Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 11, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | BIOSPECIFICS TECHNOLOGIES CORP | |
Entity Central Index Key | 0000875622 | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Shell Company | false | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 7,335,974 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2020 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Address, State or Province | NY |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (unaudited) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 19,134,304 | $ 4,999,183 |
Short term investments | 85,084,651 | 84,239,918 |
Accounts receivable | 17,750,829 | 19,065,919 |
Prepaid expenses and other current assets | 898,598 | 966,456 |
Total current assets | 122,868,382 | 109,271,476 |
Long-term investments | 9,385,996 | 16,569,024 |
Property and equipment, net | 68,313 | 0 |
Operating lease right-of-use asset | 220,530 | 239,491 |
Patent costs, net | 564,301 | 573,277 |
Other assets | 139,265 | 0 |
Total assets | 133,246,787 | 126,653,268 |
Current liabilities: | ||
Accounts payable and accrued expenses | 1,628,515 | 998,409 |
Income tax payable | 1,640,478 | 354,984 |
Current portion of lease obligation | 77,358 | 69,099 |
Total current liabilities | 3,346,351 | 1,422,492 |
Lease obligation | 146,994 | 167,014 |
Deferred tax liability, net | 484,259 | 572,660 |
Total liabilities | 3,977,604 | 2,162,166 |
Commitments and Contingencies | ||
Stockholders' equity: | ||
Common stock, $.001 par value; 10,000,000 shares authorized; 7,815,230 and 7,813,230 shares issued, 7,337,511 and 7,339,578 shares outstanding as of March 31, 2020 and December 31, 2019, respectively | 7,815 | 7,813 |
Additional paid-in capital | 39,856,101 | 39,355,797 |
Retained earnings | 101,145,333 | 96,646,527 |
Treasury stock, 477,720 and 473,653 shares at cost as of March 31, 2020 and December 31, 2019, respectively | (11,740,066) | (11,519,035) |
Total stockholders' equity | 129,269,183 | 124,491,102 |
Total liabilities and stockholders' equity | 133,246,787 | 126,653,268 |
Series A Preferred Stock [Member] | ||
Stockholders' equity: | ||
Series A Preferred stock, $.50 par value, 700,000 shares authorized; none outstanding | $ 0 | $ 0 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Stockholders' equity: | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock, issued (in shares) | 7,815,230 | 7,813,230 |
Common stock, outstanding (in shares) | 7,337,511 | 7,339,578 |
Treasury stock, shares (in shares) | 477,720 | 473,653 |
Series A Preferred Stock [Member] | ||
Stockholders' equity: | ||
Preferred stock, par value (in dollars per share) | $ 0.50 | $ 0.50 |
Preferred stock, authorized (in shares) | 700,000 | 700,000 |
Preferred stock, outstanding (in shares) | 0 | 0 |
Condensed Consolidated Income S
Condensed Consolidated Income Statements (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues: | ||
Total Revenues | $ 9,668,667 | $ 8,129,141 |
Costs and expenses: | ||
Research and development | 121,970 | 149,536 |
General and administrative | 3,168,046 | 2,907,160 |
Restructuring charges | 1,146,045 | 0 |
Total Costs and Expenses | 4,436,061 | 3,056,696 |
Operating income | 5,232,606 | 5,072,445 |
Other income: | ||
Interest income | 479,709 | 449,425 |
Income before income tax expense | 5,712,315 | 5,521,870 |
Provision for income tax expense | (1,213,509) | (1,105,275) |
Net income | $ 4,498,806 | $ 4,416,595 |
Basic net income per share (in dollars per share) | $ 0.61 | $ 0.61 |
Diluted net income per share (in dollars per share) | $ 0.61 | $ 0.60 |
Shares used in computation of basic net income per share (in shares) | 7,337,668 | 7,276,885 |
Shares used in computation of diluted net income per share (in shares) | 7,361,533 | 7,338,128 |
Royalties [Member] | ||
Revenues: | ||
Total Revenues | $ 9,668,667 | $ 8,129,141 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Stockholders' Equity (unaudited) - USD ($) | Common Stock [Member] | Additional Paid in Capital [Member] | Retained Earnings [Member] | Treasury Stock [Member] | Total |
Balances at Dec. 31, 2018 | $ 7,738 | $ 36,302,446 | $ 72,176,719 | $ (10,898,383) | $ 97,588,520 |
Balances (in shares) at Dec. 31, 2018 | 7,738,167 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of common stock upon stock option exercise | $ 2 | 58,418 | 0 | 0 | 58,420 |
Issuance of common stock upon stock option exercise (in shares) | 2,000 | ||||
Stock compensation expense | $ 0 | 141,788 | 0 | 0 | 141,788 |
Net income | 0 | 0 | 4,416,595 | 0 | 4,416,595 |
Balances at Mar. 31, 2019 | $ 7,740 | 36,502,652 | 76,593,314 | (10,898,383) | 102,205,323 |
Balances (in shares) at Mar. 31, 2019 | 7,740,167 | ||||
Balances at Dec. 31, 2019 | $ 7,813 | 39,355,797 | 96,646,527 | (11,519,035) | $ 124,491,102 |
Balances (in shares) at Dec. 31, 2019 | 7,813,230 | 7,339,578 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock compensation expense | $ 0 | 500,306 | 0 | 0 | $ 500,306 |
Issuance of common stock upon vesting of restricted stock units | $ 2 | (2) | 0 | 0 | 0 |
Issuance of common stock upon vesting of restricted stock units (in shares) | 2,000 | ||||
Repurchases of common stock | $ 0 | 0 | 0 | (221,031) | (221,031) |
Net income | 0 | 0 | 4,498,806 | 0 | 4,498,806 |
Balances at Mar. 31, 2020 | $ 7,815 | $ 39,856,101 | $ 101,145,333 | $ (11,740,066) | $ 129,269,183 |
Balances (in shares) at Mar. 31, 2020 | 7,815,230 | 7,337,511 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 4,498,806 | $ 4,416,595 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 22,234 | 203,731 |
Stock-based compensation expense | 500,306 | 141,788 |
Deferred tax expense (credit) | (88,401) | 0 |
Non-cash lease expense | 18,961 | 0 |
(Accretion) amortization of bond (discount) premium | 132,663 | (50,470) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,315,090 | 41,897 |
Income tax payable | 1,285,494 | 1,097,913 |
Prepaid expenses and other current assets | (71,408) | 42,359 |
Patent costs | (12,101) | 0 |
Accounts payable and accrued expenses | 630,107 | 146,073 |
Lease obligation | (11,761) | 0 |
Net cash provided by operating activities | 8,219,990 | 6,039,886 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (69,470) | 0 |
Maturities of marketable investments | 35,263,937 | 20,152,229 |
Purchases of marketable investments | (29,058,305) | (21,829,557) |
Net cash provided by (used in) investing activities | 6,136,162 | (1,677,328) |
Cash flows from financing activities: | ||
Proceeds from stock option exercises | 0 | 58,420 |
Payments for repurchase of common stock | (221,031) | 0 |
Net cash (used in) provided by financing activities | (221,031) | 58,420 |
Increase in cash and cash equivalents | 14,135,121 | 4,420,978 |
Cash and cash equivalents at beginning of year | 4,999,183 | 13,176,452 |
Cash and cash equivalents at end of period | 19,134,304 | 17,597,430 |
Cash paid during the year for: | ||
Interest | 0 | 0 |
Taxes | $ 16,416 | $ 7,362 |
ORGANIZATION AND DESCRIPTION OF
ORGANIZATION AND DESCRIPTION OF BUSINESS | 3 Months Ended |
Mar. 31, 2020 | |
ORGANIZATION AND DESCRIPTION OF BUSINESS [Abstract] | |
ORGANIZATION AND DESCRIPTION OF BUSINESS | 1. ORGANIZATION AND DESCRIPTION OF BUSINESS We are a biopharmaceutical company involved in the development of an injectable collagenase clostridium histolyticum (“CCH”) for multiple indications. We maintain intellectual property with respect to an injectable CCH that treats, among other indications, Dupuytren’s contracture (“DC”), Peyronie’s disease (“PD”), cellulite, frozen shoulder syndrome, plantar fibromatosis, and uterine fibroids. Injectable CCH currently is approved and marketed in the U.S. under the trademark XIAFLEX® for the treatment of both DC and PD. We generate revenue primarily from our license agreement with Endo, under which we receive license, sublicense income, royalties, milestones, and mark-up on cost of goods sold payments related to the sale, regulatory submissions, and approval of XIAFLEX®. We have developed injectable CCH for 12 clinical indications to date, and currently are evaluating CCH as a treatment for uterine fibroids. Under our license agreement with Endo, Endo has the right to further develop CCH for frozen shoulder and plantar fibromatosis, as well as certain other licensed indications. Endo has a right to opt-in for use of CCH in the treatment of uterine fibroids. On August 31, 2011, we entered into the Second Amended and Restated Development and License Agreement (as amended, the “License Agreement”) with Auxilium Pharmaceuticals, Inc. (“Auxilium”), an entity that was acquired by Endo in 2015. The License Agreement originally was entered into in June 2004 to obtain exclusive worldwide rights to develop, market, and sell certain products containing our enzyme CCH, which Endo markets for approved indications under the trademark XIAFLEX®. Endo’s licensed rights concern the development and commercialization of products, other than dermal formulations labeled for topical administration. Currently, Endo’s licensed rights cover the indications of DC, PD, cellulite, frozen shoulder, plantar fibromatosis, and other potential indications. We and Endo may further expand the License Agreement to cover other indications as they are developed. On February 26, 2019, we entered into the Second Amendment to the Second Amended and Restated Development and License Agreement (the “Second Amendment”) (effective as of January 1, 2019) to amend certain provisions of the License Agreement to, among other things, require Endo to provide timely estimates of royalties to assist us in complying with our financial reporting obligations. Pursuant to the terms of the Second Amendment, we have consented to the assignment of the License Agreement by Endo Global Ventures to Endo Global Aesthetics Limited, an Irish private company and an affiliate of Endo Global Ventures that is indirectly wholly-owned by Endo. Under the License Agreement, Endo is responsible, at its own cost and expense, for developing the formulation and finished dosage form of products and arranging for the clinical supply of products. Endo has the option to license development and marketing rights to these indications based on a full analysis of the data from the clinical trials, which would transfer responsibility for the future development costs to Endo and trigger opt-in payments and potential future milestone and royalty payments to us. The License Agreement extends, on a country-by-country and product-by-product basis, for the longer of the patent life, the expiration of any regulatory exclusivity period or twelve years from the effective date. Either party may terminate the License Agreement as a result of the other party’s breach or bankruptcy. Endo must pay us on a country-by-country and product-by-product basis a specified percentage, which typically is in the low double digits, of net sales for products covered by the License Agreement. This royalty applies to net sales by Endo or its sublicensees. Endo also is obligated to pay a percentage of any future regulatory or commercial milestone payments received from such sublicensees. In addition, Endo and its affiliates pay us an amount equal to a specified mark-up on certain cost of goods related to supply of XIAFLEX® (which mark-up is capped at a specified percentage of the cost of goods of XIAFLEX®) for products sold by Endo and its affiliates. Endo had previously collaborated with partners to commercialize XIAFLEX® and Xiapex® outside of the United States; however, Endo is in the process of terminating third party partnership agreements for markets outside of the United States, which will reduce the amount of royalty revenues received by us. We do not believe that this reduction will have a material effect on our future consolidated statements of operations. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Except as detailed below, there have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2020, as compared to the significant accounting policies disclosed in Note 2 of the Consolidated Financial Statements in the Company’s 2019 Annual Report. Basis of Presentation The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) that we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reporting. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the risk factors discussed herein and in Part I, Item 1A. Risk Factors in our 2019 Annual Report filed with the SEC on March 16, 2020. Principles of Consolidation The condensed Risks and Uncertainties We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. While we expect that COVID-19 will impact our business to some degree, the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and business closures, the effectiveness of actions taken to contain the disease, and other unforeseeable consequences. Critical Accounting Policies, Estimates and Assumptions The preparation of condensed We base our estimates on historical experience, and other relevant data including interim data provided by Endo and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. Revenue Recognition Under Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), we recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation(s). Revenues, and their respective treatment for financial reporting purposes under ASC 606 and our license agreement with Endo, are as follows: Royalty / Mark-Up on Cost of Goods Sold We receive royalty revenues on net sales and mark-up on cost of goods sold revenue in the U.S. under our License Agreement with Endo. These are presented in “Royalties” in our condensed consolidated statements of income. We do not have future performance obligations under this revenue stream. In accordance with ASC 606, we record these revenues based on estimates of the net sales that occurred during the relevant period. The relevant period estimates of these royalties are based on data provided by Endo and analysis of historical royalties and mark-up on cost of goods sold revenue that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. The royalties payable by Endo to us are subject to set-off for certain patent costs. Licensing Revenue We include revenue recognized from upfront licensing, sublicensing, and milestone payments in “License Revenues” in our condensed consolidated statements of income. The Company recognizes licensing revenues generated through development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; sublicensing; development and commercial milestone payments; development activities; and royalties on net sales of licensed products. Each of these types of payments results in licensing revenues except for revenues from royalties on net sales of licensed products and the mark-up of cost of goods sold revenues which are classified as royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer. For each development and/or commercialization agreement that result in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities, and/or transition activities. 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 (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. 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. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Development and Regulatory Milestone Payments Depending on facts and circumstances, the Company may conclude that it is appropriate to include the milestone, representing variable consideration, in the estimated total transaction price, or that it is appropriate to fully constrain the milestone. The Company may include revenues from certain milestones in the total transaction price in a reporting period before the milestone is achieved if the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such development milestones and any related constraint each reporting period. The Company adjusts its estimate of the total transaction price, including the amount of revenue that it has recorded, if necessary. Recent Accounting Pronouncements Accounting Pronouncements Adopted We adopted ASU No. 2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement as of January 1, 2020. This standard modifies certain disclosure requirements on fair value measurements. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures . Accounting Pronouncements Not Yet Adopted In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes. This standard removes certain exceptions to the general principles of ASC 740 and improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company is required to adopt this standard starting in the first quarter of fiscal year 2021. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and related disclosures. Cash, Cash Equivalents, and Investments Cash equivalents Fair Value Measurements Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held-to-maturity investments, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the duration of those instruments. As of March 31, 2020 and December 31, 2019, there were no recorded unrealized gains or losses on our investments as they are classified as held-to-maturity. As of March 31, 2020 and December 31, 2019, amortized cost basis of the investments approximated their fair value. At March 31, 2020 and December 31, 2019, the amortized net discount / (net premium) included in interest income was approximately $134,000 and $32,000, respectively. At March 31, 2020 and December 31, 2019, the remaining unamortized net premium / (net discount) was approximately $221,000 and $285,000, respectively. The schedule of maturities at March 31, 2020 and December 31, 2019 are as follows: Maturities as of March 31, 2020 Maturities as of December 31, 2019 1 Year or Less Greater than 1 Year 1 Year or Less Greater than 1 Year Municipal bonds $ 8,749,716 $ - $ 11,341,249 $ - Government agency bonds 3,423,351 3,242,692 11,950,738 6,231,804 US Treasury bonds 6,027,090 - - - Corporate bonds 62,633,006 3,636,086 57,321,784 6,675,958 Certificates of deposit 4,251,488 2,507,218 3,626,147 3,661,262 Total $ 85,084,651 $ 9,385,996 $ 84,239,918 $ 16,569,024 The authoritative literature for fair value measurements established a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. These tiers are as follows: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than the quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs (entity developed assumptions) in which little or no market data exists. As of March 31, 2020, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of March 31, 2020 and December 31, 2019: March 31, 2020 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 8,456,598 $ 8,456,598 $ - $ - Investments Certificates of Deposit 6,758,706 6,758,706 - - Cash equivalents Municipal Bonds 1,003,616 - 1,003,616 - Investments Municipal Bonds 8,749,716 - 8,749,716 - Investments Government Agency Bonds 6,666,043 - 6,666,043 - Investments US Treasury Bonds 6,027,090 - 6,027,090 - Cash equivalents Corporate Bonds 5,075,742 - 5,075,742 - Investments Corporate Bonds 66,269,092 - 66,269,092 - December 31, 2019 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 950,658 $ 950,658 $ - $ - Investments Certificates of Deposit 7,287,409 7,287,409 - - Investments Municipal Bonds 11,341,249 - 11,341,249 - Investments Government Agency Bonds 18,182,542 - 18,182,542 - Investments Corporate Bonds 63,997,742 - 63,997,742 - Concentration of Credit Risk and Major Customers The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. The Company maintains investments in FDIC insured certificates of deposits, municipal bonds, and corporate bonds. The Company is currently dependent on one customer, Endo, which generates almost all the Company’s revenues. For the three-month periods ended March 31, 2020 and 2019, licensing, sublicensing, milestones, and royalty revenues under the License Agreement with Endo were approximately $9.7 million and $8.1 million, respectively. At March 31, 2020 and December 31, 2019, our accounts receivable balances from Endo were $17.8 million and $19.1 million, respectively. Treasury Stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the three months ended March 31, 2020, we repurchased 4,067 shares at an average price of $54.35 aggregating approximately $221,000. For the three months ended March 31, 2019 Receivables and Doubtful Accounts Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Our accounts receivable balance is typically due from Endo, our single large specialty pharmaceutical customer. Endo has historically paid timely and has been a financially stable organization. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of our customer were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At March 31, 2020 Third-Party Royalties We have entered into licensing and royalty agreements with third parties and agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement. No assumptions should be made that any disclosed royalty rate payable to a particular third party is the same or similar with respect to any royalty rate payable to any other third parties. We accrue third-party royalty expenses on net sales reported to us by Endo. Third-party royalty costs are generally expensed under general and administrative in the quarter that the net sales have occurred. For the three-month periods ended March 31, 2020 and 2019, third-party royalty expenses were $0.2 million and $0.4 million, respectively. As of March 31, 2019, we have no further third-party royalties in connection with PD as the agreement has expired. Royalty Buy-Down On March 31, 2012, we entered into an amendment to our existing agreement with Dr. Martin K. Gelbard, dated August 27, 2008, related to our future royalty obligations in connection with PD. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments of $600,000, all of which have been paid as of January 1, 2018. Royalty obligations terminate five years after first commercial sale, which occurred in January 2014. Accordingly, we ceased paying royalties in February 2019. The Company amortizes long-term contracts with finite lives in a manner that reflects the pattern in which the economic benefits of the assets are consumed or otherwise used up. Dr. Gelbard’s agreement is amortized based on an income forecast method by estimating sales of XIAFLEX® and Xiapex® for PD on an annual basis as measured by the proportion of the total estimated sales over the five year period. For the three months ended March 31, 2019, we amortized approximately $0.2 million related to this agreement and is recorded as part of general and administrative expenses. As of both March 31, 2020 and December 31, 2019, there were no remaining capitalized balances outstanding related to this agreement. Research and Development Expenses R&D expenses Clinical Trial Expenses Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research organizations. In the normal course of business, we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. Stock-Based Compensation ASC 718, Compensation - Stock Compensation On June 13, 2019, at the Company’s annual meeting of stockholders, the Company’s stockholders approved the 2019 Omnibus Incentive Compensation Plan (the “2019 Plan”). Upon the 2019 Plan’s approval, approximately 1,247,598 shares of Company common stock were available for issuance thereunder, consisting of 1,100,000 shares authorized for issuance under the 2019 Plan and 147,598 shares then remaining available for issuance under the Company’s 2001 Stock Option Plan (the “2001 Plan”). The 2019 Plan replaced the 2001 Plan. No new awards may be granted under the 2001 Plan; however, awards outstanding under the 2001 Plan remain subject to and will be settled under the applicable 2001 Plan. As of March 31, 2020, options to purchase 61,687 shares of common stock were outstanding under the 2001 Plan. Grants under the 2019 Plan may consist of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, or cash awards. Employees, key advisors, or non-employee directors are eligible to participate in the 2019 Plan. Grants under the 2019 Plan vest over periods ranging from one to four years and expire ten years from date of grant. As of March 31, 2020, options to purchase 120,000 shares of common stock and 9,450 restricted stock awards were outstanding under the 2019 Plan, and a total of 1,154,648 shares remain available for grant under the 2019 Plan. 2019 Omnibus Incentive Compensation Plan (2019 Plan) Restricted Stock Awards A summary of the restricted stock awards Restricted Stock Weighted-Average Grant Date Fair Value Per Share Nonvested at December 31, 2019 10,450 $ 60.47 Granted 1,000 50.51 Vested (2,000 ) 53.69 Forfeited - Nonvested at March 31, 2020 9,450 $ 60.85 Stock-based compensation expense related to restricted stock awards recognized in general and administrative expense was approximately $144,000 and zero for the three-month periods months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was approximately $144,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to restricted stock. This cost is expected to be recognized over the vesting periods of the restricted stock, with a weighted-average period of approximately 0.25 years. Stock Option Activity For the three months ended March 31, 2020, we granted a total of 30,000 stock options with a weighted average grant date fair value of $22.70 per share. The assumptions used in the valuation of stock options granted during the three months ended March 31, 2020 were as follows: Three Months Ended March 31, 2020 Risk-free interest rate 0.70% - 1.61% Expected term of option 5.5 - 6.25 years Expected stock price volatility 39.5% - 40.6% Expected dividend yield $ 0.0 A summary of our stock option activity during the three months ended March 31, 2020 is presented below: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2019 189,187 $ 46.79 8.62 $ 1.920,684 Grants 30,000 56.11 - - Exercised - - - - Forfeited (37,500 ) 57.48 - - Outstanding at March 31, 2020 181,687 $ 46.12 7.49 $ 1,898,560 Exercisable at March 31, 2020 54,187 $ 39.74 2.69 $ 911,735 During the three-month periods months ended March 31, 2020 and 2019, the Company received approximately zero and $58,000, respectively, from stock options exercised by option holders. Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $56.57 on March 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. We have approximately $2.3 million in unrecognized compensation cost related to stock options outstanding as of March 31, 2020, which we expect to recognize over the next 3.75 years. Stock-based compensation expense related to stock options recognized in general and administrative expenses was approximately $166,000 and $142,000 for the three-month periods ended March 31, 2020 and March 31, 2019, respectively. In addition, stock compensation expense related to restructuring associated with the acceleration of vesting of certain stock options and restricted stock units was approximately $190,000 for the three months ended March 31, 2020 (see Note 7). Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture and fixtures, and autos are depreciated on a straight-line basis over their estimated useful lives of five to ten years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining life of the lease. At March 31, 2020, total property and equipment consisted of furniture and fixtures of approximately $68,000 with an expected useful life of five years. As of December 31, 2019, all property and equipment were fully depreciated. Comprehensive Income For each of the three-month periods ended March 31, 2020 and 2019, we had no components of other comprehensive income other than net income itself. Provision for Income Taxes We use the asset and liability method of accounting for income taxes, as set forth in ASC 740-10-25-2. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods when the differences are expected to reverse. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of March 31, 2020 and December 31, 2019, the Company has not recorded any unrecognized tax benefits. We classify interest associated with income taxes under interest expense and tax penalties under other. Lease Obligation We determine if an arrangement includes a lease at inception. Right-of-use lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use lease asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. We apply a portfolio approach to the property leases to apply an incremental borrowing rate to leases with similar lease terms. The lease terms may include options to extend or terminate the lease. We recognize the options to extend the lease as part of the right-of-use lease assets and lease liabilities only if it is reasonably certain that the option would be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2019 due to the short-term nature of our existing lease in Lynbrook, New York. In December 2019, we recorded a right-of-use lease asset of $243,000, a short-term lease liability of $76,000, and a long-term lease liability of $167,000 associated with the lease of our new headquarters in Wilmington, Delaware. The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 2020 $ 61,815 $ 75,352 2021 84,893 84,893 2022 87,428 87,428 Total lease payments 234,136 247,673 Less: interest (9,784 ) (11,560 ) Total lease obligation $ 224,352 $ 236,113 On January 7, 2020, the Company provided three months’ notice to 35 Wilbur Street Associates, LLC of the Company’s intent to terminate the lease agreement for our former corporate headquarters, located at 35 Wilbur St., Lynbrook, New York 11563. Accordingly, the lease terminated on April 7, 2020. As the lease provided the Company the option to cancel the lease by giving three months’ prior written notice, the Company did not incur any termination penalties. Operating lease expenses amounted to approximately $57,000 and $34,000 for the three-month periods ended March 31, 2020 and 2019, respectively. |
NET INCOME PER SHARE
NET INCOME PER SHARE | 3 Months Ended |
Mar. 31, 2020 | |
NET INCOME PER SHARE [Abstract] | |
NET INCOME PER SHARE | 3. NET INCOME PER SHARE In accordance with ASC Earnings Per Share |
ACCOUNTS PAYABLE AND ACCRUED EX
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 3 Months Ended |
Mar. 31, 2020 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES | 4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following: March 31, 2020 December 31, 2019 Trade accounts payable $ 216,453 $ 197,077 Accrued legal and other professional fees 333,558 330,787 Accrued payroll and related costs 18,293 209,330 Third party royalties 169,000 228,000 Restructuring accrual (See Note 7) 866,377 - Other accruals 24,834 33,215 Total $ 1,628,515 $ 998,409 |
PATENT COSTS
PATENT COSTS | 3 Months Ended |
Mar. 31, 2020 | |
PATENT COSTS [Abstract] | |
PATENT COSTS | 5. PATENT COSTS We amortize intangible assets with definite lives on a straight-line basis over their estimated useful lives, ranging from one to nine years, and review for impairment on a quarterly basis and when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. As of March 31, 2020 and December 31, 2019, no impairment existed, and no adjustments were warranted. Additions to our capitalized patent costs during the three-month periods months ended March 31, 2020 and 2019 were approximately $12,000 and zero, respectively. Patent costs may be creditable against future royalty revenues. For each period presented below, net patent costs consisted of: March 31, 2020 December 31, 2019 Patents $ 1,284,725 $ 1,272,625 Accumulated amortization (720,424 ) (699,348 ) $ 564,301 $ 573,277 The amortization expense for patents for the three-month periods months ended March 31, 2020 and 2019 was approximately $21,000 and $19,000, respectively. The estimated aggregate amortization expense for the remaining nine months of 2020 and each of the years below is approximately as follows: April 1, 2020 – December 31, 2020 $ 63,000 2021 66,500 2022 66,500 2023 66,500 2024 66,500 Thereafter 235,000 |
PROVISION FOR INCOME TAXES
PROVISION FOR INCOME TAXES | 3 Months Ended |
Mar. 31, 2020 | |
PROVISION FOR INCOME TAXES [Abstract] | |
PROVISION FOR INCOME TAXES | 6. PROVISION FOR INCOME TAXES Our deferred tax liabilities and deferred tax assets are impacted by events and transactions arising in the ordinary course of business, R&D activities, vesting of nonqualified options and other items. The provision for income taxes is based on an estimated effective tax rate derived from our consolidated earnings before taxes, adjusted for nondeductible expenses and other permanent differences for the fiscal year. For the three-month periods months ended March 31, 2020 and 2019, the provision for income taxes was $1.2 million and $1.1 million, respectively. As of March 31, 2020 and December 31, 2019, our remaining deferred tax liabilities were approximately $0.5 million and $0.6 million, respectively. The estimated effective tax rate for the three-month periods ended March 31, 2020 and 2019 was 21.2% and 20.0%, respectively, of pre-tax income reported in the period, calculated based on the estimated annual effective rate anticipated for the year ending December 31, 2020 and 2019 plus the effects, if any, of certain discrete items occurring in 2020 and 2019. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. The CARES Act made various tax law changes including, among other things, (i) increasing the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest, (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k) and (iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid taxes. The income tax provisions of the CARES Act had limited applicability to the Company as of March 31, 2020, and therefore, the enactment of the CARES Act did not have a material impact on the Company’s consolidated financial statements as of, and for the three months ended, March 31, 2020. We will continue to evaluate the impact of tax legislation and will update our disclosures as additional information and interpretative guidance becomes available. |
RESTRUCTURING COSTS
RESTRUCTURING COSTS | 3 Months Ended |
Mar. 31, 2020 | |
RESTRUCTURING COSTS [Abstract] | |
RESTRUCTURING COSTS | 7. RESTRUCTURING COSTS On January 7, 2020, we announced that we would be relocating our corporate headquarters from Lynbrook, New York to Wilmington, Delaware as of April 7, 2020. On January 6, 2020, in connection with this relocation, we notified five employees and one consultant that their services would no longer be required effective March 31, 2020. On March 23, 2020, the five employees and one consultant were given separation agreements detailing the termination benefits to which they would be entitled. As a result, we recorded a restructuring charge of approximately $1.1 million in the first quarter of fiscal 2020. The restructuring charge is primarily associated with $0.9 million of one-time termination benefits that we expect to pay out in cash, $0.2 million of one-time non-cash termination expenses associated with the acceleration of vesting of certain stock options and restricted stock units, and facility exit expenses. We expect to pay the cash termination benefits over a period of six months beginning April 2020. The estimated liability for termination benefits which will be paid out over six months was recorded at fair value during the first quarter of 2020 as a current liability in the consolidated balance sheet. These termination benefits consist of severance payments, reimbursement of benefits payments, and guaranteed consulting payments. Total charges and payments related to the restructuring plan recognized in the condensed consolidated statement of operations are as follows: Three Months Ended March 31, 2020 Restructuring accrual, January 1, 2020 $ - Termination costs 1,070,024 Facility exit costs 76,020 Payments (89,235 ) Stock compensation expense charged to additional paid-in-capital (190,432 ) Restructuring accrual, March 31, 2020 $ 866,377 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2020 | |
SUBSEQUENT EVENTS [Abstract] | |
SUBSEQUENT EVENTS | 8. SUBSEQUENT EVENTS On April 6, 2020, the Company and Mr. J. Kevin Buchi mutually agreed that Mr. Buchi would step down as Chief Executive Officer and as a director of the Company, effective immediately. The Company and Mr. Buchi have entered into a separation agreement that details the termination benefits to which he is entitled. The Company will pay approximately $0.6 million in termination benefits over the next 12 months related to this agreement. In connection with Mr. Buchi’s separation from the Company, on April 6, 2020, the Board approved the appointment of Mr. Joseph Truitt to serve as the Company’s Chief Executive Officer on an interim basis. Mr. Truitt was also appointed as a Class I member of the Board. On May 11, 2020, the Company announced Mr. Truitt’s appointment as the permanent Chief Executive Officer, effective May 7, 2020. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying condensed consolidated financial statements are unaudited, but include all adjustments (consisting only of normal, recurring adjustments) that we consider necessary for a fair presentation of our financial position at such dates and the operating results and cash flows for those periods. Although we believe that the disclosures in our financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for quarterly reporting. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the risk factors discussed herein and in Part I, Item 1A. Risk Factors in our 2019 Annual Report filed with the SEC on March 16, 2020. |
Principles of Consolidation | Principles of Consolidation The condensed |
Risks and Uncertainties | Risks and Uncertainties We are subject to risks and uncertainties as a result of the global COVID-19 pandemic. While we expect that COVID-19 will impact our business to some degree, the significance and duration of the impact on our business cannot be determined at this time due to numerous uncertainties, including the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and business closures, the effectiveness of actions taken to contain the disease, and other unforeseeable consequences. |
Critical Accounting Policies, Estimates and Assumptions | Critical Accounting Policies, Estimates and Assumptions The preparation of condensed We base our estimates on historical experience, and other relevant data including interim data provided by Endo and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets, liabilities, and the amount of revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions. |
Revenue Recognition | Revenue Recognition Under Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” (“ASC 606”), we recognize revenues when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation(s). Revenues, and their respective treatment for financial reporting purposes under ASC 606 and our license agreement with Endo, are as follows: Royalty / Mark-Up on Cost of Goods Sold We receive royalty revenues on net sales and mark-up on cost of goods sold revenue in the U.S. under our License Agreement with Endo. These are presented in “Royalties” in our condensed consolidated statements of income. We do not have future performance obligations under this revenue stream. In accordance with ASC 606, we record these revenues based on estimates of the net sales that occurred during the relevant period. The relevant period estimates of these royalties are based on data provided by Endo and analysis of historical royalties and mark-up on cost of goods sold revenue that have been paid to us, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known. The royalties payable by Endo to us are subject to set-off for certain patent costs. Licensing Revenue We include revenue recognized from upfront licensing, sublicensing, and milestone payments in “License Revenues” in our condensed consolidated statements of income. The Company recognizes licensing revenues generated through development and/or commercialization agreements. The terms of these agreements typically include payment to the Company of one or more of the following: nonrefundable, upfront license fees; sublicensing; development and commercial milestone payments; development activities; and royalties on net sales of licensed products. Each of these types of payments results in licensing revenues except for revenues from royalties on net sales of licensed products and the mark-up of cost of goods sold revenues which are classified as royalty revenues. Revenue is recognized upon satisfaction of a performance obligation by transferring control of a good or service to the customer. For each development and/or commercialization agreement that result in revenues, the Company identifies all performance obligations, aside from those that are immaterial, which may include a license to intellectual property and know-how, development activities, and/or transition activities. 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 (reduces) the estimates of variable consideration such that it is probable that a significant reversal of previously recognized revenue will not occur throughout the life of the contract. 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. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. These estimates are re-assessed each reporting period as required. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, upfront license fees based on the relative standalone selling price prescribed to the license compared to the total value of the arrangement. The revenue is recognized when the license is transferred to the collaborator and the collaborator is able to use and benefit from the license. For licenses that are not distinct from other obligations identified in the arrangement, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, the Company applies an appropriate method of measuring progress for purposes of recognizing revenue from nonrefundable, upfront license fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Development and Regulatory Milestone Payments Depending on facts and circumstances, the Company may conclude that it is appropriate to include the milestone, representing variable consideration, in the estimated total transaction price, or that it is appropriate to fully constrain the milestone. The Company may include revenues from certain milestones in the total transaction price in a reporting period before the milestone is achieved if the Company concludes that achievement of the milestone is probable and that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods. The Company records a corresponding contract asset when this conclusion is reached. Milestone payments that have not been included in the transaction price to date are fully constrained. The Company re-evaluates the probability of achievement of such development milestones and any related constraint each reporting period. The Company adjusts its estimate of the total transaction price, including the amount of revenue that it has recorded, if necessary. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Accounting Pronouncements Adopted We adopted ASU No. 2018-13, Fair Value Measurement - Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement as of January 1, 2020. This standard modifies certain disclosure requirements on fair value measurements. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements and related disclosures . Accounting Pronouncements Not Yet Adopted In June 2016, FASB issued ASU 2016-13, Financial Instruments - Credit Losses In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - Simplifying the Accounting for Income Taxes. This standard removes certain exceptions to the general principles of ASC 740 and improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The Company is required to adopt this standard starting in the first quarter of fiscal year 2021. Early adoption is permitted. We are currently evaluating the impact of the adoption of this standard on our consolidated financial statements and related disclosures. |
Cash, Cash Equivalents, and Investments | Cash, Cash Equivalents, and Investments Cash equivalents |
Fair Value Measurements | Fair Value Measurements Management believes that the carrying amounts of the Company’s financial instruments, including cash, cash equivalents, held-to-maturity investments, accounts receivable, accounts payable, and accrued expenses approximate fair value due to the duration of those instruments. As of March 31, 2020 and December 31, 2019, there were no recorded unrealized gains or losses on our investments as they are classified as held-to-maturity. As of March 31, 2020 and December 31, 2019, amortized cost basis of the investments approximated their fair value. At March 31, 2020 and December 31, 2019, the amortized net discount / (net premium) included in interest income was approximately $134,000 and $32,000, respectively. At March 31, 2020 and December 31, 2019, the remaining unamortized net premium / (net discount) was approximately $221,000 and $285,000, respectively. The schedule of maturities at March 31, 2020 and December 31, 2019 are as follows: Maturities as of March 31, 2020 Maturities as of December 31, 2019 1 Year or Less Greater than 1 Year 1 Year or Less Greater than 1 Year Municipal bonds $ 8,749,716 $ - $ 11,341,249 $ - Government agency bonds 3,423,351 3,242,692 11,950,738 6,231,804 US Treasury bonds 6,027,090 - - - Corporate bonds 62,633,006 3,636,086 57,321,784 6,675,958 Certificates of deposit 4,251,488 2,507,218 3,626,147 3,661,262 Total $ 85,084,651 $ 9,385,996 $ 84,239,918 $ 16,569,024 The authoritative literature for fair value measurements established a three-tier fair value hierarchy, which prioritizes the inputs in measuring fair value. These tiers are as follows: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than the quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as significant unobservable inputs (entity developed assumptions) in which little or no market data exists. As of March 31, 2020, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of March 31, 2020 and December 31, 2019: March 31, 2020 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 8,456,598 $ 8,456,598 $ - $ - Investments Certificates of Deposit 6,758,706 6,758,706 - - Cash equivalents Municipal Bonds 1,003,616 - 1,003,616 - Investments Municipal Bonds 8,749,716 - 8,749,716 - Investments Government Agency Bonds 6,666,043 - 6,666,043 - Investments US Treasury Bonds 6,027,090 - 6,027,090 - Cash equivalents Corporate Bonds 5,075,742 - 5,075,742 - Investments Corporate Bonds 66,269,092 - 66,269,092 - December 31, 2019 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 950,658 $ 950,658 $ - $ - Investments Certificates of Deposit 7,287,409 7,287,409 - - Investments Municipal Bonds 11,341,249 - 11,341,249 - Investments Government Agency Bonds 18,182,542 - 18,182,542 - Investments Corporate Bonds 63,997,742 - 63,997,742 - |
Concentration of Credit Risk and Major Customers | Concentration of Credit Risk and Major Customers The Company maintains bank account balances, which, at times, may exceed insured limits. The Company has not experienced any losses with these accounts and believes that it is not exposed to any significant credit risk on cash. The Company maintains investments in FDIC insured certificates of deposits, municipal bonds, and corporate bonds. The Company is currently dependent on one customer, Endo, which generates almost all the Company’s revenues. For the three-month periods ended March 31, 2020 and 2019, licensing, sublicensing, milestones, and royalty revenues under the License Agreement with Endo were approximately $9.7 million and $8.1 million, respectively. At March 31, 2020 and December 31, 2019, our accounts receivable balances from Endo were $17.8 million and $19.1 million, respectively. |
Treasury Stock | Treasury Stock The Company accounts for treasury stock under the cost method and includes treasury stock as a component of stockholders’ equity. For the three months ended March 31, 2020, we repurchased 4,067 shares at an average price of $54.35 aggregating approximately $221,000. For the three months ended March 31, 2019 |
Receivables and Doubtful Accounts | Receivables and Doubtful Accounts Trade accounts receivable are stated at the amount the Company expects to collect. We may maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We consider the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Our accounts receivable balance is typically due from Endo, our single large specialty pharmaceutical customer. Endo has historically paid timely and has been a financially stable organization. Due to the nature of the accounts receivable balance, we believe the risk of doubtful accounts is minimal and therefore no allowance is recorded. If the financial condition of our customer were to deteriorate, adversely affecting its ability to make payments, additional allowances would be required. We may provide for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after we have used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At March 31, 2020 |
Third-Party Royalties | Third-Party Royalties We have entered into licensing and royalty agreements with third parties and agreed to pay certain royalties on net sales of products for specific indications. The royalty rates differ from agreement to agreement. No assumptions should be made that any disclosed royalty rate payable to a particular third party is the same or similar with respect to any royalty rate payable to any other third parties. We accrue third-party royalty expenses on net sales reported to us by Endo. Third-party royalty costs are generally expensed under general and administrative in the quarter that the net sales have occurred. For the three-month periods ended March 31, 2020 and 2019, third-party royalty expenses were $0.2 million and $0.4 million, respectively. As of March 31, 2019, we have no further third-party royalties in connection with PD as the agreement has expired. |
Royalty Buy-Down | Royalty Buy-Down On March 31, 2012, we entered into an amendment to our existing agreement with Dr. Martin K. Gelbard, dated August 27, 2008, related to our future royalty obligations in connection with PD. The amendment enables us to buy down a portion of our future royalty obligations in exchange for an initial cash payment of $1.5 million and five additional cash payments of $600,000, all of which have been paid as of January 1, 2018. Royalty obligations terminate five years after first commercial sale, which occurred in January 2014. Accordingly, we ceased paying royalties in February 2019. The Company amortizes long-term contracts with finite lives in a manner that reflects the pattern in which the economic benefits of the assets are consumed or otherwise used up. Dr. Gelbard’s agreement is amortized based on an income forecast method by estimating sales of XIAFLEX® and Xiapex® for PD on an annual basis as measured by the proportion of the total estimated sales over the five year period. For the three months ended March 31, 2019, we amortized approximately $0.2 million related to this agreement and is recorded as part of general and administrative expenses. As of both March 31, 2020 and December 31, 2019, there were no remaining capitalized balances outstanding related to this agreement. |
Research and Development Expenses | Research and Development Expenses R&D expenses |
Clinical Trial Expenses | Clinical Trial Expenses Our cost accruals for clinical trials are based on estimates of the services received and efforts expended pursuant to contracts with various clinical trial centers and clinical research organizations. In the normal course of business, we contract with third parties to perform various clinical trial activities in the ongoing development of potential drugs. The financial terms of these agreements are subject to negotiation and vary from contract to contract and may result in uneven payment flows. Payments under the contracts depend on factors such as the achievement of certain events, the successful enrollment of patients, the completion of portions of the clinical trial, or similar conditions. The objective of our accrual policy is to match the recording of expenses in our financial statements to the actual cost of services received and efforts expended. As such, expenses related to each patient enrolled in a clinical trial are recognized beginning upon entry into the trial and over the course of the patient’s continued participation in the trial. In the event of early termination of a clinical trial, we accrue an amount based on our estimate of the remaining non-cancelable obligations associated with the winding down of the clinical trial. Our estimates and assumptions could differ significantly from the amounts that may actually be incurred. |
Stock-Based Compensation | Stock-Based Compensation ASC 718, Compensation - Stock Compensation On June 13, 2019, at the Company’s annual meeting of stockholders, the Company’s stockholders approved the 2019 Omnibus Incentive Compensation Plan (the “2019 Plan”). Upon the 2019 Plan’s approval, approximately 1,247,598 shares of Company common stock were available for issuance thereunder, consisting of 1,100,000 shares authorized for issuance under the 2019 Plan and 147,598 shares then remaining available for issuance under the Company’s 2001 Stock Option Plan (the “2001 Plan”). The 2019 Plan replaced the 2001 Plan. No new awards may be granted under the 2001 Plan; however, awards outstanding under the 2001 Plan remain subject to and will be settled under the applicable 2001 Plan. As of March 31, 2020, options to purchase 61,687 shares of common stock were outstanding under the 2001 Plan. Grants under the 2019 Plan may consist of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards, or cash awards. Employees, key advisors, or non-employee directors are eligible to participate in the 2019 Plan. Grants under the 2019 Plan vest over periods ranging from one to four years and expire ten years from date of grant. As of March 31, 2020, options to purchase 120,000 shares of common stock and 9,450 restricted stock awards were outstanding under the 2019 Plan, and a total of 1,154,648 shares remain available for grant under the 2019 Plan. 2019 Omnibus Incentive Compensation Plan (2019 Plan) Restricted Stock Awards A summary of the restricted stock awards Restricted Stock Weighted-Average Grant Date Fair Value Per Share Nonvested at December 31, 2019 10,450 $ 60.47 Granted 1,000 50.51 Vested (2,000 ) 53.69 Forfeited - Nonvested at March 31, 2020 9,450 $ 60.85 Stock-based compensation expense related to restricted stock awards recognized in general and administrative expense was approximately $144,000 and zero for the three-month periods months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, there was approximately $144,000 of total unrecognized compensation cost related to non-vested share-based compensation arrangements related to restricted stock. This cost is expected to be recognized over the vesting periods of the restricted stock, with a weighted-average period of approximately 0.25 years. Stock Option Activity For the three months ended March 31, 2020, we granted a total of 30,000 stock options with a weighted average grant date fair value of $22.70 per share. The assumptions used in the valuation of stock options granted during the three months ended March 31, 2020 were as follows: Three Months Ended March 31, 2020 Risk-free interest rate 0.70% - 1.61% Expected term of option 5.5 - 6.25 years Expected stock price volatility 39.5% - 40.6% Expected dividend yield $ 0.0 A summary of our stock option activity during the three months ended March 31, 2020 is presented below: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2019 189,187 $ 46.79 8.62 $ 1.920,684 Grants 30,000 56.11 - - Exercised - - - - Forfeited (37,500 ) 57.48 - - Outstanding at March 31, 2020 181,687 $ 46.12 7.49 $ 1,898,560 Exercisable at March 31, 2020 54,187 $ 39.74 2.69 $ 911,735 During the three-month periods months ended March 31, 2020 and 2019, the Company received approximately zero and $58,000, respectively, from stock options exercised by option holders. Aggregate intrinsic value represents the total pre-tax intrinsic value based on the closing price of our common stock of $56.57 on March 31, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. We have approximately $2.3 million in unrecognized compensation cost related to stock options outstanding as of March 31, 2020, which we expect to recognize over the next 3.75 years. Stock-based compensation expense related to stock options recognized in general and administrative expenses was approximately $166,000 and $142,000 for the three-month periods ended March 31, 2020 and March 31, 2019, respectively. In addition, stock compensation expense related to restructuring associated with the acceleration of vesting of certain stock options and restricted stock units was approximately $190,000 for the three months ended March 31, 2020 (see Note 7). |
Property and Equipment | Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Machinery and equipment, furniture and fixtures, and autos are depreciated on a straight-line basis over their estimated useful lives of five to ten years. Leasehold improvements are amortized over the lesser of their estimated useful lives or the remaining life of the lease. At March 31, 2020, total property and equipment consisted of furniture and fixtures of approximately $68,000 with an expected useful life of five years. As of December 31, 2019, all property and equipment were fully depreciated. |
Comprehensive Income | Comprehensive Income For each of the three-month periods ended March 31, 2020 and 2019, we had no components of other comprehensive income other than net income itself. |
Provision for Income Taxes | Provision for Income Taxes We use the asset and liability method of accounting for income taxes, as set forth in ASC 740-10-25-2. Under this method, deferred income taxes, when required, are provided on the basis of the difference between the financial reporting and income tax basis of assets and liabilities at the statutory rates enacted for future periods when the differences are expected to reverse. A valuation allowance is applied against any net deferred tax asset if, based on the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the condensed consolidated financial statements from such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate settlement. As of March 31, 2020 and December 31, 2019, the Company has not recorded any unrecognized tax benefits. We classify interest associated with income taxes under interest expense and tax penalties under other. |
Lease Obligation | Lease Obligation We determine if an arrangement includes a lease at inception. Right-of-use lease assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The right-of-use lease asset includes any lease payments made and excludes lease incentives. Incremental borrowing rate is used in determining the present value of future payments. We apply a portfolio approach to the property leases to apply an incremental borrowing rate to leases with similar lease terms. The lease terms may include options to extend or terminate the lease. We recognize the options to extend the lease as part of the right-of-use lease assets and lease liabilities only if it is reasonably certain that the option would be exercised. Lease expense for minimum lease payments is recognized on a straight-line basis over the non-cancelable lease term. The adoption of the new standard as of January 1, 2019 did not have a material impact on our consolidated financial statements for the three months ended March 31, 2019 due to the short-term nature of our existing lease in Lynbrook, New York. In December 2019, we recorded a right-of-use lease asset of $243,000, a short-term lease liability of $76,000, and a long-term lease liability of $167,000 associated with the lease of our new headquarters in Wilmington, Delaware. The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 2020 $ 61,815 $ 75,352 2021 84,893 84,893 2022 87,428 87,428 Total lease payments 234,136 247,673 Less: interest (9,784 ) (11,560 ) Total lease obligation $ 224,352 $ 236,113 On January 7, 2020, the Company provided three months’ notice to 35 Wilbur Street Associates, LLC of the Company’s intent to terminate the lease agreement for our former corporate headquarters, located at 35 Wilbur St., Lynbrook, New York 11563. Accordingly, the lease terminated on April 7, 2020. As the lease provided the Company the option to cancel the lease by giving three months’ prior written notice, the Company did not incur any termination penalties. Operating lease expenses amounted to approximately $57,000 and $34,000 for the three-month periods ended March 31, 2020 and 2019, respectively. |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Maturities | The schedule of maturities at March 31, 2020 and December 31, 2019 are as follows: Maturities as of March 31, 2020 Maturities as of December 31, 2019 1 Year or Less Greater than 1 Year 1 Year or Less Greater than 1 Year Municipal bonds $ 8,749,716 $ - $ 11,341,249 $ - Government agency bonds 3,423,351 3,242,692 11,950,738 6,231,804 US Treasury bonds 6,027,090 - - - Corporate bonds 62,633,006 3,636,086 57,321,784 6,675,958 Certificates of deposit 4,251,488 2,507,218 3,626,147 3,661,262 Total $ 85,084,651 $ 9,385,996 $ 84,239,918 $ 16,569,024 |
Fair Value Assets Measured on Recurring Basis | As of March 31, 2020, the Company held certain investments that are required to be measured at fair value on a recurring basis. The following tables present the Company’s fair value hierarchy for these financial assets as of March 31, 2020 and December 31, 2019: March 31, 2020 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 8,456,598 $ 8,456,598 $ - $ - Investments Certificates of Deposit 6,758,706 6,758,706 - - Cash equivalents Municipal Bonds 1,003,616 - 1,003,616 - Investments Municipal Bonds 8,749,716 - 8,749,716 - Investments Government Agency Bonds 6,666,043 - 6,666,043 - Investments US Treasury Bonds 6,027,090 - 6,027,090 - Cash equivalents Corporate Bonds 5,075,742 - 5,075,742 - Investments Corporate Bonds 66,269,092 - 66,269,092 - December 31, 2019 Type of Instrument Fair Value Level 1 Level 2 Level 3 Cash equivalents Institutional Money Market $ 950,658 $ 950,658 $ - $ - Investments Certificates of Deposit 7,287,409 7,287,409 - - Investments Municipal Bonds 11,341,249 - 11,341,249 - Investments Government Agency Bonds 18,182,542 - 18,182,542 - Investments Corporate Bonds 63,997,742 - 63,997,742 - |
Restricted Stock Awards Activity | A summary of the restricted stock awards Restricted Stock Weighted-Average Grant Date Fair Value Per Share Nonvested at December 31, 2019 10,450 $ 60.47 Granted 1,000 50.51 Vested (2,000 ) 53.69 Forfeited - Nonvested at March 31, 2020 9,450 $ 60.85 |
Assumptions Used to Estimate the Fair Values of the Stock Options Granted | The assumptions used in the valuation of stock options granted during the three months ended March 31, 2020 were as follows: Three Months Ended March 31, 2020 Risk-free interest rate 0.70% - 1.61% Expected term of option 5.5 - 6.25 years Expected stock price volatility 39.5% - 40.6% Expected dividend yield $ 0.0 |
Stock Option Activity | A summary of our stock option activity during the three months ended March 31, 2020 is presented below: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2019 189,187 $ 46.79 8.62 $ 1.920,684 Grants 30,000 56.11 - - Exercised - - - - Forfeited (37,500 ) 57.48 - - Outstanding at March 31, 2020 181,687 $ 46.12 7.49 $ 1,898,560 Exercisable at March 31, 2020 54,187 $ 39.74 2.69 $ 911,735 |
Maturity of Lease Obligations | The following table summarizes the maturity of the Company’s lease obligations on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on our condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 2020 $ 61,815 $ 75,352 2021 84,893 84,893 2022 87,428 87,428 Total lease payments 234,136 247,673 Less: interest (9,784 ) (11,560 ) Total lease obligation $ 224,352 $ 236,113 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
ACCOUNTS PAYABLE AND ACCRUED EXPENSES [Abstract] | |
Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consisted of the following: March 31, 2020 December 31, 2019 Trade accounts payable $ 216,453 $ 197,077 Accrued legal and other professional fees 333,558 330,787 Accrued payroll and related costs 18,293 209,330 Third party royalties 169,000 228,000 Restructuring accrual (See Note 7) 866,377 - Other accruals 24,834 33,215 Total $ 1,628,515 $ 998,409 |
PATENT COSTS (Tables)
PATENT COSTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
PATENT COSTS [Abstract] | |
Net Patent Costs | Patent costs may be creditable against future royalty revenues. For each period presented below, net patent costs consisted of: March 31, 2020 December 31, 2019 Patents $ 1,284,725 $ 1,272,625 Accumulated amortization (720,424 ) (699,348 ) $ 564,301 $ 573,277 |
Estimated Aggregate Future Amortization Expense | The estimated aggregate amortization expense for the remaining nine months of 2020 and each of the years below is approximately as follows: April 1, 2020 – December 31, 2020 $ 63,000 2021 66,500 2022 66,500 2023 66,500 2024 66,500 Thereafter 235,000 |
RESTRUCTURING COSTS (Tables)
RESTRUCTURING COSTS (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
RESTRUCTURING COSTS [Abstract] | |
Payments Related to Restructuring Plan | Total charges and payments related to the restructuring plan recognized in the condensed consolidated statement of operations are as follows: Three Months Ended March 31, 2020 Restructuring accrual, January 1, 2020 $ - Termination costs 1,070,024 Facility exit costs 76,020 Payments (89,235 ) Stock compensation expense charged to additional paid-in-capital (190,432 ) Restructuring accrual, March 31, 2020 $ 866,377 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Cash, Cash Equivalents and Investments (Details) - USD ($) $ in Millions | Mar. 31, 2020 | Dec. 31, 2019 |
Cash, Cash Equivalents and Investments [Abstract] | ||
Aggregate fair value of investments | $ 94.5 | $ 100.8 |
Held-to-maturity securities, unrecognized gain | 0 | 0 |
Held-to-maturity securities, unrecognized (loss) | $ 0 | $ 0 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Fair Value Measurements (Details) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Fair Value Measurements [Abstract] | ||
Held-to-maturity securities, unrecognized gain | $ 0 | $ 0 |
Held-to-maturity securities, unrecognized (loss) | 0 | 0 |
Amortized net premium / (net discount) included in interest income | 134,000 | 32,000 |
Remaining unamortized net premium / (net discount) | 221,000 | 285,000 |
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 85,084,651 | 84,239,918 |
Held-to-maturity securities, noncurrent | 9,385,996 | 16,569,024 |
Recurring [Member] | Institutional Money Market [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 8,456,598 | 950,658 |
Recurring [Member] | Certificates of Deposit [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 6,758,706 | 7,287,409 |
Recurring [Member] | Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 1,003,616 | |
Investments | 8,749,716 | 11,341,249 |
Recurring [Member] | Government Agency Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 6,666,043 | 18,182,542 |
Recurring [Member] | US Treasury Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 6,027,090 | |
Recurring [Member] | Corporate Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 5,075,742 | |
Investments | 66,269,092 | 63,997,742 |
Recurring [Member] | Level 1 [Member] | Institutional Money Market [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 8,456,598 | 950,658 |
Recurring [Member] | Level 1 [Member] | Certificates of Deposit [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 6,758,706 | 7,287,409 |
Recurring [Member] | Level 1 [Member] | Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 0 | |
Investments | 0 | 0 |
Recurring [Member] | Level 1 [Member] | Government Agency Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 0 | 0 |
Recurring [Member] | Level 1 [Member] | US Treasury Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 0 | |
Recurring [Member] | Level 1 [Member] | Corporate Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 0 | |
Investments | 0 | 0 |
Recurring [Member] | Level 2 [Member] | Institutional Money Market [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 0 | 0 |
Recurring [Member] | Level 2 [Member] | Certificates of Deposit [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 0 | 0 |
Recurring [Member] | Level 2 [Member] | Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 1,003,616 | |
Investments | 8,749,716 | 11,341,249 |
Recurring [Member] | Level 2 [Member] | Government Agency Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 6,666,043 | 18,182,542 |
Recurring [Member] | Level 2 [Member] | US Treasury Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 6,027,090 | |
Recurring [Member] | Level 2 [Member] | Corporate Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 5,075,742 | |
Investments | 66,269,092 | 63,997,742 |
Recurring [Member] | Level 3 [Member] | Institutional Money Market [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 0 | 0 |
Recurring [Member] | Level 3 [Member] | Certificates of Deposit [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 0 | 0 |
Recurring [Member] | Level 3 [Member] | Municipal Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 0 | |
Investments | 0 | 0 |
Recurring [Member] | Level 3 [Member] | Government Agency Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 0 | 0 |
Recurring [Member] | Level 3 [Member] | US Treasury Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Investments | 0 | |
Recurring [Member] | Level 3 [Member] | Corporate Bonds [Member] | ||
Assets, Fair Value Disclosure [Abstract] | ||
Cash equivalents | 0 | |
Investments | 0 | 0 |
Municipal Bonds [Member] | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 8,749,716 | 11,341,249 |
Held-to-maturity securities, noncurrent | 0 | 0 |
Government Agency Bonds [Member] | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 3,423,351 | 11,950,738 |
Held-to-maturity securities, noncurrent | 3,242,692 | 6,231,804 |
US Treasury Bonds [Member] | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 6,027,090 | 0 |
Held-to-maturity securities, noncurrent | 0 | 0 |
Corporate Bonds [Member] | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 62,633,006 | 57,321,784 |
Held-to-maturity securities, noncurrent | 3,636,086 | 6,675,958 |
Certificates of Deposit [Member] | ||
Debt Securities, Held-to-maturity [Abstract] | ||
Held-to-maturity securities, current | 4,251,488 | 3,626,147 |
Held-to-maturity securities, noncurrent | $ 2,507,218 | $ 3,661,262 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Concentration of Credit Risk and Major Customers (Details) | 3 Months Ended | ||
Mar. 31, 2020USD ($)Customer | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Concentration of Credit Risk and Major Customers [Abstract] | |||
Total revenues | $ 9,668,667 | $ 8,129,141 | |
Accounts receivable | $ 17,750,829 | $ 19,065,919 | |
Endo [Member] | |||
Concentration of Credit Risk and Major Customers [Abstract] | |||
Number of customers | Customer | 1 | ||
Total revenues | $ 9,700,000 | $ 8,100,000 | |
Accounts receivable | $ 17,800,000 | $ 19,100,000 |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Treasury Stock, Receivables and Doubtful Accounts (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Treasury Stock [Abstract] | |||
Treasury stock purchased (in shares) | 4,067 | 0 | |
Average price of share (in dollars per share) | $ 54.35 | $ 0 | |
Treasury stock repurchase value | $ 221,031 | ||
Receivables and Doubtful Accounts [Abstract] | |||
Accounts receivable | 17,750,829 | $ 19,065,919 | |
Endo [Member] | |||
Receivables and Doubtful Accounts [Abstract] | |||
Accounts receivable | $ 17,800,000 | $ 19,100,000 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Third party Royalties and Royalty Buy-Down (Details) $ in Thousands | 3 Months Ended | ||
Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) | Mar. 31, 2012USD ($)Payment | |
Third-Party Royalties [Abstract] | |||
Royalty expenses | $ 200 | $ 400 | |
Royalty Buy-Down [Abstract] | |||
Deferred royalty buy-down | $ 1,500 | ||
Deferred royalty buy-down, number of additional cash payments | Payment | 5 | ||
Deferred royalty buy-down, five additional capitalized cost | $ 600 | ||
Deferred costs, amortization period | 5 years | ||
Deferred royalty buy-down, amortization expense | $ 200 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Stock-Based Compensation (Details) - shares | 3 Months Ended | |
Mar. 31, 2020 | Dec. 31, 2019 | |
Stock Options [Member] | ||
Stock Option Plan [Abstract] | ||
Outstanding options (in shares) | 181,687 | 189,187 |
Restricted Stock Awards [Member] | ||
Stock Option Plan [Abstract] | ||
Outstanding awards (in shares) | 9,450 | 10,450 |
2001 Plan [Member] | ||
Stock Option Plan [Abstract] | ||
Number of shares available for issuance (in shares) | 147,598 | |
2001 Plan [Member] | Stock Options [Member] | ||
Stock Option Plan [Abstract] | ||
Outstanding options (in shares) | 61,687 | |
2019 Plan [Member] | ||
Stock Option Plan [Abstract] | ||
Number of shares authorized for issuance (in shares) | 1,247,598 | |
Number of shares available for issuance (in shares) | 1,100,000 | |
Award expiry period | 10 years | |
Number of shares remaining available for issuance (in shares) | 1,154,648 | |
2019 Plan [Member] | Minimum [Member] | ||
Stock Option Plan [Abstract] | ||
Award vesting period | 1 year | |
2019 Plan [Member] | Maximum [Member] | ||
Stock Option Plan [Abstract] | ||
Award vesting period | 4 years | |
2019 Plan [Member] | Stock Options [Member] | ||
Stock Option Plan [Abstract] | ||
Outstanding options (in shares) | 120,000 | |
2019 Plan [Member] | Restricted Stock Awards [Member] | ||
Stock Option Plan [Abstract] | ||
Outstanding awards (in shares) | 9,450 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Stock-Based Compensation, Restricted Stock Awards (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Restricted Stock Awards [Member] | ||
Restricted Stock Awards [Roll Forward] | ||
Nonvested, Beginning balance (in shares) | 10,450 | |
Granted (in shares) | 1,000 | |
Vested (in shares) | (2,000) | |
Forfeited (in shares) | 0 | |
Nonvested, Ending balance (in shares) | 9,450 | |
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||
Nonvested, Beginning of period (in dollars per share) | $ 60.47 | |
Granted (in dollars per share) | 50.51 | |
Vested (in dollars per share) | 53.69 | |
Forfeited (in dollars per share) | 0 | |
Nonvested, Ending of period (in dollars per share) | $ 60.85 | |
Unrecognized compensation cost | $ 144 | |
Recognized compensation period | 3 months | |
Restricted Stock Awards [Member] | General and Administrative [Member] | ||
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||
Stock-based compensation expense | $ 144 | $ 0 |
Stock Options [Member] | ||
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||
Unrecognized compensation cost | $ 2,300 | |
Recognized compensation period | 3 years 9 months | |
Stock Options [Member] | General and Administrative [Member] | ||
Weighted-Average Grant Date Fair Value Per Share [Roll Forward] | ||
Stock-based compensation expense | $ 166 | $ 142 |
SUMMARY OF SIGNIFICANT ACCOU_11
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Stock-Based Compensation, Stock Option Activity (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Assumptions used to estimate the fair values of the stock options granted [Abstract] | |||
Expected dividend yield | 0.00% | ||
Additional Disclosures [Abstract] | |||
Proceeds from stock option exercises | $ 0 | $ 58,420 | |
Minimum [Member] | |||
Assumptions used to estimate the fair values of the stock options granted [Abstract] | |||
Risk-free interest rate | 0.70% | ||
Expected term of option | 5 years 6 months | ||
Expected stock price volatility | 39.50% | ||
Maximum [Member] | |||
Assumptions used to estimate the fair values of the stock options granted [Abstract] | |||
Risk-free interest rate | 1.61% | ||
Expected term of option | 6 years 3 months | ||
Expected stock price volatility | 40.60% | ||
Restricted Stock Awards [Member] | |||
Additional Disclosures [Abstract] | |||
Unrecognized compensation cost | $ 144,000 | ||
Recognized compensation period | 3 months | ||
Restricted Stock Awards [Member] | General and Administrative [Member] | |||
Additional Disclosures [Abstract] | |||
Stock-based compensation expense | $ 144,000 | 0 | |
Stock Options [Member] | |||
Stock Options Activity [Roll Forward] | |||
Outstanding, beginning of period (in shares) | 189,187 | ||
Grants (in shares) | 30,000 | ||
Exercised (in shares) | 0 | ||
Forfeited (in shares) | (37,500) | ||
Outstanding, end of period (in shares) | 181,687 | 189,187 | |
Exercisable, end of period (in shares) | 54,187 | ||
Weighted Average Exercise Price [Roll Forward] | |||
Outstanding, beginning of period (in dollars per share) | $ 46.79 | ||
Grants (in dollars per share) | 56.11 | ||
Exercised (in dollars per share) | 0 | ||
Forfeited (in dollars per share) | 57.48 | ||
Outstanding, end of period (in dollars per share) | 46.12 | $ 46.79 | |
Exercisable, end of period (in dollars per share) | $ 39.74 | ||
Weighted Average Remaining Contractual Term [Roll Forward] | |||
Outstanding | 7 years 5 months 26 days | 8 years 7 months 13 days | |
Grants | 0 years | ||
Exercised | 0 years | ||
Forfeited | 0 years | ||
Exercisable | 2 years 8 months 8 days | ||
Aggregate Intrinsic Value [Roll Forward] | |||
Outstanding, beginning of period | $ 1,920,684 | ||
Grants | 0 | ||
Exercised | 0 | ||
Forfeited | 0 | ||
Outstanding, end of period | 1,898,560 | $ 1,920,684 | |
Exercisable, end of period | $ 911,735 | ||
Additional Disclosures [Abstract] | |||
Weighted average grant date fair value of stock granted (in dollars per share) | $ 22.70 | ||
Proceeds from stock option exercises | $ 0 | 58,000 | |
Closing price of common stock (in dollars per share) | $ 56.57 | ||
Unrecognized compensation cost | $ 2,300,000 | ||
Recognized compensation period | 3 years 9 months | ||
Stock Options [Member] | General and Administrative [Member] | |||
Additional Disclosures [Abstract] | |||
Stock-based compensation expense | $ 166,000 | 142,000 | |
Stock Options and Restricted Stock Awards [Member] | Restructuring [Member] | |||
Additional Disclosures [Abstract] | |||
Stock-based compensation expense | $ 190,000 |
SUMMARY OF SIGNIFICANT ACCOU_12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Property and Equipment, Comprehensive Income and Provision for Income Taxes (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Property and Equipment [Abstract] | |||
Property and equipment, net | $ 68,313 | $ 0 | |
Comprehensive Income [Abstract] | |||
Other comprehensive income | 0 | $ 0 | |
Income Taxes [Abstract] | |||
Unrecognized tax benefits | $ 0 | $ 0 | |
Machinery and Equipment [Member] | Minimum [Member] | |||
Property and Equipment [Abstract] | |||
Estimated useful life | 5 years | ||
Machinery and Equipment [Member] | Maximum [Member] | |||
Property and Equipment [Abstract] | |||
Estimated useful life | 10 years | ||
Furniture and Fixtures [Member] | |||
Property and Equipment [Abstract] | |||
Estimated useful life | 5 years | ||
Property and equipment, net | $ 68,000 | ||
Furniture and Fixtures [Member] | Minimum [Member] | |||
Property and Equipment [Abstract] | |||
Estimated useful life | 5 years | ||
Furniture and Fixtures [Member] | Maximum [Member] | |||
Property and Equipment [Abstract] | |||
Estimated useful life | 10 years | ||
Autos [Member] | Minimum [Member] | |||
Property and Equipment [Abstract] | |||
Estimated useful life | 5 years | ||
Autos [Member] | Maximum [Member] | |||
Property and Equipment [Abstract] | |||
Estimated useful life | 10 years |
SUMMARY OF SIGNIFICANT ACCOU_13
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Lease Obligation (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Lease Obligation [Abstract] | |||
Right-of-use lease asset, gross | $ 243,000 | ||
Short-term lease liability | $ 77,358 | 69,099 | |
Long-term lease liability | 146,994 | 167,014 | |
Maturity of Lease Obligations [Abstract] | |||
2020 | 61,815 | 75,352 | |
2021 | 84,893 | 84,893 | |
2022 | 87,428 | 87,428 | |
Total lease payments | 234,136 | 247,673 | |
Less: Interest | (9,784) | (11,560) | |
Total lease obligation | $ 224,352 | $ 236,113 | |
Notice period to cancel lease agreements | 3 months | ||
Operating lease expenses | $ 57,000 | $ 34,000 |
NET INCOME PER SHARE (Details)
NET INCOME PER SHARE (Details) - Stock Options and Restricted Stock Awards [Member] - shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net Income Per Share [Abstract] | ||
Common equivalent shares attributable to stock options included in calculation of diluted net income per share (in shares) | 23,865 | 61,243 |
Antidilutive securities excluded from earnings per share calculation (in shares) | 180,500 | 50,000 |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Accounts payable and accrued expenses [Abstract] | ||
Trade accounts payable | $ 216,453 | $ 197,077 |
Accrued legal and other professional fees | 333,558 | 330,787 |
Accrued payroll and related costs | 18,293 | 209,330 |
Third party royalties | 169,000 | 228,000 |
Restructuring accrual (See Note 7) | 866,377 | 0 |
Other accruals | 24,834 | 33,215 |
Total | $ 1,628,515 | $ 998,409 |
PATENT COSTS (Details)
PATENT COSTS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Finite-lived Intangible Assets [Abstract] | |||
Impairment | $ 0 | $ 0 | |
Net Patent Costs [Abstract] | |||
Net Patent Costs | 564,301 | 573,277 | |
Patents [Member] | |||
Finite-lived Intangible Assets [Abstract] | |||
Capitalized patent costs | 12,000 | $ 0 | |
Net Patent Costs [Abstract] | |||
Patents | 1,284,725 | 1,272,625 | |
Accumulated amortization | (720,424) | (699,348) | |
Net Patent Costs | 564,301 | $ 573,277 | |
Amortization expense for patents | 21,000 | $ 19,000 | |
Estimated aggregate amortization expense [Abstract] | |||
April 1, 2020 - December 31, 2020 | 63,000 | ||
2021 | 66,500 | ||
2022 | 66,500 | ||
2023 | 66,500 | ||
2024 | 66,500 | ||
Thereafter | $ 235,000 | ||
Patents [Member] | Minimum [Member] | |||
Finite-lived Intangible Assets [Abstract] | |||
Amortization period for intangible assets | 1 year | ||
Patents [Member] | Maximum [Member] | |||
Finite-lived Intangible Assets [Abstract] | |||
Amortization period for intangible assets | 9 years |
PROVISION FOR INCOME TAXES (Det
PROVISION FOR INCOME TAXES (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
PROVISION FOR INCOME TAXES [Abstract] | |||
Provision for income taxes | $ 1,213,509 | $ 1,105,275 | |
Deferred tax liabilities | $ 484,259 | $ 572,660 | |
Estimated effective tax rate | 21.20% | 20.00% |
RESTRUCTURING COSTS (Details)
RESTRUCTURING COSTS (Details) | 3 Months Ended | ||||
Mar. 31, 2020 | Mar. 31, 2020USD ($) | Mar. 31, 2020Consultant | Mar. 31, 2020Employee | Mar. 31, 2019USD ($) | |
Restructuring cost and expected cost [Abstract] | |||||
Number of positions terminated | 1 | 5 | |||
Restructuring charges | $ 1,146,045 | $ 0 | |||
Restructuring Reserve [Roll Forward] | |||||
Restructuring accrual, beginning of period | 0 | ||||
Stock compensation expense charged to additional paid-in-capital | (500,306) | $ (141,788) | |||
Restructuring accrual, end of period | 866,377 | ||||
One-time Termination Benefits [Member] | |||||
Restructuring cost and expected cost [Abstract] | |||||
Restructuring charges | 900,000 | ||||
Expected cash termination benefits payment period | 6 months | ||||
Estimated liability for termination benefits period | 6 months | ||||
Restructuring Reserve [Roll Forward] | |||||
Restructuring accrual, beginning of period | 0 | ||||
Termination costs | 1,070,024 | ||||
Facility exit costs | 76,020 | ||||
Payments | (89,235) | ||||
Stock compensation expense charged to additional paid-in-capital | (190,432) | ||||
Restructuring accrual, end of period | 866,377 | ||||
One-time Non-cash Termination Expenses [Member] | |||||
Restructuring cost and expected cost [Abstract] | |||||
Restructuring charges | $ 200,000 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) $ in Millions | Apr. 06, 2020USD ($) |
Subsequent Event [Member] | J. Kevin Buchi [Member] | |
Restructuring Charges [Abstract] | |
Benefits to terminated employees | $ 0.6 |