Note 2 - Summary of Significant Accounting Policies
|12 Months Ended|
Dec. 31, 2018
|Notes to Financial Statements|
|Significant Accounting Policies [Text Block]||
Basis of Presentation
The accompanying annual financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).
The Company operates in
onereportable segment based on management’s view of its business for purposes of evaluating performance and making operating decisions.
Use of Estimates in Financial Statement Presentation
The preparation of these financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company's significant estimates and assumptions include valuation of equity related instruments, depreciable lives of long-lived assets (including property and equipment and intangible assets), and the valuation allowance related to deferred taxes. Some of these judgments can be subjective and complex, and, consequently, actual results could differ from those estimates. Although the Company believes that its estimates and assumptions are reasonable, they are based upon information available at the time the estimates and assumptions were made. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid accounts with original maturities of
threemonths or less to be cash equivalents. The Company participates in an insured cash sweep program through its bank that sweeps cash balances exceeding the FDIC insured limit of
$250,000into multiple accounts. Periodically in the ordinary course of business, the Company
maycarry cash balances at financial institutions in excess of the insured limits of
Property and Equipment
Property and equipment are stated at historical cost and depreciated on a straight-line basis over the estimated useful lives, generally
fiveyears. Leasehold improvements are depreciated over the shorter of the remaining lease term or useful lives of the assets. Upon disposition of the assets, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations. Repairs and maintenance costs are included as expense in the accompanying statement of operations.
Intangible assets include patents and trademarks. Patent related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred and are classified as research and development expenses. The Company does
notamortize trademarks with indefinite useful lives; rather, such assets are required to be tested for impairment at least annually or sooner if events or changes in circumstances indicate that the asset
The Company evaluates its long-lived assets, including equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets
notbe recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the asset is considered impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets.
When conversion terms related to convertible debt would be triggered by future events
notcontrolled by the Company, the Company accounts for the conversion feature as contingent conversion options. Recognition of the intrinsic value of the conversion option is recognized only upon the occurrence of a triggering event.
Operating and Capital Leases
The Company has
oneoperating lease for our corporate location. The Company recognizes rent expense on a straight-line basis over the lease terms. Rent holidays and rent escalation clauses, which provide for scheduled rent increases during the lease term, are taken into account in computing straight-line rent expense included in our statements of operations. The difference between the rent due under the stated periods of the leases compared to that of the straight-line basis is recorded as a component of other long-term liabilities in the balance sheets. The Company does
nothave any capital leases as of
Fair Value Measurements
Fair value is defined as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. A
three-tier fair value hierarchy which prioritizes the inputs used in the valuation methodologies, as follows:
Level- Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
Level- Inputs other than quoted prices included in Level
1that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are
notactive, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
Level- Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
December 31, 2018and
2017,the carrying amounts of the Company's financial instruments, including cash and cash equivalents, convertible notes payable, notes payable and accounts payable, approximate their respective fair value due to the short-term nature of these instruments.
December 31, 2018and
2017,the Company does
nothave any assets or liabilities required to be measured at fair value in accordance with FASB ASC Topic
820,Fair Value Measurement.
January 1, 2019,revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration the Company expect to be entitled to in exchange for those goods or services.
Research and Development Expenses
Research and development expenses are recognized as incurred and include the costs related to the Company's various contract research service providers, suppliers, engineering studies, supplies, outsourced testing and consulting, clinical costs, and salaries and related costs of employees working directly on research activities.
Stock-based compensation expense includes the estimated fair value of equity awards vested during the reporting period. The expense for equity awards vested during the reporting period is determined based upon the grant date fair value of the award and is recognized as expense over the applicable vesting period of the stock award using the straight-line method.
The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than
notthat some portion or all of a deferred tax asset will
notbe realized. Tax rate changes are reflected in income during the period such changes are enacted. All of the Company's tax years remain subject to examination by the tax authorities.
Management has evaluated and concluded that there were
nomaterial uncertain tax positions requiring recognition in the Company's financial statement as of
December 31, 2018.The Company does
notexpect any significant changes in the unrecognized tax benefits within
twelvemonths of the reporting date.
The Company classified interest expense and any related penalties related to income tax uncertainties as a component of income tax expense.
Nointerest or penalties have been recognized in
Net Loss per Common Share
Basic net loss per common share are computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. As of
December 31, 2018and
2017,potentially dilutive securities included options to purchase
15,000common shares, respectively, preferred stock convertible to
2,534,766common shares, accrued preferred stock dividend convertible at a price determined by the Company's Board of Directors (the "Board") (the Company also has the option to pay the accrued preferred stock dividend in cash), unvested restricted stock of
305,000shares, respectively, notes and accrued interest convertible to common shares upon a future financing and warrants to purchase
0common shares, respectively.
JOBS Act Accounting Election
The Company is an emerging growth company ("EGC"), as defined in the Jumpstart Our Business Startups Act of
2012(the “JOBS Act”). The JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected
notto opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This
maymake comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
The Company’s management reviewed all material events through the date that the financial statements were issued for subsequent event disclosure consideration as discussed in Note
10in the Notes to the Financial Statements.
Recent Accounting Standards
February 2016the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
Leases (TopicThis standard amends a number of aspects of lease accounting, including requiring lessees to recognize operating leases with a term greater than
oneyear on their balance sheet as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. The standard is effective, for public EGC companies like the Company, for fiscal years beginning after
December 15, 2019including interim periods within those fiscal years, which means that it will be effective for us in the
firstquarter of our fiscal year beginning
January 1, 2020.Early adoption is permitted. This standard is required to be adopted using a modified retrospective approach. The Company expects to elect certain available transitional practical expedients. In
July 2018the FASB issued ASU
Leases (Topicwhich allows for the adoption of this standard to be applied at the beginning of the most recent fiscal year as opposed to at the beginning of the earliest year presented. The Company plans to adopt under the provisions allowed under ASU
842) Targeted Improvements,
11.While the Company continues to evaluate the impact of our pending adoption of ASU
02on our financial statements, the Company expects that the real estate lease designated as an operating lease as discussed in Note
7to the financial statements will be recognized as right-of-use asset and corresponding lease liability on our balance sheets upon adoption. The Company does
notexpect the adoption of ASU
02to have a material impact on our statements of operations or cash flows.
June 2018,the FASB issued ASU
07,Compensation Stock Compensation (Topic
718), Improvements to Non-employee Share-Based Payment Accounting. This ASU is intended to simplify aspects of share-based compensation issued to non-employees by making the guidance consistent with the accounting for employee share based compensation. The guidance is effective for the Company for the fiscal year beginning
January 1, 2020.While the exact impact of this standard is
notknown, the guidance is
notexpected to have a material impact on the Company’s financial statements, as non-employee stock compensation is nominal relative to the Company's total expenses for the year ended
December 31, 2018.
The Company does
notbelieve that any other recently issued effective standards, or standards issued but
notyet effective, if adopted, would have a material effect on the accompanying financial statements.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef