NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Abeona Therapeutics Inc. (together with our subsidiaries, “we,” “our,” “Abeona” or the “Company”), a Delaware corporation, is a clinical-stage biopharmaceutical company developing cell and gene therapies for life-threatening rare genetic diseases. Our lead programs include EB-101, an autologous, gene-corrected cell therapy for recessive dystrophic epidermolysis bullosa (“RDEB”), ABO-102, an adeno-associated (AAV)-based gene therapy for Sanfilippo syndrome type A (“MPS IIIA”), and ABO-101 an AAV based gene therapy for Sanfilippo syndrome type B (“MPS IIIB”). We are also developing ABO-201 and ABO-202, which are AAV based gene therapies for the CLN1 and CLN3 forms of Batten Disease, ABO-401 for the treatment of cystic fibrosis, and ABO-5OX for the treatment of retinal diseases. In addition, we are developing a novel vector platform, AIM™ for gene therapy product candidates.
A summary of the significant accounting policies applied in the preparation of the accompanying consolidated financial statements follows: Principles of Consolidation The consolidated financial statements include the financial statements of Abeona Therapeutics Inc. and our wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Uses and Sources of Liquidity The financial statements have been prepared on the going concern basis, which assumes the Company will have sufficient cash to pay its operating expenses, as and when they become payable, for a period of at least 12 months from the date the financial report was issued. As of December 31, 2018, we had cash, cash equivalents and short-term investments of $85.0 million and net assets of $134.0 million. For the year ended December 31, 2018, we had cash outflows from operations of $39.1 million. We believe we have sufficient resources to fund our business operations for the foreseeable future. However, we have implemented a multi-faceted program to secure sufficient liquidity through at least the end of 2020. This program considers the possibility of accessing additional equity funding from current or new stockholders, out-licensing technology and/or other assets, deferring and/or eliminating planned expenditures, restructuring operations and/or reducing headcount and sales of assets. We believe that we will be able to complete our liquidity program and will have sufficient funding to support planned expenditure commitments and our planned level of growth, and therefore we believe it is appropriate to prepare the financial statements on the going concern basis. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amount of assets and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from these estimates and assumptions. Segments The Company operates in a single segment. The Company’s chief operating decision maker, its Executive Chairman, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. Cash and Cash Equivalents We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. We maintain deposits primarily in financial institutions, which may at times exceed amounts covered by insurance provided by the U.S. Federal Deposit Insurance Corporation (“FDIC”). We have not experienced any losses related to amounts in excess of FDIC limits. Short-term Investments Short-term investments consist of investments in U.S. government, U.S. agency and U.S. treasury securities. We determine the appropriate classification of the securities at the time they are acquired and evaluate the appropriateness of such classifications at each balance sheet date. We classify our short-term investments as available-for-sale pursuant to Accounting Standards Codification, or ASC, 320,
Investments — Debt and Equity Securities . Investments classified as current have maturities of less than one year.
We review our short-term investments for other-than-temporary impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a short-term investment’s carrying amount is not recoverable within a reasonable period of time. Receivables Receivables are reported in the consolidated balance sheets at net realizable value. We continually evaluate the creditworthiness of our customers and their financial condition and generally do not require collateral. The allowance for doubtful accounts is based upon reviews of specific customer balances, historic losses, and general economic conditions. As of December 31, 2018 and 2017, no allowance was recorded as all accounts are considered collectible. Property and Equipment Property and equipment are recorded at cost. Depreciation is provided using the straight-line method over estimated useful lives ranging from three to seven years for equipment and five to ten years for leasehold improvements. Expenditures for major renewals and betterments that extend the useful lives are capitalized. Expenditures for normal maintenance and repairs are expensed as incurred. The cost of assets sold or abandoned and the related accumulated depreciation are eliminated from the accounts and any gains or losses are recognized in the accompanying consolidated statements of operations of the respective period. Licensed Technology We maintain licensed technology on our consolidated balance sheet until either the licensed technology agreement underlying it is completed or the asset becomes impaired. When we determine that an asset has become impaired or we abandon a project, we write down the carrying value of the related intangible asset to its fair value and take an impairment charge in the period in which the impairment occurs. Licensed technology is amortized over the life of the patent or the agreement and periodically reviewed for impairment. We test our intangible assets for impairment on an annual basis, or more frequently if indicators are present or changes in circumstance suggest that impairment may exist. Events that could result in an impairment, or trigger an interim impairment assessment, include the receipt of additional clinical or nonclinical data regarding our drug candidate or a potentially competitive drug candidate, changes in the clinical development program for a drug candidate or new information regarding potential sales for the drug. In connection with each annual impairment assessment and any interim impairment assessment, we compare the fair value of the asset as of the date of the assessment with the carrying value of the asset on our consolidated balance sheet. In 2018, 2017 and 2016, we did not impair any licensed technology. Goodwill As of December 31, 2018 and 2017, goodwill of $32,466,000 was recorded on the Company’s consolidated balance sheet. In accordance with ASC 350,
Intangibles — Goodwill and Other, goodwill is tested annually for impairment and whenever changes in circumstances occur that would indicate impairment. The Company did not recognize any impairment charges related to goodwill in 2018, 2017 or 2016.
Research and Development Expenses Research and development costs are expensed as incurred. Research and development expenses include, but are not limited to, payroll and personnel expense, lab supplies, preclinical, development cost, clinical trial expense, outside manufacturing and consulting. The cost of materials and equipment or facilities that are acquired for research and development activities and that have alternative future uses are capitalized when acquired. General and Administrative Expenses General and administrative expenses primarily consist of personnel, contract personnel, personnel-related expenses to support our administrative and operating activities, facility costs and professional expenses (i.e., legal expenses) and investor relations fees. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets to the extent their realization is in doubt. We account for uncertain income tax positions in accordance with ASC 740,
Income Taxes . Interest costs and penalties related to income taxes are classified as interest expense and general and administrative costs, respectively, in our consolidated financial statements. For 2018, 2017 and 2016, we did not recognize any uncertain tax positions or interest or penalty expense related to income taxes. It is determined not to be reasonably likely for the amounts of unrecognized tax benefits to significantly increase or decrease within the next 12 months. We file U.S. federal and state income tax returns as necessary. The federal return generally has a three-year statute of limitations and most states have a four-year statute of limitations; however, the taxing authorities are allowed to review the tax year in which the net operating loss was generated when the loss is utilized on a tax return. We currently do not have any open income tax audits.
Loss Per Share We have presented basic loss per share, computed on the basis of the weighted average number of common shares outstanding during the year, and diluted loss per share, computed on the basis of the weighted average number of common shares and all dilutive potential common shares outstanding during the year. Potential common shares result from outstanding stock options and warrants. Common equivalent shares have not been included in the net loss per share calculations for 2018, 2017 or 2016 because the effect of including them would have been anti-dilutive. We did not include the following potentially dilutive securities in the computation of diluted net loss per common share because the securities were anti-dilutive during the periods presented:
Stock-Based Compensation We account for stock-based compensation expense in accordance with ASC 718,
Stock Based Compensation . We have two stock-based compensation plans under which incentive and qualified stock options and restricted shares could be granted to employees, directors and consultants. Our 2015 Equity Incentive Plan was approved on May 7, 2015. As of January 20, 2015, no further grants can be made under our prior plan, the 2005 Equity Incentive Plan. We measure the cost of the employee/director/consultant services received in exchange for an award of equity instruments based on the grant date fair value for the employees and directors and vesting date fair value for consultants of the award. We use the Black-Scholes option pricing model to value our options. We account for forfeitures as they occur.
The following table summarizes stock-based option compensation for 2018, 2017 and 2016, which was allocated as follows:
The following table summarizes restricted stock-based compensation for 2018, 2017 and 2016, which was allocated as follows:
Recent Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02,
Leases (ASC 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors).
The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. ASC 842 supersedes the previous leases standard, ASC 840,
Leases . The standard is effective for public entities for annual and interim periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this new guidance.
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