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Organization and Basis of Presentation
12 Months Ended
Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization and Basis of Presentation
genix, Inc. and subsidiaries (the Company) is a pharmaceutical company committed to developing and commercializing central nervous system (CNS) therapies. The Company’s current primary area of focus is epilepsy and related seizure disorders.
The accompanying consolidated financial statements include the accounts of Zogenix, Inc. and its wholly owned subsidiary Zogenix Europe, which was incorporated under the laws of England and Wales in June 2010. Also included is Zogenix International Limited, a wholly owned subsidiary of Zogenix Europe. All intercompany accounts and transactions have been eliminated in the preparation of the consolidated financial statements.
The accompanying consolidated balance sheets as of December 31, 2016 and 2015, and consolidated statements of operations for each of the three years in the period ended December 31, 2016 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with generally accepted accounting principles in the United States of America. The accompanying consolidated financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business.
As of December 31, 2016, the Company adopted Accounting Standard Update (ASU) No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties About an Entity’s ability to Continue as a Going Concern, which requires management to evaluate whether there are conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern and to meet is obligations as they become due within one year from the date the financial statements are issued.
Excluding gains from two discrete business divestitures, the Company has incurred significant net losses from its operations since its inception and has an accumulated deficit of $445.2 million as of December 31, 2016. In 2016, the Company used $72.9 million of cash in operations. At December 31, 2016, the Company had cash and cash equivalents of $91.6 million. The Company’s loan agreement with Oxford Finance LLC and Silicon Valley Bank includes a material adverse change clause (see Note 9.) Management expects operating losses and negative cash flows to continue for at least the next year as the Company continues to incur costs related to ongoing Phase 3 programs in Dravet syndrome in North America and EU for ZX008. Additionally, in the event that ZX008 is approved in the U.S. or EU, the Company will owe milestone payments under its Zogenix International Limited Sales and Purchase Agreement (see Note 7). Based on the Company’s operating plans, management believes the Company’s cash and cash equivalents will not be sufficient to fund its operations beyond the first half of 2018. As a result, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
Management’s ability to continue as a going concern is dependent upon its ability to raise additional funding. Management intends to raise additional capital through public or private equity offerings, including debt financings. However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all. Furthermore, if the Company issues equity or debt securities to raise additional funds, its existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. If the Company raises additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish valuable rights to its potential products or proprietary technologies, or grant licenses on terms that are not favorable to the Company. Without additional funds, the Company may be forced to delay, scale back or eliminate some of our research and development activities, or other operations and potentially delay product development in an effort to provide sufficient funds to continue its operations. If any of these events occur, the Company’s ability to achieve the development and commercialization goals would be adversely affected.
The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty.