The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
The accompanying notes are an integral part of these condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim Consolidated
Financial Statements
The accompanying unaudited interim condensed consolidated financial statements of Pieris Pharmaceuticals, Inc.
(Pieris or the Company) were prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information. All significant intercompany balances and
transactions have been eliminated in the consolidation. Certain information and footnotes normally included in financial statement prepared in accordance with U.S. GAAP have been omitted pursuant to the rules and regulations of the Securities and
Exchange Commission (the SEC). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete annual consolidated financial statements. It is recommended that these financial statements be read in
conjunction with the consolidated financial statements and related footnotes that appear in the Annual Report on Form 10-K of the Company for the year ended December 31, 2015 filed with the SEC on March 23, 2016 (the 2015 Annual
Report).
In the opinion of management, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as
the audited condensed consolidated financial statements for the year ending December 31, 2015, and all adjustments, including normal recurring adjustments, considered necessary for the fair presentation of the Companys unaudited interim
consolidated financial statements have been included. The results of operations for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016 or any
future period.
Use of estimates
The preparation of
the condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses
in the financial statements and disclosures in the accompanying notes. Significant estimates are used for, but are not limited to, revenue recognition, deferred tax assets, liabilities and valuation allowances, fair value of stock options and
various accruals. Management evaluates its estimates on an ongoing basis. Actual results and outcomes could differ materially from managements estimates, judgments and assumptions.
2. Critical Accounting Policies
Research and
development expenses
Research and development expenses are charged to the statement of operations as incurred. Research and development expenses are
comprised of costs incurred in performing research and development activities, including salaries and benefits, facilities costs, pre-clinical and clinical costs, contract services, consulting, depreciation and amortization expense, and other
related costs. Costs associated with acquired technology, in the form of upfront fees or milestone payments, are charged to research and development expense as incurred.
3. Revenues
General
Pieris, to date has not generated revenues from product sales. Pieris has generated revenues pursuant to (i) license and collaboration agreements, which
include upfront payments for licenses or options to obtain licenses, payments for research and development services and milestone payments, and (ii) government grants.
Multiple element arrangements, such as license and development arrangements are analyzed to determine whether the deliverables, which often include a license
and performance obligations such as research and steering committee services, can be separated or whether they must be accounted for as a single unit of accounting in accordance with generally accepted accounting principles, or U.S. GAAP. The
Company recognizes up-front license payments as revenue upon delivery of the license only if the license has stand-alone value. If the license is considered to not have stand-alone value, the arrangement would then be accounted for as a single unit
of accounting and the license payments and payments for performance obligations are recognized as revenue over the estimated period of when the performance obligations are performed.
5
If the Company is involved in a steering committee as part of a multiple element arrangement, the Company
assesses whether its involvement constitutes a performance obligation or a right to participate. Steering committee services that are determined to be performance obligations are combined with other research services or performance obligations
required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
Whenever the Company determines that an arrangement should be accounted for as a single unit of accounting, it must determine the period over which the
performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a relative performance or straight-line method. The Company recognizes revenue using the relative performance method provided that the
Company can reasonably estimate the level of effort required to complete its performance obligations under an arrangement and such performance obligations are provided on a best-efforts basis. Full-time equivalents are typically used as the measure
of performance.
If the Company cannot reasonably estimate when its performance obligation either ceases or becomes inconsequential and perfunctory, then
revenue is deferred until the Company can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated period of performance.
Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected
to complete its performance obligations under an arrangement.
F.Hoffmann-La Roche Ltd. and Hoffmann- La Roche Inc.
In December 2015, the Company entered into a Research Collaboration and License Agreement (the Roche Agreement) with F.Hoffmann- La Roche Ltd.
and Hoffmann- La Roche Inc., (Roche), for the research, development, and commercialization of Anticalin-based drug candidates against a predefined, undisclosed target in cancer immune therapy. The parties will jointly pursue a
preclinical research program with respect to the identification and generation of Anticalin proteins that bind to a specific target for an expected period of 20 months, which may be extended by Roche for up to an additional 12 months. Roche has the
ability to continue exclusivity rights for up to an additional 5 years. Both Roche and the Company will participate in a joint research committee in connection with this agreement. Following the research program, Roche will be responsible for
subsequent pre-clinical and clinical development of any product developed through the research plan and will have worldwide commercialization rights to any such product.
Roche has paid $6.5 million of an upfront payment for the research collaboration. Additionally, Roche will pay Pieris for research services provided by Pieris
in conjunction with the research program. Roche will also pay Pieris for certain milestones relating to development, regulatory, and sales milestones as they are achieved.
Pieris recorded $0.8 million and $3.1 million in revenue for the three and nine months ended September 30, 2016, respectively, related to the recognition
of the upfront Roche payment during those periods. Revenue recognized is associated with the portion of the research services performed during the periods as well as the value of research services provided by Pieris in connection with the ongoing
research program. No revenues were recorded for the three and nine months ended September 30, 2015.
The Company identified the research and
commercial licenses, performance of R&D services, and participation in the joint research committee as deliverables under the Roche Agreement. For revenue recognition purposes, management has determined that there are two units of accounting at
the inception of the agreement representing (i) the research and commercial licenses and the performance of R&D services which do not have standalone value, and (ii) the participation in the joint research committee.
In addition to the upfront payment, under the Roche Agreement, the Company is eligible to receive research funding, development and regulatory, and sales
based milestone payments up to approximately $420.6 million, plus royalties on future sales of any commercial products. The total potential milestones are categorized as follows: development and regulatory milestones$292.0 million; and sales
milestones$123.8 million. Management has determined that the development milestones are not substantive because they do not relate solely to past performance of the Company and the Companys involvement in the achievement is limited to
progress reports and other updates. Non-substantive milestones will be recognized when achieved to the extent the Company has no remaining performance obligations under the arrangement.
6
4. Net Loss per Common Share
Basic net loss per share was determined by dividing net loss by the weighted average common shares outstanding during the period. Diluted net loss per share
was determined by dividing net loss by diluted weighted average shares outstanding. Diluted weighted average shares reflect the dilutive effect, if any, of common stock options based on the treasury stock method.
For all financial statement periods presented the number of basic and diluted weighted average shares outstanding was the same because any increase in the
number of shares of common stock equivalents for any period presented would be antidilutive based on the net loss for the period.
For the nine months
ended September 30, 2016 and 2015, approximately 7.4 million and 0.9 million weighted average shares subject to stock options and warrants, respectively, as calculated using the treasury stock method, were excluded from the calculation of
diluted weighted average common shares outstanding as their effect would have been antidilutive.
5. Fair Value Measurement
ASC Topic 820
Fair Value Measurement
defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an
orderly transaction between market participants at the measurement date. Pieris applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy
upon the lowest level of input that is available and significant to the fair value measurement. The standard describes the following fair value hierarchy based on three levels of input, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value:
Level 1 inputs are quoted prices in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 utilizes quoted market prices in markets
that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency.
Level 3
inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date.
For the periods presented in these interim financial statements, Pieris has no cash equivalents and debt instruments as of each balance sheet date presented.
All other current assets and current liabilities on our consolidated balance sheets approximate their respective carrying amounts.
6. Related-Party Transactions
Research and License
Agreement with Technische Universität München (TUM)
On July 4, 2003, the Company entered into a research and licensing
agreement with TUM, which was subsequently renewed and, on July 26, 2007, superseded and replaced. The agreement established a joint research effort led by Prof. Arne Skerra, Chair of Biological Chemistry of TUM, to optimize Anticalin
technologies for use in therapeutic, prophylactic and diagnostic applications and as research reagents, and to gain fundamental insights in lipocalin scaffolds. Prof. Dr. Skerra was a member of the Company´s supervisory board when the
parties entered into such agreement and during the period covered by the consolidated financial statements in this report. The Company provided certain funding for TUM research efforts performed under the agreement.
As a result of research efforts to date under the agreement, the Company holds a worldwide exclusive license under its license agreement with TUM to multiple
patents and patent applications, including an exclusive license to an issued U.S. patent, which patent will expire in 2027 (subject to a possible term adjustment period). The Company also holds an exclusive license to an issued U.S. patent
No. 8,420,051, which patent is expected to expire in 2029. The Company bears the costs of filing, prosecution and maintenance of patents assigned or licensed to the Company under the agreement.
As consideration for the assigned patents and licenses above, the Company is required to pay certain development milestones to TUM. The Company also is
obliged to pay low-single-digit royalties, including annual minimum royalties, on sales of such products incorporating patented technologies. If the Company grants licenses or sublicenses to those patents to third parties, the Company will be
obliged to pay a percentage of the resulting revenue to TUM. The Companys payment obligations are reduced by the Companys proportionate contribution to a joint invention. Payment obligations terminate on expiration or annulment of the
last patent covered by the agreement. The Company can terminate the licenses to any or all licensed patents upon specified advance notice to TUM. TUM may terminate the license provisions of the agreement only for cause. Termination of the agreement
does not terminate the rights in patents assigned to the Company.
7
Effective as of the fourth quarter of 2015, Pieris no longer deems TUM a related party due to Prof.
Dr. Skerra no longer having a supervisory board position in Pieris GmbH or other direct relationship with the Company since its initial public offering in December 2014. Therefore no expenses to TUM as a related party were incurred during the
three and nine months ended September 30, 2016. The Company incurred expenses related to TUM as a related party of approximately $14,000 and $42,000 for the three and nine months ended September 30, 2015.
Consulting Contract between Prof. Dr. Arne Skerra and Pieris AG
In 2001, the Company entered into a Consulting Agreement with Prof. Dr. Arne Skerra, pursuant to which Prof. Dr. Arne Skerra provides advice
regarding the use of new proteins, in particular Anticalin proteins and antibodies, for the purpose of research and development. As of the fourth quarter of 2015, Pieris no longer deemed Prof. Dr. Skerra a related party due to Prof.
Dr. Skerra no longer having a supervisory board position in Pieris GmbH or other direct relationship with the Company after its initial public offering in December 2014. Therefore no expenses to Prof. Dr. Skerra, as a related party, were
incurred during the three and nine months ended September 30, 2016. The Company incurred and paid to Prof. Dr. Skerra consulting fees of approximately $6,000 and $17,000 for the three and nine months ended September 30, 2015.
7. Accrued expenses
The Company has recorded the
following accrued expenses as of September 30, 2016 and December 31, 2015, respectively:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2016
|
|
|
December 31,
2015
|
|
Accrued expenses
|
|
|
|
|
|
|
|
|
Accrued compensation expense
|
|
$
|
983,951
|
|
|
$
|
704,597
|
|
Accrued audit and tax fees
|
|
|
394,414
|
|
|
|
179,223
|
|
Accrued professional fees
|
|
|
360,200
|
|
|
|
194,790
|
|
Accrued R&D fees
|
|
|
1,019,024
|
|
|
|
466,076
|
|
Accrued other
|
|
|
140,799
|
|
|
|
194,694
|
|
|
|
|
|
|
|
|
|
|
Total amount of accrued expenses
|
|
$
|
2,898,388
|
|
|
$
|
1,739,380
|
|
|
|
|
|
|
|
|
|
|
8. Stock-based compensation
2014 Stock Plan
Pieris granted 1,157,734 options to employees,
consultants, and directors under its 2014 Employee, Director and Consultant Equity Incentive Plan, (the 2014 Plan) during the nine months ended September 30, 2016. Pieris granted 116,027 and 663,262 options to employees,
consultants, and directors under the 2014 Employee, Director and Consultant Equity Incentive Plan, (the Plan) during the three and nine months ended September 30, 2015, respectively.
During the three months ended September 30, 2015 the Company granted an option to purchase 500,000 shares outside of the Plan to a newly-hired executive
officer that was an inducement and material to the executive officer entering into employment with the Company. The compensation expense associated with this inducement option was $32,133 and is included in research and development expense for both
the three and nine months periods ended September 30, 2015.
The 2014 Plan was terminated on June 28, 2016 when the Company adopted its 2016
Employee, Director and Consultant Equity Incentive Plan, (the 2016 Plan). Therefore no options were granted for the three months ended September 30, 2016 under the 2014 Plan.
2016 Stock Plan
In June 2016, the Company adopted the 2016 Plan
which provides for the grant of stock options, restricted and unrestricted stock awards, and other stock-based awards to employees of the Company, non-employee directors of the Company, and certain other consultants performing services for the
Company as designated by the Compensation Committee of the Board of Directors or the Board of Directors.
The vesting periods of equity incentives issued
under the 2016 Plan are determined by the Compensation Committee of the Companys Board of Directors, with stock options generally vesting over a four-year period. In September 2015, a stock option to purchase 450,000 shares of the
Companys common stock, par value $0.001 (the Common Stock), was granted to a newlyhired executive officer subject to certain restrictions on exercise that required the Companys shareholders to approve an increase in the
8
number of shares authorized under the 2014 Plan. Upon the Companys adoption of the 2016 Plan, this stock option was amended and issued under the 2016 Plan; the total shares available under
the 2016 Plan reflects the issuance of this option. The Company granted 114,378 options to employees and directors under the 2016 Plan during the three and nine months ended September 30, 2016. No options were granted under the 2016 Plan during
the three and nine months ended September 30, 2015. As of September 30, 2016, there were 3,275,622 shares available for future grant under the 2016 Plan. The shares available for future grant under the 2016 Plan include 90,000 shares which were
forfeited during the three months ended September 30, 2016 under the 2014 Plan. These forfeited shares were added to the 2016 Plan.
Stock-based
compensation expense for the three and nine months ended September 30, 2016 was $0.4 million and $1.4 million, respectively, and was $0.3 million and $0.8 million for the three and nine months ended September 30, 2015, respectively.
Total stock-based compensation expense was recorded to operating expenses based upon the functional responsibilities of the individuals holding the respective
options as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Research and Development
|
|
$
|
142,254
|
|
|
$
|
88,176
|
|
|
$
|
444,193
|
|
|
$
|
217,766
|
|
General and administrative
|
|
|
303,859
|
|
|
|
249,613
|
|
|
|
982,148
|
|
|
|
605,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-option expense
|
|
$
|
446,113
|
|
|
$
|
337,789
|
|
|
$
|
1,426,341
|
|
|
$
|
823,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were no options exercised during the three and nine months ended September 30, 2016 and 2015, respectively.
The Company uses the Black-Scholes option pricing model to determine the estimated fair value for stock-based awards. Option-pricing models require the input
of various subjective assumptions, including the options expected life, expected dividend yield, price volatility, risk free interest rate, and forfeitures of the underlying stock. Accordingly, the weighted-average fair value of the options
granted during the three and nine months ended September 30, 2016 was $1.05 and $1.01, respectively. The weighted-average fair value of the options granted during the three and nine months ended September 30, 2015 was $1.95 and $1.94,
respectively. The calculation was based on the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
|
Nine months ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Expected volatility
|
|
|
74.9% - 75.12
|
%
|
|
|
72.65% - 73.43
|
%
|
|
|
74.90% - 76.00
|
%
|
|
|
72.65% - 75.07
|
%
|
Weighted average risk-free interest rate
|
|
|
1.25% - 1.35
|
%
|
|
|
1.69% - 1.89
|
%
|
|
|
1.13% - 1.61
|
%
|
|
|
1.49% - 1.89
|
%
|
Expected term
|
|
|
5.0 - 5.7 years
|
|
|
|
5.0 - 6.1 years
|
|
|
|
5.0 - 5.7 years
|
|
|
|
5.0 - 6.1 years
|
|
Option-pricing models require the input of various subjective assumptions, including the option´s expected life and the
price volatility of the underlying stock. Pieris estimated expected stock price volatility is based on the average volatilities of other guideline companies in the same industry. Pieris expected term of options granted during the three
and nine months ended September 30, 2016 and 2015, respectively was derived using the SECs simplified method. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
The Companys stock options have a maximum term of ten years from the date of grant. Stock options granted under the 2016 Plan may be either incentive
stock options (ISOs), or nonqualified stock options. The exercise price of stock options granted under the 2016 Plan must be at least equal to the fair market value of the common stock on the date of grant.
9. Consulting Shares
Del Mar Consulting Group
& Alex Partners
In March 2015, the Company entered into an independent consulting agreement (the Consulting Agreement) with the
Del Mar Consulting Group, Inc. and Alex Partners, LLC (the Consultants), pursuant to which the Company issued 150,000 shares of common stock, to the Consultants (the Consulting Shares). The Company agreed to retain the
Consultants to provide investor relations consulting to the Company for a period commencing on March 6, 2015 (the Commencement Date) and ending thirteen months after the Commencement Date (such period, the Term). The
shares issued in connection with the Consulting Agreement were deemed to be exempt from registration in reliance upon Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving any public offering.
9
The Company recognized expenses in connection with the issuance of the Consulting Shares of $0.1 million and $0.4
million for the three and nine months ended September 30, 2015 in general and administrative expenses. No expenses were recognized during the 2016 period as the remaining shares vested on September 2, 2015 and the remaining expense was
recorded based on the fair value of the shares on that date.
Aquilo Partners
In September 2015, the Company entered into a Letter agreement (the Letter Agreement) with Aquilo Partners, L.P. (Aquilo Partners)
pursuant to which the Company recorded a cash retainer fee of $0.1 million and issued 27,272 shares of the Company´s common stock at a price of $2.75 per share.
10. Public Offering
In July 2015, the Company closed a
public offering of an aggregate of 9,090,909 shares of the Company´s common stock at a purchase price of $2.75 per share. All shares of common stock were offered by the Company. On July 24, 2015 the underwriters exercised their over-allotment
option to purchase 1,211,827 additional shares of the Company´s common stock at the public offering price of $2.75, the sale of which closed on July 28, 2015.
Gross proceeds raised by the Company in the offering, including the exercise of the over-allotment option, were $28.3 million and net of equity issuance costs
were $25.8 million.
11. Private Placement
In June
2016, the Company entered into a securities purchase agreement (the Securities Purchase Agreement) for a private placement of the Companys securities with a select group of institutional investors (the 2016 PIPE). The
2016 PIPE sale transaction, by the Company, consisted of 8,188,804 units at a price of $2.015 per unit for gross proceeds, to the Company, of approximately $16.5 million. After deducting for placement agent fees and offering expenses, the aggregate
net proceeds from the private placement was approximately $15.3 million.
Each unit consisted of (i) one share of the Companys Common Stock or
non-voting series A convertible preferred stock (the Series A Convertible Preferred Stock) which are convertible into one share of common stock, (ii) one warrant to purchase 0.4 shares of Common Stock at an exercise price of $2.00 per
share and (iii) one warrant to purchase 0.2 shares of Common Stock at an exercise price of $3.00 per share. The warrants will be exercisable for a period of five years from the date of issuance. Each share of Series A Convertible Preferred Stock was
issued at a price of $2.015 per share, and is convertible into 1,000 shares of common stock, provided the holder and/or its affiliates do not own greater than 9.99% of the total number of Pieris common stock then outstanding. The Series A
Convertible Preferred Stock has no registration or voting rights. In event of a true liquidation or winding down of the business, holders of Series A Convertible Preferred Stock will be paid prior to the holders of Common Stock. In connection with
the 2016 PIPE, the Company issued 3,225,804 shares of Common Stock and 4,963 shares of Series A Convertible Preferred Stock to the 2016 PIPE investors.
The Company expects to use the proceeds from the 2016 PIPE towards further development and pre-clinical and clinical work of the Company´s proprietary
Anticalin
®
product portfolio, including the lead candidates, as well as the development of other programs and product candidates, and general corporate purposes.
12. License and Transfer Agreement
On April 18,
2016 the Company entered into a license and transfer agreement (the Original Agreement) with Enumeral Biomedical Holdings, Inc. (Enumeral), pursuant to which the Company acquired a non-exclusive worldwide license to use
specified patent rights and know-how owned by Enumeral to research, develop and market fusion protein. As contemplated by the terms of the Original Agreement, the Company entered into a definitive license and transfer agreement (the Definitive
Agreement) with Enumeral on June 6, 2016, to expand the scope of the Companys option to license additional antibodies from Enumeral. Under the Definitive Agreement, Enumeral has granted Pieris options to license two additional
undisclosed Enumeral antibodies (each, a Subsequent Option); the Subsequent Options expire on May 31, 2017. If Pieris licenses an additional antibody pursuant to a Subsequent Option, Pieris must pay, to Enumeral, an additional
undisclosed option exercise payment; any resulting fusion protein products will be subject to royalties and development and sales milestones in the same amounts applicable to the fusion proteins consisting of an Enumerals PD-1 antibody linked
to one or more Anticalin
®
proteins.
10
Under the terms of the Original Agreement, the Company agreed to pay Enumeral an upfront license fee of $250,000
upon signing in April 2016 and subsequently elected to pay a $750,000 maintenance fee in May 2016. The terms of the Definitive Agreement, were essentially unchanged from the Original Agreement, the Company has agreed to pay Enumeral development
milestones up to an aggregate of $37.8 million and sales milestones up to an aggregate of $67.5 million. Consistent with the terms of the Original Agreement, the Company also agreed to pay Enumeral royalties within a range in the low to lower-middle
single digits as a percentage of net sales depending on the amount of net sales in the applicable years. In the event that the Company is required to pay a license fee or royalty to any third party related to the licensed products, the royalty
payment due to Enumeral shall be reduced by the amount of such third party fees or payments, up to 50% of the royalty payment for each calendar year due to Enumeral.
The term of the Definitive Agreement ends upon the expiration of the last to expire patent covered under the license. The Definitive Agreement may be
terminated by the Company on 30 days notice and by Enumeral upon 60 days notice of a material breach by the Company (or 30 days with respect to a breach of payment obligations by the Company), provided that the Company has not cured such
breach and dispute resolution procedures specified in the Agreement have been followed. The Agreement will also automatically terminate if the Company fails to make the maintenance fee payment described above.
All amounts paid related to the Agreement have been expensed as research and development expense as incurred. The Company incurred $0 and $1.0 million for the
three and nine months ended September 30, 2016.
13 Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (FASB) issued ASU No. 2014-15, Disclosure of Uncertainties about an
Entitys Ability to Continue as a Going Concern which is intended to define managements responsibility to evaluate whether there is substantial doubt about an organizations ability to continue as a going concern and to provide
related footnote disclosures. Substantial doubt about an entitys ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable
to meet its financial obligations as they become due within one year after the date that the financial statements are issued (or are available to be issued). ASU No. 2014-15 provides guidance to an organizations management, with
principles and definitions intended to reduce diversity in the timing and content of disclosures commonly provided by organizations in the footnotes of their financial statements. ASU No. 2014-15 is effective for annual reporting periods
ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. Had this standard been adopted as of September 30, 2016, the Company does not believe it would have been required to make any
additional disclosures.
In February 2016, the FASB issued ASU No. 2016-02,
Leases (Topic 842)
. Under the amendments in ASU
2016-02 lessees will be required to recognize (i) a lease liability, which is a lessees obligation to make lease payments arising from a lease, measured on a discounted basis; and (ii) a right-of-use asset, which is an asset that
represents the lessees right to use, or control the use of, a specified asset for the lease term for all leases (with the exception of short-term leases) at the commencement date. This guidance is effective for fiscal years beginning after
December 15, 2019 including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements and related
disclosures.
In March 2016, the FASB issued ASU No. 2016-08,
Revenues from Contract with Customers (Topic 606): Principal versus Agent
Considerations (Reporting Revenue Gross versus Net)
. The amendments are intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations by amending certain existing
illustrative examples and adding additional illustrative examples to assist in the application of the guidance. This guidance is effective for fiscal years beginning after December 15, 2018 including interim periods within those fiscal years.
The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements and related disclosures.
In
March 2016, the FASB issued ASU No. 2016-09,
Compensation Stock Compensation (Topic 718): Improvement to Employee Share-Based Payment Accounting.
Under the amendments in ASU 2016-09 several aspects of the accounting
for share-based payment award transactions are simplified, including (i) income tax consequences, (ii) classification of awards as either equity or liabilities and (iii) classification on the statement of cash flows. This guidance is
effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any interim or annual period. The Company is currently evaluating the potential impact the adoption
of this standard will have on its financial statements and related disclosures.
In April 2016, the FASB issued ASU. No. 2016-10,
Revenue
from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
. The amendments in ASU 2016-10 add further guidance on identifying performance obligations and also to improve the operability and
understandability of the licensing implementation guidance. The amendments do not change the core principle of the guidance in Topic 606. This guidance is effective for annual periods beginning after December 15, 2018, including interim
reporting periods therein. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements and related disclosures.
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In May 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customer (Topic 606):
Narrow-Scope Improvements and Practical Expedients.
The amendments in ASU 2016-12 address narrow-scope improvements to the guidance on collectability, noncash consideration, and completed contracts at transition. Additionally, the
amendments in this update provide a practical expedient for contract modifications at transition and an accounting policy election related to the presentation of sales taxes and other similar taxes collected from customers. This guidance is
effective for annual periods beginning after December 15, 2018, including interim reporting periods therein. The Company is currently evaluating the potential impact the adoption of this standard will have on its financial statements and
related disclosures. Pieris has considered other recent accounting pronouncements and concluded that they are either not applicable to the business, or that the effect is not expected to be material to the unaudited condensed consolidated financial
statements as a result of future adoption.
14. Subsequent Events
Milestone payment
The Company announced, in
October 2016, the achievement of a success-based milestone in its R&D collaboration with Daiichi Sankyo. The milestone was triggered by Daiichi Sankyo´s decision to initiate a GLP toxicity study in non-human primates.
Sales Agreement
In October 2016, the Company
entered into a Sales Agreement with Cowen and Company, LLC (the Sales Agreement) to establish an at-the-market equity offering program (ATM) pursuant to which it may elect to offer and sell up to an aggregate of $35
million of its Common Stock at prevailing market prices from time to time. To date the Company has not sold any shares of its Common Stock in the ATM offering.
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