| SIGNIFICANT ACCOUNTING POLICIES | 3.
SIGNIFICANT ACCOUNTING POLICIES A
summary of the significant accounting policies followed by the Company in the preparation of the financial statements is as follows: Use
of estimates The
process of preparing financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of financial statements and the reported
amounts of expenses during the reporting period. Actual results could differ from those estimates and changes in estimates may occur. Segment
and geographic information Operating
segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief
operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views
its operations and manages its business in one Cash,
cash equivalents and concentration of credit risk The
Company considers only those investments which are highly liquid, readily convertible to cash, or that mature within 90 days from the
date of purchase to be cash equivalents. Marketable securities are those investments with original maturities in excess of 90 days. The
carrying amounts reported in the balance sheets for cash and cash equivalents are valued at cost, which approximates their fair value. The
Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements.
The Company holds cash and cash equivalents in banks in excess of FDIC insurance limits. However, the Company believes risk of loss is
minimal as the cash and cash equivalents are held by large, highly-rated financial institutions. Marketable
securities The
Company considers securities with original maturities of greater than 90 days to be available for sale securities. Available for sale
securities are classified as either current or non-current assets based on the nature of the securities and their availability for use
in current operations. Available for sale securities are recorded at fair value and unrealized gains and losses are recorded within accumulated
other comprehensive income. The estimated fair value of the available for sale securities is determined based on quoted market prices
or rates for similar instruments. In addition, the cost of debt securities in this category is adjusted for amortization of premium and
accretion of discount to maturity. On
a quarterly basis, the Company reviews the status of each security in an unrealized loss position, to evaluate the existence of potential
credit losses. The Company first considers whether it intends to sell, or if it is more likely than not that the Company will be required
to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is
met, the security’s amortized cost basis is written down to fair value through income. For securities that do not meet this criteria,
the Company considers a number of factors to determine if the decline in fair value has resulted from credit losses or other factors,
including but not limited to: (1) the extent of the decline; (2) changes to the rating of the security by a rating agency; (3) any adverse
conditions specific to the security; and (4) other market conditions that may affect the fair value of the security. If this assessment
indicates that a credit loss exists and the present value of cash flows expected to be collected is less than the amortized cost basis,
an allowance for credit losses is required for the credit loss. Any impairment that has not been recorded through an allowance for credit
losses is recognized in other comprehensive income. As of June 30, 2021, the Company has not recognized any impairment or credit losses
on its available for sale securities. Financial
instruments Cash,
cash equivalents and marketable securities are reflected in the accompanying financial statements at fair value. The carrying amount
of accounts payable and accrued expenses, including accrued research and development expenses, approximates fair value due to the short-term
nature of those instruments. Fixed
assets, net Fixed
assets, which consists primarily of leasehold improvements, furniture and fixtures, software, office equipment and certain clinical equipment,
are carried at cost less accumulated depreciation. Depreciation is computed over the estimated useful lives of the respective assets,
generally three seven Leases The
Company determines if an arrangement is a lease at contract inception. A lease is a contract, or part of a contract, that conveys the
right to control the use of explicitly or implicitly identified property, plant or equipment in exchange for consideration. Control of
an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all
of the economic benefits from using the underlying asset. The Company classifies its leases as operating or financing by considering
factors such as the length of the lease term, the present value of the lease payments, the specialized nature of the asset being leased
and the potential for ownership of the asset to transfer during the lease term. Leases
with terms greater than one-year are recognized on the Company’s balance sheets as right-of-use (“ROU”) assets and
lease liabilities and are measured at the present value of the fixed payments due over the lease term minus the present value of any
incentives, rebates or abatements expected to be received from the lessor. Options to extend a lease are typically excluded from the
expected lease term as the exercise of the option is typically not reasonably certain. Leases are measured at present value using the
rate implicit in the lease or, if the implicit rate is not determinable, the lessee’s incremental borrowing rate. As the implicit
rate is not typically readily determinable, the Company uses an incremental borrowing rate, which is established based upon the information
available at the lease commencement date, to determine the present value of lease payments due under an arrangement. The incremental
borrowing rate approximates the rate the Company would pay to borrow on a collateralized basis over a similar term and amount equal to
the lease payments. ROU
assets are amortized on a straight-line basis over the term of the lease. Lease liabilities accrete to yield and are reduced at the time
when the lease payment is payable to the vendor. Costs determined to be variable and not based on an index or rate are not included in
the measurement of the lease liability and are recognized in the statements of comprehensive loss in the same line item as expenses arising
from fixed lease payments at the time when the event giving rise to the payment occurs. Foreign
currency translation The
Company considers the U.S. dollar to be its functional currency. Expenses denominated in foreign currencies are translated at the exchange
rate on the date the expense is incurred. The effect of exchange rate fluctuations on translating foreign currency assets and liabilities
into U.S. dollars is included in the Statements of Comprehensive Loss. Foreign exchange transaction gains and losses are included in
the results of operations and are not material in the Company’s financial statements. Research
and development expenses Research
and development expenses primarily consist of costs associated with the preclinical and clinical development of the Company’s product
candidate portfolio, including the following:
● external
research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”)
and other vendors and contract manufacturing organizations (“CMOs”) for the production of drug substance and drug product;
and
● employee-related
expenses, including salaries, benefits and share-based compensation expense. Research
and development expenses also include costs of acquired product licenses and related technology rights where there is no alternative
future use, costs of prototypes used in research and development, consultant fees and amounts paid to certain of our collaborative partners. All
research and development expenses are charged to operations as incurred in accordance with Financial Accounting Standards Board Accounting
Standards Codification Topic (“ASC”) 730, Research and Development Accrued
research and development expenses As
part of the process of preparing our financial statements, the Company is required to estimate its accrued expenses. This process involves
reviewing quotations and contracts, identifying services that have been performed on the Company’s 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 the actual cost. The majority of the Company’s service providers invoice the Company monthly in arrears for services performed
or when contractual milestones are met. The Company makes estimates of its accrued expenses as of each balance sheet date in our financial
statements based on facts and circumstances known to the Company at that time. The Company periodically confirms the accuracy of its
estimates with the service providers and makes adjustments if necessary. The significant estimates in the Company’s accrued research
and development expenses are related to expenses incurred with respect to CROs, CMOs and other vendors in connection with research and
development and manufacturing activities. The
Company bases its expense related to CROs and CMOs on its estimates of the services received and efforts expended pursuant to quotations
and contracts with such vendors that conduct research and development and manufacturing activities 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 the Company’s vendors will exceed the level of services provided and result in
a prepayment of the applicable research and development or manufacturing 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 its estimate, the Company adjusts the accrual or prepaid expense accordingly.
Although the Company 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 could result
in us reporting amounts that are too high or too low in any particular period. There have been no material changes in estimates for the
periods presented. Stock-based
compensation expense The
Company follows the provisions of ASC 718, Compensation—Stock Compensation Stock
Options The
Company estimates the fair value of stock options on the date of grant using the Black-Scholes option-pricing model. Due to the lack
of trading history, the Company’s computation of stock-price volatility is based on the volatility rates of comparable publicly
held companies over a period equal to the expected term of the options granted by the Company. The Company’s computation of expected
term is determined using the “simplified” method, which is the midpoint between the vesting date and the end of the contractual
term. The Company believes that it does not have sufficient reliable exercise data in order to justify the use of a method other than
the “simplified” method of estimating the expected exercise term of employee stock option grants. The Company utilizes a
dividend yield of zero based on the fact that the Company has never paid cash dividends to stockholders and has no current intentions
to pay cash dividends. The risk-free interest rate is based on the zero-coupon United States Treasury yield at the date of grant for
a term equivalent to the expected term of the option. Stock-based
compensation expense is included in both research and development expenses and general and administrative expenses in the Statements
of Comprehensive Loss. Collaboration
revenue At
the inception of a collaboration agreement, the Company first assesses whether the contractual agreement is within the scope of ASC 808,
Collaborative Arrangements Revenue from Contracts with Customers In
accordance with ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount
that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition
for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (1) identify
the contracts with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate
the transaction price to the performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance
obligation. From
time to time, the Company enters into licensing agreements that are within the scope of ASC 606, under which it may license rights to
research, develop and commercialize its product candidates to third parties. The terms of these collaborative research and development
agreements typically include non-refundable, upfront license fees; reimbursement for research and development activities; development,
regulatory and commercial milestone payments; and royalties on net sales of commercialized products. The Company may also enter into
development and manufacturing service agreements with its collaborators. For each arrangement, at contract inception, the Company identifies
all performance obligations, which may include a license to intellectual property and know-how, research and development activities,
transition activities and/or manufacturing services and determines if each performance obligation is distinct. In order to determine
the transaction price, in addition to any upfront payment, the Company estimates the amount of variable consideration at the outset of
the contract either utilizing the expected value or most likely amount method, depending on the facts and circumstances relative to the
contract. The Company constrains the estimates of variable consideration such that it is probable that a significant reversal of previously
recognized revenue will not occur. When determining if variable consideration should be constrained, management considers whether there
are factors outside the Company’s control that could result in a significant reversal of revenue. These estimates are re-assessed
each reporting period as required. Once
the estimated transaction price is established, amounts are allocated to the performance obligations that have been identified. The transaction
price is generally allocated to each separate performance obligation on a relative standalone selling price basis, which requires the
use of assumptions and judgement. Standalone selling prices used to perform the initial allocation are not updated after contract inception.
The Company then recognizes as revenue the amount of the transaction price that is allocated to
the respective performance obligation when or as the performance obligation is satisfied. Amounts
received prior to revenue recognition are recorded as deferred revenue. Amounts expected to be recognized as revenue within the 12 months
following the balance sheet date are classified as current portion of deferred revenue in the accompanying balance sheets. Amounts not
expected to be recognized as revenue within the 12 months following the balance sheet date are classified as deferred revenue, net of
current portion. Refer to Note 6 – Commitments and Contingencies, for specific details regarding the Company’s collaboration
agreements. Since
the Company’s inception and through June 30, 2021, no revenue has been recognized by the Company. Income
taxes The
Company utilizes the liability method of accounting for deferred income taxes, as set forth in ASC 740, Income Taxes. Recent
accounting pronouncements The
Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”). ASUs not discussed below were
assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s financial statements. In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses
on Financial Instruments In
August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) In
August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software Customer’s
Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract In
November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808) In
May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50),
Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):
Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (ASU 2021-04) |
