XML 39 R10.htm IDEA: XBRL DOCUMENT v3.23.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2022
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

 

Use of Estimates and Assumptions

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant areas of estimation include determining research and development accruals, the inputs in determining the fair value of equity-based awards and warrants issued, the inputs in determining present value of lease payments, and fair value of marketable securities. Actual results could differ from those estimates.

 

Risks and Uncertainties

 

The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. Operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory, and other risks, including the potential risk of business failure.

 

The extent of the future impact and effects of the coronavirus (COVID-19) on the operation and financial performance of the Company’s business will depend on future developments, including the duration of continuation or the resurgence of the outbreak and varying virus mutations, recovery times of disrupted research services, the consequential staff shortages, and research and development delays, or the uncertainty with respect to the accessibility of additional liquidity or capital markets, all of which are highly uncertain and cannot be predicted. If the Company’s operations are impacted by the outbreak for an extended period, the Company’s results of operations or liquidity may be materially adversely affected.

 

Our marketable securities have had and may in the future have their market value fluctuate due to rises or falls in interest rates. While we believe our cash, cash equivalents and marketable securities do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes in market value. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial institutions that are federally insured. Interest bearing and non-interest bearing accounts we hold at these banking institutions are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per depositor, per FDIC-insured bank, per ownership category. Substantially all of our cash balances held at banking institutions at December 31, 2022 are in excess of FDIC coverage.

 

 

Research and Development

 

Research and development costs are expensed as incurred. These expenses primarily consist of payroll, contractor expenses, research study expenses, costs for manufacturing and supplies, and technical infrastructure on the cloud for the purposes of developing the Company’s RADR platform and identifying, developing, and testing drug candidates. Development costs incurred by third parties are expensed as the work is performed. Costs to acquire technologies, including licenses, that are utilized in research and development and that have no alternative future use are expensed when incurred.

 

Cash and Cash Equivalents

 

The Company considers money market funds and other highly liquid instruments with a short-term maturity of 3 months or less to be cash equivalents. Cash equivalents at December 31, 2022 and December 31, 2021 were approximately $1,271,000 and $631,000, respectively, and are included along with cash under the caption cash and cash equivalents on the Company’s consolidated balance sheets.

 

Restricted Cash

 

The Company considers cash held in escrow for the purposes of contractual contingencies to be restricted cash. Restricted cash at December 31, 2022 and 2021 was approximately $541,000 and $1,000,000, respectively, and is included under the caption restricted cash on the Company’s consolidated balance sheets. All of the restricted cash at December 31, 2022 and 2021 relates to escrow amounts paid in connection with the Asset Purchase Agreement entered into by the Company and Allarity Therapeutics in July 2021 (See Note 4) and is considered a current asset at December 31, 2022, as the milestones that could require payments to be made to Allarity Therapeutics must be satisfied within the next 12 months.

 

Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets as of December 31, 2022 totaled approximately $2,985,000 and included approximately $1,633,000 of upfront payments for contractor fees, academic research studies and services, and subscriptions, approximately $256,000 of intellectual property related licensing and other fees, approximately $504,000 of prepaid annual insurance fees, and approximately $592,000 of receivables from interest and tax incentives.

 

Prepaid expenses and other current assets as of December 31, 2021 totaled approximately $1,991,000 and included approximately $778,000 of upfront payments for contractor fees, academic research studies and services, and subscriptions, approximately $379,000 of intellectual property related licensing and other fees, approximately $653,000 of prepaid annual insurance fees, and approximately $181,000 of receivables from interest and tax incentives.

 

Loan Pursuant to Paycheck Protection Program

 

On May 1, 2020, the Company received $108,500 in aggregate loan proceeds (the “PPP Loan”) from JPMorgan Chase Bank (the “Lender”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP Loan was evidenced by a loan application and payment agreement by and between the Company and the Lender. The Company applied for forgiveness of the loan, and in April 2021 the Company received notice that the Small Business Administration (SBA) had authorized full forgiveness of the PPP Loan (see Note 9). Forgiveness is subject to review by the SBA for a period of six years from the date of forgiveness.

 

 

Leases

 

The Company determines whether an arrangement contains a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities, and net of current portion of operating lease liabilities on our consolidated balance sheets. Lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Lease ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments. The Company does not include options to extend or terminate the lease term unless it is reasonably certain that the Company will exercise any such options. Rent expense is recognized under the operating leases on a straight-line basis. The Company does not recognize right-of-use assets or lease liabilities for short-term leases, which have a lease term of twelve months or less, and instead will recognize lease payments as expense on a straight-line basis over the lease term.

 

Marketable Securities

 

The Company’s marketable securities consist of government and agency securities, corporate bonds, and mutual funds. We classify our marketable securities as available-for-sale at the time of purchase and reevaluate such classification as of each balance sheet date. We may sell these securities at any time for use in current operations even if they have not yet reached maturity. As a result, we classify our investments, including securities with maturities beyond twelve months, as current assets in the accompanying consolidated balance sheets. Available-for-sale debt securities are recorded at fair value each reporting period. Unrealized gains and losses are excluded from earnings and recorded as a separate component within “Accumulated other comprehensive income” or “Accumulated other comprehensive loss” on the consolidated balance sheets until realized. Interest is reported within “Interest income” and dividend income is reported within “Other (expense) income, net” on the consolidated statements of operations. We evaluate our investments to assess whether the amortized cost basis is in excess of estimated fair value and determine what amount of that difference, if any, is caused by expected credit losses. Allowance for credit losses are recognized as a charge in “Other income, net” on the consolidated statements of operations, and any remaining unrealized losses are included in “Accumulated other comprehensive loss” on the consolidated balance sheets. There were no credit losses recorded for the year ended December 31, 2022. There was no impairment charge for any unrealized losses for the years ended December 31, 2022 and 2021. We determine realized gains and losses on the sale of marketable securities based on the specific identification method and record such gains and losses in “Other (expense) income, net” on the consolidated statements of operations.

 

Income Taxes

 

Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities using enacted tax rates which will be in effect when the differences reverse. The Company provides a full valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax asset will be realized.

 

Stock-based Compensation

 

Stock-based awards have been accounted for as required by ASC 718 Compensation - Stock Compensation. Under ASC 718, awards are valued at fair value on the date of grant, and that fair value is recognized over the requisite service period. Forfeitures are accounted for as they occur.

 

 

New Accounting Pronouncements, Not Yet Adopted

 

Current Expected Credit Loss

 

In June 2016 the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). This introduces new methodology for recognition of credit losses - the current expected credit loss (“CECL”) method. The CECL method requires the recognition of all losses expected over the life of a financial instrument upon origination or purchase of the instrument, unless the company elects to recognize such instruments at fair value with changes in profit and loss. CECL is effective for the Company on January 1, 2023. The Company believes it will not be materially impacted by the adoption of this new standard.

 

Recently Adopted Accounting Standards

 

Government Assistance

 

In November 2021 the FASB issued ASU 2021-10, Government Assistance (Topic 832). This introduces new guidance to increase transparency of government assistance. It requires annual disclosures about transactions with a government, including those accounted for by applying a grant. This includes the nature of the transactions and related accounting policy used to account for the transactions, the line items on the balance sheet and income statement that are affected by the transactions, and significant terms and conditions of the transactions. The Company adopted ASU 2021-10 on January 1, 2022 and has not been materially impacted by its adoption.