Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 09, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Monopar Therapeutics | |
Entity Central Index Key | 1,645,469 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer? | No | |
Is Entity a Voluntary Filer? | No | |
Is Entity's Reporting Status Current? | No | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 9,291,420.614 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
Balance Sheet
Balance Sheet - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 7,418,610 | $ 8,981,894 |
Other current assets | 228,052 | 149,342 |
Total current assets | 7,646,662 | 9,131,236 |
Restricted cash | 800,031 | 800,031 |
Total assets | 8,446,693 | 9,931,267 |
Current liabilities: | ||
Accounts payable and accrued expenses | 323,063 | 311,867 |
Total current liabilities | 323,063 | 311,867 |
Total liabilities | 323,063 | 311,867 |
Commitments and contingencies (Note 7) | ||
Stockholders’ equity: | ||
Common stock, par value of $0.001 per share, 40,000,000 authorized, 9,291,421 shares issued and outstanding at June 30, 2018 and December 31, 2017 | 9,291 | 9,291 |
Additional paid-in capital | 28,240,985 | 28,037,889 |
Accumulated other comprehensive loss | (1,579) | 0 |
Accumulated deficit | (20,125,067) | (18,427,780) |
Total stockholders’ equity | 8,123,630 | 9,619,400 |
Total liabilities and stockholders’ equity | $ 8,446,693 | $ 9,931,267 |
Balance Sheet (Parenthetical)
Balance Sheet (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ .001 | $ .001 |
Common stock, authorized | 40,000,000 | 40,000,000 |
Common stock, issued | 9,291,421 | 9,291,421 |
Common stock, outstanding | 9,291,421 | 9,291,421 |
Statements of Operations
Statements of Operations - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Revenues | $ 0 | $ 0 | $ 0 | $ 0 |
Operating expenses: | ||||
Research and development | 492,647 | 311,593 | 949,788 | 445,329 |
General and administrative | 347,350 | 283,364 | 787,469 | 523,468 |
Total operating expenses | 839,997 | 594,957 | 1,737,257 | 968,797 |
Loss from operations | (839,997) | (594,957) | (1,737,257) | (968,797) |
Other income: | ||||
Interest and other income | 19,058 | 3,519 | 39,970 | 4,442 |
Net loss | (820,939) | (591,438) | (1,697,287) | (964,355) |
Other comprehensive income: | ||||
Foreign currency translation gain | 1,579 | 0 | 1,579 | 0 |
Comprehensive loss | $ (819,360) | $ (591,438) | $ (1,695,708) | $ (964,355) |
Net loss per share: | ||||
Basic and diluted | $ (0.09) | $ (0.07) | $ (0.18) | $ (0.11) |
Weighted average shares outstanding: | ||||
Basic and diluted | 9,291,421 | 8,615,621 | 9,291,421 | 8,477,967 |
Statement of Cash Flows
Statement of Cash Flows - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||||
Net loss | $ (820,939) | $ (591,438) | $ (1,697,287) | $ (964,355) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||||
Stock compensation expense (non-cash) | 203,096 | 198,090 | ||
Changes in operating assets and liabilities, net | ||||
Other current assets | (78,795) | 11,073 | ||
Accounts payable and accrued expenses | 11,274 | 138,578 | ||
Net cash used in operating activities | (1,561,712) | (616,614) | ||
Cash flows from financing activities: | ||||
Proceeds from the sale of common stock, net of $20,000 of issuance costs | 0 | 2,025,042 | ||
Net cash provided by financing activities | 0 | 2,025,042 | ||
Effect of exchange rates on cash, cash equivalents, and restricted cash | (1,572) | 0 | ||
Net increase (decrease) in cash, cash equivalents, and restricted cash | (1,563,284) | 1,408,428 | ||
Cash, cash equivalents and restricted cash at beginning of period | 9,781,925 | 2,873,004 | ||
Cash, cash equivalents and restricted cash at end of period | $ 8,218,641 | $ 4,281,432 | $ 8,218,641 | $ 4,281,432 |
1. Nature of Business and Liqui
1. Nature of Business and Liquidity | 6 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Liquidity | Nature of Business Monopar Therapeutics Inc. (“Monopar” or the ”Company”) is an emerging biopharmaceutical company focused on developing innovative drugs and drug combinations to improve clinical outcomes in cancer patients. Monopar currently has three compounds in development: Validive® (clonidine mucobuccal tablet; clonidine MBT), a Phase 3-ready, first-in-class mucoadhesive local anti-inflammatory tablet for the prevention and treatment of radiation induced severe oral mucositis (“SOM”) in oropharyngeal cancer patients; MNPR-201 (GPX-150; 5-imino-13-deoxydoxorubicin), a proprietary Phase 2 clinical stage topoisomerase II-alpha targeted analog of doxorubicin engineered specifically to retain anticancer activity while minimizing toxic effects on the heart; and MNPR-101 (formerly huATN-658), a pre-IND stage humanized monoclonal antibody, which targets the urokinase plasminogen activator receptor (“uPAR”), for the treatment of advanced solid cancers. The Company was originally formed in the State of Delaware on December 5, 2014 as a limited liability company (“LLC”) and on December 16, 2015 converted to a C Corporation in a tax-free exchange at which time the Company effected a 1 for 10 reverse stock split. All references to preferred stock and common stock authorized take into account the 1 for 10 reverse stock split. In March 2017, the Company’s Series A Preferred Stock and Series Z Preferred Stock converted into common stock at a conversion rate of 1.2 for 1 and 1 for 1, respectively, along with a concurrent common stock split of 70 for 1 which eliminated all shares of Series A Preferred Stock and Series Z Preferred Stock. All references to common stock authorized, issued and outstanding and common stock options take into account the 70 for 1 stock split. Liquidity The Company has incurred an accumulated loss of approximately $20.1 million as of June 30, 2018. To date, the Company has primarily funded its operations with the net proceeds from private placements of convertible preferred stock and common stock and from the cash provided in the MNPR-201 asset purchase transaction. Management believes that currently available resources will provide sufficient funds to enable the Company to meet its minimum obligations through August 2019. The Company’s ability to fund its future operations, including the clinical development of Validive, is dependent primarily upon its ability to execute on its business strategy and obtain additional funding and/or execute collaboration research transactions. There can be no certainty that future financing or collaborative research transactions will occur. |
2. Significant Accounting Polic
2. Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Basis of Presentation These condensed consolidated financial statements include the financial results of Monopar Therapeutics Inc., its French branch, its wholly-owned French subsidiary, Monopar Therapeutics, SARL, and Monopar Therapeutics Pty Ltd. its wholly-owned Australian subsidiary and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include all disclosures required by GAAP for interim financial information. All intercompany accounts have been eliminated. The principal accounting policies applied in the preparation of these condensed consolidated financial statements are set out below and have been consistently applied in all periods presented. The Company has been primarily involved in performing research activities, developing product technologies, and raising capital to support and expand these activities. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal, recurring adjustments necessary to present fairly the Company’s condensed consolidated financial position as of June 30, 2018 and December 31, 2017, the Company’s condensed consolidated results of operations and comprehensive loss for the three and six months ended June 30, 2018 and 2017, and the Company’s condensed consolidated cash flows for the six months ended June 30, 2018 and 2017. The condensed consolidated results of operations and cash flows for the periods presented are not necessarily indicative of the consolidated results of operations or cash flows which may be reported for the remainder of 2018 or in any future period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 26, 2018. Functional Currency The Company's consolidated functional currency is the U.S. Dollar. The Company's Australian subsidiary and French subsidiary use the Australian Dollar and European Euro, respectively, as their functional currency. At each quarter end, each foreign subsidiary's balance sheets are translated into U.S. dollars based upon the quarter-end exchange rate, while their statements of operations and comprehensive loss are translated into U.S. dollars based upon an average exchange rate during the period. Comprehensive Loss Comprehensive loss represents net loss plus any gains or losses not reported in the condensed consolidated statements of operations, such as foreign currency translations gains and losses that are typically reflected on a Company’s condensed consolidated statements of stockholders’ equity. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in the financial statements and accompanying notes. Actual results could differ from those estimates. Going Concern Assessment The Company adopted Accounting Standards Updates (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents as of June 30, 2018 and December 31, 2017 consist entirely of money market accounts. Restricted Cash On July 9, 2015, the Company entered into a Clinical Trial and Option Agreement (“CTOA”) with Cancer Research UK. Pursuant to the CTOA, the Company deposited $0.8 million into an escrow account to cover certain future indemnities, claims or potential termination costs incurred by Cancer Research UK. Restricted cash was $0.8 million as of June 30, 2018 and December 31, 2017. In connection with a portfolio reprioritization review, on March 21, 2018, Cancer Research UK notified us it was terminating the CTOA and would work to transfer to us the data generated under the CTOA. Once termination is completed it is expected that these funds will be released from escrow in September 2019. Prepaid Expenses Prepayments are expenditures for goods or services before the goods are used or the services are received and are charged to operations as the benefits are realized. Prepaid expenses include insurance premiums and software costs that are expensed monthly over the life of the contract. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and restricted cash. The Company maintains cash and cash equivalents at one financial institution and restricted cash at another financial institution. As of June 30, 2018, and December 31, 2017, cash and cash equivalents and restricted cash balances at these two financial institutions were in excess of the $250,000 Federal Deposit Insurance Corporation (“FDIC”) insurable limit. Fair Value of Financial Instruments For financial instruments consisting of cash and cash equivalents, prepaid expenses, deferred offering costs, accounts payable and accrued expenses, the carrying amounts are reasonable estimates of fair value due to their relatively short maturities. The Company adopted Accounting Standard Codification Fair Value Measurements and Disclosures, In determining fair values of all reported assets and liabilities that represent financial instruments, the Company uses the carrying market values of such amounts. The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources. Unobservable inputs reflect a reporting entity’s pricing an asset or liability developed based on the best information available in the circumstances. The fair value hierarchy consists of the following three levels: Level 1 Level 2 Level 3 Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2 or 3 of the fair value hierarchy during the six months ended June 30, 2018 and year ended December 31, 2017. The following table presents the assets and liabilities recorded that are reported at fair value on our condensed consolidated balance sheets on a recurring basis. Assets and Liabilities Measured at Fair Value on a Recurring Basis June 30, 2018 Level 1 Level 2 Total Assets Cash equivalents(1) $ 7,373,758 $ - $ 7,373,758 Restricted cash(2) 31 800,000 800,031 Total $ 7,373,789 $ 800,000 $ 8,173,789 (1) Cash equivalents represent the fair value of the Company’s investments in a money market account at June 30, 2018. (2) Restricted cash represents the fair value of the Company’s investments in an $800,000 certificate of deposit and $31 in a money market account at June 30, 2018. December 31, 2017 Level 1 Level 2 Total Assets Cash equivalents(1) $ 8,864,288 $ - $ 8,864,288 Restricted cash(2) 31 800,000 800,031 Total $ 8,864,319 $ 800,000 $ 9,664,319 (1) Cash equivalents represent the fair value of the Company’s investments in a money market account at December 31, 2017. (2) Restricted cash represents the fair value of the Company’s investments in an $800,000 certificate of deposit and $31 in a money market account at December 31, 2017. Net Loss per Share Net loss per share for the three and six months ended June 30, 2018 is calculated by dividing net loss by the weighted-average shares of common stock outstanding during the period. Diluted net loss per share for the three and six months ended June 30, 2018 is calculated by dividing net loss by the weighted-average shares of common stock outstanding and potential shares of common stock during the period. As of June 30, 2018, potentially dilutive securities included options to purchase up to 661,429 shares of the Company’s common stock. As of June 30, 2017, potentially dilutive securities included stock options to purchase up to 555,520 shares of the Company’s common stock. For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted net loss per share as their effect is anti-dilutive. Research and Development Expenses Research and development (“R&D”) costs are expensed as incurred. Major components of research and development expenses include salaries and benefits paid to the Company’s R&D staff, fees paid to consultants and to the entities that conduct certain research and development activities on the Company’s behalf and materials and supplies which are used in R&D activities. The Company accrues and expenses the costs for clinical trial activities performed by third parties based upon estimates of the percentage of work completed over the life of the individual study in accordance with agreements established with contract research organizations and clinical trial sites. The Company determines the estimates through discussions with internal clinical personnel and external service providers as to progress or stage of completion of trials or services and the agreed upon fee to be paid for such services. Costs of setting up clinical trial sites for participation in the trials are expensed immediately as research and development expenses. Clinical trial site costs related to patient enrollment are accrued as patients are entered into the trial. During the three and six months ended June 30, 2018 and 2017, the Company had no clinical trials in progress. In-process Research and Development In-process research and development expense represents the costs to acquire technologies to be used in research and development that have not reached technological feasibility, have no alternative future uses and thus are expensed as incurred. IPR&D expense also includes upfront license fees and milestones paid to collaborators, for technologies with no alternative use. Collaborative Arrangements The Company and its future collaborative partners would be active participants in collaborative arrangements and all parties would be exposed to significant risks and rewards depending on the technical and commercial success of the activities. Contractual payments to the other parties in collaboration agreements and costs incurred by the Company when the Company is deemed to be the principal participant for a given transaction are recognized on a gross basis in research and development expenses. Royalties and license payments are recorded as earned. During the three and six months ended June 30, 2018 and 2017, no milestones were met and no royalties were earned, therefore, the Company did not pay or accrue/expense any milestone or royalty payments. Licensing Agreements The Company has various agreements to license technology utilized in the development of its programs. The licenses contain success milestone obligations and royalties on future sales. During the three and six months ended June 30, 2018 and 2017, no milestones were met and no royalties were earned, therefore, the Company did not pay or accrue/expense any milestone or royalty payments under any of its license agreements. Patent Costs The Company expenses costs relating to issued patents and patent applications, including costs relating to legal, renewal and application fees, as a component of general and administrative expenses in its condensed consolidated statements of operations and comprehensive loss. Income Taxes From December 2014 to December 16, 2015, the Company was an LLC taxed as a partnership under the Internal Revenue Code, during which period the members separately accounted for their pro-rata share of income, deductions, losses, and credits of the Company. On December 16, 2015, the Company converted from an LLC to a C Corporation. Beginning on December 16, 2015, the Company uses an asset and liability approach for accounting for deferred income taxes, which requires recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements, but have not been reflected in its taxable income. Estimates and judgments are required in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred income tax assets, which arise from temporary differences and carry forwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company regularly assesses the likelihood that its deferred income tax assets will be realized from recoverable income taxes or recovered from future taxable income. To the extent that the Company believes any amounts are more likely not to be realized, the Company records a valuation allowance to reduce the deferred income tax assets. In the event the Company determines that all or part of the net deferred tax assets are not realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. Similarly, if the Company subsequently realizes deferred income tax assets that were previously determined to be unrealizable are now realizable, the respective valuation allowance would be reversed, resulting in an adjustment to earnings in the period such determination is made. Internal Revenue Code Section 382 provides that, after an ownership change, the amount of a loss corporation’s net operating loss (“NOL”) for any post-change year that may be offset by pre-change losses shall not exceed the section 382 limitation for that year. Because the Company will continue to raise equity in the coming years, section 382 may limit the Company’s usage of NOLs in the future. Based on the available evidence, the Company believed it was not likely to utilize its minimal deferred tax assets in the future and as a result, the Company recorded a full valuation allowance as of June 30, 2018 and December 31, 2017. The Company intends to maintain the valuation allowance until sufficient evidence exists to support their reversal. The Company regularly reviews its tax positions and for a tax benefit to be recognized, the related tax position must be more likely than not to be sustained upon examination. Any amount recognized is generally the largest benefit that is more likely than not to be realized upon settlement. The Company’s policy is to recognize interest and penalties related to income tax matters as an income tax expense. For the three and six months ended June 30, 2018 and 2017, the Company did not have any interest or penalties associated with unrecognized tax benefits. The Company is subject to U.S. Federal, Illinois and California income taxes. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company was incorporated on December 16, 2015 and is subject to U.S. Federal, state and local tax examinations by tax authorities for the years ended December 31, 2017 and 2016 and for the short tax period December 16, 2015 to December 31, 2015. The Company does not anticipate significant changes to its current uncertain tax positions through June 30, 2018. The Company plans on filing its tax returns for the year ending December 31, 2017 prior to the filing deadlines in all jurisdictions. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted. The Tax Reform Bill was effective as of January 1, 2018. In accordance with ASC guidance, deferred tax assets/liabilities in the Company’s financial statements for the year ended December 31, 2017, were reflected at the tax rate in which the deferred tax assets/liabilities are anticipated to be realized. As a result, the Company changed the tax rate for tax provision purposes at December 31, 2017 from 34% to 21%. Stock-Based Compensation The Company accounts for stock-based compensation arrangements with employees, nonemployee directors and consultants using a fair value method, which requires the recognition of compensation expense for costs related to all stock-based payments, including stock options. The fair value method requires the Company to estimate the fair value of stock-based payment awards on the date of grant using an option pricing model. Stock-based compensation costs for options granted to employees and nonemployee directors are based on the fair value of the underlying option calculated using the Black-Scholes option-pricing model on the date of grant for stock options and recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. Determining the appropriate fair value model and related assumptions requires judgment, including estimating the future stock price volatility, forfeiture rates and expected term. The expected volatility rates are estimated based on the current volatility of comparable public companies over the expected term. The Company selected these companies based on comparable characteristics, including market capitalization, stage of development and with historical share price information sufficient to meet the expected term of the stock-based awards. The expected term for options granted to date is estimated using the simplified method. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has not paid dividends and does not anticipate paying a cash dividend in the future vesting period and, accordingly, uses an expected dividend yield of zero. The risk-free interest rate is based on the rate of U.S. Treasury securities with maturities consistent with the estimated expected term of the awards. The measurement of consultant share-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period over which services are rendered. Recent Accounting Pronouncements In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases Codification Improvements to Topic 842, Leases In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815) (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities Financial Instruments – Overall (Subtopic 825-10) In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting |
3. Capital Stock
3. Capital Stock | 6 Months Ended |
Jun. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
Capital Stock | On December 16, 2015, the Company converted from an LLC to a C Corporation at which time the Company effected a 1 for 10 reverse stock split. All references to preferred stock and common stock authorized take into account the 1 for 10 reverse stock split. In March 2017, the Company’s Series A Preferred Stock and Series Z Preferred Stock converted to common stock at a conversion rate of 1.2 for 1 and 1 for 1, respectively, along with a simultaneous common stock split of 70 for 1 and the elimination all shares of Series A Preferred Stock and Series Z Preferred Stock (collectively, the “Conversion”). 100,000 shares of Series Z Preferred Stock were converted into 7,000,000 shares of common stock and 15,894 shares of Series A Preferred Stock were converted into 1,335,079 shares of common stock. All references to common stock authorized, issued and outstanding and common stock options take into account the 70 for 1 stock split. Holders of the common stock are entitled to receive such dividends as may be declared by the Board of Directors out of funds legally available therefor. Upon dissolution and liquidation of the Company, holders of the common stock are entitled to a ratable share of the net assets of the Company remaining after payments to creditors of the Company. The holders of shares of common stock are entitled to one vote per share for the election of directors and on all other matters submitted to a vote of stockholders. The Company’s amended and restated certificate of incorporation authorizes the Company to issue 40,000,000 shares of common stock with a par value of $0.001 per share. Contribution to Capital In August 2017, the Company’s largest stockholder, Tactic Pharma, LLC (“Tactic Pharma”), surrendered 2,888,727 shares of common stock back to the Company as a contribution to the capital of the Company. This resulted in reducing Tactic Pharma’s ownership in Monopar from 79.5% to 69.9%. Sales of Common Stock Pursuant to an active private placement memorandum, during the period from July 1, 2017 through September 30, 2017, Monopar sold 448,834 shares of common stock at $6 per share for proceeds of approximately $2.7 million. This financing closed on September 30, 2017. Issuance of Common Stock In August 2017, the Company issued 3,055,394 shares of its common stock in exchange for cash and intellectual property related to MNPR-201. As of June 30, 2018, the Company had 9,291,421 shares of common stock issued and outstanding. The Company no longer has any shares of preferred stock authorized or outstanding. In April 2016, the Company adopted the 2016 Stock Incentive Plan and the Company’s Board of Directors reserved 700,000 shares of common stock for issuances under the plan (as adjusted subsequent to the Conversion). In October 2017, the Company’s Board of Directors increased the stock option pool to 1,600,000 shares of common stock. |
4. Stock Option Plan
4. Stock Option Plan | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Option Plan | In April 2016, the Company’s Board of Directors and the convertible preferred stockholders representing a majority of the Company’s outstanding stock approved, the Monopar Therapeutics Inc. 2016 Stock Incentive Plan (the “Plan”) allowing the Company to grant up to an aggregate 700,000 shares of stock awards, stock options, stock appreciation rights and other stock-based awards to employees, directors and consultants. Concurrently, the Board of Directors granted to certain Board members and the Company’s acting chief financial officer stock options to purchase up to an aggregate 273,000 shares of the Company’s common stock at an exercise price of $0.001 par value based upon a third-party valuation of the Company’s common stock. In December 2016, the Board of Directors granted to the Company’s acting chief medical officer stock options to purchase up to 7,000 shares of the Company’s common stock at an exercise price of $0.001 par value based upon a third-party valuation of the Company’s common stock. In February 2017, the Board of Directors granted to certain Board members and the Company’s acting chief financial officer stock options to purchase up to an aggregate 275,520 shares of the Company’s common stock at an exercise price of $0.001 par value based upon a third-party valuation of the Company’s common stock. In September 2017, the Board of Directors represented by the designated Plan Administrator, granted options to purchase up to 21,024 shares of common stock to each of the three new Board members and in November 2017, the Company granted options to purchase up to 40,000 shares of common stock to an employee. These Board and employee options have an exercise price of $6 per share based on the price per share at which common stock was sold in the Company’s most recent private offering. In January 2018, the Company granted options to purchase up to 32,004 shares of common stock to its acting chief medical officer, at an exercise price of $6 per share based on the price per share at which common stock was sold in the Company’s most recent private offering. In May 2018, the Company granted options to purchase up to 5,000 shares of common stock to an employee, at an exercise price of $6 per share based on the price per share at which common stock was sold in the Company’s most recent private offering. Under the Plan, the per share exercise price for the shares to be issued upon exercise of an option shall be determined by the Plan administrator, except that the per share exercise price shall be no less than 100% of the fair market value per share on the grant date. Fair market value is established by the Company’s Board of Directors, using third party valuation reports and recent financings. Options generally expire after ten years. Stock option activity under the Plan was as follows: Options Outstanding Options Available Number ofOptions Weighted-Average Exercise Price Balances at January 1, 2017 420,000 280,000 $ 0.001 Option pool increase(1) 900,000 Granted(2) (378,592 ) 378,592 1.63 Forfeited — — — Exercised — — — Balances at December 31, 2017 941,408 658,592 0.94 Granted(3) (37,004 ) 37,004 6.00 Forfeited(4) 34,167 (34,167 ) 6.00 Exercised — — — Balances at June 30, 2018 938,571 661,429 $ 0.96 (1) In October 2017, the Company’s Board of Directors increased the option pool to 1,600,000 shares. (2) 336,544 options vest 6/48ths at the six-month anniversary of grant date and 1/48th per month thereafter; 21,024 options vest 6/24ths on the six-month anniversary of grant date and 1/24th per month thereafter; and 21,024 options vest 6/42nds on the six-month anniversary of grant date and 1/42nd per month thereafter. (3) 32,004 options vest as follows: options to purchase up to 12,000 shares of common stock vest on the grant date, options to purchase up to 1,667 shares of common stock vest on the 1st of each month thereafter. 5,000 options vest 6/48ths on the grant date and 1/48th per month thereafter. (4) Options forfeited as a result of an employee termination. A summary of options outstanding as of June 30, 2018 is shown below: Exercise Prices Number of Shares subject to Options Outstanding Weighted Average Remaining Contractual Term Number of Shares Subject to Options Fully Vested and Exercisable Weighted Average Remaining Contractual Term $ 0.001 555,520 8.2 years 371,840 8.0 years $ 6.00 105,909 9.3 years 43,228 9.4 years 661,429 415,068 During the three months ended June 30, 2018 and 2017, the Company recognized $26,362 and $0, respectively, of employee and non-employee director stock-based compensation expense as general and administrative expenses and $36,978 and $0, respectively, as research and development expenses. During the six months ended June 30, 2018 and 2017, the Company recognized $52,514 and $0, respectively, of employee and non-employee director stock-based compensation expense as general and administrative expenses and $76,726 and $0, respectively, as research and development expenses. The compensation expense is allocated on a departmental basis, based on the classification of the option holder. No income tax benefits have been recognized in the condensed consolidated statements of operations and comprehensive loss for stock-based compensation arrangements. The Company recognizes as an expense the fair value of options granted to persons who are neither employees nor non-employee directors. Stock-based compensation expense for consultants for the three and six months ended June 30, 2018 was $25,230 and $73,856, respectively, which was recorded as research and development expenses. Stock-based compensation expense for consultants for the three months ended June 30, 2017 was $198,090, of which $40,314 was recorded as general and administrative, and $157,776 as research and development expenses; and for the six months ended June 30, 2017 was $198,090, of which $40,314 was recorded as general and administrative, and $157,776 as research and development expenses. The fair value of options granted from inception to June 30, 2018 was based on the Black-Scholes option-pricing model assuming the following factors: 5.3 to 6.1 years expected term, 57% volatility, 1.2% to 2.8% risk free interest rate and zero dividends. The expected term for options granted to date is estimated using the simplified method. For the three months ended June 30, 2018 and 2017: the weighted average grant date fair value was $3.30 and $0.0005 per share, respectively; and the fair value of shares vested was $79,310 and nominal, respectively. For the six months ended June 30, 2018 and 2017: the weighted average grant date fair value was $3.30 and $0.0005 per share, respectively; and the fair value of shares vested was $154,281 and nominal, respectively. At June 30, 2018, the aggregate intrinsic value was approximately $3.3 million of which approximately $2.2 million was vested and approximately $1.1 million is expected to vest and the weighted average exercise price in aggregate was $0.96 which includes $0.62 for fully vested stock options and $1.53 for stock options expected to vest. At June 30, 2018, unamortized unvested balance of stock based compensation was approximately $0.6 million to be amortized over 3.4 years. |
5. Development and Collaboratio
5. Development and Collaboration Agreements | 6 Months Ended |
Jun. 30, 2018 | |
Development And Collaboration Agreements | |
Development and Collaboration Agreements | Onxeo SA The pre-negotiated Onxeo license agreement for Validive as part of the option agreement includes clinical, regulatory, developmental and sales milestones that could reach up to $108 million if the Company achieves all milestones, and escalating royalties on net sales from 5 - 10%. On September 8, 2017, the Company exercised the license option, and therefore paid Onxeo the $1 million fee under the option and license agreement. Under the agreement, the Company is required to pay royalties to Onxeo on a product-by-product and country-by-country basis until the later of (1) the date when a given product is no longer within the scope of a patent claim in the country of sale or manufacture, (2) the expiry of any extended exclusivity period in the relevant country (such as orphan drug exclusivity, pediatric exclusivity, new chemical entity exclusivity, or other exclusivity granted beyond the expiry of the relevant patent), or (3) a specific time period after the first commercial sale of the product in such country. In most countries, including the U.S., the patent term is generally 20 years from the earliest claimed filing date of a non-provisional patent application in the applicable country, not taking into consideration any potential patent term adjustment that may be filed in the future or any regulatory extensions that may be obtained. The royalty termination provision pursuant to (3) described above is shorter than 20 years and is the least likely cause of termination of royalty payments. The Onxeo license agreement does not have a pre-determined term, but expires on a product-by-product and country-by-country basis; that is, the agreement expires with respect to a given product in a given country whenever the Company’s royalty payment obligations with respect to such product have expired. The agreement may also be terminated early for cause if either the Company or Onxeo materially breach the agreement, or if either the Company or Onxeo become insolvent. The Company may also choose to terminate the agreement, either in its entirety or as to a certain product and a certain country, by providing Onxeo with advance notice. The Company plans to internally develop Validive with the near-term goal of commencing a Phase 3 clinical development program, which, if successful, may allow the Company to apply for marketing approval within the next several years. The Company will need to raise significant funds to support the further development of Validive. Cancer Research UK In May 2015, the Company entered into a CTOA with Cancer Research UK and Cancer Research Technology Limited, a wholly-owned subsidiary of Cancer Research UK. As part of the CTOA, the Company was obligated to submit $0.8 million in escrow to cover certain potential future claims, intellectual property infringement costs or termination costs incurred by Cancer Research UK. Pursuant to this agreement Cancer Research UK conducted preclinical work, improved manufacturing processes and yields, and planned to conduct a Phase 1a/1b clinical trial in cancer patients. As part of a portfolio reprioritization review, on March 21, 2018 Cancer Research UK notified the Company that it was terminating the CTOA and would work to transfer to the Company the data generated under the CTOA. The Company is currently reviewing potential alternative collaboration opportunities for MNPR-101 and continues to maintain the program’s intellectual property portfolio. XOMA Ltd. The intellectual property rights contributed by Tactic Pharma to the Company included the non-exclusive license agreement with XOMA Ltd. for the humanization technology used in the development of MNPR-101. Pursuant to such license agreement, the Company is obligated to pay XOMA Ltd. clinical, regulatory and sales milestones for MNPR-101 that could reach up to $14.925 million if the Company achieves all milestones. The agreement does not require the payment of sales royalties. There can be no assurance that the Company will reach any milestones under the XOMA agreement. As of June 30, 2018, the Company has not reached any milestones and has not been required to pay XOMA Ltd. any funds under this license agreement. |
6. Related Party Transactions
6. Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | During the three and six months ended June 30, 2018 and 2017, the Company was advised by four members of its Board of Directors, who were Managers of the LLC prior to the Company’s conversion to a C Corporation. The four former Managers are also current common stockholders (owning approximately an aggregate 3% of the common stock outstanding as of June 30, 2018). Three of the former Managers are also Managing Members of Tactic Pharma the Company’s largest and controlling stockholder (beneficially owning 46% of the Company at June 30, 2018 and together with Gem through TacticGem owning 77%). Monopar paid Managing Members of Tactic Pharma and the Manager of CDR Pharma, LLC, which is the Manager of TacticGem the following: Chandler D. Robinson, the Company’s Co-Founder, Chief Executive Officer, common stockholder, Managing Member of Tactic Pharma, former Manager of the predecessor LLC, and the Manager of CDR Pharma, LLC: $107,500 and $80,500 for the three months ended June 30, 2018 and 2017, respectively, and $215,000 and $161,000 for the six months ended June 30, 2018 and 2017, respectively; and Andrew P. Mazar, the Company’s Co-Founder, Chief Scientific Officer, common stockholder, Managing Member of Tactic Pharma and former Manager of the predecessor LLC, $109,038 and $75,000 for the three months ended June 30, 2018 and 2017, respectively, $202,500 and $150,000 for the six months ended June 30, 2018 and 2017, respectively, and. The Company also paid Christopher M. Starr, the Company’s Co-Founder, Executive Chairman of the Board of Directors, common stockholder and former Manager of the predecessor LLC $25,224 and $25,224 in board fees for the three months ended June 30, 2018 and 2017, respectively, and $50,448 and $50,448 in board fees for the six months ended June 30, 2018 and 2017, respectively. Michael Brown, as a managing member of Tactic, a previous managing member of Monopar as an LLC and shareholder and uncompensated board member (until Q3 2017) of Monopar as a C Corporation was paid $10,000 and $20,000 in board fees for the three and six months ended June 30, 2018. The Company reimbursed Tactic Pharma a de minimis During the three and six months ended June 30, 2018, the Company paid or accrued legal fees to a large national law firm, in which a family member of the Company’s Chief Executive Officer is a law partner, approximately $39,584 and $92,584, respectively, compared to $20,000 and $40,000 paid or accrued legal fees for the three and six months ended June 30, 2017, respectively. The family member personally billed a de minimis |
7. Commitments and Contingencie
7. Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Development and Collaboration Agreements The intellectual property rights contributed by Tactic Pharma, LLC to the Company included the non-exclusive license agreement with XOMA Ltd. for the humanization technology used in the development of MNPR-101. Pursuant to such license agreement, the Company is obligated to pay XOMA Ltd. clinical, regulatory and sales milestones for MNPR-101 and zero royalties. During the three and six months ended June 30, 2018, the Company has not reached any milestones and has not been required to pay XOMA Ltd. any funds under this license agreement. Leases Commencing January 1, 2018, the Company entered into a lease for its executive headquarters at 1000 Skokie Blvd., Suite 350, Wilmette, IL. The lease term is January 1, 2018 through December 31, 2019. The Company also leased office space at 500 Mercer St., Seattle, WA. The lease commenced on November 1, 2017 and was extendable on a month-to-month basis and was terminated as of July 31, 2018. The future lease commitments as presented below represents amounts for the Company’s executive headquarters lease. 2018 (July 1 to December 31) $ 15,117 2019 30,234 Total future lease payments $ 45,351 Legal Contingencies The Company is subject to claims and assessments from time to time in the ordinary course of business. No claims have been asserted to date. Indemnification In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made. To date, the Company has not paid any claims nor been required to defend any action related to its indemnification obligations. However, the Company may record charges in the future as a result of these indemnification obligations. In accordance with its amended and restated certificate of incorporation and bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date. |
8. Subsequent Events
8. Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | The Company has evaluated all events occurring from June 30, 2018 through August 9, 2018, the date which these condensed consolidated financial statements were available to be issued, and did not identify any additional material disclosable subsequent events. |
2. Significant Accounting Pol14
2. Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | These condensed consolidated financial statements include the financial results of Monopar Therapeutics Inc., its French branch, its wholly-owned French subsidiary, Monopar Therapeutics, SARL, and Monopar Therapeutics Pty Ltd. its wholly-owned Australian subsidiary and have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include all disclosures required by GAAP for interim financial information. All intercompany accounts have been eliminated. The principal accounting policies applied in the preparation of these condensed consolidated financial statements are set out below and have been consistently applied in all periods presented. The Company has been primarily involved in performing research activities, developing product technologies, and raising capital to support and expand these activities. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal, recurring adjustments necessary to present fairly the Company’s condensed consolidated financial position as of June 30, 2018 and December 31, 2017, the Company’s condensed consolidated results of operations and comprehensive loss for the three and six months ended June 30, 2018 and 2017, and the Company’s condensed consolidated cash flows for the six months ended June 30, 2018 and 2017. The condensed consolidated results of operations and cash flows for the periods presented are not necessarily indicative of the consolidated results of operations or cash flows which may be reported for the remainder of 2018 or in any future period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (“SEC”) on March 26, 2018. |
Functional Currency | The Company's consolidated functional currency is the U.S. Dollar. The Company's Australian subsidiary and French subsidiary use the Australian Dollar and European Euro, respectively, as their functional currency. At each quarter end, each foreign subsidiary's balance sheets are translated into U.S. dollars based upon the quarter-end exchange rate, while their statements of operations and comprehensive loss are translated into U.S. dollars based upon an average exchange rate during the period. |
Comprehensive Loss | Comprehensive loss represents net loss plus any gains or losses not reported in the condensed consolidated statements of operations, such as foreign currency translations gains and losses that are typically reflected on a Company’s condensed consolidated statements of stockholders’ equity. |
Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in the financial statements and accompanying notes. Actual results could differ from those estimates. |
Going Concern Assessment | The Company adopted Accounting Standards Updates (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, |
Cash Equivalents | The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash equivalents. Cash equivalents as of June 30, 2018 and December 31, 2017 consist entirely of money market accounts. |
Restricted Cash | On July 9, 2015, the Company entered into a Clinical Trial and Option Agreement (“CTOA”) with Cancer Research UK. Pursuant to the CTOA, the Company deposited $0.8 million into an escrow account to cover certain future indemnities, claims or potential termination costs incurred by Cancer Research UK. Restricted cash was $0.8 million as of June 30, 2018 and December 31, 2017. In connection with a portfolio reprioritization review, on March 21, 2018, Cancer Research UK notified us it was terminating the CTOA and would work to transfer to us the data generated under the CTOA. Once termination is completed it is expected that these funds will be released from escrow in September 2019. |
Prepaid Expenses | Prepayments are expenditures for goods or services before the goods are used or the services are received and are charged to operations as the benefits are realized. Prepaid expenses include insurance premiums and software costs that are expensed monthly over the life of the contract. |
Concentration of Credit Risk | Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and restricted cash. The Company maintains cash and cash equivalents at one financial institution and restricted cash at another financial institution. As of June 30, 2018, and December 31, 2017, cash and cash equivalents and restricted cash balances at these two financial institutions were in excess of the $250,000 Federal Deposit Insurance Corporation (“FDIC”) insurable limit. |
Fair Value of Financial Instruments | For financial instruments consisting of cash and cash equivalents, prepaid expenses, deferred offering costs, accounts payable and accrued expenses, the carrying amounts are reasonable estimates of fair value due to their relatively short maturities. The Company adopted Accounting Standard Codification Fair Value Measurements and Disclosures, In determining fair values of all reported assets and liabilities that represent financial instruments, the Company uses the carrying market values of such amounts. The standard establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources. Unobservable inputs reflect a reporting entity’s pricing an asset or liability developed based on the best information available in the circumstances. The fair value hierarchy consists of the following three levels: Level 1 Level 2 Level 3 Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2 or 3 of the fair value hierarchy during the six months ended June 30, 2018 and year ended December 31, 2017. The following table presents the assets and liabilities recorded that are reported at fair value on our condensed consolidated balance sheets on a recurring basis. Assets and Liabilities Measured at Fair Value on a Recurring Basis June 30, 2018 Level 1 Level 2 Total Assets Cash equivalents(1) $ 7,373,758 $ - $ 7,373,758 Restricted cash(2) 31 800,000 800,031 Total $ 7,373,789 $ 800,000 $ 8,173,789 (1) Cash equivalents represent the fair value of the Company’s investments in a money market account at June 30, 2018. (2) Restricted cash represents the fair value of the Company’s investments in an $800,000 certificate of deposit and $31 in a money market account at June 30, 2018. December 31, 2017 Level 1 Level 2 Total Assets Cash equivalents(1) $ 8,864,288 $ - $ 8,864,288 Restricted cash(2) 31 800,000 800,031 Total $ 8,864,319 $ 800,000 $ 9,664,319 (1) Cash equivalents represent the fair value of the Company’s investments in a money market account at December 31, 2017. (2) Restricted cash represents the fair value of the Company’s investments in an $800,000 certificate of deposit and $31 in a money market account at December 31, 2017. |
Net Loss per Share | Net loss per share for the three and six months ended June 30, 2018 is calculated by dividing net loss by the weighted-average shares of common stock outstanding during the period. Diluted net loss per share for the three and six months ended June 30, 2018 is calculated by dividing net loss by the weighted-average shares of common stock outstanding and potential shares of common stock during the period. As of June 30, 2018, potentially dilutive securities included options to purchase up to 661,429 shares of the Company’s common stock. As of June 30, 2017, potentially dilutive securities included stock options to purchase up to 555,520 shares of the Company’s common stock. For all periods presented, potentially dilutive securities are excluded from the computation of fully diluted net loss per share as their effect is anti-dilutive. |
Research and Development Expenses | Research and development (“R&D”) costs are expensed as incurred. Major components of research and development expenses include salaries and benefits paid to the Company’s R&D staff, fees paid to consultants and to the entities that conduct certain research and development activities on the Company’s behalf and materials and supplies which are used in R&D activities. The Company accrues and expenses the costs for clinical trial activities performed by third parties based upon estimates of the percentage of work completed over the life of the individual study in accordance with agreements established with contract research organizations and clinical trial sites. The Company determines the estimates through discussions with internal clinical personnel and external service providers as to progress or stage of completion of trials or services and the agreed upon fee to be paid for such services. Costs of setting up clinical trial sites for participation in the trials are expensed immediately as research and development expenses. Clinical trial site costs related to patient enrollment are accrued as patients are entered into the trial. During the three and six months ended June 30, 2018 and 2017, the Company had no clinical trials in progress. |
In-process Research and Development | In-process research and development expense represents the costs to acquire technologies to be used in research and development that have not reached technological feasibility, have no alternative future uses and thus are expensed as incurred. IPR&D expense also includes upfront license fees and milestones paid to collaborators, for technologies with no alternative use. |
Collaborative Arrangements | The Company and its future collaborative partners would be active participants in collaborative arrangements and all parties would be exposed to significant risks and rewards depending on the technical and commercial success of the activities. Contractual payments to the other parties in collaboration agreements and costs incurred by the Company when the Company is deemed to be the principal participant for a given transaction are recognized on a gross basis in research and development expenses. Royalties and license payments are recorded as earned. During the three and six months ended June 30, 2018 and 2017, no milestones were met and no royalties were earned, therefore, the Company did not pay or accrue/expense any milestone or royalty payments. |
Licensing Agreements | The Company has various agreements to license technology utilized in the development of its programs. The licenses contain success milestone obligations and royalties on future sales. During the three and six months ended June 30, 2018 and 2017, no milestones were met and no royalties were earned, therefore, the Company did not pay or accrue/expense any milestone or royalty payments under any of its license agreements. |
Patent Costs | The Company expenses costs relating to issued patents and patent applications, including costs relating to legal, renewal and application fees, as a component of general and administrative expenses in its condensed consolidated statements of operations and comprehensive loss. |
Income Taxes | From December 2014 to December 16, 2015, the Company was an LLC taxed as a partnership under the Internal Revenue Code, during which period the members separately accounted for their pro-rata share of income, deductions, losses, and credits of the Company. On December 16, 2015, the Company converted from an LLC to a C Corporation. Beginning on December 16, 2015, the Company uses an asset and liability approach for accounting for deferred income taxes, which requires recognition of deferred income tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements, but have not been reflected in its taxable income. Estimates and judgments are required in the calculation of certain tax liabilities and in the determination of the recoverability of certain deferred income tax assets, which arise from temporary differences and carry forwards. Deferred income tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company regularly assesses the likelihood that its deferred income tax assets will be realized from recoverable income taxes or recovered from future taxable income. To the extent that the Company believes any amounts are more likely not to be realized, the Company records a valuation allowance to reduce the deferred income tax assets. In the event the Company determines that all or part of the net deferred tax assets are not realizable in the future, an adjustment to the valuation allowance would be charged to earnings in the period such determination is made. Similarly, if the Company subsequently realizes deferred income tax assets that were previously determined to be unrealizable are now realizable, the respective valuation allowance would be reversed, resulting in an adjustment to earnings in the period such determination is made. Internal Revenue Code Section 382 provides that, after an ownership change, the amount of a loss corporation’s net operating loss (“NOL”) for any post-change year that may be offset by pre-change losses shall not exceed the section 382 limitation for that year. Because the Company will continue to raise equity in the coming years, section 382 may limit the Company’s usage of NOLs in the future. Based on the available evidence, the Company believed it was not likely to utilize its minimal deferred tax assets in the future and as a result, the Company recorded a full valuation allowance as of June 30, 2018 and December 31, 2017. The Company intends to maintain the valuation allowance until sufficient evidence exists to support their reversal. The Company regularly reviews its tax positions and for a tax benefit to be recognized, the related tax position must be more likely than not to be sustained upon examination. Any amount recognized is generally the largest benefit that is more likely than not to be realized upon settlement. The Company’s policy is to recognize interest and penalties related to income tax matters as an income tax expense. For the three and six months ended June 30, 2018 and 2017, the Company did not have any interest or penalties associated with unrecognized tax benefits. The Company is subject to U.S. Federal, Illinois and California income taxes. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. The Company was incorporated on December 16, 2015 and is subject to U.S. Federal, state and local tax examinations by tax authorities for the years ended December 31, 2017 and 2016 and for the short tax period December 16, 2015 to December 31, 2015. The Company does not anticipate significant changes to its current uncertain tax positions through June 30, 2018. The Company plans on filing its tax returns for the year ending December 31, 2017 prior to the filing deadlines in all jurisdictions. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was enacted. The Tax Reform Bill was effective as of January 1, 2018. In accordance with ASC guidance, deferred tax assets/liabilities in the Company’s financial statements for the year ended December 31, 2017, were reflected at the tax rate in which the deferred tax assets/liabilities are anticipated to be realized. As a result, the Company changed the tax rate for tax provision purposes at December 31, 2017 from 34% to 21%. |
Stock-Based Compensation | The Company accounts for stock-based compensation arrangements with employees, nonemployee directors and consultants using a fair value method, which requires the recognition of compensation expense for costs related to all stock-based payments, including stock options. The fair value method requires the Company to estimate the fair value of stock-based payment awards on the date of grant using an option pricing model. Stock-based compensation costs for options granted to employees and nonemployee directors are based on the fair value of the underlying option calculated using the Black-Scholes option-pricing model on the date of grant for stock options and recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. Determining the appropriate fair value model and related assumptions requires judgment, including estimating the future stock price volatility, forfeiture rates and expected term. The expected volatility rates are estimated based on the current volatility of comparable public companies over the expected term. The Company selected these companies based on comparable characteristics, including market capitalization, stage of development and with historical share price information sufficient to meet the expected term of the stock-based awards. The expected term for options granted to date is estimated using the simplified method. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company has not paid dividends and does not anticipate paying a cash dividend in the future vesting period and, accordingly, uses an expected dividend yield of zero. The risk-free interest rate is based on the rate of U.S. Treasury securities with maturities consistent with the estimated expected term of the awards. The measurement of consultant share-based compensation is subject to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period over which services are rendered. |
Recent Accounting Pronouncements | In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities In February 2016, the FASB issued ASU 2016-02, Leases Codification Improvements to Topic 842, Leases In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic 480) Derivatives and Hedging (Topic 815) (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In February 2018, the FASB issued ASU No. 2018-03, Technical Corrections and Improvements to Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities Financial Instruments – Overall (Subtopic 825-10) In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. In June 2018, the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting |
2. Significant Accounting Pol15
2. Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Assets and liabilities measured at fair value on a recurring basis | June 30, 2018 Level 1 Level 2 Total Assets Cash equivalents(1) $ 7,373,758 $ - $ 7,373,758 Restricted cash(2) 31 800,000 800,031 Total $ 7,373,789 $ 800,000 $ 8,173,789 (1) Cash equivalents represent the fair value of the Company’s investments in a money market account at June 30, 2018. (2) Restricted cash represents the fair value of the Company’s investments in an $800,000 certificate of deposit and $31 in a money market account at June 30, 2018. December 31, 2017 Level 1 Level 2 Total Assets Cash equivalents(1) $ 8,864,288 $ - $ 8,864,288 Restricted cash(2) 31 800,000 800,031 Total $ 8,864,319 $ 800,000 $ 9,664,319 (1) Cash equivalents represent the fair value of the Company’s investments in a money market account at December 31, 2017. (2) Restricted cash represents the fair value of the Company’s investments in an $800,000 certificate of deposit and $31 in a money market account at December 31, 2017. |
4. Stock Option Plan (Tables)
4. Stock Option Plan (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock option activity | Options Outstanding Options Available Number ofOptions Weighted-Average Exercise Price Balances at January 1, 2017 420,000 280,000 $ 0.001 Option pool increase(1) 900,000 Granted(2) (378,592 ) 378,592 1.63 Forfeited — — — Exercised — — — Balances at December 31, 2017 941,408 658,592 0.94 Granted(3) (37,004 ) 37,004 6.00 Forfeited(4) 34,167 (34,167 ) 6.00 Exercised — — — Balances at June 30, 2018 938,571 661,429 $ 0.96 (1) In October 2017, the Company’s Board of Directors increased the option pool to 1,600,000 shares. (2) 336,544 options vest 6/48ths at the six-month anniversary of grant date and 1/48th per month thereafter; 21,024 options vest 6/24ths on the six-month anniversary of grant date and 1/24th per month thereafter; and 21,024 options vest 6/42nds on the six-month anniversary of grant date and 1/42nd per month thereafter. (3) 32,004 options vest as follows: options to purchase up to 12,000 shares of common stock vest on the grant date, options to purchase up to 1,667 shares of common stock vest on the 1st of each month thereafter. 5,000 options vest 6/48ths on the grant date and 1/48th per month thereafter. (4) Options forfeited as a result of an employee termination. |
Summary of options outstanding | Exercise Prices Number of Shares subject to Options Outstanding Weighted Average Remaining Contractual Term Number of Shares Subject to Options Fully Vested and Exercisable Weighted Average Remaining Contractual Term $ 0.001 555,520 8.2 years 371,840 8.0 years $ 6.00 105,909 9.3 years 43,228 9.4 years 661,429 415,068 |
7. Commitments and Contingenc17
7. Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Future lease commitments | 2018 (July 1 to December 31) $ 15,117 2019 30,234 Total future lease payments $ 45,351 |
1. Nature of Business and Liq18
1. Nature of Business and Liquidity (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
State of incorporation | Delaware | |
Date of incorporation | Dec. 5, 2014 | |
Accumulated loss | $ (20,125,067) | $ (18,427,780) |
2. Significant Accounting Pol19
2. Significant Accounting Policies (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Assets | ||
Cash equivalents | $ 7,373,758 | $ 8,864,288 |
Restricted cash | 800,031 | 800,031 |
Total | 8,173,789 | 9,664,319 |
Level 1 | ||
Assets | ||
Cash equivalents | 7,373,758 | 8,864,288 |
Restricted cash | 31 | 31 |
Total | 7,373,789 | 8,864,319 |
Level 2 | ||
Assets | ||
Cash equivalents | 0 | 0 |
Restricted cash | 800,000 | 800,000 |
Total | $ 800,000 | $ 800,000 |
2. Significant Accounting Pol20
2. Significant Accounting Policies (Details Narrative) - USD ($) | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | |||
Restricted cash | $ 800,031 | $ 800,031 | |
Potentially dilutive securities | 661,429 | 555,520 |
3. Capital Stock (Details Narra
3. Capital Stock (Details Narrative) - shares | Jun. 30, 2018 | Dec. 31, 2017 |
Stockholders' Equity Note [Abstract] | ||
Common stock, issued | 9,291,421 | 9,291,421 |
Common stock, outstanding | 9,291,421 | 9,291,421 |
4. Stock Option Plan (Details)
4. Stock Option Plan (Details) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Stock options available outstanding, beginning | 941,408 | 420,000 |
Stock options available, option pool | 0 | 900,000 |
Stock options available, granted | (37,004) | (378,592) |
Stock options available, forfeited | 34,167 | 0 |
Stock options available, exercised | 0 | 0 |
Stock options available outstanding, ending | 938,571 | 941,408 |
Stock options outstanding, beginning | 658,592 | 280,000 |
Stock options, granted | 37,004 | 378,592 |
Stock options, forfeited | (34,167) | 0 |
Stock options, exercised | 0 | 0 |
Stock options outstanding, ending | 661,429 | 658,592 |
Weighted average exercise price outstanding, beginning | $ 0.94 | $ 0.001 |
Weighted average exercise price, granted | 6 | 1.63 |
Weighted average exercise price, forfeited | 6 | 0 |
Weighted average exercise price, exercised | 0 | 0 |
Weighted average exercise price outstanding, ending | $ 0.96 | $ 0.94 |
4. Stock Option Plan (Details 1
4. Stock Option Plan (Details 1) - $ / shares | 6 Months Ended | ||
Jun. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Number of shares outstanding | 661,429 | 658,592 | 280,000 |
Number of shares fully vested and exercisable | 415,068 | ||
Option 1 | |||
Exercise price | $ 0.001 | ||
Number of shares outstanding | 555,520 | ||
Weighted average remaining contractual life | 8 years 2 months 12 days | ||
Number of shares fully vested and exercisable | 371,840 | ||
Weighted average remaining contractual life | 8 years | ||
Option 2 | |||
Exercise price | $ 6 | ||
Number of shares outstanding | 105,909 | ||
Weighted average remaining contractual life | 9 years 3 months 18 days | ||
Number of shares fully vested and exercisable | 43,228 | ||
Weighted average remaining contractual life | 9 years 4 months 24 days |
4. Stock Option Plan (Details N
4. Stock Option Plan (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Unamortized unvested balance of stock base compensation | $ 600,000 | $ 600,000 | ||
Unamortized unvested balance of stock base compensation, period | 3 years 4 months 24 days | |||
General and Administrative Expenses | ||||
Employee and non-employee director stock-based compensation expense | 26,362 | $ 0 | $ 52,514 | $ 0 |
Stock-based compensation expense for non-employees | 0 | 40,314 | 0 | 40,314 |
Research and Development Expenses | ||||
Employee and non-employee director stock-based compensation expense | 36,978 | 0 | 76,726 | 0 |
Stock-based compensation expense for non-employees | $ 25,230 | $ 157,776 | $ 73,856 | $ 157,776 |
7. Commitments and Contingenc25
7. Commitments and Contingencies (Details) | Jun. 30, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2018 (Q3-Q4) | $ 15,117 |
2,019 | 30,234 |
Total future lease payments | $ 45,351 |