Note 2 - Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||
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Sep. 30, 2018 | ||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||
Significant Accounting Policies [Text Block] |
The accompanying condensed consolidated balance sheets, statements of operations and cash flows as of and for the three and nine months ended September 30, 2018 and 2017 are unaudited. The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or SEC, for interim financial information and on a basis consistent with the annual financial statements. In the opinion of management, they also reflect all adjustments which include only normal recurring adjustments, necessary to present fairly our financial position for the interim periods presented. The results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any other interim period or for any other future year.These condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in our Annual Report on Form 10 -K for the year ended December 31, 2017, filed with the SEC on March 16, 2018.
We have incurred net losses and negative cash flows from operations since our inception and had an accumulated deficit of $82.7 million as of September 30, 2018. Management expects operating losses and negative cash flows to continue through the next several years. Based on management’s current plans, management believes cash and cash equivalents of $4.8 million as of September 30, 2018 are sufficient to fund us into Q1 2019. These factors raise substantial doubt about our ability to continue as a going concern beyond one year from the date these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.Our ability to continue as a going concern and to continue further development of our lead therapeutic candidate, the CardiAMP Cell Therapy System, and our second therapeutic candidate, the CardiALLO Cell Therapy System, through and beyond Q1 2019, will require us to raise additional capital. We plan to raise additional capital, potentially including debt and equity arrangements, to finance our future operations. If adequate funds are not available, we may be required to reduce operating expenses, delay or reduce the scope of our product development programs, obtain funds through arrangements with others that may require us to relinquish rights to certain of our technologies or products that we would otherwise seek to develop or commercialize ourselves, or cease operations. While we believe we have a viable strategy to raise additional funds, there can be no assurances that we will be able to obtain additional capital on acceptable terms and in the amounts necessary to fully fund our operating needs.
The preparation of the financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Significant items subject to such estimates and assumptions include share-based compensation, the useful lives of property and equipment, allowances for doubtful accounts and sales returns and inventory valuation.
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated during the consolidation process.
Our significant accounting policies are described in Note 2 of the notes to the financial statements included in our Annual Report on Form 10 -K filed for the year ended December 31, 2017. Apart from the adoption of ASU No. 2014 -09, Revenue from Contracts with Customers (Topic 606 ) on January 1, 2018, which led to an amended revenue policy as described in the following paragraphs, there have been no changes to those policies.Revenue Recognition Net product revenue – We currently have a portfolio of enabling and delivery products. Revenue from product sales is recognized generally upon shipment to the end customer, which is when control of the product is deemed to be transferred.Collaboration agreement revenue – Collaboration agreement revenue is income from agreements under partnering programs with corporate and academic institutions, wherein we provide biotherapeutic delivery systems and customer training and support for their use in clinical trials and studies. These programs provide additional clinical data, intellectual property rights and opportunities to participate in the development of combination products for the treatment of cardiac disease.Revenue is recognized when control of products and services is transferred to the customer in an amount that reflects the consideration that we expect to receive from the customer in exchange for those products and services. This process involves identifying the contract with the customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identifiable from other promises in the contract. We consider a performance obligation satisfied once control of a good or service has been transferred to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service. Amounts received from customers in advance of revenue recognition are recorded as deferred revenue on the consolidated balance sheets.
In May 2014, the FASB issued Topic 606, which provides comprehensive guidance for revenue recognition. Topic 606 affects any entity which either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets. The core principle of the guidance provides that a company should recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. The new standard can be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of the change recognized at the date of the initial application in retained earnings. On January 1, 2018, we adopted Topic 606 using the cumulative effect adoption method. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. We recorded a net reduction to opening accumulated deficit of $76,000 as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact related to our collaboration revenues.In January 2016, the FASB issued ASU No. 2016 -01 (ASU 2016 -01 ), Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2016 -01 changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, the update clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. We adopted ASU 2016 -01 on January 1, 2018 and the adoption did not have a material impact on our financial statements.In May 2017, the FASB issued ASU No. 2017 -09 Compensation – Stock Compensation (Topic 718 ) Scope of Modification Accounting (ASU 2017 -09 ). The amendments in ASU 2017 -09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. We adopted ASU 2017 -09 effective January 1, 2018, and the adoption did not have a material impact on our financial statements.
In February 2016, the FASB issued ASU No. 2016 -02 Leases (Topic 842 ) (ASU 2016 -02 ), which supersedes existing guidance on accounting for leases in Leases (Topic 840 ) and generally requires all leases to be recognized in the consolidated balance sheet. ASU 2016 -02 is effective for annual and interim reporting periods beginning after December 15, 2018; early adoption is permitted. The provisions of ASU 2016 -02 are to be applied using a modified retrospective approach, or if we elect we may use a cumulative-effect adjustment to accumulated deficit as of January 1, 2019. We expect to adopt the new standard on January 1, 2019 and use the effective date as our date of initial application. Consequently, financial information will not be updated, and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2019. The new standard provides a number of optional practical expedients in transition. We expect to elect the ‘package of practical expedients’, which permits us not to reassess under the new standard our prior conclusions about the lease identification, lease classification and initial direct costs. We do not expect to elect the use-of-hindsight or the practical expedient pertaining to land easements, the latter not being applicable to us. We expect that this new standard will have a material effect on our financial statements. While we continue to assess all the effects of adoption, we currently believe the most significant effects relate to (1 ) the recognition of new right-to-use (ROU) assets and lease liabilities on our balance sheet for our real estate operating lease and (2 ) providing significant new disclosures about our leasing activities. We do not expect a significant change in our leasing activities between now and adoption.In June 2018, the FASB issued ASU 2018 -07 Compensation – Stock Compensation (Topic 718 ): Improvements to Nonemployee Share-Based Payment Accounting, (ASU 2018 -07 ). ASU 2018 -07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance is intended to align the accounting for such payments to nonemployees with the existing requirements for share-based payments granted to employees. ASU 2018 -07 is effective for fiscal years beginning after December 15, 2018 and is to be adopted through a cumulative-effect adjustment to retained earnings as of January 1, 2019 for then outstanding share-based payments to nonemployees. We are currently assessing the future impact of this ASU on our consolidated financial statements.Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, and the American Institute of Certified Public Accountants did not or are not believed by management to have a material impact on the Company’s financial statement presentation or disclosures. |