ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking
statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, or the Securities Act, and
Section 21E of the Securities Exchange Act of 1934, as
amended, or the Exchange Act, which are subject to the “safe
harbor” created by those sections. Forward-looking statements
are based on our management’s beliefs and assumptions and on
information currently available to them. In some cases you can
identify forward-looking statements by words such as
“may,” “will,” “should,”
“could,” “would,” “expects,”
“plans,” “anticipates,”
“believes,” “estimates,”
“projects,” “predicts,”
“potential” and similar expressions intended to
identify forward-looking statements. Examples of these statements
include, but are not limited to, statements regarding: the
implications of interim or final results of our clinical trials,
the progress of our research programs, including clinical testing,
the extent to which our issued and pending patents may protect our
products and technology, our ability to identify new product
candidates, the potential of such product candidates to lead to the
development of commercial products, our anticipated timing for
initiation or completion of our clinical trials for any of our
product candidates, our future operating expenses, our future
losses, our future expenditures for research and development, our
ability to raise capital and the sufficiency of our cash resources.
Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including the
risks faced by us and described in Part II, Item 1A of this
Quarterly Report on Form 10-Q, Part I, Item 1A of our Annual Report
on Form 10-K, and our other filings with the Securities and
Exchange Commission, or SEC. You should not place undue reliance on
these forward-looking statements, which apply only as of the date
of this Quarterly Report on Form 10-Q. You should read this
Quarterly Report on Form 10-Q completely and with the understanding
that our actual future results may be materially different from
those we expect. Except as required by law, we assume no obligation
to update these forward-looking statements, whether as a result of
new information, future events or otherwise.
The following discussion and analysis should be read in conjunction
with the unaudited
condensed
consolidated financial statements and notes thereto included in
Part I, Item 1 of this Quarterly Report on Form 10-Q and with
the audited consolidated financial statements and related notes
thereto included as part of our Annual Report on Form 10-K for the
year ended December 31, 2016.
All references in this Quarterly Report to “Tenax
Therapeutics”, “we”, “our” and
“us” means Tenax Therapeutics, Inc.
Overview
Strategy
We are
a specialty pharmaceutical company focused on identifying,
developing and commercializing drugs for critical care patients.
Our principal business objective is to acquire or discover,
develop, and commercialize novel therapeutic products for disease
indications that represent significant areas of clinical need and
commercial opportunity. Our lead product is levosimendan, which was
acquired in an asset purchase agreement with Phyxius Pharma, Inc.,
or Phyxius. Levosimendan is a calcium sensitizer developed for
intravenous use in hospitalized patients with acutely decompensated
heart failure. The treatment is currently approved in more than 60
countries for this indication.
The
United States Food and Drug Administration, or FDA, has granted
Fast Track status for levosimendan for the reduction of morbidity
and mortality in cardiac surgery patients at risk for developing
Low Cardiac Output Syndrome, or LCOS. In addition, the FDA has
agreed to the Phase III protocol design under Special Protocol
Assessment, or SPA, and provided guidance that a single successful
trial will be sufficient to support approval of levosimendan in
this indication.
On January 31, 2017,
we announced top-line results from the Phase III LEVO-CTS trial.
Levosimendan, given prophylactically prior to cardiac surgery to
patients with reduced left ventricular function, had no effect on
the co-primary outcomes. The study did not achieve statistically
significant reductions in the dual endpoint of death or use of a
mechanical assist device at 30 days, nor in the quad endpoint of
death, myocardial infarction, need for dialysis, or use of a
mechanical assist device at 30 days. However, the study results
demonstrated statistically significant reductions in two of three
secondary endpoints including reduction in LCOS and a reduction in
postoperative use of secondary inotropes. Additionally,
levosimendan was found to be safe with no clinically significant
increases in hypotension or cardiac arrhythmias and the clinical
data showed a non-significant numerical reduction in 90-day
mortality.
Notwithstanding the fact that the trial’s primary endpoints
were not statistically significant, and given the statistically
significant reductions in the secondary endpoints, we continue to
believe levosimendan is an effective and safe inotrope to increase
cardiac output in patients at risk for or with perioperative low
cardiac output. Following the announcement of the Phase III
LEVO-CTS top-line results, we held a meeting with the FDA to review
the preliminary trial data and discuss a path forward to file a NDA
for levosimendan. As a follow-up to this meeting, a pre-NDA meeting
has been scheduled with the FDA on May 10, 2017 to discuss the data
that supports the approval of levosimendan for acute decompensated
heart failure or cardiac surgery patients undergoing coronary
artery bypass graft. The FDA may not approve levosimendan for this
or any other indication, and if we are unable to obtain regulatory
approval, we will be unable to commercialize levosimendan in the
U.S.
Additionally,
our Board of
Directors is conducting a comprehensive review of strategic
alternatives focused on maximizing stockholder value and has formed
a strategic committee of three independent board members to
supervise management in this review. We have engaged Ladenburg
Thalmann & Co. Inc. as its financial advisor to assist in the
strategic review process; including, but not limited to a merger, a
business combination, or a purchase, license or other acquisition
of assets. This process may not result in any transaction and we do
not intend to disclose additional details unless and until we
determine further disclosure is appropriate or
required.
First Quarter 2017 Highlights
The
following summarizes certain key financial measures for the three
months ended March 31, 2017:
●
Cash and cash
equivalents, including the fair-value of our marketable securities,
were $17.8 million at March 31, 2017.
●
Our net loss from
operations was $3.5 million for the first quarter of fiscal 2017
compared to $5.7 million for the three months ended March 31,
2016.
●
Net cash used in
operating activities was $4.0 million and $3.3 million for the
three months ended March 31, 2017 and 2016,
respectively.
Opportunities and Trends
As we
focus on the development of our existing products and product
candidates, we also continue to position ourselves to execute upon
licensing and other partnering opportunities. To do so, we will
need to continue to maintain our strategic direction, manage and
deploy our available cash efficiently and strengthen our
collaborative research development and partner
relationships.
During
the remainder of calendar year 2017, we are focused on the
following initiatives:
●
Working with
collaborators and partners to accelerate product development,
reduce our development costs, and broaden our commercialization
capabilities;
●
Gaining regulatory
approval for the continued development and commercialization of our
products in the United States; and
●
Identifying and
acquiring additional products or product candidates.
Critical Accounting Policies and Significant Judgments and
Estimates
There
have been no significant changes in critical accounting policies,
as compared to the critical accounting policies described in
“
Item 7—Management’s
Discussion and Analysis of Financial Condition and Results of
Operations—
Summary of Significant
Accounting Policies”
in our Annual Report on Form 10-K for the year ended December 31,
2016.
Financial Overview
Results of Operations- Comparison of the Three Months Ended March
31, 2017 and 2016
General and Administrative Expenses
General
and administrative expenses consist primarily of compensation for
executive, finance, legal and administrative personnel, including
stock-based compensation. Other general and administrative expenses
include facility costs not otherwise included in research and
development expenses, legal and accounting services, other
professional services, and consulting fees. General and
administrative expenses and percentage changes for the three months
ended March 31, 2017 and 2016, respectively, are as
follows:
|
Three
months ended March 31,
|
|
|
|
|
|
|
|
Personnel
costs
|
$
788,814
|
$
713,335
|
$
75,479
|
11
%
|
Legal
and professional fees
|
505,901
|
667,364
|
(161,463
)
|
(24
)%
|
Other
costs
|
116,872
|
341,613
|
(224,741
)
|
(66
)%
|
Facilities
|
34,694
|
36,436
|
(1,742
)
|
(5
)%
|
Depreciation
and amortization
|
1,173
|
2,948
|
(1,775
)
|
(60
)%
|
Personnel costs:
Personnel
costs increased approximately $75,000 for the
three months ended March 31, 2017
compared
to the same period in the prior year. This increase was due
primarily to the recognized expense for the vesting of outstanding
stock options and an overall increase in employee salaries and
benefits paid during the current period as compared to the same
period of the prior year.
Legal and professional fees:
Legal
and professional fees consist of the costs incurred for legal fees,
accounting fees, consulting fees, recruiting costs and investor
relations services, as well as fees paid to our Board of Directors.
Legal and professional fees decreased approximately $161,000 for
the
three months ended March 31,
2017
compared to the same period in the prior year. This
decrease was due primarily to decreases in costs incurred for
auditing, legal and consulting fees, and the vested value of stock
option grants to our Board of Directors, partially offset by an
increase in costs incurred for investor relations
services.
–
Audit and
accounting fees decreased approximately $45,000 in the current
period. This decrease was due primarily to the costs incurred for
the change in our fiscal year,
which necessitated
the filing of our audited transitional financial statements in the
prior year which were not incurred in the current
period
.
–
Legal fees
decreased approximately $62,000 in the current period. This
decrease was due primarily to the costs incurred for the change in
our fiscal year,
which necessitated
the filing of our Form 10-KT to transition to a calendar year filer
in the prior year, which were not incurred in the current
period
.
–
Consulting costs
decreased approximately $70,000 in the current period. This
decrease was due primarily to the fees paid to third-party firms
for pre-launch commercialization preparations for LCOS, nationwide
registrations for drug distribution and market analysis and
research for septic shock in the prior year which were not incurred
in the current period.
–
Costs associated
with investor relations and communication increased approximately
$33,000 in the current period. This increase was due primarily to
fees paid to a third-party investor relations firm providing
marketing and corporate communications services to us in the
current period, which were not incurred in the same period of the
prior year.
–
Board of Directors
fees decreased in the current period by approximately $21,000. This
decrease was due primarily to a reduction in the recognized expense
for the vesting of stock options awarded in the current period as
compared to the recognized expense for stock options awarded in the
same period of the prior year.
Other costs:
Other
costs include costs incurred for travel, supplies, insurance and
other miscellaneous charges. The approximately $225,000 decrease in
other costs for the
three months ended
March 31, 2017
was due primarily to an approximately
$145,000 decrease in franchise taxes paid, a reduction of
approximately $20,000 in costs incurred for our sponsorship of the
National Sepsis Foundation during the same period in the prior
year, and an overall decrease in travel costs, supplies expenses,
bank fees and other miscellaneous charges in the current period as
compared to the same period in the prior year.
Facilities:
Facilities
expenses include costs paid for rent and utilities at our corporate
headquarters in North Carolina. Facilities costs remained
relatively consistent for the three months
ended March 31, 2017 and 2016.
Depreciation and Amortization:
Depreciation
and amortization costs remained relatively consistent for the three
months
ended March 31, 2017 and
2016.
Research and Development
Expenses
Research
and development expenses include, but are not limited to,
(i) expenses incurred under agreements with CROs and
investigative sites, which conduct our clinical trials and a
substantial portion of our pre-clinical studies; (ii) the cost
of manufacturing and supplying clinical trial materials;
(iii) payments to contract service organizations, as well as
consultants; (iv) employee-related expenses, which include
salaries and benefits; and (v) facilities, depreciation and
other allocated expenses, which include direct and allocated
expenses for rent and maintenance of facilities and equipment,
depreciation of leasehold improvements, equipment, laboratory and
other supplies. All research and development expenses are expensed
as incurred. Research and development expenses and percentage
changes for the
three months ended
March 31, 2017 and 2016, respectively
, are as
follows:
|
Three
months ended March 31,
|
|
|
|
|
|
|
|
Clinical
and preclinical development
|
$
1,830,087
|
$
3,534,718
|
$
(1,704,631
)
|
(48
)%
|
Consulting
|
110,612
|
256,304
|
(145,692
)
|
(57
)%
|
Personnel
costs
|
106,776
|
140,503
|
(33,727
)
|
(24
)%
|
Other
costs
|
3,957
|
12,109
|
(8,152
)
|
(67
)%
|
Clinical and preclinical development:
Clinical
and preclinical development costs include, primarily, the costs
associated with our Phase III clinical trial for levosimendan. The
decrease of approximately $1.7 million in clinical and preclinical
development costs for the three months ended March 31, 2017,
compared to the same period in the prior year, was primarily due to
decreased expenditures for CRO costs to manage the Levo-CTS Phase
III clinical trial.
For the three months ended March
31, 2017, we recorded CRO costs of approximately $1.8 million for
the management of the Phase III trial, compared to CRO costs of
$3.5 million, which included approximately $1.6 million in
pass-through site activation and enrolled patient costs, during the
same period in the prior year.
Consulting fees:
Consulting
fees decreased approximately $146,000 for the three months ended
March 31, 2017 compared to the same period in the prior year,
primarily due to a decrease in fees paid to a third-party
consulting firm for services provided to improve training and
communication with active sites in support of our Phase III
Levo-CTS clinical trial in the prior year which were not incurred
in the current period.
Personnel costs:
Personnel
costs decreased approximately $34,000 for the three months ended
March 31, 2017 primarily due to a reduction in headcount in the
current period as compared to the same period in the prior
year.
Other costs:
Other
costs decreased approximately $8,000 for the three months
ended March 31, 2017 as compared to
the same period in the prior year due primarily to a reduction in
travel costs in the current period.
The
process of conducting preclinical studies and clinical trials
necessary to obtain approval from the FDA is costly and time
consuming. The probability of success for each product candidate
and clinical trial may be affected by a variety of factors,
including, among other things, the quality of the product
candidate’s early clinical data, investment in the program,
competition, manufacturing capabilities and commercial viability.
As a result of the uncertainties discussed above, uncertainty
associated with clinical trial enrollment and risks inherent in the
development process, we are unable to determine the duration and
completion costs of current or future clinical stages of our
product candidates or when, or to what extent, we will generate
revenues from the commercialization and sale of any of our product
candidates. Development timelines, probability of success and
development costs vary widely. We are currently focused on
developing our most advanced product candidate, levosimendan;
however, we will need substantial additional capital in the future
in order to complete the development and potential
commercialization of levosimendan, and to continue with the
development of other potential product candidates.
Other income and expense, net
Other
income and expense includes non-operating income and expense items
not otherwise recorded in our
condensed
consolidated statement of
comprehensive loss
. These items
include, but are not limited to, changes in the fair value of
financial assets and derivative liabilities, interest income earned
and fixed asset disposals. Other income for the three months ended
March 31, 2017 and 2016, respectively, is as follows:
|
Three
months ended March 31,
|
|
|
|
|
|
|
|
Other
income, net
|
$
(223,301
)
|
$
(343,668
)
|
$
120,367
|
(35
)%
|
Other
income decreased approximately $120,000 for the three months ended
March 31, 2017 compared to the same period in the prior year. This
decrease is due primarily to the change in fair value of our Series
C warrant derivative liability in the current period and a
reduction in the interest earned on our investment in marketable
securities.
During the three months ended March 31, 2017, we recorded a
derivative gain of approximately $171,000 which compared to a
derivative gain of approximately $231,000 for the same period in
the prior year. These charges to income are derived from the free
standing Series C warrants which are measured at their fair market
value each period using the Monte Carlo simulation
model
.
During
the three months ended March 31, 2017, we recorded interest income
of approximately $52,000 from our investments in marketable
securities. This income is derived from approximately $114,000 in
bond interest paid, partially offset by approximately $67,000 in
charges for amortization of premiums paid and fair-value
adjustments measured each period, which compares to approximately
$314,000 in bond interest paid, partially offset by approximately
$198,000 in charges for amortization of premiums paid and
fair-value adjustments during the same period in the prior
year.
Liquidity, Capital Resources and Plan of Operation
We have
incurred losses since our inception and as of March 31, 2017 we had
an accumulated deficit of approximately $208 million. We will
continue to incur losses until we generate sufficient revenue to
offset our expenses, and we anticipate that we will continue to
incur net losses for at least the next several years. We expect to
incur increased expenses related to our development and potential
commercialization of levosimendan for heart failure and other
potential indications, as well as identifying and developing other
potential product candidates and, as a result, we will need to
generate significant net product sales, royalty and other revenues
to achieve profitability.
Liquidity
We have
financed our operations since September 1990 through the issuance
of debt and equity securities and loans from stockholders. We had
total current assets of $12,787,780 and $13,628,175 and working
capital of $7,746,447 and $7,428,938 as of March 31, 2017 and
December 31, 2016, respectively. Based on our working capital and
the value of our investments in marketable securities at March 31,
2017, we believe we have sufficient capital to fund our operations
through the first half of calendar year 2018.
We
recently completed a Phase III clinical trial for levosimendan, and
we expect our primary focus will be on preparing and filing an NDA
with the FDA for heart failure or cardiac surgery. Our ability to
continue to pursue testing and development of other potential
products depends on obtaining license income or outside financial
resources. There is no assurance that we will obtain any license
agreement or outside financing or that we will otherwise succeed in
obtaining the necessary resources.
Our common stock is currently listed on
The Nasdaq Capital
Market. In order to maintain this listing, we must satisfy minimum
financial and other requirements. On March 15, 2017, we received a
notification letter from Nasdaq’s Listing Qualifications
Department indicating that we are not in compliance with Nasdaq
Listing Rule 5550(a)(2), because the minimum bid price of our
common stock on the Nasdaq Capital Market has closed below $1.00
per share for 30 consecutive business days. In accordance with
Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days,
or until September 11, 2017, to regain compliance with the minimum
$1.00 bid price per share requirement. To regain compliance, any
time before September 11, 2017, the bid price of our common stock
must close at $1.00 per share or more for a minimum of 10
consecutive business days. If we do not regain compliance during
this cure period, we expect that Nasdaq will provide written
notification to us that our common stock will be delisted. At that
time, we may appeal Nasdaq’s delisting determination to a
Nasdaq hearing panel.
We
intend to engage in efforts to regain compliance and thus maintain
our listing. However, there can be no assurance that we will be
able to regain compliance during the applicable time periods set
forth above. If we fail to continue to meet all applicable Nasdaq
Capital Market requirements in the future and Nasdaq determines to
delist our common stock, the delisting could substantially decrease
trading in our common stock; adversely affect the market liquidity
of our common stock as a result of the loss of market efficiencies
associated with Nasdaq and the loss of federal preemption of state
securities laws; adversely affect our ability to obtain financing
on acceptable terms, if at all; and may result in the potential
loss of confidence by investors, suppliers, customers, and
employees and fewer business development opportunities.
Additionally, the market price of our common stock may decline
further and shareholders may lose some or all of their
investment.
Cash Flows
The following table shows a summary of our cash flows for the three
months ended March 31, 2017 and 2016:
|
Three months ended March 31,
|
|
|
|
Net
cash used in operating activities
|
$
(4,037,296
)
|
$
(3,319,866
)
|
Net
cash provided by investing activities
|
1,069,744
|
2,921,931
|
Net cash used in operating activities.
Net cash used
in operating activities was approximately $4.0 million for the
three months ended March 31, 2017 compared to net cash used in
operating activities of approximately $3.3 million for the three
months ended March 31, 2016. The increase in cash used for
operating activities was due primarily to a decrease in our accrued
costs related to the Phase III clinical trial for
levosimendan.
Net cash provided by investing activities
. Net cash
provided by investing activities was approximately $1.1 million for
the three months ended March 31, 2017 compared to approximately
$2.9 million for the three months ended March 31, 2016. The
decrease in cash provided by investing activities was primarily due
a reduction in the sale of marketable securities in the current
period.
Operating Capital and Capital Expenditure Requirements
Our
future capital requirements will depend on many factors that
include, but are not limited to the following:
●
the initiation,
progress, timing and completion of clinical trials for our product
candidates and potential product candidates;
●
the outcome, timing
and cost of regulatory approvals and the regulatory approval
process;
●
delays that may be
caused by changing regulatory requirements;
●
the number of
product candidates that we pursue;
●
the costs involved
in filing and prosecuting patent applications and enforcing and
defending patent claims;
●
the timing and
terms of future in-licensing and out-licensing
transactions;
●
the cost and timing
of establishing sales, marketing, manufacturing and distribution
capabilities;
●
the cost of
procuring clinical and commercial supplies of our product
candidates;
●
the extent to which
we acquire or invest in businesses, products or technologies;
and
●
the possible costs
of litigation.
We
believe that our existing cash and cash equivalents, along with our
investment in marketable securities, will be sufficient to fund our
projected operating requirements through the first half of calendar
year 2018. We will need substantial additional capital in the
future in order to complete the development and commercialization
of levosimendan and to fund the development and commercialization
of other future product candidates. Until we can generate a
sufficient amount of product revenue, if ever, we expect to finance
future cash needs through public or private equity offerings, debt
financings or corporate collaboration and licensing arrangements.
Such funding, if needed, may not be available on favorable terms,
if at all. In the event we are unable to obtain additional capital,
we may delay or reduce the scope of our current research and
development programs and other expenses.
To the
extent that we raise additional funds by issuing equity securities,
our stockholders may experience additional significant dilution,
and debt financing, if available, may involve restrictive
covenants. To the extent that we raise additional funds through
collaboration and licensing arrangements, it may be necessary to
relinquish some rights to our technologies or our product
candidates or grant licenses on terms that may not be favorable to
us. We may seek to access the public or private capital markets
whenever conditions are favorable, even if we do not have an
immediate need for additional capital.
Critical Accounting Policies
Our consolidated financial statements have been prepared in
accordance with GAAP. For information regarding our critical
accounting policies and estimates, please refer to
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Summary of Significant
Accounting Policies” contained in our Annual Report on Form
10-K for the year ended December 31, 2016. There have not been
material changes to the critical accounting policies previously
disclosed in that report.
Recent Accounting Pronouncements
In
January 2017, the
Financial Accounting
Standards Board, or the
FASB, issued a new accounting
standard that provides guidance for evaluating whether transactions
should be accounted for as acquisitions (or disposals) of assets or
businesses. The guidance provides a screen to determine when an
integrated set of assets and activities, or a set, does not qualify
to be a business. The screen requires that when substantially all
of the fair value of the gross assets acquired (or disposed of) is
concentrated in an identifiable asset or a group of similar
identifiable assets, the set is not a business. If the screen is
not met, the guidance requires a set to be considered a business to
include, at a minimum, an input and a substantive process that
together significantly contribute to the ability to create outputs
and removes the evaluation as to whether a market participant could
replace the missing elements. The new standard will be effective
for us on January 1, 2018 and will be adopted on a prospective
basis. Early adoption is permitted. We are currently evaluating the
effect that the standard will have on our condensed consolidated
financial statements and related disclosures.
In
August 2016, the FASB issued a new accounting standard that
clarifies how companies present and classify certain cash receipts
and cash payments in the statement of cash flows where diversity in
practice exists. The new standard is effective for us in our first
quarter of fiscal 2018 and earlier adoption is permitted. We do not
believe that adopting this updated standard will have a material
impact on our condensed consolidated financial statements and
related disclosures.
In June
2016,
the
FASB, issued a new
accounting standard that amends how credit losses are measured and
reported for certain financial instruments that are not accounted
for at fair value through net income. This new standard will
require that credit losses be presented as an allowance rather than
as a write-down for available-for-sale debt securities and will be
effective for interim and annual reporting periods beginning
January 1, 2020, with early adoption permitted, but not
earlier than annual reporting periods beginning January 1,
2019. A modified retrospective approach is to be used for certain
parts of this guidance, while other parts of the guidance are to be
applied using a prospective approach. We are currently evaluating
the impact that this new standard will have on our condensed
consolidated financial statements and
related disclosures
.
In
March 2016,
the FASB
issued a
new accounting standard intended to simplify various aspects
related to how share-based payments are accounted for and presented
in the financial statements.
The new
guidance includes provisions to reduce the complexity related to
income taxes, statement of cash flows, and forfeitures when
accounting for share-based payment transactions. The new standard
is effective for annual periods beginning after December 15, 2016,
and interim periods within those annual periods. Early adoption is
permitted.
We adopted this standard as
of January 1, 2017. The adoption of this standard does not have a
material impact on our condensed consolidated financial statements
and related disclosures
.
In May 2014, the FASB issued a new accounting standard that
supersedes nearly all existing revenue recognition guidance under
GAAP. The new standard is principles-based and provides a five-step
model to determine when and how revenue is recognized. The core
principle of the new standard is that revenue should be recognized
when a company transfers promised goods or services to customers in
an amount that reflects the consideration to which we expect to be
entitled in exchange for those goods or services. In March 2016,
the FASB issued a new standard to
clarify the implementation
guidance on principal versus agent considerations, and in April
2016, the FASB issued a new standard to clarify the implementation
guidance on identifying performance obligations and licensing.
The new standard also requires
disclosure of qualitative and quantitative information surrounding
the amount, nature, timing and uncertainty of revenues and cash
flows arising from contracts with customers. In July 2015, the FASB
agreed to defer the effective date of the standard from annual
periods beginning after December 15, 2016, to annual periods
beginning after December 15, 2017, with an option that permits
companies to adopt the standard as early as the original effective
date. Early application prior to the original effective date is not
permitted. The standard permits the use of either the retrospective
or cumulative effect transition method. We do not believe the
adoption of this standard will have a material impact on our
condensed consolidated financial statements and related
disclosures
.
In February 2016, the FASB issued a new accounting standard
intended to improve financial reporting regarding leasing
transactions. The new standard will require us to recognize on our
balance sheet the assets and liabilities for the rights and
obligations created by all leased assets. The new standard will
also require us to provide enhanced disclosures designed to enable
users of financial statements to understand the amount, timing, and
uncertainty of cash flows arising from all leases, operating and
capital, with lease terms greater than 12 months. The new standard
is effective for financial statements beginning after December 15,
2018, and interim periods within those annual periods. Early
adoption is permitted. We are currently evaluating the impact that
this new standard will have on our condensed consolidated financial
statements and related disclosures.
In January 2016, the FASB issued a new accounting standard that
will enhance our reporting for financial instruments. The new
standard is effective for financial statements issued for annual
periods beginning after December 15, 2017, and interim periods
within those annual periods. Earlier adoption is permitted for
interim and annual reporting periods as of the beginning of the
fiscal year of adoption. We do not believe the adoption of this
standard will have a material impact on our condensed consolidated
financial statements.
Contractual Obligations
There have been no material changes, outside of the ordinary course
of business, to our contractual obligations as previously disclosed
in our Annual Report on Form 10-K for the year ended December 31,
2016.
Off-Balance Sheet Arrangements
Since
our inception, we have not engaged in any off-balance sheet
arrangements, including the use of structured finance, special
purpose entities or variable interest entities.
ITEM 3.
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There
have been no material changes to our quantitative and qualitative
disclosures about market risk as compared to the quantitative and
qualitative disclosures about market risk described in our
Annual Report on Form 10-K for the
year ended December 31, 2016
.
ITEM 4.
CONTROLS
AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As
required by paragraph (b) of Rules 13a-15 and 15d-15
promulgated under the Exchange Act, our management, including our
Interim Chief Executive Officer and Chief Financial Officer,
conducted an evaluation as of the end of the period covered by this
report, of the effectiveness of our disclosure controls and
procedures as defined in Exchange Act Rule 13a-15(e) and
15d-15(e). Based on that evaluation, our Interim Chief Executive
Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of March 31, 2017, the
end of the period covered by this report in that they provide
reasonable assurance that the information we are required to
disclose in the reports we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time
periods required by the SEC and is accumulated and communicated to
our management, including our Interim Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
Changes in Internal Control over Financial Reporting
There
were no significant changes in our internal control over financial
reporting during our most recently completed fiscal quarter that
has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting. We routinely
review our internal controls over financial reporting and from time
to time make changes intended to enhance the effectiveness of our
internal control over financial reporting. We will continue to
evaluate the effectiveness of our disclosure controls and
procedures and internal controls over financial reporting on an
ongoing basis and will take action as appropriate.