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SIGNIFICANT ACCOUNTING POLICIES
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3 Months Ended | |
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Mar. 31, 2014
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| Accounting Policies [Abstract] | ||
| Significant Accounting Policies [Text Block] |
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES Interim Financial Statements The unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The condensed consolidated balance sheet as of December 31, 2013 contained herein has been derived from audited financial statements. Operating results for the three months ended March 31, 2014 are not necessarily indicative of results that may be expected for the year ending December 31, 2014. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2013 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 28, 2014. Development Stage As the Company is devoting substantially all of its efforts to establishing a new business and while planned principal operations have commenced there has been no revenue generated from sales, license fees or royalties; the Company is considered a development stage enterprise. Accordingly, the Company’s consolidated financial statements are presented in accordance with authoritative accounting guidance related to a development stage enterprise. Financial position, results of operations and cash flows of a development stage enterprise are presented in conformity with GAAP that apply to established operating enterprises.
Liquidity As a development stage enterprise, the Company's primary efforts are devoted to conducting research and development for the treatment of disorders of the central nervous system. The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. Further, the Company does not have any commercial products available for sale and has not generated revenues and there is no assurance that if approval of their products is received that the Company will be able to generate cash flow to fund operations. In addition, there can be no assurance that the Company's research and development will be successfully completed or that any product will be approved or commercially viable. At March 31, 2014, the Company had working capital of approximately $48.0 million. During the quarter ended March 31, 2014, the Company raised approximately $40.7 million through the sale of common stock in an underwritten public offering and approximately $4.8 million upon the exercise of previously issued warrants. Management believes that the Company has sufficient funds to meet its research and development and other funding requirements for at least the next twelve months. The Company expects that cash used in operations will increase significantly over the next several years. In the event the funding obtained is not sufficient to complete the development and commercialization of its current product candidates, the Company intends to raise additional funds through equity or debt financing. If the Company is unsuccessful in raising additional financing, it will need to reduce costs and operations in the future.
Use of estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful life of fixed assets, assumptions used in the fair value of stock-based compensation and other equity instruments, and the percent of completion of research and development contracts. Research and development costs The Company outsources its research and development efforts and expenses these costs as incurred, including the cost of manufacturing products for testing, as well as licensing fees and costs associated with planning and conducting clinical trials. The value ascribed to patents and other intellectual property acquired was expensed in 2007, 2010 and 2014 as research and development costs, as it related to particular research and development projects and had no alternative future uses (see Note 6). Income taxes Income tax provisions or benefits for interim periods are computed based on the Company’s estimated annual effective tax rate. Based on the Company's historical losses and its expectation of continuation of losses for the foreseeable future, the Company has determined that it is more likely than not that deferred tax assets will not be realized and, accordingly, has provided a full valuation allowance. As the Company anticipates or anticipated that its net deferred tax assets at December 31, 2014 and 2013 would be fully offset by a valuation allowance, there is no federal or state income tax benefit for the periods ended March 31, 2014 and 2013 related to losses incurred during such periods. Per share data Basic and diluted net loss per common share is calculated by dividing net loss by the weighted average number of outstanding shares of common stock. As of March 31, 2014 and 2013, there were outstanding warrants to purchase an aggregate of 2,006,160 and 1,270,732 shares, respectively, of the Company’s common stock (see Note 5). In addition, the Company has issued to employees and directors, options to acquire shares of the Company’s common stock of which 550,000 and 376,500 were outstanding at March 31, 2014 and 2013, respectively (see Note 4). In computing diluted net loss per share for the three months ended March 31, 2014 and 2013, no effect has been given to such options and warrants as their effect would be anti-dilutive.
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