INSPYR THERAPEUTICS, INC., 10-Q filed on 15 May 17
Document and Entity Information
3 Months Ended
Mar. 31, 2017
May 9, 2017
Document And Entity Information
 
 
Entity Registrant Name
Inspyr Therapeutics, Inc. 
 
Entity Central Index Key
0001421204 
 
Document Type
10-Q 
 
Trading Symbol
NSPX 
 
Document Period End Date
Mar. 31, 2017 
 
Amendment Flag
false 
 
Current Fiscal Year End Date
--12-31 
 
Entity a Well-known Seasoned Issuer
No 
 
Entity a Voluntary Filer
No 
 
Entity's Reporting Status Current
Yes 
 
Entity Filer Category
Non-accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
1,582,417 
Document Fiscal Period Focus
Q1 
 
Document Fiscal Year Focus
2017 
 
CONDENSED BALANCE SHEETS (Unaudited) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 33 
$ 547 
Receivable for sale of preferred stock
10 
   
Prepaid expenses
132 
112 
Total current assets
175 
659 
Office equipment, net of accumulated depreciation of $1 and $0
Intangible assets, net of accumulated amortization of $149 and $144
63 
68 
Other assets
Total assets
247 
734 
Current liabilities:
 
 
Accounts payable
1,330 
1,238 
Accrued expenses
436 
384 
Derivative liability
2,419 
2,541 
Total current liabilities
4,185 
4,163 
Total liabilities
4,185 
4,163 
Commitments and contingencies (Note 7)
   
   
Stockholders' deficit:
 
 
Convertible preferred stock, par value $.0001 per share; 30,000,000 shares authorized, 2,957 and 2,828 shares issued and outstanding, respectively
   
   
Common stock, par value $.0001 per share; 150,000,000 shares authorized, 1,532,417 and 1,398,832 shares issued and outstanding, respectively
   
   
Additional paid-in capital
45,541 
45,391 
Accumulated deficit
(49,479)
(48,820)
Total stockholders' deficit
(3,938)
(3,429)
Total liabilities and stockholders' deficit
$ 247 
$ 734 
CONDENSED BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]
 
 
Office equipment, accumulated depreciation (in dollars)
$ 1 
$ 0 
Intangible assets, accumulated amortization (in dollars)
$ 149 
$ 144 
Preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Preferred stock, shares authorized
30,000,000 
30,000,000 
Preferred stock, shares issued
2,957 
2,828 
Preferred stock, shares outstanding
2,957 
2,828 
Common stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
Common stock, shares authorized
150,000,000 
150,000,000 
Common stock, shares issued
1,532,417 
1,398,832 
Common stock, shares outstanding
1,532,417 
1,398,832 
CONDENSED STATEMENTS OF LOSSES (unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Operating expenses:
 
 
Research and development
$ 465 
$ 323 
General and administrative
460 
707 
Total operating expenses
925 
1,030 
Loss from operations
(925)
(1,030)
Other income (expense):
 
 
Gain on change in fair value of derivative liability
1,683 
538 
Interest income (expense), net
(1,417)
Loss before provision for income taxes
(659)
(490)
Provision for income taxes
   
   
Net loss
$ (659)
$ (490)
Net loss per common share, basic and diluted (in dollars per share)
$ (0.45)
$ (0.35)
Weighted average shares outstanding (in shares)
1,464,490 
1,392,079 
CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIT (unaudited) (USD $)
In Thousands, except Share data, unless otherwise specified
Convertible Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Accumulated Deficit [Member]
Total
Balance at beginning at Dec. 31, 2016
    
    
$ 45,391 
$ (48,820)
$ (3,429)
Balance at beginning (in shares) at Dec. 31, 2016
2,828 
1,398,832 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
Stock-based compensation
   
   
94 
   
94 
Conversion of preferred stock
   
   
   
   
   
Conversion of preferred stock (in shares)
(71)
133,585 
 
 
 
Reclasification of derivative liability
   
   
56 
   
56 
Sale of preferred stock and warrants
   
   
195 
   
195 
Sale of preferred stock and warrants (in shares)
195 
   
 
 
 
Preferred stock and warrants issued for services
   
   
   
Preferred stock and warrants issued for services (in shares)
 
 
 
 
Derivative liability
   
   
(200)
   
(200)
Net loss
   
   
   
(659)
(659)
Balance at end at Mar. 31, 2017
    
    
$ 45,541 
$ (49,479)
$ (3,938)
Balance at end (in shares) at Mar. 31, 2017
2,957 
1,532,417 
 
 
 
CONDENSED STATEMENTS OF CASH FLOWS (unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Cash flows from operating activities:
 
 
Net loss
$ (659)
$ (490)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation and amortization
Stock-based compensation
99 
23 
Gain on change in fair value of derivative liability
(1,683)
(538)
Finance cost
1,417 
   
Increase in operating assets:
 
 
Receivable for sale of preferred stock
(10)
 
Prepaid expenses
(20)
(2)
Increase in operating liabilities:
 
 
Accounts payable and accrued expenses
144 
95 
Cash used in operating activities
(706)
(907)
Cash flows from investing activities:
 
 
Acquisition of office equipment
(3)
   
Cash used in investing activities
(3)
   
Cash flows from financing activities:
 
 
Proceeds from sale of stock and warrants
195 
   
Cash provided by financing activities
195 
   
Net decrease in cash
(514)
(907)
Cash, beginning of period
547 
2,465 
Cash, end of period
$ 33 
$ 1,558 
BACKGROUND
BACKGROUND

NOTE 1 – BACKGROUND

 

Inspyr Therapeutics, Inc. (“we”, “us”, “our company”, “our”, “Inspyr” or the “Company”) was formed under the laws of the State of Delaware in November 2003, and has its principal office in Westlake Village, California. We are an early-stage, pre-revenue, pharmaceutical company focused on the discovery and development of prodrug cancer therapeutics for the treatment of solid tumors, including brain, liver, prostate and other cancers. We plan to develop a series of therapies based on our target-activated prodrug technology platform.

 

Effective August 1, 2016, pursuant to a certificate of amendment to our amended and restated certificate of incorporation, we changed our corporate name from GenSpera, Inc. to Inspyr Therapeutics, Inc. Effective August 1, 2016, our common stock ceased trading under the symbol “GNSZ” and began trading under the symbol NSPX on August 2, 2016.

 

Effective November 17, 2016 at 5:00 p.m. Eastern Time, we effected a one (1) for thirty (30) reverse stock split of our common stock. Accordingly, each of our shareholders received one (1) new share of common stock for every thirty (30) shares of common stock such shareholder held immediately prior to the effective time of the reverse split. The reverse stock split affected all of our issued and outstanding shares of common stock as well as the number of shares of common stock underlying stock options, warrants and other exercisable or convertible instruments outstanding at the effective time of the reverse split. The reverse split also has the effect of proportionately increasing the applicable conversion or exercise price of such convertible securities. The shareholders received no fractional shares and instead had every fractional share rounded up to the next whole number.

 

All references to common stock, share and per share amounts have been retroactively restated to reflect the 1:30 reverse stock split as if it had taken place as of the beginning of the earliest period presented.

 

We are an early-stage, pre-revenue, pharmaceutical company focused on the development of prodrug cancer therapeutics for the treatment of solid tumors. A prodrug is an inactive precursor of a drug that is converted into its active form only at the site of the tumor. Our technology platform combines a powerful cytotoxin with a patented prodrug delivery system that targets the release of the drug within the tumor. We believe our cancer prodrugs have the potential to provide a targeted therapeutic approach to a broad range of solid tumors with fewer side effects than those related to current cytotoxic chemotherapy treatments. Our lead drug candidate, mipsagargin, has completed an open label single arm Phase II clinical trial in patients with advanced hepatocellular carcinoma (HCC) or liver cancer.

 

Our major focus for the next twelve to eighteen months is the (i) development of a clinical protocol for and enrollment into a dose optimization trial of single-agent mipsagargin followed by a clinical trial in patients with advanced HCC, (ii) completion of the non-clinical study of mipsagargin in combination with Nexavar® in liver tumor models (iii) development of a Phase 1b clinical protocol of mipsagargin in combination with Nexavar® in patients with Nexavar® naïve HCC in anticipation of positive non-clinical data, (iv) completion of a nonclinical study of mipsagargin in combination with paclitaxel and in combination with DC101 (Cyramza surrogate antibody) in gastric cancer tumor models, (v) ongoing business development discussions with potential development partners, (vi) evaluation of mipsagargin (single agent and in combination with standard of care) in nonclinical models of other solid tumor types that express PSMA, (vii) evaluate our PSMA-peptide prodrug technology with new linkers and new payloads in non-clinical models, and (viii) explore collaborations utilizing mipsagargin in new, non-clinical solid tumor models with leading researchers in the oncology field.

 

A review of ongoing investigator led clinical trials resulted in the discontinuation of studies to realign with our mipsagargin clinical strategy of prioritizing smaller, potentially faster to market indications, pursuing mipsagargin combinations with standard of care, and conducting key clinical trials as company sponsored studies. Larger market indications will be pursued subsequently. The investigator led studies that were discontinued during the realignment were G202-004 (An Open-Label, Single-Arm, Phase II Study to Evaluate the Efficacy, Safety and CNS Exposure of G-202 in Patients with Recurrent or Progressive Glioblastoma), G202-005 (An Open-Label, Single-Arm, Phase II Study to Evaluate the Safety and Activity of G-202 Administered in the Neoadjuvant Setting Followed by Radical Prostatectomy in Patients with Adenocarcinoma of the Prostate) and G202-006 (An Open-Label, Single-Arm, Phase II Study to Evaluate the Safety and Activity of G-202 in Patients with Clear Cell Renal Cell Carcinoma that Expresses PSMA); all studies were closed December 2016

 

In January 2015, we presented preliminary results from our Phase II study of mipsagargin in advanced liver cancer patients, and these data were updated in May 2015 when we received a final clinical study report. We consider the results of the study to be positive, with 41% of evaluable patients demonstrating a reduction in tumor burden, 63% of treated patients having stable disease, and a median time to progression of 4.5 months. Additionally, the trial demonstrated that mipsagargin is effective at destroying the vascularity of solid tumors thereby starving the tumor. These results support our plans to continue the development of mipsagargin for patients with liver cancer, as well as proceed with our development strategy in other indications.

 

In January 2017, we announced the initiation of development programs focused on mipsagargin combination therapies with the start of the first nonclinical combination study of mipsagargin in combination with Nexavar® in HCC tumor models. 

 

In February 2017, we announced the start of our second nonclinical combination study of mipsagargin in combination with paclitaxel in gastric cancer tumor models. In addition, the Company plans to evaluate Mipsagargin in combination with DC101 (Cyramza® surrogate antibody).

 

While we believe that the data from our nonclinical and completed clinical studies appear promising, the outcome of our ongoing or future studies may ultimately be unsuccessful.

 

Our ability to execute our business plan is dependent on the amount and timing of cash, if any, that we are able to raise. Should we not raise sufficient funds to execute our business plan, our priority is the completion of the nonclinical studies of mipsagargin in HCC and gastric cancer and continuing business development discussions with potential development partners.

MANAGEMENT'S PLANS TO CONTINUE AS A GOING CONCERN
MANAGEMENT'S PLANS TO CONTINUE AS A GOING CONCERN

NOTE 2 – MANAGEMENT’S PLANS TO CONTINUE AS A GOING CONCERN

 

The opinion of our independent registered accounting firm on our financial statements contains explanatory going concern language. We have prepared our financial statements on the basis that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures made are adequate to make the information not misleading. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for fair presentation have been included. We have incurred losses since inception and have an accumulated deficit of $49.5 million as of March 31, 2017. We anticipate incurring additional losses for the foreseeable future until such time, if ever, that we can generate significant sales from our therapeutic product candidates which are currently in development or we enter into cash flow positive business development transactions.

 

To date, we have generated no sales or revenues, have incurred significant losses and expect to incur significant additional losses as we advance mipsagargin through clinical studies. Consequently, our operations are subject to all the risks inherent in the establishment of a pre-revenue business enterprise as well as those risks associated with a company engaged in the research and development of pharmaceutical compounds. 

  

Our cash and cash equivalents balance at March 31, 2017 was $0.03 million, representing 13% of our total assets. Based on our current expected level of operating expenditures, and financings completed in the first and second quarters of 2017, we expect to be able to fund our operations into the second quarter of 2017. We will require additional cash to fund and continue our operations beyond that point. This period could be shortened if there are any unanticipated increases in planned spending on development programs or other unforeseen events. We anticipate raising additional funds through collaborative arrangements, licensing agreements, public or private sales of debt or equity securities, or some combination thereof. There is no assurance that any such arrangement will be entered into or that financing will be available when needed in order to allow us to continue our operations, or if available, on terms favorable or acceptable to us.

 

In the event financing is not obtained, we may pursue cost cutting measures as well as explore the sale of selected assets to generate additional funds. If we are required to significantly reduce operating expenses and delay, reduce the scope of, or eliminate any of our development programs or clinical trials, these events could have a material adverse effect on: our business, results of operations, and financial condition. These factors raise significant doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

 

Our auditors’ report issued in connection with our December 31, 2016 financial statements expressed an opinion that our capital resources as of the date of their audit report were not sufficient to sustain operations or complete our planned activities for the upcoming year unless we raised additional funds. Accordingly, our current cash level raises substantial doubt about our ability to continue as a going concern past second quarter of 2017. If we do not obtain additional funds by such time, we may no longer be able to continue as a going concern and will cease operations which means that our shareholders will lose their entire investment.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

NOTE 3 – SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

 

Basis of Presentation

 

The accompanying condensed financial statements are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

These interim financial statements as of and for the three months ended March 31, 2017 and 2016 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or for any future period. All references to March 31, 2017 and 2016 in these footnotes are unaudited.

 

These unaudited condensed financial statements should be read in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2016, included in the Company's annual report on Form 10-K filed with the SEC on April 17, 2017. 

 

The condensed balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

 

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results may differ from those estimates.

 

Research and Development

 

Research and development costs are charged to expense as incurred. Our research and development expenses consist primarily of expenditures for manufacturing, clinical trials, employee compensation and consulting costs and expenses.

 

We incurred research and development expenses of approximately $0.5 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively.

 

Loss per Share

 

Basic loss per share is calculated by dividing net loss and net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. The following potentially dilutive securities have been excluded from the computations of weighted average shares outstanding as of March 31, 2017 and 2016, as they would be anti-dilutive:

 

    Three months ended March 31,  
    2017     2016  
Shares underlying options outstanding     363,152       301,940  
Shares underlying warrants outstanding     6,075,744       1,363,272  
Shares underlying convertible preferred stock outstanding     5,469,167       411,806  
      11,908,063       2,077,018  

 

Derivative Liability

 

The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding preferred stock.

 

Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. Using this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to December 25, 2015 are derivative liabilities. The Company values these derivative liabilities using the Black-Scholes option valuation model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations.

 

Fair Value of Financial Instruments

 

Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments with maturities of three months or less when acquired. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts.

 

The derivative liability consists of our convertible preferred stock with anti-dilution provisions, and related warrants. The Company uses the Black-Scholes option pricing model to value its derivative liability which incorporate the Company’s stock price, volatility, U.S. risk-free interest rate, dividend rate, and estimated life.

 

Fair Value Measurements

 

Valuation Hierarchy - GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

 

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

 

Level 2: Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3: Unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

 

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company has recorded a derivative liability for convertible preferred stock with anti-dilution provisions, and related warrants, as of March 31, 2017. The table below summarizes the fair values of our financial liabilities as of March 31, 2017 (in thousands):

 

    Fair Value at
March 31,
    Fair Value Measurement Using  
    2017     Level 1     Level 2     Level 3  
                         
Derivative liability   $ 2,419     $     $     $ 2,419  

 

The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

 

    Three months ended March 31,  
    2017     2016  
             
Balance at beginning of year   $ 2,541     $ 1,177  
Additions to derivative instruments     1,617        
Reclassification on conversion     (56 )      
Gain on change in fair value of derivative liability     (1,683 )     (538 )
Balance at end of period   $ 2,419     $ 639  

 

Stock-Based Compensation

 

We measure the cost of employee services received in exchange for equity awards based on the grant-date fair value of the awards. All awards under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period).

 

Compensation expense for options granted to non-employees is determined in accordance with the fair value of the consideration received or the fair value of the equity instruments issued, whichever is a more reliable measurement. Compensation expense for awards granted to non-employees is re-measured on each accounting period.

 

Determining the appropriate fair value of stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based compensation and the volatility of our stock price. We use the Black-Scholes option-pricing model to value our stock option awards which incorporates our stock price, volatility, U.S. risk-free interest rate, dividend rate, and estimated life.

 

Recent Accounting Pronouncements

 

There are various recently issued accounting updates, most of which represented technical corrections to the accounting literature or application to specific industries, which are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION

NOTE 4 – SUPPLEMENTAL CASH FLOW INFORMATION

 

The following table contains additional information for the periods reported (in thousands).

 

    Three Months Ended March 31,  
    2017     2016  
Non-cash financial activities:                
Derivative liability issued     1,417        
Preferred stock and warrants issued for fees     5        

 

There was no cash paid for interest and income taxes for the three months ended March 31, 2017 and 2016.

ACCRUED EXPENSES
ACCRUED EXPENSES

NOTE 5 – ACCRUED EXPENSES

 

Accrued expenses consist of the following (in thousands):

 

    March 31,
2017
    December 31,
2016
 
Accrued compensation and benefits   $ 69     $ 62  
Accrued research and development     126       126  
Accrued other     241       196  
Total accrued expenses   $ 436     $ 384  
DERIVATIVE LIABILITY
DERIVATIVE LIABILITY

NOTE 6 – DERIVATIVE LIABILITY

 

We account for equity-linked financial instruments, such as our convertible preferred stock, and our common stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the respective agreement. Equity-linked financial instruments are accounted for as derivative liabilities, in accordance with ASC Topic 815 – Derivatives and Hedging, if the instrument allows for cash settlement or provide for modification of the exercise price in the event subsequent sales of common stock are at a lower price per share than the then-current warrant exercise price. Additionally, financial instruments are classified as derivative liabilities if, as a result of the anti-dilution protection, there is no limit on the number of shares that may be subsequently issued and we conclude there are not adequate authorized shares available to provide for subsequent issuances. We classify derivative liabilities on the balance sheet at fair value, and changes in fair value during the periods presented in the statement of operations, which is revalued at each balance sheet date subsequent to the initial issuance of the stock warrant.

 

In March 2017, we issued shares of Series C convertible preferred stock which contain anti-dilution protection and other conversion price adjustment provisions, and related warrants which contain anti-dilution protection and other exercise price adjustment provisions. As a result, the Company assessed its outstanding equity-linked financial instruments and concluded that this series of preferred stock, and related warrants, is subject to derivative accounting. The fair value of these shares is classified as a liability in the financial statements, with the change in fair value during the periods presented recorded in the statement of operations. We have recorded a finance cost of approximately $0.1 million due to the excess of the liability over the proceeds received.

 

As a result of recent equity financings, the conversion prices of our Series A Preferred Stock and our Series B preferred stock has been reduced to $0.53 per share. The exercise prices of the warrants issued in conjunction with the Series B preferred stock have also been reduced to $0.53 per share. As a result, we have recorded a finance cost of approximately $1.3 million due to the repricing during the three months ended March 31, 2017.

 

During the three months ended March 31, 2017, we recorded a gain of approximately $1.7 million related to the change in fair value of the derivative liabilities during the period. For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuations of the derivatives at March 31, 2017 are as follows: 

 

    2017
Volatility   102%-269%
Expected term (years)   3 - 60 months
Risk-free interest rate   0.76% -1.93%
Dividend yield   None

 

During the three months ended March 31, 2016, we recorded a gain of approximately $0.5 million related to the change in fair value of the derivative liability during the period. For purpose of determining the fair market value of the derivative liability, the Company used Black Scholes option valuation model. The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

 

    2016
Volatility   68%
Expected term (years)   15 months
Risk-free interest rate   0.63%
Dividend yield   None

 

As of March 31, 2017 and December 31, 2016, the derivative liability recognized in the financial statements was approximately $2.4 million and $2.5 million, respectively.

COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company currently does not have any ongoing leases for office space. It has availability to office space on an as needed basis. Its employees work on a remote basis. Rent expense for office space amounted to $0 and approximately $15,000 for the three months ended March 31, 2017 and 2016, respectively. 

 

Employment Agreements

 

We employ our Chief Executive Officer, our Chief Operating Officer and our Chief Medical Officer pursuant to written employment agreements. The employment agreements contain severance provisions and indemnification clauses. The indemnification agreement provides for the indemnification and defense of the executive officers, in the event of litigation, to the fullest extent permitted by law.

 

On February 28, 2017, Russell Richerson, PhD, resigned as chief operating officer of the Company, effective immediately. Dr. Richerson entered into a separation release of claims agreement (“Separation Agreement”) pursuant to which the Company: (i) issued Dr. Richerson a warrant to purchase 76,726 shares of Common Stock with an exercise price of $0.75 per share and a term of three and a half (3.5) years, (ii) agreed to make the vested portion of any options held by Dr. Richerson, exercisable at any time during their remaining term regardless of any termination provisions contained in the applicable equity compensation plans pursuant to which such awards were made (collectively, the “Awards”) and (iii) agreed to reduce the exercise prices of such Awards to $0.75 per share for the duration of their respective terms. In consideration of the foregoing, Dr. Richerson agreed to release the Company from any and all claims, including any rights or obligations as contained in his prior employment agreement, as amended.

 

Severance provisions are not applicable to any other executive officer employment agreements until such time as they have each been employed for at least 6 months and the Company has raised $25 million in gross proceeds from capital raising transactions. Severance provisions pursuant to a termination within 12 months of a Sale Event occurring are not applicable as of March 31, 2017, as no Sale Event has occurred prior to such date.

 

Legal Matters

 

On March 16, 2016, Dr. Craig Dionne provided us his notice of termination as the company’s Chief Executive Officer and Chief Financial Officer. Dr. Dionne’s notice of termination states that such termination was for “Good Reason” as a result of a material change in his authority, functions, duties and responsibilities as chief executive officer. In the event that termination was for “Good Reason”, Dr. Dionne would be entitled to certain severance payments as well as other benefits. The notice of termination, in additional to requesting such severance, also requests the payment of Dr. Dionne’s annual and long term bonus for 2014 and 2015. While the Company disputes that the termination was for “Good Reason,” as well as the amount of the bonuses due Dr. Dionne, if any, at this time the Company is unable to predict the financial outcome of this matter, and any views formed as to the viability of these claims or the financial liability which could result may change from time to time as the matter proceeds through its course. The Company is uncertain whether any litigation may result from the foregoing and the outcome of any such litigation is uncertain.

 

The Company is subject at times to other legal proceedings and claims, which arise in the ordinary course of its business.  Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.

STOCK OPTIONS
STOCK OPTIONS

NOTE 9 – STOCK OPTIONS

 

Total stock-based compensation expense recognized for stock options issued using the straight-line method in the statement of operations for the three months ended March 31, 2017 and 2016 was as follows:

  

    Three months ended March 31,  
    2017     2016  
             
Research and development   $ 70     $ 5  
General and administrative     24       18  
    $ 94     $ 23  

 

The following table summarizes stock option activity for the three month ended March 31, 2017:

 

    Number of
shares
    Weighted-
average
exercise
price
    Weighted-average
remaining
contractual term
(in years)
    Aggregate
intrinsic
value (in
thousands)
 
Outstanding at December 31, 2016     268,876     $ 24.15                  
Granted     98,245     $ 0.55                  
Forfeited     (3,969 )   $ 69.95                  
Outstanding at March 31, 2017     363,152     $ 8.52       5.1     $  
                                 
Exercisable at March 31, 2017     160,023     $ 16.06       3.3     $  

 

As of March 31, 2017, there was approximately $201,000 of total unrecognized compensation cost related to non-vested stock options which vest which vest over time, and is estimated to be recognized $109,000 in 2017, $68,000 in 2018, $12,000 in 2019 and $12,000 in 2020. 

 

During the three months ended March 31, 2017, we issued options to purchase 2,335 shares of common stock to a non-employee director. Additionally, we issued options to purchase 95,910 shares of common stock to employees. During the three months ended March 31, 2016, we issued options to purchase 1,767 shares of common stock to a non-employee director. Additionally, we issued options to purchase 10,167 shares of common stock to consultants and advisors. The weighted-average fair value of the options granted during 2017 and 2016 was estimated at $0.59 and $2.10 per share, respectively, on the date of grant. During the three months ended March 31, 2017 and 2016, no options were exercised.

 

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the three months ended March 31, 2017 and 2016:

 

    Three months ended March 31,  
    2017     2016  
Volatility     127.2 %     76.0 %
Expected term (years)     3.2       2.7  
Risk-free interest rate     1.42 %     1.1 %
Dividend yield     0 %     0 %
CAPITAL STOCK AND STOCKHOLDERS' EQUITY
CAPITAL STOCK AND STOCKHOLDER'S EQUITY

NOTE 8 – CAPITAL STOCK AND STOCKHOLDER’S EQUITY

 

Preferred Stock

 

In March, 2017, we sold 200 shares of Series C 0% Convertible Preferred Stock. The Series C Preferred Stock has a stated value of $1,000 and is immediately convertible into 266,673 shares of the Company’s common stock, subject to certain beneficial ownership limitations, at a conversion price equal to $0.75, subject to adjustment. The Conversion Price is subject to certain reset adjustments as more fully described in the Certificate of Designation (as defined below), including (a) the date of any future amendment to the Company’s certificate of incorporation with respect to a reverse stock split. The Series C Preferred Stock has anti-dilution protection until such the twelve (12) month anniversary of the issuance of the Series C Preferred Stock. See “March 2017 Offering” below for further discussion.

 

Between January 1 and March 31, 2017, 31.8 shares of Series A Preferred Stock and 39 shares of Series B Preferred Stock were converted into a total of 133,585 shares of common stock.

 

Common Stock

 

Between January 1 and April 5, 2017, we issued a total of 133,585 shares of common stock upon the conversion of 31.8 shares of Series A Preferred Stock and 39 shares of Series B Preferred Stock.

 

Equity Financings

 

March 2017 Offering

 

In March, 2017, we sold $200,000 of the Company’s securities consisting of 200 shares of Series C 0% Convertible Preferred Stock and an aggregate of 800,019 common stock purchase warrants as described below. The Series C Preferred Stock has a stated value of $1,000 and is immediately convertible into 266,673 shares of the Company’s common stock, subject to certain beneficial ownership limitations, at a conversion price equal to $0.75, subject to adjustment. The Conversion Price is subject to certain reset adjustments as more fully described in the Certificate of Designation (as defined below), including (a) the date of any future amendment to the Company’s certificate of incorporation with respect to a reverse stock split. The Series C Preferred Stock has anti-dilution protection until such the twelve (12) month anniversary of the issuance of the Series C Preferred Stock. 

 

The Investors also received an aggregate of approximately: (i) 266,673 Series M common stock purchase warrants (“Series M Warrants”), (ii) 266,673 Series N common stock purchase warrants (“Series N Warrants”) and (iii) 266,673 Series O common stock purchase warrants (“Series O Warrants”) (collectively, the “Warrants”). The Series M Warrants have an exercise price of $0.90 per share, subject to adjustment, and a term of five (5) years from the date of issuance, the Series N Warrants have an exercise price of $0.75 per share, subject to adjustment, and a term of six (6) months from the date of issuance and the Series O warrants have an exercise price of $0.75, subject to adjustment, and a term of twelve (12) months from the date of issuance. The Warrants are immediately exercisable and separately transferable from the Series C Preferred Stock. In the event that the shares underlying the Warrants are not subject to a registration statement at the time of exercise, the Warrants may be exercised on a cashless basis after 6 months from the issuance date. The Warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. Additionally, the Warrants contain anti-dilution protection until the twelve (12) month anniversary of the issuance date.

WARRANTS
WARRANTS

NOTE 10 – WARRANTS

 

On February 28, 2017, Russell Richerson, PhD, resigned as chief operating officer of the Company, effective immediately. Dr. Richerson entered into a separation release of claims agreement (“Separation Agreement”) pursuant to which we issued Dr. Richerson a warrant to purchase 76,726 shares of Common Stock with an exercise price of $0.75 per share and a term of 3.5 years.

 

In connection with the sale of our Series C Preferred Stock in March 2017, we issued an aggregate of: (i) 266,673 Series M common stock purchase warrants (“Series M Warrants”), (ii) 266,673 Series N common stock purchase warrants (“Series N Warrants”) and (iii) 266,673 Series O common stock purchase warrants (“Series O Warrants”) (collectively, the “Warrants”). The Series M Warrants have an exercise price of $0.90 per share, subject to adjustment, and a term of five (5) years from the date of issuance, the Series N Warrants have an exercise price of $0.75 per share, subject to adjustment, and a term of six (6) months from the date of issuance and the Series O warrants have an exercise price of $0.75, subject to adjustment, and a term of twelve (12) months from the date of issuance. The Warrants are immediately exercisable and separately transferable from the Series C Preferred Stock. In the event that the shares underlying the Warrants are not subject to a registration statement at the time of exercise, the Warrants may be exercised on a cashless basis after 6 months from the issuance date. The Warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends and fundamental transactions. Additionally, the Warrants contain anti-dilution protection until the twelve (12) month anniversary of the issuance date.

 

Transactions involving our warrants are summarized as follows:

 

    Number of
shares
    Weighted-
average exercise
price
    Weighted-average
remaining contractual
term (in years)
    Aggregate
intrinsic
value (in
thousands)
 
Outstanding at December 31, 2016     5,203,436     $ 4.56                  
Issued     876,745       0.80                  
Expired     (4,437 )   $ 4.50                  
Outstanding at March 31, 2017     6,075,744     $ 3.83       2.0     $  
                                 
Exercisable at March 31, 2017     6,069,581     $ 3.83       2.0     $  

 

The following table summarizes outstanding common stock purchase warrants as of March 31, 2017:

 

    Number of
shares
    Weighted-
average
exercise
price
    Expiration
Issued to consultants     104,813     $ 7.64     June 2017 through August 2020
Issued pursuant to 2013 financings     155,819     $ 61.11     December 2017 through August 2018
Issued pursuant to 2014 financings     96,412     $ 34.50     June 2019
Issued pursuant to 2015 financings     785,339     $ 8.65     July 2017 through January 2021
Issued pursuant to 2016 financings     4,133,342     $ 0.53     June 2017 through December 2021
Issued pursuant to 2017 financings     800,019     $ 0.80     September 2017 through March 2022
      6,075,744              

 

Total stock-based compensation expense of approximately $30,000 and $0 was recognized for warrants and included in the statement of operations for the three months ended March 31, 2017 and 2016, respectively.

SUBSEQUENT EVENTS
SUBSEQUENT EVENTS

NOTE 11 – SUBSEQUENT EVENTS

 

In April 2017, we offered and sold 90.43148 units, in a private placement to certain accredited investors for gross proceeds of approximately $90,000. The Series C preferred stock has a stated value of $1,000 per share and the common shares are issuable pursuant to conversion of the preferred stock at a conversion price of $0.75 per share, subject to a 9.99% beneficial ownership limitation and subject to adjustment pursuant to stock splits and dividends, and subject to adjustment pursuant to customary anti-dilution protection for subsequent equity sales for a period of 12 months from the date of issuance. The warrants include (i) 120,578 Series M common stock purchase warrants with a price per share of $0.90 and a term of five years from the date of issuance, (ii) 120,578 Series N common stock purchase warrants with a price per share of $0.75 and a term of six months from the date of issuance and (iii) 120,578 Series O common stock purchase with a price per share of $0.75 and a term of six months from the date of issuance. The common shares underlying the Series C preferred stock are subject to adjustment in the in the event of stock splits and dividends, subsequent equity sales, pro rata distributions and fundamental transactions. In the event that the shares underlying all of the warrants issued in the March through April 2017 Offering are not subject to a registration statement at the time of exercise, the warrants may be exercised on a cashless basis after 6 months from the issuance date. The warrants also contain provisions providing for an adjustment in the underlying number of shares and exercise price in the event of stock splits or dividends, fundamental transactions, and pro rata distributions. The warrants also contain anti-dilution protection for a period of 12 months from the date of issuance.

 

In April 2017, we issued an aggregate of 50,000 shares of common stock to shareholders pursuant to the conversion of 26.5 shares of Series A 0% Convertible Preferred Stock at a conversion price of $0.53 per share.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES (Policies)

Basis of Presentation

 

The accompanying condensed financial statements are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

 

These interim financial statements as of and for the three months ended March 31, 2017 and 2016 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the year ending December 31, 2017 or for any future period. All references to March 31, 2017 and 2016 in these footnotes are unaudited.

 

These unaudited condensed financial statements should be read in conjunction with our audited financial statements and the notes thereto for the year ended December 31, 2016, included in the Company's annual report on Form 10-K filed with the SEC on April 17, 2017. 

 

The condensed balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date but do not include all disclosures required by the accounting principles generally accepted in the United States of America.

Use of estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Actual results may differ from those estimates.

Research and Development

 

Research and development costs are charged to expense as incurred. Our research and development expenses consist primarily of expenditures for manufacturing, clinical trials, employee compensation and consulting costs and expenses.

 

We incurred research and development expenses of approximately $0.5 million and $0.3 million for the three months ended March 31, 2017 and 2016, respectively.

Loss per Share

 

Basic loss per share is calculated by dividing net loss and net loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Basic and diluted loss per share are the same, in that any potential common stock equivalents would have the effect of being anti-dilutive in the computation of net loss per share. The following potentially dilutive securities have been excluded from the computations of weighted average shares outstanding as of March 31, 2017 and 2016, as they would be anti-dilutive:

 

    Three months ended March 31,  
    2017     2016  
Shares underlying options outstanding     363,152       301,940  
Shares underlying warrants outstanding     6,075,744       1,363,272  
Shares underlying convertible preferred stock outstanding     5,469,167       411,806  
      11,908,063       2,077,018

Derivative Liability

 

The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change. Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding preferred stock.

 

Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date wherein instruments with the earliest issuance date would be settled first. The sequencing policy also considers contingently issuable additional shares, such as those issuable upon a stock split, to have an issuance date to coincide with the event giving rise to the additional shares. Using this sequencing policy, all instruments convertible into common stock, including warrants and the conversion feature of notes payable, issued subsequent to December 25, 2015 are derivative liabilities. The Company values these derivative liabilities using the Black-Scholes option valuation model. The resulting liability is valued at each reporting date and the change in the liability is reflected as change in derivative liability in the statement of operations.

Fair Value of Financial Instruments

 

Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments with maturities of three months or less when acquired. We believe that the fair values of our current assets and current liabilities approximate their reported carrying amounts.

 

The derivative liability consists of our convertible preferred stock with anti-dilution provisions, and related warrants. The Company uses the Black-Scholes option pricing model to value its derivative liability which incorporate the Company’s stock price, volatility, U.S. risk-free interest rate, dividend rate, and estimated life.

Fair Value Measurements

 

Valuation Hierarchy - GAAP establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

 

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

 

Level 2: Quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3: Unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

 

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The Company has recorded a derivative liability for convertible preferred stock with anti-dilution provisions, and related warrants, as of March 31, 2017. The table below summarizes the fair values of our financial liabilities as of March 31, 2017 (in thousands):

 

    Fair Value at
March 31,
    Fair Value Measurement Using  
    2017     Level 1     Level 2     Level 3  
                         
Derivative liability   $ 2,419     $     $     $ 2,419  

 

The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

 

    Three months ended March 31,  
    2017     2016  
             
Balance at beginning of year   $ 2,541     $ 1,177  
Additions to derivative instruments     1,617        
Reclassification on conversion     (56 )      
Gain on change in fair value of derivative liability     (1,683 )     (538 )
Balance at end of period   $ 2,419     $ 639  

Stock-Based Compensation

 

We measure the cost of employee services received in exchange for equity awards based on the grant-date fair value of the awards. All awards under our stock-based compensation programs are accounted for at fair value and that cost is recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period).

 

Compensation expense for options granted to non-employees is determined in accordance with the fair value of the consideration received or the fair value of the equity instruments issued, whichever is a more reliable measurement. Compensation expense for awards granted to non-employees is re-measured on each accounting period.

 

Determining the appropriate fair value of stock-based compensation requires the input of subjective assumptions, including the expected life of the stock-based compensation and the volatility of our stock price. We use the Black-Scholes option-pricing model to value our stock option awards which incorporates our stock price, volatility, U.S. risk-free interest rate, dividend rate, and estimated life.

Recent Accounting Pronouncements

 

There are various recently issued accounting updates, most of which represented technical corrections to the accounting literature or application to specific industries, which are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.

SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES (Tables)

The following potentially dilutive securities have been excluded from the computations of weighted average shares outstanding as of March 31, 2017 and 2016, as they would be anti-dilutive:

 

    Three months ended March 31,  
    2017     2016  
Shares underlying options outstanding     363,152       301,940  
Shares underlying warrants outstanding     6,075,744       1,363,272  
Shares underlying convertible preferred stock outstanding     5,469,167       411,806  
      11,908,063       2,077,018  

The table below summarizes the fair values of our financial liabilities as of March 31, 2017 (in thousands):

 

    Fair Value at
March 31,
    Fair Value Measurement Using  
    2017     Level 1     Level 2     Level 3  
                         
Derivative liability   $ 2,419     $     $     $ 2,419  

The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows (in thousands):

 

    Three months ended March 31,  
    2017     2016  
             
Balance at beginning of year   $ 2,541     $ 1,177  
Additions to derivative instruments     1,617        
Reclassification on conversion     (56 )      
Gain on change in fair value of derivative liability     (1,683 )     (538 )
Balance at end of period   $ 2,419     $ 639  
SUPPLEMENTAL CASH FLOW INFORMATION (Tables)
Schedule of additional information of cash flow

The following table contains additional information for the periods reported (in thousands).

 

    Three Months Ended March 31,  
    2017     2016  
Non-cash financial activities:                
Derivative liability issued     1,417        
Preferred stock and warrants issued for fees     5        

ACCRUED EXPENSES (Tables)
Schedule of accrued expenses

Accrued expenses consist of the following (in thousands):

 

    March 31,
2017
    December 31,
2016
 
Accrued compensation and benefits   $ 69     $ 62  
Accrued research and development     126       126  
Accrued other     241       196  
Total accrued expenses   $ 436     $ 384  
DERIVATIVE LIABILITY (Tables)
Schedule of black scholes valuations of derivatives

The significant assumptions used in the Black Scholes valuations of the derivatives at March 31, 2017 are as follows: 

 

    2017
Volatility   102%-269%
Expected term (years)   3 - 60 months
Risk-free interest rate   0.76% -1.93%
Dividend yield   None

 

The significant assumptions used in the Black Scholes valuation of the derivative are as follows:

 

    2016
Volatility   68%
Expected term (years)   15 months
Risk-free interest rate   0.63%
Dividend yield   None
STOCK OPTIONS (Tables)

Total stock-based compensation expense recognized for stock options issued using the straight-line method in the statement of operations for the three months ended March 31, 2017 and 2016 was as follows:

  

    Three months ended March 31,  
    2017     2016  
             
Research and development   $ 70     $ 5  
General and administrative     24       18  
    $ 94     $ 23

The following table summarizes stock option activity for the three months ended March 31, 2017:

 

    Number of
shares
    Weighted-
average
exercise
price
    Weighted-average
remaining
contractual term
(in years)
    Aggregate
intrinsic
value (in
thousands)
 
Outstanding at December 31, 2016     268,876     $ 24.15                  
Granted     98,245     $ 0.55                  
Forfeited     (3,969 )   $ 69.95                  
Outstanding at March 31, 2017     363,152     $ 8.52       5.1     $  
                                 
Exercisable at March 31, 2017     160,023     $ 16.06       3.3     $  

The following table summarizes weighted-average assumptions using the Black-Scholes option-pricing model used on the date of the grants issued during the three months ended March 31, 2017 and 2016:

 

    Three months ended March 31,  
    2017     2016  
Volatility     127.2 %     76.0 %
Expected term (years)     3.2       2.7  
Risk-free interest rate     1.42 %     1.1 %
Dividend yield     0 %     0 %
WARRANTS (Tables)

Transactions involving our warrants are summarized as follows:

 

    Number of
shares
    Weighted-
average exercise
price
    Weighted-average
remaining contractual
term (in years)
    Aggregate
intrinsic
value (in
thousands)
 
Outstanding at December 31, 2016     5,203,436     $ 4.56                  
Issued     876,745       0.80                  
Expired     (4,437 )   $ 4.50                  
Outstanding at March 31, 2017     6,075,744     $ 3.83       2.0     $  
                                 
Exercisable at March 31, 2017     6,069,581     $ 3.83       2.0     $

The following table summarizes outstanding common stock purchase warrants as of March 31, 2017:

 

    Number of
shares
    Weighted-
average
exercise
price
    Expiration
Issued to consultants     104,813     $ 7.64     June 2017 through August 2020
Issued pursuant to 2013 financings     155,819     $ 61.11     December 2017 through August 2018
Issued pursuant to 2014 financings     96,412     $ 34.50     June 2019
Issued pursuant to 2015 financings     785,339     $ 8.65     July 2017 through January 2021
Issued pursuant to 2016 financings     4,133,342     $ 0.53     June 2017 through December 2021
Issued pursuant to 2017 financings     800,019     $ 0.80     September 2017 through March 2022
      6,075,744            
BACKGROUND (Details Narrative)
Description of reverse stock split

1:30

MANAGEMENT'S PLANS TO CONTINUE AS A GOING CONCERN (Details Narrative) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2016
Dec. 31, 2015
Management Plans to Continue as Going Concern [Abstract]
 
 
 
 
Accumulated deficit
$ (49,479)
$ (48,820)
 
 
Cash and cash equivalents
$ 33 
$ 547 
$ 1,558 
$ 2,465 
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES (Details)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Shares underlying, outstanding
11,908,063 
2,077,018 
Series A 0% Convertible Preferred Stock [Member]
 
 
Shares underlying, outstanding
5,469,167 
411,806 
Warrant [Member]
 
 
Shares underlying, outstanding
6,075,744 
1,363,272 
Employee Stock Option [Member]
 
 
Shares underlying, outstanding
363,152 
301,940 
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES (Details 1) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Derivative liability
$ 2,419 
$ 2,500 
Fair Value, Inputs, Level 1 [Member]
 
 
Derivative liability
   
 
Fair Value, Inputs, Level 2 [Member]
 
 
Derivative liability
   
 
Fair Value, Inputs, Level 3 [Member]
 
 
Derivative liability
$ 2,419 
 
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES (Details 2) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Accounting Policies [Abstract]
 
 
Balance at beginning of year
$ 2,541 
$ 1,177 
Additions to derivative instruments
1,617 
   
Reclassification on conversion
(56)
   
Gain on change in fair value of derivative liability
(1,683)
(538)
Balance at end of year
$ 2,419 
$ 639 
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES (Details Narrative) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Accounting Policies [Abstract]
 
 
Research and development
$ 465 
$ 323 
SUPPLEMENTAL CASH FLOW INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Non-cash financial activities:
 
 
Derivative liability issued
$ 1,417 
    
Preferred stock and warrants issued for fees
$ 5 
    
ACCRUED EXPENSES (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Accrued Liabilities, Current [Abstract]
 
 
Accrued compensation and benefits
$ 69 
$ 62 
Accrued research and development
126 
126 
Accrued other
241 
196 
Total accrued expenses
$ 436 
$ 384 
DERIVATIVE LIABILITY (Details)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Volatility
 
68.00% 
Expected term (years)
 
15 months 
Risk-free interest rate
 
0.63% 
Dividend yield
   
   
Minimum [Member]
 
 
Volatility
102.00% 
 
Expected term (years)
3 months 
 
Risk-free interest rate
0.76% 
 
Maximum [Member]
 
 
Volatility
269.00% 
 
Expected term (years)
60 months 
 
Risk-free interest rate
1.93% 
 
DERIVATIVE LIABILITY (Details Narrative) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Finance cost
$ 100 
 
 
Gain on change in fair value of the derivative liability
1,700 
500 
 
Derivative liability
2,419 
 
2,500 
Series B Preferred Stock [Member]
 
 
 
Finance cost
$ 1,300 
 
 
Conversion price per share
$ 0.53 
 
 
Exercise price of warrants (in dollars per share)
$ 0.53 
 
 
COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 0 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Feb. 28, 2017
Dr. Richerson [Member]
Separation Agreement [Member]
Rent expenses
$ 0 
$ 15 
 
 
Warrants issued to purchase common stock
 
 
 
76,726 
Exercise price (in dollars per share)
 
 
 
$ 0.75 
Option excersice price (in dollars per share)
$ 8.52 
 
$ 24.15 
$ 0.75 
Warrant expiration period
 
 
 
3 years 6 months 
Gross proceeds from capital raising transactions
$ 25,000 
 
 
 
CAPITAL STOCK AND STOCKHOLDERS' EQUITY (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified
1 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Apr. 5, 2017
Subsequent Event [Member]
Mar. 31, 2017
Warrant [Member]
Mar. 31, 2017
Series C 0% Convertible Preferred Stock [Member]
Apr. 30, 2017
Series C 0% Convertible Preferred Stock [Member]
Subsequent Event [Member]
Mar. 31, 2017
Series M Common Stock Purchase Warrants [Member]
Apr. 30, 2017
Series M Common Stock Purchase Warrants [Member]
Subsequent Event [Member]
Mar. 31, 2017
Series N Common Stock Purchase Warrants [Member]
Apr. 30, 2017
Series N Common Stock Purchase Warrants [Member]
Subsequent Event [Member]
Mar. 31, 2017
Series O Common Stock Purchase Warrants [Member]
Apr. 30, 2017
Series O Common Stock Purchase Warrants [Member]
Subsequent Event [Member]
Mar. 31, 2017
Series A Preferred Stock [Member]
Apr. 30, 2017
Series A Preferred Stock [Member]
Subsequent Event [Member]
Apr. 5, 2017
Series A Preferred Stock [Member]
Subsequent Event [Member]
Mar. 31, 2017
Series B Preferred Stock [Member]
Apr. 5, 2017
Series B Preferred Stock [Member]
Subsequent Event [Member]
Stock issued during period, shares
 
 
 
 
200 
 
 
 
 
 
 
 
 
 
 
 
 
Value of number of shares issued
 
 
 
 
$ 200 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise price (in dollars per share)
 
 
 
 
 
 
$ 0.90 
$ 0.90 
$ 0.75 
$ 0.75 
$ 0.75 
$ 0.75 
 
 
 
$ 0.53 
 
Warrant expiration period
 
 
 
 
 
 
5 years 
5 years 
6 months 
6 months 
12 months 
6 months 
 
 
 
 
 
Conversion price (in dollars per share)
 
 
 
 
$ 0.75 
$ 0.75 
 
 
 
 
 
 
 
$ 0.53 
 
 
 
Number of shares issued upon conversion
133,585 
 
133,585 
 
266,673 
 
 
 
 
 
 
 
 
50,000 
 
 
 
Number of shares converted
 
 
 
 
 
 
 
 
 
 
 
 
31.8 
26.5 
31.8 
39 
39 
Number of common shares purchased
 
 
 
800,019 
 
 
266,673 
120,578 
266,673 
120,578 
266,673 
120,578 
 
 
 
 
 
Preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
 
 
$ 1,000 
$ 1,000 
 
 
 
 
 
 
 
 
 
 
 
STOCK OPTIONS (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Total stock-based compensation expense
$ 94 
$ 23 
Research And Development [Member]
 
 
Total stock-based compensation expense
70 
General And Administrative [Member]
 
 
Total stock-based compensation expense
$ 24 
$ 18 
STOCK OPTIONS (Details 1) (USD $)
3 Months Ended
Mar. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
 
Outstanding at begenning
268,876 
Granted
98,245 
Forfeited
(3,969)
Outstanding at ending
363,152 
Exercisable at ending
160,023 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
 
Outstanding at begenning
$ 24.15 
Granted
$ 0.55 
Forfeited
$ 69.95 
Outstanding at ending
$ 8.52 
Exercisable at ending
$ 16.06 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Weighted Average Remaining Contractual Term [Roll Forward]
 
Outstanding at ending
5 years 1 month 6 days 
Exercisable at ending
3 years 3 months 18 days 
STOCK OPTIONS (Details 2)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
 
 
Volatility
127.20% 
76.00% 
Expected term (years)
3 years 2 months 12 days 
2 years 8 months 12 days 
Risk-free interest rate
1.42% 
1.10% 
Dividend yield
0.00% 
0.00% 
STOCK OPTIONS (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Employee Stock Option [Member]
Mar. 31, 2016
Employee Stock Option [Member]
Mar. 31, 2017
Non-Employee Director [Member]
Employee Stock Option [Member]
Mar. 31, 2016
Non-Employee Director [Member]
Employee Stock Option [Member]
Mar. 31, 2017
Employee [Member]
Employee Stock Option [Member]
Mar. 31, 2016
Employee [Member]
Employee Stock Option [Member]
Mar. 31, 2017
2007 Executive Compensation Plan [Member]
Dec. 31, 2020
2007 Executive Compensation Plan [Member]
Subsequent Event [Member]
Dec. 31, 2019
2007 Executive Compensation Plan [Member]
Subsequent Event [Member]
Dec. 31, 2018
2007 Executive Compensation Plan [Member]
Subsequent Event [Member]
Dec. 31, 2017
2007 Executive Compensation Plan [Member]
Subsequent Event [Member]
Total unrecognized compensation cost
 
 
 
 
 
 
$ 201 
$ 12 
$ 12 
$ 68 
$ 109 
Number of options granted
 
 
2,335 
1,767 
95,910 
10,167 
 
 
 
 
 
Weighted average fair value of the options granted
$ 0.59 
$ 2.10 
 
 
 
 
 
 
 
 
 
WARRANTS (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Weighted-average remaining contractual term [Roll Forward]
 
Exercisable at ending
3 years 3 months 18 days 
Warrant [Member]
 
Number of shares [Roll Forward]
 
Outstanding at beginning
5,203,436 
Issued
876,745 
Expired
(4,437)
Outstanding at ending
6,075,744 
Exercisable at ending
6,069,581 
Weighted-average exercise price [Roll Forward]
 
Outstanding at beginning
$ 4.56 
Issued
$ 0.80 
Expired
$ 4.50 
Outstanding at ending
$ 3.83 
Exercisable at ending
$ 3.83 
Weighted-average remaining contractual term [Roll Forward]
 
Outstanding at ending
2 years 
Exercisable at ending
2 years 
WARRANTS (Details 1) (Warrant [Member], USD $)
3 Months Ended
Mar. 31, 2017
Number of shares
6,075,744 
Financing 2013 [Member]
 
Number of shares
155,819 
Weighted Average Exercise price
$ 61.11 
Expiration date begenning
2017-12 
Expiration date ending
2018-08 
Financing 2014 [Member]
 
Number of shares
96,412 
Weighted Average Exercise price
$ 34.50 
Expiration date ending
2019-06 
Financing 2015 [Member]
 
Number of shares
785,339 
Weighted Average Exercise price
$ 8.65 
Expiration date begenning
2017-07 
Expiration date ending
2021-01 
Financing 2016 [Member]
 
Number of shares
4,133,342 
Weighted Average Exercise price
$ 0.53 
Expiration date begenning
2017-06 
Expiration date ending
2021-12 
Financings 2017 [Member]
 
Number of shares
800,019 
Weighted Average Exercise price
$ 0.80 
Expiration date begenning
2017-09 
Expiration date ending
2022-03 
Consultant [Member]
 
Number of shares
104,813 
Weighted Average Exercise price
$ 7.64 
Expiration date begenning
2017-06 
Expiration date ending
2020-08 
WARRANTS (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 0 Months Ended 1 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Feb. 28, 2017
Dr. Richerson [Member]
Separation Agreement [Member]
Mar. 31, 2017
Series M Common Stock Purchase Warrants [Member]
Mar. 31, 2017
Series N Common Stock Purchase Warrants [Member]
Mar. 31, 2017
Series O Common Stock Purchase Warrants [Member]
Warrants issued to purchase common stock
 
 
76,726 
 
 
 
Exercise price (in dollars per share)
 
 
$ 0.75 
$ 0.90 
$ 0.75 
$ 0.75 
Warrant expiration period
 
 
3 years 6 months 
5 years 
6 months 
12 months 
Number of common shares purchased
 
 
 
266,673 
266,673 
266,673 
Total stock-based compensation expense
$ 30 
$ 0 
 
 
 
 
SUBSEQUENT EVENTS (Details Narrative) (USD $)
In Thousands, except Share data, unless otherwise specified
1 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Series C 0% Convertible Preferred Stock [Member]
Mar. 31, 2017
Series M Common Stock Purchase Warrants [Member]
Mar. 31, 2017
Series N Common Stock Purchase Warrants [Member]
Mar. 31, 2017
Series O Common Stock Purchase Warrants [Member]
Mar. 31, 2017
Series A Preferred Stock [Member]
Apr. 5, 2017
Subsequent Event [Member]
Apr. 30, 2017
Subsequent Event [Member]
Series C 0% Convertible Preferred Stock [Member]
Apr. 30, 2017
Subsequent Event [Member]
Series M Common Stock Purchase Warrants [Member]
Apr. 30, 2017
Subsequent Event [Member]
Series N Common Stock Purchase Warrants [Member]
Apr. 30, 2017
Subsequent Event [Member]
Series O Common Stock Purchase Warrants [Member]
Apr. 30, 2017
Subsequent Event [Member]
Series A Preferred Stock [Member]
Apr. 5, 2017
Subsequent Event [Member]
Series A Preferred Stock [Member]
Apr. 30, 2017
Subsequent Event [Member]
Private Placement [Member]
Accredited Investors [Member]
Subsidiary or Equity Method Investee [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of units sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
90.43148 
Proceeds from units sold
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 90 
Preferred stock, par value (in dollars per share)
$ 0.0001 
$ 0.0001 
$ 1,000 
 
 
 
 
 
$ 1,000 
 
 
 
 
 
 
Conversion price (in dollars per share)
 
 
$ 0.75 
 
 
 
 
 
$ 0.75 
 
 
 
$ 0.53 
 
 
Exercise price (in dollars per share)
 
 
 
$ 0.90 
$ 0.75 
$ 0.75 
 
 
 
$ 0.90 
$ 0.75 
$ 0.75 
 
 
 
Warrant expiration period
 
 
 
5 years 
6 months 
12 months 
 
 
 
5 years 
6 months 
6 months 
 
 
 
Number of common shares purchased
 
 
 
266,673 
266,673 
266,673 
 
 
 
120,578 
120,578 
120,578 
 
 
 
Number of shares issued upon conversion
133,585 
 
266,673 
 
 
 
 
133,585 
 
 
 
 
50,000 
 
 
Number of shares converted
 
 
 
 
 
 
31.8 
 
 
 
 
 
26.5 
31.8 
 

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