Summary of Significant Accounting Policies
|12 Months Ended|
Dec. 31, 2020
|Accounting Policies [Abstract]|
|Summary of Significant Accounting Policies||
Note 3. Summary of Significant Accounting Policies
Use of Estimates and Assumptions
The preparation of financial statements in conformity with 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. The significant areas of estimation include determining deferred tax asset valuation allowance and the inputs in determining the fair value of equity-based awards and warrants issued. Actual results could differ from those estimates.
Risks and Uncertainties
The Company operates in an industry that is subject to intense competition, government regulation and rapid technological change. Operations are subject to significant risk and uncertainties including financial, operational, technological, regulatory, and other risks, including the potential risk of business failure.
The extent of the impact and effects of the coronavirus (COVID-19) on the operation and financial performance of the Company’s business will depend on future developments, including the duration and spread of the outbreak, related travel advisories and restrictions, the recovery time of disrupted research services, the consequential staff shortages, and research and development delays, or the uncertainty with respect to the accessibility of additional liquidity or capital markets, all of which are highly uncertain and cannot be predicted. If the Company’s operations are impacted by this outbreak for an extended period, the Company’s results of operations or liquidity may be materially adversely affected.
Deferred Offering Costs
Costs incurred related to equity offerings are capitalized as deferred equity issuance costs in other non-current assets until the offering is completed or abandoned. If the Company completes an offering, these costs will be offset against proceeds received; or if the offering does not occur, they will be expensed. Offering costs include direct and incremental costs related to the offering such as legal fees and related costs.
The Company recorded deferred offering costs of $101,205 and $191,000 as of December 31, 2020 and 2019, respectively. During the year ended December 31, 2020, the Company has applied deferred offering costs of $456,437 as a reduction to additional paid-in capital upon completion of the Company’s initial public offering (“IPO”) on June 15, 2020.
Research and Development
Research and development costs are expensed as incurred. These expenses primarily consist of payroll, contractor expenses, research study expenses, costs for manufacturing and supplies, and technical infrastructure on the cloud for the purposes of developing the Company’s RADR platform and identifying, developing, and testing drug candidates. Development costs incurred by third parties are expensed as the work is performed. Costs to acquire technologies, including licenses, that are utilized in research and development and that have no alternative future use are expensed when incurred.
Cash and Cash Equivalents
Highly liquid investments with original maturities of three months or less when purchased are considered to be cash equivalents. Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains cash and cash equivalents with high-credit quality financial institutions. At times, such amounts may exceed insured limits. The Company has not experienced any losses in such accounts.
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets as of December 31, 2020 totaled approximately $1,008,000 and included approximately $187,000 of upfront payments for contractor and academic research studies and services, approximately $15,000 of licensing and other fees, and approximately $806,000 of prepaid annual insurance fees.
Loan Pursuant to Paycheck Protection Program
On May 1, 2020, the Company received $108,500 in aggregate loan proceeds (the “PPP Loan”) from JPMorgan Chase Bank (the “Lender”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP Loan is evidenced by a loan application and payment agreement (the “PPP Loan Agreement”) by and between the Company and the Lender. This amount is recorded as a loan payable on the Company’s consolidated balance sheet at December 31, 2020.
Deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax basis of assets and liabilities using enacted tax rates which will be in effect when the differences reverse. The Company provides a full valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax asset will be realized.
Stock-based awards have been accounted for as required by ASC 718 “Compensation - Stock Compensation.” Under ASC 718, awards are valued at fair value on the date of grant, and that fair value is recognized over the requisite service period.
Certain prior period information has been reclassified to conform to the current period presentation.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef