Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2018

Organization and Operations [Policy Text Block]

(a) ORGANIZATION AND OPERATIONS––The Company was incorporated in

August 1990

as a Florida corporation, with operations beginning in

July 1992.

We are a biotechnology company that develops cyclodextrin-based products for the treatment of disease. We have filed a Type II Drug Master File with the U.S. Food and Drug Administration (“FDA”) for our lead drug candidate, Trappsol® Cyclo™ as a treatment for Niemann-Pick Type C disease (“NPC”), a rare and fatal cholesterol metabolism disease that impacts the brain, lungs, liver, spleen, and other organs. The FDA approved our Investigational New Drug application (IND) which describes our Phase I clinical plans in the U.S. for Trappsol® Cyclo™ and in

January 2017

the FDA granted Fast Track designation to Trappsol® Cyclo™ for the treatment of NPC. Initial patient enrollment in the U.S. Phase I study commenced in

September 2017.

We have also filed Clinical Trial Applications with several European regulatory bodies, including those in the United Kingdom, Sweden, Israel and Italy, all of which have approved our applications. The

first

patient was dosed in our European study in

July 2017.

We also sell cyclodextrins and related products to the pharmaceutical, nutritional, and other industries, primarily for use in diagnostics and specialty drugs with continuing growth in research and new product development. However, our core business has transitioned to a biotechnology company primarily focused on the development of cyclodextrin-based biopharmaceuticals for the treatment of disease from a business which had been primarily reselling basic cyclodextrin products.

Basis of Accounting, Policy [Policy Text Block]

(b) BASIS OF PRESENTATION––The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form

-Q and Rule

of Regulation S-

Accordingly, they do

not

include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

Operating results for the

three

and

nine

month periods ended

September

30,

2018

are

not

necessarily indicative of the results that

may

be expected for the year ending

December 31, 2018.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form

-K for the year ended

December

31,

2017,

as filed with the Securities and Exchange Commission on

April 16, 2018.

Cash and Cash Equivalents, Policy [Policy Text Block]

(c) CASH AND CASH EQUIVALENTS––Cash and cash equivalents consist of cash and any highly liquid investments with an original maturity of

three

months or less.

Receivables, Policy [Policy Text Block]

(d) ACCOUNTS RECEIVABLE––Accounts receivable are unsecured and non-interest bearing and are stated at the amount we expect to collect from outstanding balances. Based on our assessment of the credit history with customers having outstanding balances and current relationships with them, an allowance for uncollectible accounts was

not

deemed necessary at

September

30,

2018

and

December 31, 2017.

Inventory, Cash Flow Policy [Policy Text Block]

(e) INVENTORY AND COST OF PRODUCTS SOLD––Inventory consists of our pharmaceutical drug Trappsol® Cyclo™, cyclodextrin products and chemical complexes purchased for resale recorded at the lower of cost (

first

-in,

first

-out) or net realizable value. Cost of products sold includes the acquisition cost of the products sold and does

not

include any allocation of inbound or outbound freight charges, indirect overhead expenses, warehouse and distribution expenses, or depreciation and amortization expense. The Company records a specific reserve for inventory items that are determined to be obsolete. The reserve for obsolete inventory was

$27,500

September 30, 2018

and

December 31, 2017.

Property, Plant and Equipment, Policy [Policy Text Block]

(f) EQUIPMENT––Equipment is recorded at cost. Depreciation on equipment is computed using primarily the straight-line method over the estimated useful lives of the assets (generally

three

five

years for computers, and

seven

ten

years for equipment and office furniture).

Revenue Recognition, Policy [Policy Text Block]

(g) REVENUE RECOGNITION–– Effective

January 1, 2018,

the Company adopted the provisions of ASC

606

using the modified retrospective method. The adoption of the new revenue standards as of

January 1, 2018

did

not

change our revenue recognition as the majority of our revenues continue to be recognized when the customer takes control of our product. As we did

not

identify any accounting changes that impacted the amount of reported revenues with respect to our product revenues,

adjustment to retained earnings was required upon adoption.

Under the new revenue standards, revenues are recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the

five

step model prescribed under ASU

No.

2014

09:

(i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Product revenues

In the U.S. we sell our products to the end user or wholesale distributors. In other countries, we sell our products primarily to wholesale distributors and other

third

-party distribution partners. These customers subsequently resell our products to health care providers and patients.

Revenues from product sales are recognized when the customer obtains control of our product, which occurs at a point in time, typically upon delivery to the customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is

one

year or less or the amount is immaterial. We treat shipping and handling costs performed after a customer obtains control of the product as a fulfillment cost. We have identified

one

performance obligation in our contracts with customers which is the delivery of product to our customers. The transaction price is recognized in full when we deliver the product to our customer, which is the point at which we have satisfied our performance obligation.

Reserves for Discounts and Allowances

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers, health care providers or payors, including those associated with the implementation of pricing actions in certain of the international markets in which we operate. Our process for estimating reserves established for these variable consideration components do

not

differ materially from our historical practices.

Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, contractual adjustments and returns.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to our customer) or a liability (if the amount is payable to a party other than our customer). Our estimates of reserves established for variable consideration typically utilize the most likely method and reflect our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances,

may

be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will

not

occur in a future period. Actual amounts

may

ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

For additional information on our revenues, please read Note

Revenues, to these condensed consolidated financial statements.

Research and Development Expense, Policy [Policy Text Block]

(h) RESEARCH AND DEVELOPMENT COSTS––Research and development costs are expensed as incurred.

Income Tax, Policy [Policy Text Block]

(i) INCOME TAXES––Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Deferred tax assets and liabilities are measured using enacted rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. In addition, tax benefits related to positions considered uncertain are recognized only when it is more likely than

not

the position will be sustained upon examination by the tax authorities. Such tax positions shall initially and subsequently be measured as the largest amount of tax benefit that has a greater than

50%

likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

Earnings Per Share, Policy [Policy Text Block]

(j) NET LOSS PER COMMON SHARE––Basic and fully diluted net loss per common share is computed using a simple weighted average of common shares outstanding during the periods presented; outstanding warrants to purchase

30,440,478

and

15,085,787

common shares were antidilutive for the

three

and

nine

months ended

September 30, 2018

and

2017,

respectively, and have been excluded from the calculation of loss per common share.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

(k) STOCK BASED COMPENSATION––The Company periodically awards stock to employees, directors, and consultants. An expense is recognized equal to the fair value of the stock determined using the closing trading price of the stock on the award date.

Liquidity [Policy Text Block]

(l) LIQUIDITY AND GOING CONCERN–– For the

three

and

nine

months ended

September 30, 2018,

the Company incurred net losses of

$787,301

and

$2,889,474

respectively. The Company has an accumulated deficit of

$16,222,141

September 30, 2018.

Our recent losses have predominantly resulted from research and development expenses for our Trappsol® Cyclo™ product and other general operating expenses, including board advisory fees. We believe our expenses will continue to increase as we conduct clinical trials and continue to seek regulatory approval for the use of Trappsol® Cyclo™ in the treatment of NPC.

For year ended

December 31, 2017,

our operations used approximately

$3,062,000

in cash. This cash was provided primarily by cash on hand and net proceeds of

$3,341,000

from equity issuances. At

December 31, 2017,

the Company had a cash balance of approximately

$1,271,000

and current assets less current liabilities of

$953,000.

September 30, 2018,

the Company had a cash balance of approximately

$1,122,000

and its current assets less current liabilities were

$56,000.

April 2018,

the Company generated additional net proceeds of

$1,960,000,

including

$74,983

received in

March 2018,

from the sale of equity securities in a private placement. We will need additional capital to maintain our operations, continue our research and development programs, conduct clinical trials, seek regulatory approvals and manufacture and market our products.

Our ability to obtain such additional capital will likely be subject to various factors, including our overall business performance and market conditions. If we cannot raise the additional funds required for our anticipated operations, we

may

be required to reduce the scope of or eliminate our research and development programs, delay our clinical trials and the ability to seek regulatory approvals, downsize our general and administrative infrastructure, or seek alternative measures to avoid insolvency. If we raise additional funds through future offerings of shares of our Common Stock or other securities, such offerings would cause dilution of current stockholders’ percentage ownership in the Company, which could be substantial. Future offerings also could have a material and adverse effect on the price of our Common Stock.

We have incurred losses from operations in each of our last

four

fiscal years. Our ability to continue as a going concern is dependent upon the availability of equity financing as noted above. We will need to raise additional capital to support our ongoing operations and continue our clinical trials. These factors raise substantial doubt about our ability to continue as a going concern. The financial statements do

not

include any adjustments that might result from the outcome of these uncertainties.

Use of Estimates, Policy [Policy Text Block]

(m) USE OF ESTIMATES––The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Although management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, actual results could significantly differ from these estimates.

Fair Value Measurement, Policy [Policy Text Block]

(n) FAIR VALUE MEASUREMENTS AND DISCLOSURES -The Fair Value Measurements and Disclosures topic of the Accounting Standards Codification (“ASC”) requires companies to determine fair value based on the price that would be received to sell the asset or paid to transfer the liability to a market participant. The Fair Value Measurements and Disclosures topic emphasizes that fair value is a market-based measurement,

not

an entity-specific measurement.

The guidance requires that assets and liabilities carried at fair value be classified and disclosed in

one

of the following categories:

●	Level 1: Quoted market prices in active markets for identical assets or liabilities.

●	Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

●	Level 3: Unobservable inputs that are not corroborated by market data.

We have

assets or liabilities that are required to have their fair value measured on a recurring basis at

September 30, 2018

December 31, 2017.

Long-lived assets are measured at fair value on a non-recurring basis and are subject to fair value adjustments when there is evidence of impairment.

For short-term classes of our financial instruments which are

not

reported at fair value, the carrying amounts approximate fair value due to their short-term nature. The fair value of the mortgage note receivable is estimated based on the present value of the underlying cash flows discounted at current rates. At

September 30, 2018

and

December 31, 2017,

the carrying value of the mortgage note receivable approximates fair value.