VENAXIS, INC.
|
(Exact name of registrant as specified in its charter)
|
Colorado
|
84-1553387
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
1585 South Perry Street, Castle Rock, Colorado 80104
|
(Address of principal executive offices) (Zip Code)
|
(303) 794-2000
|
(Registrant's telephone number, including area code)
|
Page
|
||||||
PART I - Financial Information
|
||||||
Item 1.
|
Condensed Financial Statements
|
|||||
Balance Sheets as of March 31, 2016 (unaudited) and December 31, 2015
|
3
|
|||||
Statements of Operations for the Three Months Ended March 31, 2016 and 2015 (unaudited)
|
4
|
|||||
Statements of Cash Flows for the Three Months Ended March 31, 2016 and 2015 (unaudited)
|
5
|
|||||
Notes to Condensed Financial Statements (unaudited)
|
6
|
|||||
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
16
|
||||
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
20
|
||||
Item 4.
|
Controls and Procedures
|
21
|
||||
PART II - Other Information
|
||||||
Item 1.
|
Legal Proceedings
|
22
|
||||
Item 1A.
|
Risk Factors
|
22
|
||||
Item 6.
|
Exhibits
|
23
|
||||
Signatures
|
24
|
March 31,
2016
(Unaudited)
|
December 31,
2015
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
3,841,065
|
$
|
2,012,283
|
||||
Short-term investments (Note 1)
|
12,759,109
|
14,147,991
|
||||||
Prepaid expenses and other current assets (Note 1)
|
241,817
|
251,778
|
||||||
Total current assets
|
16,841,991
|
16,412,052
|
||||||
Property and equipment, net (Note 2)
|
896
|
1,954,496
|
||||||
Long-term investments (Note 1)
|
250,000
|
972,000
|
||||||
Other long term assets, net (Notes 1 and 3)
|
1,381,566
|
1,523,649
|
||||||
Total assets
|
$
|
18,474,453
|
$
|
20,862,197
|
||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$
|
321,054
|
$
|
701,064
|
||||
Accrued compensation
|
12,549
|
449,873
|
||||||
Accrued expenses
|
171,129
|
241,882
|
||||||
Notes and other obligations, current portion (Note 4)
|
57,152
|
301,250
|
||||||
Deferred revenue, current portion (Note 7)
|
96,698
|
96,698
|
||||||
Total current liabilities
|
658,582
|
1,790,767
|
||||||
Notes and other obligations, less current portion (Note 4)
|
-
|
1,838,779
|
||||||
Deferred revenue, less current portion (Note 7)
|
1,137,840
|
1,162,015
|
||||||
Total liabilities
|
1,796,422
|
4,791,561
|
||||||
Commitments and contingencies (Notes 7 and 9)
|
||||||||
Stockholders' equity (Notes 5 and 6):
|
||||||||
Common stock, no par value, 60,000,000 shares authorized;
|
||||||||
3,876,960 shares issued and outstanding
|
121,700,959
|
121,653,075
|
||||||
Accumulated deficit
|
(105,022,928
|
)
|
(105,582,439
|
)
|
||||
Total stockholders' equity
|
16,678,031
|
16,070,636
|
||||||
Total liabilities and stockholders' equity
|
$
|
18,474,453
|
$
|
20,862,197
|
2016
|
2015
|
|||||||
Sales (Note 1)
|
$
|
-
|
$
|
11,288
|
||||
Cost of sales
|
-
|
4,007
|
||||||
Gross profit
|
-
|
7,281
|
||||||
Other revenue – fee (Note 7)
|
24,175
|
24,175
|
||||||
Operating expenses:
|
||||||||
Selling, general and administrative
|
1,030,126
|
1,535,851
|
||||||
Research and development
|
372,586
|
707,742
|
||||||
Total operating expenses
|
1,402,712
|
2,243,593
|
||||||
Operating loss
|
(1,378,537
|
)
|
(2,212,137
|
)
|
||||
Other (expense) income:
|
||||||||
Gain on sale of property and equipment (Note 2)
|
1,919,361
|
-
|
||||||
Interest expense
|
(25,598
|
)
|
(25,064
|
)
|
||||
Investment income
|
44,285
|
50,828
|
||||||
Total other income
|
1,938,048
|
25,764
|
||||||
Net income (loss)
|
$
|
559,511
|
$
|
(2,186,373
|
)
|
|||
Basic and diluted net loss per share (Note 1)
|
$
|
0.14
|
$
|
(0.56
|
)
|
|||
Basic and diluted weighted average number
|
||||||||
of shares outstanding (Note 1)
|
3,876,960
|
3,876,960
|
2016
|
2015
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$
|
559,511
|
$
|
(2,186,373
|
)
|
|||
Adjustments to reconcile net loss to
|
||||||||
net cash used in operating activities:
|
||||||||
Stock-based compensation for services
|
47,884
|
433,402
|
||||||
Depreciation and amortization
|
19,401
|
64,021
|
||||||
Amortization of license fees
|
(24,175
|
)
|
(24,175
|
)
|
||||
Other non-cash charges
|
133,899
|
-
|
||||||
Gain on sale of property and equipment
|
(1,919,361
|
)
|
-
|
|||||
Change in:
|
||||||||
Accounts receivable
|
-
|
7,077
|
||||||
Prepaid expenses and other current assets
|
69,155
|
89,690
|
||||||
Accounts payable
|
(380,010
|
)
|
(34,707
|
)
|
||||
Accrued compensation
|
(437,324
|
)
|
(565,862
|
)
|
||||
Accrued expenses
|
28,058
|
(69,744
|
)
|
|||||
Net cash (used in) operating activities
|
(1,902,962
|
)
|
(2,286,671
|
)
|
||||
Cash flows from investing activities:
|
||||||||
Purchases of short-term investments
|
(7,537,862
|
)
|
(11,305,556
|
)
|
||||
Sales of short-term investments
|
9,648,744
|
14,402,745
|
||||||
Proceeds from sale of property and equipment
|
1,748,571
|
-
|
||||||
Purchases of patent and trademark application costs
|
(10,778
|
)
|
(14,679
|
)
|
||||
Net cash provided by investing activities
|
3,848,675
|
3,082,510
|
||||||
Cash flows from financing activities:
|
||||||||
Repayment of notes payable and other obligations
|
(116,931
|
)
|
(133,715
|
)
|
||||
Net cash (used in) financing activities
|
(116,931
|
)
|
(133,715
|
)
|
||||
Net change in cash and cash equivalents
|
1,828,782
|
662,124
|
||||||
Cash and cash equivalents at beginning of period
|
2,012,283
|
3,539,911
|
||||||
Cash and cash equivalents at end of period
|
$
|
3,841,065
|
$
|
4,202,035
|
||||
Supplemental disclosure of cash flow information:
|
||||||||
Cash paid during the period for interest
|
$
|
31,140
|
$
|
25,286
|
||||
Supplemental disclosure of investing information:
|
||||||||
Liability payoffs upon property sale
|
$
|
2,064,758
|
$
|
-
|
· | exploring other possible strategic options available to the Company following termination of the Strand transaction; |
· | evaluating options to monetize, partner or license the Company's appendicitis product portfolio; |
· | continuing to explore prospective partnering or licensing opportunities with complementary opportunities and technologies; and |
· | continuing to implement cost control initiatives to conserve cash. |
March 31,
2016
(Unaudited)
|
December 31,
2015
|
|||||||
Land and improvements
|
$
|
-
|
$
|
1,107,508
|
||||
Building
|
-
|
2,589,231
|
||||||
Building improvements
|
-
|
253,526
|
||||||
Laboratory equipment
|
-
|
848,014
|
||||||
Office and computer equipment
|
66,104
|
318,254
|
||||||
66,104
|
5,116,533
|
|||||||
Less accumulated depreciation
|
65,208
|
3,162,037
|
||||||
$
|
896
|
$
|
1,954,496
|
March 31,
2016
(Unaudited)
|
December 31,
2015
|
|||||||
Patents, trademarks and applications, net of accumulated amortization of $534,692 and $548,327, respectively
|
$
|
994,327
|
$
|
1,136,410
|
||||
Goodwill
|
387,239
|
387,239
|
||||||
$
|
1,381,566
|
$
|
1,523,649
|
March 31,
2016
(Unaudited)
|
December 31,
2015
|
|||||||
Mortgage notes
|
$
|
-
|
$
|
1,997,701
|
||||
Other short-term installment obligations
|
57,152
|
142,328
|
||||||
57,152
|
2,140,029
|
|||||||
Less current portion
|
57,152
|
301,250
|
||||||
$
|
-
|
$
|
1,838,779
|
·
|
The grant date exercise price – the closing market price of the Company’s common stock on the date of the grant;
|
·
|
Estimated option term – based on historical experience with existing option holders;
|
·
|
Estimated dividend rates – based on historical and anticipated dividends over the life of the option;
|
·
|
Term of the option – based on historical experience, grants have lives of approximately 3-5 years;
|
·
|
Risk-free interest rates – with maturities that approximate the expected life of the options granted;
|
·
|
Calculated stock price volatility – calculated over the expected life of the options granted, which is calculated based on the daily closing price of the Company’s common stock over a period equal to the expected term of the option; and
|
·
|
Option exercise behaviors – based on actual and projected employee stock option exercises and forfeitures.
|
2016
|
2015
|
|||||||
Selling, general and administrative expenses
|
$
|
45,324
|
$
|
392,362
|
||||
Research and development expenses
|
2,560
|
41,040
|
||||||
Total stock-based compensation
|
$
|
47,884
|
$
|
433,402
|
Shares
Underlying
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding at January 1, 2016
|
332,560
|
$
|
35.36
|
|||||||||||||
Granted
|
-
|
-
|
||||||||||||||
Exercised
|
-
|
-
|
||||||||||||||
Forfeited
|
(7,382
|
)
|
20.98
|
|||||||||||||
Outstanding at March 31, 2016
|
325,178
|
$
|
35.75
|
7.5
|
$
|
-
|
||||||||||
Exercisable at March 31, 2016
|
305,265
|
$
|
37.10
|
7.5
|
$
|
-
|
Nonvested Shares
|
Nonvested
Shares
Underlying
Options
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Grant Date
Fair Value
|
|||||||||
Nonvested at January 1, 2016
|
33,336
|
$
|
15.54
|
$
|
11.41
|
|||||||
Granted
|
-
|
-
|
-
|
|||||||||
Vested
|
(9,803
|
)
|
16.67
|
12.92
|
||||||||
Forfeited
|
(3,620
|
)
|
15.13
|
10.75
|
||||||||
Nonvested at March 31, 2016
|
19,913
|
$
|
15.06
|
$
|
10.79
|
Shares
Underlying
Options / Warrants
|
Weighted
Average
Exercise
Price
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
Aggregate
Intrinsic
Value
|
|||||||||
Outstanding at January 1, 2016
|
432,003
|
$
|
15.47
|
|||||||||
Granted
|
-
|
-
|
||||||||||
Exercised
|
-
|
-
|
||||||||||
Forfeited
|
-
|
-
|
||||||||||
Outstanding and exercisable at March 31, 2016
|
432,003
|
$
|
15.47
|
2.0
|
$
|
-
|
• | Milestone payments, totaling up to a potential of $1.1 million in the aggregate, based on the satisfactory conclusion of milestones as defined in the License Agreement; |
• | Potential for milestone payments of up to an additional $2 million for development and receipt of regulatory approval for additional licensed products; and |
• | Royalties, at low double digit rates, based on sales of licensed products. |
Category
|
Totals
|
|||
License fees and milestone amounts paid / achieved
|
$
|
1,920,000
|
||
Third party obligations recorded, including WU
|
(363,700
|
)
|
||
Deferred revenue balance
|
1,556,300
|
|||
Revenue amortization to March 31, 2016
|
(321,762
|
)
|
||
Net deferred revenue balance at March 31, 2016
|
$
|
1,234,538
|
||
Commencement of license fees revenue recognition
|
Upon signing or receipt | |||
Commencement of milestone revenue recognition
|
Upon milestone achievement over then remaining life | |||
Original amortization period
|
197 months |
· | exploring other possible strategic options available to the Company following termination of the Strand transaction; |
· | evaluating options to monetize, partner or license the Company's appendicitis product portfolio; |
· | continuing to explore prospective partnering or licensing opportunities with complementary opportunities and technologies; and |
· | continuing to implement cost control initiatives to conserve cash. |
• | Milestone payments, totaling up to a potential of $1.1 million in the aggregate, based on the satisfactory conclusion of milestones as defined in the License Agreement; |
• | Potential for milestone payments of up to an additional $2 million for development and receipt of regulatory approval for additional licensed products; and |
• | Royalties, at low double digit rates, based on sales of licensed products. |
(a) | Exhibits |
EXHIBIT
|
DESCRIPTION
|
|
3.1
|
Articles of Amendment to amend and restate the Articles of Incorporation, as amended, of Venaxis, Inc. (Incorporated by reference to the Registrant’s Report on Form 8-K, dated March 24, 2016 and filed on March 29, 2016).
|
|
10.14
|
Master Agreement, dated January 26, 2016, by and among Strand Life Sciences Private Limited, Strand Genomics, Inc. and Venaxis, Inc. (Incorporated by reference to the Registrant’s Report on Form 8-K, dated January 26, 2016 and filed on January 27, 2016).
|
|
10.15
|
Asset Purchase Agreement, dated January 26, 2016, by and between Strand Genomics, Inc., as seller, and Venaxis sub, Inc., as buyer. (Incorporated by reference to the Registrant’s Report on Form 8-K, dated January 26, 2016 and filed on January 27, 2016).
|
|
10.16
|
Form of Share Sale Agreement between Venaxis, Inc. and a Strand Life Sciences Private Limited Shareholder. (Incorporated by reference to the Registrant’s Report on Form 8-K, dated January 26, 2016 and filed on January 27, 2016).
|
|
10.17
|
Form of Investment Agreement between Venaxis, Inc. and a Strand Life Sciences Private Limited Shareholder. (Incorporated by reference to the Registrant’s Report on Form 8-K, dated January 26, 2016 and filed on January 27, 2016).
|
|
10.18
|
Form of Investment Agreement between Venaxis, Inc. and Biomark Capital Fund IV, L.P. (Incorporated by reference to the Registrant’s Report on Form 8-K, dated January 26, 2016 and filed on January 27, 2016).
|
|
10.19
|
Mutual Termination Agreement, dated March 11, 2016, by and among Venaxis, Inc., Strand Life Sciences Private Limited and Strand Genomics, Inc. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, dated and filed March 14, 2016).
|
|
31.1
|
Rule 13a-14(a)/15d-14(a) - Certification of Chief Executive Officer. Filed herewith.
|
|
31.2
|
Rule 13a-14(a)/15d-14(a) - Certification of Chief Financial Officer. Filed herewith.
|
|
32
|
Section 1350 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
|
|
99.1
|
Notice to Corporate Stock Transfer Inc., as Warrant Agent, dated April 1, 2016 (incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K, dated March 31, 2016, and filed April 4, 2016).
|
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Balance Sheets, (ii) the Statements of Operations, (iii) the Statement of Cash Flows and (iv) the Notes to Condensed Financial Statements. (1)
|
(1) | Pursuant to Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be filed by the Company for purposes of Section 18 or any other provision of the Exchange Act of 1934, as amended. |
Venaxis, Inc.
(Registrant)
|
|||
By:
|
/s/ Jeffrey G. McGonegal
|
||
Dated: May 11, 2016
|
Jeffrey G. McGonegal,
Chief Financial Officer and duly authorized officer
|
||
May 11, 2016
|
||
/s/ Stephen T. Lundy
|
||
Stephen T. Lundy, Chief Executive Officer and President
|
May 11, 2016
|
||
/s/ Jeffrey G. McGonegal
|
||
Jeffrey G. McGonegal, Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|||
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|||
May 11, 2016
|
||||
/s/ Stephen T. Lundy
|
||||
Stephen T. Lundy, Chief Executive Officer and President
|
||||
May 11, 2016
|
||||
/s/ Jeffrey G. McGonegal
|
||||
Jeffrey G. McGonegal, Chief Financial Officer
|
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
May. 11, 2016 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | Venaxis, Inc. | |
Entity Central Index Key | 0001167419 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2016 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2016 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 3,876,960 |
Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value | ||
Common stock, shares authorized | 60,000,000 | 60,000,000 |
Common stock, shares issued | 3,876,960 | 3,876,960 |
Common stock, shares outstanding | 3,876,960 | 3,876,960 |
Statements of Operations - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Income Statement [Abstract] | ||
Sales (Note 1) | $ 11,288 | |
Cost of sales | 4,007 | |
Gross profit | 7,281 | |
Other revenue - fee (Note 7) | $ 24,175 | 24,175 |
Operating expenses: | ||
Selling, general and administrative | 1,030,126 | 1,535,851 |
Research and development | 372,586 | 707,742 |
Total operating expenses | 1,402,712 | 2,243,593 |
Operating loss | (1,378,537) | $ (2,212,137) |
Other (expense) income: | ||
Gain on sale of property and equipment (Note 2) | 1,919,361 | |
Interest expense | (25,598) | $ (25,064) |
Investment income | 44,285 | 50,828 |
Total other income | 1,938,048 | 25,764 |
Net income (loss) | $ 559,511 | $ (2,186,373) |
Basic and diluted net loss per share (Note 1) | $ 0.14 | $ (0.56) |
Basic and diluted weighted average number of shares outstanding (Note 1) | 3,876,960 | 3,876,960 |
INTERIM FINANCIAL STATEMENTS |
3 Months Ended | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2016 | |||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||
INTERIM FINANCIAL STATEMENTS | INTERIM FINANCIAL STATEMENTS
The accompanying financial statements of Venaxis, Inc. (the “Company,” “we,” or “Venaxis”) have been prepared in accordance with the instructions to quarterly reports on Form 10-Q. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in financial position at March 31, 2016 and for all periods presented have been made. Certain information and footnote data necessary for fair presentation of financial position and results of operations in conformity with accounting principles generally accepted in the United States of America have been condensed or omitted. It is therefore suggested that these financial statements be read in conjunction with the summary of significant accounting policies and notes to financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. The results of operations for the period ended March 31, 2016 are not necessarily an indication of operating results for the full year.
Management’s plans and basis of presentation:
The Company has experienced recurring losses and negative cash flows from operations. At March 31, 2016, the Company had approximate balances of cash and liquid investments of $16,600,000, working capital of $16,183,000, total stockholders’ equity of $16,678,000 and an accumulated deficit of $105,023,000. To date, the Company has in large part relied on equity financing to fund its operations. The Company expects to continue to incur losses from operations for the near-term and these losses could be significant as professional and other associated expenses in connection with possible strategic considerations, evaluations and transactions, appendicitis portfolio related expenses, public company and administrative related expenses are incurred. The Company believes that its current working capital position will be sufficient to meet its estimated cash needs into early 2017. The Company is closely monitoring its cash balances, cash needs and expense levels.
As of January 26, 2016, Venaxis publically disclosed that it had entered into a series of agreements, including a Master Agreement, for a combination transaction (the “Strand transaction”) with Strand Life Sciences Private Limited and its shareholders (“Strand”). Strand is privately-held, and operates clinical reference labs in the US and in India, providing testing and lab services in India and other world-wide markets. Strand has commercialized a next generation sequencing (NGS) based, targeted, multi-gene, pan-cancer diagnostic panel in select international markets and has engaged in initial commercialization activities in the United States.
On March 11, 2016, Venaxis and Strand entered into a Mutual Termination Agreement to terminate the series of agreements. Pursuant to the Mutual Termination Agreement, each of the parties was relieved of any obligations or responsibilities under the Master Agreement and other transaction agreements. Each party remains responsible for its respective transaction-related costs.
Following the recent termination of the Strand transaction, the Company has begun evaluating potential strategic alternatives. The Company expects, in the near term, to establish the primary criteria it will consider as it evaluates its next steps and strategic path forward with the goal of maximizing value for its shareholders. As a result of the current market trends and uncertainties, and the impact on many companies, management believes that there may currently be attractive opportunities available to the Company.
Management’s strategic assessment includes the following potential options:
As part of the Company’s process to identify possible strategic partners, several targets were identified that the Company assessed as possibly having a business model that could be interested in discussions with Venaxis for possibly acquiring or licensing the appendicitis assets. Venaxis has made initial contact with several of these parties to gauge their interest level, which initially is more focused on the APPY2 development assets. Management believes that the estimated potential market for an appendicitis test continues to be significant. If Venaxis is unable to locate a new strategic target, a partner or other third-party interested in advancing development and commercial activities of the Venaxis appendicitis portfolio, the capitalized costs on the Company’s balance sheet, totaling approximately $374,000, as of March 31, 2016 for the acute appendicitis patents may be deemed impaired. |
Significant accounting policies |
3 Months Ended |
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Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Significant accounting policies | Note 1. Significant accounting policies:
Cash, cash equivalents and investments:
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. From time to time, the Company’s cash account balances exceed the balances as covered by the Federal Deposit Insurance System. The Company has never suffered a loss due to such excess balances.
The Company invests excess cash from time to time in highly-liquid debt and equity investments of highly-rated entities, which are classified as trading securities. Historically, the purpose of the investments has been to fund research and development, product development, FDA clearance-related activities and general corporate purposes. Such amounts are recorded at market values using Level 1 inputs in determining fair value and are generally classified as current, as the Company does not intend to hold the investments beyond twelve months. Investment securities classified as trading are those securities that are bought and held principally for the purpose of selling them in the near term, with the objective of preserving principal and generating profits. These securities are reported at fair value with unrealized gains and losses reported as an element of other (expense) income in current period earnings. The Company’s Board of Directors has approved an investment policy covering the investment parameters to be followed with the primary goals being the safety of principal amounts and maintaining liquidity. The policy provides for minimum investment rating requirements as well as limitations on investment duration and concentrations. Based upon market conditions, the investment guidelines have been tightened to increase the minimum acceptable investment ratings required for investments and shorten the maximum investment term. As of March 31, 2016, approximately 11% of the investment portfolio was in cash and cash equivalents, which is presented as such on the accompanying balance sheet, and the remaining funds were invested in marketable securities with none individually representing a material amount of the portfolio. Investments with a scheduled maturity beyond one year are classified as long-term investments on the balance sheet. To date, the Company’s cumulative realized market loss from the investments has not been significant. For the three months ended March 31, 2016 and 2015, there was approximately $5,900 and $8,400, respectively, in management fee expenses.
Fair value of financial instruments:
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1— quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 — assets and liabilities whose significant value drivers are unobservable.
Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. There were no financial assets or liabilities measured at fair value, with the exception of cash, cash equivalents and short-term investments as of March 31, 2016 and December 31, 2015.
The carrying amounts of the Company’s financial instruments (other than cash, cash equivalents and short-term investments as discussed above) approximate fair value because of their variable interest rates and / or short maturities combined with the recent historical interest rate levels.
Revenue recognition and accounts receivable:
We recognize sales of goods under the provisions of ASC 605 and the U.S. Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition. Future revenue is expected to be generated primarily from the sale of products. Product revenue primarily consists of sales of instrumentation and consumables.
Revenue is recognized when the following four basic criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and risk of loss has passed; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured. In international markets, the Company sells its products to distributors or re-sellers, who subsequently resell the products to hospitals. The Company has an agreement with the distributor which provides that title and risk of loss pass to the distributor upon shipment of the products, FOB to the distributor. Revenue is recognized upon shipment of products to the distributor as the products are shipped based on FOB shipping point terms.
Revenues are recorded less a reserve for estimated product returns and allowances which to date has not been significant. Determination of the reserve for estimated product returns and allowances is based on management’s analyses and judgments regarding certain conditions. Should future changes in conditions prove management’s conclusions and judgments on previous analyses to be incorrect, revenue recognized for any reporting period could be adversely affected.
The Company extends credit to customers generally without requiring collateral. As of March 31, 2016, there were no accounts receivable and no sales. At December 31, 2015, the Company did not have any accounts receivable. During the three months ended March 31, 2015, three European-based customers accounted for the total net sales, each representing 12%, 44% and 44%, respectively.
The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The Company records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected. When estimating the allowance, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, the industry and size of its clients. A financial decline of any one of the Company’s large clients could have an adverse and material effect on the collectability of receivables and thus the adequacy of the allowance for doubtful accounts receivable. Increases in the allowance are recorded as charges to bad debt expense and are reflected in other operating expenses in the Company’s statements of operations. Write-offs of uncollectible accounts are charged against the allowance.
Recently issued and adopted accounting pronouncements:
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company's financial statements properly reflect the change.
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts from Customers," which supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)," and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. In July 2015, the FASB extended the effective date of ASU 2014-09 by one year, to now be effective for fiscal years, and interim periods beginning after December 15, 2017, and is to be applied retrospectively, with early adoption now permitted for fiscal years, and interim periods beginning after December 31, 2015. The Company does not believe the new standard will have a material impact on its operations and financial statements.
Income (loss) per share:
ASC 260, Earnings Per Share, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net earnings (loss) per share includes no dilution and is computed by dividing net earnings (loss) available to shareholders by the weighted average number of common shares outstanding for the period. Diluted net earnings (loss) per share reflect the potential dilution of securities that could share in the Company’s earnings (loss). The outstanding options and warrants did not have a dilutive effect on earnings per share for the three months ended March 31, 2016 pursuant to the treasury stock method. The effect of the inclusion of the dilutive shares would have resulted in a decrease in loss per share for the three months ended March 31, 2015. Accordingly, the weighted average shares outstanding have not been adjusted for dilutive shares for either period presented. Outstanding stock options and warrants are not considered in the calculation, as the impact of the potential common shares (totaling approximately 757,000 shares and 779,000 shares for the three month periods ended March 31, 2016 and 2015, respectively) would be anti-dilutive.
Upon the completion of a special shareholders meeting on March 24, 2016, where such action was approved by shareholders, the Board of Directors authorized a reverse stock split of the Company’s common stock at a ratio of one-for-eight, whereby each eight shares of common stock were combined into one share of common stock (the “Reverse Stock Split”). The Reverse Stock Split was implemented and effective on March 31, 2016. All historical references to shares and share amounts in this report have been retroactively revised to reflect the Reverse Stock Split. A reconciliation of basic and diluted weighted average number of shares outstanding adjusted for the Reverse Stock Split for the period ended March 31, 2016 was 30,990,029 shares on a pre-split basis and 3,876,960 shares on a post-split basis. |
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Property and equipment | Note 2. Property and equipment:
Property and equipment consisted of the following:
Depreciation expense totaled approximately $400 and $40,000 for the three month periods ended March 31, 2016 and 2015, respectively.
On February 25, 2016, the Company completed the sale of its corporate headquarters, land, building and certain fixtures and equipment to a third party at a purchase price of approximately $4,000,000 . The sale resulted in a gain of approximately $1,900,000 and generated approximately $1,700,000 in net cash after expenses and mortgage payoffs. The Company is leasing back space in the building under short term lease agreements that provide office and storage space required for its current level of operations. |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other long-term assets | Note 3. Other long-term assets:
Other long-term assets consisted of the following:
The Company capitalizes legal costs and filing fees associated with obtaining patents on its new discoveries. Once the patents have been issued, the Company amortizes these costs over the shorter of the legal life of the patent or its estimated economic life using the straight-line method. Based upon the current status of the above intangible assets, the aggregate amortization expense is estimated to be approximately $76,000 for each of the next five fiscal years. The Company tests intangible assets with finite lives for impairment upon significant changes in the Company’s business environment. The testing resulted in net patent impairment charges of $134,000 and zero during the three months ended March 31, 2016 and 2015 respectively. The impairment charges are related to the Company’s ongoing analysis of which specific country patents in its portfolio are determined as potentially worth pursuing. |
Notes and Other Obligations |
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Notes and Other Obligations | Note 4. Notes and Other Obligations:
Notes payable and other obligations consisted of the following:
Mortgage notes:
Prior to the February 2016 sale of the corporate headquarters, the Company had a permanent mortgage on its land and building that was refinanced in May 2013. The mortgage was held by a commercial bank and included a portion guaranteed by the U. S. Small Business Administration (“SBA”). The loan was collateralized by the real property and the SBA portion was also personally guaranteed by a former officer of the Company. The commercial bank loan terms included a payment schedule based on a fifteen year amortization, with a balloon maturity at five years. The commercial bank portion had an interest rate fixed at 3.95%, and the SBA portion bore interest at the rate of 5.86%. The commercial bank portion of the loan required total monthly payments of approximately $11,700, which included approximately $4,500 per month in interest. The SBA portion of the loan required total monthly payments of approximately $9,000 through July 2023, which included approximately $3,500 per month in interest and fees in 2016.
On February 25, 2016, the Company completed the sale of its corporate headquarters, land and building, and also paid off its mortgage obligations. See Note 2.
Future maturities:
The Company’s total debt obligations require minimum annual principal payments of approximately $57,000 for the remainder of 2016, with nothing due beyond that date. |
Stockholders' equity |
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Mar. 31, 2016 | |
Equity [Abstract] | |
Stockholders' equity | Note 5. Stockholders’ equity:
Upon the completion of a special shareholders meeting on March 24, 2016, where such action was approved by shareholders, the Board of Directors authorized the Reverse Stock Split at a ratio of one-for-eight, whereby each eight shares of common stock were combined into one share of common stock . The Reverse Stock Split was implemented and effective on March 31, 2016. All historical references to shares and share amounts in this report have been retroactively revised to reflect the Reverse Stock Split. Following the Reverse Stock Split, the Company regained its compliance with the Nasdaq minimum bid price, allowing its common stock to continue to be listed on the Nasdaq Capital Market.
For the three months periods ended March 31, 2016 and 2015, the Company did not issue any common shares and no options or warrants were exercised during those same periods. |
Stock options and warrants |
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Stock options and warrants | Note 6. Stock options and warrants:
Stock options:
The Company currently provides stock-based compensation to employees, directors and consultants, both under the Company's 2002 Stock Incentive Plan, as amended (the "Plan"), and non-qualified options and warrants issued outside of the Plan. During September 2015, the Company's shareholders approved amendments to the Plan to increase the number of shares reserved under the Plan from 459,141 to 709,141. The Company estimates the fair value of the share-based awards on the date of grant using the Black-Scholes option-pricing model (the "Black-Scholes model"). Using the Black-Scholes model, the value of the award that is ultimately expected to vest is recognized over the requisite service period in the statement of operations. Option forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company attributes compensation to expense using the straight-line single option method for all options granted.
The Company’s determination of the estimated fair value of share-based payment awards on the date of grant is affected by the following variables and assumptions:
The Company recognized total expenses for stock-based compensation during the three-month periods ended March 31, 2016 and 2015 of $47,884 and $433,402, respectively. These expenses are included in the accompanying statements of operations for the three-month periods ended March 31, in the following categories:
During the three months ended March 31, 2016 and 2015, respectively, no options were exercised.
Stock incentive plan options:
The Company currently provides stock-based compensation to employees, directors and consultants under the Plan. The Company did not grant any stock-based compensation to employees, directors or consultants for the three months ended March 31, 2016. Stock-based compensation to employees, directors and consultants for the three months ended March 31, 2015 utilized assumptions in the estimation of fair value of stock-based compensation as follows: a dividend yield of 0%, an expected price volatility of 93%, a risk free interest rate of 1.39%, and an expected term of 5 years.
A summary of activity under the Plan for the three months ended March 31, 2016 is presented below:
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price on March 31, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on March 31, 2016.
During the three months ended March 31, 2015, 43,000 options were issued to non-employee directors under the Plan, exercisable at an average of $15.12 per share. The options expire ten years from the date of grant and vested over one year, based upon 25% on the date of grant, and 25% on each of April 1, 2015, July 1, 2015, and October 1, 2015.
During the three months ended March 31, 2015, 98,813 options were issued to officers and employees under the Plan, exercisable at an average of $15.12 per share. The options expire ten years from the date of grant and vest over two years with 50% vesting upon six month anniversary of grant date and the remaining balance vesting over the following six quarters in arrears.
During the three months ended March 31, 2016, a total of 7,382 options that were granted under the Plan were forfeited, of which 3,762 were vested and 3,620 were unvested. The vested options were exercisable at an average of $26.61 per share and the unvested options were exercisable at an average of $15.13 per share. During the three months ended March 31, 2015, a total of 21,668 options that were granted under the Plan were forfeited, of which 1,876 were vested and 19,792 were unvested. The vested options were exercisable at an average of $193.36 per share and the unvested options were exercisable at an average of $16.48 per share.
The total fair value of stock options granted to employees, directors and consultants that vested and became exercisable during the three months ended March 31, 2016 and 2015, was approximately $127,000 and $234,000, respectively. Based upon the Company’s experience, approximately 80% of the outstanding nonvested stock options, or approximately 16,000 options, are expected to vest in the future, under their terms.
A summary of the activity of nonvested options under the Plan to acquire common shares granted to employees, officers, directors and consultants during the three months ended March 31, 2016 is presented below:
At March 31, 2016, based upon employee, officer, director and consultant options granted under the Plan to that point, there was approximately $128,000 of additional unrecognized compensation cost related to stock options that will be recorded over a weighted average future period of less than one year.
Other common stock purchase options and warrants:
As of March 31, 2016, in addition to the stock incentive plan options discussed above, the Company had outstanding 432,003 non-qualified options and warrants in connection with offering warrants and an officer’s employment that were not issued under the Plan.
During the three month periods ended March 31, 2016 and 2015, respectively, no stock options were granted outside of the Plan. Operating expenses for the three months ended March 31, 2016 and 2015, did not include any value related to stock-based compensation of non-qualified options and warrants.
Following is a summary of outstanding options and warrants that were issued outside of the Plan for the three months ended March 31, 2016:
During the three months ended March 31, 2016 and 2015, no warrants were exercised.
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing stock price on March 31, 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders been able to, and in fact had, exercised their options on March 31, 2016.
The total fair value of stock options previously granted to a former officer that vested and became exercisable during the three months ended March 31, 2016 and 2015, was zero. At March 31, 2016, there was no unrecognized cost for non-qualified options that will be recorded in the future. |
Animal Health License Agreements |
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Animal Health License Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Animal Health License Agreements | Note 7. Animal Health License Agreements:
Effective May 1, 2004 Washington University in St. Louis (“WU”) and Venaxis entered into an Exclusive License Agreement (“WU License Agreement”), which grants Venaxis exclusive license and right to sublicense WU’s technology (as defined under the WU License Agreement) for veterinary products worldwide, except where such products are prohibited under U.S. laws for export. The term of the WU License Agreement continues until the expiration of the last of WU’s patents (as defined in the WU License Agreement) expire. Venaxis has agreed to pay minimum annual royalties of $20,000 annually during the term of the WU License Agreement and such amounts are creditable against future royalties. Royalties payable to WU under the WU License Agreement for covered product sales by Venaxis carry a mid-single digit royalty rate and for sublicense fees received by Venaxis carry a low double-digit royalty rate. The WU License Agreement contains customary terms for confidentiality, prosecution and infringement provisions for licensed patents, publication rights, indemnification and insurance coverage. The WU License Agreement is cancelable by Venaxis with ninety days advance notice at any time and by WU with sixty days advance notice if Venaxis materially breaches the WU License Agreement and fails to cure such breach.
In July 2012, the Company entered into an Exclusive License Agreement (the “License Agreement”) with Ceva Santé Animale S.A. (“Licensee”), under which the Company granted the Licensee an exclusive royalty-bearing license, until December 31, 2028, to the Company’s intellectual property and other assets, including patent rights and know-how, relating to recombinant single chain reproductive hormone technology for use in non-human mammals (the “Company’s Animal Health Assets”). The License Agreement is subject to termination by the Licensee (a) for convenience on 180 days prior written notice, (b) in the Licensee’s discretion in the event of a sale or other disposal of the Company’s animal health assets, (c) in the Licensee’s discretion upon a change in control of the Company, (d) for a material breach of the License Agreement by the Company; or (e) in the Licensee’s discretion, if the Company becomes insolvent. The License Agreement is also terminable by the Company if there is a material breach of the License Agreement by the Licensee, or if the Licensee challenges the Company’s ownership of designated intellectual property. The License Agreement includes a sublicense of the technology licensed to the Company by WU. Under the terms of the WU License Agreement, a portion of license fees and royalties Venaxis receives from sublicensing agreements will be paid to WU. The obligation for such license fees due to WU is included in accrued expenses at March 31, 2016.
Under the License Agreement, the Licensee obtained a worldwide exclusive license to develop, seek regulatory approval for and offer to sell, market, distribute, import and export luteinizing hormone (“LH”) and/or follicle-stimulating hormone (“FSH”) products for bovine (cattle), equine and swine in the field of the assistance and facilitation of reproduction in bovine, equine and swine animals.
Under the License Agreement as of March 31, 2016, the following future milestone payments are provided, assuming future milestones are successfully achieved:
Revenue recognition related to the License Agreement and WU License Agreement is based primarily on the Company’s consideration of ASC 808-10-45, “Accounting for Collaborative Arrangements”. For financial reporting purposes, the license fees and milestone payments received from the License Agreement, net of the amounts due to third parties, including WU, have been recorded as deferred revenue and are amortized over the term of the License Agreement. License fees and milestone revenue totaling a net of approximately $1,500,000 commenced being amortized into income upon the July 2012 date of milestone achievement. As of March 31, 2016, deferred revenue of $96,698 has been classified as a current liability and $1,137,840 has been classified as a long-term liability. The current liability represents the next twelve months’ portion of the amortizable milestone revenue. During the three months ended March 31, 2016 and 2015, $24,175 in each period was recorded as the amortized license fee revenue arising from the License Agreement.
A tabular summary of the revenue categories and cumulative amounts of revenue recognition associated with the License Agreement follows:
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3 Months Ended |
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Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | Note 8. Commitments and contingencies:
Commitments:
As of March 31, 2016, the Company had employment agreements with two officers providing aggregate annual minimum commitments totaling $655,000. The agreements automatically renew at the end of each year unless terminated by either party and contain customary confidentiality and benefit provisions.
Venaxis determined in the first quarter of 2016 to begin winding down and ceasing its APPY1 commercial activities, due to continuing limited sales and losses from the European operations. This decision also resulted in a reduction of the Company’s workforce, which was implemented as of January 31, 2016. In February 2016, Venaxis sent notices to its four European distributors informing them of the wind down and therefore the termination of their distribution agreements. Two of the distributors, linked by common management / ownership subsequently communicated to Venaxis that they dispute that Venaxis had the right to terminate the agreements. Under the terms of the distribution agreements, such a dispute shall first be attempted to be resolved between management of the parties and then subject to binding arbitration. Venaxis believes that the distributors’ claims are without merit and any potential settlement or resolution will not be material to the Company’s financial position.
Contingencies:
In the ordinary course of business and in the general industry in which the Company is engaged, it is not atypical to periodically receive a third party communication which may be in the form of a notice, threat, or “cease and desist” letter concerning certain activities. For example, this can occur in the context of the Company’s pursuit of intellectual property rights. This can also occur in the context of operations such as the using, making, having made, selling, and offering to sell products and services, and in other contexts. The Company makes rational assessments of each situation on a case-by-case basis as such may arise. The Company periodically evaluates its options for trademark positions and considers a full spectrum of alternatives for trademark protection and product branding.
We are currently not a party to any legal proceedings, the adverse outcome of which would, in our management’s opinion, have a material adverse effect on our business, financial condition and results of operations. |
Subsequent event |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent event | Note 9. Subsequent event:
Subsequent to March 31, 2016, 77,000 options were issued to non-employee directors under the Plan, exercisable at an average of $2.89 per share. The options expire ten years from the date of grant and vest over one year, based upon 50% on the date of grant, and 25% on each of July 1, 2016, and October 1, 2016.
Subsequent to March 31, 2016, 150,000 options were issued to officers and employees under the Plan, exercisable at an average of $2.89 per share. The options expire ten years from the date of grant and vest 50% upon each of the six month and the one year anniversary of the grant date. |
Significant accounting policies (Policy) |
3 Months Ended |
---|---|
Mar. 31, 2016 | |
Accounting Policies [Abstract] | |
Cash, cash equivalents and investments | Cash, cash equivalents and investments:
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. From time to time, the Company’s cash account balances exceed the balances as covered by the Federal Deposit Insurance System. The Company has never suffered a loss due to such excess balances.
The Company invests excess cash from time to time in highly-liquid debt and equity investments of highly-rated entities, which are classified as trading securities. Historically, the purpose of the investments has been to fund research and development, product development, FDA clearance-related activities and general corporate purposes. Such amounts are recorded at market values using Level 1 inputs in determining fair value and are generally classified as current, as the Company does not intend to hold the investments beyond twelve months. Investment securities classified as trading are those securities that are bought and held principally for the purpose of selling them in the near term, with the objective of preserving principal and generating profits. These securities are reported at fair value with unrealized gains and losses reported as an element of other (expense) income in current period earnings. The Company’s Board of Directors has approved an investment policy covering the investment parameters to be followed with the primary goals being the safety of principal amounts and maintaining liquidity. The policy provides for minimum investment rating requirements as well as limitations on investment duration and concentrations. Based upon market conditions, the investment guidelines have been tightened to increase the minimum acceptable investment ratings required for investments and shorten the maximum investment term. As of March 31, 2016, approximately 11% of the investment portfolio was in cash and cash equivalents, which is presented as such on the accompanying balance sheet, and the remaining funds were invested in marketable securities with none individually representing a material amount of the portfolio. Investments with a scheduled maturity beyond one year are classified as long-term investments on the balance sheet. To date, the Company’s cumulative realized market loss from the investments has not been significant. For the three months ended March 31, 2016 and 2015, there was approximately $5,900 and $8,400, respectively, in management fee expenses. |
Fair value of financial instruments | Fair value of financial instruments:
The Company accounts for financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic (“ASC”) 820, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements, ASC 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
Level 1— quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and
Level 3 — assets and liabilities whose significant value drivers are unobservable.
Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. There were no financial assets or liabilities measured at fair value, with the exception of cash, cash equivalents and short-term investments as of March 31, 2016 and December 31, 2015.
The carrying amounts of the Company’s financial instruments (other than cash, cash equivalents and short-term investments as discussed above) approximate fair value because of their variable interest rates and / or short maturities combined with the recent historical interest rate levels. |
Revenue recognition and accounts receivable | Revenue recognition and accounts receivable:
We recognize sales of goods under the provisions of ASC 605 and the U.S. Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) 104, Revenue Recognition. Future revenue is expected to be generated primarily from the sale of products. Product revenue primarily consists of sales of instrumentation and consumables.
Revenue is recognized when the following four basic criteria have been met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred and risk of loss has passed; (iii) the seller’s price to the buyer is fixed or determinable; and (iv) collectability is reasonably assured. In international markets, the Company sells its products to distributors or re-sellers, who subsequently resell the products to hospitals. The Company has an agreement with the distributor which provides that title and risk of loss pass to the distributor upon shipment of the products, FOB to the distributor. Revenue is recognized upon shipment of products to the distributor as the products are shipped based on FOB shipping point terms.
Revenues are recorded less a reserve for estimated product returns and allowances which to date has not been significant. Determination of the reserve for estimated product returns and allowances is based on management’s analyses and judgments regarding certain conditions. Should future changes in conditions prove management’s conclusions and judgments on previous analyses to be incorrect, revenue recognized for any reporting period could be adversely affected.
The Company extends credit to customers generally without requiring collateral. As of March 31, 2016, there were no accounts receivable and no sales. At December 31, 2015, the Company did not have any accounts receivable. During the three months ended March 31, 2015, three European-based customers accounted for the total net sales, each representing 12%, 44% and 44%, respectively.
The Company monitors its exposure for credit losses and maintains allowances for anticipated losses. The Company records an allowance for doubtful accounts when it is probable that the accounts receivable balance will not be collected. When estimating the allowance, the Company takes into consideration such factors as its day-to-day knowledge of the financial position of specific clients, the industry and size of its clients. A financial decline of any one of the Company’s large clients could have an adverse and material effect on the collectability of receivables and thus the adequacy of the allowance for doubtful accounts receivable. Increases in the allowance are recorded as charges to bad debt expense and are reflected in other operating expenses in the Company’s statements of operations. Write-offs of uncollectible accounts are charged against the allowance. |
Recently issued and adopted accounting pronouncements | Recently issued and adopted accounting pronouncements:
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company's financial reporting, the Company undertakes a study to determine the consequences of the change to its financial statements and assures that there are proper controls in place to ascertain that the Company's financial statements properly reflect the change.
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09 "Revenue from Contracts from Customers," which supersedes the revenue recognition requirements in "Revenue Recognition (Topic 605)," and requires entities to recognize revenue in a way that depicts the transfer of potential goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to the exchange for those goods or services. In July 2015, the FASB extended the effective date of ASU 2014-09 by one year, to now be effective for fiscal years, and interim periods beginning after December 15, 2017, and is to be applied retrospectively, with early adoption now permitted for fiscal years, and interim periods beginning after December 31, 2015. The Company does not believe the new standard will have a material impact on its operations and financial statements. |
Income (loss) per share | Income (loss) per share:
ASC 260, Earnings Per Share, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic net earnings (loss) per share includes no dilution and is computed by dividing net earnings (loss) available to shareholders by the weighted average number of common shares outstanding for the period. Diluted net earnings (loss) per share reflect the potential dilution of securities that could share in the Company’s earnings (loss). The outstanding options and warrants did not have a dilutive effect on earnings per share for the three months ended March 31, 2016 pursuant to the treasury stock method. The effect of the inclusion of the dilutive shares would have resulted in a decrease in loss per share for the three months ended March 31, 2015. Accordingly, the weighted average shares outstanding have not been adjusted for dilutive shares for either period presented. Outstanding stock options and warrants are not considered in the calculation, as the impact of the potential common shares (totaling approximately 757,000 shares and 779,000 shares for the three month periods ended March 31, 2016 and 2015, respectively) would be anti-dilutive.
Upon the completion of a special shareholders meeting on March 24, 2016, where such action was approved by shareholders, the Board of Directors authorized a reverse stock split of the Company’s common stock at a ratio of one-for-eight, whereby each eight shares of common stock were combined into one share of common stock (the “Reverse Stock Split”). The Reverse Stock Split was implemented and effective on March 31, 2016. All historical references to shares and share amounts in this report have been retroactively revised to reflect the Reverse Stock Split. A reconciliation of basic and diluted weighted average number of shares outstanding adjusted for the Reverse Stock Split for the period ended March 31, 2016 was 30,990,029 shares on a pre-split basis and 3,876,960 shares on a post-split basis. |
Property and equipment (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment | Property and equipment consisted of the following:
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Other long-term assets (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Other Long-Term Assets | Other long-term assets consisted of the following:
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Notes and Other Obligations (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Debt | Notes payable and other obligations consisted of the following:
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Stock options and warrants (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the Income Statement Allocation of Stock-based Compensation | The Company recognized total expenses for stock-based compensation during the three-month periods ended March 31, 2016 and 2015 of $47,884 and $433,402, respectively. These expenses are included in the accompanying statements of operations for the three-month periods ended March 31, in the following categories:
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Summary of Stock Incentive Plan Activity | A summary of activity under the Plan for the three months ended March 31, 2016 is presented below:
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Schedule of Nonvested Share Activity | A summary of the activity of nonvested options under the Plan to acquire common shares granted to employees, officers, directors and consultants during the three months ended March 31, 2016 is presented below:
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Schedule of Nonqualified Award Activity | Following is a summary of outstanding options and warrants that were issued outside of the Plan for the three months ended March 31, 2016:
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Animal Health License Agreements (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Animal Health License Agreements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Current and Long-Term Deferred Revenues | A tabular summary of the revenue categories and cumulative amounts of revenue recognition associated with the License Agreement follows:
|
INTERIM FINANCIAL STATEMENTS (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Cash and liquid investments | $ 16,600,000 | |
Working capital | 16,183,000 | |
Stockholders' equity | 16,678,031 | $ 16,070,636 |
Accumulated deficit | 105,022,928 | $ 105,582,439 |
Total value of capitalized patent costs that could be impaired due to inability to locate a new strategic target, a partner or other third-party interested in advancing development and commercial activities of the Venaxis appendicitis portfolio | $ 374,000 |
Significant accounting policies (Narrative) (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Cash, cash equivalents and short-term investments: | ||
Cash and cash equivalent investment portfolio, percentage | 11.00% | |
Management fees | $ 5,900 | $ 8,400 |
Accounts receivable, net | ||
Sales | $ 11,288 | |
Income (loss) per share: | ||
Shares not included in the computation of EPS | 757,000 | 779,000 |
Basic and diluted weighted average number of shares outstanding pre-stock split basis | 30,990,029 | |
Basic and diluted weighted average number of shares outstanding | 3,876,960 | 3,876,960 |
Significant accounting policies (Revenue recognition and accounts receivable) (Details) - Customer Concentration [Member] - Net Sales [Member] |
3 Months Ended |
---|---|
Mar. 31, 2015
item
| |
Concentration Risk [Line Items] | |
Number of customers | 3 |
Customer One [Member] | |
Concentration Risk [Line Items] | |
Risk percentage | 12.00% |
Customer Two [Member] | |
Concentration Risk [Line Items] | |
Risk percentage | 44.00% |
Customer Three [Member] | |
Concentration Risk [Line Items] | |
Risk percentage | 44.00% |
Property and equipment (Narrative) (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Feb. 29, 2016 |
|
Property, Plant and Equipment [Abstract] | |||
Depreciation expense | $ 400 | $ 40,000 | |
Sales price of corporate headquarters, land and building to a third party | $ 4,000,000 | ||
Proceeds from sale of property and equipment | 1,748,571 | ||
Gain on sale of property and equipment (Note 2) | $ 1,919,361 |
Property and equipment (Schedule of Property and Equipment) (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 66,104 | $ 5,116,533 |
Less accumulated depreciation | 65,208 | 3,162,037 |
Total property and equipment, net | $ 896 | 1,954,496 |
Land and improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 1,107,508 | |
Building [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 2,589,231 | |
Building improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 253,526 | |
Laboratory equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | 848,014 | |
Office and computer equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment | $ 66,104 | $ 318,254 |
Other long-term assets (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Patents, trademarks and applications, net of accumulated amortization | $ 994,327 | $ 1,136,410 | |
Goodwill | 387,239 | 387,239 | |
Total other long-term assets | 1,381,566 | 1,523,649 | |
Finite-lived assets, accumulated amortization | 534,692 | $ 548,327 | |
Future amortization | |||
2016 | 76,000 | ||
2017 | 76,000 | ||
2018 | 76,000 | ||
2019 | 76,000 | ||
2020 | 76,000 | ||
Impairment charges | $ 134,000 |
Notes and Other Obligations (Narrative) (Details) |
3 Months Ended |
---|---|
Mar. 31, 2016
USD ($)
| |
Future Maturities: | |
Remainder of 2016 | $ 57,000 |
Mortgage Notes [Member] | |
Debt Instrument [Line Items] | |
Amortization period | 15 years |
Balloon maturity period | 5 years |
Commercial Banks [Member] | Mortgage Notes [Member] | |
Debt Instrument [Line Items] | |
Fixed interest rate | 3.95% |
Periodic payments, principal and interest | $ 11,700 |
Periodic payments, interest | $ 4,500 |
U.S. Small Business Administration [Member] | Mortgage Notes [Member] | |
Debt Instrument [Line Items] | |
Fixed interest rate | 5.86% |
Periodic payments, principal and interest | $ 9,000 |
Periodic payments, interest | $ 3,500 |
Notes and Other Obligations (Schedule of Long-Term Debt) (Details) - USD ($) |
Mar. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Disclosure [Abstract] | ||
Mortgage notes | $ 1,997,701 | |
Other short-term installment obligations | $ 57,152 | 142,328 |
Notes and other obligations | 57,152 | 2,140,029 |
Less current portion | $ 57,152 | 301,250 |
Notes and other obligations, noncurrent | $ 1,838,779 |
Stock options and warrants (Schedule of Stock-based Compensation) (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Stock-based compensation | $ 47,884 | $ 433,402 |
Selling, General and Administrative Expenses [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Stock-based compensation | 45,324 | 392,362 |
Research and Development Expense [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items] | ||
Stock-based compensation | $ 2,560 | $ 41,040 |
Stock options and warrants (Schedule of Award Activity) (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Stock Incentive Plan [Member] | ||
Shares Underlying Options | ||
Outstanding, beginning | 332,560 | |
Granted | ||
Exercised | ||
Forfeited | (7,382) | (21,668) |
Outstanding, ending | 325,178 | |
Exercisable | 305,265 | |
Weighted Average Exercise Price | ||
Outstanding, beginning | $ 35.36 | |
Granted | ||
Exercised | ||
Forfeited | $ 20.98 | |
Outstanding, ending | 35.75 | |
Exercisable | $ 37.10 | |
Weighted Average Remaining Contractual Term | ||
Outstanding | 7 years 6 months | |
Outstanding and exercisable | 7 years 6 months | |
Aggregate Intrinsic Value | ||
Outstanding | ||
Exercisable | ||
Nonqualified [Member] | ||
Shares Underlying Options | ||
Outstanding, beginning | 432,003 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding, ending | 432,003 | |
Weighted Average Exercise Price | ||
Outstanding, beginning | $ 15.47 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding, ending | $ 15.47 | |
Weighted Average Remaining Contractual Term | ||
Outstanding | 2 years | |
Aggregate Intrinsic Value | ||
Outstanding | ||
Exercisable |
Stock options and warrants (Schedule of Nonvested Awards) (Details) - Stock Incentive Plan [Member] - $ / shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Nonvested Shares Underlying Options | ||
Beginning balance | 33,336 | |
Granted | ||
Vested | (9,803) | |
Forfeited | (3,620) | (19,792) |
Ending balance | 19,913 | |
Weighted Average Exercise Price | ||
Beginning balance | $ 15.54 | |
Granted | ||
Vested | $ 16.67 | |
Forfeited | 15.13 | $ 16.48 |
Ending balance | 15.06 | |
Weighted Average Grant Date Fair Value | ||
Beginning balance | $ 11.41 | |
Granted | ||
Vested | $ 12.92 | |
Forfeited | 10.75 | |
Ending balance | $ 10.79 |
Animal Health License Agreements (Narrative) (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2016 |
Mar. 31, 2015 |
Dec. 31, 2015 |
|
Animal Health License Agreements [Abstract] | |||
Annual royalty commitment | $ 20,000 | ||
Prior written notice period for termination of license agreement by the licensee | 180 days | ||
Aggregate milestone payments, maximum | $ 1,100,000 | ||
Additional milestone payments, maximum | 2,000,000 | ||
Original amount of deferred revenue | 1,556,300 | ||
Deferred revenue | 96,698 | $ 96,698 | |
Deferred revenue, noncurrent | 1,137,840 | $ 1,162,015 | |
Recognition of license fee revenue | $ 24,175 | $ 24,175 |
Animal Health License Agreements (Schedule of Revenue Recognition Associated with the License Agreement) (Details) |
3 Months Ended |
---|---|
Mar. 31, 2016
USD ($)
| |
Animal Health License Agreements [Abstract] | |
License fees and milestone amounts paid / achieved | $ 1,920,000 |
Third party obligations recorded, including WU | (363,700) |
Deferred revenue balance | 1,556,300 |
Revenue recognized | (321,762) |
Deferred revenue balance | $ 1,234,538 |
Original amortization period | 197 months |
Commitments and contingencies (Details) |
3 Months Ended |
---|---|
Mar. 31, 2016
USD ($)
Officers
| |
Purchase Commitment, Excluding Long-term Commitment [Line Items] | |
Number of officers | Officers | 2 |
Employment Contracts [Member] | |
Purchase Commitment, Excluding Long-term Commitment [Line Items] | |
Annual commitment amount | $ | $ 655,000 |
Subsequent event (Details) - Stock Incentive Plan [Member] - $ / shares |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
May. 11, 2016 |
Mar. 31, 2016 |
Mar. 31, 2015 |
|
Subsequent Event [Line Items] | |||
Options granted | |||
Options granted, exercise price | |||
Subsequent Event [Member] | Independent Directors [Member] | |||
Subsequent Event [Line Items] | |||
Options granted | 77,000 | ||
Options granted, exercise price | $ 2.89 | ||
Expiration period | 10 years | ||
Vesting period | 1 year | ||
Subsequent Event [Member] | Officers and Employees [Member] | |||
Subsequent Event [Line Items] | |||
Options granted | 150,000 | ||
Options granted, exercise price | $ 2.89 | ||
Expiration period | 10 years | ||
Vesting period | 6 months |
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