Balance Sheet Components

Prepaid Expenses and Other Current Assets

The following table summarizes the Company’s prepaid expenses and other current assets for each of the periods presented:



	December 31, 2019		December 31, 2018
	(in thousands)
Prepaid services	$	316	$	88
Deferred offering costs	65		114
Prepaid software and subscriptions	61		42
Prepaid insurance	49		45
Other	6		69
Total	$	497	$	358

Property and Equipment

The following table summarizes the Company’s property and equipment for each of the periods presented:



	December 31, 2019			December 31, 2018
	(in thousands)
Leasehold improvements	$	16,932		$	16,690
Manufacturing equipment	12,173			10,387
Laboratory and office equipment	1,610			1,434
Computer equipment and software	167			206
Construction-in-progress	20,602			9,558
	51,484			38,275
Less: accumulated depreciation	(26,848		)	(26,359		)
Total	$	24,636		$	11,916

Depreciation expense was approximately $0.7 million and $0.8 million for the years ended December 31, 2019 and 2018, respectively. The gross property and equipment and accumulated depreciation presented in the above table includes right-of-use assets acquired under finance leases and the corresponding accumulated amortization, respectively. Assets acquired under finance leases, "right-of-use" assets as of 1/1/19, were comprised of office and computer equipment. Assets acquired under finance leases included in property and equipment in the balance sheets were $54,000 and $24,000 at December 31, 2019 and 2018, respectively. Accumulated amortization on assets acquired under finance leases were $27,000 and insignificant at December 31, 2019 and 2018, respectively.

As of December 31, 2019, construction-in-progress included $12.4 million of an asset relating to the build-to-suit arrangement for construction of the Company's commercial coating and primary packaging system, of which capitalized construction period interest was $1.5 million (See Note 6. Debt Financing).

Impairment

The Company evaluates its long-lived assets for indications of possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of the asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds the fair value of the asset.

There was no impairment of long-lived assets during the year ended December 31, 2019. For the year ended December 31, 2018, the Company recognized $0.5 million of impairment losses, primarily related to laboratory and manufacturing equipment with no current or future utility to the Company.

Previously, the Company discontinued its D107 research and development program, and concluded that the D107 related assets could be repurposed. In 2018, the Company performed an impairment analysis of the D107 related assets to determine fair value based on highest and best use. The Company concluded that only certain of these assets would be able to be repurposed for other research and development projects. As a result, the Company determined the fair value based on its highest and best use and that for certain D107 related assets, the carrying value of the assets was not entirely recoverable and the fair value, which was calculated using the market or cost approach depending on the specific asset, was lower than the carrying value. Accordingly, the Company recorded an impairment loss of approximately $0.4 million for D107 related assets for the year ended December 31, 2018

In 2018, the Company defined its manufacturing strategy for Qtrypta™ (M207), resulting in the decision to use CMOs for future clinical supply and commercial product production. As a result of this strategy, the Company entered into a drug delivery and supply agreement with a new supplier to design and manufacture the Company’s next generation applicator, obsoleting custom manufacturing equipment that had been used to manufacture the Company’s current applicator. The Company performed an impairment analysis of the manufacturing equipment assets to determine fair value based on highest and best use. The Company concluded that due to the custom nature of the assets that they could not be repurposed and that there was not a secondary market for the assets. As a result, the Company determined the fair value was not entirely recoverable and the fair value, which was calculated using the market or cost approach depending on the specific asset, was lower than the carrying value. Accordingly, the Company recorded an impairment loss of approximately $0.1 million for custom manufacturing assets for the year ended December 31, 2018.

Other Accrued Liabilities

The following table summarizes the Company’s other accrued liabilities for each of the periods presented:



	December 31, 2019		December 31, 2018
	(in thousands)
Construction-in-progress obligations	$	3,422	$	395
Contract manufacturing	250		834
Professional service fees	206		112
Pre-clinical and clinical studies	43		483
Accrued taxes	27		187
Other	206		403
Total	$	4,154	$	2,414