2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (GAAP).

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make informed estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes as of the date of the financial statements. The most significant estimates in the Company’s financial statements include the fair value of assets and liabilities, acquisitions, stock-based compensation, completeness of clinical trial accruals and income taxes. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable. Actual results may be materially different from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase as cash equivalents. Cash and cash equivalents primarily represent funds invested in readily available checking and saving accounts, and funds that invest in securities issued or guaranteed as to the principal and interest by the U.S. government. Cash and cash equivalents are recorded at face value or cost, which approximates fair market value. At times, the Company has cash and cash equivalents deposited at financial institutions in excess of federally insured deposit limits. Cash is held on deposit in major financial institutions and is subject to minimal credit risk.

Reverse Stock Splits

On May 4, 2015, Regado effected a one for nine reverse stock split of its outstanding common stock and options for common stock. The par value was not adjusted as a result of the reverse stock split.

On July 28, 2014, Private Tobira effected a one for 26.4065866 reverse stock split of Private Tobira’s common stock, convertible preferred stock, preferred stock warrants and options for common stock, or the Private Tobira Reverse Split. The par value was not adjusted as a result of the Private Tobira Reverse Split. On February 23, 2015, in connection with the Private Tobira Reverse Split, Private Tobira filed a correction to its amended articles of incorporation to effect a one for 26.4065866 reverse stock split of its authorized shares of common stock, Series A preferred stock and Series B preferred stock.

The accompanying financial statements and notes to the financial statements give retroactive effect to the Private Tobira Reverse Split for all periods presented.

Deferred Offering Costs

Deferred offering costs, which primarily consist of direct incremental legal and accounting fees relating to a planned initial public offering, are capitalized and offset against initial public offering proceeds upon the consummation of an offering. In the event an offering is terminated, deferred offering costs are expensed. The Company capitalized deferred offering costs in 2014 related to a planned initial public offering that were expensed as of December 31, 2014 upon its termination.

Business Combinations

Accounting for acquisitions requires extensive use of estimates and judgment to measure the fair value of the identifiable tangible and intangible assets acquired, including in-process research and development and liabilities assumed. Additionally, the Company must determine whether an acquired entity is considered a business or a set of net assets because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination. The Company accounted for the Merger with Regado as a business combination under the acquisition method of accounting. Consideration paid to acquire Regado was measured at fair value and included the exchange of Regado’s common stock, Series F preferred stock and vested stock options. The allocation of the purchase price resulted in recognition of intangible assets related to in-process research and development and goodwill. The key assumptions in determining the fair value of intangible assets were assessing the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, developing an appropriate discount rate and the estimated future cash flows.

As a result of the Merger, historical common stock, stock options and additional paid-in capital, including share and per share amounts, have been retroactively adjusted to reflect the equity structure of the Company including the effect of the exchange ratio of 1.4302 and the Company’s common stock par value of $0.001 per share.

In-Process Research and Development

In-process research and development, or IPR&D, represents the fair value assigned to research and development assets that were not fully developed as of the completion of the Merger. IPR&D acquired in a business combination is capitalized on the Company’s balance sheet at its acquisition-date fair value. Until the project is completed, the asset is accounted for as an indefinite-lived intangible asset subject to impairment testing. Upon completion of a project, the carrying value of the related IPR&D is reclassified to intangible assets and is amortized over the estimated useful life of the asset. The Company evaluates the potential impairment of intangible assets if events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable.

IPR&D, recognized in the Merger, consisted of intellectual property related to Regado’s aptamer platform, including patents from Duke University, or Duke, and was valued based on the estimated net present value of future cash flows expected to be generated from commercialization. Following the Merger, the Company attempted to license or partner the aptamer intellectual property to a third party. Given the expense to maintain the intellectual property and limited commercial interest, the Company decided to discontinue investment in the aptamer platform. As a result of this indicator of impairment, during 2015, the Company calculated and compared the fair value of the IPR&D to the carrying value to assess the recoverability of the asset. During 2015, the Company recorded an impairment of the IPR&D of $12.2 million which is included under the caption “Impairment of intangible assets” in the accompanying Statements of Operations and Comprehensive Loss. Subsequently, the Company entered into an agreement with Duke to terminate its license and release its financial obligations with Duke. Additionally, the Company assigned its aptamer intellectual property to Duke and provided a payment of $0.1 million. In exchange, the Company is entitled to receive a percentage of payments, if any, received by Duke from the license or sale of the assigned intellectual property.

Goodwill

Goodwill represents the difference between the consideration transferred and the fair value of the net assets acquired under the acquisition method of accounting. Goodwill is not amortized but is evaluated for impairment as of October 31 of each year or if indicators of impairment exist that would, more likely than not, reduce the fair value from its carrying amount.

The Company recorded goodwill related to the Merger on May 4, 2015. As noted above under In-Process Research and Development, the Company was unable to divest or license the aptamer platform and has discontinued investment in the Regado business. The Company determined the fair value was less than the carrying value and impaired the IPR&D associated with its acquisition of Regado during 2015. Further, the Company determined the Regado operations acquired in the Merger had not been integrated with the Company and thus no benefit was realized. As a result, the Company recorded an impairment of goodwill of $5.1 million in accordance with applicable guidance, which is included under the caption “Impairment of intangible assets” in the accompanying Statements of Operations and Comprehensive Loss.

Fair Value of Financial Instruments

Financial assets and liabilities are recorded at fair value. The carrying amounts of certain financial instruments, including cash equivalents, prepaid expenses and other assets, accounts payable and accrued expenses, approximate their fair value due to their short term maturities. Based on prevailing borrowing rates available to the Company for loans with similar terms, the Company believes that the fair value of long-term debt approximates its carrying value. The carrying amount of the warrant liability represents its fair value.

The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.

The Company values its assets and liabilities based on observable market prices or inputs. If observable prices or inputs are not available, fair values are measured using unobservable inputs based on the Company’s own assumptions about what market participants would use to price the asset or liability.

Fair value measurements are classified within one of three levels in a valuation hierarchy based upon the observability of significant inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical unrestricted assets or liabilities;

Level 2 inputs for similar assets and liabilities in active markets other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and

Level 3 inputs that are significant to the fair value measurement and unobservable (i.e. supported by little or no market activity), which require the reporting entity to develop its own valuation techniques and assumptions.

Property and Equipment

The Company records its property and equipment at cost, less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated useful lives of the assets, which are three to five years depending on asset class. Leasehold improvements are amortized over their estimated useful life or the related lease term, whichever is shorter. The Company expenses repair and maintenance costs as they are incurred.

Preferred Stock Warrants

The Company issued freestanding warrants to purchase shares of its convertible preferred stock. The Company accounts for its warrants as either equity or liabilities based upon the characteristics and provisions of each instrument. The warrants are recorded as a liability on the Company’s balance sheet at their fair value on the date of issuance and are revalued at each subsequent balance sheet date, with fair value changes recognized as increases or reductions to other income (expense), net in the accompanying Statements of Operations and Comprehensive Loss. The warrant liabilities will continue to be re-measured to fair value until such time as the warrants are no longer outstanding or the underlying securities into which the warrants are exercisable no longer contain deemed liquidation provisions that are outside the control of the Company. The Company estimates the fair value of these liabilities using option pricing models and assumptions that are based on the individual characteristics of the warrants or instruments on the valuation date, as well as assumptions for expected volatility, expected life, expected yield, and risk-free interest rate.

In connection with the Merger, the warrants to purchase shares of Series B preferred stock issued in connection with the convertible notes expired unexercised. Additionally, the warrants to purchase shares of Series B preferred stock issued in connection with the term loans converted to warrants to purchase common stock. The associated preferred stock warrant liability was revalued to fair value and reclassified to additional paid-in capital.

Research and Development Expenses

Research and development expenses consist primarily of fees paid to contract research organizations and other vendors for clinical, non-clinical and manufacturing services, salaries and related overhead expenses, consultant expenses, costs related to acquiring manufacturing materials and costs related to compliance with regulatory requirements.

The Company recognizes research and development expenses as incurred, typically estimated based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, manufacturing steps completed, or information provided by vendors on their actual costs incurred. The Company determines the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. These estimates are made by the Company as of each balance sheet date based on facts and circumstances known to the Company at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the estimate accordingly. Nonrefundable advance payments for goods and services, including fees for process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are capitalized as prepaid expenses and recognized as expense in the period that the related goods are consumed or services are performed.

The Company may pay fees to third-parties for clinical, non-clinical and manufacturing services that are based on contractual milestones that may result in uneven payment flows. There may be instances in which payments made to vendors will exceed the level of services provided and result in a prepayment of the research and development expense.

Stock-Based Compensation Expense

For stock options granted to employees, the Company recognizes compensation expense for all stock-based awards based on the grant date estimated fair value. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service period. The fair value of stock options is determined using the Black-Scholes option pricing model net of estimated forfeitures. The determination of fair value for stock-based awards on the date of grant using an option pricing model requires management to make certain assumptions regarding subjective variables.

Stock-based compensation expense related to stock options granted to non-employees is recognized based on the fair value of the stock options, determined using the Black-Scholes option pricing model, as the options are vested. The awards generally vest over the time period the Company expects to receive services from non-employees. Stock options granted to non-employees are subject to periodic revaluation over their vesting terms.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

The Company recognizes net deferred tax assets to the extent that the Company believes these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If management determines that the Company would be able to realize its deferred tax assets in the future in excess of their net recorded amount, management would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes, in the period such determination is made.

The Company is required to file federal and state income tax returns in the United States and various other state jurisdictions. The preparation of these income tax returns requires the Company to interpret the applicable tax laws and regulations in effect which could affect the amount of tax paid to these jurisdictions.

The Company follows the accounting guidance on accounting for uncertainty in income taxes. The guidance prescribes a recognition threshold and measurement attribute criteria for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities based on the technical merits of the position. The Company has not recognized interest or penalties in its Statements of Operations and Comprehensive Loss since inception.

Comprehensive Loss

Comprehensive loss is defined as the change in equity during a period from transactions and other events or circumstances from non-owner sources. Net loss and comprehensive loss were the same for all periods presented in the accompanying financial statements.

Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. The calculation of diluted loss per share also requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of such securities are dilutive to earnings (loss) per share for the period, adjustments to net income or net loss used in the calculation are required to remove the change in fair value of the warrants for the period. Likewise, adjustments to the denominator are required to reflect the related dilutive shares. For purposes of the diluted net loss per share calculation, convertible preferred stock, convertible notes and accrued interest, stock options and preferred stock warrants are considered to be potentially dilutive securities and are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. Therefore, basic and diluted net loss per share was the same for the periods presented due to the Company’s net loss position.

The following table sets forth the outstanding potentially dilutive securities, as adjusted retroactively to reflect the exchange for Regado shares, which have been excluded in the calculation of diluted net loss per share because including such would be anti-dilutive (in common stock equivalent shares):

	Year Ended December 31,
	2015		2014		2013
Common stock options		2,369,847		1,110,744		755,074
Warrants to purchase common stock		64,657		—		—
Warrants to purchase preferred stock		—		901,987		652,937
Convertible preferred stock		—		5,581,682		5,487,474
Convertible notes		—		3,368,650		2,342,727
Total		2,434,504		10,963,063		9,238,212

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous GAAP. For public business entities and other entities that are subject to SEC reporting and regulation, the amendments of the guidance are effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019 and interim periods within fiscal years beginning after December 15, 2020. Early application of the amendments is permitted for all entities. The Company is evaluating the impact of the guidance.

In November 2015, the FASB issued ASU, No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, which requires deferred tax assets and liabilities to be classified as noncurrent amounts on the Company’s balance sheet. For public business entities, the amendments of the guidance are effective for fiscal years beginning after December 15, 2016 and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2017 and interim periods with fiscal years beginning after December 15, 2018. Earlier adoption of the amendments is permitted for all entities as of the beginning of an interim or annual reporting period. The amendments may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. The Company adopted this guidance retrospectively for all periods presented in the accompanying financial statements. As of December 31, 2015 and 2014, the Company established a full valuation allowance on its net deferred tax assets and did not have any amounts outstanding.

In April 2015, the FASB issued ASU No. 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which amends the presentation of debt issuance costs as a direct deduction from the face amount of a liability rather than an asset. Amortization of debt issuance costs is to be reported as interest expense. Additionally, amortization of a discount or premium is to be reported as interest expense in the case of liabilities or interest income in the case of assets. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2015 and interim periods with fiscal years beginning after December 15, 2016. Earlier adoption of the amendments is permitted for financial statements that have not been previously issued, and the new guidance shall be applied retrospectively to comparative balance sheets presented. The Company expects to adopt this guidance for its 2016 fiscal year and does not expect adoption to have a material impact on its financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. This guidance is effective for fiscal periods ending after December 15, 2016, and, as such, will be applicable to the Company in 2016. Early adoption is permitted. The Company does not expect this standard to have a material impact on its financial statements.

In April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which changed the requirements for reporting disposals as discontinued operations. A disposal that represents a strategic shift that has a major effect on the Company’s operations and financial results, such as a major line of business, should be presented as a discontinued operation with additional financial disclosures. This guidance is effective for reporting periods beginning on or after December 15, 2014. The Company adopted this guidance during 2015. The decision to discontinue investment in the aptamer platform does not represent a strategic shift as prescribed by this guidance. Management concluded there was no impact to the Financial Statements resulting from adopting this guidance.