Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 30, 2018 | Jun. 30, 2017 | |
Document And Entity Information [Abstract] | |||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2,017 | ||
Document Fiscal Period Focus | FY | ||
Trading Symbol | XBIO | ||
Entity Registrant Name | Xenetic Biosciences, Inc. | ||
Entity Central Index Key | 1,534,525 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 8,652,541 | ||
Current Reporting Status | Yes | ||
Well known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Public Float | $ 13,978,386 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash | $ 5,533,062 | $ 4,048,131 |
Restricted cash | 66,510 | 66,510 |
Accounts receivable | 0 | 3,000,000 |
Prepaid expenses and other | 285,005 | 1,224,009 |
Total current assets | 5,884,577 | 8,338,650 |
Property and equipment, net | 27,846 | 42,366 |
Goodwill | 3,283,379 | 3,283,379 |
Indefinite-lived intangible assets | 9,243,128 | 9,243,128 |
Other assets | 724,713 | 66,342 |
Total assets | 19,163,643 | 20,973,865 |
Current liabilities: | ||
Accounts payable | 786,779 | 1,006,903 |
Accrued expenses | 1,135,653 | 838,888 |
Other current liabilities | 21,234 | 20,205 |
Total current liabilities | 1,943,666 | 1,865,996 |
Deferred tax liability | 2,918,518 | 2,918,518 |
Other liabilities | 0 | 19,876 |
Total liabilities | 4,862,184 | 4,804,390 |
Stockholders' equity: | ||
Common stock, $0.001 par value; 45,454,546 shares authorized as of December 31, 2017 and December 31, 2016; 9,041,426 and 8,731,029 shares issued as of December 31, 2017 and December 31, 2016, respectively; 8,717,541 and 8,407,144 shares outstanding as of December 31, 2017 and December 31, 2016, respectively | 9,040 | 8,730 |
Additional paid in capital | 165,249,912 | 163,522,921 |
Accumulated deficit | (145,933,137) | (142,338,005) |
Accumulated other comprehensive income | 253,734 | 253,734 |
Treasury stock | (5,281,180) | (5,281,180) |
Total stockholders' equity | 14,301,459 | 16,169,475 |
Total liabilities and stockholders' equity | 19,163,643 | 20,973,865 |
Preferred Class A [Member] | ||
Stockholders' equity: | ||
Preferred stock | 970 | 970 |
Preferred Class B [Member] | ||
Stockholders' equity: | ||
Preferred stock | $ 2,120 | $ 2,305 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Common stock, par value | $ .001 | $ 0.001 |
Common stock, shares authorized | 45,454,546 | 45,454,546 |
Common stock, shares issued | 8,731,029 | 4,909,685 |
Common stock, shares outstanding | 8,407,144 | 4,585,800 |
Preferred stock, shares authorized | 10,000,000 | |
Preferred Class A [Member] | ||
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock shares issued | 970,000 | 970,000 |
Preferred stock, shares outstanding | 970,000 | 970,000 |
Preferred Class B [Member] | ||
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock shares issued | 2,120,742 | 2,305,742 |
Preferred stock, shares outstanding | 2,120,742 | 2,305,742 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenue: | ||
Licenses | $ 7,500,000 | $ 0 |
Milestones | 0 | 3,000,000 |
Collaboration services | 85,000 | 0 |
Total revenues | 7,585,000 | 3,000,000 |
Operating costs and expenses: | ||
Cost of research and development revenue | (156,119) | 0 |
Research and development | (4,060,000) | (43,737,814) |
General and administrative | (6,937,643) | (6,692,786) |
Loss from operations | (3,568,762) | (47,430,600) |
Other income (expense): | ||
Change in fair value of derviative liability | 0 | 2,125,113 |
Loss on issuance of hybrid debt instruments | 0 | (1,690,784) |
Loss on conversion of debt | 0 | (6,394,921) |
Other expense | (41,096) | (85,374) |
Interest income | 16,544 | 32 |
Interest expense | (1,818) | (729,572) |
Total other expense | (26,370) | (6,775,506) |
Net loss | (3,595,132) | (54,206,106) |
Accretion of beneficial conversion feature on convertible preferred stock | 0 | (4,035,260) |
Net loss applicable to common stockholders | (3,595,132) | (58,241,366) |
Total comprehensive loss | $ (3,595,132) | $ (54,206,106) |
Basic and diluted loss per share applicable to common stockholders | $ (0.41) | $ (7.84) |
Weighted-average shares of common stock outstanding basic and diluted | 8,665,763 | 7,430,574 |
Consolidated Statements Of Chan
Consolidated Statements Of Changes In Stockholders' Equity - USD ($) | Preferred Stock | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Other Comprehensive Income / Loss | Treasury Stock | Total |
Beginning balance, shares at Dec. 31, 2015 | 4,909,686 | ||||||
Beginning balance, value at Dec. 31, 2015 | $ 4,909 | $ 99,763,101 | $ (88,131,899) | $ 253,734 | $ (5,281,180) | $ 6,608,665 | |
Issuance of common stock to vendors, shares | 253,630 | ||||||
Issuance of common stock to vendors, value | $ 254 | 1,174,383 | 1,174,637 | ||||
Exchange of common stock for Series A preferred stock, shares | 970,000 | (970,000) | |||||
Exchange of common stock for Series A preferred stock, value | $ 970 | $ (970) | |||||
Warrant expense | 1,121,466 | 1,121,466 | |||||
Issuance of warrants in connection with debt (net of issuance costs of $16,769) | 2,069,673 | 2,069,673 | |||||
Conversion of notes, shares issued | 1,313,132 | ||||||
Conversion of notes, value | $ 1,313 | 12,014,887 | 12,016,200 | ||||
Settlement of accrued interest in common stock | $ 60 | 237,184 | 237,244 | ||||
Settlement of accrued interest in common stock, shares | 59,904 | ||||||
Issuance of common stock in connection with completion of asset acquisition, shares | 3,045,455 | ||||||
Issuance of common stock in connection with completion of asset acquisition, value | $ 3,045 | 34,899,399 | 34,902,444 | ||||
Issuance of warrants in connection with completion of asset acquisition | 853,039 | 853,039 | |||||
Issuance of Series B preferred stock in public offering, shares | 2,424,242 | ||||||
Issuance of Series B preferred stock in public offering, value | $ 2,424 | 5,703,577 | 5,706,001 | ||||
Issuance of warrants in public offering | 3,763,997 | 3,763,997 | |||||
Record beneficial conversion feature in connection with public offering | 4,035,260 | 4,035,260 | |||||
Acrete beneficial conversion feature in connection with public offering | (4,035,260) | (4,035,260) | |||||
Conversion of Series B preferred stock to shares of common stock, Shares | (118,500) | 118,500 | |||||
Conversion of Series B preferred stock to shares of common stock, Value | $ (119) | $ 119 | |||||
Share-based payments | 1,922,215 | 1,922,215 | |||||
Adjust shares in connection with reverse merger and reverse split | 722 | ||||||
Net loss | (54,206,106) | (54,206,106) | |||||
Ending balance, shares at Dec. 31, 2016 | 3,275,742 | 8,731,029 | |||||
Ending balance, value at Dec. 31, 2016 | $ 3,275 | $ 8,730 | 163,522,921 | (142,338,005) | 253,734 | (5,281,180) | 16,169,475 |
Warrant expense | (126,316) | (126,316) | |||||
Conversion of notes, shares issued | 125,397 | ||||||
Conversion of notes, value | $ 125 | (125) | |||||
Conversion of Series B preferred stock to shares of common stock, Shares | (185,000) | 185,000 | |||||
Conversion of Series B preferred stock to shares of common stock, Value | $ (185) | $ 185 | |||||
Share-based payments | 1,784,129 | 1,784,129 | |||||
Common stock awards to vendors | 69,303 | 69,303 | |||||
Net loss | (3,595,132) | (3,595,132) | |||||
Ending balance, shares at Dec. 31, 2017 | 3,090,742 | 9,041,426 | |||||
Ending balance, value at Dec. 31, 2017 | $ 3,090 | $ 9,040 | $ 165,249,912 | $ (145,933,137) | $ 253,734 | $ (5,281,180) | $ 14,301,459 |
Consolidated Statements Of Cha6
Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Warrants Issued with Debt [Member] | |
Debt issuance costs | $ 38,163 |
Warrants Issued in Public Offering [Member] | |
Debt issuance costs | 210,657 |
Preferred Series B Stock [Member] | |
Debt issuance costs | $ 319,343 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (3,595,132) | $ (54,206,106) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||
In-process research and development expense | 0 | 39,500,000 |
Depreciation | 23,784 | 36,449 |
Amortization of hybrid debt instrument discount | 0 | 544,480 |
Non-cash interest expense | 0 | 174,519 |
Share-based payments | 1,784,129 | 1,922,215 |
Change in value of warrants issued for services | (126,316) | 1,121,466 |
Vendor share-based payments | 135,280 | 180,971 |
Change in fair value of derivative liability | 0 | (2,125,113) |
Loss on issuance of hybrid debt instrument | 0 | 1,690,784 |
Hybrid debt instrument issuance costs | 0 | (12,093) |
Loss on conversion of debt | 0 | 6,394,921 |
Settlement of accounts payable with common stock | 0 | 243,667 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 3,000,000 | (3,000,000) |
Prepaid expenses and other assets | 280,633 | (234,924) |
Accounts payable, accrued expenses and other liabilities | (8,183) | (1,018,411) |
Net cash provided by (used in) operating activities | 1,494,195 | (8,787,175) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (9,264) | (16,793) |
Net cash used in investing activities | (9,264) | (16,793) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from issuance of debt | 0 | 4,500,000 |
Payments on debt | 0 | (369,958) |
Proceeds from issuance of units in offering | 0 | 8,969,998 |
Payments on loan from related party | 0 | (380,170) |
Net cash provided by financing activities | 0 | 12,719,870 |
Net change in cash, excluding restricted cash | 1,484,931 | 3,915,902 |
Cash at beginning of period | 4,048,131 | 132,229 |
Cash at end of period | 5,533,062 | 4,048,131 |
SUPPLEMENTAL CASH FLOW INFORMATION: | ||
Cash paid for interest | 1,932 | 15,836 |
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||
Interest paid in common stock | 0 | 255,607 |
Purchase of XBIO IPR&D with common stock | 0 | 39,500,000 |
Issuance of note in settlement of deferred payroll costs | 0 | 369,958 |
Reclassification of related party loan principal to accounts payable | 0 | 14,830 |
Exchange of common stock for Series A preferred stock | 0 | 970 |
Conversion of Series B preferred stock to common stock | 185 | 119 |
Convertible debt paid in common stock | 0 | 7,000,000 |
Convertible debt paid in public offering units | 0 | 500,000 |
Issuance of warrants in connection with debt | 0 | 2,107,836 |
Recording of derivative liability in connection with debt | 0 | 4,120,359 |
Reclassification of common shares issuable to accounts payable | 65,977 | 0 |
Issuance of common stock for promissory note converted | $ 125 | $ 0 |
1. The Company
1. The Company | 12 Months Ended |
Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
The Company | Background Xenetic Biosciences, Inc. (“Xenetic,” the “Company,” “we” or “us”), incorporated in the state of Nevada and based in Lexington, Massachusetts, is a biopharmaceutical company focused on the discovery, research and development of next-generation biologic drugs and novel oncology therapeutics. The Company’s 170+ patent portfolio covers next generation biologic drugs and novel oncology drug therapeutics and provides protection for its current drug candidates and positions it well for strategic partnership and commercialization opportunities. The Company’s objective is to leverage its portfolio to maximize opportunities to out-license assets from its portfolio in order to generate working capital to both build long-term stockholder value and provide the Company with the funding necessary for clinical development of its oncology drug candidates through to market launch. Xenetic incorporates its patented and proprietary technologies into a number of drug candidates currently under development either in-house or with biotechnology and pharmaceutical industry collaborators to create what the Company believes will be the next-generation biologic drugs with improved pharmacological properties over existing therapeutics. While the Company primarily focuses on researching and developing oncology drugs, it also has significant interests in drugs being developed by its collaborators to treat other conditions. Xenetic’s lead investigational drug candidate is oncology therapeutic XBIO-101 (sodium cridanimod) for the treatment of progestin – resistant endometrial cancer. The Company has exclusive rights to develop and commercialize XBIO-101 worldwide, except for specified countries in the Commonwealth of Independent States (“CIS”). XBIO-101 has been granted orphan drug designation by the U.S. Food and Drug Administration (“FDA”) for the potential treatment of progesterone receptor negative (“PrR-”) endometrial cancer in conjunction with progesterone therapy. The Company is currently conducting a Phase 2 trial for XBIO-101, with the first patient dosed in October 2017, and expects to generate preliminary data from this trial before the end of 2018. Xenetic’s lead proprietary technology is PolyXen ™ In May 2017, Xenetic announced that its strategic collaborator, Shire plc (“Shire”), had terminated further development of SHP656, its polysialylated rFVIII drug candidate being developed using the Company’s proprietary PolyXen technology. While Shire’s Phase 1/2 trial demonstrated SHP656’s efficacy and pharmacokinetic data commensurate with the profile of an extended half-life rFVIII product, the pre-defined once-weekly dosing criterion set forth in the research, development, license and supply agreement was not met. To the Company’s knowledge, there were no drug-related adverse events, serious adverse events, or rFVIII inhibitors reported to date. Though the trial’s pre-defined once-weekly dosing criterion was not met, the Company intends to continue to explore the potential for future collaborations with Shire. In October 2017, Xenetic entered into a Right to Sublicense Agreement (the “Sublicense Agreement”) with Baxalta Incorporated, Baxalta US Inc., and Baxalta GmbH (collectively, with their affiliates, “Baxalta”) wholly-owned subsidiaries of Shire. Pursuant to the Sublicense Agreement, the Company granted to Baxalta the right to grant a nonexclusive sublicense to certain patents related to the Company’s PolyXen technology that were previously exclusively licensed to Baxalta pursuant to an agreement between the Company and Baxalta (the “Licensed Patents”) in connection with products relating to the treatment of blood and bleeding disorders (the “Covered Products”). The term of the Sublicense Agreement continues on a country-to-country basis until the expiration of the last-to-expire Licensed Patents or upon certification from Baxalta that it is not receiving compensation for sales of Covered Products in a given country, whichever is later (the “Term”). Pursuant to the Sublicense Agreement, Baxalta (i) paid Xenetic a one-time payment of seven million five hundred thousand dollars ($7,500,000) in November 2017 and (ii) agreed to pay the Company a single digit royalty payments based upon net sales of the Covered Products throughout the Term, each of which is conditioned upon the performance of the sublicense contemplated by the Sublicense Agreement. Xenetic’s drug candidates have resulted from its research activities or those of its collaborators and are in the development stage. As a result, the Company commits significant resources to its research and development activities and anticipates continuing to do so for the near future. To date, none of the Company’s drug candidates have received regulatory marketing authorization in the U.S. by the FDA nor in any other territories by any applicable agencies. Although the Company holds a broad patent portfolio, the focus of its internal development efforts is currently limited to research and development of its lead product candidate XBIO-101 due to capital restraints. The Company, directly or indirectly, through its wholly-owned subsidiary, Xenetic Biosciences (U.K.) Limited (“Xenetic UK”), and its wholly-owned subsidiaries, Lipoxen Technologies Limited (“Lipoxen”), Xenetic Bioscience, Incorporated and SymbioTec, GmbH (“SymbioTec”), own various U.S. federal trademark registrations and applications, and unregistered trademarks and service marks, including but not limited to Virexxa®, OncoHist™, PolyXen™, ErepoXen™, ImuXen™, and PulmoXen™. Going Concern and Management’s Plan The Company incurred a net loss of approximately $3.6 million for the year ended December 31, 2017 and had an accumulated deficit of approximately $145.9 million as of December 31, 2017. The Company had working capital of approximately $3.9 million at December 31, 2017 compared to working capital of approximately $6.5 million at December 31, 2016. The Company expects to continue incurring losses for the foreseeable future and will need to raise additional capital or pursue other strategic alternatives in the near term in order to pursue its business plan and continue as a going concern. The Company believes that it has access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations or other means; however, it has not secured any commitment for additional financing at this time. The terms, timing and extent of any future financing will depend upon several factors, including the achievement of progress in its clinical development programs, its ability to identify and enter into licensing or other strategic arrangements, and factors related to financial, economic and market conditions, many of which are beyond its control. While these consolidated financial statements have been prepared on a going concern basis, if the Company does not successfully raise additional working capital, there can be no assurance that the Company will be able to continue its operations and these conditions raise substantial doubt about its ability to continue as a going concern. Under such circumstances, the Company would have to further reduce the planned scale of, or possibly suspend, some or all of its pre-clinical development initiatives and clinical trials. In addition, the Company would have to continue to reduce its general and administrative and other operating expenses and delay or cease the purchase of clinical research services if and until the Company is able to obtain additional financing. The accompanying consolidated financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Preparation of Financial Statements These consolidated financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. This assumption is presently uncertain and contingent upon the Company’s ability to raise additional working capital. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Principles of Consolidation The consolidated financial statements of the Company include the accounts of Xenetic UK and its wholly owned subsidiaries: Lipoxen, Xenetic Bioscience, Incorporated, and SymbioTec. All material intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The consolidated financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of the financial statements in accordance with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue, costs and expenses in the financial statements and disclosures in the accompanying notes. Actual results and outcomes may differ materially from management’s estimates, judgments and assumptions. Functional Currency Change Effective April 1, 2015, the functional currency of the Company’s foreign subsidiaries changed from the British Pound Sterling to the United States (“U.S.”) dollar. The change in functional currency was applied on a prospective basis. Therefore, any gains and losses that were previously recorded in accumulated other comprehensive income remain unchanged. Foreign Currency Transactions Realized and unrealized gains and losses resulting from foreign currency transactions arising from exchange rate fluctuations on balances denominated in currencies other than the functional currencies are recognized in “Other income (expense)” in the consolidated statements of comprehensive loss. Monetary assets and liabilities that are denominated in a currency other than the functional currency are re-measured to the functional currency using the exchange rate at the balance sheet date and gains or losses are recorded in the consolidated statements of comprehensive loss. Fair Value of Financial Instruments The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. See Note 9, Fair Value Measurements Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents. Investments with original maturities of greater than 90 days from the date of purchase but less than one year from the balance sheet date are classified as short-term investments, while investments with maturities of one year or beyond from the balance sheet date are classified as long-term investments. Management determines the appropriate classification of its cash equivalents and investment securities at the time of purchase and re-evaluates such determination as of each balance sheet date. Restricted Cash As of December 31, 2017 and 2016, restricted cash represents a certificate of deposit that matures annually, and secures the Company’s outstanding letter of credit of approximately $0.1 million for the operating lease in Lexington, Massachusetts. The letter of credit is required to be maintained the term of the lease, which expires in January 2019. Concentration of Credit Risk Financial instruments that subject the Company to concentrations of credit risk include cash and cash equivalents. The Company maintains cash and cash equivalents with various major financial institutions. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution. Property and Equipment The Company records property and equipment at cost less accumulated depreciation. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Items of an ordinary repair or maintenance nature are charged directly to operating expense as incurred. The Company calculates depreciation using the straight-line method over the estimated useful lives of the assets: Asset Classification Estimated Useful Life Laboratory equipment 3 years Office and computer equipment 3 years Leasehold improvements 5 years or the remaining term of the lease, if shorter Furniture and fixtures 5 years The Company eliminates the cost of assets retired or otherwise disposed of, along with the corresponding accumulated depreciation, from the related accounts, and the resulting gain or loss is reflected in the results of operations. Indefinite-Lived Intangible Assets Acquired indefinite-lived intangible assets consist of in-process research and development (“IPR&D”) related to the Company’s business combination with SymbioTec, which was recorded at fair value on the acquisition date. IPR&D intangible assets are considered indefinite-lived intangible assets until completion or abandonment of the associated research and development efforts. Substantial additional research and development may be required before the Company’s IPR&D reaches technological feasibility. Upon completion of the IPR&D project, the IPR&D assets will be amortized over their estimated useful lives. The Company assesses intangible assets with indefinite lives for impairment at least annually as of October 1, or when events or changes in the business environment indicate the carrying value may be impaired. T he circumstances leads the Company to determine that it is more likely than not (that is, a likelihood of more than 50%) that the acquired IPR&D is impaired. If the Company chooses to first assess the qualitative factors and it is determined that it is not more likely than not acquired IPR&D is impaired, the Company is not required to take further action to test for impairment. The Company also has the option to bypass the qualitative assessment and perform only the quantitative impairment test, which the Company may choose to perform in some periods but not in others. No impairment was recorded during the years ended December 31, 2017 and 2016. Goodwill Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. The Company assesses goodwill for impairment at least annually, or when events or changes in the business environment indicate the carrying value may not be fully recoverable. The Company also has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the Company to determine that it is more likely than not (that is, a likelihood of more than 50%) that goodwill is impaired. If the Company chooses to first assess qualitative factors and it is determined that it is not more likely than not goodwill is impaired, the Company is not required to take further action to test for impairment. The Company also has the option to bypass the qualitative assessment and perform only the quantitative impairment test, which the Company may choose to do in some periods but not in others. The Company performs its annual impairment review as of October 1. No impairment was recorded during the years ended December 31, 2017 and 2016. Impairment of Long-Lived Assets The Company reviews long-lived assets to be held and used, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be fully recoverable. No such impairments were recorded during the years ended December 31, 2017 and 2016. Evaluation of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset or asset group and its eventual disposition. Impairment, if any, is calculated as the amount by which an asset’s carrying value exceeds its fair value, typically using discounted cash flows to determine fair value. Embedded Derivatives Related to Debt Instruments Embedded derivatives that are required to be bifurcated from their host contract are evaluated and valued separately from the host contract (i.e., the debt instrument). Features of the Company’s debt instrument that meet the definition of a derivative and the criteria for separate accounting include the conversion feature and certain put options. The fair value of each embedded derivative is valued independently using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with all of the embedded derivatives compared to the instrument without the individual embedded derivative is the fair value of that individual derivative. The embedded derivatives are settled when the underlying debt instrument is settled. Therefore, there are three possible settlement mechanisms: the debt instrument can be converted into equity, repaid early, or held to maturity. Embedded derivatives are valued individually and recorded as a compound derivative. The compound derivative is presented together with the host debt instrument and the related debt discount on a combined basis. Changes in the estimated fair value of the bifurcated embedded derivatives are reported as gains and losses in the consolidated statement of comprehensive loss each reporting period. Revenue Recognition The Company enters into supply, license and collaboration arrangements with pharmaceutical and biotechnology partners, some of which include royalty agreements based on potential net sales of approved commercial pharmaceutical products. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. The terms of the Company’s license agreements include delivery of an IP license to a collaboration partner. The Company may be compensated under license arrangements through a combination of non-refundable upfront receipts, development and regulatory objective receipts and royalty receipts on future product sales by partners. Non-refundable upfront license payments and development and regulatory milestone payments received by the Company in license and collaboration arrangements that include future obligations, such as supply obligations, are recognized ratably over the Company’s expected performance period under each respective arrangement. The Company makes its best estimate of the period over which the Company expects to fulfil the Company’s performance obligations, which may include technology transfer assistance, research activities, clinical development activities, and manufacturing activities from development through the commercialization of the product. Given the uncertainties of these collaboration arrangements, significant judgment is required to determine the duration of the performance period. When we enter into an arrangement to sub-license some of our patents we consider the performance obligations to determine if there is a single element or multiple elements to the arrangement as we determine the proper method and timing of revenue recognition. We consider the terms of the license for such elements as price adjustments or refund clauses in addition to any performance obligations for us to provide such as services, patent defense costs, technology support, marketing or sales assistance or any other elements to the arrangement that could constitute an additional deliverable to us that could change the timing of the revenue recognition. Non-refundable upfront license fees received, whereby continued performance or future obligations are considered inconsequential or perfunctory to the relevant licensed technology, are recognized as revenue upon delivery of the technology. The Company expects to recognize royalty revenue in the period of sale, based on the underlying contract terms, provided that the reported sales are reliably measurable, the Company has no remaining performance obligations, and all other revenue recognition criteria are met. Reimbursements for research and development services completed by the Company related to the collaboration agreements are recognized in operations as revenue on a gross basis. The Company’s license and collaboration agreements with certain collaboration partners could also provide for future milestone receipts to the Company based solely upon the performance of the respective collaboration partner in consideration of deadline extensions or upon the achievement of specified sales volumes of approved drugs. For such receipts, the Company expects to recognize the receipts as revenue when earned under the applicable contract terms on a performance basis or ratably over the term of the agreement. These receipts may also be recognized as revenue when continued performance or future obligations by the Company are considered inconsequential or perfunctory. See also Note 4, Significant Strategic Drug Development Collaborations Research and Development Expenses Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits, facilities expenses, overhead expenses, clinical trial and related clinical manufacturing expenses, fees paid to contract research organizations (“CROs”) and contract manufacturing organizations and other outside expenses. The Company expenses research and development costs as incurred. The Company expenses upfront, non-refundable payments made for research and development services as obligations are incurred. The value ascribed to intangible assets acquired but which have not met capitalization criteria is expensed as research and development at the time of acquisition. The Company is required to estimate accrued research and development expenses at each reporting period. This process involves reviewing open contracts and purchase orders, communicating with Company personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs. The majority of the Company’s service providers invoice it in arrears for services performed, on a pre-determined schedule or when contractual milestones are met. However, some require advanced payments. The Company makes estimates of accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known at that time. The Company periodically confirms the accuracy of the estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include fees paid to: · program managers in connection with overall program management of clinical trials; · CROs in connection with clinical trials; and · investigative sites in connection with clinical trials. The Company bases its expenses related to clinical trials on its estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage clinical trials on the Company’s behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts the accrual or prepaid accordingly. Although it does not expect its estimates to be materially different from amounts actually incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to the Company’s prior estimates of accrued research and development expenses. As of December 31, 2017, the Company has recorded deferred program expense of approximately $33,000 as a component of prepaid expenses and other current assets. Share-based Payments Stock options and restricted stock units The Company grants share-based payments in the form of options and restricted stock units (“RSUs”) to employees and non-employees, Joint Share Ownership Plan (“JSOP”) awards to employees, as well as agreements to issue common stock in exchange for services provided by non-employees. Share-based compensation expense is based on the fair value of the option or calculated using the Black-Scholes option pricing model. Determining the appropriate fair value model and related assumptions requires judgment, including estimating share price volatility and expected terms of the awards. The expected volatility rates are estimated based on the actual volatility of the Company and of comparable public companies over the expected term of the option. The expected terms represent the time that options are expected to be outstanding. The Company accounts for forfeitures as they occur and not at the time of grant. The Company has not paid dividends and does not anticipate paying cash dividends in the foreseeable future and, accordingly, uses an expected dividend yield of zero. The risk-free interest rate is based on the rate of U.S. Treasury securities with maturities consistent with the estimated expected term of the awards. Upon exercise, stock options are redeemed for newly issued shares of common stock. RSUs are redeemed for newly issued shares of common stock as the vesting provisions of the grant are met. For employee options that vest based solely on service conditions, the fair value measurement date is generally on the date of grant and the related compensation expense is recognized on a straight-line basis over the requisite vesting period of the awards. For non-employee options, the fair value measurement date is the earlier of the date the performance of services is complete or the date the performance commitment has been reached. The Company generally determines that the fair value of the stock options is more reliably measurable than the fair value of the services received. Compensation expense related to stock options granted to non-employees that vest based solely on service conditions is subject to re-measurement at each reporting period until the options vest and is recognized on a straight-line basis over the requisite vesting period of the awards. The Company adopted Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718) · There have been no stock option exercises as a U.S. company and, therefore, there are no excess tax benefits related to windfalls. Moreover, the Company maintains a full valuation allowance and expects to do so for the foreseeable future; · The Company has elected to account for forfeitures as they occur, which the Company adopted using a modified retrospective approach and there was no material cumulative effect adjustment to be recorded to opening retained earnings; and · The Company will classify cash paid to taxing authorities arising from the withholding of shares from employees in cash flows from financing activities. Common stock awards The Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash. Warrants In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued to collaboration partners in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 11, Stockholders’ Equity Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences resulting from the different treatment of items for tax and financial reporting purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Additionally, the Company must assess the likelihood that deferred tax assets will be recovered as deductions from future taxable income. The Company evaluates the recoverability of its deferred tax assets on a quarterly basis. Basic and Diluted Net Loss per Share The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options that are outstanding during the period, except where such non-participating securities would be anti-dilutive. The Company’s JSOP awards, prior to exercise, are considered treasury shares by the Company and thus do not impact the Company’s net loss per share calculation. As of December 31, 2017 and 2016, there were approximately 0.3 million JSOP awards issued. For the years ended December 31, 2017 and 2016, basic and diluted net loss per share are the same for each year due to the Company’s net loss position. Potentially dilutive, non-participating securities have not been included in the calculations of diluted net loss per share, as their inclusion would be anti-dilutive. As of December 31, 2017 and 2016, approximately 0.6 million and 1.7 million potentially dilutive securities, respectively, were deemed anti-dilutive. Segment Information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, who is the Company’s Chief Executive Officer, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business in one operating segment. Operating Leases The Company leases administrative and laboratory facilities under operating leases. Lease agreements may include rent holidays, rent escalation clauses and tenant improvement allowances. The Company recognizes scheduled rent increases on a straight-line basis over the lease term beginning with the date the Company takes possession of the leased space. Acquisitions The Company has a history of engaging in acquisition transactions that require the Company to evaluate whether the transaction meets the criteria of a business combination and, in some cases, whether it meets the definition of a reverse merger. If the transaction does not meet the business combination requirements, the transaction is accounted for as an asset acquisition or recapitalization and no goodwill is recognized. If the acquisition meets the definition of a business combination, the Company allocates the purchase price, including any contingent consideration, to the assets acquired and the liabilities assumed at their estimated fair values as of the date of the acquisition with any excess of the purchase price paid over the estimated fair value of net assets acquired recorded as goodwill. The fair value of the assets acquired and liabilities assumed is typically determined by using either estimates of replacement costs or discounted cash flow valuation methods. When determining the fair value of tangible assets acquired, the Company estimates the cost to replace the asset with a new asset, taking into consideration such factors as age, condition and the economic useful life of the asset. When determining the fair value of intangible assets acquired, the Company uses judgment to estimate the applicable discount rate, growth rates and the timing and amount of future cash flows. The fair value of assets acquired and liabilities assumed is typically determined using the assistance of an independent third-party specialist. Business combination related costs are expensed in the period in which the costs are incurred. Asset acquisition related costs are generally capitalized as a component of cost of the assets acquired. Recent Accounting Standards In January 2017, the FASB issued ASU 2017-04: Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815); (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception The Company has considered other recent accounting standards and concluded that they are either not applicable to the business, or that no material effect is expected on the consolidated financial statements as a result of future adoption. |
3. Acquisitions
3. Acquisitions | 12 Months Ended |
Dec. 31, 2017 | |
Asset Purchase And Financing Agreement | |
Acquisitions | 2015 Asset Purchase and Financing Agreement In November 2015, the Company entered into an Asset Purchase Agreement (the “APA”) with PJSC Pharmsynthez (“Pharmsynthez”) and AS Kevelt (“Kevelt”), a wholly owned subsidiary of Pharmsynthez, providing for the transfer to the Company of certain intellectual property rights with respect to XBIO-101 in exchange for, among other conditions, approximately 3.4 million shares of the Company’s common stock. The APA also provided for up to $10.0 million in financing proceeds beginning with the issuance of a minimum of a $3.5 million 10% Senior Secured Collateralized Convertible Promissory Note (the “Initial APA Note”) and the issuance of certain warrants covering up to half the amount of the Initial APA Note. Of the approximate 3.4 million total shares exchanged, 0.3 million were issued in December 2015 to two individuals associated with Pharmsynthez and Kevelt and inventors of a provisional patent transferred in connection with the APA. On April 29, 2016, the Company closed on the APA with an effective date of April 27, 2016, acquiring certain intellectual property rights with respect to the immunomodulator product XBIO-101 held by Kevelt and grant of the worldwide right to develop, market and license XBIO-101 for certain uses, excluding CIS countries. The fair value of the asset acquired was $39.5 million, which included Company common stock issued of $38.6 million and warrants with a fair value of $0.9 million. In connection with the closing of the APA, Pharmsynthez converted all the then outstanding convertible notes in the principal amount of $6.5 million, which included the Initial APA Note of $3.5 million as well as $3.0 million of notes issued by the Company in July 2015 (plus accrued interest of approximately $0.3 million). The conversion rate as set forth in the notes was $4.95 per share. As such, the Company issued to Pharmsynthez approximately 1.4 million shares of its common stock in connection with conversion of the convertible notes which, together with the approximate 3.0 million shares of common stock issued in connection with the closing of the APA, resulted in an aggregate of 4.4 million new shares of common stock being issued to Pharmsynthez. |
4. Significant Strategic Drug D
4. Significant Strategic Drug Development Collaborations - Related Parties | 12 Months Ended |
Dec. 31, 2017 | |
Significant Strategic Drug Development Collaborations - Related Parties | |
Significant Strategic Drug Development Collaborations - Related Parties | Shire plc The Company is party to an exclusive research, development and license agreement with Baxalta US Inc. and Baxalta AB, wholly owned subsidiaries of Shire, related to the development of a novel series of polysialylated blood coagulation factors. This collaboration with Shire relies of the Company’s PolyXen technology to conjugate PSA with therapeutic blood-clotting factors, with the goal of improving the pharmacokinetic profile and extending the half-life of these biologic molecules. The agreement grants Shire a worldwide, exclusive, royalty-bearing license to the Company’s PSA patented and proprietary technology in combination with Shire’s proprietary molecules designed for the treatment of blood and bleeding disorders. The first program under this agreement was a next generation Factor VIII protein product candidate (“SHP656”). In December 2016, Shire reached a milestone of its Phase 1/2 clinical trial for the treatment of hemophilia with SHP656, triggering a $3.0 million payment to be paid to the Company pursuant to the agreement with Shire. The Company determined the milestone to be non-substantive because all significant performance obligations to achieve the contingent payments were the responsibility of Shire with only negligible amount by the Company of effort to fulfill its obligations, specifically assistance on a research committee. As the amount allocable to the remaining performance period was negligible, the Company recognized the full $3.0 million in milestone revenue in connection with this collaboration during the year ended December 31, 2016. In May 2017 Shire provided an update on the Phase 1/2 clinical study indicating that SHP656’s efficacy and pharmacokinetic data commensurate with the profile of an extended half-life rFVIII product. Additionally, to the Company’s knowledge, there were no drug-related adverse events, serious adverse events, or rFVIII inhibitors reported. However, the pre-defined once-weekly dosing criterion was not met and the Factor VIII program was terminated by Shire. On October 27, 2017, the Company entered into the Sublicense Agreement with Baxalta, Pursuant to the Sublicense Agreement, the Company granted to Baxalta the right to grant a nonexclusive sublicense to certain Licensed Patents in connection with the Covered Products. Pursuant to the Sublicense Agreement, Baxalta (i) paid the Company a one-time payment of seven million five hundred thousand dollars ($7,500,000) in November 2017 and (ii) agreed to pay to the Company single digit royalty payments based upon net sales of the Covered Products throughout the Term. The Company recognized the full $7.5 million as license revenue in connection with this Sublicense Agreement during the year ended December 31, 2017. SynBio LLC In August 2011, SynBio LLC (“SynBio”) and the Company entered into a stock subscription and collaborative development of pharmaceutical products agreement (the “Co-Development Agreement”). The Company granted an exclusive license to SynBio to develop pharmaceutical products using certain molecule(s) based on SynBio’s technology and the Company’s proprietary technology (PolyXen, OncoHist and ImuXen) that prolongs the active life and/or improves the pharmacokinetics of certain therapeutic proteins and peptides (as well as conventional drugs). In return, SynBio granted an exclusive license to the Company to use the pre-clinical and clinical data generated by SynBio in certain agreed products and engage in the development of commercial candidates. SynBio and the Company are each responsible for funding their own research activities. There are no milestone or other research-related payments due under the agreement other than fees for the supply of each company’s respective research supplies based on their technology, which, when provided, are due to mutual convenience and not representative of an ongoing or recurring obligation to supply research supplies. Serum Institute of India Limited (“Serum Institute”) has agreed to directly provide the research supplies to SynBio, where the Company is not liable for any failure to supply the research supplies as a result of any act or fault of Serum Institute. Upon successful commercialization of any resultant products, the Company is entitled to receive royalties on sales in certain territories and pay royalties to SynBio for sales outside those certain territories. Through December 31, 2017, the Company and SynBio continued to engage in research and development activities with no resultant commercial products. The Company did not recognize revenue in connection with the Co-Development Agreement during the years ended December 31, 2017 and 2016. SynBio was an affiliate of the Company in 2016 with a share ownership of 9.8% of the total issued common stock of the Company as of December 31, 2016. In addition to its common stock ownership, SynBio also held outstanding warrants to purchase the Company’s common stock and all of the Company’s issued and outstanding Series A Preferred Stock. In 2017, SynBio became a wholly-owned subsidiary of Pharmsynthez and all ownership percentages previously held by SynBio are combined with Pharmsynthez. See Note 11, Stockholders’ Equity. Serum Institute of India Limited In August 2011, the Company entered into a collaborative research and development agreement with Serum Institute providing Serum Institute an exclusive license to use the Company’s PolyXen technology to research and develop one potential commercial product, Polysialylated Erythropoietin (“PSA-EPO”). Serum Institute is responsible for conducting all pre-clinical and clinical trials required to achieve regulatory approvals within the certain predetermined territories at Serum Institute’s own expense. Royalty payments are payable by Serum Institute to the Company for net sales to certain customers in the Serum Institute sales territory. Royalty payments are payable by the Company to Serum Institute for net sales received by the Company over the term of the license. There are no milestone or other research-related payments due under the collaborative arrangement. Through December 31, 2017, the Company and Serum Institute continued to engage in research and development activities with no resultant commercial products. No royalty revenue or expense was recognized by the Company related to the Serum Institute arrangement during the years ended December 31, 2017 and 2016. Serum Institute is a related party of the Company with a share ownership of approximately 7.2% and 7.5% of the total issued common stock of the Company as of December 31, 2017 and 2016, respectively. In addition to its’ common stock ownership, Serum Institute holds outstanding warrants to purchase the Company’s common stock. See Note 11, Stockholders’ Equity. PJSC Pharmsynthez In November 2009, the Company entered into a collaborative research and development license agreement with Pharmsynthez (the “Pharmsynthez Arrangement”) pursuant to which the Company granted an exclusive license to Pharmsynthez to develop, commercialize and market six drug candidates based on the Company’s PolyXen and ImuXen technology in certain territories. In exchange, Pharmsynthez granted an exclusive license to the Company to use any pre-clinical and clinical data developed by Pharmsynthez, within the scope of the Pharmsynthez Arrangement, and to engage in further research, development and commercialization of drug candidates outside of certain territories at the Company’s own expense. In addition to collaborative research and development, the Company and Pharmsynthez engaged in certain financing transactions during 2017 and 2016 which included the issuance by the Company to Pharmsynthez of $4.5 million in promissory notes with warrant coverage during 2016 as well as participation by Pharmsynthez in the Company’s November 2016 public offering. For discussion of these transactions refer to Note 8, Hybrid Debt Instruments Stockholders’ Equity. Pharmsynthez is an affiliate and controlling stockholder of the Company with a share ownership of approximately 61.5% and 52.6% of the total issued common stock of the Company as of December 31, 2017 and 2016, respectively. In addition to its common stock ownership, Pharmsynthez holds outstanding warrants to purchase the Company’s common stock, approximately 1.5 million shares of the Company’s issued and outstanding Series B Preferred Stock, and all of the Company’s issued and outstanding Series A Preferred Stock through its wholly-owned subsidiary, SynBio. See Note 11, Stockholders’ Equity |
5. Property and Equipment, net
5. Property and Equipment, net | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, net | Property and equipment, net consists of the following: December 31, 2017 December 31, 2016 Laboratory equipment $ 264,583 $ 264,583 Office and computer equipment 46,634 37,370 Leasehold improvements 26,841 26,841 Furniture and fixtures 20,263 20,263 Property and equipment 358,321 349,057 Less accumulated depreciation (330,475 ) (306,691 ) Property and equipment – net $ 27,846 $ 42,366 Depreciation expense was approximately $24,000 and $36,000 for the years ended December 31, 2017 and 2016, respectively. |
6. Goodwill and Indefinite-Live
6. Goodwill and Indefinite-Lived Intangible Assets | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Indefinite-Lived Intangible Assets | Goodwill A reconciliation of the change in the carrying value of goodwill is as follows: Balance as of January 1, 2016 $ 3,283,379 No changes – Balance as of December 31, 2016 $ 3,283,379 No changes – Balance as of December 31, 2017 $ 3,283,379 As of October 1, 2017 and 2016, the dates of the Company’s annual impairment review, the fair value of the Company’s goodwill balance exceeded its carrying value. Indefinite-Lived Intangible Assets The Company’s acquired indefinite-lived intangible asset, OncoHist, is IPR&D relating to the Company’s business combination with SymbioTec in 2012. The carrying value of OncoHist was approximately $9.2 million as of December 31, 2017 and 2016. No impairment was recorded during the years ended December 31, 2017 and 2016. OncoHist is not yet commercialized and, therefore, has not yet begun to be amortized as of December 31, 2017. |
7. Accrued Expenses
7. Accrued Expenses | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | Accrued expenses consist of the following: December 31, 2017 December 31, 2016 Accrued payroll and benefits $ 723,488 $ 109,315 Accrued professional fees 389,086 477,345 Accrued research costs 11,477 208,751 Other 11,602 43,477 $ 1,135,653 $ 838,888 On November 2, 2017, the Company entered into a Settlement Agreement with M. Scott Maguire, former Chief Executive Officer of the Company (the “Settlement Agreement”), which terminated the Employment Agreement dated November 3, 2009, between Xenetic UK and Mr. Maguire. Pursuant to the terms of the Settlement Agreement, Mr. Maguire will continue to receive his current base salary and benefits for a period of 12 months, received a lump sum termination payment of £30,000 and will be reimbursed for certain tax liabilities as described in the Settlement Agreement. As of December 31, 2017, the Company expensed approximately $0.4 million of accrued payroll and benefits related to future payments required to be made to Mr. Maguire in accordance with the Settlement Agreement. Additionally, Mr. Maguire’s unvested stock options will immediately vest on October 31, 2018, upon the terms and conditions specified in the Settlement Agreement, and Mr. Maguire will have until June 10, 2020 to exercise the vested options. |
8. Hybrid Debt Instrument
8. Hybrid Debt Instrument | 12 Months Ended |
Dec. 31, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Hybrid Debt Instrument | During 2015 and 2016, the Company entered into several financing arrangements which included the issuance of convertible notes and warrants to purchase shares of common stock. On July 1, 2015, the Company entered into a Securities Purchase Agreement (the “SPA”) with Pharmsynthez providing for the issuance of a minimum of a $3.0 million 10% Senior Secured Collateralized Convertible Promissory Note (the “SPA Note”). The SPA also provided for the issuance of certain warrants up to the amount of the SPA Note to purchase shares of common stock at the lesser of $6.60 per share and 120% of the price per share in the Company’s next capital raise of at least $7 million (the “Exercise Price”). On November 13, 2015, the Company entered into the APA with Pharmsynthez and Kevelt providing for, among other things, the issuance of a minimum of a $3.5 million 10% Senior Secured Collateralized Convertible Promissory Note (the “Initial APA Note”) and the issuance of certain warrants. The warrants covered up to half the amount of the Initial APA Note to purchase shares of common stock at the Exercise Price. During the quarter ended March 31, 2016, the Company issued $3.5 million of convertible debt as well as the associated warrants, both in connection with the Initial APA Note. A $1.6 million loss was recorded upon the issuance of hybrid debt instruments. In addition, a $1.9 million gain was recorded during 2016 reflecting the change in fair value of hybrid instruments during the period. On April 22, 2016, Pharmsynthez converted all of the then outstanding convertible notes issued by the Company to Pharmsynthez in the principal amount of $6.5 million plus accrued interest of approximately $0.2 million, resulting in a $6.2 million loss. The conversion rate was $4.95 per share. As such, the Company issued to Pharmsynthez approximately 1.4 million shares of common stock in connection with conversion of the convertible notes. The related embedded derivatives, which had been bifurcated from the host debt and accounted for separately, were settled by action of the conversion. Both the final mark-to-market gain and the loss on conversion were recorded in other income (expense) in the consolidated statement of comprehensive loss for the year ended December 31, 2016. On July 1, 2016, the Company issued a convertible promissory note (the “Note”) in the amount of $500,000 to Pharmsynthez. In consideration for the Note, the Company issued Pharmsynthez warrants (the “Warrants”) to purchase 50,506 shares of its common stock at the Exercise Price. The Note was convertible into shares of the Company’s common stock at any time at a conversion price of $4.95 per share (subject to price protection and usual and customary adjustments). The Warrants could be exercised at any time through the five-year anniversary. The maturity date of the Note was one year from issuance and was convertible, in whole or in part, into shares of common stock at the option of the holder, at any time and from time to time in accordance with the terms contained therein. Upon a public offering, as such term was defined in the Note, the holder was required to convert the Note to shares of the Company’s common stock in accordance with the conversion terms contained therein. On July 1, 2016, the Company issued a convertible promissory note in the amount of $369,958 (the “CEO Note”) and warrants to purchase 37,369 shares of the Company’s common stock at the Exercise Price to Mr. Scott Maguire, the Company’s former CEO, for his deferred salary. Upon a public offering, as defined, and at the option of the holder, the CEO Note could be settled in cash or by means of conversion into shares of common stock in accordance with the conversion terms contained therein. Upon completion of its public offering, the Company settled the CEO Note and the related interest of $13,176 in cash on November 7, 2016. On August 26 and September 9, 2016, the Company issued convertible promissory notes (the “Further Notes”) in the amount of $178,000 and $322,000, respectively, and warrants to purchase 50,506 shares of its common stock at the Exercise Price to Pharmsynthez. The notes were convertible into shares of the Company’s common stock at any time at a conversion price of $4.00 per share (subject to price protection and usual and customary adjustments) or may be applied toward a public offering, at the option of Pharmsynthez. The maturity date of the Further Notes was one year from issuance and were convertible, in whole or in part, into shares of common stock at the option of the holder, at any time and from time to time in accordance with the terms contained therein. Upon the closing of the Company’s underwritten public offering in November 2016, the balance of the Further Notes automatically converted into units of the Company’s public offering in accordance with the conversion terms contained therein. The Note, CEO Note and Further Notes (together, the “Period Notes”) shared the same principal terms and features. The Period Notes were convertible debt and included embedded debt-like features and were reflected as a hybrid debt instrument. The fair value of the compound derivative was bifurcated from the Period Notes and remeasured at each report date until they were settled, with changes in fair value recognized in the consolidated statement of comprehensive loss as a change in fair value of derivative liability. Refer to Note 9, Fair Value Measurements The key assumptions used to calculate the estimated fair value of the compound derivative liability at each issuance and subsequent report date included the Company’s stock price ($4.50 - $16.83), expected volatility (100% - 115%), and risk-free interest rate (0.28% - 0.68%). A $0.1 million loss on issuance of hybrid instrument was recorded upon the issuance of the Period Notes. This amount was recorded as a loss in other income (expense) in the consolidated statement of comprehensive loss for the year ended December 31, 2016. On November 7, 2016, the Company closed an approximate $10.0 million underwritten public offering (see Note 11, Stockholders’ Equity - The Note converted to shares of common stock, - The CEO Note was settled in cash, and - The Further Notes converted into units which are included in the aggregate 2,424,242 offering units discussed in Note 11, Stockholders’ Equity Following the November 2016 settlement of these instruments, all outstanding convertible debt and embedded debt-like instruments under these financing arrangements were retired. As a result, no hybrid debt instruments were outstanding as of December 31, 2017 and December 31, 2016, respectively. Interest expense (including both debt discount amortization and coupon rate) related to the SPA Note, the Initial APA Note, and the Period Notes of approximately $0.7 million was recognized in the consolidated statement of comprehensive loss for the twelve months ended December 31, 2016. |
9. Fair Value Measurements
9. Fair Value Measurements | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurements | ASC Topic 820, Fair Value Measurement, The Company’s cash and restricted cash are measured at fair value and are classified as Level 1 in the fair value hierarchy. The carrying amount of certain of the Company’s financial instruments approximate fair value due to their short maturities. The Company measures derivative liabilities at fair value on a recurring basis and classifies derivative liabilities as Level 3 in the fair value hierarchy. There were no financial instruments classified as Level 3 in the fair value hierarchy during the year ended December 31, 2017. The following table provides a summary of the changes in fair value of the compound derivative instrument measured at fair value on a recurring basis using significant unobservable inputs during the year ended December 31, 2016. Balance as of January 1, 2016 $ (3,544,222 ) Issuance of compound derivative instrument (4,120,359 ) Change in fair value of compound derivative instrument 2,125,113 Settlement of derivative instruments through conversion of debt host 5,539,468 Balance as of December 31, 2016 $ – |
10. Income Taxes
10. Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Deferred tax assets and liabilities are determined based on temporary differences resulting from the different treatment of items for tax and financial reporting purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Additionally, the Company must assess the likelihood that deferred tax assets will be recovered as deductions from future taxable income. The Company has provided a full valuation allowance on the Company’s deferred tax assets because the Company believes it is more likely than not that its deferred tax assets will not be realized. The Company evaluates the recoverability of its deferred tax assets on a quarterly basis. Currently, there is no provision for income taxes as the Company has incurred losses to date. The components of loss before income taxes are as follows: Year ended December 31, 2017 2016 Domestic (U.S.) $ (5,889,926 ) $ (12,253,271 ) Foreign (U.K.) 2,398,830 (41,837,056 ) Foreign (Germany) (104,036 ) (115,779 ) Loss before income taxes $ (3,595,132 ) $ (54,206,106 ) The reconciliation of income tax benefit at the U.S. corporation tax rate, being the rate applicable to the country of domicile of the Company to net income tax benefit is as follows: Year ended December 31, 2017 2016 Federal $ (1,222,345 ) (18,429,763 ) State (303,315 ) (455,191 ) Increase in tax losses not recognized (359,833 ) 9,751,401 Permanent differences, net 162,543 780,836 Mark to market – 992,621 Foreign rate differential (383,601 ) 6,923,116 Share-based payments, net (22,087 ) 524,131 Changes per enacted tax reform 2,320,059 – Enhanced research and development tax credits (191,421 ) (87,151 ) Net provision (benefit) for income taxes $ – $ – Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount 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 are as follows: Year ended December 31, 2017 2016 Deferred tax assets: U.K. net operating loss carryforwards $ 7,641,719 $ 6,868,717 U.K. capital loss carryforwards 1,378,643 1,259,062 U.S. federal net operating loss carryforwards 2,606,017 3,061,669 IPR&D 6,776,473 6,630,745 Share-based payments 1,527,615 1,534,992 Enhanced research and development tax credits 1,060,200 796,256 Germany net operating loss carryforwards 516,401 424,432 U.S. state net operating loss carryforwards 1,057,856 749,812 Accrued expenses 198,067 174,424 Depreciation 1,948 3,673 Other – – Total deferred tax assets before valuation allowance 22,764,939 21,503,782 Valuation allowance for deferred tax assets (22,764,939 ) (21,503,782 ) Deferred tax liabilities: Indefinite-lived intangible asset (2,918,518 ) (2,918,518 ) Debt discount – – Total deferred tax liabilities (2,918,518 ) (2,918,518 ) Net deferred tax assets and liabilities $ (2,918,518 ) $ (2,918,518 ) For the years ended December 31, 2017 and 2016, the Company had U.K. net operating loss carryforwards of approximately $45.0 million and $41.1 million, respectively, U.S. federal net operating loss carryforwards of approximately $13.5 million and $9.8 million, respectively, U.S. state net operating loss carryforwards of approximately $13.3 million and $9.4 million, respectively, and Germany net operating loss carryforwards of approximately $1.6 million and $1.3 million, respectively. The U.K. and Germany net operating loss carryforwards can be carried forward indefinitely. The U.S. federal and state net operating loss carryforwards begin to expire in 2032. The Company’s ability to use its operating loss carryforwards and tax credits generated in the U.S. to offset future taxable income is subject to restrictions under Section 382 of the United States Internal Revenue Code (the “Internal Revenue Code”). These restrictions may limit the future use of the operating loss carryforwards and tax credits if certain ownership changes described in the Internal Revenue Code occur. Future changes in stock ownership may occur that would create further limitations on the Company’s use of the operating loss carryforwards and tax credits. In such a situation, the Company may be required to pay income taxes, even though significant operating loss carryforwards and tax credits exist. The Company’s ability to use its operating loss carryforwards and tax credits generated in the U.K. are subject to restrictions under U.K. tax legislation. These regulations may limit the future use of operating loss carryforwards if there is a change in ownership and a change in the nature or conduct of the business carried on by the Company, and in certain circumstances where there is a change in the nature or conduct of the business only. In such cases the carryforwards would cease to be available to set against future income. The Company’s ability to use its operating loss carryforwards and tax credits generated in Germany are also subject to restrictions under German tax legislation. These regulations may limit the future use of operating loss carryforwards if there is a change in ownership. In such cases the carryforwards would cease to be available to set against future income. On December 22, 2017, the United States enacted new tax reform (“Tax Cuts and Jobs Act”). The Tax Cuts and Jobs Act contains provisions with separate effective dates but is generally effective for taxable years beginning after December 31, 2017. Beginning with the year ending December 31, 2018, the corporate statutory rates on U.S. earnings will be reduced from 34% to 21%. The impact of the future rate reduction for the year ending December 31, 2017, was approximately $2.3 million relating to the revaluation of the net deferred tax assets. Other than the reduction in statutory rate, the Company does not anticipate the regulations will have a material impact on income taxes in future years. The Tax Cuts and Jobs Act also contains a provision requiring companies to repatriate all aggregate post 1986 earnings and profits of foreign corporations. The Company has estimated that the repatriation will be zero under a provisional basis under SAB 118. As discussed in Note 2, Summary of Significant Accounting Policies, the Company adopted ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting. Upon adoption of this standard in 2017, the Company has recognized their previously unrecognized excess tax benefits, which resulted in a cumulative-effect increase of $0.1 million to their deferred tax assets along with an increase to the corresponding valuation allowance against these deferred tax assets. As of December 31, 2017 and 2016, the Company did not record any uncertain tax positions. The changes to uncertain tax positions for 2017 and 2016 were as follows: Year ended December 31, 2017 2016 Uncertain tax benefits as of January 1 $ – $ – Gross adjustments in tax positions – – Uncertain tax positions as of December 31 $ – $ – The Company files income tax returns in the U.S. federal tax jurisdiction and Massachusetts state tax jurisdiction, and certain foreign tax jurisdictions. The Company is subject to examination by the U.S. federal, state, foreign, and local income tax authorities for calendar tax years ending 2012 through 2017 due to available net operating loss carryforwards and research and development tax credits arising in those years. The Company has not been notified of any examinations by the Internal Revenue Service or any other tax authorities as of December 31, 2017. The Company has not recorded any interest or penalties for unrecognized tax benefits since its inception. Potential 382 Limitation The Company’s net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service. The Company’s ability to utilize its net operating loss (“NOL”) and research and development credit (“R&D”) carryforwards may be substantially limited due to ownership changes that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined in Section 382 of the Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50% of the outstanding stock of a company by certain stockholders or public groups. The Company has not completed a study to assess whether one or more ownership changes have occurred since it became a loss corporation as defined in Section 382 of the Code, but the Company believes that it is likely that an ownership change has occurred. If the Company has experienced an ownership change, utilization of the NOL and R&D credit carryforwards would be subject to an annual limitation, which is determined by first multiplying the value of the Company’s common stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any such limitation may result in the expiration of a portion of the NOL or R&D credit carryforwards before utilization. Until a study is completed, and any limitation known, no amounts are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Any carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding adjustment to the valuation allowance. Due to the existence of the valuation allowance, it is not expected that any potential limitation will have a material impact on the Company’s operating results. From time to time the Company may be assessed interest or penalties by major tax jurisdictions, namely the Commonwealth of Massachusetts. As of December 31, 2017, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. No interest and penalties have been recognized by the Company to date. The Company net operating loss carryforwards are subject to review and possible adjustment by the Internal Revenue Service and are subject to certain limitations in the event of cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%. |
11. Stockholders' Equity
11. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Reverse Stock Split On May 16, 2016, the Company’s board of directors approved a reverse stock split on a 1 for 33 basis, in the Company’s authorized common stock, along with a corresponding and proportional decrease in the number of shares of the Company’s common stock issued and outstanding. This reduction was filed with the Nevada Secretary of State on May 18, 2016 but required a review by the Financial Industry Regulatory Authority, Inc. (“FINRA”) before becoming effective in the market. On May 31, 2016, FINRA announced that this change took effect in the over-the-counter securities markets on June 1, 2016. All share information provided herein reflects the effect of the reverse stock split for all periods presented. Public Offering On November 7, 2016, the Company closed its public offering of an aggregate of 2,424,242 units, consisting of (i) 484,849 units, consisting of one share of Convertible Series B Preferred Stock and a Class A Warrant to purchase one share of common stock and (ii) 1,939,393 units consisting of one share of Convertible Series B Preferred Stock and a Class B Warrant to purchase one share of common stock, at a public offering price of $4.125 per unit (the “Public Offering”). At closing, the Company issued $10.0 million of units and received $9.0 million in cash, which is net of approximately $0.5 million in underwriting and related fees as well as proceeds from the Further Notes of $0.5 million, which automatically converted into units of the Public Offering on a one-for-one basis. The Company assessed the Public Offering warrants as meeting the criteria for equity classification and allocated the proceeds based on the relative fair values of the base instruments (the Series B preferred stock and the warrants). The Company obtained a valuation of the Series B preferred stock and associated warrants, which indicated values of $5.23 and $3.45, respectively. The Company determined that the embedded conversion feature of the Series B preferred stock included more equity-like features than debt-like features and, therefore, concluded that the conversion feature should not be bifurcated and accounted for separately. In addition, the Company evaluated the conversion feature of the Series B preferred stock to assess whether it met the definition of a beneficial conversion feature (“BCF”). The initial conversion price per share for each share of Series B preferred stock is equal to $4.00 per share and the exercise price of the warrant is equal to $4.00 per share. As the fair value of a share of common stock of $4.15 exceeded the effective conversion price of $2.49 at the issuance date, the Series B preferred stock contained a BCF. The total intrinsic value of the BCF of approximately $4.0 million was recorded as a discount to the preferred stock and a credit to additional paid in capital. Because the Series B preferred stock has no redemption date and is immediately convertible, the BCF was immediately accreted. Common Stock Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to dividends when and if declared by the Board of Directors. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the holders of common stock are entitled to share ratably in the assets of the Company available for distribution. In December 2015, approximately 0.3 million shares of new common stock were issued to Dr. Genkin and Mr. Surkhov, individuals associated with Pharmsynthez and Kevelt and inventors of a provisional patent transferred in connection with the APA. On April 29, 2016, the Company closed on the APA with an effective date of April 27, 2016, acquiring IPR&D related to certain intellectual property rights with respect to the immunomodulator product XBIO-101 held by Kevelt. In connection with the closing, the Company issued approximately 3.1 million shares of its common stock to Pharmsynthez. The fair value of the asset acquired was $39.5 million, which was determined to be more reliably measured than the related equity consideration. As there was no alternative use for the IPR&D, the Company recognized $39.5 million of expense in the Statement of Comprehensive Loss for the year ended December 31, 2016. On September 15, 2016, the Company issued approximately 0.2 million shares of common stock to Serum Institute in exchange for approximately $0.8 million of clinical PSA supply as well as settlement of approximately $0.2 million of prior purchases of PSA supply. Approximately $0.1 million of the clinical supply was expensed during the twelve months ended December 31, 2017. The remaining $0.7 million was reclassified to long-term as the Company does not anticipate utilizing the majority of the PSA supply within the next 12-months. On September 23, 2016, SynBio exchanged approximately 1.0 million shares of common stock in the Company for an equal number of shares of Series A Preferred Stock. In March 2017, the Company issued approximately 0.1 million shares of the Company’s common stock to Pharmsynthez in connection with the conversion of the Note as a result of the Company’s underwritten public offering in November 2016 and Pharmsynthez subsequently exercising its rights to the shares. The shares issued to Pharmsynthez represent both owed principal and accrued interest. The holders of Series B Convertible Preferred Stock converted approximately 0.2 million shares and 0.1 million shares into the same number of shares of common stock during the years ended December 31, 2017 and December 31, 2016, respectively. Series A Preferred Stock As approved by the Company’s Board of Directors, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series A Preferred Stock and subsequently filed an Amended and Restated Certificate of Designation of Series A Preferred Stock (the “Amended Series A Certificate of Designation”) on October 27, 2016. Pursuant to the Amended Series A Certificate of Designation, the Company designated 1,000,000 shares as Series A preferred stock. Each share of Series A preferred stock has a par value of $0.001 and stated value of $4.80. Liquidation Dividends Conversion Stock Dividends and Stock Splits Fundamental Transaction Voting Rights Fractional Shares Redemption As of December 31, 2017 and 2016, there were approximately 1.0 million shares of Series A preferred stock issued and outstanding which are convertible into the same number of shares of common stock. Series B Preferred Stock In connection with the Public Offering and as approved by the Company’s Board of Directors, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation of Series B Preferred Stock and subsequently filed an Amended and Restated Certificate of Designation of Series B Preferred Stock (the “Amended Series B Certificate of Designation”). Pursuant to the Amended Series B Certificate of Designation, the Company designated 2,500,000 shares as Series B preferred stock. Each share of Series B preferred stock has a stated value of $4.00 per share. The following is a summary of the material terms of the Company’s Series B Preferred Stock. Liquidation Dividends Conversion Stock Dividends and Stock Splits Fundamental Transaction Subsequent Equity Sales Voting Rights Fractional Shares Pursuant to the Public Offering, the Company issued approximately 2.4 million shares of Series B preferred stock. Since its issuance on November 7, 2016, holders of Series B preferred stock converted 0.3 million shares to the same number of common stock shares. As of December 31, 2017, there were approximately 2.1 million shares of Series B preferred stock issued and outstanding which are convertible into the same number of shares of common stock. Warrants Related to Collaboration and Consulting Agreements As of December 31, 2017 and 2016 there were outstanding warrants related to collaboration and consulting agreements to purchase an aggregate of 646,249 shares of common stock at an average weighted exercise price of $12.89. These warrants are fair valued at issuance date using the Black-Scholes option pricing model. The warrants are subject to re-measurement at each reporting period until the measurement date is reached. Expense is recognized on a straight-line basis over the expected service period or at the date of issuance, if there is not a service period. On December 31, 2014, SynBio was granted a warrant to purchase 204,394 new shares of common stock at an exercise price of $25.41 per share (“SynBio 2014 Warrant”). The SynBio 2014 Warrant is exercisable in four equal tranches, each with separate non-market, performance-based vesting criteria. The Company uses its judgment to assess the probability and timing of SynBio achieving these vesting criteria and estimated that it is not probable that the vesting criteria for any tranche will be achieved. As a result, the Company did not recognize expense related to this warrant during the years ended December 31, 2017 and 2016. These judgments are reassessed at each reporting period until the measurement date is reached. In connection with the SynBio 2014 Warrant grant, warrants to purchase 9,697 aggregate new shares of common stock were issued to SynBio and Pharmsynthez non-director designees (“SynBio Partner Warrants”) on December 31, 2014 under the same terms and conditions of the SynBio 2014 Warrant. The Company estimated that it is not probable that the vesting criteria for any tranche will be achieved and, as a result, the Company did not recognize expense related to the SynBio Partner Warrants during the years ended December 31, 2017 and 2016. The SynBio 2014 Warrant and SynBio Partner Warrants expire on December 30, 2019 and no warrants were exercised during the years ended December 31, 2017 and 2016. On December 31, 2014, the Company granted Serum Institute a warrant to purchase 96,970 new shares of common stock at an exercise price of $25.41 per share (“Serum Institute 2014 Warrant”). The Serum Institute 2014 Warrant, which was fair valued at approximately $0.5 million at the time of issuance, is exercisable in two equal tranches, each with separate non-market, performance-based vesting criteria. The Company uses its judgment to assess the probability and timing of Serum Institute achieving these vesting criteria and estimated that it is probable that the vesting criteria will be achieved for each tranche. These judgments are reassessed at each reporting period until the measurement date is reached. In connection with the Serum Institute 2014 Warrant grant, warrants to purchase 4,852 aggregate new shares of common stock were issued to Serum Institute non-director designees (“Serum Institute Partner Warrants”) on December 31, 2014 under the same terms and conditions of the Serum Institute 2014 Warrant. The Serum Institute Partner Warrants were fair valued at approximately $24,000 at the time of issuance. On May 16, 2016, the Company modified the exercise price of 150,307 performance-based warrants held by Serum Institute and individuals related to Serum Institute from $25.41 to $7.92 which resulted in an incremental value expense of approximately $0.2 million. Additionally, the Company issued 212,122 warrants to purchase shares of common stock to Serum Institute with an exercise price of $7.92. The new warrants were fully vested and the Company recognized $1.4 million in research and development expense in the consolidated statements of comprehensive loss related to the grants. The Company recognized warrant (income) expense of approximately $(0.1) million and $1.1 million during the years ended December 31, 2017 and 2016, respectively, related to the Serum Institute 2014 Warrant and Serum Institute Partner Warrants. The Serum Institute 2014 Warrant and Serum Institute Partner Warrants expire on December 30, 2019. No warrants were exercised during the years ended December 31, 2017 and 2016 and no warrants were granted during the year ended December 31, 2017. Key assumptions used in the Black-Scholes option pricing model for warrants related to collaboration and consultant agreements granted during the year ended December 31, 2016 are as follows: 2016 Weighted-average expected dividend yield (%) – Weighted-average expected volatility (%) 109.86 Weighted-average risk-free interest rate (%) 0.97 Weighted-average expected life of option (years) 5.00 Weighted-average exercise price ($) 10.40 Warrants Related to Financing Arrangements As of December 31, 2017 and 2016 there were outstanding warrants related to financing agreements to purchase an aggregate of 3,522,225 shares of Common Stock at an average weighted exercise price of $4.30. In connection with the Company’s issuance of the SPA Note on July 1, 2015, the Company issued a warrant to purchase 303,031 shares of common stock in accordance with the terms of the SPA (the “SPA Warrant”). The SPA Warrant has a five-year term and is exercisable commencing January 1, 2016, at the Exercise Price. Pursuant to the terms of the SPA Note, if not repaid or converted on or before six months from the date of issuance, the Holder will be issued an additional warrant to purchase 303,031 shares of common stock under the same terms as the Warrant (the “Contingent SPA Warrant,” or together referred to as the “SPA Warrants”). The Company determined there was a high probability that the SPA Note would not be repaid or converted within the period six months from the date of issuance, resulting in the issuance of the Contingent Warrant. As such, the Company concluded the Contingent SPA Warrant to be considered issued and outstanding as of the SPA Note issuance date in accordance with ASC 815. The SPA Note remained unpaid and unconverted six months following issuance and, therefore, the Contingent SPA Warrant was triggered and issued. As this was already recorded in 2015, no additional accounting was necessary upon the triggering event date. In connection with the Company’s issuance of the Initial APA Note in March 2016, the Company issued a warrant to purchase 353,540 shares of common stock in accordance with the terms of the APA (the “Initial APA Warrant”) at the Exercise Price. The Initial APA Warrant has a five-year term and is exercisable commencing March 31, 2016. If the Initial APA Note was not repaid or converted on or before six months from the date of issuance, the Holder would be issued an additional warrant to purchase 353,540 shares of common stock under the same terms as the Initial APA Warrant (the “Contingent APA Warrant”). At issuance, the Company determined there was a low probability that the Initial APA Note would not be repaid or converted within the period six months from the date of issuance and, therefore, did not account for the additional warrant as issued. (The Initial APA Note was converted in April 2016.) The fair value of the warrant was calculated using the Black-Scholes option pricing model. Key valuation assumptions used consist of the Company’s stock price, a risk-free interest rate of 1.42%, an expected volatility of 135%, and no expected dividends. Using an allocation of the Initial APA Note proceeds between the relative fair values of the Initial APA Warrant and the Initial APA Note, the Company recorded the Initial APA Warrant at a value of $1.7 million as additional paid-in-capital in 2016. In connection with the Company’s issuance of each of the Period Notes (see Note 8, Hybrid Debt Instruments In addition, warrants related to financing arrangements includes the Class A warrants to purchase 484,849 shares and the Class B warrants to purchase 1,939,393 shares issued in connection with the Company’s November 7, 2016 public offering. |
12. Share-Based Payments
12. Share-Based Payments | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Payments | Total share-based compensation related to stock options, RSUs, common stock awards, and non-financing warrants was approximately $1.8 million and $3.2 million for the years ended December 31, 2017 and 2016, respectively. (See Note 11, Stockholders’ Equity Share-based payments is classified in the consolidated statements of comprehensive loss as follows: Year Ended December 31, 2017 2016 Research and development expenses $ 101,401 $ 1,425,995 General and administrative expenses 1,691,692 1,798,657 $ 1,793,093 $ 3,224,652 Stock Option Modifications During the years ended December 31, 2017 and 2016, the Company modified certain former employee stock option awards to extend the expiry dates through March 31, 2018 and 2017, respectively. As a result of the modifications, the Company recognized approximately $4,000 and $24,000 in incremental compensation expense during the years ended December 31, 2017 and 2016, respectively, which was charged to general and administrative expense in the consolidated statements of comprehensive loss. In August 2016, the Company modified the exercise price and vesting of certain employee and non-employee stock option awards resulting in a change in incremental value and catch up of share-based amortization of approximately $0.2 million, which was charged to administrative and research and development expense. In November 2017, the Company accelerated the vesting and extended the exercise period post termination for certain employees, including the Company’s former Chief Executive Officer. These modifications resulted in a change in incremental value and catch up of share-based amortization of approximately $0.2 million, which was charged to general and administrative expense. Stock Options The Company grants stock option awards and RSUs to employees and non-employees with varying vesting terms under the Xenetic Biosciences, Inc. Amended and Restated Equity Incentive Plan (“Stock Plan”). The Company measures the fair value of stock option awards using the Black-Scholes option pricing model, which uses the assumptions noted in the tables below, including the risk-free interest rate, expected term, share price volatility, dividend yield and forfeiture rate. The risk-free interest rate is based upon the U.S. Treasury yield curve in effect at the time of grant, with a term that approximates the expected life of the option. For employee stock options issued in 2017 and 2016 that qualify as “plain vanilla” stock options, the expected term is based on the simplified method. The Company has a limited history of stock option exercises, which does not provide a reasonable basis for the Company to estimate the expected term of employee stock options. For all other employee stock options, the Company estimates the expected life using judgment based on the anticipated research and development milestones of the Company’s clinical projects and behavior of the Company’s employees. The expected life of non-employee options is the contractual life of the option. The Company determines the expected volatility based on a blended volatility rate of its own historical volatility with that of comparable publicly traded companies with drug candidates in similar therapeutic areas and stages of nonclinical and clinical development to the Company’s drug candidates. The Company has applied an expected dividend yield of 0% as the Company has not historically declared a dividend and does not anticipate declaring a dividend during the expected life of the options. Further, the Company has applied a forfeiture rate of 0% as the Company has not historically experienced forfeitures. Effective January 1, 2017, the Company adopted ASU 2016-09 and elected to account for forfeitures as they occur. Employee Stock Options During the years ended December 31, 2017 and 2016, 700,000 and 603,622 total stock options to purchase shares of common stock were granted by the Company, respectively. The weighted average grant date fair value per option share was $2.70 and $2.94, respectively. No stock options were exercised during the years ended December 31, 2017 and 2016. During the years ended December 31, 2017 and 2016, 340,930 and 212,472 total stock options vested, with total fair values of approximately $1.9 million and $1.7 million, respectively. As of December 31, 2017, there was approximately $2.1 million of unrecognized share-based payments related to employee stock options that are expected to vest. The Company expects to recognize this expense over a weighted-average period of approximately 1.9 years. Key assumptions used in the Black-Scholes option pricing model for options granted to employees during the years ending December 31, 2017 and 2016 are as follows: Year Ended December 31, 2017 2016 Weighted-average expected dividend yield (%) – – Weighted-average expected volatility (%) 111.37 110.11 Weighted-average risk-free interest rate (%) 1.79 1.63 Weighted-average expected life of option (years) 5.36 5.92 Weighted-average exercise price ($) 3.34 3.49 The following is a summary of employee stock option activity for the years ended December 31, 2017 and 2016: Number of Weighted- Weighted- Aggregate Outstanding as of January 1, 2016 619,259 15.22 8.92 $ 1,915,942 Granted 603,622 3.49 Expired (29,169 ) 12.38 Outstanding as of December 31, 2016 1,193,712 4.43 8.94 $ 526,073 Granted 700,000 3.34 Expired (113,343 ) 4.61 Outstanding as of December 31, 2017 1,780,369 3.99 8.53 $ 5,273 Vested or expected to vest as of December 31, 2017 1,755,369 4.02 8.51 $ 5,273 Exercisable as of December 31, 2016 440,092 $ 5.60 8.94 $ 55,109 Exercisable as of December 31, 2017 731,895 $ 4.84 7.44 $ 5,273 A summary of the status of the Company’s non-vested employee stock option shares as of December 31, 2017, and the changes during the year ended December 31, 2017, is as follows: Number of Weighted- Balance as of January 1, 2017 753,620 $ 4.49 Granted 700,000 $ 2.70 Forfeited (64,218 ) $ 6.15 Vested (340,928 ) $ 5.87 Balance as of December 31, 2017 1,048,474 $ 2.86 Restricted Stock Units For the year ended December 31, 2017, the Company granted 50,000 restricted stock units (“RSUs”). The RSUs vest annually over a 3-year period and had a grant date fair value of $2.11. No RSUs were vested and none expired during the year ended December 31, 2017. Non-Employee Stock Options Share-based payments expense related to stock options granted to non-employees is recognized as the services are rendered on a straight-line basis. The Company determined that the fair value of the stock options is more reliably measurable than the fair value of the services received. Compensation expense related to stock options granted to non-employees is subject to re-measurement at each reporting period until the options vest. No options were granted to non-employees and none were exercised during the years ended December 31, 2017 and 2016, respectively. During the year ended December 31, 2017 and 2016, 10,101 and 17,857 total stock options vested, with total fair values of approximately $0.1 million and $0.2 million, respectively. As of December 31, 2017, all non-employees stock options had vested. For the years ended December 31, 2017 and 2016, the Company recognized approximately $0.1 million in each period, respectively, of compensation expense related to non-employee options. The following is a summary of non-employee stock option activity for the years ended December 31, 2017 and 2016: Number of shares Weighted- average exercise price Weighted- average remaining life (years) Aggregate intrinsic value Outstanding as of January 1, 2016 57,442 $ 13.39 8.23 $ 220,764 Granted – Outstanding as of December 31, 2016 57,442 7.57 7.23 $ – Granted – Expired (723 ) 10.34 $ Outstanding as of December 31, 2017 56,719 7.53 6.31 $ – Vested or expected to vest as of December 31, 2017 56,719 7.53 6.31 $ – Exercisable as of December 31, 2016 47,341 $ 8.21 6.92 $ – Exercisable as of December 31, 2017 56,719 $ 7.53 6.31 $ – A summary of the status of the Company’s non-vested non-employee stock option shares as of December 31, 2017, and the changes during the year ended December 31, 2017 is as follows: Number of Weighted- Balance as of January 1, 2017 10,101 $ 13.13 Vested (10,101 ) $ 13.13 Balance as of December 31, 2017 – $ – Common Stock Awards The Company granted common stock awards to several non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized as services are rendered on a straight-line basis. A summary of the Company’s common stock awards granted and issued during the years ended December 31, 2017 and 2016 are as follows: Number of shares Balance as of January 1, 2016 22,887 Granted 26,760 Issued (19,857 ) Balance as of December 31, 2016 29,790 Granted 41,800 Settled in cash (8,773 ) Balance as of December 31, 2017 62,817 The Company granted 41,800 and 26,760 shares of common stock during the years ended December 31, 2017 and 2016, respectively, in exchange for professional services. As all services were rendered in each respective period, expense related to common stock awards of approximately $0.1 million and $0.2 million was recognized during the years ended December 31, 2017 and 2016, respectively. The balance of the common stock awards has not been issued as of December 31, 2017. Joint Share Ownership Plan As of December 31, 2017 and 2016, there were approximately 0.3 million JSOP awards issued and outstanding to two former senior executives, respectively. Under the JSOP, shares in the Company are jointly purchased at fair market value by the participating executives and the trustees of the JSOP trust, with such shares held in the JSOP trust. For U.S. GAAP purposes the awards were valued as employee options and recorded as a reduction in equity as treasury shares until they are exercised by the employee. The JSOP awards are fully vested and have no expiration date. There were no compensation charges during the years ended December 31, 2017 and 2016, respectively. |
13. Employee Benefit Plans
13. Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |
Employee Benefit Plans | The Company has a defined contribution 401(k) savings plan (the “401(k) Plan”). The 401(k) Plan covers substantially all U.S. employees, and allows participants to defer a portion of their annual compensation on a pre-tax basis or make post-tax contributions. Company contributions to the 401(k) Plan may be made at the discretion of the Board of Directors. During the years ended December 31, 2017 and 2016, the Company made contributions of approximately $51,000 and $44,000, respectively, to the 401(k) Plan. In the U.K., the Company has adopted a defined contribution plan (the “UK Plan”) which qualifies under the rules established by HM Revenue & Customs. The UK Plan generally allows all U.K. employees to contribute a minimum of 3% of salary with no maximum limit. The Company contributes to the plan between 8% and 12% of the employee’s salary, depending upon seniority of the employee. The Company, at its discretion, may also contribute to an employee’s personal pension plan. The Company paid total contributions of approximately $0 and $48,000 during the years ended December 31, 2017 and 2016, respectively. |
14. Commitments and Contingent
14. Commitments and Contingent Liabilities | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingent Liabilities | Leases In August 2013, the Company entered into an agreement to lease office and laboratory space in Lexington, Massachusetts under an operating lease with a commencement date of January 1, 2014 and a termination date of January 31, 2019. With the execution of this lease, the Company is required to maintain a $66,000 letter of credit as a security deposit, which is classified as a current asset within the consolidated balance sheets. In connection with the Lexington lease, the Company has approximately $32,000 recorded as prepaid rent as of December 31, 2017, with approximately $2,000 recorded as a non-current asset. The Company also incurred a liability of $89,074 with respect to the Company’s contribution to the landlord’s leasehold improvements, of which approximately $20,000 is outstanding and reflected as a current liability as of December 31, 2017. This liability is repayable as additional rent expense over the term of the lease and bears interest at 6%. In December 2016, the Company entered into a one-year lease of office space in Miami, Florida, under an operating lease with a commencement date of December 1, 2016, and a termination date of November 30, 2017. The Company renewed this lease in November 2017 for an additional two years with a revised termination date of November 30, 2019. The Company’s contractual commitments under all non-cancelable operating leases as of December 31, 2017, are as follows: As of December 31, Total Operating Leases 2018 $ 123,663 2019 24,583 2020 – Total minimum lease payments $ 148,246 Rent expense is calculated on a straight-line basis over the term of the leases. Rent expense under the Company’s operating leases was approximately $0.1 million for the years ended December 31, 2017 and 2016, respectively. Litigation On August 27, 2015, Eurogentec S.A. (“EGT”), a former supplier of the Company, brought an action against the Company in the Commercial Court of the Canton of Zurich Switzerland (the “Court”) alleging nonpayment of invoices for services provided by EGT. The Company requested dismissal of the claim based on the argument that EGT knew, or should have known, that the services provided by EGT should not have been performed or had not been properly performed. On July 12, 2017, the Court rendered a decision in favor of EGT ordering the Company to pay approximately $0.7 million to EGT, representing all amounts that EGT alleged were owed by the Company, plus interest and court and legal fees. The Company had previously recorded $0.6 million related to this contract when the relevant services were provided and accrued an additional $0.1 million related to interest and fees in 2017 as a result of the ruling. In December 2017, the Company entered into a Settlement Agreement and paid approximately $0.6 million to settle all claims associated with this matter. |
15. Related Party Transactions
15. Related Party Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | In May 2011, the Company received a short term unsecured loan facility of up to $1.7 million from SynBio (the “SynBio Loan”), an affiliate of the Company. In connection with the APA, the Company made a series of payments during the first two quarters of 2016 totaling approximately $0.3 million to creditors of Kevelt. Pursuant to the APA, such payments are considered direct offsets to the loan with SynBio. In December 2016, the Company entered into an agreement with SynBio, Pharmsynthez, and Kevelt which settled all amounts owed on the SynBio Loan, Kevelt services provided to Xenetic in connection with the XBIO-101 Phase 2 project, and the purchase of drug candidate supply from Kevelt sufficient to meet the needs of the XBIO-101 Phase 2 clinical trial. Pursuant to this agreement, the Company transferred approximately $0.6 million to the counter parties. No amounts were outstanding under the SynBio Loan as of December 31, 2017 and 2016, respectively. The Company has entered into various research, development, license and supply agreements with Shire, SynBio, Serum Institute and Pharmsynthez, each a related party whose relationship, ownership, and nature of transactions is disclosed within other sections of these footnotes. During the years ended December 31, 2017 and 2016, the Company received research and consulting services from a director of Pharmsynthez, a controlling stockholder of the Company. The total amount of services received was approximately $0.1 million for the years ended December 31, 2017 and 2016, respectively. This consulting agreement was terminated in July 2017. Please refer to Note 4, Significant Strategic Drug Development Collaborations – Related Parties, Hybrid Debt Instruments Stockholder’s Equity |
16. Subsequent Events
16. Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company performed a review of events subsequent to the balance sheet date through the date the financial statements were issued and determined that there were no such events requiring recognition or disclosure in the financial statements. |
Schedule II - Valuation and Qua
Schedule II - Valuation and Qualifying Accounts | 12 Months Ended |
Dec. 31, 2017 | |
Valuation and Qualifying Accounts [Abstract] | |
Schedule II - Valuation and Qualifying Accounts | XENETIC BIOSCIENCES, INC. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016 Valuation Allowance on Deferred Tax Assets Balance Beginning of Period Additions (Deductions) Charged to (from) Income Tax Expense Other Changes to Valuation Allowance Balance End of Period 2017 $ (21,503,782 ) (1,261,157 ) – $ (22,764,939 ) 2016 $ (15,324,438 ) (6,179,344 ) – $ (21,503,782 ) |
2. Summary of Significant Acc25
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Preparation of Financial Statements | Preparation of Financial Statements These consolidated financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. This assumption is presently uncertain and contingent upon the Company’s ability to raise additional working capital. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements of the Company include the accounts of Xenetic UK and its wholly owned subsidiaries: Lipoxen, Xenetic Bioscience, Incorporated, and SymbioTec. All material intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The consolidated financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of the financial statements in accordance with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenue, costs and expenses in the financial statements and disclosures in the accompanying notes. Actual results and outcomes may differ materially from management’s estimates, judgments and assumptions. |
Functional Currency Change | Functional Currency Change Effective April 1, 2015, the functional currency of the Company’s foreign subsidiaries changed from the British Pound Sterling to the United States (“U.S.”) dollar. The change in functional currency was applied on a prospective basis. Therefore, any gains and losses that were previously recorded in accumulated other comprehensive income remain unchanged. |
Foreign Currency Transaction | Foreign Currency Transactions Realized and unrealized gains and losses resulting from foreign currency transactions arising from exchange rate fluctuations on balances denominated in currencies other than the functional currencies are recognized in “Other income (expense)” in the consolidated statements of comprehensive loss. Monetary assets and liabilities that are denominated in a currency other than the functional currency are re-measured to the functional currency using the exchange rate at the balance sheet date and gains or losses are recorded in the consolidated statements of comprehensive loss. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. See Note 9, Fair Value Measurements |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with maturities of 90 days or less from the date of purchase to be cash equivalents. Investments with original maturities of greater than 90 days from the date of purchase but less than one year from the balance sheet date are classified as short-term investments, while investments with maturities of one year or beyond from the balance sheet date are classified as long-term investments. Management determines the appropriate classification of its cash equivalents and investment securities at the time of purchase and re-evaluates such determination as of each balance sheet date. |
Restricted Cash | Restricted Cash As of December 31, 2017 and 2016, restricted cash represents a certificate of deposit that matures annually, and secures the Company’s outstanding letter of credit of approximately $0.1 million for the operating lease in Lexington, Massachusetts. The letter of credit is required to be maintained the term of the lease, which expires in January 2019. |
Concentration of Credit Risk | Concentration of Credit Risk Financial instruments that subject the Company to concentrations of credit risk include cash and cash equivalents. The Company maintains cash and cash equivalents with various major financial institutions. The Company performs periodic evaluations of the relative credit standing of these financial institutions and limits the amount of credit exposure with any one institution. |
Property and Equipment | Property and Equipment The Company records property and equipment at cost less accumulated depreciation. Expenditures for major renewals and improvements which extend the life or usefulness of the asset are capitalized. Items of an ordinary repair or maintenance nature are charged directly to operating expense as incurred. The Company calculates depreciation using the straight-line method over the estimated useful lives of the assets: Asset Classification Estimated Useful Life Laboratory equipment 3 years Office and computer equipment 3 years Leasehold improvements 5 years or the remaining term of the lease, if shorter Furniture and fixtures 5 years The Company eliminates the cost of assets retired or otherwise disposed of, along with the corresponding accumulated depreciation, from the related accounts, and the resulting gain or loss is reflected in the results of operations. |
Indefinite-Lived Intangible Assets | Indefinite-Lived Intangible Assets Acquired indefinite-lived intangible assets consist of in-process research and development (“IPR&D”) related to the Company’s business combination with SymbioTec, which was recorded at fair value on the acquisition date. IPR&D intangible assets are considered indefinite-lived intangible assets until completion or abandonment of the associated research and development efforts. Substantial additional research and development may be required before the Company’s IPR&D reaches technological feasibility. Upon completion of the IPR&D project, the IPR&D assets will be amortized over their estimated useful lives. The Company assesses intangible assets with indefinite lives for impairment at least annually as of October 1, or when events or changes in the business environment indicate the carrying value may be impaired. T he circumstances leads the Company to determine that it is more likely than not (that is, a likelihood of more than 50%) that the acquired IPR&D is impaired. If the Company chooses to first assess the qualitative factors and it is determined that it is not more likely than not acquired IPR&D is impaired, the Company is not required to take further action to test for impairment. The Company also has the option to bypass the qualitative assessment and perform only the quantitative impairment test, which the Company may choose to perform in some periods but not in others. No impairment was recorded during the years ended December 31, 2017 and 2016. |
Goodwill | Goodwill Goodwill is comprised of the purchase price of business combinations in excess of the fair value assigned at acquisition to the net tangible and identifiable intangible assets acquired. Goodwill is not amortized. The Company assesses goodwill for impairment at least annually, or when events or changes in the business environment indicate the carrying value may not be fully recoverable. The Company also has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads the Company to determine that it is more likely than not (that is, a likelihood of more than 50%) that goodwill is impaired. If the Company chooses to first assess qualitative factors and it is determined that it is not more likely than not goodwill is impaired, the Company is not required to take further action to test for impairment. The Company also has the option to bypass the qualitative assessment and perform only the quantitative impairment test, which the Company may choose to do in some periods but not in others. The Company performs its annual impairment review as of October 1. No impairment was recorded during the years ended December 31, 2017 and 2016. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets The Company reviews long-lived assets to be held and used, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets or asset group may not be fully recoverable. No such impairments were recorded during the years ended December 31, 2017 and 2016. Evaluation of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset or asset group and its eventual disposition. Impairment, if any, is calculated as the amount by which an asset’s carrying value exceeds its fair value, typically using discounted cash flows to determine fair value. |
Embedded Derivatives Related to Debt Instruments | Embedded Derivatives Related to Debt Instruments Embedded derivatives that are required to be bifurcated from their host contract are evaluated and valued separately from the host contract (i.e., the debt instrument). Features of the Company’s debt instrument that meet the definition of a derivative and the criteria for separate accounting include the conversion feature and certain put options. The fair value of each embedded derivative is valued independently using a “with-and-without” method. The “with-and-without” methodology involves valuing the whole instrument on an as-is basis and then valuing the instrument without the individual embedded derivative. The difference between the entire instrument with all of the embedded derivatives compared to the instrument without the individual embedded derivative is the fair value of that individual derivative. The embedded derivatives are settled when the underlying debt instrument is settled. Therefore, there are three possible settlement mechanisms: the debt instrument can be converted into equity, repaid early, or held to maturity. Embedded derivatives are valued individually and recorded as a compound derivative. The compound derivative is presented together with the host debt instrument and the related debt discount on a combined basis. Changes in the estimated fair value of the bifurcated embedded derivatives are reported as gains and losses in the consolidated statement of comprehensive loss each reporting period. |
Revenue Recognition | Revenue Recognition The Company enters into supply, license and collaboration arrangements with pharmaceutical and biotechnology partners, some of which include royalty agreements based on potential net sales of approved commercial pharmaceutical products. The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred or services have been rendered, (iii) the seller’s price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. The terms of the Company’s license agreements include delivery of an IP license to a collaboration partner. The Company may be compensated under license arrangements through a combination of non-refundable upfront receipts, development and regulatory objective receipts and royalty receipts on future product sales by partners. Non-refundable upfront license payments and development and regulatory milestone payments received by the Company in license and collaboration arrangements that include future obligations, such as supply obligations, are recognized ratably over the Company’s expected performance period under each respective arrangement. The Company makes its best estimate of the period over which the Company expects to fulfil the Company’s performance obligations, which may include technology transfer assistance, research activities, clinical development activities, and manufacturing activities from development through the commercialization of the product. Given the uncertainties of these collaboration arrangements, significant judgment is required to determine the duration of the performance period. When we enter into an arrangement to sub-license some of our patents we consider the performance obligations to determine if there is a single element or multiple elements to the arrangement as we determine the proper method and timing of revenue recognition. We consider the terms of the license for such elements as price adjustments or refund clauses in addition to any performance obligations for us to provide such as services, patent defense costs, technology support, marketing or sales assistance or any other elements to the arrangement that could constitute an additional deliverable to us that could change the timing of the revenue recognition. Non-refundable upfront license fees received, whereby continued performance or future obligations are considered inconsequential or perfunctory to the relevant licensed technology, are recognized as revenue upon delivery of the technology. The Company expects to recognize royalty revenue in the period of sale, based on the underlying contract terms, provided that the reported sales are reliably measurable, the Company has no remaining performance obligations, and all other revenue recognition criteria are met. Reimbursements for research and development services completed by the Company related to the collaboration agreements are recognized in operations as revenue on a gross basis. The Company’s license and collaboration agreements with certain collaboration partners could also provide for future milestone receipts to the Company based solely upon the performance of the respective collaboration partner in consideration of deadline extensions or upon the achievement of specified sales volumes of approved drugs. For such receipts, the Company expects to recognize the receipts as revenue when earned under the applicable contract terms on a performance basis or ratably over the term of the agreement. These receipts may also be recognized as revenue when continued performance or future obligations by the Company are considered inconsequential or perfunctory. See also Note 4, Significant Strategic Drug Development Collaborations – Related Parties |
Research and Development Expenses | Research and Development Expenses Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits, facilities expenses, overhead expenses, clinical trial and related clinical manufacturing expenses, fees paid to contract research organizations (“CROs”) and contract manufacturing organizations and other outside expenses. The Company expenses research and development costs as incurred. The Company expenses upfront, non-refundable payments made for research and development services as obligations are incurred. The value ascribed to intangible assets acquired but which have not met capitalization criteria is expensed as research and development at the time of acquisition. The Company is required to estimate accrued research and development expenses at each reporting period. This process involves reviewing open contracts and purchase orders, communicating with Company personnel to identify services that have been performed on its behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of actual costs. The majority of the Company’s service providers invoice it in arrears for services performed, on a pre-determined schedule or when contractual milestones are met. However, some require advanced payments. The Company makes estimates of accrued expenses as of each balance sheet date in the financial statements based on facts and circumstances known at that time. The Company periodically confirms the accuracy of the estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include fees paid to: · program managers in connection with overall program management of clinical trials; · CROs in connection with clinical trials; and · investigative sites in connection with clinical trials. The Company bases its expenses related to clinical trials on its estimates of the services received and efforts expended pursuant to quotes and contracts with multiple research institutions and CROs that conduct and manage clinical trials on the Company’s behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of the expense. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts the accrual or prepaid accordingly. Although it does not expect its estimates to be materially different from amounts actually incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to the Company’s prior estimates of accrued research and development expenses. As of December 31, 2017, the Company has recorded deferred program expense of approximately $33,000 as a component of prepaid expenses and other current assets. |
Share-Based Compensation | Share-based Payments Stock options and restricted stock units The Company grants share-based payments in the form of options and restricted stock units (“RSUs”) to employees and non-employees, Joint Share Ownership Plan (“JSOP”) awards to employees, as well as agreements to issue common stock in exchange for services provided by non-employees. Share-based compensation expense is based on the fair value of the option or calculated using the Black-Scholes option pricing model. Determining the appropriate fair value model and related assumptions requires judgment, including estimating share price volatility and expected terms of the awards. The expected volatility rates are estimated based on the actual volatility of the Company and of comparable public companies over the expected term of the option. The expected terms represent the time that options are expected to be outstanding. The Company accounts for forfeitures as they occur and not at the time of grant. The Company has not paid dividends and does not anticipate paying cash dividends in the foreseeable future and, accordingly, uses an expected dividend yield of zero. The risk-free interest rate is based on the rate of U.S. Treasury securities with maturities consistent with the estimated expected term of the awards. Upon exercise, stock options are redeemed for newly issued shares of common stock. RSUs are redeemed for newly issued shares of common stock as the vesting provisions of the grant are met. For employee options that vest based solely on service conditions, the fair value measurement date is generally on the date of grant and the related compensation expense is recognized on a straight-line basis over the requisite vesting period of the awards. For non-employee options, the fair value measurement date is the earlier of the date the performance of services is complete or the date the performance commitment has been reached. The Company generally determines that the fair value of the stock options is more reliably measurable than the fair value of the services received. Compensation expense related to stock options granted to non-employees that vest based solely on service conditions is subject to re-measurement at each reporting period until the options vest and is recognized on a straight-line basis over the requisite vesting period of the awards. The Company adopted Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718) · There have been no stock option exercises as a U.S. company and, therefore, there are no excess tax benefits related to windfalls. Moreover, the Company maintains a full valuation allowance and expects to do so for the foreseeable future; · The Company has elected to account for forfeitures as they occur, which the Company adopted using a modified retrospective approach and there was no material cumulative effect adjustment to be recorded to opening retained earnings; and · The Company will classify cash paid to taxing authorities arising from the withholding of shares from employees in cash flows from financing activities. Common stock awards The Company grants common stock awards to non-employees in exchange for services provided. The Company measures the fair value of these awards using the fair value of the services provided or the fair value of the awards granted, whichever is more reliably measurable. The fair value measurement date of these awards is generally the date the performance of services is complete. The fair value of the awards is recognized on a straight-line basis as services are rendered. The share-based payments related to common stock awards for the settlement of services provided by non-employees is recorded on the consolidated statement of comprehensive loss in the same manner and charged to the same account as if such settlements had been made in cash. |
Warrants | Warrants In connection with certain financing, consulting and collaboration arrangements, the Company has issued warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of the awards using the Black-Scholes option pricing model as of the measurement date. Warrants issued to collaboration partners in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants are recorded at fair value as expense over the requisite service period or at the date of issuance, if there is not a service period. Warrants granted in connection with ongoing arrangements are more fully described in Note 11, Stockholders’ Equity |
Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences resulting from the different treatment of items for tax and financial reporting purposes. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. Additionally, the Company must assess the likelihood that deferred tax assets will be recovered as deductions from future taxable income. The Company evaluates the recoverability of its deferred tax assets on a quarterly basis. |
Basic and Diluted Net Loss per Share | Basic and Diluted Net Loss per Share The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options that are outstanding during the period, except where such non-participating securities would be anti-dilutive. The Company’s JSOP awards, prior to exercise, are considered treasury shares by the Company and thus do not impact the Company’s net loss per share calculation. As of December 31, 2017 and 2016, there were approximately 0.3 million JSOP awards issued. For the years ended December 31, 2017 and 2016, basic and diluted net loss per share are the same for each year due to the Company’s net loss position. Potentially dilutive, non-participating securities have not been included in the calculations of diluted net loss per share, as their inclusion would be anti-dilutive. As of December 31, 2017 and 2016, approximately 0.6 million and 1.7 million potentially dilutive securities, respectively, were deemed anti-dilutive. |
Segment Information | Segment Information Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, who is the Company’s Chief Executive Officer, in making decisions on how to allocate resources and assess performance. The Company views its operations and manages its business in one operating segment. |
Operating Leases | Operating Leases The Company leases administrative and laboratory facilities under operating leases. Lease agreements may include rent holidays, rent escalation clauses and tenant improvement allowances. The Company recognizes scheduled rent increases on a straight-line basis over the lease term beginning with the date the Company takes possession of the leased space. |
Acquisitions | Acquisitions The Company has a history of engaging in acquisition transactions that require the Company to evaluate whether the transaction meets the criteria of a business combination and, in some cases, whether it meets the definition of a reverse merger. If the transaction does not meet the business combination requirements, the transaction is accounted for as an asset acquisition or recapitalization and no goodwill is recognized. If the acquisition meets the definition of a business combination, the Company allocates the purchase price, including any contingent consideration, to the assets acquired and the liabilities assumed at their estimated fair values as of the date of the acquisition with any excess of the purchase price paid over the estimated fair value of net assets acquired recorded as goodwill. The fair value of the assets acquired and liabilities assumed is typically determined by using either estimates of replacement costs or discounted cash flow valuation methods. When determining the fair value of tangible assets acquired, the Company estimates the cost to replace the asset with a new asset, taking into consideration such factors as age, condition and the economic useful life of the asset. When determining the fair value of intangible assets acquired, the Company uses judgment to estimate the applicable discount rate, growth rates and the timing and amount of future cash flows. The fair value of assets acquired and liabilities assumed is typically determined using the assistance of an independent third-party specialist. Business combination related costs are expensed in the period in which the costs are incurred. Asset acquisition related costs are generally capitalized as a component of cost of the assets acquired. |
Recent Accounting Standards | Recent Accounting Standards In January 2017, the FASB issued ASU 2017-04: Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash In February 2016, FASB issued ASU 2016-02, Leases (Topic 842) In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815); (Part I) Accounting for Certain Financial Instruments with Down Round Features; (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception The Company has considered other recent accounting standards and concluded that they are either not applicable to the business, or that no material effect is expected on the consolidated financial statements as a result of future adoption. |
2. Summary of Significant Acc26
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of Estimated Useful Life of Assets | Asset Classification Estimated Useful Life Laboratory equipment 3 years Office and computer equipment 3 years Leasehold improvements 5 years or the remaining term of the lease, if shorter Furniture and fixtures 5 years |
5. Property and Equipment, net
5. Property and Equipment, net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment, Net | December 31, 2017 December 31, 2016 Laboratory equipment $ 264,583 $ 264,583 Office and computer equipment 46,634 37,370 Leasehold improvements 26,841 26,841 Furniture and fixtures 20,263 20,263 Property and equipment 358,321 349,057 Less accumulated depreciation (330,475 ) (306,691 ) Property and equipment – net $ 27,846 $ 42,366 |
6. Goodwill and Indefinite-Li28
6. Goodwill and Indefinite-Lived Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Reconciliation of Change in Carrying Value of Goodwill | Balance as of January 1, 2016 $ 3,283,379 No changes – Balance as of December 31, 2016 $ 3,283,379 No changes – Balance as of December 31, 2017 $ 3,283,379 |
7. Accrued Expenses (Tables)
7. Accrued Expenses (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | December 31, 2017 December 31, 2016 Accrued payroll and benefits $ 723,488 $ 109,315 Accrued professional fees 389,086 477,345 Accrued research costs 11,477 208,751 Other 11,602 43,477 $ 1,135,653 $ 838,888 |
9. Fair Value Measurements (Tab
9. Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Fair Value Disclosures [Abstract] | |
Schedule of derivative measured on a recurring basis | Balance as of January 1, 2016 $ (3,544,222 ) Issuance of compound derivative instrument (4,120,359 ) Change in fair value of compound derivative instrument 2,125,113 Settlement of derivative instruments through conversion of debt host 5,539,468 Balance as of December 31, 2016 $ – |
10. Income Taxes (Tables)
10. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Components of loss before income taxes | Year ended December 31, 2017 2016 Domestic (U.S.) $ (5,889,926 ) $ (12,253,271 ) Foreign (U.K.) 2,398,830 (41,837,056 ) Foreign (Germany) (104,036 ) (115,779 ) Loss before income taxes $ (3,595,132 ) $ (54,206,106 ) |
Reconciliation of income tax provision (benefit) | Year ended December 31, 2017 2016 Federal $ (1,222,345 ) (18,429,763 ) State (303,315 ) (455,191 ) Increase in tax losses not recognized (359,833 ) 9,751,401 Permanent differences, net 162,543 780,836 Mark to market – 992,621 Foreign rate differential (383,601 ) 6,923,116 Share-based payments, net (22,087 ) 524,131 Changes per enacted tax reform 2,320,059 – Enhanced research and development tax credits (191,421 ) (87,151 ) Net provision (benefit) for income taxes $ – $ – |
Schedule of deferred tax assets and liabilities | Year ended December 31, 2017 2016 Deferred tax assets: U.K. net operating loss carryforwards $ 7,641,719 $ 6,868,717 U.K. capital loss carryforwards 1,378,643 1,259,062 U.S. federal net operating loss carryforwards 2,606,017 3,061,669 IPR&D 6,776,473 6,630,745 Share-based payments 1,527,615 1,534,992 Enhanced research and development tax credits 1,060,200 796,256 Germany net operating loss carryforwards 516,401 424,432 U.S. state net operating loss carryforwards 1,057,856 749,812 Accrued expenses 198,067 174,424 Depreciation 1,948 3,673 Other – – Total deferred tax assets before valuation allowance 22,764,939 21,503,782 Valuation allowance for deferred tax assets (22,764,939 ) (21,503,782 ) Deferred tax liabilities: Indefinite-lived intangible asset (2,918,518 ) (2,918,518 ) Debt discount – – Total deferred tax liabilities (2,918,518 ) (2,918,518 ) Net deferred tax assets and liabilities $ (2,918,518 ) $ (2,918,518 ) |
Uncertain tax benefits | Year ended December 31, 2017 2016 Uncertain tax benefits as of January 1 $ – $ – Gross adjustments in tax positions – – Uncertain tax positions as of December 31 $ – $ – |
11. Stockholders' Equity (Table
11. Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Assumptions used | 2016 Weighted-average expected dividend yield (%) – Weighted-average expected volatility (%) 109.86 Weighted-average risk-free interest rate (%) 0.97 Weighted-average expected life of option (years) 5.00 Weighted-average exercise price ($) 10.40 |
12. Share-Based Compensation (T
12. Share-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Schedule of Share-Based Compensation Expense | Year Ended December 31, 2017 2016 Research and development expenses $ 101,401 $ 1,425,995 General and administrative expenses 1,691,692 1,798,657 $ 1,793,093 $ 3,224,652 |
Non-Vested Non-Employee Stock Options [Member] | |
Option activity | Number of shares Weighted- average exercise price Weighted- average remaining life (years) Aggregate intrinsic value Outstanding as of January 1, 2016 57,442 $ 13.39 8.23 $ 220,764 Granted – Outstanding as of December 31, 2016 57,442 7.57 7.23 $ – Granted – Expired (723 ) 10.34 $ Outstanding as of December 31, 2017 56,719 7.53 6.31 $ – Vested or expected to vest as of December 31, 2017 56,719 7.53 6.31 $ – Exercisable as of December 31, 2016 47,341 $ 8.21 6.92 $ – Exercisable as of December 31, 2017 56,719 $ 7.53 6.31 $ – |
Common Stock Awards [Member] | |
Common stock awards | Number of shares Balance as of January 1, 2016 22,887 Granted 26,760 Issued (19,857 ) Balance as of December 31, 2016 29,790 Granted 41,800 Settled in cash (8,773 ) Balance as of December 31, 2017 62,817 |
Employee Stock Options [Member] | |
Assumptions used | Year Ended December 31, 2017 2016 Weighted-average expected dividend yield (%) – – Weighted-average expected volatility (%) 111.37 110.11 Weighted-average risk-free interest rate (%) 1.79 1.63 Weighted-average expected life of option (years) 5.36 5.92 Weighted-average exercise price ($) 3.34 3.49 |
Option activity | Number of shares Weighted- average exercise price Weighted- average remaining life (years) Aggregate intrinsic value Outstanding as of January 1, 2016 619,259 15.22 8.92 $ 1,915,942 Granted 603,622 3.49 Expired (29,169 ) 12.38 Outstanding as of December 31, 2016 1,193,712 4.43 8.94 $ 526,073 Granted 700,000 3.34 Expired (113,343 ) 4.61 Outstanding as of December 31, 2017 1,780,369 3.99 8.53 $ 5,273 Vested or expected to vest as of December 31, 2017 1,755,369 4.02 8.51 $ 5,273 Exercisable as of December 31, 2016 440,092 $ 5.60 8.94 $ 55,109 Exercisable as of December 31, 2017 731,895 $ 4.84 7.44 $ 5,273 |
Employee Stock Options [Member] | Non-Vested [Member] | |
Option activity | Number of shares Weighted- average grant date fair value Balance as of January 1, 2017 753,620 $ 4.49 Granted 700,000 $ 2.70 Forfeited (64,218 ) $ 6.15 Vested (340,928 ) $ 5.87 Balance as of December 31, 2017 1,048,474 $ 2.86 |
Non Employee Stock Options [Member] | Non-Vested [Member] | |
Option activity | Number of shares Weighted- average grant date fair value Balance as of January 1, 2017 10,101 $ 13.13 Vested (10,101 ) $ 13.13 Balance as of December 31, 2017 – $ – |
14. Commitments and Contingen34
14. Commitments and Contingent Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future minimum operating lease payment schedule | As of December 31, Total Operating Leases 2018 $ 123,663 2019 24,583 2020 – Total minimum lease payments $ 148,246 |
Schedule II - Valuation and Q35
Schedule II - Valuation and Qualifying Accounts (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Valuation and Qualifying Accounts [Abstract] | |
Schedule of Valuation and Qualifying Accounts | Valuation Allowance on Deferred Tax Assets Balance Beginning of Period Additions (Deductions) Charged to (from) Income Tax Expense Other Changes to Valuation Allowance Balance End of Period 2017 $ (21,503,782 ) (1,261,157 ) – $ (22,764,939 ) 2016 $ (15,324,438 ) (6,179,344 ) – $ (21,503,782 ) |
2. Summary of Significant Acc36
2. Summary of Significant Accounting Policies (Details - Useful Lives) | 12 Months Ended |
Dec. 31, 2017 | |
Laboratory Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life | 3 years |
Leasehold Improvements [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life | 5 years |
Office and Computer Equipment [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life | 3 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Estimated Useful Life | 5 years |
2. Summary of Significant Acc37
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Basis Of Presentation And Significant Accounting Policies [Line Items] | ||
Letter of credit | $ 100,000 | |
Letter of credit purpose | Required for operating lease in Lexington, Massachusetts. | |
Impairment of indefinate lived intangible assets | $ 0 | $ 0 |
Impairment of goodwill | 0 | 0 |
Impairment of long-lived assets | $ 0 | $ 0 |
Antidilutive shares | 600,000 | 1,700,000 |
JSOP [Member] | ||
Basis Of Presentation And Significant Accounting Policies [Line Items] | ||
Awards outstanding | 300,000 | 300,000 |
3. Acquisitions (Details Narrat
3. Acquisitions (Details Narrative) | 12 Months Ended |
Dec. 31, 2016USD ($)shares | |
Issuance of common stock in connection with completion of asset acquisition, value | $ 34,902,444 |
Fair value of warrants issued | 2,069,673 |
Asset Purchase Agreement [Member] | Pharmsynthez [Member] | |
Fair value of asset acquired | 39,500,000 |
Issuance of common stock in connection with completion of asset acquisition, value | 38,600,000 |
Fair value of warrants issued | 900,000 |
Debt converted, amount converted | $ 6,500,000 |
Debt converted, shares issued | shares | 1,400,000 |
Stock issued with closing of the APA | shares | 3,000,000 |
4. Significant Strategic Drug39
4. Significant Strategic Drug Development Collaborations (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||
Licenses Revenue | $ 7,500,000 | $ 0 |
Milestone revenue | 0 | 3,000,000 |
Research, development, license and supply agreement [Member] | Shire [Member] | ||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||
Licenses Revenue | $ 7,500,000 | |
Milestone revenue | $ 3,000,000 | |
Percent ownership in Xenetic | 4.70% | |
License and supply agreements [Member] | Serum Institute of India Ltd [Member] | ||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||
Milestone revenue | $ 0 | |
Percent ownership in Xenetic | 7.20% | 7.50% |
License and supply agreements [Member] | Pharmsynthez [Member] | ||
Research and Development Arrangement, Contract to Perform for Others [Line Items] | ||
Percent ownership in Xenetic | 61.50% | 52.60% |
5. Property and Equipment, ne40
5. Property and Equipment, net (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment - at cost | $ 358,321 | $ 349,057 |
Less accumulated depreciation | (330,475) | (306,691) |
Property and equipment - net | 27,846 | 42,366 |
Laboratory Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment - at cost | 264,583 | 264,583 |
Office and Computer Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment - at cost | 46,634 | 37,370 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment - at cost | 26,841 | 20,263 |
Furniture and Fixtures [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment - at cost | $ 20,263 | $ 26,841 |
5. Property and Equipment, ne41
5. Property and Equipment, net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 23,784 | $ 36,449 |
6. Goodwill and Indefinite-Li42
6. Goodwill and Indefinite-Lived Intangible Assets (Details - Goodwill) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Beginning Balance | $ 3,283,379 | $ 3,283,379 |
No chages | 0 | 0 |
Ending Balance | $ 3,283,379 | $ 3,283,379 |
6. Goodwill and Indefinite-Li43
6. Goodwill and Indefinite-Lived Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Indefinite-lived Intangible Assets [Line Items] | ||
Carrying value of indefinite-lived intangible asset | $ 9,243,128 | $ 9,243,128 |
Impairment of indefinite-lived intangible asset | 0 | 0 |
OncoHist [Member] | ||
Indefinite-lived Intangible Assets [Line Items] | ||
Carrying value of indefinite-lived intangible asset | 9,200,000 | 9,200,000 |
Impairment of indefinite-lived intangible asset | $ 0 | $ 0 |
7. Accrued Expenses (Details)
7. Accrued Expenses (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Payables and Accruals [Abstract] | ||
Accrued payroll and benefits | $ 723,488 | $ 109,315 |
Accrued professional fees | 389,086 | 477,345 |
Accrued research costs | 11,477 | 208,751 |
Other | 11,602 | 43,477 |
Total accrued expenses | $ 1,135,653 | $ 838,888 |
7. Accrued Expenses (Details Na
7. Accrued Expenses (Details Narrative) - 12 months ended Dec. 31, 2017 - M. Scott Maguire [Member] | GBP (£) | USD ($) |
Accrued payroll and benefits | $ | $ 400,000 | |
United Kingdom, Pounds | ||
Termination payment | £ | £ 30,000 |
8. Hybrid Debt Instrument (Deta
8. Hybrid Debt Instrument (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loss on issuance of hybrid debt instruments | $ 0 | $ (1,690,784) |
Gain (loss) on extinguishment of debt | $ 0 | (6,394,921) |
Initial APA Note [Member] | Pharmsynthez and Kevelt [Member] | ||
Convertible note face value | 3,500,000 | |
Loss on issuance of hybrid debt instruments | (1,600,000) | |
Gain on change in fair value of hybrid instrument | $ 1,900,000 | |
Hybrid Debt Instrument [Member] | Pharmsynthez [Member] | ||
Devt converted, shares issued | 1,400,000 | |
Debt converted, debt amount | $ 6,500,000 | |
Debt converted, interest converted | 200,000 | |
Gain (loss) on extinguishment of debt | (6,200,000) | |
Additional APA Note [Member] | Pharmsynthez [Member] | ||
Convertible note face value | $ 500,000 | |
Conversion price | $ 4.95 | |
Warrants issued | 50,506 | |
CEO Note [Member] | M. Scott Maguire [Member] | ||
Convertible note face value | $ 369,958 | |
Warrants issued | 37,369 | |
Interest expense | $ 13,176 | |
Further Notes [Member] | Note 1 [Member] | ||
Convertible note face value | $ 178,000 | |
Conversion price | $ 4 | |
Further Notes [Member] | Note 2 [Member] | ||
Convertible note face value | $ 322,000 | |
Conversion price | $ 4 | |
Period Notes [Member] | ||
Gain on change in fair value of hybrid instrument | $ (100,000) | |
All Notes [Member] | ||
Interest expense | $ 700,000 |
9. Fair Value Measurements (Det
9. Fair Value Measurements (Details) - Fair Value, Inputs, Level 3 [Member] | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Beginning Balance | $ (3,544,222) |
Issuances of compound derivative instrument | (4,120,359) |
Change in fair value of compund derivative instrument | 2,125,113 |
Settlement of derivative instruments through conversion of debt host | 5,539,468 |
Ending Balance | $ 0 |
10. Income Taxes (Details - Inc
10. Income Taxes (Details - Income by geographic regions) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Loss before income taxes | $ (3,595,132) | $ (54,206,106) |
UNITED STATES [Member] | ||
Loss before income taxes | (5,889,926) | (12,253,271) |
UNITED KINGDOM [Member] | ||
Loss before income taxes | 2,398,830 | (41,837,056) |
GERMANY [Member] | ||
Loss before income taxes | $ (104,036) | $ (115,779) |
10. Income Taxes (Details - Tax
10. Income Taxes (Details - Tax reconcilation) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Federal | $ (1,222,345) | $ (18,429,763) |
State | (303,315) | (455,191) |
Increase in tax losses not recognized | (359,833) | 9,751,401 |
Permanent differences, net | 162,543 | 780,836 |
Mark to market | 0 | 992,621 |
Foreign rate differential | (383,601) | 6,923,116 |
Share-based payments, net | (22,087) | 524,131 |
Changes per enacted tax reform | 2,320,059 | 0 |
Enhanced research and development tax credits | (191,421) | (87,151) |
Net provision (benefit) for income taxes | $ 0 | $ 0 |
10. Income Taxes (Details - Def
10. Income Taxes (Details - Deferred Tax Assets) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
U.S. federal net operating loss carryforwards | $ 2,606,017 | $ 3,061,669 |
IPR&D | 6,776,473 | 6,630,745 |
Share-based compensation | 1,527,615 | 1,534,992 |
Enhanced research and development tax credits | 1,060,200 | 796,256 |
U.S. state net operating loss carryforwards | 1,057,856 | 749,812 |
Accrued expenses | 198,067 | 174,424 |
Depreciation | 1,948 | 3,673 |
Other | 0 | 0 |
Total deferred tax assets before valuation allowance | 22,764,939 | 21,503,782 |
Valuation allowance for deferred tax assets | (22,764,939) | (21,503,782) |
Deferred tax liability: | ||
Indefinite-lived intangible asset | (2,918,518) | (2,918,518) |
Debt discount | 0 | 0 |
Total deferred tax liabilities | (2,918,518) | (2,918,518) |
Net deferred tax assets and liabilities | (2,918,518) | (2,918,518) |
UNITED KINGDOM [Member] | ||
Deferred tax assets: | ||
Foreign net operating loss carryforwards | 7,641,719 | 6,868,717 |
Foreign capital loss carryforwards | 1,378,643 | 1,259,062 |
GERMANY [Member] | ||
Deferred tax assets: | ||
Foreign net operating loss carryforwards | $ 516,401 | $ 424,432 |
10. Income Taxes (Details - Unc
10. Income Taxes (Details - Uncertain tax benefits) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Uncertain tax benefits as of January 1 | $ 0 | $ 0 |
Gross adjustments in tax positions | 0 | 0 |
Uncertain tax positions as of December 31 | $ 0 | $ 0 |
10. Income Taxes (Details Narra
10. Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
UNITED KINGDOM [Member] | ||
Net operating loss carryforwards | $ 45,000,000 | $ 41,100,000 |
UNITED STATES [Member] | ||
Net operating loss carryforwards | $ 13,500,000 | 9,800,000 |
Operating loss expiration dates | Dec. 31, 2032 | |
State [Member] | ||
Net operating loss carryforwards | $ 13,300,000 | 9,400,000 |
Operating loss expiration dates | Dec. 31, 2032 | |
GERMANY [Member] | ||
Net operating loss carryforwards | $ 1,600,000 | $ 1,300,000 |
11. Stockholders' Equity (Detai
11. Stockholders' Equity (Details) - Warrants [Member] | 12 Months Ended |
Dec. 31, 2016$ / shares | |
Weighted-average expected dividend yield | 0.00% |
Weighted-average expected volatility | 109.86% |
Weighted-average risk-free interest rate | 0.97% |
Weighted-average expected life of option (years) | 5 years |
Weighted-average exercise price | $ 10.4 |
Model used | Black-Scholes |
12. Share-Based Compensation (D
12. Share-Based Compensation (Details - Share based compensation) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based compensation | $ 1,793,093 | $ 3,224,652 |
Research and Development Expense [Member] | ||
Share-based compensation | 101,401 | 1,425,995 |
General and Administrative Expense [Member] | ||
Share-based compensation | $ 1,691,692 | $ 1,798,657 |
12. Share-Based Compensation 55
12. Share-Based Compensation (Details - Assumptions Employee) - Employee Stock Options [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Weighted-average expected dividend yield | 0.00% | 0.00% |
Weighted-average expected volatility | 111.37% | 110.11% |
Weighted-average risk-free interest rate | 1.79% | 1.63% |
Weighted-average expected life of option | 5 years 4 months 10 days | 5 years 11 months 1 day |
Weighted-average exercise price | $ 3.34 | $ 3.49 |
12. Share-Based Compensation 56
12. Share-Based Compensation (Details - Employee option activity) - Employee Stock Options [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Options outstanding, beginning balance | 1,193,712 | 619,259 |
Options granted | 700,000 | 603,622 |
Options expired | (113,343) | (29,169) |
Options outstanding, ending balance | 1,780,369 | 1,193,712 |
Options vested or expected to vest | 1,755,369 | |
Options exercisable | 731,895 | 440,092 |
Weighted-average exercise price outstanding, beginning balance | $ 4.43 | $ 15.22 |
Weighted-average exercise price, granted | 3.34 | 3.49 |
Weighted-average exercise price, expired | 4.61 | 12.38 |
Weighted-average exercise price, ending balance | 3.99 | 4.43 |
Weighted-average exercise price, vested or expected to vest | 4.02 | |
Weighted-average exercise price, exercisable | $ 4.84 | $ 5.6 |
Weighted-average remaining life outstanding | 8 years 6 months 11 days | 8 years 11 months 1 day |
Weighted-average remaining life, vested or expected to vest | 8 years 6 months 4 days | |
Weighted-average remaining life, exercisable | 7 years 5 months 8 days | 8 years 11 months 8 days |
Aggregate intrinsic value, outstanding beginning balance | $ 526,073 | $ 1,915,942 |
Aggregate intrinsic value, outstanding ending balance | 5,273 | 526,073 |
Aggregate intrinsic value, vested or expected to vest | 5,273 | |
Aggregate intrinsic value, exercisable | $ 5,273 | $ 55,109 |
12. Share-Based Compensation 57
12. Share-Based Compensation (Details - Non-Vested employee Option activity) - Non-vested Employee Stock Options [Member] | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Options outstanding, beginning balance | shares | 753,620 |
Options granted | shares | 700,000 |
Options forfeited | shares | (64,218) |
Options vested | shares | (340,928) |
Options outstanding, ending balance | shares | 1,048,474 |
Weighted-average grant date fair value per share, beginning balance | $ / shares | $ 4.49 |
Weighted-average grant date fair value per share, options granted | $ / shares | 2.70 |
Weighted-average grant date fair value per share, options forfeited | $ / shares | 6.15 |
Weighted-average grant date fair value per share, options vested | $ / shares | 5.87 |
Weighted-average grant date fair value per share, ending balance | $ / shares | $ 2.86 |
12. Share-Based Compensation 58
12. Share-Based Compensation (Details - Non-employee option activity) - Non Employee Stock Options [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Options outstanding, beginning balance | 57,442 | 57,442 |
Options granted | 0 | 0 |
Options expired | (723) | |
Options outstanding, ending balance | 56,719 | 57,442 |
Options vested or expected to vest | 56,719 | |
Options exercisable | 56,719 | 47,341 |
Weighted-average exercise price outstanding, beginning balance | $ 7.57 | $ 13.39 |
Weighted-average exercise price, forfeited/expired | 10.34 | |
Weighted-average exercise price, ending balance | 7.53 | 7.57 |
Weighted-average exercise price, vested or expected to vest | 7.53 | |
Weighted-average exercise price, exercisable | $ 7.53 | $ 8.21 |
Weighted-average remaining life outstanding | 6 years 3 months 22 days | 7 years 2 months 23 days |
Weighted-average remaining life, vested or expected to vest | 6 years 3 months 22 days | |
Weighted-average remaining life, exercisable | 6 years 3 months 22 days | 6 years 11 months 1 day |
Aggregate intrinsic value, outstanding beginning balance | $ 0 | $ 220,764 |
Aggregate intrinsic value, outstanding ending balance | 0 | 0 |
Aggregate intrinsic value, vested or expected to vest | 0 | |
Aggregate intrinsic value, exercisable | $ 0 | $ 0 |
12. Share-Based Compensation 59
12. Share-Based Compensation (Details - Non-vested non-employee) - Non-vested Non-Employee Stock Options [Member] | 12 Months Ended |
Dec. 31, 2017$ / sharesshares | |
Options outstanding, beginning balance | shares | 10,101 |
Options vested | shares | (10,101) |
Options outstanding, ending balance | shares | 0 |
Weighted-average exercise price outstanding, beginning balance | $ / shares | $ 13.13 |
Weighted-average grant date fair value per share, options vested | $ / shares | 13.13 |
Weighted-average exercise price, ending balance | $ / shares |
12. Share-Based Compensation 60
12. Share-Based Compensation (Details - Common stock awards) - Common Stock Awards [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Common stock awards outstanding, beginning balance | 29,790 | 22,887 |
Common stock awards granted | 41,800 | 26,760 |
Common stock awards issued | (19,857) | |
Common stock awards settled in cash | $ (8,773) | |
Common stock awards outstanding, ending balance | 62,817 | 29,790 |
12. Share-Based Compensation 61
12. Share-Based Compensation (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based compensation expense | $ 1,793,093 | $ 3,224,652 | |
Extend Expiry Dates [Member] | |||
Incremental compensation expense | 4,000 | 24,000 | |
Modification of Exercise Price and Vesting [Member] | |||
Incremental compensation expense | $ 200,000 | ||
Post Termination Modifications [Member] | |||
Incremental compensation expense | $ 200,000 | ||
Employee Stock Options [Member] | |||
Options granted | 700,000 | 603,622 | |
Weighted average grant date fair value | $ 2.70 | $ 2.94 | |
Options exercised | 0 | 0 | |
Options vested | 340,930 | 212,472 | |
Fair value of options vested | $ 1,900,000 | $ 1,700,000 | |
Unrecognized compensation expense | $ 2,100,000 | ||
Unrecognized compensation expense recognition period | 1 year 10 months 24 days | ||
Restricted Stock Units (RSUs) [Member] | |||
Other than options granted, shares | 50,000 | ||
Vesting period | 3 years | ||
Other than options, grant date fair value per share | $ 2.11 | ||
Other than options, shares vested | 0 | ||
Other than options, shares expired | 0 | ||
Non Employee Stock Options [Member] | |||
Share-based compensation expense | $ 100,000 | $ 100,000 | |
Options granted | 0 | 0 | |
Options exercised | 0 | 0 | |
Options vested | 10,101 | 17,857 | |
Common Stock Awards [Member] | |||
Share-based compensation expense | $ 100,000 | $ 200,000 | |
Other than options granted, shares | 41,800 | 26,760 | |
Other than options, shares outstanding | 62,817 | 29,790 | 22,887 |
JSOP [Member] | |||
Other than options, shares outstanding | 300,000 | 300,000 |
13. Employee Benefit Plans (Det
13. Employee Benefit Plans (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
401k Plan [Member] | ||
Contribution to 401k plan | $ 51,000 | $ 44,000 |
UK Plan [Member] | ||
Contribution to 401k plan | $ 0 | $ 48,000 |
14. Commitments and Contingen63
14. Commitments and Contingent Liabilities (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Prepaid rent | $ 32,000 | |
Prepaid rent, noncurrent | 2,000 | |
Landlord's leasehold obligation | 20,000 | |
Rent expense | $ 100,000 | $ 100,000 |
15. Related Party Transactions
15. Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
SynBio LLC [Member] | ||
Due to related party | $ 0 | $ 0 |
Non-Employee Director [Member] | ||
Professional fees | $ 100,000 | $ 100,000 |
Schedule II - Valuation and Q65
Schedule II - Valuation and Qualifying Accounts (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Valuation and Qualifying Accounts [Abstract] | ||
Valuation allowance on deferred tax assets, beginning balance | $ (21,503,782) | $ (15,324,438) |
Additions (deductions) charged to (from) income tax expense | (1,261,157) | (6,179,344) |
Other changes to valuation allowance | 0 | 0 |
Valuation allowance on deferred tax assets, ending balance | $ (22,764,939) | $ (21,503,782) |