SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policy) | 9 Months Ended |
Sep. 30, 2014 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | ' |
Recently Adopted Accounting Standards | ' |
Recently Adopted Accounting Standards |
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On June 10, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2014-10, Development Stage Entities (Topic 915) – Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation (“ASU 2014-10”), which eliminates the concept of a development stage entity in its entirety from current accounting guidance. Amendments to the consolidation guidance may result in more DSEs being considered variable interest entities. The new guidance applies to all entities that previously met the definition of a DSE. ASU 2014-10 is effective for public business entities for annual reporting periods beginning after December 15, 2015, and interim periods therein. Early adoption of the new standard is permitted. Management has elected to early adopt ASU 2014-10, as permitted and, accordingly, has not included the inception-to-date disclosures and other previously required disclosures for development stage entities. |
Basis of Presentation | ' |
Basis of Presentation |
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The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read in conjunction with the Company's 2013 financial statements for the year ended December 31, 2013, which are included in the Company's Form 8-K for the Merger occurring on July 31, 2014, as discussed above. |
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The preparation of financial statements in conformity with these accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements; and the reported amounts of expenses during the reported period. Ultimate results could differ from the estimates of management. |
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In the opinion of management, the unaudited financial statements included herein contain all adjustments necessary to present fairly the Company's financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the three and nine months ended September 30, 2014 may not be indicative of results for the full year. |
Use of Estimates | ' |
Use of Estimates |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Significant estimates used in preparing the Company's financial statements include the estimation of stock based compensation, stock warrants liability, accrued expenses, revenue recognition and income taxes. Actual results could differ from those estimates. |
Cash and Cash Equivalents | ' |
Cash and Cash Equivalents |
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The Company considers all highly liquid investments with maturities of 90 days or less from the purchase date to be cash equivalents. Cash and cash equivalents are held in depository and money market accounts and are reported at fair value. |
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Marketable securities consist of U.S. treasury securities with maturities of more than 90 days. The Company has determined the appropriate balance sheet classification of the securities as current since they are available for use in current operating activities, regardless of actual maturity dates, and are recorded on the balance sheet at fair value. |
Concentration of Credit Risk | ' |
Concentration of Credit Risk |
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The Company has no significant off-balance sheet concentrations of credit risk such as foreign currency exchange contracts, option contracts or other hedging arrangements. Financial instruments that subject the Company to credit risk consists primarily of cash and cash equivalents. The Company generally invests its cash in money market funds, U.S. Treasury securities and U.S. Agency securities that are subject to minimal credit and market risk. Management has established guidelines relative to credit ratings and maturities intended to safeguard principal balances and maintain liquidity. At times, the Company's cash balances may exceed the current insured amounts under the Federal Deposit Insurance Corporation. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
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Fair values of financial instruments included in current assets and current liabilities are estimated to approximate their book values, due to the short maturity of such instruments. All debt was based on current rates at which the Company could borrow funds with similar remaining maturities and approximates fair value. The Company's assets and liabilities that are measured at fair value on a recurring basis are measured in accordance with FASB's Accounting Standards Codification 820, Fair Value Measurements and Disclosures, which establishes a three-level valuation hierarchy for measuring fair value and expands financial statement disclosures about fair value measurements. |
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The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows: |
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| • | Level 1: Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets in active markets. | | | | | | | | | | | | | | |
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| • | Level 2: Inputs to the valuation methodology included quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. | | | | | | | | | | | | | | |
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| • | Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. | | | | | | | | | | | | | | |
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The Company's cash equivalents carried at fair value are primarily comprised of investments in a U.S. Treasury and federal agency backed money market fund. The valuation of the Company's derivative liabilities is discussed below and in Note 9. |
The following table presents information about the Company's financial assets and liabilities measured at a fair value on a recurring basis as of September 30, 2014 and December 31, 2013: |
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| | September 30, | | | Quoted Prices in | | | Observable | | | Unobservable | |
2014 | Active Markets | Inputs | Inputs |
| (Level 1) | (Level 2) | (Level 3) |
Assets | | | | | | | | | | | | | | | | |
Cash | | $ | 1,219,603 | | | $ | 1,219,603 | | | $ | - | | | $ | - | |
Money Market funds, included in cash equivalents | | $ | 11,972,281 | | | $ | 11,972,281 | | | $ | - | | | $ | - | |
Marketable securities – U.S. Treasuries | | $ | 3,017,324 | | | $ | 3,017,324 | | | $ | - | | | $ | - | |
Liabilities | | | | | | | | | | | | | | | | |
Derivative liabilities | | $ | 21,136,878 | | | $ | - | | | $ | - | | | $ | 21,136,878 | |
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| | December 31, | | | Quoted Prices | | | Observable | | | Unobservable | |
2013 | in Active | Inputs | Inputs |
| Markets | (Level 2) | (Level 3) |
| (Level 1) | | |
Assets | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 263,910 | | | $ | 263,910 | | | $ | - | | | $ | - | |
Liabilities | | | | | | | | | | | | | | | | |
Derivative liabilities | | $ | 41,466 | | | $ | - | | | $ | - | | | $ | 41,466 | |
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The following table provides a roll forward of the fair value of the Company's warrant liabilities, using Level 3 inputs: |
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Balance at December 31, 2013 | | $ | 41,466 | | | | | | | | | | | | | |
Warrants granted with PPO at July 31, 2014 | | | 16,261,784 | | | | | | | | | | | | | |
Change in fair value | | | 4,833,628 | | | | | | | | | | | | | |
Balance at September 30, 2014 | | $ | 21,136,878 | | | | | | | | | | | | | |
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Accounts Receivable and Allowance for Doubtful Accounts | ' |
Accounts Receivable and Allowance for Doubtful Accounts |
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Trade receivables are recorded at the invoiced amount. The Company maintains allowances for doubtful accounts, if needed, for estimated losses resulting from the inability of customers to make required payments. This allowance is based on specific customer account reviews and historical collections experience. There was no allowance for doubtful accounts as of September 30, 2014 or December 31, 2013. |
Property and Equipment | ' |
Property and Equipment |
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Property and equipment are recorded at cost. Expenditures for maintenance and repairs are charged to expense as incurred, whereas major betterments are capitalized as additions to property and equipment. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows: |
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Lab equipment | | 5 years | | | | | | | | | | | | | | |
Computer equipment and software | | 3 years | | | | | | | | | | | | | | |
Furniture | | 3 years | | | | | | | | | | | | | | |
Leasehold improvements | | Shorter of useful life or life of the lease | | | | | | | | | | | | | | |
Impairment of Long-Lived Assets | ' |
Impairment of Long-Lived Assets |
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Long-lived assets are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicated that there is impairment, the amount of the impairment is calculated as the difference between the carrying value and fair value. There have been no impairments recognized during the nine months ended September 30, 2014 and 2013, respectively. |
Revenue Recognition - Collaboration and license revenue | ' |
Collaboration and license revenue |
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Non-refundable license fees are recognized as revenue when the Company has a contractual right to receive such payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured and the Company has no further performance obligations under the license agreement. Multiple element arrangements, such as license and development arrangements are analyzed to determine whether the deliverables, which often include license and performance obligations such as research and steering committee services, can be separated or whether they must be accounted for as a single unit of accounting in accordance with GAAP. The Company recognizes up-front license payments as revenue upon delivery of the license only if the license has stand-alone value and the fair value of the undelivered performance obligations, typically including research and/or steering committee services, can be determined. If the fair value of the undelivered performance obligations can be determined, such obligations would then be accounted for separately as performed. If the license is considered to either (i) not have stand-alone or (ii) have stand-alone value but the fair value of any of the undelivered performance obligations cannot be determined, the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations are recognized as revenue over the estimated period of when the performance obligations are performed. |
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Whenever the Company determines that an arrangement should be accounted for as a single unit of accounting, it must determine the period over which the performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a relative performance or straight-line method. The Company recognizes revenue using the relative performance method provided that the Company can reasonably estimate the level of effort required to complete its performance obligations under an arrangement and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as a measure of performance. Revenue recognized under the relative performance method would be determined by multiplying the total payments under the contract, excluding royalties and payments contingent upon achievement of substantive milestones, by the ratio of level of effort incurred to date to estimated total level of effort required to complete the Company's performance obligations under the arrangement. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the relative performance method, as of each reporting period. |
If the Company cannot reasonably estimate the level of effort required to complete its performance obligations under an arrangement, the performance obligations are provided on best-efforts basis and the Company can reasonably estimate when the performance obligation ceases or the remaining obligations become inconsequential and perfunctory. At that time, the total payments under the arrangement, excluding royalties and payments contingent upon achievement of substantive milestones, would be recognized as revenue on a straight-line basis over a period the Company expects to complete its performance obligations. |
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Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the straight-line basis, as of the period ending date. |
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The difference between the total consideration received to date and the revenue recognized is recorded as deferred collaboration revenue and totals $0 and $25,714 at September 30, 2014 and December 31, 2013, respectively. |
Revenue Recognition - Grant Revenue | ' |
Grant Revenue |
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The Company recognizes nonrefundable grant revenue that is earned in connection with its Research Agreement with the National Cancer Institute (“NCI”). Grant revenue consists of a portion of the funds received to date by the NCI, which allow the Company to conduct research on colon cancer tissues. Revenue is recognized as the related research services are performed in accordance with the terms of the agreement. The difference between the total consideration received to date and the revenue recognized is recorded as deferred grant revenue and totals $0 at both September 30, 2014 and December 31, 2013. In September 2014, the Company was awarded a Phase II Small Business Innovation Research contract from NCI. |
Research and Development Expenses | ' |
Research and Development Expenses |
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Research and development expenditures are charged to the statement of operations as incurred. Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, clinical supply costs, contract services, depreciation and amortization expense and other related costs. Costs associated with acquired technology, in the form of upfront fees or milestone payments, are charged to research and development expense as incurred. Legal fees incurred in connection with patent applications, along with fees associated with the license to the Company's core technology, are expensed as research and development expense. |
Derivative Liabilities | ' |
Derivative Liabilities |
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The Company's derivative liabilities relates to (a) warrants to purchase an aggregate of 23,549,510 shares of the Company's common stock that were issued in connection with the July 2014 PPO (as defined below in Note 8) and (b) warrants to purchase 41,659 shares of Enumeral Series A Preferred Stock that were issued in December 2011 and June 2012 pursuant to Enumeral's debt financing arrangement with Square 1 Bank (as further described in Note 5) that were subsequently converted into warrants to purchase 66,574 shares of the Company's common stock in connection with the July 2014 Merger. Additional detail regarding these warrants can be found in Note 9 below. |
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Due to the price protection provision included in the warrant agreements, the warrants were deemed to be liabilities and, therefore, the fair value of the warrants is recorded in the current liability section of the balance sheet. As such, the outstanding warrants are revalued each reporting period with the resulting gains and losses recorded as the change in fair value of warrant liability on the statement of operations. |
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The Company used the Black-Scholes option-pricing model to estimate the fair values of the issued and outstanding warrants upon issuance and as of September 30, 2014. |
Stock-Based Compensation | ' |
Stock-Based Compensation |
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The Company has elected to use the Black-Scholes option pricing model to determine the grant date fair value of share-based awards. The Company recognizes the compensation cost of employee share-based awards on a straight-line basis over the employee's requisite service period of each award, which is generally the vesting period. |
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The fair value of the restricted stock awards granted to employees is based upon the fair value of the common stock on the date of grant. Expense is recognized over the vesting period. |
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The Company has recorded stock-based compensation expense of $510,587 and $159,754 for the nine months ended September 30, 2014 and 2013, respectively, and $304,163 and $79,771 for three months ended September 30, 2014 and 2013, respectively. The Company has an aggregate of $953,653 of unrecognized stock-based compensation cost as of September 30, 2014 to be amortized over a weighted average period of 1.72 years. |
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Prior to the Merger, Enumeral engaged a third party to develop an estimate of the fair value of a share of Enumeral's common stock on a fully-diluted, minority, non-marketable basis as of December 31, 2013. Based upon unaudited historical, pro-forma and/or forecast financial and operational information, which Enumeral management represented as accurately reflecting the company's operating results and financial position, the third party utilized both a market approach (using various financial statement metrics of similar enterprises' equity securities to estimate the fair value of Enumeral's equity securities) and an income approach (which bases value on expectations of future income and cash flows) in their analyses. The fair value of a single share of common stock was determined using the option pricing method, which treats common and preferred stock as call options on the aggregate enterprise value and using traditional models, including Black-Scholes or binomial models, to calculate share values. |
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During the quarter ended September 30, 2014, the Company engaged a third party to develop a binomial lattice model to estimate the fair value of options to purchase a total of 450,000 shares with vesting based on the future performance of a share of the Company's common stock. |
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Following the Merger, the Company's common stock became publicly traded, and fair market value is determined based on the closing sales price of the Company's common stock on the OTC Markets. |
Earnings (Loss) Per Share | ' |
Earnings (Loss) Per Share |
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Basic earnings (loss) per common share amounts are based on weighted average number of common shares outstanding. Diluted earnings per share amounts are based on the weighted average number of common shares outstanding, plus the incremental shares that would have been outstanding upon the assumed exercise of all potentially dilutive stock options, warrants and convertible debt, subject to anti-dilution limitations. All such potentially dilutive instruments were anti-dilutive as of September 30, 2014 and December 31, 2013. At September 30, 2014 and December 31, 2013, the number of shares underlying options and warrants that were anti-dilutive was approximately 27.2 million shares and 0.9 million shares, respectively. |
Income Taxes | ' |
Income Taxes |
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The Company records income taxes using the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and operating loss and tax credit carryforwards. The Company's financial statements contain certain deferred tax assets, which have arisen primarily as a result of operating losses, as well as other temporary differences between financial and tax accounting. The Company would establish a valuation allowance if the likelihood of realization of the deferred tax assets is reduced based on an evaluation of objective verifiable evidence. Significant management judgment is required in determining the Company's provision for income taxes, the Company's deferred tax assets and liabilities and any valuation allowance recorded against those net deferred assets. The Company evaluates the weight of all available evidence to determine whether it is more likely than not that some portion or all of the net deferred income tax assets will not be realized. |
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The Company accounts for uncertain tax positions in accordance with GAAP and has no uncertain tax liabilities at September 30, 2014 or December 31, 2013. The guidance requires the Company to determine whether it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authority. If a tax position meets the more likely than not recognition criteria, the guidance requires the tax position be measured at the largest amount of benefit greater than 50% likely of being realized upon ultimate settlement. |
New Accounting Pronouncements | ' |
New Accounting Pronouncements |
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In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASU 2014-09”). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The guidance in ASU 2014-09 supersedes the revenue recognition requirements in Topic 605, Revenue Recognition and most industry-specific guidance. The core principle of the guidance is that an entity should recognize revenue to illustrate the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new guidance also includes a cohesive set of disclosure requirements that will provide users of financial statements with comprehensive information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a reporting organization's contracts with customers. ASU 2014-09 is effective retrospectively for fiscal years, and interim periods within those years beginning after December 15, 2016 for public companies and 2017 for non-public entities. Management is evaluating the effect, if any, on the Company's financial position and results of operations. |
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In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (“ASU 2014-12”). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation – Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. ASU 2014-12 is effective for annual periods and interim periods within those periods beginning after December 31, 2015. Earlier adoption is permitted. The Company does not expect the adoption of this guidance will have a significant impact on the Company's consolidated financial statements. |
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