Basis of Presentation and Significant Accounting Policies (Policies)
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12 Months Ended |
Dec. 31, 2017 |
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| Accounting Policies [Abstract] |
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| PRINCIPLES OF CONSOLIDATION |
| a. |
PRINCIPLES OF CONSOLIDATION.
The consolidated financial statements include the Company’s
accounts and those of its wholly-owned subsidiary Catalyst
Pharmaceuticals Ireland, Ltd. (“Catalyst Ireland”). All
intercompany accounts and transactions have been eliminated in
consolidation. Catalyst Ireland was organized in August 2017. |
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| USE OF ESTIMATES |
| b. |
USE OF ESTIMATES. The
preparation of financial statements in conformity with U.S.
generally accepted accounting principles (U.S. GAAP) requires
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates. |
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| CASH AND CASH EQUIVALENTS |
| c. |
CASH AND CASH EQUIVALENTS. The
Company considers all highly liquid instruments, purchased with an
original maturity of three months or less to be cash equivalents.
Cash equivalents consist mainly of money market funds. The Company
has substantially all of its cash and cash equivalents deposited
with one financial institution. These amounts at times may exceed
federally insured limits. |
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| SHORT-TERM INVESTMENTS |
| d. |
SHORT-TERM INVESTMENTS. The
Company invests in short-term investments in high credit-quality
funds in order to obtain higher yields on its cash available for
investments. As of December 31, 2017, and 2016, short-term
investments consisted of a short-term bond fund. Such investments
are not insured by the Federal Deposit Insurance Corporation.
Short-term investments at December 31, 2017 and 2016 were
accounted for as trading securities. Trading securities are
recorded at fair value based on the closing market price of the
security. For trading securities, the Company recognizes realized
gains and losses and unrealized gains and losses to earnings.
Unrealized gain (loss) on trading securities for the years ended
December 31, 2017, 2016 and 2015 were $29,430, $58,861, and
($29,430), respectively, and are included in other income, net in
the accompanying consolidated statements of operations. |
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| PREPAID EXPENSES AND OTHER CURRENT ASSETS |
| e. |
PREPAID EXPENSES AND OTHER CURRENT
ASSETS. Prepaid expenses and other current assets consist
primarily of prepaid research fees, prepaid insurance, prepaid
pre-commercialization fees
and prepaid subscription fees. Prepaid research fees consist of
advances for the Company’s product development activities,
including drug manufacturing, contracts for preclinical studies,
clinical trials and studies, regulatory affairs and consulting.
Such advances are recorded as expense as the related goods are
received or the related services are performed. |
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| PROPERTY AND EQUIPMENT |
| f. |
PROPERTY AND EQUIPMENT.
Property and equipment are recorded at cost. Depreciation is
calculated to amortize the depreciable assets over their useful
lives using the straight-line method and commences when the asset
is placed in service. Leasehold improvements are amortized on a
straight-line basis over the term of the lease or the estimated
life of the improvement, whichever is shorter. Useful lives
generally range from three years for computer equipment to three to
six years for furniture and equipment, and from five to seven years
for leasehold improvements. Expenditures for repairs and
maintenance are charged to expenses as incurred. |
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| OPERATING LEASES |
| g. |
OPERATING LEASES. The Company
recognizes lease expense on a straight-line basis over the initial
lease term. For leases that contain rent holidays, escalation
clauses or tenant improvement allowances, the Company recognizes
rent expense on a straight-line basis and records the difference
between the rent expense and rental amount payable as deferred
rent. As of December 31, 2017, and 2016, the Company had
$181,467 and $199,256, respectively, of deferred rent and lease
incentive in accrued expenses and other liabilities. |
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| FAIR VALUE OF FINANCIAL INSTRUMENTS |
h. |
FAIR VALUE OF FINANCIAL
INSTRUMENTS. The Company’s financial
instruments consist of cash and cash equivalents, short-term
investments, accounts payable and accrued expenses and other
liabilities, and warrants liability. At December 31, 2017 and
2016, the fair value of these instruments approximated their
carrying value. |
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| FAIR VALUE MEASUREMENTS |
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i. |
FAIR VALUE MEASUREMENTS.
Current Financial Accounting Standards Board (FASB) fair value
guidance emphasizes that fair value is a market-based measurement,
not an entity-specific measurement. Therefore, a fair value
measurement should be determined based on the assumptions that
market participants would use in pricing the asset or liability. As
a basis for considering market participant assumptions in fair
value measurements, current FASB guidance establishes a fair value
hierarchy that distinguishes between market participant assumptions
based on market data obtained from sources independent of the
reporting entity (observable inputs that are classified within
Levels 1 and 2 of the hierarchy) and the reporting entity’s
own assumptions that it believes market participants would use in
pricing assets or liabilities (unobservable inputs classified
within Level 3 of the hierarchy). |
Level 1 inputs utilize quoted prices (unadjusted) in active
markets for identical assets or liabilities that the Company has
the ability to access at the measurement date. Level 2 inputs
are inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly or
indirectly. Level 2 inputs may include quoted prices for
similar assets and liabilities in active markets, as well as inputs
that are observable for the asset or liability (other than quoted
prices), such as interest rates, foreign exchange rates, and yield
curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or
liability, which are typically based on an entity’s own
assumptions, as there is little, if any, related market activity.
In instances where the determination of the fair value measurement
is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the
entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its
entirety. The Company’s assessment of the significance of a
particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the asset or
liability.
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Fair Value Measurements at Reporting Date Using |
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Balances as of
December 31,
2017 |
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Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1) |
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Significant
Other
Observable
Inputs
(Level 2) |
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Significant
Unobservable
Inputs
(Level 3) |
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Money market funds
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$ |
56,820,688 |
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$ |
56,820,688 |
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$ |
— |
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$ |
— |
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Short-term investments
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$ |
26,516,711 |
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$ |
26,516,711 |
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$ |
— |
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$ |
— |
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Fair Value Measurements at Reporting Date Using |
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Balances as of
December 31,
2016 |
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Quoted Prices in
Active Markets
for Identical
Assets/Liabilities
(Level 1) |
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Significant
Other
Observable
Inputs
(Level 2) |
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Significant
Unobservable
Inputs
(Level 3) |
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Money market funds
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$ |
13,395,759 |
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$ |
13,395,759 |
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$ |
— |
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$ |
— |
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Short-term investments
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$ |
26,512,753 |
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$ |
26,512,753 |
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$ |
— |
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$ |
— |
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Warrants liability
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$ |
122,226 |
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$ |
— |
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$ |
— |
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$ |
122,226 |
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| WARRANTS LIABILITY |
j.
| WARRANTS LIABILITY. In October
2011, the Company issued 1,523,370 warrants (the 2011 warrants) to
purchase shares of the Company’s common stock in connection
with a registered direct offering. The Company accounted for these
warrants as a liability measured at fair value due to a provision
included in the warrants agreement that provided the warrants
holders with an option to require the Company (or its successor) to
purchase their warrants for cash in an amount equal to their
Black-Scholes Option Pricing Model (the Black-Scholes Model) value,
in the event that certain fundamental transactions, as defined,
were to occur while the 2011 warrants were outstanding. During
periods that the 2011 warrants were outstanding, the fair value of
the warrants liability was estimated using the Black-Scholes Model
which required inputs such as the expected term of the warrants,
share price volatility and risk-free interest rate. These
assumptions were reviewed on a quarterly basis and changes in the
estimated fair value of the outstanding warrants were recognized
each reporting period in the “Change in fair value of
warrants liability” line in the consolidated statements of
operations. The 2011 warrants expired on May 2, 2017. At
December 31, 2017 and 2016, respectively, none and 763,913 of
the 2011 warrants remained outstanding. |
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| RESEARCH AND DEVELOPMENT |
| k. |
RESEARCH AND DEVELOPMENT.
Costs incurred in connection with research and development
activities are expensed as incurred. These costs consist of direct
and indirect costs associated with specific projects as well as
fees paid to various entities that perform research related
services for the Company. |
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| STOCK-BASED COMPENSATION |
| |
l. |
STOCK-BASED COMPENSATION. The
Company recognizes expense in the consolidated statements of
operations for the fair value of all stock-based payments to
employees, directors, scientific advisors and consultants,
including grants of stock options and other share-based awards. For
stock options, the Company uses the Black-Scholes option valuation
model, the single-option award approach and the straight-line
attribution method. Using this approach, compensation cost is
amortized on a straight-line basis over the vesting period of each
respective stock option, generally one to three years. Forfeitures
are recognized as a reduction of share-based compensation expense
as they occur. |
For the years ended December 31, 2017, 2016 and 2015, the
Company recorded stock-based compensation expense as follows:
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2017 |
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2016 |
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2015 |
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Research and development
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$ |
785,899 |
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$ |
590,857 |
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$ |
378,548 |
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General and administrative
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1,622,062 |
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1,245,228 |
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1,206,910 |
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Total stock-based compensation
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$ |
2,407,961 |
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$ |
1,836,085 |
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$ |
1,585,458 |
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| CONCENTRATION OF CREDIT RISK |
| m. |
CONCENTRATION OF CREDIT RISK.
The financial instruments that potentially subject the Company to
concentration of credit risk are cash equivalents (i.e. money
market funds) and short-term investments. The Company places its
cash equivalents with high-credit quality financial institutions.
These amounts at times may exceed federally insured limits. The
Company has not experienced any credit losses in these
accounts. |
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| INCOME TAXES |
| n. |
INCOME
TAXES. The Company utilizes the asset and
liability method of accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using enacted tax rates and laws that
will be in effect when the differences are expected to reverse. A
valuation allowance is provided when it is more likely than not
that some portion or all of a deferred tax asset will not be
realized. |
The Company recognizes the financial statement benefit of a tax
position only after determining that the relevant tax authority
would more likely than not sustain the position following an audit.
For tax positions meeting the more-likely-than-not threshold,
the amount recognized in the financial statements is the largest
benefit that has a greater than 50 percent likelihood of being
realized upon ultimate settlement with the relevant tax authority.
The Company is subject to income taxes in the U.S. federal
jurisdiction and various state jurisdictions. Tax regulations
within each jurisdiction are subject to the interpretation of the
related tax laws and regulations and require significant judgment
to apply. The Company is not subject to U.S. federal, state and
local tax examinations by tax authorities for years before 2014. If
the Company were to subsequently record an unrecognized tax
benefit, associated penalties and tax related interest expense
would be reported as a component of income tax expense.
On December 22, 2017, the U.S. government enacted
comprehensive tax legislation commonly referred to as the Tax Cuts
and Jobs Act (the “Tax Act”). The Tax Act makes broad
and complex changes to the U.S. tax code, including, but not
limited to, (1) reducing the U.S. federal corporate tax rate
from 35 to 21 percent; (2) requiring companies to pay
a one-time transition
tax on certain repatriated earnings of foreign subsidiaries;
(3) generally eliminating U.S. federal income taxes on
dividends from foreign subsidiaries; (4) requiring a current
inclusion in U.S. federal taxable income earnings of controlled
foreign corporations; (5) eliminating the corporate
alternative minimum tax (AMT) and changing how existing AMT credits
can be realized; (6) creating the base erosion anti-abuse tax
(BEAT), a new minimum tax; (7) creating a new limitation on
deductible interest expense, and (8) changing rules related to
uses and limitations of net operating loss carryforwards created in
tax years beginning after December 31, 2017.
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| COMPREHENSIVE INCOME (LOSS) |
| o. |
COMPREHENSIVE INCOME (LOSS).
U.S. GAAP require that all components of comprehensive income
(loss) be reported in the consolidated financial statements in the
period in which they are recognized. Comprehensive income (loss) is
net income (loss), plus certain other items that are recorded
directly into stockholders’ equity. For all periods
presented, the Company’s net loss equals comprehensive loss,
since the Company has no items which are considered other
comprehensive income (loss). |
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| NET INCOME (LOSS) PER SHARE |
| |
p. |
NET INCOME (LOSS) PER SHARE.
Basic loss per share is computed by dividing net loss for the
period by the weighted average number of common shares outstanding
during the period. The calculation of basic and diluted net loss
per share is the same for all periods presented, as the effect of
potential common stock equivalents is anti-dilutive due to the
Company’s net loss position for all periods presented. The
potential shares, which are excluded from the determination of
basic and diluted net loss per share as their effect is
anti-dilutive, for the years ended December 31, 2017, 2016 and
2015, are as follows: |
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2017 |
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2016 |
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2015 |
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Stock options to purchase common stock
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5,191,666 |
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4,660,000 |
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4,250,000 |
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Warrants to purchase common stock
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— |
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2,407,663 |
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2,407,663 |
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Unvested restricted stock
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— |
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26,667 |
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53,334 |
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Potential equivalent common stock excluded
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5,191,666 |
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7,094,330 |
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6,710,997 |
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Potentially dilutive stock options to purchase common stock as of
December 31, 2017, 2016 and 2015 have exercise prices ranging
from $0.47 to $4.64. Potentially dilutive warrants to purchase
common stock as of December 31, 2016 and 2015 had exercise
prices ranging from $1.04 to $2.08 and expired in periods between
May 2017 and August 2017.
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| SEGMENT INFORMATION |
| q. |
SEGMENT INFORMATION.
Management has determined that the Company operates in one
reportable segment, which is the development and commercialization
of pharmaceutical products. |
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| RECLASSIFICATIONS |
| r. |
RECLASSIFICATIONS. Certain
prior year amounts in the consolidated financial statements have
been reclassified to conform to the current year presentation. |
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| RECENTLY ISSUED ACCOUNTING STANDARDS |
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s. |
RECENTLY ISSUED ACCOUNTING
STANDARDS. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic
842), which requires an entity to recognize assets and
liabilities arising from a lease for both financing and operating
leases. The ASU will also require new qualitative and quantitative
disclosures to help investors and other financial statement users
better understand the amount, timing, and uncertainty of cash flows
arising from leases. ASU 2016-02 is effective for fiscal years
beginning after December 15, 2018, with early adoption
permitted. The Company is currently evaluating the impact this
accounting standard will have on its consolidated financial
statements. |
On March 30, 2016, the FASB issued ASU No. 2016-09,
Compensation—Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting,
which simplifies several aspects of the accounting for employee
share-based payment transactions for both public and nonpublic
entities, including the accounting for income taxes, forfeitures,
and statutory tax withholding requirements, as well as
classification in the statement of cash flows. For public
companies, the changes are effective for reporting periods (annual
and interim) beginning after December 15, 2016. The Company
adopted this standard in the first quarter of 2017. The adoption of
this standard did not have a material impact on the Company’s
consolidated financial statements.
In May 2017, the FASB issued ASU No. 2017-09, Compensation
– Stock Compensation (Topic 718): Scope of
Modification Accounting to clarify when to account for a change
to the terms or conditions of a share-based payment award as a
modification. Under this new guidance, modification accounting is
required if the fair value, vesting conditions, or classification
of the award changes as a result of the change in terms or
conditions. ASU 2017-09 is
effective for all entities for annual reporting periods beginning
after December 15, 2017, including interim reporting periods
within each annual reporting period, applied prospectively on or
after the effective date. The Company is currently evaluating the
impact this accounting standard will have on its consolidated
financial statements; however, the Company does not expect that the
adoption of this standard will have a material impact on the
Company’s consolidated financial statements.
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