| Summary of Significant Accounting Policies | 2.
Summary of Significant Accounting
Policies
Basis of Presentation and Use of Estimates The accompanying consolidated financial statements
have been prepared in accordance with accounting principles
generally accepted in the United States (U.S. GAAP). The
preparation of the accompanying consolidated financial statements
in accordance with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities as
of the date of the consolidated financial statements, and the
reported amounts of revenue and expenses during the reporting
periods. Actual results could differ from those estimates. On January 23, 2018, our stockholders approved
an increase to the number of authorized shares of the
Company’s common stock from 100,000,000 to 250,000,000
shares. Our stockholders also approved a proposal authorizing the
board of directors, in its discretion, to effect a reverse stock
split of our outstanding shares of common stock at a ratio ranging
from 1-for-5 1-for-20 1-for-20 (pre-split) The reverse stock split did not affect the number
of authorized shares of common stock, which, after giving effect to
the authorized share increase, is 250,000,000 shares.
Liquidity and Substantial Doubt in Going Concern As of December 31, 2017, the Company has an
accumulated deficit of $225.9 million as well as negative cash
flows from operating activities. Presently, the Company does not
have sufficient cash resources to meet its obligations as they
become due within a year from issuance of these financial
statements. The Company will continue to require substantial funds
to continue research and development, including clinical trials of
its product candidate. Management plans to meet its operating
cash flow requirements include financing activities such as public
or private offerings of its common stock, and/or preferred stock
offerings, issuances of debt and convertible debt instruments and
collaborative or other arrangements with corporate sources. These factors raise substantial doubt regarding the
Company’s ability to continue as a going concern for a period
of one year from the issuance of these financial statements. There
are no assurances that such additional funding will be achieved and
that the Company will succeed in its future operations. The
Company’s inability to obtain required funding in the near
future or its inability to obtain funding on favorable terms will
have a material adverse effect on its operations and strategic
development plan for future growth. If the Company cannot
successfully raise additional capital and implement its strategic
development plan, its liquidity, financial condition and business
prospects will be materially and adversely affected, and the
Company may have to cease operations.
Segment Reporting The Company operates in one reportable segment to
develop human pharmaceutical products. Management uses one
measurement of profitability and does not segregate its business
for internal reporting. All long-lived assets are maintained in the
United States.
Cash Equivalents The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be
cash equivalents.
Restricted Cash The Company entered into a pledge and security
agreement with a bank whereby $35,000 was held as a security for
corporate purchasing cards. The balance is classified as restricted
cash as of December 31, 2017 and 2016, respectively. Concentrations of Credit Risk Financial instruments that potentially subject the
Company to a concentration of credit risk consist primarily of
cash, cash equivalents and short-term investments. The Company
invests its excess cash in money market funds, U.S. government
agency bonds, corporate notes, certificates of deposit and
commercial paper. The Company’s investment policy limits
investments to certain types of debt securities issued by the U.S.
government, its agencies and institutions with investment-grade
credit ratings and places restrictions on maturities and
concentration by type and issuer. Other than for obligations of the
U.S. government, the Company’s policy is that no single
issuer in the portfolio shall exceed 10% or $1 million, whichever
is greater, of the total portfolio at the time of purchase.
Additionally, no single issuer in the portfolio shall exceed 5% of
the total issue size outstanding at the time of purchase. Bank
deposits are held by a single financial institution having a strong
credit rating and these deposits may at times be in excess of FDIC
insured limits. The Company is exposed to credit risk in the event
of a default by the financial institutions holding its cash and
cash equivalents to the extent recorded on the balance sheets.
Property and Equipment Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is
calculated using the straight-line method over the estimated useful
lives of the respective assets, which range from three to five
years for computer equipment and software, and nine years for
manufacturing, laboratory, and office equipment. Leasehold
improvements are amortized over the shorter of the lease term or
the estimated useful lives of the respective assets.
Impairment of Long-Lived Assets The Company identifies and records impairment
losses on long-lived assets used in operations when events and
changes in circumstances indicate that the carrying amount of an
asset likely is not recoverable. Recoverability is measured by
comparing the fair value to the related asset’s carrying
value. If an asset is considered impaired, the asset is written
down to fair value, which is determined based either on discounted
cash flows or appraised value, depending on the nature of the
asset. An impairment charge of $70,000 primarily from its
laboratory equipment was recorded for the year ended
December 31, 2017 and no impairment charge was recorded for
2016.
Long-Term Investment In October 2013, the Company entered into a stock
purchase agreement with Zosano, Inc. (the Shell Corporation), a
Delaware corporation, pursuant to which the Company acquired
10,016,973 shares of the Shell Corporation’s common stock,
$0.0001 par value, for an aggregate cash purchase price of
$0.4 million. Immediately following the closing of the
acquisition, 10,027,000 shares of the Shell Corporation’s
common stock were issued and outstanding, approximately 99.9% of
which were held by the Company. The Company accounted for its investment in the
Shell Corporation using the cost method of accounting and
classified it as other long-term assets in its consolidated balance
sheet. In November 2016, the Company sold its interest in
Zosano, Inc. for an aggregate cash selling price of $225,000 and
recorded a realized loss of approximately $57,000 in its
consolidated income statement under the caption Other expense,
net.
Debt Issuance Costs Deferred issuance costs related to the
Company’s debt are presented as a direct deduction from the
carrying amount of the debt.
Deferred Offering Costs Deferred offering costs represent legal, accounting
and other direct costs related to the Company’s efforts to
raise capital through a public or private sale of the
Company’s common stock. These costs are deferred until the
completion of the applicable offering, at which time such costs are
reclassified to additional paid-in-capital
Deferred Rent Rent expense is recognized on a straight-line basis
over the non-cancelable non-cancelable
Research and Development Expenses Research and development costs are charged to
expense as incurred and consist of costs related to furthering the
Company’s research and development efforts and designing
and manufacturing the Company’s intracutaneous applicator for
the Company’s clinical and nonclinical studies. Research and
development costs include salaries and related employee benefits,
costs associated with clinical trials, nonclinical research and
development activities, regulatory activities, costs of active
pharmaceutical ingredients and raw materials, research and
development related overhead expenses, fees paid to contract
research organizations that conduct clinical trials on behalf of
the Company, and fees paid to contract manufacturing organizations
that conduct manufacturing activities on behalf of the Company. For the year ended December 31, 2017, the
Company incurred research and development costs of approximately
$10.4 million in connection with the Company’s research
and development efforts and approximately $9.8 million in the
manufacturing of the Company’s intracutaneous delivery system
for development of the Company’s product candidate. For the
year ended December 31, 2016, the Company incurred research
and development costs of approximately $11.9 million in
connection with the Company’s research and development
efforts and approximately $8.6 million in the manufacturing of
the Company’s intracutaneous delivery system for development
of the Company’s product candidate.
Clinical Trial Costs Clinical trial costs are a component of research
and development expenses. The Company expenses clinical trial
activities performed by third parties based upon actual work
completed in accordance with agreements established with clinical
research organizations and clinical sites. The Company accrues
clinical trial expenses each reporting period. The Company
determines the actual costs through discussions with internal
personnel and external service providers as to the progress or
stage of completion of trials or services and the agreed-upon fee
to be paid for such services.
Stock-Based Compensation The Company accounts for its stock-based
compensation, at fair value in accordance with ASC 718,
Compensation — Stock Compensation. The fair value of
employee stock option grants is estimated on the date of grant
using the Black-Scholes option pricing model, and are recognized as
expense on a straight- line basis over the employee’s
requisite service period (generally the vesting period), net of
estimated forfeitures. The Company records the expense attributed
to non-employee Income Taxes The Company uses the liability method to account
for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the
financial statement carrying amounts of existing assets and
liabilities and their tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates applied to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. A valuation allowance is
established when necessary to reduce deferred tax assets to the
amount expected to be realized. Financial statement effects of
uncertain tax positions are recognized when it
is more-likely-than-not,
Net Loss Per Common Share Basic net loss per common share is calculated by
dividing the net loss by the weighted-average number of common
shares outstanding during the period, without consideration for
potentially dilutive securities. Diluted net loss per common share
is computed by dividing the net loss attributable to common
stockholders by the weighted-average number of common shares and
potentially dilutive securities outstanding for the period
determined using the treasury-stock
and if-converted The following outstanding common stock equivalents
were excluded from the computations of diluted net loss per common
share for the periods presented as the effect of including such
securities would be antidilutive:
December 31,
2017
2016
(in
shares)
Warrants to purchase common stock 199,524 483,619
Options to purchase common stock 118,379 125,756
317,903
609,375
Recently Adopted and Issued Accounting Pronouncements In January 2017, the Company adopted ASU 2015-17,
“ Income Taxes (Topic 740): Balance Sheet Classification of
Deferred Taxes In February 2016, the FASB issued ASU
2016-02, Leases |
