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Basis of Presentation, Accounting Policies and Going Concern (Policies)
12 Months Ended
Dec. 31, 2015
Basis of Presentation, Accounting Policies and Going Concern  
Use of Estimates

 

Use of Estimates

 

The preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in which they become known. Actual results could differ from those estimates.

 

 

Cash, Cash Equivalents and Marketable Securities

 

Cash, Cash Equivalents and Marketable Securities

 

All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. As of December 31, 2015, the amount of cash and cash equivalents was approximately $61.7 million and consists of checking accounts and short-term money market mutual funds. As of December 31, 2014, the amount of cash and cash equivalents was approximately $146.5 million and consisted of checking accounts and short-term money market funds with U.S. commercial banks. At any point in time, the Company’s balance of cash and cash equivalents may exceed federally insured limits.

 

The Company’s marketable securities as of December 31, 2015 and 2014 consist of approximately $50.1 million and $49.9 million, respectively, in U.S. Treasury and U.S. government sponsored entity securities with maturities of less than one year, and have been classified and accounted for as available-for-sale. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the available-for-sale designations as of each balance sheet date. As of December 31, 2015 and 2014, gross unrealized losses were not material. The Company recognized no net realized gains or losses for the year ended December 31, 2015 and 2014. Fair values were determined for each individual security in the investment portfolio. When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and the Company’s intent to sell, or whether it is more likely than not it will be required to sell, the investment before recovery of the investment’s amortized cost basis. During the year ended December 31, 2015 and 2014, the Company did not recognize any impairment charges.

 

 

Derivative Instruments

 

Derivative Instruments

 

The Company’s derivative liabilities are related to warrants issued in connection with financing transactions and are therefore not designated as hedging instruments. All derivatives are recorded on the Company’s balance sheet at fair value in accordance with current accounting guidelines for such complex financial instruments. Changes in fair value are recorded in the Company’s statement of operations.

 

 

Fair Value of Financial Instruments

 

Fair Value of Financial Instruments

 

In accordance with Accounting Standards Codification (“ASC”) Subtopic 820-10, the Company measures certain assets and liabilities at fair value on a recurring basis using the three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The three tiers include:

 

  Level 1, defined as observable inputs such as quoted prices for identical assets in active markets;

 

  Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

 

  Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring management to develop its own assumptions based on best estimates of what market participants would use in pricing an asset or liability at the reporting date.

 

Financial instruments consist of cash and cash equivalents, marketable securities, accounts payable and derivative instruments. These financial instruments are stated at their respective historical carrying amounts, which approximate fair value due to their short term nature, except for derivative instruments which are marked to market at the end of each reporting period.

 

The value Senior Convertible Notes are stated at their carrying value at December 31, 2015 and 2014. Carrying value approximates fair value because the Company believes it could obtain borrowings at December 31, 2015 at comparable interest rates as these November 2014 Senior Notes, therefore, the carrying value approximates fair value.

 

 

Property, equipment and depreciation

 

Property, equipment and depreciation

 

Expenditures for additions, renewals and improvements are capitalized at cost. Depreciation is computed on a straight-line method based on the estimated useful lives of the related assets. The estimated useful lives of the major classes of depreciable assets are 2 to 5 years for equipment and furniture and fixtures. Leasehold improvements are depreciated over the remaining useful life of the lease. Expenditures for repairs and maintenance are charged to operations as incurred. Synergy periodically evaluates whether current events or circumstances indicate that the carrying value of its depreciable assets may not be recoverable.

 

 

Income Taxes

 

Income Taxes

 

Income taxes have been determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes result from differences between the financial statement and tax bases of Synergy’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The assessment of whether or not a valuation allowance is required often requires significant judgment.

 

 

Contingencies

 

Contingencies

 

In the normal course of business, Synergy is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, product and environmental liability, and tax matters. In accordance with FASB ASC Topic 450, Accounting for Contingencies (“ASC Topic 450”), Synergy records accruals for such loss contingencies when it is probable that a liability will be incurred and the amount of loss can be reasonably estimated. Synergy, in accordance with this guidance, does not recognize gain contingencies until realized. For a discussion of contingencies, see Note 8, Commitments and Contingencies below.

 

 

Research and Development

 

Research and Development

 

Research and development costs include expenditures in connection with an in-house research and development laboratory, salaries and staff costs, application and filing for regulatory approval of proposed products, regulatory and scientific consulting fees, as well as contract research, patient costs, drug formulation and tableting, data collection, monitoring, and clinical trial insurance.

 

In accordance with FASB ASC Topic 730-10-55, Research and Development, Synergy recorded prepaid research and development costs of approximately $3.1 million and $3.7 million as of December 31, 2015 and December 31, 2014, respectively, of pre-payments for production of drug substance, analytical testing services and clinical trial monitoring for its drug candidates. In accordance with this guidance, Synergy expenses these costs when drug substance is delivered and/or services are performed.

 

 

Loss Per Share

 

Loss Per Share

 

Basic and diluted net loss per share is presented in conformity with ASC Topic 260, Earnings per Share, (“ASC Topic 260”) for all periods presented. In accordance with this guidance, basic and diluted net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period. Diluted weighted-average shares are the same as basic weighted-average shares because shares issuable pursuant to the exercise of stock options would have been antidilutive. For the years ended December 31, 2015, 2014 and 2013, the effect of 20,953,375, 16,567,020 and 11,324,049, respectively, outstanding stock options and 4,726,823, 5,647,203 and 5,647,203, respectively, outstanding warrants were excluded from the calculation of diluted loss per share because the effect was antidilutive.

 

The Senior Convertible Notes carrying value of $159 million is convertible into 51,128,938 shares of common stock at December 31, 2015, the effect of which was excluded from the calculation of diluted loss per share because it was antidilutive. As of December 31, 2014, the carrying value of these notes was $200 million and was convertible into, 64,308,680 shares of common stock, the effect of which was excluded from the calculation of diluted loss per share because it was antidilutive.

 

 

Recent Accounting Pronouncements

 

Recent Accounting Pronouncements

 

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The updated guidance enhances the reporting model for financial instruments, and requires entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, and the separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements. The guidance is effective for annual and interim reporting periods beginning after December 15, 2017. The Company is currently evaluating the effect the guidance will have on the Consolidated Financial Statements.

 

In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”), which requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU simplifies the current guidance in ASC Topic 740, Income Taxes, which requires entities to separately present deferred tax assets and liabilities as current and noncurrent in a classified balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for all entities as of the beginning of an interim or annual reporting period. The Company expects that this guidance will have no effect on the Consolidated Financial Statements.

 

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of debt issuance costs in the financial statements. Under the standard, debt issuance costs are presented in the balance sheet as a direct deduction from the related debt liability rather than as an asset. In addition amortization of debt issuance costs are to be combined with interest expense in the statement of operations. The guidance is effective for annual and interim reporting periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this guidance during the quarter ended June 30, 2015. (See Note 5 to the financial statements.)