusetts focusing on developing innovative formulations aimed at improving the delivery and compliance of approved drugs. The Company was founded as Citius Pharmaceuticals, LLC, a Massachusetts limited liability company, on January 23, 2007. On September 12, 2014, Citius Pharmaceuticals, LLC entered into a Share Exchange and Reorganization Agreement (the "Exchange Agreement"), with Citius Pharmaceuticals, Inc. (formerly Trail One, Inc.), a publicly traded company incorporated under the laws of the State of Nevada. Citius Pharmaceuticals, LLC became a wholly-owned subsidiary of Citius (see "Reverse Acquisition" below). The Company currently has one approved and marketed product, Suprenza (phentermine hydrochloride), which it has out licensed for promotion in the United States, Canada and Mexico. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital. Citius is subject to a number of risks common to companies in the pharmaceutical industry including, but not limited to, risks related to the development by Citius or its competitors of research and development stage products, market acceptance of its products, competition from larger companies, dependence on key personnel, dependence on key suppliers and strategic partners, the Company's ability to obtain additional financing and the Company's compliance with governmental and other regulations. Reverse Acquisition On September 12, 2014, Citius completed a reverse acquisition transaction with Citius Pharmaceuticals, LLC, which became a wholly-owned subsidiary of Citius. As part of the reverse acquisition, the former members of Citius Pharmaceuticals, LLC received 21,625,219 shares of the Company's common stock in exchange for their interest in Citius Pharmaceuticals, LLC and, immediately after the transaction, owned 72% of the outstanding common stock. Immediately prior to the transaction, Citius had 5,000,000 shares of common stock outstanding. In connection with the Exchange Agreement, the Company completed the first closing of a Private Offering (see Note 7). Following the acquisition, Citius Pharmaceuticals, LLC began operating as a wholly-owned subsidiary of Citius Pharmaceuticals, Inc. Accounting principles generally accepted in the United States generally require that a company whose security holders retain the majority voting interest in the combined business be treated as the acquirer for financial reporting purposes. The acquisition was accounted for as a reverse acquisition whereby Citius Pharmaceuticals, LLC was deemed to be the accounting acquirer. Accordingly, the historical consolidated financial statements are those of Citius Pharmaceuticals, LLC as the accounting acquirer. The post-merger combination of Citius Pharmaceuticals, Inc. and Citius Pharmaceuticals, LLC is referred to throughout these notes to consolidated financial statements as the "Company." As the accounting acquirer, Citius Pharmaceuticals, LLC did not acquire any tangible assets from Citius and did not assume any liabilities of Citius. This transaction is not considered a business combination because Citius, the non-operating public corporation, did not meet the definition of a business. Instead, this transaction is considered to be a capital transaction of Citius Pharmaceuticals, LLC and is equivalent to the issuance of shares by Citius Pharmaceuticals, LLC for the net assets of Citius accompanied by a recapitalization. In connection with the reverse acquisition, Citius Pharmaceuticals, LLC adopted the fiscal year end of Citius, thereby changing our fiscal year end from December 31 to September 30. Basis of Presentation As a result of the reverse acquisition, the accompanying consolidated financial statements include the operations of Citius Pharmaceuticals, LLC (the accounting acquirer). The accompanying consolidated financial statements also include the operations of Citius Pharmaceuticals, Inc. (formerly Trail One, Inc.) since the date of the reverse acquisition. All significant inter-company balances and transactions have been eliminated in consolidation. All share and per share amounts presented in these consolidated financial statements reflect the one-for-one exchange ratio of Citius Pharmaceuticals, LLC member interests to common shares in the reverse acquisition. |
GOING CONCERN UNCERTAINTY AND M
GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLAN | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 2. GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLAN | The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company experienced negative cash flows from operations of $2,385,416, $183,164, and $1,095,266 for the year ended September 30, 2015, the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively. At September 30, 2015, the Company had a working capital deficit of $640,614 and a stockholders' deficit of $635,213. The Company has no revenue and has relied on proceeds from equity transactions and debt to finance its operations. At September 30, 2015, the Company had limited capital to fund its operations. This raises substantial doubt about the Company's ability to continue as a going concern. The Company plans to raise capital through equity financings from outside investors as well as raise additional funds from existing investors. There is no assurance, however, that that the Company will be successful in raising the needed capital and, if funding is available, that it will be available on terms acceptable to the Company. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of the above uncertainty. |
BUSINESS AGREEMENTS
BUSINESS AGREEMENTS | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 3. BUSINESS AGREEMENTS | Alpex Pharma S.A. On June 12, 2008, the Company entered into a collaboration and license agreement (the "Alpex Agreement") with Alpex Pharma S.A. ("Alpex"), in which Alpex granted the Company an exclusive right and license to use certain Alpex intellectual property in order to develop and commercialize orally disintegrating tablet formulations of pharmaceutical products in United States, Canada and Mexico. In addition, Alpex manufactures Suprenza, the Company's commercialized pharmaceutical product, on a contract basis. The agreement was amended on November 15, 2011 as part of an Amendment and Coordination Agreement (see the "Three-Party Agreement" below). Under the terms of the Alpex Agreement, as amended by the Three-Party Agreement dated November 15, 2011 (see below), Alpex is entitled to a payment per tablet manufactured and a percentage of all milestone, royalty and other payments received by the Company from Prenzamax, LLC, pursuant to a sublicense agreement (see below). A milestone is generally understood as a completion of a specific defined task towards the completion of a project or performance of a contract. For example, pursuant to the Company's agreement with Alpex, the Company is required to pay Alpex for the completion of certain tasks including, but not limited to, the development of the analytical methods, formulations and filings of the NDA. In addition, under the terms of the Alpex Agreement, Alpex retained the right to use the clinical data generated by the Company to file for regulatory approval and market Suprenza in the rest of the world. In the event that Alpex has such sales, Alpex will pay the Company a percentage royalty on net sales, as defined ("Alpex Revenue"). No milestone, royalty or other payments have been earned or received by the Company through September 30, 2015. Prenzamax, LLC On November 15, 2011, the Company entered into an exclusive license agreement (the "Sublicense Agreement") with Prenzamax, LLC ("Prenzamax"), in which the Company granted Prenzamax and its affiliates the exclusive right to commercialize Suprenza in the United States. Prenzamax is an affiliate of Akrimax, a related party (see Note 8) and was formed for the specific purpose of managing the Sublicense Agreement. Under the terms of the Sublicense Agreement, Prenzamax is to pay the Company a percentage of the product's EBITDA, as defined ("Profit Share Payments"). In addition, Prenzamax is to reimburse the Company directly for certain development costs. These payments are to commence once Prenzamax has achieved profitability, as defined in the Sublicense Agreement. Further, under the terms of the Sublicense Agreement, Prenzamax is required to share in the royalty payment due to Alpex under the Alpex Agreement. In addition, Prenzamax is entitled to a percentage of the Alpex Revenue received by the Company. The Company has not been reimbursed for any development costs nor has it earned any Profit Share Payments through September 30, 2015. Three-Party Agreement On November 15, 2011, the Company, Alpex and Prenzamax entered into the Three-Party Agreement wherein the terms of the Alpex Agreement were modified and Prenzamax and the Company agreed to each pay a portion of certain regulatory filing fees for as long as Prenzamax is purchasing Suprenza from Alpex pursuant to the Three-Party Agreement. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Use of Estimates The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and changes in estimates may occur. Cash and Cash Equivalents The Company considers all highly liquid instruments with maturities of less than three months at the time of purchase to be cash equivalents. From time to time, the Company may have cash balances in financial institutions in excess of insurance limits. The Company has never experienced any losses related to these balances. Research and Development Research and development costs, including upfront fees and milestones paid to collaborators who are performing research and development activities under contractual agreement with the Company, are expensed as incurred. The Company defers and capitalizes its nonrefundable advance payments that are for research and development activities until the related goods are delivered or the related services are performed. When the Company is reimbursed by a collaboration partner for work the Company performs, it records the costs incurred as research and development expenses and the related reimbursement as a reduction to research and development expenses in its consolidated statement of operations. Research and development expenses primarily consist of clinical and non-clinical studies, materials and supplies, third-party costs for contracted services, and payments related to external collaborations and other research and development related costs. Patents and Trademarks Certain costs of outside legal counsel related to obtaining trademarks for the Company are capitalized. Patent costs are amortized over the legal life of the patents, generally twenty years, starting at the patent issuance date. The costs of unsuccessful and abandoned applications are expensed when abandoned. The cost of maintaining existing patents are expensed as incurred. Revenue Recognition The Company recognizes revenue using the four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the selling price is fixed and determinable, and (4) collectability is reasonably assured. Provisions for discounts, rebates, estimated returns and allowances, and other adjustments are provided in the period that the revenue is recorded. The Company's license and collaboration agreements with certain partners also provide for contingent payments to us based solely upon the performance of the respective partner. For such contingent amounts we expect to recognize the payments as revenue when earned under the applicable contract, which is generally upon completion of performance by the respective partner, provided that collection is reasonably assured. The Company's license and collaboration agreements with its partners also provide for payments to us upon the achievement of specified sales volumes of approved drugs. We consider these payments to be similar to royalty payments and we will recognize such sales-based payments upon achievement of such sales volumes, provided that collection is reasonably assured. Stock-Based Compensation The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees and directors as an expense in the consolidated statement of operations over the requisite service period based on the fair value for each stock award on the grant date. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Due to its limited operating history, limited number of sales of its Common Stock and limited history of its shares being publicly traded, the Company estimates its volatility in consideration of a number of factors including the volatility of comparable public companies. Derivative Instruments The Company generally does not use derivative instruments to hedge exposures to cash-flow or market risks; however, certain warrants to purchase common stock that do not meet the requirements for classification as equity are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash settlement. Such financial instruments are initially recorded at fair value with subsequent changes in fair value charged (credited) to operations in each reporting period. If these instruments subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. Income Taxes Citius Pharmaceuticals, LLC was treated as a partnership for federal and state income taxes prior to the Reverse Acquisition. A partnership's income or loss is allocated directly to the Members for income tax purposes. Accordingly, there is no provision for federal and state income taxes in the accompanying consolidated financial statements for the year ended December 31, 2013. The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the consolidated financial statements. Tax positions taken or expected to be taken in the course of preparing our tax returns, including the position that Citius Pharmaceuticals, LLC qualified as a pass-through entity, are required to be evaluated to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the consolidated financial statements. There are no uncertain tax positions, however the Company is still in the process of filing their 2013, 2014 and 2015 tax returns. Any interest or penalties are charged to expense. None have been recognized in these consolidated financial statements. Generally, we are subject to federal and state tax examinations by tax authorities for all years subsequent to December 31, 2011. After the Reverse Acquisition, we recognize deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We provide a valuation allowance, if necessary, for deferred tax assets for which we do not consider realization of such assets to be "more-likely-than-not". The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period. Basic and Diluted Loss per Share Basic and diluted net loss per common share is computed by dividing net loss in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of options, warrants and convertible securities were not included in the calculation of the diluted loss per share because they were anti-dilutive. Fair Value of Financial Instruments The financial statements include various estimated fair value information. Financial instruments are initially recorded at historical cost. If subsequent circumstances indicate that a decline in the fair value of a financial asset is other than temporary, the financial asset is written down to its fair value. Unless otherwise indicated, the fair values of financial instruments approximate their carrying amounts. By their nature, all financial instruments involve risk, including credit risk for non-performance by counterparties. The fair values of cash and cash equivalents, accounts payable, accrued interest, accrued expenses, notes payable and due to related party approximate their recorded amounts because of their relatively short settlement terms. The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The Company's financial liabilities measured at fair value on September 30, 2015 and 2014 consists solely of the derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 6). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. The Company has no financial assets measured at fair value. The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the year ended September 30, 2015, the nine month period ended September 30, 2014, and the year ended December 31, 2013. Segment Reporting The Company currently operates as a single segment. Concentrations of Credit Risk The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements. Recently Adopted Accounting Standards Development Stage Entities In June 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2014-10, "Development Stage Entities", Topic 915. The objective of the ASU is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities. The ASU removes Topic 915, Development Stage Entities in its entirety from FASB Accounting Standards Codification ("ASC"). The ASU removes all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the inception-to-date information and certain other disclosures. It also eliminates the guidance in ASC 810 on how to assess whether a development stage entity has sufficient equity at risk in the evaluation of whether the development stage entity is a variable interest entity. Additionally, the ASU clarifies that all entities, including entities that have not begun operations, should provide the risk and uncertainty disclosures required in ASC 275. The Company has elected to early adopt as permitted by ASU 2014-10 and therefore has omitted the incremental development stage reporting requirements. Recently Issued Accounting Standards In August 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-15, "Interest Imputation of Interest (Subtopic 835-30) - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting)". Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff stated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. In August 2015, the FASB also issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date. Deferred the effective date of ASU 2014-09 by one year. Originally scheduled to be effective for fiscal years beginning after December 15, 2016, ASU 2015-14 is effective for the year ended September 30, 2019. In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial StatementsGoing Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern" which applies should a company be facing probable liquidation within one year of the issuance of the financial statements, but is not actually in liquidation at the time of issuance. The applicable accounting basis for presentation remains as a going concern, but if liquidation within one year is probable, then certain disclosures must be included in the financial statement presentation. ASU 2014-15 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. |
NOTES PAYABLE
NOTES PAYABLE | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 5. NOTES PAYABLE | Convertible Promissory Notes Between July 12, 2010 and November 30, 2012, the Company issued several convertible promissory notes (collectively the "Convertible Notes") to two existing investors in aggregate total principal amount of $1,460,000. The Convertible Notes accrue interest at 3.00% per annum and are payable on demand only after their respective 10-year maturities. Between January 1, 2013 and March 25, 2013, the Company issued additional Convertible Notes to existing investors in aggregate total principal amount of $225,000. The additional Convertible Notes accrue interest at 5.00% per annum and are payable on demand only after their respective 10-year maturities. The unpaid principal and accrued interest are only convertible into common stock following a reorganization or conversion into a corporation at the option of the holder. The unpaid principal and accrued interest will convert into common stock at the greater of the fair value of the common stock on the date of the conversion or $0.25 ($0.69 if the Company's common stock is admitted to trade on a national exchange prior to the date of conversion). On July 31, 2014, in anticipation of the completion of the reverse acquisition and the Private Offering, the note holders demanded conversion of the outstanding $1,685,000 Convertible Notes and accrued interest of $151,813 into 3,061,355 shares of common stock at a conversion price of $0.60 per share. Promissory Notes In November 2013, the Company issued two promissory notes (the "Promissory Notes") to two existing investors in aggregate total principal amount of $600,000. The Promissory Notes accrue interest at 5.00% per annum and are due at the earliest of (1) December 19, 2014, (2) the occurrence of an event of default as defined in the Promissory Notes, (3) an initial installment of $100,000 principal amount, to each investor, upon the receipt by the Company of a minimum $6,500,000 in aggregate proceeds under any financing transaction, (4) a second installment of $100,000 principal amount, to each investor, upon the receipt by the Company of a minimum $8,500,000 in aggregate proceeds under any financing transaction, and (5) a third installment of $100,000 principal amount, to each investor, upon the receipt by the Company of a minimum $10,000,000 in aggregate proceeds under any financing transaction. At September 30, 2014, the Promissory Notes had an outstanding aggregate principal balance of $600,000. On December 31, 2014, the note holders requested conversion of the outstanding $600,000 Promissory Notes and accrued interest of $33,333 into 1,055,554 shares of common stock at a conversion price of $0.60 per share. Subordinated Convertible Promissory Note In 2013, the Company entered into an investment banking agreement to raise up to $6 million of 10% subordinated convertible promissory notes. The agreement contemplated a reverse acquisition with a public company and an automatic conversion of the notes into units of common stock and warrants, as defined therein. In April 2013, the Company issued a $350,000 subordinated convertible promissory note (the "Subordinated Note"). The Subordinated Note accrued interest at 10% per annum and was payable on demand any time after April 2014. If the Company has not repaid the Subordinated Note at the closing of a reverse acquisition, the unpaid principal and accrued interest will automatically convert into common stock by dividing the amount due by a price per unit of $0.65. Also, upon automatic conversion, the purchaser of the Subordinated Note will receive a warrant to purchase the same number of shares in to which the Subordinated Note converts. On July 31, 2014, in anticipation of the completion of the reverse acquisition and the Private Offering, the note holder demanded conversion of the outstanding $350,000 Subordinated Note and accrued interest of $44,245 into 606,531 shares of common stock at a conversion price of $0.65 per share. Interest Expense During 2013, the Company incurred $42,000 of debt issuance costs related to the Subordinated Note which was amortized over the term of the underlying debt. Amortization of debt issuance costs recorded as interest expense for the nine months ended September 30, 2014 and the year ended December 31, 2013 amounted to $14,000 and $28,000, respectively. Interest expense on the notes for the year ended September 30, 2015, the nine months ended September 30, 2014 and the year ended December 31, 2013, including non-cash interest related to debt issuance costs, was $7,500, $93,067, and $105,471, respectively. |
DERIVATIVE WARRANT LIABILITY
DERIVATIVE WARRANT LIABILITY | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 6. DERIVATIVE WARRANT LIABILITY | Derivative financial instruments are recognized as a liability on the consolidated balance sheet and measured at fair value. At September 30, 2015 and 2014, the Company had outstanding warrants to purchase 3,037,037 and 5,080,080 shares, respectively, of its common stock that are considered to be derivative instruments since the agreements contain "down round" provisions whereby the exercise price of the warrants is subject to adjustment in the event that the Company issues common stock for less than $0.60 per share within one-year of the issuance of the warrants (see Note 7). The Company performs valuations of the warrants using a probability weighted Black-Scholes option pricing model which value was also compared to a Binomial Option Pricing Model for reasonableness. This model requires input of assumptions including the risk-free interest rates, volatility, expected life and dividend rates, and has also considered the likelihood of "down-round" financings. Selection of these inputs involves management's judgment and may impact net income. Due to our limited operating history and limited number of sales of our common stock, we estimate our volatility based on a number of factors including the volatility of comparable publicly traded pharmaceutical companies. The volatility factor used in the Black-Scholes option pricing model has a significant effect on the resulting valuation of the derivative liabilities on our balance sheet. The volatility calculated at September 30, 2015 was 57% and we used a risk-free interest rate of 1.37%, estimated lives of 4.47 to 4.96 years, which are the remaining contractual lives of the warrants subject to "down-round" provisions, and no dividends to our common stock. The volatility calculated at September 30, 2014 was 54% and we used a risk-free interest rate of 1.78%, an estimated life of 4.95 years, which is the remaining contractual life of the warrants and no dividends to our common stock. On September 12, 2015, anti-dilution rights related to warrants to purchase 5,080,080 shares of common stock expired which resulted in a reclassification from derivative warrant liability to additional paid-in capital of $1,148,328. The table below presents the changes in the derivative warrant liability, which is measured at fair value on a recurring basis and classified as Level 3 in fair value hierarchy (see Note 4): Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Derivative warrant liability, beginning of period $ 1,450,943 $ Fair value of warrants issued 768,435 1,459,531 Total realized/unrealized gains included in net loss (1) (332,095 ) (8,588 ) Reclassification of liability to additional paid-in capital (1,148,328 ) Derivative warrant liability, end of period $ 738,955 $ 1,450,943 ________________________ |
COMMON STOCK, STOCK OPTIONS AND
COMMON STOCK, STOCK OPTIONS AND WARRANTS | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 7. COMMON STOCK, STOCK OPTIONS AND WARRANTS | Common Stock In May 2014, the Company issued 200,000 shares of common stock for $50,000, or $0.25 per share. On September 12, 2014, in connection with the Reverse Acquisition, 5,000,000 shares of common stock were recorded in the financial statements of Citius Pharmaceuticals, LLC, the accounting acquirer (See Note 1 Reverse Acquisition). Private Offerings In 2014, the Company entered into an investment banking agreement to raise up to $5.1 million and issue up to 8,500,000 Units described below. The agreement contemplated a Reverse Acquisition with a public company. As of December 31, 2013, the Company capitalized as deferred offering costs a $25,000 retainer for legal costs associated with this offering. The $25,000 retainer was charged to additional paid-in capital on completion of the first closing of the offering. On September 12, 2014, the Company sold 3,400,067 Units for a purchase price of $0.60 per Unit for gross proceeds of $2,040,040. Each Unit consists of one share of common stock and one five-year warrant (the "Investor Warrants") to purchase one share of common stock at an exercise price of $0.60, (the "Private Offering"). The exercise price of the Investor Warrants is subject to adjustment, for up to one year, if the Company issues common stock at a price lower than the exercise price, subject to certain exceptions. The 2015 private placement described below did not result in an adjustment of the exercise price of the Investor Warrants. The Investor Warrants will be redeemable by the Company at a price of $0.001 per Investor Warrant at any time subject to the conditions that (i) the common stock has traded for twenty (20) consecutive trading days with a closing price of at least $1.50 per share with an average trading volume of 50,000 shares per day and (ii) the Company provides 20 trading days prior notice of the redemption and the closing price of the common stock is not less than $1.17 for more than any 3 days during such notice period and (iii) the underlying shares of common stock are registered. The Placement Agent was paid a commission of ten percent (10%) and a non-accountable expense allowance of three percent (3%) of the funds raised in the Private Offering. As a result of the foregoing arrangement, the Placement Agent was paid commissions and expenses of $265,206. In addition, the Company issued to the Placement Agent and their designees five-year warrants (the "Placement Agent Unit Warrants") to purchase 680,013 Units at an exercise price of $0.60 per Unit. The Placement Agent Unit Warrants are exercisable on a cash or cashless basis with respect to purchase of the Units, and will be exercisable only for cash with respect to warrants received as part of the Units. The exercise price of the warrants underlying the Placement Agent Unit Warrants is subject to adjustment, for up to one year, if the Company issues common stock at a price lower than the exercise price, subject to certain exceptions. In addition, the Placement Agent was issued warrants to purchase 1,000,000 shares of common stock exercisable for cash at $0.60 per share for investment banking services provided in connection with the transaction (the "Placement Agent Share Warrants"). Other cash expenses related to the private placement totaled $169,000. The Placement Agent may, while the Placement Agent Unit Warrants are outstanding, appoint one person to the Board of Directors, and designate one person who may attend meetings of the Board of Directors as an observer. On November 2, 2015, the Placement Agent waived its right to appoint a person to the Board of Directors. In connection with the Private Offering, the Company entered into a Registration Rights Agreement pursuant to which the Company is required to file a registration statement (the "Registration Statement"), registering for resale all shares of common stock (i) included in the Units; and (ii) issuable upon exercise of the Investor Warrants. The Company has agreed to use its reasonable efforts to cause the Registration Statement to be filed no later than 60 days after the completion of the Private Offering (the "Filing Deadline"), and to have the Registration Statement declared effective within 180 days of the Filing Deadline. Any holders of the shares of common stock removed from the Registration Statement as a result of a Section 415 comment from the SEC shall be included in a subsequent registration statement the Company will file no later than six months after the prior registration statement (or such other period as permitted by SEC rules). The Company filed the Registration Statement on September 11, 2015, however, it was not declared effective as of September 30, 2015. Between March 19, 2015 and September 14, 2015, the Company sold an additional 2,837,037 Units for a purchase price of $0.54 per Unit and 200,000 Units for a purchase price of $0.60 per Unit for gross proceeds of $1,652,000. Each Unit consists of one share of common stock and one Investor Warrant (see description above). There was no placement agent for the 2015 private placements and other cash expenses related to the placements were $142,507. In connection with these placements, the Company credited $741,058 to stockholders' equity (deficit) and $768,435 to derivative warrant liability. Stock Options On September 12, 2014, the Board of Directors adopted the 2014 Stock Incentive Plan (the "2014 Plan") and reserved 13,000,000 shares of common stock for issuance to employees, directors and consultants. On September 12, 2014, the stockholders approved the plan. Pursuant to the 2014 Plan, the Board of Directors (or committees and/or executive officers delegated by the Board of Directors)may grant stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash-based awards. As of September 30, 2015, there were options to purchase an aggregate of 3,900,000 shares of common stock outstanding under the 2014 Plan and 9,100,000 shares available for future grants. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model. Due to its limited operating history and limited number of sales of its Common Stock, the Company estimated its volatility in consideration of a number of factors including the volatility of comparable public companies. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the consolidated financial statements, to estimate option exercises and employee terminations within the valuation model. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption. The expected term of stock options granted, all of which qualify as "plain vanilla," is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee options, the expected term is the contractual term. The following assumptions were used in determining the fair value of stock option grants: Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Risk-free interest rate 1.37 1.52% 1.83 Expected dividend yield 0% 0% Expected term 2.5 6 years 5 6 years Forfeiture rate 0 0 Expected volatility 53 58% 54 A summary of option activity under the 2014 Plan is presented below: Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2014 $ Granted 3,300,000 0.45 Exercised Forfeited or expired Outstanding at September 30, 2014 3,300,000 0.45 9.96 years $ 495,000 Granted 600,000 0.60 Exercised Forfeited or expired Outstanding at September 30, 2015 3,900,000 $ 0.47 8.94 years $ 297,000 Exercisable at September 30, 2015 2,090,000 $ 0.47 8.81 years $ 162,000 On September 12, 2014, the Board of Directors granted stock options to purchase 3,300,000 shares of common stock at an exercise price of $0.45 per share. The weighted average grant-date fair value of the options granted was estimated at $0.34 per share. These options vest over three years and have a term of 10 years. On April 1, 2015, the Board of Directors granted stock options to purchase 100,000 shares of common stock at an exercise price of $0.60 per share. The weighted average grant-date fair value of the options granted was estimated at $0.16 per share. These options vested immediately and have a term of 5 years. On June 1, 2015, the Board of Directors granted stock options to purchase 500,000 shares of common stock at an exercise price of $0.60 per share. The weighted average grant-date fair value of the options granted was estimated at $0.27 per share. These options vest over three years and have a term of 10 years. Stock-based compensation expense for the year ended September 30, 2015 and the nine months ended September 30, 2014 was $486,271 and $470,185, respectively. At September 30, 2015, unrecognized total compensation cost related to unvested awards of $325,316 is expected to be recognized over a weighted average period of 1.62 years. Warrants The Company has reserved 8,797,130 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2015: Exercise price Number Expiration Date Investor Warrants $ 0.60 3,400,067 September 12, 2019 Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Warrants underlying Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Placement Agent Share Warrants 0.60 1,000,000 September 12, 2019 Investor Warrants 0.60 500,000 (1) March 19, 2020 Investor Warrants 0.60 583,334 (1) April 22, 2020 Investor Warrants 0.60 258,333 (1) April 30, 2020 Investor Warrants 0.60 333,334 (1) June 10, 2020 Investor Warrants 0.60 100,000 (1) June 22, 2020 Investor Warrants 0.60 370,370 (1) June 26, 2020 Investor Warrants 0.60 208,333 (1) July 2, 2020 Investor Warrants 0.60 100,000 (1) July 7, 2020 Investor Warrants 0.60 333,333 (1) July 15, 2020 Investor Warrants 0.60 250,000 (1) September 14, 2020 8,797,130 _____________ (1) Fair value of these warrants are included in the derivative warrant liability At September 30, 2015, the weighted average remaining life of the warrants is 4.23 years, all warrants are exercisable, and there is no aggregate intrinsic value for the warrants outstanding. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 8. RELATED PARTY TRANSACTIONS | The Company's headquarters is located in the office space of a company affiliated through common ownership. The Company has not recorded any revenue or expense related to the use of the office space as management has determined the usage to be immaterial and the affiliate has not charged for the usage. As of September 30, 2015 and 2014, the Company owed $70,386 and $56,134, respectively, to a company affiliated through common ownership for the expenses the related party paid on the Company's behalf and services performed by the related party. Our Chief Executive Officer is the cofounder and Vice Chairman of Akrimax Pharmaceuticals, LLC ("Akrimax"), a privately held pharmaceutical company specializing in producing cardiovascular and general pharmaceutical products (see Note 3). |
EMPLOYMENT AND CONSULTING AGREE
EMPLOYMENT AND CONSULTING AGREEMENTS | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 9. EMPLOYMENT AND CONSULTING AGREEMENTS | Employment Agreements In December 2012 and January 2013, the Company entered into employment agreements with two employees. As of December 31, 2013, the employment agreements had expired. The Company entered into a three year employment agreement with its new Chief Executive Officer effective September 12, 2014. Upon expiration, the agreement automatically renews for successive periods of one-year. The agreement requires the Company to pay base compensation plus incentives over the employment term plus severance benefits upon the occurrence of certain events as described in the agreement. Under the agreement, the Chief Executive Officer was granted options to purchase 3,300,000 shares of common stock (see Note 7 Stock Options Consulting Agreements Effective September 1, 2014, the Company entered into three consulting agreements. Two of the agreements are for financial consulting services including accounting, preparation of financial statements and filings with the SEC. The third agreement is for financing activities, product development strategies and corporate development. The agreements may be terminated by the Company or the consultant with 90 days written notice. Consulting expense under the agreements for the year ended September 30, 2015 and the nine months ended September 30, 2014 was $348,000 and $29,000, respectively. Consulting expense for the year ended September 30, 2015 and the nine months ended September 30, 2014 includes $48,000 and $4,000, respectively, paid to a financial consultant who is a stockholder of the Company. In addition, one financial consulting services agreement provides for the grant of options to purchase 500,000 shares of common stock contingent upon approval by the Board of Directors. The options were granted on June 1, 2015. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 10. COMMITMENTS AND CONTINGENCIES | Legal Proceedings On May 17, 2013, the Company received notification from Zydus Pharmaceuticals (USA) Inc. ("Zydus") that Zydus had submitted Abbreviated New Drug Application No. 204663 to the FDA seeking approval to engage in the commercial manufacture, use or sale of generic versions of the 15 mg and 30 mg dosages of our SuprenzaÒ tablets. The notification informed the Company that Zydus was seeking to manufacture and sell its generic product prior to the expiration of U.S. Patent No. 6,149,938 (the "938 patent") which is listed in the Orange Book and covers SuprenzaÒ, and that the Zydus ANDA contained a certification that its proposed generic product does not infringe the '938 patent ("Paragraph IV Certification"). On June 19, 2013, the Company received a separate notification from Zydus that it was also pursuing approval for the 37.5 mg dosage of SuprenzaÒ under the same-numbered ANDA, with a separate Paragraph IV Certification. In response, within 45 days of receiving the first notification from Zydus, the Company and our partners (Alpex Pharma, S.A. and Prenzamax, LLC), filed suit against Zydus and its parent Cadila Healthcare Limited (d/b/a Zydus Cadila) in Federal District Court in Delaware and New Jersey for infringement of the 938 patent pursuant, pursuant to the Hatch-Waxman statutory regime. Several months after initiation of the suit, the Company initiated discussions with Zydus to seek a resolution to this dispute. We diligently negotiated a settlement agreement and dismissal of the pending lawsuit to the mutual satisfaction of all parties. As a result of this mutual agreement, the district court officially terminated the suit on November 21, 2014. The terms of the settlement agreement remain confidential per mutual agreement of the parties. The resolution of this matter has been deemed a success by Akrimax and its partners Citius, Prenzamax, and Alpex. On November 24, 2015, a petition for inter partes review (the "Petition") was filed by Mr. J. Kyle Bass and Mr. Erich Spengenberg with the Patent Trial and Appeal Board (the "PTAB") of the U.S. Patent and Trademark Office ("USPTO"), challenging claims of U.S. Patent No. 8.440.170 (the "170 Patent"), titled "Orally Disintegrating Tablets with Speckled Appearance," which patent is owned by Alpex Pharma and is licensed by the Company. The inter partes review procedure allows a party to challenge the patentability of a patent before the PTAB. A patentability trial will commence if the PTAB decides to institute the inter partes review proceedings after considering the Petition and Alpex's preliminary response to the Petition. Pursuant to our agreement with Alpex, it is Alpex's primary responsibility to defend the patents. Alpex is reviewing its options and will inform us of its decision accordingly. If Alpex elects to not defend this patent, then we have the right to do so. The 170 patent relates to the appearance of the Suprenza tablets and we believe that loss of this patent will not have any impact on the Suprenza sales. Since we have already settled with Zydus on the main patent and we fully expect to have competition to our Suprenza, we are unlikely to defend this patent. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 11. INCOME TAXES | There was no provision for federal or state income taxes for the year ended September 30, 2015 and the nine months ended September 30, 2014 due to the Company's operating losses and a full valuation reserve on deferred tax assets. In addition, Citius Pharmaceuticals, LLC (the accounting acquirer) was treated as a partnership for federal and state income taxes from inception until the Reverse Acquisition was completed. A partnership's income or loss is allocated directly to the partners for income tax purposes. Accordingly, there was no provision for federal and state income taxes for the year ended December 31, 2013. The income tax benefit differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income due to the following: Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Computed "expected" tax benefit (35.0 )% (35.0 )% Increase (decrease) in income taxes resulting from: State taxes, net of federal benefit (5.2 )% (5.2 )% Permanent differences (4.6 )% % Tax reporting differences due to the reverse acquisition % 11.3 % Increase in the valuation reserve 44.8 % 28.9 % 0.0 % 0.0 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: September 30, 2015 September 30, 2014 Deferred tax assets: Net operating loss carryforward $ 1,131,000 $ 27,000 Stock-based compensation 384,000 189,000 Valuation allowance (1,515,000 ) (216,000 ) Deferred tax assets $ $ The Company has recorded a valuation allowance against deferred tax assets as the utilization of the net operating loss carryforward and other deferred tax assets is uncertain. There were no deferred tax assets or liabilities carried forward from Trail One, Inc. (the legal acquirer in the Reverse Acquisition) as the Company did not acquire any assets or liabilities in the Reverse Acquisition. Accordingly, during the nine months ended September 30, 2014, the valuation allowance increased by $216,000. During the year ended September 30, 2015, the valuation allowance increased by $1,299,000. The increase in the valuation allowance during the year ended September 30, 2015 and the nine months ended September 30, 2014 was due to the Company's net operating loss. At September 30, 2015, the Company has a net operating loss carryforward of approximately $2,814,000 which begins expiring in 2034. During the year ended September 30, 2015 and the nine months ended September 30, 2014, the Company did not recognize any interest and penalties. As of September 30, 2015, the Company had no uncertain tax positions, however the Company is still in the process of filing their 2013, 2014 and 2015 tax returns. Tax years subsequent to 2011 are subject to examination by federal and state authorities. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Sep. 30, 2015 | |
Notes to Financial Statements | |
NOTE 12. SUBSEQUENT EVENTS | On October 1 and October 8, 2015, the Company appointed two new directors. Each director received an option to purchase 400,000 shares of the Company's common stock at an exercise price of $0.54 per share in consideration for their services as members of the Company's board of directors. The options were issued pursuant to the Company's 2014 Stock Incentive Plan. Between October 1, 2015 and November 20, 2015, the Company sold an additional 416,667 Units for a purchase price of $0.54 per Unit and 166,667 Units for a purchase price of $0.60 per Unit for gross proceeds of $325,000. Each Unit consists of one share of common stock and one Investor Warrant (see Note 7 Private Offerings). On November 24, 2015, a petition for inter partes review (the "Petition") was filed by Mr. J. Kyle Bass and Mr. Erich Spengenberg with the Patent Trial and Appeal Board (the "PTAB") of the U.S. Patent and Trademark Office ("USPTO"), challenging claims of U.S. Patent No. 8.440.170 (the "170 Patent"), titled "Orally Disintegrating Tablets with Speckled Appearance," which patent is owned by Alpex Pharma and is licensed by the Company. The inter partes review procedure allows a party to challenge the patentability of a patent before the PTAB. A patentability trial will commence if the PTAB decides to institute the inter partes review proceedings after considering the Petition and Alpex's preliminary response to the Petition. Pursuant to our agreement with Alpex, it is Alpex's primary responsibility to defend the patents. Alpex is reviewing its options and will inform us of its decision accordingly. If Alpex elects to not defend this patent, then we have the right to do so. The 170 patent relates to the appearance of the Suprenza tablets and we believe that loss of this patent will not have any impact on the Suprenza sales. Since we have already settled with Zydus on the main patent and we fully expect to have competition to our Suprenza, we are unlikely to defend this patent. |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Sep. 30, 2015 | |
Summary Of Significant Accounting Policies Policies | |
Use of Estimates | The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and changes in estimates may occur. |
Cash and Cash Equivalents | The Company considers all highly liquid instruments with maturities of less than three months at the time of purchase to be cash equivalents. From time to time, the Company may have cash balances in financial institutions in excess of insurance limits. The Company has never experienced any losses related to these balances. |
Research and Development | Research and development costs, including upfront fees and milestones paid to collaborators who are performing research and development activities under contractual agreement with the Company, are expensed as incurred. The Company defers and capitalizes its nonrefundable advance payments that are for research and development activities until the related goods are delivered or the related services are performed. When the Company is reimbursed by a collaboration partner for work the Company performs, it records the costs incurred as research and development expenses and the related reimbursement as a reduction to research and development expenses in its consolidated statement of operations. Research and development expenses primarily consist of clinical and non-clinical studies, materials and supplies, third-party costs for contracted services, and payments related to external collaborations and other research and development related costs. |
Patents and Trademarks | Certain costs of outside legal counsel related to obtaining trademarks for the Company are capitalized. Patent costs are amortized over the legal life of the patents, generally twenty years, starting at the patent issuance date. The costs of unsuccessful and abandoned applications are expensed when abandoned. The cost of maintaining existing patents are expensed as incurred. |
Revenue Recognition | The Company recognizes revenue using the four basic criteria that must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred, (3) the selling price is fixed and determinable, and (4) collectability is reasonably assured. Provisions for discounts, rebates, estimated returns and allowances, and other adjustments are provided in the period that the revenue is recorded. The Company's license and collaboration agreements with certain partners also provide for contingent payments to us based solely upon the performance of the respective partner. For such contingent amounts we expect to recognize the payments as revenue when earned under the applicable contract, which is generally upon completion of performance by the respective partner, provided that collection is reasonably assured. The Company's license and collaboration agreements with its partners also provide for payments to us upon the achievement of specified sales volumes of approved drugs. We consider these payments to be similar to royalty payments and we will recognize such sales-based payments upon achievement of such sales volumes, provided that collection is reasonably assured. |
Stock-Based Compensation | The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees and directors as an expense in the consolidated statement of operations over the requisite service period based on the fair value for each stock award on the grant date. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option pricing model. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Due to its limited operating history, limited number of sales of its Common Stock and limited history of its shares being publicly traded, the Company estimates its volatility in consideration of a number of factors including the volatility of comparable public companies. |
Derivative Instruments | The Company generally does not use derivative instruments to hedge exposures to cash-flow or market risks; however, certain warrants to purchase common stock that do not meet the requirements for classification as equity are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting purposes, even when the terms of the underlying contracts do not provide for a net-cash settlement. Such financial instruments are initially recorded at fair value with subsequent changes in fair value charged (credited) to operations in each reporting period. If these instruments subsequently meet the requirements for classification as equity, the Company reclassifies the fair value to equity. |
Income Taxes | Citius Pharmaceuticals, LLC was treated as a partnership for federal and state income taxes prior to the Reverse Acquisition. A partnership's income or loss is allocated directly to the Members for income tax purposes. Accordingly, there is no provision for federal and state income taxes in the accompanying consolidated financial statements for the year ended December 31, 2013. The Company follows accounting guidance regarding the recognition, measurement, presentation and disclosure of uncertain tax positions in the consolidated financial statements. Tax positions taken or expected to be taken in the course of preparing our tax returns, including the position that Citius Pharmaceuticals, LLC qualified as a pass-through entity, are required to be evaluated to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authorities. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded in the consolidated financial statements. There are no uncertain tax positions, however the Company is still in the process of filing their 2013, 2014 and 2015 tax returns. Any interest or penalties are charged to expense. None have been recognized in these consolidated financial statements. Generally, we are subject to federal and state tax examinations by tax authorities for all years subsequent to December 31, 2011. After the Reverse Acquisition, we recognize deferred tax assets and liabilities based on differences between the financial reporting and tax basis of assets and liabilities, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. We provide a valuation allowance, if necessary, for deferred tax assets for which we do not consider realization of such assets to be "more-likely-than-not". The deferred tax benefit or expense for the period represents the change in the deferred tax asset or liability from the beginning to the end of the period. |
Basic and Diluted Loss per Share | Basic and diluted net loss per common share is computed by dividing net loss in each period by the weighted average number of shares of common stock outstanding during such period. For the periods presented, common stock equivalents, consisting of options, warrants and convertible securities were not included in the calculation of the diluted loss per share because they were anti-dilutive. |
Fair Value of Financial Instruments | The financial statements include various estimated fair value information. Financial instruments are initially recorded at historical cost. If subsequent circumstances indicate that a decline in the fair value of a financial asset is other than temporary, the financial asset is written down to its fair value. Unless otherwise indicated, the fair values of financial instruments approximate their carrying amounts. By their nature, all financial instruments involve risk, including credit risk for non-performance by counterparties. The fair values of cash and cash equivalents, accounts payable, accrued interest, accrued expenses, notes payable and due to related party approximate their recorded amounts because of their relatively short settlement terms. The Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level 1: Valuation is based on quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2: Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. For example, Level 2 assets and liabilities may include debt securities with quoted prices that are traded less frequently than exchange-traded instruments. Level 3: Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category generally includes certain private equity investments and long-term derivative contracts. The Company's financial liabilities measured at fair value on September 30, 2015 and 2014 consists solely of the derivative warrant liability which is classified as Level 3 in fair value hierarchy (see Note 6). The Company uses a valuation method, the Black-Scholes option pricing model, and the requisite assumptions in estimating the fair value for the warrants considered to be derivative instruments. The Company has no financial assets measured at fair value. The Company may also be required, from time to time, to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or write-downs of individual assets. There were no such adjustments in the year ended September 30, 2015, the nine month period ended September 30, 2014, and the year ended December 31, 2013. |
Segment Reporting | The Company currently operates as a single segment. |
Concentrations of Credit Risk | The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements. |
Recently Adopted Accounting Standards - Development Stage Entities | In June 2014, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2014-10, "Development Stage Entities", Topic 915. The objective of the ASU is to improve financial reporting by reducing the cost and complexity associated with the incremental reporting requirements for development stage entities. The ASU removes Topic 915, Development Stage Entities in its entirety from FASB Accounting Standards Codification ("ASC"). The ASU removes all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the inception-to-date information and certain other disclosures. It also eliminates the guidance in ASC 810 on how to assess whether a development stage entity has sufficient equity at risk in the evaluation of whether the development stage entity is a variable interest entity. Additionally, the ASU clarifies that all entities, including entities that have not begun operations, should provide the risk and uncertainty disclosures required in ASC 275. The Company has elected to early adopt as permitted by ASU 2014-10 and therefore has omitted the incremental development stage reporting requirements. |
Recently Issued Accounting Standards | In August 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-15, "Interest Imputation of Interest (Subtopic 835-30) - Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements (Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting)". Given the absence of authoritative guidance within ASU 2015-03 for debt issuance costs related to line-of-credit arrangements, the SEC staff stated that they would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. In August 2015, the FASB also issued ASU No. 2015-14, "Revenue from Contracts with Customers (Topic 606) Deferral of the Effective Date. Deferred the effective date of ASU 2014-09 by one year. Originally scheduled to be effective for fiscal years beginning after December 15, 2016, ASU 2015-14 is effective for the year ended September 30, 2019. In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial StatementsGoing Concern (Subtopic 205-40); Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern" which applies should a company be facing probable liquidation within one year of the issuance of the financial statements, but is not actually in liquidation at the time of issuance. The applicable accounting basis for presentation remains as a going concern, but if liquidation within one year is probable, then certain disclosures must be included in the financial statement presentation. ASU 2014-15 is effective for annual and interim periods beginning after December 15, 2016, with early adoption permitted. We are currently in the process of evaluating the impact of adoption of this ASU on the consolidated financial statements. |
DERIVATIVE WARRANT LIABILITY (T
DERIVATIVE WARRANT LIABILITY (Tables) | 12 Months Ended |
Sep. 30, 2015 | |
Derivative Warrant Liability Tables | |
Schedule of derivative warrant liabilities | The table below presents the changes in the derivative warrant liability, which is measured at fair value on a recurring basis and classified as Level 3 in fair value hierarchy (see Note 4): Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Derivative warrant liability, beginning of period $ 1,450,943 $ Fair value of warrants issued 768,435 1,459,531 Total realized/unrealized gains included in net loss (1) (332,095 ) (8,588 ) Reclassification of liability to additional paid-in capital (1,148,328 ) Derivative warrant liability, end of period $ 738,955 $ 1,450,943 |
COMMON STOCK, STOCK OPTIONS A21
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Tables) | 12 Months Ended |
Sep. 30, 2015 | |
Common Stock Stock Options And Warrants Tables | |
Schedule of fair value stock option grants | The following assumptions were used in determining the fair value of stock option grants: Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Risk-free interest rate 1.37 1.52% 1.83% Expected dividend yield 0% 0% Expected term 2.5 6 years 5 6 years Forfeiture rate 0 0 Expected volatility 53 58% 54% |
Schedule of stock option activity | A summary of option activity under the 2014 Plan is presented below: Options Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2014 $ Granted 3,300,000 0.45 Exercised Forfeited or expired Outstanding at September 30, 2014 3,300,000 0.45 9.96 years $ 495,000 Granted 600,000 0.60 Exercised Forfeited or expired Outstanding at September 30, 2015 3,900,000 $ 0.47 8.94 years $ 297,000 Exercisable at September 30, 2015 2,090,000 $ 0.47 8.81 years $ 162,000 |
Schedule of Warrants | The Company has reserved 8,797,130 shares of common stock for the exercise of outstanding warrants. The following table summarizes the warrants outstanding at September 30, 2015: Exercise price Number Expiration Date Investor Warrants $ 0.60 3,400,067 September 12, 2019 Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Warrants underlying Placement Agent Unit Warrants 0.60 680,013 September 12, 2019 Placement Agent Share Warrants 0.60 1,000,000 September 12, 2019 Investor Warrants 0.60 500,000 (1) March 19, 2020 Investor Warrants 0.60 583,334 (1) April 22, 2020 Investor Warrants 0.60 258,333 (1) April 30, 2020 Investor Warrants 0.60 333,334 (1) June 10, 2020 Investor Warrants 0.60 100,000 (1) June 22, 2020 Investor Warrants 0.60 370,370 (1) June 26, 2020 Investor Warrants 0.60 208,333 (1) July 2, 2020 Investor Warrants 0.60 100,000 (1) July 7, 2020 Investor Warrants 0.60 333,333 (1) July 15, 2020 Investor Warrants 0.60 250,000 (1) September 14, 2020 8,797,130 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Sep. 30, 2015 | |
Income Taxes Tables | |
Schedule of U.S. federal income tax rate | The income tax benefit differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income due to the following: Year Ended September 30, 2015 Nine Months Ended September 30, 2014 Computed "expected" tax benefit (35.0 )% (35.0 )% Increase (decrease) in income taxes resulting from: State taxes, net of federal benefit (5.2 )% (5.2 )% Permanent differences (4.6 )% % Tax reporting differences due to the reverse acquisition % 11.3 % Increase in the valuation reserve 44.8 % 28.9 % 0.0 % 0.0 % |
Schedule of deferred income taxes | Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows: September 30, 2015 September 30, 2014 Deferred tax assets: Net operating loss carryforward $ 1,131,000 $ 27,000 Stock-based compensation 384,000 189,000 Valuation allowance (1,515,000 ) (216,000 ) Deferred tax assets $ $ |
GOING CONCERN UNCERTAINTY AND23
GOING CONCERN UNCERTAINTY AND MANAGEMENT'S PLAN (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2013 | Dec. 31, 2012 | |
Going Concern Uncertainty And Managements Plan Details Narrative | ||||
Cash flows from operations | $ (183,164) | $ (2,385,416) | $ (1,095,266) | |
Working capital deficit | 640,614 | |||
Stockholders' Deficit | $ (741,935) | $ (635,213) | $ (2,901,754) | $ (1,613,751) |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2013 | |
Notes Payable Details Narrative | |||
Outstanding aggregate principal balance | $ 600,000 | ||
Interest expense | 93,067 | $ 7,500 | $ 105,471 |
Amortization of debt issuance costs | $ 14,000 | $ 28,000 |
DERIVATIVE WARRANT LIABILITY (D
DERIVATIVE WARRANT LIABILITY (Details) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2015 | ||
Derivative Warrant Liability Details | |||
Derivative warrant liability, beginning of period | $ 1,450,943 | ||
Fair value of warrants issued | $ 1,459,531 | 768,435 | |
Total realized/unrealized losses included in net loss | $ (8,588) | (332,095) | [1] |
Reclassification of liability to additional paid-in capital | (1,148,328) | ||
Derivative warrant liability, end of period | $ 1,450,943 | $ 738,955 | |
[1] | Included in gain or loss on revaluation of derivative warrant liability in the Condensed Consolidated Statement of Operations. |
DERIVATIVE WARRANT LIABILITY 26
DERIVATIVE WARRANT LIABILITY (Details Narrative) - shares | 12 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Outstanding warrants to purchase of its common stock | 3,037,037 | 5,080,080 |
Volatility rate | 57.00% | 54.00% |
Risk-free interest rate | 1.37% | 1.78% |
Estimated life | 4 years 11 months 12 days | |
Minimum [Member] | ||
Estimated life | 4 years 5 months 19 days | |
Maximum [Member] | ||
Estimated life | 4 years 11 months 16 days |
COMMON STOCK, STOCK OPTIONS A27
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Sep. 30, 2015 | |
Risk-free interest rate | 1.83% | |
Expected dividend yield | 0.00% | 0.00% |
Forfeiture rate | 0.00% | 0.00% |
Expected volatility | 54.00% | |
Minimum [Member] | ||
Risk-free interest rate | 1.37% | |
Expected term | 5 years | 2 years 6 months |
Expected volatility | 53.00% | |
Maximum [Member] | ||
Risk-free interest rate | 1.52% | |
Expected term | 6 years | 6 years |
Expected volatility | 58.00% |
COMMON STOCK, STOCK OPTIONS A28
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details 1) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Sep. 30, 2015 | |
Stock Options | ||
Outstanding, beginning balance | 3,300,000 | |
Granted | 3,300,000 | |
Exercised | ||
Forfeited or expired | ||
Outstanding, ending balance | 3,300,000 | |
Exercisable, ending balance | ||
Weighted Average Exercise Price | ||
Outstanding, beginning balance | $ 0.45 | |
Granted | $ 0.45 | |
Exercised | ||
Forfeited or expired | ||
Outstanding, ending balance | $ 0.45 | |
Exercisable, ending balance | ||
Weighted Average Remaining Contractual Life (years) | ||
Weighted Average Remaining Contractual Life (years), Ending | 9 years 11 months 16 days | |
Aggregate Intrinsic value | ||
Outstanding ending balance | $ 495,000 | |
Stock Options [Member] | ||
Stock Options | ||
Outstanding, beginning balance | 3,300,000 | |
Granted | 600,000 | |
Exercised | ||
Forfeited or expired | ||
Outstanding, ending balance | 3,300,000 | 3,900,000 |
Exercisable, ending balance | 2,090,000 | |
Weighted Average Exercise Price | ||
Outstanding, beginning balance | $ 0.45 | |
Granted | $ 0.60 | |
Exercised | ||
Forfeited or expired | ||
Outstanding, ending balance | $ 0.45 | $ 0.47 |
Exercisable, ending balance | $ 0.47 | |
Weighted Average Remaining Contractual Life (years) | ||
Weighted Average Remaining Contractual Life (years), Beginning | 9 years 11 months 16 days | |
Weighted Average Remaining Contractual Life (years), Ending | 8 years 11 months 9 days | |
Exercisable Remaining Contractual Life (years) | 8 years 9 months 22 days | |
Aggregate Intrinsic value | ||
Outstanding ending balance | $ 297,000 | |
Exercisable ending balance | $ 162,000 |
COMMON STOCK, STOCK OPTIONS A29
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details 2) - $ / shares | 12 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2013 | |
Exercise price | $ 0.45 | ||
Number | 3,300,000 | ||
Investor Warrants [Member] | |||
Exercise price | $ 0.60 | ||
Number | 3,400,067 | ||
Expiration Date | Sep. 12, 2019 | ||
Placement Agent Unit Warrants [Member] | |||
Exercise price | $ 0.60 | ||
Number | 680,013 | ||
Expiration Date | Sep. 12, 2019 | ||
Warrants underlying Placement Agent Unit Warrants [Member] | |||
Exercise price | $ 0.60 | ||
Number | 680,013 | ||
Expiration Date | Sep. 12, 2019 | ||
Placement Agent Share Warrants [Member] | |||
Exercise price | $ 0.60 | ||
Number | 1,000,000 | ||
Expiration Date | Sep. 12, 2019 | ||
Investor Warrants One [Member] | |||
Exercise price | $ 0.60 | ||
Number | 500,000 | ||
Expiration Date | Mar. 19, 2020 | ||
Investor Warrants Two [Member] | |||
Exercise price | $ 0.60 | ||
Number | 583,334 | ||
Expiration Date | Apr. 22, 2020 | ||
Investor Warrants Three [Member] | |||
Exercise price | $ 0.60 | ||
Number | 258,333 | ||
Expiration Date | Apr. 30, 2020 | ||
Investor Warrants Four [Member] | |||
Exercise price | $ 0.60 | ||
Number | 333,334 | ||
Expiration Date | Jun. 10, 2020 | ||
Investor Warrants Five [Member] | |||
Exercise price | $ 0.60 | ||
Number | 100,000 | ||
Expiration Date | Jun. 22, 2020 | ||
Investor Warrants Six [Member] | |||
Exercise price | $ 0.60 | ||
Number | 370,370 | ||
Expiration Date | Jun. 26, 2020 | ||
Investor Warrants Seven [Member] | |||
Exercise price | $ 0.60 | ||
Number | 208,333 | ||
Expiration Date | Jul. 2, 2020 | ||
Investor Warrants Eight [Member] | |||
Exercise price | $ 0.60 | ||
Number | 100,000 | ||
Expiration Date | Jul. 7, 2020 | ||
Investor Warrants Nine [Member] | |||
Exercise price | $ 0.60 | ||
Number | 333,333 | ||
Expiration Date | Jul. 15, 2020 | ||
Investor Warrants Ten [Member] | |||
Exercise price | $ 0.60 | ||
Number | 250,000 | ||
Expiration Date | Sep. 14, 2020 | ||
Warrant [Member] | |||
Number | 8,797,130 |
COMMON STOCK, STOCK OPTIONS A30
COMMON STOCK, STOCK OPTIONS AND WARRANTS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2015 | Dec. 31, 2013 | |
Common stock outstanding | 3,300,000 | ||
Stock-based compensation expense | $ 470,185 | $ 486,271 | |
2014 Plan [Member] | |||
Common stock outstanding | 3,900,000 | ||
Shares available for future grants | 9,100,000 | ||
Warrant [Member] | |||
Common stock outstanding | 8,797,130 | ||
Stock Options [Member] | |||
Common stock outstanding | 3,300,000 | 3,900,000 | |
Unrecognized total compensation cost related to unvested awards | $ 325,316 | ||
Weighted average remaining life | 9 years 11 months 16 days |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Sep. 30, 2015 | Sep. 30, 2014 |
Related Party Transactions Details Narrative | ||
Company owes to related party | $ 70,386 | $ 56,134 |
EMPLOYMENT AND CONSULTING AGR32
EMPLOYMENT AND CONSULTING AGREEMENTS (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Sep. 30, 2015 | |
Employment And Consulting Agreements Details Narrative | ||
Consulting expense under the agreements | $ 29,000 | $ 348,000 |
Consulting expense | $ 4,000 | $ 48,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Sep. 30, 2015 | |
Income Taxes Details | ||
Computed “expected” tax benefit | (35.00%) | (35.00%) |
Increase (decrease) in income taxes resulting from: | ||
State taxes, net of federal benefit | (5.20%) | (5.20%) |
Permanent differences | 0.00% | (4.60%) |
Tax reporting differences due to the reverse acquisition | 11.30% | 0.00% |
Increase in the valuation reserve | 28.90% | 44.80% |
Income tax benefit | 0.00% | 0.00% |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | Sep. 30, 2015 | Sep. 30, 2014 |
Deferred tax assets: | ||
Net operating loss carryforward | $ 1,131,000 | $ 27,000 |
Stock-based compensation | 384,000 | 189,000 |
Valuation allowance | $ (1,515,000) | $ (216,000) |
Deferred tax assets |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2014 | Sep. 30, 2015 | |
Income Taxes Details Narrative | ||
Increase valuation allowance | $ 216,000 | $ 1,299,000 |
Net operating loss carryforward | $ 2,814,000 | |
Expiring Year | 2,034 |