Going Concern and Summary of Significant Accounting Policies |
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Going Concern and Summary of Significant Accounting Policies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Going Concern and Summary of Significant Accounting Policies | Note 2 – Going Concern and Summary of Significant Accounting Policies Since the date of the 2022 Form 10-K, there have been no material changes to the Company’s significant accounting policies, except as disclosed below. Going Concern As of September 30, 2023, the Company had cash and cash equivalents in the aggregate amount of approximately $20.7 million. For the nine months ended September 30, 2023 and 2022, the Company incurred net losses of approximately $19.3 million and $21.9 million, respectively, and used cash in operations of approximately $17.5 million and $19.7 million, respectively. The Company does not have material recurring revenue, has not yet achieved profitability and may never become profitable. The Company expects to continue to incur cash outflows from operations. Research and development and general and administrative expenses will continue to be incurred by the Company and, as a result, the Company will eventually need to generate significant product revenues to achieve profitability. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern for at least one year from the date that these financial statements were issued. Implementation of the Company’s plans and its ability to continue as a going concern will depend upon the Company’s ability to raise further capital through licensing transactions, the sale of additional equity or debt securities, or otherwise, to support its future operations. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully commercialize its products and services, competing technological and market developments, and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement its product and service offerings. If the Company is unable to secure additional capital, it may be required to curtail its research and development initiatives and/or take additional measures to reduce general and administrative and sales and marketing costs in order to conserve its cash. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents in the financial statements.As of September 30, 2023, the Company had Treasury bills with original maturity dates of three months or less in the amount of $5,221,319. The Company has cash deposits in financial institutions that, at times, may be in excess of Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The Company has not experienced losses in such accounts and periodically evaluates the creditworthiness of its financial institutions. As of September 30, 2023 and December 31, 2022, the Company had cash balances in excess of FDIC insurance limits of $15,056,184 and $22,613,520, respectively. Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period plus fully vested shares that are subject to issuance for little or no monetary consideration. Diluted earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. The following table presents the computation of basic and diluted net loss per common share:
The following securities are excluded from the calculation of weighted average diluted common shares because their inclusion would have been anti-dilutive:
Clinical Supply Arrangements Bausch + Lomb, Inc. (“B+L”) and Arctic Vision (Hong Kong) Limited (“Arctic Vision”) have contracted with the Company to manufacture and supply them with the appropriate drug-device combination products to conduct their clinical trials on a cost plus 10% mark-up basis. The Company’s licensing agreements with Bausch + Lomb and Arctic Vision represent collaborative arrangements and they are not customers with respect to the clinical supply arrangements. The Company’s policy is to (a) defer the materials and manufacturing costs in order to properly match them up against the income from the clinical supply arrangements; and (b) to report the net income from the clinical supply arrangements as other income. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using the first-in, first-out method. The cost of inventory that is sold to third parties is included within cost of sales. The Company will periodically review for slow-moving, excess or obsolete inventories. Inventory is primarily comprised of drug-device combination products, which are available for commercial sale, as follows:
Intangible Assets The application of the guidance in ASC 805 (“Business Combinations”) on accounting for business combinations can differ significantly depending on whether the acquired entity is considered a “business” or an “asset.” A determination of whether the transaction represented an asset acquisition or a business combination must be made. Pursuant to ASC 350 (“Intangibles - Goodwill and Other”), the payment made for the intangible asset will be capitalized and amortized over the useful life of the intangible asset. On August 15, 2023 (the “Effective Date”), the Company entered into a license agreement (the “License”) with Formosa Pharmaceuticals Inc. (the “Licensor”), whereby the Company acquired the exclusive U.S. rights to commercialize any product related to a novel formulation of clobetasol propionate ophthalmic nanosuspension, 0.05% (the “Licensed Product”), which is currently under review by the FDA for ophthalmic use for inflammation and pain after ocular surgery and supplemental disease indications, if any, associated with the New Drug Application for the Licensed Product. The License will remain in effect for ten years from the date of the first commercial sale of a Licensed Product, unless earlier terminated. The Company paid the Licensor the aggregate amount of $2,000,000 (the “Upfront Payment”), consisting of (a) cash in the amount of $1,000,000 and (b) 487,805 shares of common stock valued at $1,000,000, which is included in Intangible Assets on the accompanying condensed balance sheet. In addition to the Upfront Payment, the Company also capitalized $122,945 of transaction costs, which were primarily legal expenses. In addition, the Company must pay the Licensor up to $4 million upon the achievement of certain development milestones and up to $80 million upon the achievement of certain sales milestones. The initial trigger for development milestone payments is FDA approval of the Licensed Product. These contingent payments will be recorded when payment becomes probable and estimable. It was determined that the transaction represented an asset acquisition, rather than a business combination, because substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset. Consequently, the accounting is pursuant to the cost accumulation model. The Upfront Payment has been capitalized as an intangible asset by the Company, and will be amortized over the useful life of 10 years beginning on the date of the first commercial sale of the Licensed Product. Recently Adopted Accounting Standards In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326)” and also issued subsequent amendments to the initial guidance under ASU 2018-19, ASU 2019-04 and ASU 2019-05 (collectively, “Topic 326”). Topic 326 requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. This replaces the existing incurred loss model with an expected loss model and requires the use of forward-looking information to calculate credit loss estimates. The Company adopted ASU 2016-13 on January 1, 2023. The adoption of ASU 2016-13 did not have a material impact on the Company’s financial position, results of operations or cash flows. In August 2020, the FASB issued ASU 2020-06, “Debt—Debt with Conversion and Other Options (Subtopic 470-20)” and “Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, to clarify the accounting for certain financial instruments with characteristics of liabilities and equity. The amendments in this update reduce the number of accounting models for convertible debt instruments and convertible preferred stock by removing the cash conversion model and the beneficial conversion feature model. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in-capital. In addition, ASU 2020-06 improves disclosure requirements for convertible instruments and earnings-per-share guidance. ASU 2020-06 also revises the derivative scope exception guidance to reduce form-over-substance-based accounting conclusions driven by remote contingent events. The amendments in this update are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted ASU 2020-06 effective January 1, 2023 which eliminates the need to assess whether a beneficial conversion feature needs to be recognized upon the issuance of new convertible instruments. The adoption of ASU 2020-06 did not have a material impact on the Company’s financial position, results of operations or cash flows. |