NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 2016 (unaudited)
The accompanying condensed consolidated
financial statements include the accounts of CASI Pharmaceuticals, Inc. and its subsidiaries (“CASI” or “the
Company”), Miikana Therapeutics, Inc. (“Miikana”) and CASI Pharmaceuticals (Beijing) Co., Ltd. (“CASI China”).
The Company previously operated under a different name prior to its restructuring in 2012 that was made possible by an investment
group led by the Company’s current largest shareholder group. CASI China is a non-stock Chinese entity with 100% of its interest
owned by CASI. CASI China received approval for a business license from the Beijing Industry and Commercial Administration in August
2012 and has operating facilities in Beijing. All inter-company balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, such
condensed consolidated financial statements do not include all of the information and disclosures required by U. S. generally accepted
accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying December 31,
2015 financial information was derived from the Company’s audited financial statements in the Annual Report on Form 10-K
for the year ended December 31, 2015. Operating results for the three and six month periods ended June 30, 2016 are not necessarily
indicative of the results that may be expected for the year ending December 31, 2016. For further information, refer to the Company’s
audited consolidated financial statements and footnotes thereto included in its Form 10-K for the year ended December 31, 2015.
Liquidity Risks
and Management’s Plans
Since inception, the
Company has incurred significant losses from operations and
has incurred an accumulated deficit of $437.6
million.
The Company was restructured in 2012 by an investment group led by the Company’s current largest
shareholder group, followed by implementation of a name change to reflect its core mission and business strategy.
The Company expects to continue to incur operating losses for the foreseeable future due to, among other factors, its continuing
clinical activities. In September 2015, the Company entered into stock purchase agreements for a $25.1 million strategic financing,
the closing of which was subject to certain regulatory and customary conditions. In January 2016, the Company completed the first
closing and received approximately $10.3 million (“First Closing”) (see Note 5). In June 2016, the Company completed
the second closing and received approximately $6.0 million (“Second Closing”). In July 2016, the Company completed
the third closing and received $1.0 million (“Third Closing”), together these closings are referred to as the 2016
Closings. The Company and certain institutional and accredited investors (the “Investors”) are working to close on
the remaining $7.8 million (“Remaining Closing”) which is expected during the third quarter of 2016. There can be no
assurance that the Remaining Closing will occur. Net proceeds of the closings will be used to further fund the Company’s
operations, accelerate its clinical and regulatory activities, expand its product pipeline, and support its marketing and commercial
planning activities. As a result of the 2016 Closings, the Company believes that it has sufficient resources to fund its operations
for at least the twelve months subsequent to June 30, 2016. As of June 30, 2016, approximately $4.6 million of the Company’s
cash balance was held by CASI China. The Company intends to continue to exercise tight controls over operating expenditures and
will continue to pursue opportunities, as required, to raise additional capital and will also actively pursue non- or less-dilutive
capital raising arrangements in China to support the Company’s dual-country approach to drug development.
|
2.
|
License Arrangements and Acquisition of In-Process Research
and Development
|
In September 2014,
the Company acquired certain product rights and perpetual exclusive licenses from Spectrum Pharmaceuticals, Inc. and certain of
its affiliates (together referred to as “Spectrum”) to develop and commercialize the following commercial oncology
drugs and drug candidates in China, Taiwan, Hong Kong and Macau (the “Territories”):
|
·
|
MARQIBO
®
(vinCRIStine sulfate LIPOSOME injection) (“Marqibo”);
|
|
·
|
ZEVALIN
®
(ibritumomab tiuxetan) (“Zevalin”); and
|
|
·
|
EVOMELA
®
(melphalan) for Injection (“Evomela”).
|
CASI
is responsible for developing and commercializing these three drugs in the Territories, including the submission of import drug
registration applications and conducting confirmatory clinical trials as needed.
The Company has initiated
the regulatory and development process to obtain marketing approval for MARQIBO
®
and ZEVALIN
®
in
its territorial region, and has initiated commercial activities for ZEVALIN
®
in Hong Kong. In January 2016, the
China Food and Drug Administration (CFDA) accepted for review the Company’s import drug registration application for MARQIBO
®
.
On March 10, 2016, Spectrum received notification from the U.S. Food and Drug Administration (FDA) of the grant of approval of
its New Drug Application (NDA) for EVOMELA
®
primarily for use as a high-dose conditioning treatment prior
to hematopoietic progenitor (stem) cell transplantation in patients with multiple myeloma. The Company has initiated the regulatory
and development process to obtain marketing approval for EVOMELA
®
in China.
As consideration for
the acquisition from Spectrum, the Company issued a total 5,405,382 shares of its common stock, a $1.5 million 0.5% secured promissory
note originally due in March 2016, and certain contingent rights (“Contingent Rights”) to purchase additional shares
of its common stock, which Contingent Rights expire upon the occurrence of certain events. The note was subsequently amended to
extend the due date to March 2017 (see Note 3). The Company accounted for the acquisition of the product rights and licenses as
an asset acquisition and, accordingly, recorded the acquired product rights and licenses at their estimated fair values based on
the fair value of the consideration exchanged (including transaction costs) of approximately $19.7 million. Because the products
underlying the acquired product rights and licenses have not reached technological feasibility and have no alternative uses, they
are considered “in-process research and development” costs; as such, the Company expensed the total purchase price
at the acquisition date as acquired in-process research and development in the consolidated statement of operations for the year
ended December 31, 2014.
The fair value of the
common stock issued was based on the closing market price of the Company’s common stock on the acquisition date. The fair
value of the promissory note was measured using Level 3 unobservable inputs (see Note 4) including primarily the Company’s
estimated incremental borrowing rate as provided by a commercial lending institution.
The Contingent Rights
provide Spectrum with the option to acquire, at a strike price of par value, a variable number of additional shares of common stock
that allows Spectrum to maintain its fully-diluted ownership percentage for a certain time period and under certain terms and conditions.
These Contingent Rights will expire on the earlier of raising an aggregate of $50 million or September 17, 2019 (subject to possible
extension only for certain outstanding derivative securities). Based on the terms and conditions of the Contingent Rights, the
Company has determined that the Contingent Rights are a derivative financial instrument that is not indexed to its common stock
and therefore is required to be accounted for at fair value, initially and on a recurring basis. The fair value of the Contingent
Rights was measured using Level 3 unobservable inputs; the unobservable inputs include estimates of the Company’s future
capital requirements, and the timing, probability, size and characteristics of those capital raises, among other inputs. The total
estimated fair value of the Contingent Rights was $6,358,276 and $9,395,222 as of June 30, 2016 and December 31, 2015, respectively;
the change in fair value (see Note 4) is reflected as change in fair value of contingent rights in the accompanying condensed consolidated
statements of operations.
As a result of the
First Closing (see Note 5), Spectrum exercised its Contingent Rights and the Company issued Spectrum 1,688,877 shares of common
stock in February 2016. As a result of the Second Closing (see Note 5), Spectrum exercised its Contingent Rights and the Company
issued Spectrum 980,732 shares of common stock in July 2016. The Company recorded a reduction to the contingent rights derivative
liability and an increase to additional paid-in capital of $3,044,346 related to the partial settlement of the contingent rights
derivative as a result of the First and Second Closings, which is reflected in the accompanying condensed consolidated balance
sheet as of June 30, 2016.
As a result of the
Third Closing (see Note 5), Spectrum exercised its Contingent Rights and the Company issued Spectrum 164,526 shares of common stock
in July 2016. In July 2016, the Company has recorded a reduction to the contingent rights derivative liability and an increase
to additional paid-in-capital of $188,156 which will be reflected in the Company’s September 30, 2016 condensed consolidated
financial statements.
As part of the license
arrangements with Spectrum (see Note 2), the Company issued to Spectrum a $1.5 million 0.5% secured promissory note originally
due March 17, 2016. The promissory note was recorded initially at its fair value, giving rise to a discount of approximately $136,000;
the promissory note is presented as note payable, net of discount in the accompanying condensed consolidated balance sheets. For
the six months ended June 30, 2016 and 2015, the Company recognized $14,010 and $45,300 of non-cash interest expense, respectively,
related to the amortization of the debt discount, using the effective interest rate method. On September 28, 2015, the Company
entered into a First Amendment to Secured Promissory Note (the “Amendment”) with Spectrum. Pursuant to the Amendment,
the Company and Spectrum agreed to extend the maturity date of the note to March 17, 2017. All other terms remain the same.
|
4.
|
Fair Value Measurements
|
Fair value is the price
that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous
market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level
of observability of inputs used in measuring fair value. These tiers include:
|
·
|
Level 1, defined as observable inputs such as quoted prices in active markets for identical assets;
|
|
·
|
Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar
assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or liabilities; and
|
|
·
|
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring
an entity to develop its own assumptions.
|
An asset’s or
liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair
value measurement. At each reporting period, the Company performs a detailed analysis of its assets and liabilities that are measured
at fair value. All assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments
which trade infrequently and therefore have little or no price transparency are classified as Level 3.
The inputs used in
measuring the fair value of cash and cash equivalents are considered to be Level 1 in accordance with the three-tier fair value
hierarchy. The fair values are based on period-end statements supplied by the various banks and brokers that held the majority
of the Company’s funds. The fair value of short-term financial instruments (primarily accounts receivable, prepaid expenses,
accounts payable, accrued expenses, and other current assets and liabilities) approximates their carrying values because of their
short-term nature.
Financial Assets
and Liabilities Measured at Fair Value on a Recurring Basis:
The Contingent Rights
issued to Spectrum in connection with the license arrangements (see Note 2) are considered derivative liabilities and were recorded
initially at their estimated fair value, and are marked to market each reporting period until settlement. The fair value of the
Contingent Rights was measured using Level 3 unobservable inputs; the unobservable inputs include estimates of the Company’s
future capital requirements, and the timing, probability, size and characteristics of those capital raises, among other inputs.
Generally, if the estimates of the size and probability of the Company’s future capital requirements increase, the fair value
of the Contingent Rights will also increase.
The following table
presents the Company’s financial liabilities accounted for at fair value on a recurring basis as of June 30, 2016 and December
31, 2015 by level within the fair value hierarchy:
|
|
As of June 30, 2016
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities - Contingent Rights
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
6,358,276
|
|
|
$
|
6,358,276
|
|
|
|
As of December 31, 2015
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities - Contingent Rights
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,395,222
|
|
|
$
|
9,395,222
|
|
The following table
presents the changes in the Company’s financial liabilities accounted for at fair value on a recurring basis using Level
3 unobservable inputs:
December 31, 2015
|
|
$
|
9,395,222
|
|
Partial settlement of Contingent Rights
|
|
|
(3,044,346
|
)
|
Change in fair value of Contingent Rights
|
|
|
7,400
|
|
Balance at June 30, 2016
|
|
$
|
6,358,276
|
|
Financial Assets
and Liabilities Measured at Fair Value on a Non-Recurring Basis:
The promissory note
issued to Spectrum in connection with the license arrangements (see Notes 2 and 3) was initially recorded at its fair value using
Level 3 unobservable inputs including primarily the Company’s estimated incremental borrowing rate as provided by a commercial
lending institution.
Non-Financial Assets
and Liabilities Measured at Fair Value on a Recurring Basis:
The Company does not
have any non-financial assets and liabilities that are measured at fair value on a recurring basis.
Non-Financial Assets
and Liabilities Measured at Fair Value on a Non-Recurring Basis:
The Company measures
its long-lived assets, including property and equipment, at fair value on a non-recurring basis. These assets are recognized at
fair value when they are deemed to be impaired. No such fair value impairment was recognized for the six months ended June 30,
2016 and 2015.
Securities Purchase Agreements
As described in Note
1, on September 20, 2015, the Company entered into stock purchase agreements with the Investors for a $25.1 million financing.
Pursuant to these agreements, the Company agreed to sell to the Investors in a private placement an aggregate of 20,658,434 shares
of the Company’s common stock, at $1.19 per share, based on the closing bid price of the Company’s common stock on the Nasdaq Capital
Market on September 18, 2015, and a total of 4,131,686 warrants, representing a 20% warrant coverage, with a purchase price of
$0.125 per whole warrant share. The warrants become exercisable three months after issuance at $1.69 per share exercise price,
and expire three years from the date the warrants become exercisable.
The offering was expected
to close after satisfaction of certain regulatory and customary closing conditions, with the net proceeds being subject to payment
of offering expenses, including fees and expenses to be finalized prior to the closing.
On January 15, 2016,
the Company completed the First Closing and received approximately $10.3 million and yielded approximately $10.2 million after
offering expenses. The First Closing resulted in the issuance of 8,448,613 shares of Common Stock, priced at $1.19 per share, and
1,689,722 warrants, with a purchase price of $0.125 per warrant. The warrants became exercisable on April 15, 2016 at $1.69 per
share exercise price, and will expire on April 15, 2019. The fair value of the warrants issued is $321,047, calculated using the
Black-Scholes-Merton valuation model value of $0.19 with a contractual life of 3.25 years, an assumed volatility of 70.1%, and
a risk-free interest rate of 1.08%.
On June 24, 2016, the
Company completed the Second Closing and received approximately $6.0 million. The Second Closing resulted in the issuance of 4,906,118
shares of Common Stock, priced at $1.19 per share, and 981,223 warrants, with a purchase price of $0.125 per warrant. The warrants
will become exercisable on September 23, 2016 at $1.69 per share exercise price, and will expire on September 23, 2019. The fair
value of the warrants issued is $431,738, calculated using the Black-Scholes-Merton valuation model value of $0.44 with a contractual
life of 3.25 years, an assumed volatility of 70.4%, and a risk-free interest rate of 0.76%.
On July 5, 2016, the
Company completed the Third Closing and received $1.0 million. The Third Closing resulted in the issuance of 823,045 shares of
Common Stock, priced at $1.19 per share, and 164,609 warrants, with a purchase price of $0.125 per warrant. The warrants will become
exercisable on October 4, 2016 at $1.69 per share exercise price, and will expire on October 4, 2019. The fair value of the warrants
issued is $67,490, calculated using the Black-Scholes-Merton valuation model value of $0.41 with a contractual life of 3.25 years,
an assumed volatility of 70.6%, and a risk-free interest rate of 0.66%.
The Company and Investors
are working to close on the remaining $7.8 million (“Remaining Closing”) which is expected during the third quarter
of 2016. There can be no assurance that the Remaining Closing will occur.
The Company has granted
registration rights to the Investors and has agreed to file a resale registration statement covering the shares of common stock
and the shares of common stock underlying the warrants within 120 days of the final closing.
|
6.
|
Share-Based Compensation
|
The Company has adopted
incentive and nonqualified stock option plans for executive, scientific and administrative personnel of the Company as well as
outside directors and consultants. In June 2016, the Company’s shareholders approved an amendment to the 2011 Long-Term Incentive
Plan, increasing the number of shares reserved for issuance from 8,230,000 to 11,230,000 shares of common stock to be available
for grants and awards.
As of June 30, 2016, there are 9,218,719 shares issuable under options previously
granted and currently outstanding, with exercise prices ranging from $0.86 to $19.36. In 2016, the Company awarded options to officers
and employees, covering up to 873,000 shares, in which vesting is subject to achievement of certain performance milestones. Options
granted under the plans generally vest over periods varying from immediately to one to three years, are not transferable and generally
expire ten years from the date of grant. As of June 30, 2016, 2,404,360 shares remained available for grant under the Company’s
2011 Long-Term Incentive Plan.
The Company records
compensation expense associated with stock options and other equity-based compensation in accordance with provisions of authoritative
guidance. Compensation costs are recognized over the requisite service period, which is generally the option vesting term of up
to three years.
Awards with
performance conditions
will be expensed
if it is probable that the
performance condition
will be achieved. For the six months ended
June 30, 2016, $10,100 was expensed for share awards with performance conditions that became probable during that period. There
was no expense recorded for share awards with performance conditions during the six months ended June 30, 2015.
The Company’s
net loss for the six months ended June 30, 2016 and 2015 includes non-cash compensation expense of $1,976,736 and $872,126, respectively,
related to the Company’s share-based compensation awards. The compensation expense related to the Company’s share-based
compensation arrangements is recorded as components of general and administrative expense and research and development expense,
as follows:
|
|
SIX MONTH PERIOD ENDED
JUNE 30,
|
|
|
|
2016
|
|
|
2015
|
|
Research and development
|
|
$
|
517,536
|
|
|
$
|
421,908
|
|
General and administrative
|
|
|
1,459,200
|
|
|
|
450,218
|
|
Share-based compensation expense
|
|
$
|
1,976,736
|
|
|
$
|
872,126
|
|
Net share-based compensation expense, per common share:
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.05
|
|
|
$
|
0.03
|
|
The Company uses the
Black-Scholes-Merton valuation model to estimate the fair value of stock options granted to employees. Option valuation models,
including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially
affect the grant date fair value of an award.
Following are the weighted-average
assumptions used in valuing the stock options granted during the six-month periods ended June 30, 2016 and 2015:
|
|
SIX MONTH PERIOD ENDED
JUNE 30,
|
|
|
|
2016
|
|
|
2015
|
|
Expected volatility
|
|
|
83.09
|
%
|
|
|
85.28
|
%
|
Risk-free interest rate
|
|
|
1.32
|
%
|
|
|
1.58
|
%
|
Expected term of option
|
|
|
5.42 years
|
|
|
|
5.67 years
|
|
Forfeiture rate*
|
|
|
3.00
|
%
|
|
|
3.00
|
%
|
Expected dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
* - Authoritative guidance requires forfeitures
to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
During the six-month periods ended June 30, 2016 and 2015, forfeitures were estimated at 3%.
The weighted average
fair value of stock options granted during the six-month periods ended June 30, 2016 and 2015 were $0.75 and $1.02, respectively.
A summary of the Company’s
stock option plans and of changes in options outstanding under the plans for the six months ended June 30, 2016 is as follows:
|
|
Number of
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding at January 1, 2016
|
|
|
6,694,744
|
|
|
$
|
1.99
|
|
Granted
|
|
|
3,251,850
|
|
|
$
|
0.94
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
Expired
|
|
|
(600,080
|
)
|
|
$
|
2.24
|
|
Forfeited
|
|
|
(127,795
|
)
|
|
$
|
1.32
|
|
Outstanding at June 30, 2016
|
|
|
9,218,719
|
|
|
$
|
1.61
|
|
Vested and expected to vest at June 30, 2016
|
|
|
9,113,371
|
|
|
$
|
1.62
|
|
Exercisable at June 30, 2016
|
|
|
5,707,122
|
|
|
$
|
1.95
|
|
There were no option
exercises during the three or six months ended June 30, 2016 or 2015.
At December 31, 2015,
the Company had a $3.1 million unrecognized tax benefit. The Company recorded a full valuation allowance on the net deferred tax
asset recognized in the consolidated financial statements as of December 31, 2015.
During the six months
ended June 30, 2016, there were no material changes to the measurement of unrecognized tax benefits in various taxing jurisdictions.
The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense.
The tax returns for
all years in the Company’s major tax jurisdictions are not settled as June 30, 2016. Due to the existence of tax attribute
carryforwards (which are currently offset by a full valuation allowance), the Company treats all years’ tax positions as
unsettled due to the taxing authorities’ ability to modify these attributes.
|
8.
|
Related Party Transactions
|
In June 2016, under
a supply agreement with Spectrum, the Company received a shipment of MARQIBO
®
in China for quality testing purposes
to support CASI’s application for import drug registration. The CEO of Spectrum is also a board member of CASI. The total
cost of the materials was $133,770 which is payable as of June 30, 2016 and included in research and development expense for the
six months ended June 30, 2016.
In 2015, the Company
began utilizing the services of Crown Biosciences, Inc. (“Crown Bio”) to perform certain research and development testing.
The CEO of Crown Bio is also a board member of CASI. The total value of the services is $66,545, of which $12,397 was payable as
of June 30, 2016. The research and development expense recognized for the services provided for the six months ended June 30, 2016
and 2015 was $24,935 and $8,250, respectively.
In October 2015, the
Company entered into a material transfer and research agreement with Origene Technologies, Inc. (“Origene”) for certain
research materials. The CEO of Origene is also the Chairman of the Board of CASI. No materials have been purchased
as of June 30, 2016, and there is no minimum commitment associated with this agreement.
|
9.
|
New Accounting Pronouncements
|
The Company has implemented
all new accounting pronouncements that are in effect and that may impact the Company’s condensed consolidated financial statements.
In August 2014, the
Financial Accounting Standards Board (“FASB”) issued
Accounting
Standard Update (“ASU”) 2014-15,
Presentation of Financial Statements – Going Concern
. The new standard
requires management to evaluate on a regular basis whether any conditions or events have arisen that could raise substantial
doubt about the entity’s ability to continue as a going concern. The guidance 1) provides a definition for the term “substantial
doubt,” 2) requires an evaluation every reporting period, interim periods included, 3) provides principles for considering
the mitigating effect of management’s plans to alleviate the substantial doubt, 4) requires certain disclosures if the substantial
doubt is alleviated as a result of management’s plans, 5) requires an express statement, as well as other disclosures, if
the substantial doubt is not alleviated, and 6) requires an assessment period of one year from the date the financial statements
are issued. The standard is effective for the Company’s reporting year beginning January 1, 2017 and early adoption
is not permitted. The Company is currently evaluating the impact, if any, that this new accounting pronouncement will have on its
financial statements.
In May 2014, the FASB
issued
ASU 2014-09,
Revenue from Contracts with Customers,
which provides guidance
for revenue recognition for contracts, superseding the previous revenue recognition requirements, along with most existing industry-specific
guidance. The guidance requires an entity to review contracts in five steps: 1) identify the contract, 2) identify performance
obligations, 3) determine the transaction price, 4) allocate the transaction price, and 5) recognize revenue. The new standard
will result in enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue arising from contracts with
customers.
In July 2015, the FASB delayed the effective date of this standard by one year. The new standard
will be effective for the Company’s reporting year beginning on January 1, 2018, and early adoption of the standard as of
January 1, 2017 is permitted. In March 2016, the FASB issued an accounting standard update to clarify the implementation
guidance on principal versus agent considerations. In April 2016, the FASB issued an accounting standard update to clarify
the identification of performance obligations and the licensing implementation guidance, while retaining the related principles
for those areas. In May 2016, the FASB issued an accounting standard update to clarify guidance in certain areas and add
some practical expedients to the guidance. The amendments in these 2016 updates do not change the core principle of the previously
issued guidance in May 2014. The Company is currently evaluating the impact, if any, that this new accounting pronouncement
will have on its financial statements.
In
November 2015, the FASB issued new guidance on the balance sheet classification of deferred taxes. To simplify presentation, the
new guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as
noncurrent on the balance sheet
.
The accounting standard
is effective for public business entities for annual reporting periods (including interim reporting periods within those periods)
beginning after December 15, 2016. Early adoption is permitted. The Company has not yet adopted this pronouncement and is currently
evaluating the impact, if any, it may have on its consolidated financial statements.
In January 2016, the
FASB issued a new accounting standard on recognition and measurement of financial assets and financial liabilities. The accounting
standard primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation
and disclosure requirements for financial instruments. In addition, it includes a clarification related to the valuation
allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.
The accounting guidance is effective for annual reporting periods (including interim periods within those periods) beginning after
December 15, 2017. Early adoption is permitted for the provision to record fair value changes for financial liabilities under the
fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating
the impact, if any, that the pronouncement will have on the consolidated financial statements.
In
February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. ASU 2016-02 supersedes existing lease guidance,
including Accounting Standards Codification (ASC) 840 -
Leases
. Among other things, the new standard requires recognition
of a right-of-use asset and liability for future lease payments for contracts that meet the definition of a lease.
This
ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.
Earlier application is permitted.
The standard must be applied using a modified retrospective approach.
The Company is currently evaluating the effect that the adoption of this ASU will have on its financial statements.
In
March 2016, the FASB issued an accounting standard update which simplified several aspects of the accounting for employee
share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements,
as well as classification in the statement of cash flows. The standard is effective for annual reporting periods beginning after
December 15, 2016, including interim periods within those annual reporting periods.
The Company is currently evaluating
the effect that the adoption of this ASU will have on its financial statements.