Annual report pursuant to Section 13 and 15(d)

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2012
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2.            Summary of Significant Accounting Policies

a)  Cash and Cash Equivalents

Cash and cash equivalents include cash on hand and short‑term investments purchased with remaining maturities of three months or less at acquisition.

b)  Marketable Securities

Marketable securities are considered “available-for-sale” in accordance with Financial Statement Accounting Board (“FASB”) Accounting Standard Codification (“ASC”) 320, “Debt and Equity Securities”, and thus are reported at fair value in our accompanying balance sheet, with unrealized gains and losses excluded from earnings and reported as a separate component of stockholders’ equity.  Realized gains and losses are accounted for on the basis of specific identification and are included in other income or expense in the statement of operations.  The Company classifies such investments as current on the balance sheet as the investments are readily marketable and available for use in our current operations. 

c)   Equipment

Equipment is stated at cost less accumulated depreciation. Depreciation, based on the lesser of the term of the lease or the estimated useful life of the assets, is provided as follows:




Depreciation Method

Furniture and fixtures

7 years

straight line

Office equipment

5 years

straight line

Lab equipment

5-7 years

straight line

Computer equipment

5 years

straight line

Leasehold improvements

3-5 years

straight line


d)   Research and Development

Research and development costs are expensed as incurred.  Research and development expenses consist primarily of third party service costs under research and development agreements, salaries and related personnel costs, as well as stock compensation related to these costs, costs to acquire pharmaceutical products and product rights for development and amounts paid to contract research organizations, hospitals and laboratories for the provision of services and materials for drug development and clinical trials.

Costs incurred in obtaining the licensing rights to technology in the research and development stage that have no alternative future uses and are for unapproved product compounds are expensed as incurred.

e)   Use of Estimates

The preparation of financial statements in conformity 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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  These estimates are based on management’s best knowledge of current events and actions the Company may undertake in the future.  Actual results may ultimately differ from those estimates.  These estimates are reviewed periodically and as adjustments become necessary, they are reported in earnings in the period in which they become available.




f)    Fair Value of Financial Instruments

The carrying amounts reported in the accompanying financial statements for cash and cash equivalents, note receivable, prepaid expenses and other current assets and accounts payable and accrued expenses approximate fair value because of the short‑term maturity of these financial instruments.  The fair values for marketable securities, warrant liabilities, the put feature on common stock and all other assets and liabilities is discussed in Notes 3, 12, 13, and 16, respectively.

g)   Income Taxes

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”.  Deferred tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates.  ASC 740 requires that a valuation allowance be established when it is more likely than not that all portions of a deferred tax asset will not be realized.  A review of all positive and negative evidence needs to be considered, including a company’s current and past performance, the market environment in which the company operates, length of carryback and carryforward periods and existing contracts that will result in future profits.  Income tax expense is recorded for the amount of income tax payable or refundable for the period, increased or decreased by the change in deferred tax assets and liabilities during the period.

As a result of the Company’s significant cumulative losses, we determined that it was appropriate to establish a valuation allowance for the full amount of our deferred tax assets.

The calculation of our tax liabilities involves the inherent uncertainty associated with the application of complex tax laws.  We are subject to examination by various taxing authorities.  We believe that as a result of our loss carryforward sustained to date, any examination would result in a reduction of our net operating losses rather than a tax liability.  As such, we have not provided for additional taxes estimated under ASC 740.

h)   Loss Per Share

The Company accounts for loss per share pursuant to ASC 260, “Earnings per Share”, which requires disclosure on the financial statements of “basic” and “diluted” loss per share.  Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year.  Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus potentially dilutive securities outstanding for each year. Potentially dilutive securities include stock options and warrants.  Diluted loss per share for the years ended December 31, 2012 and 2011, is the same as basic loss per share due to the fact that the Company incurred losses for all periods presented and the inclusion of common share equivalents would be antidilutive. The following securities, presented on a common share equivalent basis, have been excluded from the per share computations:




Year Ended December 31





Stock Options








i)   Stock-Based Compensation

In accordance with ASC 718, “Stock Compensation,” compensation costs related to share-based payment transactions, including employee stock options, are to be recognized in the financial statements. In addition, the Company adheres to the guidance set forth within Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 107, which provides the Staff’s views regarding the interaction between ASC 718 and certain SEC rules and regulations, and provides interpretations with respect to the valuation of share-based payments for public companies.



j)   Impairment of Long-Lived Assets

In accordance with ASC 360, “Property, Plant and Equipment,” long‑lived assets to be held and used are analyzed for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable.  The Company evaluates at each balance sheet date whether events and circumstances have occurred that indicate possible impairment.  If there are indications of impairment, the Company uses future undiscounted cash flows of the related asset or asset grouping over the remaining life in measuring whether the assets are recoverable.  In the event such cash flows are not expected to be sufficient to recover the recorded asset values, the assets are written down to their estimated fair value.  Management determined that an impairment of intangible assets occurred in 2009 and wrote-off the assets remaining carrying value of $286,132, which is reflected in research and development expenses in the Company’s statement of operations for the year ended December 31, 2009.

k)   Concentration of Credit Risk

The Company does not have significant off‑balance sheet risk or credit concentration.  The Company maintains cash and short-term investments with major financial institutions.  From time to time the Company has funds on deposit with commercial banks that exceed federally insured limits.  The balances are insured by either the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation up to $250,000. At December 31, 2012, the Company’s uninsured cash balance was $13,805,740.  

l)    Recent Accounting Pronouncements Affecting the Company


Fair Value Measurements


In May 2011, the FASB issued Accounting Standards Update 2011-04 to ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”) which amends the disclosure requirements for fair value instruments.  The new disclosures required include disclosure regarding the sensitivity of the fair value measurement to changes in unobservable inputs, and the interrelationships between those unobservable inputs.  The guidance is effective for the Company for fiscal years and interim periods beginning on or after December 15, 2011.  The Company adopted this guidance during the first quarter of 2012.


Comprehensive Income

In June 2011, the FASB issued authoritative guidance for presentation and disclosure of comprehensive income in the financial statements.  Under the new guidance, a company may no longer present the components of other comprehensive income as part of the statement of changes in the statement of stockholders’ equity, and instead must present the components of comprehensive income either in the statement of operations or in a separate statement immediately following the Statement of Operations.  In addition, reclassification adjustments between comprehensive income and net income must be disclosed on the financial statements.  This guidance is effective for the Company for fiscal years and interim periods beginning on or after December 15, 2011.  The Company adopted this guidance during the first quarter of 2012


In February, 2013 the FASB issued Accounting Standards Update 2013-02, “Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,” to improve the transparency of reporting reclassifications from comprehensive income to net income.  The new amendments require that a company must present the effects on line items of net income of significant amounts reclassified out of accumulated other comprehensive income, and additional referencing and disclosure regarding these items.  The guidance is effective for the Company for fiscal years and interim periods beginning on or after December 15, 2012.  Management believes that the adoption of this guidance will not have a material impact on the financial statements.