Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include Soligenix, Inc., and its wholly and majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated as a result of consolidation.

Operating Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment. The Company divides its operations into two operating segments: Specialized BioTherapeutics and Public Health Solutions.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Contracts and Grants Receivable

Contracts and grants receivable consist of amounts due from various grants from the NIH and contracts from NIAID, an institute of NIH, for costs incurred prior to the period end under reimbursement contracts. The amounts were billed to the respective governmental agencies in the month subsequent to period end and collected shortly thereafter. Accordingly, no allowance for doubtful amounts has been established. If amounts become uncollectible, they are charged to operations.

Intangible Assets

One of the most significant estimates or judgments that the Company makes is whether to capitalize or expense patent and license costs. The Company makes this judgment based on whether the technology has alternative future uses, as defined in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 730, Research and Development. Based on this consideration, the Company capitalizes payments made to legal firms that are engaged in filing and protecting rights to intellectual property and rights for its current products in both the domestic and international markets. The Company believes that patent rights are one of its most valuable assets. Patents and patent applications are a key component of intellectual property, especially in the early stage of product development, as their purchase and maintenance gives the Company access to key product development rights from Soligenix's academic and industry partners. These rights can also be sold or sub-licensed as part of its strategy to partner its products at each stage of development as the intangible assets have alternative future use. The legal costs incurred for these patents consist of work associated with filing new patents designed to protect, preserve and maintain the Company's rights, and perhaps extend the lives of the patents. The Company capitalizes such costs and amortizes intangibles on a straight-line basis over their expected useful life – generally a period of 11 to 16 years.

The Company did not capitalize any patent related costs during the six months ended June 30, 2019 and 2018.

These intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or if the underlying program is no longer being pursued. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and carrying value of the related asset or group of assets. No such write downs have occurred for the six months ended June 30, 2019 and 2018.

Website Development Costs

In February 2019, the Company engaged a third party vendor to re-develop its website. Upon completion of the project in June 2019, the Company capitalized the related website development costs of $46,500 in accordance with FASB Codification ASC 350-50 "Accounting for Web Site Development Costs", which was reported in other assets in the consolidated balance sheet as of June 30, 2019. Beginning in the quarter ending September 30, 2019, the Company will amortize the website development costs on a straight-line basis over three years, the estimated useful life of the website. The Company will also review its capitalized website development costs periodically for impairment.

Impairment of Long-Lived Assets

Office furniture and equipment and intangible assets with finite lives are evaluated and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company recognizes impairment of long-lived assets in the event the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets. If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair value and the carrying value of the related asset or group of assets. Such analyses necessarily involve significant judgment.

The Company did not record any impairment of long-lived assets for the six months ended June 30, 2019 and 2018.

Fair Value of Financial Instruments

FASB ASC 820 — Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company on June 30, 2019. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments.

FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

● Level 1 — Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

● Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models consider various assumptions, including volatility factors, current market prices and contractual prices for the underlying financial instruments. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

● Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, contracts and grants receivable, accounts payable, accrued expenses, and accrued compensation approximate their fair value based on the short-term maturity of these instruments.

Revenue Recognition

The Company's revenues are primarily generated from government contracts and grants. The revenue from government contracts and grants is based upon subcontractor costs and internal costs incurred that are specifically covered by the contracts and grants, plus a facilities and administrative rate that provides funding for overhead expenses and management fees. These revenues are recognized when expenses have been incurred by subcontractors or when the Company incurs reimbursable internal expenses that are related to the government contracts and grants.

Research and Development Costs

Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development includes costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials, salaries, share-based compensation, employee benefits, equipment depreciation and allocation of various corporate costs. Purchased in-process research and development expense represents the value assigned or paid for acquired research and development for which there is no alternative future use as of the date of acquisition.

Share-Based Compensation

Stock options are issued with an exercise price equal to the market price on the date of grant. Stock options issued to directors upon re-election vest quarterly for a period of one year (new director issuances are fully vested upon issuance). Stock options issued to employees generally vest 25% on the grant date, then 25% each subsequent year for a period of three years. These options have a ten year life for as long as the individuals remain employees or directors. In general, when an employee or director terminates their position, the options will expire within three months, unless otherwise extended by the Board.

From time to time, the Company issues restricted shares of common stock to vendors and consultants as compensation for services performed. In June 2018, the FASB amended the accounting for share-based compensation issued to nonemployees in ASU 2018-07. Under the revised guidance, the scope of Topic 718 was expanded to include share-based payments issued to nonemployees, supersedes Subtopic 505-50 and generally aligns the accounting for awards issued to nonemployees to the accounting for employee awards. The Company adopted the new guidance effective January 1, 2019, and in accordance with the new guidance, stock compensation expense for equity-classified awards to nonemployees is measured on the date of grant and is recognized when the services are performed. The adoption of ASU 2018-07 did not have a material impact on the Company's financial statements.

During the six months ended June 30, 2019 and 2018, the Company issued 74,300 common stock options at a weighted average exercise price of $0.93 per share, and 600 common stock options at a weighted average exercise price of $1.59 per share, respectively. The fair value of options issued during the six months ended June 30, 2019 and 2018 were estimated using the Black-Scholes option-pricing model and the following assumptions:

● a dividend yield of 0%;

● an expected life of 4 years;

● volatility ranging from 90.87% - 92.93% for 2019 and from 91.17%-91.18% for 2018;

● forfeitures at a rate of 12%; and

● risk free interest rates ranging from 1.84% - 2.50% for 2019 and from 2.68%-2.85% for 2018.

The fair value of each option grant made during 2019 was estimated on the date of each grant using the Black-Scholes option pricing model and recognized as share-based compensation expense ratably over the option vesting periods, which approximates the service period.

For the six months ended June 30, 2019, the Company issued 197,019 shares of common stock to third-party vendors as partial consideration for services performed. In accordance with ASU 2018-07, the Company recognized $107,447 of share-based compensation expenses, capitalized $46,500 of website development costs, and recorded $7,110 of prepaid vendor service expenses based on the market prices of the Company's common stock on the issue dates. The Company did not issue shares of common stock to third party vendors during the six months ended June 30, 2018.

Foreign Currency Transactions and Translation

In 2018, the Company changed the status of a wholly owned subsidiary in the United Kingdom ("UK") from inactive to active and incurred expenditures in multiple currencies including the U.S. dollar, the British Pound and the Euro to fund its clinical trial operations in the UK and select countries in Europe. In accordance with ASC 830 Foreign Currency Matters, the UK subsidiary expresses its U.S. dollar and Euro denominated transactions in its functional currency, the British Pound, with related transaction gains or losses included in net loss. On a quarterly basis, the financial statements of the UK subsidiary are translated into U.S. dollars and consolidated into the Company's financials, with related translation adjustments reported as a cumulative translation adjustment ("CTA"), which is a component of accumulated other comprehensive loss. During the six months ended June 30, 2019, the Company did not incur any material foreign currency transaction or translation gain or loss. No foreign currency transaction or translation gain or loss was recorded in the six months ended June 30, 2018.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence is considered, including the Company's current and past performance, the market environment in which the Company operates, the utilization of past tax credits, and the length of carryback and carryforward periods. Deferred tax assets and liabilities are measured utilizing tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company recognized an income tax benefit of $610,676 from the sale of New Jersey NOL carryforward during the six months ended June 30, 2019. No income tax benefit was recognized for the six months ended June 30, 2018. The Company recognizes accrued interest and penalties associated with uncertain tax positions, if any, as part of the income tax provision. There were no tax related interest and penalties recorded for the periods ended June 30, 2019 or 2018. Additionally, the Company has not recorded an asset for unrecognized tax benefits or a liability for uncertain tax positions at June 30, 2019 and December 31, 2018.

Earnings Per Share

Basic earnings per share ("EPS") excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average number of common shares outstanding for the period. 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 shared in the earnings of the entity. Since there is a significant number of options and warrants outstanding, fluctuations in the actual market price can have a variety of results for each period presented.

The following table summarizes potentially dilutive adjustments to the weighted average number of common shares which were excluded from the calculation because their effect would be anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Common stock purchase warrants		6,303,643		2,575,988		6,303,643		2,575,988
Stock options		1,093,032		761,855		1,093,032		761,855
Total		7,396,675		3,337,843		7,396,675		3,337,843

The weighted average exercise price of the Company's stock options and warrants outstanding at June 30, 2019 were $4.97 and $3.09 per share, respectively, and at June 30, 2018 were $7.25 and $4.38 per share, respectively.

Use of Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions such as the fair value of warrants and stock options and the useful life of intangibles that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.

Accounting for Leases

On January 1, 2019, the Company adopted ASC No. 2016-02, "Leases" (Topic 842) (the "Lease Standard"), a new FASB standard which requires all leases with terms longer than 12 months be recognized by the lessee on its balance sheet as a right-of-use asset and a corresponding lease liability, including leases currently accounted for as operating leases, and key information about leasing arrangements to be disclosed.

The Company adopted the Lease Standard under the alternative transition method permitted by ASU 2018-11. This transition method allowed the Company to initially apply the requirements of the Lease Standard at the adoption date, versus at the beginning of the earliest period presented. The Company elected the transition package of practical expedients, which permits not separating lease and non-lease components for all of its leases and the short-term lease recognition exemption for all of its leases that qualify; it did not elect the use of hindsight practical expedient.

As a result of the adoption of the Lease Standard, the Company classified a lease for its office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey and a lease for a copier machine in the office as an operating lease and a financing lease, respectively, and recorded related right-of-use assets and lease liabilities accordingly. As of June 30, 2019, the Company's consolidated balance sheet included a right-of-use asset of $175,453 for the office space and $16,747 for the copier machine. Lease liabilities in the Company's consolidated balance sheet included corresponding lease liabilities of $176,297 and $17,151, respectively. During the six months ended June 30, 2019, the Company recognized lease expense of $70,594 for the operating lease, in addition to amortization expense of $3,721 and interest expense of $955 for the financing lease in the Company's consolidated statement of operations.

The following represented a reconciliation of contractual lease cash flows to the right-of-use lease assets and liabilities recognized in the financial statements upon adoption:

	Operating Lease			Financing Lease
Contractual cash payments for the remaining lease term as of January 1, 2019:
2019	$	140,016		$	8,544
2020		118,830			8,544
2021		-			6,408
Total	$	258,846		$	23,496
Discount rate applied		10	%		10	%
Present value of contractual cash payments for the remaining lease term as of January 1, 2019	$	235,494		$	20,468
Right-of-use lease asset:
Right-of-use lease asset, January 1, 2019	$	235,494		$	20,468
Less: reduction/amortization		60,041			3,721
Right-of-use lease asset, June 30, 2019	$	175,453		$	16,747
Lease liability:
Lease liability, January 1, 2019	$	235,494		$	20,468
Less: principal repayments		59,197			3,317
Lease liability, June 30, 2019	$	176,297		$	17,151
Lease expenses for the six months ended on June 30, 2019:
Lease expense	$	70,594		$	-
Amortization expense		-			3,721
Interest expense		-			955
Total	$	70,594		$	4,676
Contractual cash payments for the remaining lease term as of June 30, 2019:
July through December 2019	$	70,266		$	4,272
2020		118,830			8,544
2021		-			6,408
Total	$	189,096		$	19,224
Remaining lease term (months) as of June 30, 2019		16			27