Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. Accordingly, they do not include all the information and notes required for complete financial statements and should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019. There were no significant changes to the accounting policies during the six months ended June 30, 2019 from the significant accounting policies described in Note 2 to the consolidated financial statements in the 2018 Form 10-K, with the exception of the policies noted below. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

These unaudited condensed consolidated financial statements and related disclosure have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s condensed consolidated financial statements included in this report. The condensed consolidated results of operations for the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2018 included herein was derived from the audited consolidated financial statements as of that date.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expense during the reporting period. Significant estimates and assumptions made in the accompanying condensed consolidated financial statements include, but are not limited to the fair value of stock options and the warrant issued, accruals such as research and development costs, and recoverability of the Company’s net deferred tax assets and related valuation allowance. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

Operating Lease Right-of-Use Asset and Lease Liabilities

Operating Lease Right-of-Use Asset and Lease

Liability

On January 1, 2019, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-02,

Leases (Topic 842)

on a modified retrospective basis and did not restate comparative periods as permitted under the transition guidance. The Company elected the package of practical expedients as permitted, which carries forward the Company’s assessments prior to the date of initial application with respect to lease classifications, initial direct costs as well as whether an existing contract contains a lease. The Company also elected to account for lease and non-lease components separately under transition relief available.

The Company recognizes an operating lease with terms greater than one year as right-of-use (ROU) asset and lease liability on its condensed consolidated balance sheet using the portfolio approach. Lease liability and ROU asset are recorded based on the present value of future lease payments over the contractual term of the operating lease. The Company utilized its incremental borrowing rate from information available as at the date of initial adoption in determining the present value of the future lease payments. The lease liability and ROU asset are amortized over the term of the lease with operating lease expense being recognized on a straight-line basis over the lease term. Please see

Note 6, Leases

below for further disclosures associated with the impact of the new standard.

Stock-Based Compensation

The Company accounts for stock-based payments at fair value, which is measured using the Black-Scholes option-pricing model. For stock-based awards that vest subject to the satisfaction of a service requirement, the fair value measurement date for stock-based compensation awards is the date of grant and the expense is recognized on a straight-line basis over the vesting period, which is generally the service period. The Company accounts for forfeitures as they occur.

On January 1, 2019, the Company adopted FASB ASU No. 2018-07,

Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

, which aligns the guidance for share-based payments issued for goods and services for employees and nonemployees. The adoption of this new accounting guidance did not have a material impact on the Company’s condensed consolidated financial statements.