| Summary of Significant Accounting Policies | (3)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The Company bases its estimates and judgments on historical
experience and on various other assumptions that it believes are
reasonable under the circumstances. The amounts of assets and
liabilities reported in the Company’s consolidated balance
sheets and the amount of revenues and expenses reported for each of
the periods presented are affected by estimates and assumptions,
which are used for, but not limited to, the accounting for
derivative instrument liabilities, stock-based compensation,
valuation of inventory, impairment of long-lived assets, income
taxes and operating expense accruals. Such assumptions and
estimates are subject to change in the future as additional
information becomes available or as circumstances are modified.
Actual results could differ from these estimates.
Cash Equivalents and Concentrations of Credit
Risk
The Company considers investments with original maturities of three
months or less at date of acquisition to be cash equivalents. The
Company has deposits that exceed amounts insured by the Federal
Deposit Insurance Corporation (“FDIC”), however, the
Company does not consider this a significant concentration of
credit risk based on the strength of the financial institution.
Restricted Cash
Cash and cash equivalents that are restricted as to withdrawal or
use under the terms of certain contractual agreements are recorded
as restricted cash on the accompanying consolidated balance
sheets.
Accounts Receivable
Accounts receivable, principally trade, are generally due within 30
days and are stated at amounts due from customers. Collections and
payments from customers are monitored and a provision for estimated
credit losses may be created based upon historical experience and
specific customer collection issues that may be identified.
Inventories
Inventories are valued at the lower of cost or market value using
the first-in, first-out work-in-process,
Property, Plant and Equipment
Property, plant and equipment are recorded at cost, less
accumulated depreciation. The Company provides for depreciation on
a straight line basis over the estimated useful lives of the assets
which range from three to seven years. Leasehold improvements will
be amortized over the shorter of the lease term or the estimated
useful life of the related assets when they are placed into
service. The Company evaluates property, plant and equipment for
impairment periodically to determine if changes in circumstances or
the occurrence of events suggest the carrying value of the asset or
asset group may not be recoverable. Maintenance and repairs are
charged to operations as incurred. Expenditures which substantially
increase the useful lives of the related assets are
capitalized.
Derivative Instrument Liability
The Company accounts for derivative instruments in accordance with
Accounting Standards Codification (“ASC”) 815,
Derivatives and Hedging, which establishes accounting and reporting
standards for derivative instruments and hedging activities,
including certain derivative instruments embedded in other
financial instruments or contracts and requires recognition of all
derivatives on the balance sheet at fair value, regardless of the
hedging relationship designation. Accounting for changes in the
fair value of the derivative instruments depends on whether the
derivatives qualify as hedge relationships and the types of
relationships designated are based on the exposures hedged. At
December 31, 2018 and 2017, the Company did not have any
derivative instruments that were designated as hedges.
Fair Value Measurements
The Company adheres to ASC 820, Fair Value Measurement, which
defines fair value, establishes a framework for measuring fair
value, and expands disclosures about fair value measurements. ASC
820 applies to reported balances that are required or permitted to
be measured at fair value under existing accounting pronouncements;
accordingly, the standard does not require any new fair value
measurements of reported balances.
ASC 820 emphasizes that fair value is a market-based measurement,
not an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions that
market participants would use in pricing the asset or
liability. As a basis for considering market participant
assumptions in fair value measurements, ASC 820 establishes a fair
value hierarchy that distinguishes between market participant
assumptions based on market data obtained from sources independent
of the reporting entity (observable inputs that are classified
within Levels 1 and 2 of the hierarchy) and the reporting
entity’s own assumptions about market participant assumptions
(unobservable inputs classified within Level 3 of the
hierarchy).
•
Level 1 inputs utilize quoted prices (unadjusted)
in active markets for identical assets or liabilities that the
Company has the ability to access.
•
Level 2 inputs are inputs other than quoted
prices included in Level 1 that are observable for the asset
or liability, either directly or indirectly. Level 2 inputs
may include quoted prices for similar assets and liabilities in
active markets, as well as inputs that are observable for the asset
or liability (other than quoted prices), such as interest rates,
foreign exchange rates, and yield curves that are observable at
commonly quoted intervals.
•
Level 3 inputs are unobservable inputs for the
asset or liability, which is typically based on an entity’s
own assumptions, as there is little, if any, related market
activity.
In instances where the determination of the fair value measurement
is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the asset or
liability.
Revenue Recognition
Revenue is generated from proprietary and partnered product sales
and license and royalty arrangements. Revenue is recognized when or
as we transfer control of the promised goods or services to our
customers in an amount that reflects the consideration to which we
expect to be entitled to in exchange for those goods or services.
When obligations or contingencies remain after the products are
shipped, such as training and certifying the treatment centers,
revenue is deferred until the obligations or contingencies are
satisfied.
We may enter into contracts with partners that contain multiple
elements such as licensing, development, manufacturing and
commercialization components. These arrangements are often complex
and we may receive various types of consideration over the life of
the arrangement, including: up-front
Our results of operations for reporting periods beginning on or
after January 1, 2018 are presented under ASC 606, Revenue
from Contracts with Customers, while prior period amounts, as
reported, are not adjusted. The effects of the adoption of the new
standard in 2018 were not material to our consolidated financial
statements. In assessing our revenue arrangements in accordance
with ASC 606, Revenue from Contracts with Customers, we must
identify the contract, determine the transaction price including an
estimation of any variable consideration we expect to receive in
connection with the contract, identify the promises of goods or
services to the customer and each distinct performance obligation,
allocate the transaction price to each of the performance
obligations, and recognize revenue when or as the performance
obligations are satisfied. Each of these steps in the revenue
recognition process requires management to make judgements and/or
estimates. The most significant judgements and estimates involve
the determination of variable consideration to be included in the
transaction price. Variable consideration is recognized at an
amount we believe is not subject to significant reversal and is
adjusted at each reporting period if the most likely amount of
expected consideration changes or becomes fixed. We believe this
provides a reasonable basis for recognizing revenue, however,
actual results could differ from estimates and significant changes
in estimates could impact our results of operations in future
periods.
Deferred Revenue
License fees and milestones received in exchange for the grant of a
license for the commercialization of CHEMOSAT are generally
recognized over the development period, as the license is
considered distinct from the delivery of product. Milestone
payments that are contingent upon the occurrence of future events,
are evaluated and recorded at the most likely amount, and to the
extent that it is probable that a significant reversal will not
occur when the associated uncertainty is resolved.
Selling, General and Administrative
Selling, general and administrative costs include personnel costs
and related expenses for the Company’s sales, marketing,
general management and administrative staff, recruitment, costs
related to the Company’s commercialization efforts in Europe,
professional service fees, professional license fees, business
development and certain general legal activities. All such costs
are charged to expense when incurred.
Research and Development
Research and development costs include the costs of materials used
for clinical trials and R&D, personnel costs associated with
device and pharmaceutical R&D, clinical affairs, medical
affairs, medical science liaisons, and regulatory affairs, costs of
outside services and applicable indirect costs incurred in the
development of the Company’s proprietary drug delivery
system. All such costs are charged to expense when
incurred.
Stock Based Compensation
The Company accounts for its share-based compensation in accordance
with the provisions of ASC 718, Stock-Based Compensation, which
establishes accounting for equity instruments exchanged for
employee services and ASC 505-50, Non-Employees, non-employees. Under 505-50, non-employees non-employee
The Company periodically grants stock options for a fixed number of
shares of Common Stock to its employees, directors and non-employee
Income Taxes
The Company accounts for income taxes following the asset and
liability method in accordance with the ASC 740, Income Taxes.
Under such method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the consolidated financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. The Company applies the accounting guidance issued to
address the accounting for uncertain tax positions. This guidance
clarifies the accounting for income taxes, by prescribing a minimum
recognition threshold a tax position is required to meet before
being recognized in the financial statements as well as provides
guidance on derecognition, measurement, classification, interest
and penalties, accounting in interim periods, disclosure and
transition. The Company classifies interest and penalty expense
related to uncertain tax positions as a component of income tax
expense. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years
that the asset is expected to be recovered or the liability
settled. A valuation allowance is provided when it is more likely
than not that some portion or all of a deferred tax asset will not
be realized. The ultimate realization of deferred tax assets
depends on the generation of future taxable income during the
period in which related temporary differences become deductible.
The Company considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning
strategies in its assessment of a valuation allowance. See Note 14
for additional information.
Net Loss per Common Share
Basic net loss per share is determined by dividing net loss by the
weighted average shares of Common Stock outstanding during the
period. Diluted net loss per share is determined by dividing net
loss by diluted weighted average shares outstanding. Diluted
weighted average shares reflects the dilutive effect, if any, of
potentially dilutive common shares, such as stock options and
warrants calculated using the treasury stock method. In periods
with reported net operating losses, all stock options, unvested
restricted stock and warrants are deemed anti-dilutive such that
basic net loss per share and diluted net loss per share are
equal.
The calculation of net loss and the number of shares used to
compute basic and diluted earnings per share for the years ended
December 31, 2018 and 2017:
December 31,
(in thousands, except share data) 2018 2017
Net loss—basic $ (19,222 ) $ (45,117 )
Preferred stock dividends
— (527 )
Net loss—diluted $ (19,222 ) $ (45,644 )
Weighted average shares outstanding—basic 26,705,375 14,039
Weighted average shares outstanding—diluted 26,705,375 14,039
Net loss per share—basic $ (0.72 ) $ (3,250 )
Net loss per share—diluted $ (0.72 ) $ (3,250 )
In the third quarter of 2017, the Company issued Series B Preferred
Shares. A portion of the redemption price of the Series B Preferred
Shares was accounted for as a deemed dividend.
At December 31, 2018, the Company has 61.3 million
pre-funded
December 31,
Weighted average shares issued 2,738,944
Weighted average pre-funded 23,966,431
Weighted average shares outstanding 26,705,375
For the years ended December 31, 2018 and 2017 the following
potentially dilutive securities were excluded from the computation
of diluted earnings per share because their effects would be
antidilutive.
Shares excluded from the computation of diluted earnings per
share:
2018 2017
Common stock warrants—equity 4,202,909 14,049
Common stock warrants—liability 189,029
—
Assumed conversion of convertible notes 2,576,203
—
Total 6,968,141 14,049
Segment Information
The Company currently operates in one business segment, which is
the development and commercialization of Melphalan/HDS and
CHEMOSAT. A single management team that reports to the CEO and
President comprehensively manages the business. Accordingly, the
Company does not have separately reportable segments.
Foreign Currency and Currency Translation
Transactions that are denominated in a foreign currency are
remeasured into the functional currency at the current exchange
rate on the date of the transaction. Any foreign
currency-denominated monetary assets and liabilities are
subsequently remeasured at current exchange rates, with gains or
losses recognized as foreign exchange (losses)/gains in the
statements of operations.
The assets and liabilities of the Company’s international
subsidiaries are translated from their functional currencies into
United States dollars at exchange rates prevailing at the balance
sheet date. The majority of the foreign subsidiaries revenues and
operating expenses are denominated in Euros. The reporting currency
for the Company is the United States Dollar (“USD”).
Average rates of exchange during the period are used to translate
the statement of operations, while historical rates of exchange are
used to translate any equity transactions.
Translation adjustments arising on consolidation due to differences
between average rates and balance sheet rates, as well as
unrealized foreign exchange gains or losses arising from
translation of intercompany loans that are of a
long-term-investment nature, are recorded in other comprehensive
income.
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 2014-09, 2014-09 2014-09
In June 2016, the FASB issued ASU 2016-15,
In October 2016, the FASB issues ASU 2016-16 2016-16, 2016-16
In November 2016, the FASB issued ASU 2016-18, 2016-18
SEC Disclosure Update and Simplification
In August 2018, the SEC adopted the final rule under SEC Release
No. 33-10532,
Recent Accounting Standards to be Adopted
In February 2016, the FASB issued ASU No. 2016-02, 2016-02 right-of-use 2016-02 No. 2018-11,
In July 2017, the FASB issued ASU 2017-11, re-characterized re-characterization 2017-11 |
