AVENUE THERAPEUTICS, INC., 10-K filed on 3/1/2018
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Dec. 31, 2017
Feb. 14, 2018
Jun. 30, 2017
Document Information [Line Items]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Entity Registrant Name
AVENUE THERAPEUTICS, INC. 
 
 
Entity Central Index Key
0001644963 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Filer Category
Non-accelerated Filer 
 
 
Entity Public Float
 
 
$ 50,811,757 
Trading Symbol
ATXI 
 
 
Entity Common Stock, Shares Outstanding
 
10,277,083 
 
BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Current Assets:
 
 
Cash and cash equivalents
$ 11,782 
$ 197 
Short-term investments
10,000 
Prepaid expenses and other current assets
388 
Total Assets
22,170 
197 
Current Liabilities:
 
 
Accounts payable and accrued expenses
2,737 
506 
Accounts payable and accrued expenses - related party
53 
1,348 
Interest payable
57 
Accrued interest - related party
346 
Notes payable - related party
2,848 
NSC notes payable, short-term
1,000 
Derivative warrant liability
314 
Total current liabilities
2,790 
6,419 
Convertible notes payable, at fair value
200 
NSC notes payable, long-term (net of debt discount of $0 and $174, respectively)
1,826 
Total Liabilities
2,790 
8,445 
Commitments and Contingencies - see Note 8
   
   
Stockholders' Equity (Deficit)
 
 
Common Stock ($0.0001 par value), 50,000,000 shares authorized Common shares; 10,265,083 and 3,257,936 shares issued and outstanding as of December 31, 2017 and December 31, 2016, respectively
Common stock issuable, 273,837 and 83,532 shares as of December 31, 2017 and December 31, 2016, respectively
1,103 
49 
Additional paid-in capital
38,937 
105 
Accumulated deficit
(20,661)
(8,403)
Total Stockholders' Equity (Deficit)
19,380 
(8,248)
Total Liabilities and Stockholders' Equity (Deficit)
22,170 
197 
Series A Preferred Stock [Member]
 
 
Stockholders' Equity (Deficit)
 
 
Preferred Stock ($0.0001 par value), 2,000,000 shares authorized Class A Preferred Stock, 250,000 shares issued and outstanding as of December 31, 2017 and December 31, 2016
$ 0 
$ 0 
BALANCE SHEETS (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
Preferred Stock, Par or Stated Value Per Share
$ 0.0001 
$ 0.0001 
Preferred Stock, Shares Authorized
2,000,000 
2,000,000 
Common Stock, Par or Stated Value Per Share
$ 0.0001 
$ 0.0001 
Common Stock, Shares Authorized
50,000,000 
50,000,000 
Common Stock, Shares, Issued
10,265,083 
3,257,936 
Common Stock, Shares, Outstanding
10,265,083 
3,257,936 
Common Stock Shares issuable
273,837 
83,532 
Series A Preferred Stock [Member]
 
 
Preferred Stock, Shares Issued
250,000 
250,000 
Preferred Stock, Shares Outstanding
250,000 
250,000 
NSC Notes Memebers [Member]
 
 
Debt Instrument, Unamortized Discount
$ 0 
$ 174 
STATEMENTS OF OPERATIONS (USD $)
In Thousands, except Share data, unless otherwise specified
11 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Operating expenses:
 
 
 
Research and development
$ 961 
$ 6,698 
$ 1,331 
Research and development - licenses acquired
3,040 
1,103 
49 
General and administration
842 
3,620 
997 
Loss from operations
(4,843)
(11,421)
(2,377)
Interest income
(88)
Interest expense
215 
294 
420 
Interest expense - related party
168 
81 
192 
Change in fair value of convertible notes payable
99 
Change in fair value of warrant liabilities
451 
188 
Net Loss
$ (5,226)
$ (12,258)
$ (3,177)
Net loss per common share outstanding, basic and diluted
$ (1.93)
$ (1.85)
$ (1.11)
Weighted average number of common shares outstanding, basic and diluted
2,702,403 
6,634,937 
2,860,526 
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $)
Total
Common Class A [Member]
Preferred Stock [Member]
Common Stock [Member]
Common Stock issuable [Member]
Additional Paid-in Capital [Member]
Accumulated deficit [Member]
Balance at Feb. 08, 2015
$ 0 
$ 1,000 
$ 0 
$ 0 
$ 0 
$ (1,000)
$ 0 
Balance (Shares) at Feb. 08, 2015
 
2,333,333 
 
 
Issuance of common shares to Fortress
Issuance of common shares to Fortress (in shares)
 
333,333 
 
 
Issuance of common shares for services
22,000 
22,000 
Issuance of common shares for services (in shares)
 
50,000 
 
 
Share based compensation
29,000 
29,000 
 
Share based compensation (in shares)
 
333,333 
 
 
Common shares issuable to Fortress - Founders
40,000 
40,000 
Common shares issuable to Fortress - Founders (in shares)
 
76,250 
 
 
Net loss
(5,226,000)
(5,226,000)
Balance at Dec. 31, 2015
(5,135,000)
1,000 
40,000 
50,000 
(5,226,000)
Balance (Shares) at Dec. 31, 2015
 
2,333,333 
716,666 
76,250 
 
 
Issuance of common shares - Founders Agreement
5,000 
(40,000)
45,000 
Issuance of common shares - Founders Agreement (in shares)
 
84,187 
(76,250)
 
 
Conversion Class A common shares to Class A preferred shares and common shares
(1,000)
1,000 
Conversion Class A common shares to Class A preferred shares and common shares (in shares)
 
(2,333,333)
250,000 
2,490,417 
 
 
Share based compensation
28,000 
28,000 
Share based compensation (in shares)
 
 
 
Common shares issuable to Fortress - Founders
49,000 
49,000 
Common shares issuable to Fortress - Founders (in shares)
 
83,532 
 
 
Retirement of common shares
(18,000)
(18,000)
Retirement of common shares (in shares)
 
(33,333)
 
 
Net loss
(3,177,000)
(3,177,000)
Balance at Dec. 31, 2016
(8,248,000)
1,000 
49,000 
105,000 
(8,403,000)
Balance (Shares) at Dec. 31, 2016
 
250,000 
3,257,937 
83,532 
 
 
Issuance of common shares - Founders Agreement
948,000 
(49,000)
997,000 
Issuance of common shares - Founders Agreement (in shares)
 
241,657 
(83,532)
 
 
Share based compensation
604,000 
604,000 
Share based compensation (in shares)
 
220,000 
 
 
Common shares issuable to Fortress - Founders
1,103,000 
1,103,000 
Common shares issuable to Fortress - Founders (in shares)
 
273,837 
 
 
Issuance of common shares, net of costs
34,235,000 
34,235,000 
Issuance of common shares, net of costs (in shares)
 
6,325,000 
 
 
Conversion of MSA fees into common shares
1,000,000 
1,000,000 
Conversion of MSA fees into common shares (in shares)
 
166,666 
 
 
Issuance of warrants under the NSC Note
750,000 
750,000 
 
Exercise of warrants under the NSC Note
Exercise of warrants under the NSC Note (in shares)
 
4,075 
 
 
Conversion of notes payable
299,000 
299,000 
Conversion of notes payable (in shares)
 
49,748 
 
 
Change in fair value of convertible notes warrants
15,000 
15,000 
Modification to interest on fortress note
300,000 
300,000 
Contribution of capital - extinguishment of Fortress compensation accrual
632,000 
632,000 
Contribution of capital - extinguishment of Fortress compensation accrual (in Shares)
 
 
 
Net loss
(12,258,000)
(12,258,000)
Balance at Dec. 31, 2017
$ 19,380,000 
$ 0 
$ 0 
$ 1,000 
$ 1,103,000 
$ 38,937,000 
$ (20,661,000)
Balance (Shares) at Dec. 31, 2017
 
250,000 
10,265,083 
273,837 
 
 
STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
11 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities:
 
 
 
Net loss
$ (5,226)
$ (12,258)
$ (3,177)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Share based compensation
29 
604 
28 
Change in fair value of convertible notes payable
99 
Change in fair value of warrant liabilities
451 
188 
Debt discount amortization
73 
174 
123 
Issuance of common shares for services
22 
Research and development - licenses acquired, expensed
3,000 
Issuance of common shares - Founders Agreement
948 
Common shares issuable - Founders Agreement
40 
1,103 
49 
Financing fees expensed related to convertible notes, at fair value
58 
Non-cash financing fees expensed related to convertible notes, at fair value
12 
Changes in operating assets and liabilities:
 
 
 
Prepaid expenses
(388)
Accounts payable and accrued expenses
491 
2,231 
15 
Accrued expenses - related party
511 
337 
829 
Interest payable
(57)
57 
Accrued interest - related party
165 
(46)
181 
Net cash used in operating activities
(895)
(6,802)
(1,632)
Cash flows from investing activities:
 
 
 
Purchase of research and development licenses
(3,000)
Purchase of Short-term investments (certificates of deposits)
(10,000)
Net cash used in investing activities
(3,000)
(10,000)
Cash flows from financing activities:
 
 
 
Issuance of common shares
37,950 
Offering costs
(3,715)
Proceeds from convertible note, at fair value
200 
Financing fees expensed related to convertible notes, at fair value
(58)
Payment of debt issue costs associated with NSC Note
(256)
Proceeds from NSC Note
3,000 
Repayment of NSC Note
(3,000)
Proceeds from notes payable - related party
1,165 
637 
1,673 
Repayments of notes payable - related party
(3,485)
Net cash provided by financing activities
3,909 
28,387 
1,815 
Net change in cash
14 
11,585 
183 
Cash and cash equivalents, beginning of period
197 
14 
Cash and cash equivalents, end of period
14 
11,782 
197 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
60 
303 
183 
Non-cash financing activities:
 
 
 
Conversion of MSA fees into common shares
1,000 
Issuance of Class A common shares to Fortress on February 9, 2015
Warrant liability associated with NSC debt
114 
Issuance of warrants
750 
Extinguishment of Fortress compensation accrual
632 
Modification to interest on fortress note
300 
Conversion of notes payable
200 
Change in fair value of convertible notes warrants
15 
Retirement of common shares
18 
Conversion Class A common shares to Class A preferred shares and common shares
$ 0 
$ 0 
$ 1 
Organization, Plan of Business Operations
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
Note 1 — Organization, Plan of Business Operations
 
Avenue Therapeutics, Inc. (the “Company” or “Avenue”) was incorporated in Delaware on February 9, 2015, as a wholly owned subsidiary of Fortress Biotech, Inc. (“Fortress”), to develop and market pharmaceutical products for the acute care setting in the United States. The Company will focus on developing its product candidate, an intravenous (“IV”) formulation of tramadol HCI (“IV Tramadol”), for moderate to moderately severe post-operative pain.
 
On June 26, 2017, the Company completed an initial public offering (“IPO”) of its common stock, which resulted in the issuance of 6,325,000 shares of its common stock, inclusive of 825,000 shares which were subject to an underwriter over-allotment. The shares were issued at $6.00 per share, resulting in net proceeds of approximately $34.2 million after deducting underwriting discounts, and other offering costs.
 
Liquidity and Capital Resources
 
The Company has incurred substantial operating losses since its inception and expects to continue to incur significant operating losses for the foreseeable future as it executes on its product development plan and may never become profitable. As of December 31, 2017, the Company had an accumulated deficit of $20.7 million.
 
The Company’s development plan anticipates that its cash and short-term investments at December 31, 2017 will provide sufficient liquidity for the period through March 1, 2019.  However, the Company will need to raise additional funding through strategic relationships, public or private equity or debt financings, grants or other arrangements.  If such funding is not available or not available on terms acceptable to the Company, the current development plan will be curtailed.
Significant Accounting Policies
Significant Accounting Policies [Text Block]
Note 2 — Significant Accounting Policies
 
Basis of Presentation
 
The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are stated in U.S. dollars. The Company has no subsidiaries.
 
The financial statements may not be indicative of future performance and may not reflect what their results of operations, financial position, and cash flows would have been had Avenue operated as an independent entity. Certain estimates, including allocations from Fortress, have been made to provide financial statements for stand-alone reporting purposes. Avenue became a stand-alone entity following the IPO on June 26, 2017. All inter-company transactions between Fortress and Avenue are classified as accrued expenses — related party in the financial statements. The Company believes that the assumptions underlying the financial statements are reasonable. The cost allocation methods used prior to the IPO in June 2017 applied to certain common costs include the following:
 
Specific identification.  Where the amounts were specifically identified to Avenue, they were classified accordingly.
 
 
Reasonable allocation.  Where the amounts were not clearly or specifically identified, management determined if a reasonable allocation method could be applied.
 
The acquisition of the IV Tramadol license and the assumption of liabilities in connection with this license was accounted for as a transaction among businesses under common control. Because the license and assumption of liabilities met the definition of a business (as defined in Accounting Standards Codification (“ASC”) 805), the transfer of the business represented a transfer among entities under common control which should be accounted for at carrying amount with retrospective adjustment of prior period financial statements similar to the manner in which a pooling-of-interest was accounted for under Accounting Principles Board (“APB”) 16, Business Combinations. Given this, the acquisition of the license by Fortress (and transferred to Avenue) represented a Research and Development expenditure which should be expensed pursuant to ASC 730 Research and Development.
 
Reverse stock split
 
On June 26, 2017, the Company effected a 3.0-to-1.0 reverse stock split of Company's common stock. No fractional shares were issued in connection with the stock split. The par value and other terms of these classes of stock were not affected by the reverse stock split.
 
All share and per share amounts, including stock options, have been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0-to-1.0 reverse stock split. Further, the fair value of stock issuances has been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0-to-1.0 reverse stock split.
 
Use of Estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
 
Cash and Cash Equivalents
 
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 2017 and at December 31, 2016 consisted of cash, money market funds and certificates of deposit in institutions in the United States. Balances at certain institutions have exceeded Federal Deposit Insurance Corporation (“FDIC”) insured limits and U.S. government agency securities.
 
Short-term Investments 
 
The company classifies its certificates of deposit as short-term investments in accordance with the Financial Accounting Standards Board ("FASB") ASC 320,  Investments - Debt and Equity Securities. The Company considers all short-term investments with an original maturity in excess of three months when purchased to be short-term investments. In July 2017 and in September 2017, the Company purchased $5.0 million of certificates of deposit with an original maturity of six months. At December 31, 2017, the Company had approximately $10.0 million in certificates of deposit with an original maturity of greater than three months. The Company reassesses the appropriateness of the classification of its investments at the end of each reporting period. The Company has determined that its certificates of deposits with an original maturity of six months should be classified as short-term investments as of December 31, 2017. There were no investments as of December 31, 2016. This classification was based upon management’s determination that it has the positive intent and ability to hold the securities until their maturity dates, as its investments mature within one year and the underlying cash invested in these securities is not required for current operations.
 
Investments consist of short-term FDIC insured certificates of deposit carried at amortized cost using the effective interest method. The cost of the Company’s certificates of deposit approximated fair value.
 
Research and Development
 
Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is achieved. Costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use.
 
Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings and patents, laboratory costs and other supplies.
 
Costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use. The licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future use. Accordingly, the total purchase price for the licenses acquired are reflected as research and development — licenses acquired on the Company’s Statement of Operations.
 
Annual Equity Fee
 
Prior to the September 2016 amendment to the Founder’s Agreement, Fortress was entitled to an annual fee on each anniversary date equal to 2.5% of the fully diluted outstanding equity of the Company, payable in Common Stock (“Annual Equity Fee”). The annual equity fee was part of consideration payable for formation of the Company and identification of certain assets.
 
The Company recorded the Annual Equity Fee in connection with the Founders Agreement as contingent consideration. Contingent consideration is recorded when probable and reasonably estimable. The Company’s future share prices cannot be estimated due to the nature of its assets and the Company’s stage of development. Due to these uncertainties, the Company concluded that it could not reasonably estimate the contingent consideration until shares were actually issued on February 17, 2016. Because the issuance of shares on February 17, 2016 occurred prior to the issuance of the December 31, 2015 financial statements, the Company recorded approximately $40,000 in research and development - licenses acquired during the period from February 9, 2015 (inception) through December 31, 2015. Pursuant to the terms of the Founders Agreement, as amended in September 2016, this equity fee is no longer payable.
 
Annual Stock Dividend
 
In September 2016, in connection with the Amended and Restated Articles of Incorporation, the Company issued 250,000 Class A preferred shares to Fortress. The Class A preferred shares entitle the holder to a stock dividend equal to 2.5% of the fully diluted outstanding equity of the Company (“The Annual Stock Dividend”).
 
The Company recorded the Annual Stock Dividend due to Fortress as contingent consideration. Contingent consideration is recorded when probable and reasonably estimable. The Company’s future share prices cannot be estimated due to the nature of its assets and the Company’s stage of development. Due to these uncertainties, the Company concluded that it could not reasonably estimate the contingent consideration until shares were actually issued on February 17, 2018 and February 17, 2017. Because the issuance of shares on February 17, 2018 and 2017 occurred prior to the issuance of the December 31, 2017 and 2016 financial statements, respectively, the Company recorded approximately $1.1 million and $49,000 in research and development - licenses acquired for the years ended December 31, 2017 and 2016, respectively.
 
Fair Value Measurement
 
The Company follows accounting guidance on fair value measurements for financial assets and liabilities measured at fair value on a recurring basis. Under the accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
 
The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:
 
Level 1:  Quoted prices in active markets for identical assets or liabilities.
 
Level 2:  Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.
 
Level 3:  Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
 
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
 
Stock-Based Compensation
 
The Company expenses stock-based compensation to employees and board members over the requisite service period based on the estimated grant-date fair value of the awards. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. For stock-based compensation awards to non-employees, the Company measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes in the estimated fair value of these non-employee awards are recognized as compensation expense in the period of change.
 
The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.
 
Fair Value Option
 
As permitted under ASC 825, Financial Instruments, (“ASC 825”), the Company has elected the fair value option to account for its convertible notes that were issued during 2016. In accordance with ASC 825, the Company records these convertible notes at fair value with changes in fair value recorded in the Statement of Operations. As a result of applying the fair value option, direct costs and fees related to the convertible notes were recognized in earnings as incurred and were not deferred.
 
Valuation of Warrant Related to NSC Note
 
In accordance with ASC 815 Derivatives and Hedging, the Company classified the fair value of the warrant (“Contingently Issuable Warrants”) that it may be obligated to issue to National Securities, Inc. (“NSC”), in connection with the transfer on October 31, 2015 of $3.0 million of indebtedness to NSC, as a derivative liability as there was a potential that the Company would not have a sufficient number of authorized common shares available to settle this instrument. The Company valued these Contingently Issuable Warrants using a Black-Scholes model and used estimates for an expected dividend yield, a risk-free interest rate, and expected volatility together with management’s estimate of the probability of issuance of the Contingently Issuable Warrants. At each reporting period, as long as the Contingently Issuable Warrants were potentially issuable and there was a potential for an insufficient number of authorized shares available to settle the Contingently Issuable Warrants, the Contingently Issuable Warrants had to be revalued and any difference from the previous valuation date would be recognized as a change in fair value in the Company’s statement of operations. On June 26, 2017, the warrants were issued (See Note 9).
 
Income Taxes
 
The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
 
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on February 9, 2015, the 2015 through 2017 tax years are the only periods subject to examination upon filing of appropriate tax returns. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.
 
The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the year ended December 31, 2017 and 2016. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
 
Net loss per Share
 
Loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding, excluding unvested restricted stock and stock options, during the period. Since dividends are declared paid and set aside among the holders of shares of common stock and Class A common stock pro-rata on an as-if-converted basis, the two-class method of computing net loss per share is not required.
 
The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented:
 
 
 
For the Years Ended
 
For the period from 
February 9, 
2015
 
 
 
December 31,
 
December 31,
 
(Inception) through
 
 
 
2017
 
2016
 
December 31, 2015
 
Restricted stock units/awards
 
 
714,999
 
 
274,999
 
 
366,666
 
Preferred shares
 
 
250,000
 
 
250,000
 
 
-
 
Options
 
 
20,000
 
 
-
 
 
-
 
Total potential dilutive effect
 
 
984,999
 
 
524,999
 
 
366,666
 
 
Comprehensive Loss
 
The Company has no components of other comprehensive loss, and therefore, comprehensive loss equals net loss.
 
Recently Adopted Accounting Standards
 
In August 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-15, Presentation of Financial Statements - Going Concern (Topic 915): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 states that in connection with preparing financial statements for each annual and interim reporting period, an entity's management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 will be effective for annual and interim periods beginning on or after December 15, 2016. The Company adopted ASU No. 2014-15 in 2016, and its adoption did not have a material impact on the Company’s financial statements.
 
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). Under ASU 2016-09, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and the APIC pools will be eliminated. In addition, ASU 2016-09 eliminates the requirement that excess tax benefits be realized before companies can recognize them. ASU 2016-09 also requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. Furthermore, ASU 2016-09 will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. An employer with a statutory income tax withholding obligation will now be allowed to withhold shares with a fair value up to the amount of taxes owed using the maximum statutory tax rate in the employee’s applicable jurisdiction(s). ASU 2016-09 requires a company to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on the statement of cash flows. Under current GAAP, it was not specified how these cash flows should be classified. In addition, companies will now have to elect whether to account for forfeitures on share-based payments by (1) recognizing forfeitures of awards as they occur or (2) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. The Amendments of this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted but all of the guidance must be adopted in the same period. The Company adopted ASU 2016-09 in the first quarter of 2017, and its adoption did not have a material impact on the Company’s financial statements.
 
Recently Issued Accounting Standards
 
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact of adopting this standard on the financial statements and disclosures.
 
In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. It is effective prospectively for the annual period ending December 31, 2018 and interim periods within that annual period. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on the financial statements and disclosures, but does not expect it to have a significant impact.
 
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance, but does not expect it to have a significant impact.
 
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is currently evaluating the method of adoption and the impact of adopting ASU 2016-02 on its financial statements. As the Company has no leases currently, the Company does not expect this guidance to have a material impact on its financial statements.
 
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact that ASU 2016-01 will have on its balance sheet or financial statement disclosures. When adopted, the Company does not expect this guidance to have a material impact on its financial statements.
Allocation
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 3 — Allocation
 
The expense allocations to Avenue, which represent Lucy Lu’s executive compensation, have been paid by Fortress and allocated by the Company between Avenue and Fortress based on time spent on Avenue projects versus time spent on Fortress projects. The allocations were based on assumptions that management believes are reasonable; however, these allocations are not necessarily indicative of the costs and expenses that would have resulted if Avenue had been operating as a stand-alone entity. Since Lucy Lu became a full-time employee for Avenue in June 2017, the allocations ceased as her time spent was 100% devoted to Avenue. For the years ended December 31, 2017 and 2016 and period from February 9, 2015 (Inception) to December 31, 2015, the allocated expenses related to Lucy Lu were approximately $0.2 million, $0.3 million and $0.1 million, respectively, and were recorded 50% to research and development and 50% to general and administration expenses. Upon the IPO, Fortress and Avenue agreed to extinguish the total amount accrued under these expense allocations. Therefore, the Company recorded the $0.6 million related to the allocation of Lucy Lu’s compensation as a contribution of capital on June 26, 2017.
License Agreement
License Agreement Disclosure [Text Block]
Note 4 — License Agreement
 
Effective as of February 17, 2015, Fortress transferred the Revogenex license and all other rights and obligations under the License Agreement to Avenue, pursuant to the terms of the Founders Agreement. In connection with the terms of the License Agreement, Fortress purchased an exclusive license to IV Tramadol for the U.S. market from Revogenex, a privately held company in Dublin, Ireland. Tramadol is a centrally acting synthetic opioid analgesic for moderate to moderately severe pain and is available as immediate release or extended-release tablets in the United States. Fortress made an upfront payment of $2.0 million to Revogenex upon execution of the exclusive license, and on June 17, 2015, Fortress paid an additional $1.0 million to Revogenex after receiving all the assets specified in the agreement. The $3.0 million cumulative payment has been included in research and development-licenses acquired on the statements of operations. In addition, under the terms of the agreement, Revogenex is eligible to receive additional milestone payments totaling $4.0 million upon the achievement of certain development milestones, as well as royalty payments for sales of the product.
Related Party Agreements
Related Party Transactions Disclosure [Text Block]
Note 5 — Related Party Agreements
 
Founders Agreement and Management Services Agreement with Fortress
 
Fortress entered into a Founders Agreement with Avenue in February 2015, pursuant to which Fortress assigned to Avenue all of its rights and interest under Fortress’s license agreement with Revogenex for IV Tramadol (the “License Agreement”). As consideration for the Founders Agreement, Avenue assumed $3.0 million in debt (see Note 7) that Fortress accumulated to NSC for expenses and costs of forming Avenue and obtaining the IV Tramadol license, of which $3.0 million represents the acquisition of the License Agreement. As additional consideration for the transfer of rights under the Founders Agreement, Avenue shall also: (i) issue annually to Fortress, on the anniversary date of the Founders Agreement, shares of common stock equal to two and one half percent (2.5%) of the fully-diluted outstanding equity of Avenue at the time of issuance; (ii) pay an equity fee in shares of Avenue common stock, payable within five (5) business days of the closing of any equity or debt financing for Avenue or any of its respective subsidiaries that occurs after the effective date of the Founders Agreement and ending on the date when Fortress no longer has majority voting control in Avenue’s voting equity, equal to two and one half percent (2.5%) of the gross amount of any such equity or debt financing; and (iii) pay a cash fee equal to four and one half percent (4.5%) of Avenue’s annual net sales, payable on an annual basis, within ninety (90) days of the end of each calendar year. In the event of a change in control (as it is defined in the Founders Agreement), Fortress will be paid a one-time change in control fee equal to five (5x) times the product of (i) net sales for the twelve (12) months immediately preceding the change in control and (ii) four and one-half percent (4.5%).
 
On September 13, 2016, the Company entered into an Amended and Restated the Founders Agreement (“A&;R Founders Agreement”) with Fortress. The A&;R Founders Agreement eliminated the Annual Equity Fee in connection with the original agreement and added a term of 15 years, which upon expiration automatically renews for successive one-year periods unless terminated by Fortress or a Change in Control occurs. Concurrently with the A&;R Founders Agreement the Company entered into an Exchange Agreement whereby the Company exchanged Fortress’ 2.3 million Class A common shares for approximately 2.5 million common shares and 250,000 Class A Preferred shares (see Note 9).
  
On June 26, 2017, the Company issued 158,125 common shares to Fortress representing 2.5% of common shares issued in connection with the IPO (see Note 9). The Company recorded expense of approximately $0.9 million related to the financing fee in general and administrative expenses in the Statement of Operations for the year ended December 31, 2017.
 
Effective as of February 17, 2015, Fortress entered into a Management Services Agreement (the “MSA”) with Avenue and each of Avenue’s current directors and officers who are directors or officers of Fortress, excluding services provided by Dr. Lucy Lu, the Company’s current Chief Executive Officer as of June 26, 2017 and the former Chief Financial Officer of Fortress (resigned as of June 26, 2017), to provide services to Avenue pursuant to the terms of the MSA. Pursuant to the terms of the MSA, for a period of five (5) years, Fortress will render advisory and consulting services to Avenue. Services provided under the MSA may include, without limitation, (i) advice and assistance concerning any and all aspects of Avenue’s operations, clinical trials, financial planning and strategic transactions and financings and (ii) conducting relations on behalf of Avenue with accountants, attorneys, financial advisors and other professionals (collectively, the “Services”). Avenue is obligated to utilize clinical research services, medical education, communication and marketing services and investor relations/public relation services of companies or individuals designated by Fortress, provided those services are offered at market prices. However, Avenue is not obligated to take or act upon any advice rendered from Fortress and Fortress shall not be liable for any of Avenue’s actions or inactions based upon their advice. Fortress and its affiliates, including all members of Avenue’s Board of Directors, have been contractually exempt from fiduciary duties to Avenue relating to corporate opportunities. In consideration for the Services, Avenue will pay Fortress an annual consulting fee of $0.5 million (the “Annual Consulting Fee”), payable in advance in equal quarterly installments on the first business day of each calendar quarter in each year, provided, however, that such Annual Consulting Fee shall be increased to $1.0 million for each calendar year in which Avenue has net assets in excess of $100.0 million at the beginning of the calendar year.
 
On May 15, 2017, the Company and Fortress amended the MSA to allow for payment of the Annual Consulting Fee in the Company’s common stock in increments of $0.5 million, prior to the launch of the Company’s IPO (see Note 9). On June 26, 2017, the Company repaid $1.0 million of the outstanding 2015 and 2016 Annual Consulting fees by issuing 166,666 shares of the Company’s common stock at the offering price of $6.00 per share.
 
For the years ended December 31, 2017 and 2016 and the period from February 9, 2015 (Inception) to December 31, 2015, the Company had expenses related to the MSA of approximately $0.5 million, $0.5 million and $0.4 million, respectively.
 
Fortress Note
 
Effective March 15, 2015, the Company and Fortress entered into a future advance promissory note (the “Fortress Note”), in which Fortress agreed to provide a working capital line of credit until the Company has a third-party financing. Interest on the Fortress Note accrued at 8% per annum and shall be payable to Fortress on the day after the end of each calendar quarter following the first third-party financing. All principal and accrued interest under the Fortress Note is payable on demand following the first third-party financing. This Fortress Note can be pre-paid at any time in cash or through the assumption of Fortress’ indebtedness NSC or other similar indebtedness.
 
In May 2017, in anticipation of the Company’s IPO, the Company and Fortress amended the FBIO Note (the “FBIO Note Amendment”), to reduce interest on the FBIO Note from 8% to 2% from inception, effective the closing date of the Company’s IPO. Accordingly, on June 26, 2017, the interest rate was reduced and resulted in a reduction of interest of approximately $0.3 million ($0.4 million at 8% versus $0.1 million at 2%). In accordance with ASC 470-50, Debt, Modifications and Extinguishments, the Company determined that since the change in interest rate did not materially change the nature of the note, it was accounted for as a modification and recorded as a reduction in interest expense of $0.3 million in additional paid in capital on the Statement of Stockholders’ Equity (Deficit).
 
On July 25, 2017, the Company repaid the outstanding principal and interest balance of the Fortress Note of approximately $3.5 million and $0.1 million, respectively. For the years ended December 31, 2017 and 2016 and the period from February 9, 2015 (Inception) to December 31, 2015, the Company had interest expense related to the Fortress Note of approximately $74,000, $0.2 million and $0.2 million, respectively.
 
NSC Note and Financings
 
In September 2016, Fortress acquired through a tender offer 56.6% of National Holdings, Inc. (“National” or “NHLD”). The Company held an approximate $3.0 million NSC Note (“NSC Note”) (see Note 7) for which NSC, a subsidiary of National, received a 10% placement fee upon issuance of the Note to Fortress. On June 26, 2017, the Company completed an IPO and NSC acted as co-manager in this offering and earned commissions and fees of approximately $2.3 million. On July 5, 2017, the Company repaid the outstanding NSC Note of approximately $3.0 million and accrued interest of approximately $2,000.
 
On June 26, 2017, pursuant to the terms of the Company’s $3.0 million NSC Note, upon the closing of the Company’s IPO, the Company issued to National the Contingently Issuable Warrants for 125,000 common shares at par, relating to its aggregate gross proceeds from its third-party offerings exceeding five times the value of the debt. Upon the issuance of the Contingently Issuable Warrants, Fortress was removed as the guarantor on the note (see Note 7).
Accounts Payable and Accrued Expenses
Accounts Payable and Accrued Liabilities Disclosure [Text Block]
Note 6 — Accounts Payable and Accrued Expenses
 
Accounts payable, accrued expenses and other liabilities consisted of the following (in thousands):
 
 
 
As of December 31,
 
 
 
2017
 
2016
 
Accounts payable
 
$
1,545
 
$
334
 
Accrued employee compensation
 
 
215
 
 
-
 
Accrued contracted services and other
 
 
977
 
 
172
 
Accounts payable and accrued expenses
 
$
2,737
 
$
506
 
Notes Payable
Debt Disclosure [Text Block]
Note 7 — Notes Payable
 
NSC Note
 
In February 2015, Fortress closed a private placement of a promissory note for $10.0 million in favor of NSC Biotech Venture Fund I, LLC. Fortress used the proceeds from this promissory note to acquire medical technologies and products. The note matures in 36 months, provided that during the first 24 months Fortress can extend the maturity date by six months. No principal amount will be due for the first 24 months (or the first 30 months if the maturity date is extended). Thereafter, the note will be repaid at the rate of 1/12 of the principal amount per month for a period of 12 months. Interest on the note is 8% payable quarterly during the first 24 months (or the first 30 months if the note is extended) and monthly during the last 12 months. NSC acted as the sole placement agent for the this note. The NSC Note, was amended and restated on July 29, 2015, to provide that any time a Fortress Company receives from Fortress any proceeds from this note, Fortress may, in its sole discretion, cause the Fortress Company to issue to NSC Biotech Venture Fund I, LLC a new promissory note (the NSC Note) on identical terms as the original note (giving effect to the passage of time with respect to maturity). The NSC Note will equal the dollar amount of the Fortress Company’s share of the original note and reduce the Fortress’ obligations under the original note by such amount.
 
Fortress will guarantee the NSC Note until the Company either completes an initial public offering of its securities or raises sufficient equity capital so that it has cash equal to five times the NSC Note. If the Company has an initial public offering and raises sufficient equity capital so that it has cash equal to five times the amount of the portion of the proceeds of the NSC Note transferred to it, then NSC will receive a Contingently Issuable Warrant to purchase the Company’s stock equal to 25% of the outstanding note divided by the lowest price the Company sells its equity in its first third party financing. The warrants were issued on June 26, 2017 and have a term of 10 years and an exercise price equal to the par value of the Company’s common stock.
 
In January 2017, the Company notified NSC Biotech Venture Fund I, LLC, of its election to extend the maturity date to September 30, 2018.
 
As of December 31, 2016, the Company’s NSC Note totaled $3.0 million, with a debt discount related to the Company’s pro rata share of Fortress’ debt issuance costs of approximately $0.2 million. The effective interest rate of the NSC Note approximates 13.1%. The original fair value of the Contingently Issuable Warrants in connection with the NSC Note in the amount of approximately $0.1 million was recorded as a debt discount based on its fair value (see Note 9). The Contingently Issuable Warrants were recorded at fair value at each reporting period (see Note 10).
 
On June 26, 2017, pursuant to the terms of the Company’s $3.0 million NSC Note, upon the closing of the Company’s IPO, the Company issued to National warrants for 125,000 common shares at par with a fair value of $0.8 million, relating to its aggregate gross proceeds from its third-party offerings exceeding five times the value of the debt. Upon the issuance of the warrant, Fortress was removed as the guarantor on the note.
 
On July 5, 2017, the Company repaid the outstanding NSC Note of approximately $3.0 million and accrued interest of approximately $2,000. At December 31, 2017, the Company had $0 outstanding under its NSC Note.
 
For the years ended December 31, 2017 and 2016 and the period from February 9, 2015 (Inception) to December 31, 2015, the Company recorded interest expense of approximately $0.3 million, $0.4 million and $0.2 million, respectively.
 
The following table summarizes NSC Note activities as of December 31, 2017 (in thousands):
 
 
 
Note Payable
 
Discount
 
Note Payable, Net
 
January 1, 2016 balance
 
$
3,000
 
$
(297)
 
$
2,703
 
Amortization of debt discount
 
 
-
 
 
123
 
 
123
 
December 31, 2016 balance
 
$
3,000
 
$
(174)
 
$
2,826
 
Repayments
 
 
(3,000)
 
 
-
 
 
(3,000)
 
Amortization of debt discount
 
 
-
 
 
174
 
 
174
 
December 31, 2017 balance
 
$
-
 
$
-
 
$
-
 
 
Westpark Convertible Note
 
On December 30, 2016, Avenue held a closing of the sale of convertible promissory notes. Avenue sold three convertible promissory notes to investors for an aggregate of $0.2 million. The notes have an initial term of 18 months, which can be extended at the option of the holder, on one or more occasions, for up to 180 days and accrue simple interest at the rate of 5% per annum for the first 12 months and 8% per annum simple interest thereafter. The notes are guaranteed by Fortress. The outstanding principal and interest of the notes automatically converts into the type of equity securities sold by Avenue in the next sale of equity securities in which Avenue realizes aggregate gross cash proceeds of at least $10.0 million (before commissions or other expenses and excluding conversion of the notes) at a conversion price equal to the lesser of (a) the lowest price per share at which equity securities of Avenue are sold in such sale less a 33% discount and (b) a per share price based on a pre-offering valuation of $30.0 million divided by the number of common shares outstanding on a fully-diluted basis. The outstanding principal and interest of the notes may be converted at the option of the holder in any sale of equity securities that does not meet the $10.0 million threshold for automatic conversion using the same methodology. The notes also automatically convert upon a “Sale” of Avenue, defined as (a) a transaction or series of related transactions where one or more non-affiliates acquires (i) capital stock of Avenue or any surviving successor entity possessing the voting power to elect a majority of the board of directors or (ii) a majority of the outstanding capital stock of Avenue or the surviving successor entity (b) the sale, lease or other disposition of all or substantially all of Avenue’s assets or any other transaction resulting in substantially all of Avenue’s assets being converted into securities of another entity or cash. Upon a Sale of Avenue, the outstanding principal and interest of the notes automatically converts into common shares at a price equal to the lesser of (a) a discount to the price per share being paid in the Sale of Avenue equal to 33% or (b) the quotient resulting from dividing (x) $30.0 million by (y) the fully-diluted common stock of Avenue outstanding immediately prior to the Sale of Avenue (excluding the notes).
 
In the closing, Avenue realized net proceeds of $0.1 million after paying WestPark Capital, Inc., the placement agent, placement agent fees of $30,000 and escrow fees of $4,000 and paying approximately $14,000 in legal fees. Additionally, WestPark received a warrant (“Avenue Warrant”) to purchase the number of shares of Avenue’s common stock equal to $10,000 divided by the price per share at which any note sold to investors first converts into Avenue’s common stock. The Avenue Warrant has a ten-year term and has a per share exercise price equal to the price per share at which any note sold to investors first converts into Avenue’s common stock.
 
The fair value of these convertible notes amounted to $0.2 million.
 
Due to the complexity and number of embedded features within each convertible note, and as permitted under accounting guidance, the Company elected to account for the convertible notes and all the embedded features (collectively, the “hybrid instrument”) under the fair value option.
 
On June 26, 2017, in connection with the closing of the Company’s IPO, these convertible notes were converted into 49,748 shares of Avenue’s common stock.
Commitments and Contingencies
Commitments and Contingencies Disclosure [Text Block]
Note 8 — Commitments and Contingencies
 
Leases
 
The Company is not a party to any leases for office space or equipment.
 
Litigation
 
The Company recognizes a liability for a contingency when it is probable that liability has been incurred and when the amount of loss can be reasonably estimated. When a range of probable loss can be estimated, the Company accrues the most likely amount of such loss, and if such amount is not determinable, then the Company accrues the minimum of the range of probable loss. As of December 31, 2017, and 2016, there was no litigation against the Company.
Stockholders’ Equity (Deficit)
Stockholders' Equity Note Disclosure [Text Block]
Note 9 — Stockholders’ Equity (Deficit)
 
Class A Preferred Shares
 
Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation, filed September 13, 2016, Class A Common Stock was eliminated and 2,000,000 shares of Preferred Stock were authorized, of which 250,000 have been designated as Class A Preferred Stock and the remainder are undesignated preferred stock. The Class A Preferred Stock, with a par value of $0.0001 per share, is identical to undesignated Common Stock other than as to voting rights, conversion rights, and the PIK Dividend right (as described below). The undesignated Preferred Stock may be issued from time to time in one or more series. The Company’s Board of Directors is authorized to determine or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions, if any), the redemption price or prices, the liquidation preferences and other designations, powers, preferences and relative, participating, optional or other special rights, if any, and the qualifications, limitations and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock, and to fix the number of shares of any series of Preferred Stock (but not below the number of shares of any such series then outstanding).
 
The holders of the outstanding shares of Class A Preferred Stock shall receive on each February 17 (each a “PIK Dividend Payment Date”) after the original issuance date of the Class A Preferred Stock until the date all outstanding Class A Preferred Stock is converted into Common Stock or redeemed (and the purchase price is paid in full), pro rata per share dividends paid in additional fully paid and nonassessable shares of Common Stock (such dividend being herein called “PIK Dividends”) such that the aggregate number of shares of Common Stock issued pursuant to such PIK Dividend is equal to two and one-half percent (2.5%) of the Corporation’s fully-diluted outstanding capitalization on the date that is one (1) business day prior to any PIK Dividend Payment Date (“PIK Record Date”). In the event the Class A Preferred Stock converts into Common Stock, the holders shall receive all PIK Dividends accrued through the date of such conversion. No dividend or other distribution shall be paid, or declared and set apart for payment (other than dividends payable solely in capital stock on the capital stock of the Company) on the shares of Common Stock until all PIK Dividends on the Class A Preferred Stock shall have been paid or declared and set apart for payment. All dividends are non-cumulative.
 
On any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Class A Preferred Stock shall be entitled to cast for each share of Class A Preferred Stock held by such holder as of the record date for determining stockholders entitled to vote on such matter, the number of votes that is equal to one and one-tenth (1.1) times a fraction, the numerator of which is the sum of (A) the number of shares of outstanding Common Stock and (B) the whole shares of Common Stock in to which the shares of outstanding Class A Common Stock and the Class A Preferred Stock are convertible, and the denominator of which is number of shares of outstanding Class A Preferred Stock (the “Class A Preferred Stock Ratio”). Thus, the Class A Preferred Stock will at all times constitute a voting majority.
 
Each share of Class A Preferred Stock is convertible, at the option of the holder, into one fully paid and nonassessable share of Common Stock (the “Conversion Ratio”), subject to certain adjustments. If the Company, at any time effects a subdivision or combination of the outstanding Common Stock (by any stock split, stock dividend, recapitalization, reverse stock split or otherwise), the applicable Conversion Ratio in effect immediately before that subdivision is proportionately decreased or increased, as applicable, so that the number of shares of Common Stock issuable on conversion of each share of Class A Preferred Stock shall be increased or decreased, a applicable, in proportion to such increase or decrease in the aggregate number of shares of Common Stock outstanding. Additionally, if any reorganization, recapitalization, reclassification, consolidation or merger involving the Company occurs in which the Common Stock (but not the Class A Preferred Stock) is converted into or exchanged for securities, cash or other property, then each share of Class A Preferred Stock becomes convertible into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Company issuable upon conversion of one share of the Class A Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction.
 
Common Stock
 
As of December 31, 2017, the Company’s authorized capital stock consists of 50,000,000 shares of common stock, with $0.0001 par value, and 2,000,000 shares of Preferred Stock, with $0.0001 par value, of which 250,000 have been designated as Class A Preferred Stock and the remainder are undesignated Preferred Stock.
 
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our Board of Directors, subject to any preferential dividend rights of outstanding preferred stock.
 
In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately all assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
 
On September 13, 2016, the Company entered into the A&;R Founders Agreement with Fortress. The A&;R Founders Agreement eliminated the Annual Equity Fee in connection with the original agreement and added a term of 15 years, which upon expiration automatically renews for successive one-year periods unless terminated by Fortress or a Change in Control occurs. Concurrently with the A&;R Founders Agreement the Company entered into an Exchange Agreement whereby the Company exchanged Fortress’ 2.3 million Class A common shares for approximately 2.5 million common shares and 250,000 Class A Preferred shares.
 
On September 15, 2016, the Company retired the 33,333 shares of restricted stock issued to a consultant in connection with a May 2015 subscription agreement.
 
Initial Public Offering
 
On June 26, 2017, the Company completed an IPO of its common stock, which resulted in the issuance of 6,325,000 shares of its common stock, inclusive of 825,000 shares which were subject to an underwriter over-allotment. The shares were issued at $6.00 per share, resulting in net proceeds of approximately $34.2 million after deducting underwriting discounts, and other offering costs.
 
In conjunction with the closing of the IPO, the Company issued warrants in connection with its NSC Debt and its Convertible Notes.
 
Awards to Fortress
 
Pursuant to the Founders Agreement, on February 17, 2016, the Company issued 76,250 shares of common stock to Fortress, which equaled to 2.5% of the fully diluted outstanding equity of Avenue at the time of issuance for the annual equity fee. The Company recorded an expense of approximately $40,000, in research and development licenses-acquired related to this stock grant during the period from February 9, 2015 (Inception) to December 31, 2015.
 
Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation, on February 17, 2017, the Company issued 83,532 shares of common stock to Fortress, which equaled to 2.5% of the fully diluted outstanding equity of Avenue at the time of issuance for the annual stock dividend. The Company recorded an expense of approximately $49,000, in research and development licenses-acquired related to this stock grant during the year ended December 31, 2016.
 
Pursuant to the Company’s Second Amended and Restated Certificate of Incorporation for the annual stock dividend that will be due on February 17, 2018, the Company reserved 273,837 shares of common stock to Fortress as common shares issuable, which equaled to 2.5% of the fully diluted outstanding equity of Avenue at the time of issuance for the annual stock dividend. The Company recorded an expense of approximately $1.1 million in research and development licenses-acquired related to this stock grant during the year ended December 31, 2017.
 
 On June 26, 2017, pursuant to the terms of the Founders Agreement with Fortress, the Company issued to Fortress 158,125 shares of common stock at $6.00 per share, representing the 2.5% financing fee Fortress receives on third-party financings. The Company recorded expense of approximately $0.9 million related to the financing fee in general and administrative expenses in the Statement of Operations for the year ended December 31, 2017.
 
On June 26, 2017, the Company repaid $1.0 million of the outstanding 2015 and 2016 Annual Consulting fees by issuing 166,666 shares of the Company’s common stock at the offering price of $6.00 per share. The 2017 Annual Consulting fee of $0.5 million was paid in cash in the year ended December 31, 2017.
 
Equity Incentive Plan
 
The Company has in effect the 2015 Incentive Plan (“2015 Incentive Plan’). The 2015 Incentive Plan was adopted in January 2015 by our stockholders. Under the 2015 Incentive Plan, the compensation committee of the Company’s board of directors is authorized to grant stock-based awards to directors, officers, employees and consultants. The plan authorizes grants to issue up to 2,000,000 shares of authorized but unissued common stock and expires 10 years from adoption and limits the term of each option to no more than 10 years from the date of grant.
 
 Total shares available for the issuance of stock-based awards under the Company’s 2015 Incentive Plan was 1,115,000 shares at December 31, 2017.
 
Restricted Stock Units and Restricted Stock Awards
 
The following table summarizes restricted stock unit and award activity for the year ended December 31, 2017:
 
 
 
Number of Units 
and Awards
 
Weighted 
Average Grant 
Date Fair Value
 
Unvested balance at December 31, 2016
 
 
274,999
 
$
0.44
 
Granted
 
 
515,000
 
$
6.77
 
Vested
 
 
(75,000)
 
$
0.44
 
Unvested balance at December 31, 2017
 
 
714,999
 
$
5.00
 
 
For the years ended December 31, 2017 and 2016 and the period from February 9, 2015 (Inception) to December 31, 2015, stock-based compensation expenses associated with the amortization of restricted stock units and restricted stock awards for employees and non-employees were approximately $0.6 million, $28,000 and $51,000 respectively.
 
At December 31, 2017, the Company had unrecognized stock-based compensation expense related to restricted stock units and restricted stock awards of $2.8 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.5 years.
 
Stock Options
 
On August 15, 2017, 20,000 stock options were granted to a consultant under the 2015 Incentive Plan with a $6.29 exercise price and a five-year life. The stock options vest upon achievement of certain milestones based on the price of the Company’s stock in relation to the exercise price of $6.29. The stock options were valued using a Black-Scholes model with the following assumptions; volatility of 80%, risk free rate of 1.83% and effective life of 5 years. The fair value of each stock option was $1.85. The entire value of the stock option grant of $37,000 was expensed on the grant date in accordance with ASC 505 Equity-based Payments to Non-employees as “no specific performance is required by the grantee to retain those equity instruments, then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached.”
 
The following table summarizes stock option award activity for the year ended December 31, 2017:
 
 
 
Stock Options
 
Weighted 
Average Exercise
Price
 
Weighted Average 
Remaining 
Contractual Life 
(in years)
 
Outstanding, December 31, 2016
 
 
-
 
$
-
 
 
-
 
Granted
 
 
20,000
 
 
6.29
 
 
5.00
 
Outstanding, December 31, 2017
 
 
20,000
 
$
6.29
 
 
4.63
 
 
Stock Warrants
 
On June 26, 2017, sufficient equity capital was raised so that the Company had cash equal to five times the amount of the portion of the proceeds of the NSC Note transferred to it. As a result, the Company issued warrants for 125,000 common shares with an exercise price of par value and a ten-year term. As a result of this transaction, the Company recorded the fair value of the Contingently Issuable Warrants of approximately $0.8 million as an increase to additional paid in capital on the Statement of Stockholders’ Equity (Deficit).
 
On June 26, 2017, in connection with the automatic conversion of the WestPark Convertible Notes, which automatically converted upon the closing of the IPO, the Company issued 2,488 warrants at an exercise price of $4.02 and a ten-year term. Pursuant to the terms of the note agreement, the exercise price represents the price at which the notes converted, which is equal to a 33% discount to the IPO price of $6.00 per share.
Fair Value Measurement
Fair Value Disclosures [Text Block]
Note 10 — Fair Value Measurement
 
Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. At December 31, 2017 and 2016, the warrant balance of approximately $0 and $0.3 million, respectively, were classified as Level 3 instruments.
 
The following table sets forth the changes in the estimated fair value for the Company’s Level 3 classified derivative warrant liability (in thousands):
 
 
 
NSC 
Contingently
Issuable 
Warrants
 
Westpark 
Contingently 
Issuable 
Warrants
 
Total
 
Fair value, December 31, 2015
 
$
114
 
$
-
 
$
114
 
Change in fair value
 
 
188
 
 
-
 
 
188
 
Issuable derivative warrant liabilities
 
 
-
 
 
12
 
 
12
 
Fair value, December 31, 2016
 
$
302
 
$
12
 
$
314
 
Change in fair value
 
 
448
 
 
3
 
 
451
 
Conversion into common shares
 
 
(750)
 
 
-
 
 
(750)
 
Change in fair value of convertible notes warrants
 
 
-
 
 
(15)
 
 
(15)
 
Fair value, December 31, 2017
 
$
-
 
$
-
 
$
-
 
 
On June 26, 2017, pursuant to the terms of the Company’s $3.0 million NSC Note, upon the closing of the Company’s IPO, the Company issued to National warrants for 125,000 common shares at par with a fair value of $0.8 million, relating to its aggregate gross proceeds from its third-party offerings exceeding five times the value of the debt. Upon the issuance of the warrant, Fortress was removed as the guarantor on the note (see Note 7).
 
Additionally, on June 26, 2017, the Company issued 2,488 warrants to purchase common shares of the Company at $4.02, to Westpark, in connection with their role as placement agent.
 
The fair value of the NSC Contingently Issuable Warrants was determined at December 31, 2016 for approximately $0.3 million by applying management’s estimate of the probability of issuance of the Contingently Issuable Warrants together with the Black-Scholes option pricing model with the following key assumptions:
 
 
 
December 31,
 
 
 
2016
 
Risk-free interest rate
 
 
2.45
%
Expected dividend yield
 
 
-
 
Expected term (in years)
 
 
10.00
 
Expected volatility
 
 
83
%
Probability of issuance of the warrant
 
 
50
%
 
The fair value of Westpark warrant liability at December 31, 2016 was measured at fair value for approximately $12,000 using a Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy for the year ended December 31, 2016 is as follows:
 
 
 
December 31,
 
 
 
2016
 
Risk-free interest rate
 
 
2.45
%
Expected dividend yield
 
 
-
 
Expected term (in years)
 
 
10.00
 
Expected volatility
 
 
87
%
 
The following table sets forth the changes in the estimated fair value for our Level 3 classified convertible notes payable (in thousands):
 
 
 
Westpark 
Convertible 
Notes
 
Fair value, December 31, 2015
 
$
-
 
Additions
 
 
200
 
Change in fair value
 
 
-
 
Fair value, December 31, 2016
 
$
200
 
Change in fair value
 
 
99
 
Conversion into common shares
 
 
(299)
 
Fair value, December 31, 2017
 
$
-
 
Income Taxes
Income Tax Disclosure [Text Block]
Note 11 — Income Taxes
 
For financial reporting purposes, the Company calculated income tax provision and deferred income tax balances as if it was a separate entity and had filed its own separate tax return under Sub-Chapter C of the Internal Revenue Code.
 
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
 
 
 
For the years ended
 December 31,
 
 
 
2017
 
2016
 
Statutory federal income tax rate
 
 
35
%
 
35
%
State taxes, net of federal tax benefit
 
 
8
%
 
4
%
Federal tax rate change
 
 
(20)
%
 
0
%
State tax rate change
 
 
1
%
 
(1)
%
Non-deductible items
 
 
(3)
%
 
0
%
Other
 
 
(1)
%
 
0
%
Credits
 
 
1
%
 
0
%
Change in valuation allowance
 
 
(21)
%
 
(38)
%
Income taxes provision (benefit)
 
 
0
%
 
0
%
 
The components of the net deferred tax asset as of December 31, 2017 and 2016 are the following (in thousands):
 
 
 
As of December 31,
 
 
 
2017
 
2016
 
Deferred tax assets:
 
 
 
 
 
 
 
Net operating loss carryovers
 
$
4,220
 
$
2,080
 
Stock compensation and other
 
 
70
 
 
-
 
Change in warrant liabilities
 
 
226
 
 
73
 
Amortization of license
 
 
1,064
 
 
1,064
 
Accruals and reserves
 
 
8
 
 
78
 
Tax credits
 
 
154
 
 
33
 
Total deferred tax assets
 
 
5,742
 
 
3,328
 
Less valuation allowance
 
 
(5,742)
 
 
(3,318)
 
Stock compensation and other
 
 
-
 
 
(10)
 
Deferred tax assets, net of valuation allowance
 
$
-
 
$
-
 
 
The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax asset will not be realized and, accordingly, has provided a full valuation allowance against it. A valuation allowance of approximately $5.7 million and $3.3 million was recorded for the years ended December 31, 2017 and 2016, respectively.
 
The Tax Cuts and Jobs Act (“Tax Act,”) was enacted on December 22, 2017. The act significantly changes US tax law by, among other things, lowering US corporate income tax rates, implementing a territorial tax system, and imposing a one-time transition tax on deemed repatriated earnings of foreign subsidiaries. The Tax Act reduces the US corporate income tax rate from 35% to 21%, effective January 1, 2018.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. As a result of the reduction in the US corporate tax rate from 35% to 21% under the Tax Act, the Company revalued its ending net deferred tax assets at December 31, 2017. There was no impact as a result of the revaluation of the deferred tax assets as the Company is in a full valuation allowance. 
 
The SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act and allows the registrant to record provisional amounts during the measurement period.  The Company is in the process of analyzing the impact of the various provisions of the Tax Act. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.
  
As of December 31, 2017, the Company had federal and state net operating loss carryforwards of approximately $15.1 million and $15.5 million, respectively. The federal and state net operating loss carryforwards will begin to expire, if not utilized, by 2035 and 2035, respectively. Utilization of the net operating loss carryforward may be subject to an annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986 (“IRC”), as amended and similar state provisions. The Company may have undergone an ownership change under Section 382 of the IRC from the issuance of its common stock. The Company would determine whether an ownership change has occurred and the annual limitation before the Company could utilize its net operating losses to offset taxable income.
 
The Company is included in the consolidated income tax returns of Fortress Biotech, Inc. and Subsidiaries. The Company’s federal and state net operating loss carryforwards may be utilized to offset income of other members included in the consolidated income tax returns for which the Company may be compensated pursuant to outstanding tax-sharing agreements.
 
There are no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s financial statements for the period ended December 31, 2017. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.
 
Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the period ended December 31, 2017.
 
The federal and state tax returns for the period ended December 31, 2015 and the year ended December 31, 2016 are currently open for examination under the applicable federal and state income tax statues of limitations.
Quarterly Financial Data (unaudited)
Quarterly Financial Information [Text Block]
Note 12 - Quarterly Financial Data (unaudited)
 
The following table summarizes the unaudited quarterly financial data for the years ended December 31, 2017 and 2016 (in thousands except for per share amounts):
 
Year Ended December 31, 2017
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Operating expenses
 
$
504
 
$
1,744
 
$
2,848
 
$
6,325
 
Other income (expenses)
 
 
(157)
 
 
(662)
 
 
(100)
 
 
82
 
Net loss
 
 
(661)
 
 
(2,406)
 
 
(2,948)
 
 
(6,243)
 
Basic and diluted net loss per common share
 
 
(0.07)
 
 
(0.70)
 
 
(0.30)
 
 
(0.63)
 
 
Year Ended December 31, 2016
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Operating expenses
 
$
840
 
$
638
 
$
383
 
$
516
 
Other expenses
 
 
(207)
 
 
(133)
 
 
(161)
 
 
(299)
 
Net loss
 
 
(1,047)
 
 
(771)
 
 
(544)
 
 
(815)
 
Basic and diluted net loss per common share
 
 
(0.13)
 
 
(0.28)
 
 
(0.19)
 
 
(0.27)
 
Significant Accounting Policies (Policies)
Basis of Presentation
 
The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and are stated in U.S. dollars. The Company has no subsidiaries.
 
The financial statements may not be indicative of future performance and may not reflect what their results of operations, financial position, and cash flows would have been had Avenue operated as an independent entity. Certain estimates, including allocations from Fortress, have been made to provide financial statements for stand-alone reporting purposes. Avenue became a stand-alone entity following the IPO on June 26, 2017. All inter-company transactions between Fortress and Avenue are classified as accrued expenses — related party in the financial statements. The Company believes that the assumptions underlying the financial statements are reasonable. The cost allocation methods used prior to the IPO in June 2017 applied to certain common costs include the following:
 
Specific identification.  Where the amounts were specifically identified to Avenue, they were classified accordingly.
 
 
Reasonable allocation.  Where the amounts were not clearly or specifically identified, management determined if a reasonable allocation method could be applied.
 
The acquisition of the IV Tramadol license and the assumption of liabilities in connection with this license was accounted for as a transaction among businesses under common control. Because the license and assumption of liabilities met the definition of a business (as defined in Accounting Standards Codification (“ASC”) 805), the transfer of the business represented a transfer among entities under common control which should be accounted for at carrying amount with retrospective adjustment of prior period financial statements similar to the manner in which a pooling-of-interest was accounted for under Accounting Principles Board (“APB”) 16, Business Combinations. Given this, the acquisition of the license by Fortress (and transferred to Avenue) represented a Research and Development expenditure which should be expensed pursuant to ASC 730 Research and Development.
 
Reverse stock split
 
On June 26, 2017, the Company effected a 3.0-to-1.0 reverse stock split of Company's common stock. No fractional shares were issued in connection with the stock split. The par value and other terms of these classes of stock were not affected by the reverse stock split.
 
All share and per share amounts, including stock options, have been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0-to-1.0 reverse stock split. Further, the fair value of stock issuances has been retroactively adjusted in these financial statements for all periods presented to reflect the 3.0-to-1.0 reverse stock split.
Use of Estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
 
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 2017 and at December 31, 2016 consisted of cash, money market funds and certificates of deposit in institutions in the United States. Balances at certain institutions have exceeded Federal Deposit Insurance Corporation (“FDIC”) insured limits and U.S. government agency securities.
Short-term Investments 
 
The company classifies its certificates of deposit as short-term investments in accordance with the Financial Accounting Standards Board ("FASB") ASC 320,  Investments - Debt and Equity Securities. The Company considers all short-term investments with an original maturity in excess of three months when purchased to be short-term investments. In July 2017 and in September 2017, the Company purchased $5.0 million of certificates of deposit with an original maturity of six months. At December 31, 2017, the Company had approximately $10.0 million in certificates of deposit with an original maturity of greater than three months. The Company reassesses the appropriateness of the classification of its investments at the end of each reporting period. The Company has determined that its certificates of deposits with an original maturity of six months should be classified as short-term investments as of December 31, 2017. There were no investments as of December 31, 2016. This classification was based upon management’s determination that it has the positive intent and ability to hold the securities until their maturity dates, as its investments mature within one year and the underlying cash invested in these securities is not required for current operations.
 
Investments consist of short-term FDIC insured certificates of deposit carried at amortized cost using the effective interest method. The cost of the Company’s certificates of deposit approximated fair value.
Research and Development
 
Research and development costs are expensed as incurred. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Upfront and milestone payments due to third parties that perform research and development services on the Company’s behalf will be expensed as services are rendered or when the milestone is achieved. Costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility and has no alternative future use.
 
Research and development costs primarily consist of personnel related expenses, including salaries, benefits, travel, and other related expenses, stock-based compensation, payments made to third parties for license and milestone costs related to in-licensed products and technology, payments made to third party contract research organizations for preclinical and clinical studies, investigative sites for clinical trials, consultants, the cost of acquiring and manufacturing clinical trial materials, costs associated with regulatory filings and patents, laboratory costs and other supplies.
 
Costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached commercial feasibility and has no alternative future use. The licenses purchased by the Company require substantial completion of research and development, regulatory and marketing approval efforts in order to reach commercial feasibility and has no alternative future use. Accordingly, the total purchase price for the licenses acquired are reflected as research and development — licenses acquired on the Company’s Statement of Operations.
Annual Equity Fee
 
Prior to the September 2016 amendment to the Founder’s Agreement, Fortress was entitled to an annual fee on each anniversary date equal to 2.5% of the fully diluted outstanding equity of the Company, payable in Common Stock (“Annual Equity Fee”). The annual equity fee was part of consideration payable for formation of the Company and identification of certain assets.
 
The Company recorded the Annual Equity Fee in connection with the Founders Agreement as contingent consideration. Contingent consideration is recorded when probable and reasonably estimable. The Company’s future share prices cannot be estimated due to the nature of its assets and the Company’s stage of development. Due to these uncertainties, the Company concluded that it could not reasonably estimate the contingent consideration until shares were actually issued on February 17, 2016. Because the issuance of shares on February 17, 2016 occurred prior to the issuance of the December 31, 2015 financial statements, the Company recorded approximately $40,000 in research and development - licenses acquired during the period from February 9, 2015 (inception) through December 31, 2015. Pursuant to the terms of the Founders Agreement, as amended in September 2016, this equity fee is no longer payable.
Annual Stock Dividend
 
In September 2016, in connection with the Amended and Restated Articles of Incorporation, the Company issued 250,000 Class A preferred shares to Fortress. The Class A preferred shares entitle the holder to a stock dividend equal to 2.5% of the fully diluted outstanding equity of the Company (“The Annual Stock Dividend”).
 
The Company recorded the Annual Stock Dividend due to Fortress as contingent consideration. Contingent consideration is recorded when probable and reasonably estimable. The Company’s future share prices cannot be estimated due to the nature of its assets and the Company’s stage of development. Due to these uncertainties, the Company concluded that it could not reasonably estimate the contingent consideration until shares were actually issued on February 17, 2018 and February 17, 2017. Because the issuance of shares on February 17, 2018 and 2017 occurred prior to the issuance of the December 31, 2017 and 2016 financial statements, respectively, the Company recorded approximately $1.1 million and $49,000 in research and development - licenses acquired for the years ended December 31, 2017 and 2016, respectively.
Fair Value Measurement
 
The Company follows accounting guidance on fair value measurements for financial assets and liabilities measured at fair value on a recurring basis. Under the accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
 
The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:
 
Level 1:  Quoted prices in active markets for identical assets or liabilities.
 
Level 2:  Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.
 
Level 3:  Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
 
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
Stock-Based Compensation
 
The Company expenses stock-based compensation to employees and board members over the requisite service period based on the estimated grant-date fair value of the awards. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. For stock-based compensation awards to non-employees, the Company measures the fair value of the non-employee awards at each reporting period prior to vesting and finally at the vesting date of the award. Changes in the estimated fair value of these non-employee awards are recognized as compensation expense in the period of change.
 
The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.
Fair Value Option
 
As permitted under ASC 825, Financial Instruments, (“ASC 825”), the Company has elected the fair value option to account for its convertible notes that were issued during 2016. In accordance with ASC 825, the Company records these convertible notes at fair value with changes in fair value recorded in the Statement of Operations. As a result of applying the fair value option, direct costs and fees related to the convertible notes were recognized in earnings as incurred and were not deferred.
Valuation of Warrant Related to NSC Note
 
In accordance with ASC 815 Derivatives and Hedging, the Company classified the fair value of the warrant (“Contingently Issuable Warrants”) that it may be obligated to issue to National Securities, Inc. (“NSC”), in connection with the transfer on October 31, 2015 of $3.0 million of indebtedness to NSC, as a derivative liability as there was a potential that the Company would not have a sufficient number of authorized common shares available to settle this instrument. The Company valued these Contingently Issuable Warrants using a Black-Scholes model and used estimates for an expected dividend yield, a risk-free interest rate, and expected volatility together with management’s estimate of the probability of issuance of the Contingently Issuable Warrants. At each reporting period, as long as the Contingently Issuable Warrants were potentially issuable and there was a potential for an insufficient number of authorized shares available to settle the Contingently Issuable Warrants, the Contingently Issuable Warrants had to be revalued and any difference from the previous valuation date would be recognized as a change in fair value in the Company’s statement of operations. On June 26, 2017, the warrants were issued (See Note 9).
Income Taxes
 
The Company accounts for income taxes under ASC 740, Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
 
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. Since the Company was incorporated on February 9, 2015, the 2015 through 2017 tax years are the only periods subject to examination upon filing of appropriate tax returns. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position.
 
The Company’s policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the year ended December 31, 2017 and 2016. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
Net loss per Share
 
Loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding, excluding unvested restricted stock and stock options, during the period. Since dividends are declared paid and set aside among the holders of shares of common stock and Class A common stock pro-rata on an as-if-converted basis, the two-class method of computing net loss per share is not required.
 
The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented:
 
 
 
For the Years Ended
 
For the period from 
February 9, 
2015
 
 
 
December 31,
 
December 31,
 
(Inception) through
 
 
 
2017
 
2016
 
December 31, 2015
 
Restricted stock units/awards
 
 
714,999
 
 
274,999
 
 
366,666
 
Preferred shares
 
 
250,000
 
 
250,000
 
 
-
 
Options
 
 
20,000
 
 
-
 
 
-
 
Total potential dilutive effect
 
 
984,999
 
 
524,999
 
 
366,666
 
Comprehensive Loss
 
The Company has no components of other comprehensive loss, and therefore, comprehensive loss equals net loss.
Recently Adopted Accounting Standards
 
In August 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-15, Presentation of Financial Statements - Going Concern (Topic 915): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 states that in connection with preparing financial statements for each annual and interim reporting period, an entity's management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). ASU 2014-15 will be effective for annual and interim periods beginning on or after December 15, 2016. The Company adopted ASU No. 2014-15 in 2016, and its adoption did not have a material impact on the Company’s financial statements.
 
In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”). Under ASU 2016-09, companies will no longer record excess tax benefits and certain tax deficiencies in additional paid-in capital (“APIC”). Instead, they will record all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement and the APIC pools will be eliminated. In addition, ASU 2016-09 eliminates the requirement that excess tax benefits be realized before companies can recognize them. ASU 2016-09 also requires companies to present excess tax benefits as an operating activity on the statement of cash flows rather than as a financing activity. Furthermore, ASU 2016-09 will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the exception to liability classification for shares used to satisfy the employer’s statutory income tax withholding obligation. An employer with a statutory income tax withholding obligation will now be allowed to withhold shares with a fair value up to the amount of taxes owed using the maximum statutory tax rate in the employee’s applicable jurisdiction(s). ASU 2016-09 requires a company to classify the cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation as a financing activity on the statement of cash flows. Under current GAAP, it was not specified how these cash flows should be classified. In addition, companies will now have to elect whether to account for forfeitures on share-based payments by (1) recognizing forfeitures of awards as they occur or (2) estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. The Amendments of this ASU are effective for reporting periods beginning after December 15, 2016, with early adoption permitted but all of the guidance must be adopted in the same period. The Company adopted ASU 2016-09 in the first quarter of 2017, and its adoption did not have a material impact on the Company’s financial statements.
 
Recently Issued Accounting Standards
 
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt-Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. For all other entities, the amendments in Part I of this Update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company is currently evaluating the impact of adopting this standard on the financial statements and disclosures.
 
In May 2017, the FASB issued ASU No. 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. It is effective prospectively for the annual period ending December 31, 2018 and interim periods within that annual period. Early adoption is permitted. The Company is currently evaluating the impact of adopting this standard on the financial statements and disclosures, but does not expect it to have a significant impact.
 
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those periods. The Company is currently evaluating the impact of adopting this guidance, but does not expect it to have a significant impact.
 
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes ASC Topic 840, Leases (Topic 840) and provides principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with a term of twelve months or less will be accounted for similar to existing guidance for operating leases. The standard is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The Company is currently evaluating the method of adoption and the impact of adopting ASU 2016-02 on its financial statements. As the Company has no leases currently, the Company does not expect this guidance to have a material impact on its financial statements.
 
In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 requires equity investments to be measured at fair value with changes in fair value recognized in net income; simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment; eliminates the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments; requires separate presentation of financial assets and financial liabilities by measurement category and form of financial assets on the balance sheet or the accompanying notes to the financial statements and clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. ASU 2016-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is currently evaluating the impact that ASU 2016-01 will have on its balance sheet or financial statement disclosures. When adopted, the Company does not expect this guidance to have a material impact on its financial statements.
Significant Accounting Policies (Tables)
Schedule of Earnings Per Share, Basic, by Common Class, Including Two Class Method [Table Text Block]
The following table sets forth the potential common shares that could potentially dilute basic income per share in the future that were not included in the computation of diluted income (loss) per share because to do so would have been anti-dilutive for the periods presented:
 
 
 
For the Years Ended
 
For the period from 
February 9, 
2015
 
 
 
December 31,
 
December 31,
 
(Inception) through
 
 
 
2017
 
2016
 
December 31, 2015
 
Restricted stock units/awards
 
 
714,999
 
 
274,999
 
 
366,666
 
Preferred shares
 
 
250,000
 
 
250,000
 
 
-
 
Options
 
 
20,000
 
 
-
 
 
-
 
Total potential dilutive effect
 
 
984,999
 
 
524,999
 
 
366,666
 
Accounts Payable and Accrued Expenses (Tables)
Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]
Accounts payable, accrued expenses and other liabilities consisted of the following (in thousands):
 
 
 
As of December 31,
 
 
 
2017
 
2016
 
Accounts payable
 
$
1,545
 
$
334
 
Accrued employee compensation
 
 
215
 
 
-
 
Accrued contracted services and other
 
 
977
 
 
172
 
Accounts payable and accrued expenses
 
$
2,737
 
$
506
 
Notes Payable (Tables)
Schedule of Long-term Debt Instruments [Table Text Block]
The following table summarizes NSC Note activities as of December 31, 2017 (in thousands):
 
 
 
Note Payable
 
Discount
 
Note Payable, Net
 
January 1, 2016 balance
 
$
3,000
 
$
(297)
 
$
2,703
 
Amortization of debt discount
 
 
-
 
 
123
 
 
123
 
December 31, 2016 balance
 
$
3,000
 
$
(174)
 
$
2,826
 
Repayments
 
 
(3,000)
 
 
-
 
 
(3,000)
 
Amortization of debt discount
 
 
-
 
 
174
 
 
174
 
December 31, 2017 balance
 
$
-
 
$
-
 
$
-
 
Stockholders’ Equity (Deficit) (Tables)
The following table summarizes restricted stock unit and award activity for the year ended December 31, 2017:
 
 
 
Number of Units 
and Awards
 
Weighted 
Average Grant 
Date Fair Value
 
Unvested balance at December 31, 2016
 
 
274,999
 
$
0.44
 
Granted
 
 
515,000
 
$
6.77
 
Vested
 
 
(75,000)
 
$
0.44
 
Unvested balance at December 31, 2017
 
 
714,999
 
$
5.00
 
The following table summarizes stock option award activity for the year ended December 31, 2017:
 
 
 
Stock Options
 
Weighted 
Average Exercise
Price
 
Weighted Average 
Remaining 
Contractual Life 
(in years)
 
Outstanding, December 31, 2016
 
 
-
 
$
-
 
 
-
 
Granted
 
 
20,000
 
 
6.29
 
 
5.00
 
Outstanding, December 31, 2017
 
 
20,000
 
$
6.29
 
 
4.63
 
Fair Value Measurement (Tables)
The following table sets forth the changes in the estimated fair value for the Company’s Level 3 classified derivative warrant liability (in thousands):
 
 
 
NSC 
Contingently
Issuable 
Warrants
 
Westpark 
Contingently 
Issuable 
Warrants
 
Total
 
Fair value, December 31, 2015
 
$
114
 
$
-
 
$
114
 
Change in fair value
 
 
188
 
 
-
 
 
188
 
Issuable derivative warrant liabilities
 
 
-
 
 
12
 
 
12
 
Fair value, December 31, 2016
 
$
302
 
$
12
 
$
314
 
Change in fair value
 
 
448
 
 
3
 
 
451
 
Conversion into common shares
 
 
(750)
 
 
-
 
 
(750)
 
Change in fair value of convertible notes warrants
 
 
-
 
 
(15)
 
 
(15)
 
Fair value, December 31, 2017
 
$
-
 
$
-
 
$
-
 
The fair value of the NSC Contingently Issuable Warrants was determined at December 31, 2016 for approximately $0.3 million by applying management’s estimate of the probability of issuance of the Contingently Issuable Warrants together with the Black-Scholes option pricing model with the following key assumptions:
 
 
 
December 31,
 
 
 
2016
 
Risk-free interest rate
 
 
2.45
%
Expected dividend yield
 
 
-
 
Expected term (in years)
 
 
10.00
 
Expected volatility
 
 
83
%
Probability of issuance of the warrant
 
 
50
%
The following table sets forth the changes in the estimated fair value for our Level 3 classified convertible notes payable (in thousands):
 
 
 
Westpark 
Convertible 
Notes
 
Fair value, December 31, 2015
 
$
-
 
Additions
 
 
200
 
Change in fair value
 
 
-
 
Fair value, December 31, 2016
 
$
200
 
Change in fair value
 
 
99
 
Conversion into common shares
 
 
(299)
 
Fair value, December 31, 2017
 
$
-
 
The fair value of Westpark warrant liability at December 31, 2016 was measured at fair value for approximately $12,000 using a Monte Carlo simulation valuation methodology. A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy for the year ended December 31, 2016 is as follows:
 
 
 
December 31,
 
 
 
2016
 
Risk-free interest rate
 
 
2.45
%
Expected dividend yield
 
 
-
 
Expected term (in years)
 
 
10.00
 
Expected volatility
 
 
87
%
Income Taxes (Tables)
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
 
 
 
For the years ended
 December 31,
 
 
 
2017
 
2016
 
Statutory federal income tax rate
 
 
35
%
 
35
%
State taxes, net of federal tax benefit
 
 
8
%
 
4
%
Federal tax rate change
 
 
(20)
%
 
0
%
State tax rate change
 
 
1
%
 
(1)
%
Non-deductible items
 
 
(3)
%
 
0
%
Other
 
 
(1)
%
 
0
%
Credits
 
 
1
%
 
0
%
Change in valuation allowance
 
 
(21)
%
 
(38)
%
Income taxes provision (benefit)
 
 
0
%
 
0
%
The components of the net deferred tax asset as of December 31, 2017 and 2016 are the following (in thousands):
 
 
 
As of December 31,
 
 
 
2017
 
2016
 
Deferred tax assets:
 
 
 
 
 
 
 
Net operating loss carryovers
 
$
4,220
 
$
2,080
 
Stock compensation and other
 
 
70
 
 
-
 
Change in warrant liabilities
 
 
226
 
 
73
 
Amortization of license
 
 
1,064
 
 
1,064
 
Accruals and reserves
 
 
8
 
 
78
 
Tax credits
 
 
154
 
 
33
 
Total deferred tax assets
 
 
5,742
 
 
3,328
 
Less valuation allowance
 
 
(5,742)
 
 
(3,318)
 
Stock compensation and other
 
 
-
 
 
(10)
 
Deferred tax assets, net of valuation allowance
 
$
-
 
$
-
 
Quarterly Financial Data (unaudited) (Tables)
Quarterly Financial Information [Table Text Block]
The following table summarizes the unaudited quarterly financial data for the years ended December 31, 2017 and 2016 (in thousands except for per share amounts):
 
Year Ended December 31, 2017
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Operating expenses
 
$
504
 
$
1,744
 
$
2,848
 
$
6,325
 
Other income (expenses)
 
 
(157)
 
 
(662)
 
 
(100)
 
 
82
 
Net loss
 
 
(661)
 
 
(2,406)
 
 
(2,948)
 
 
(6,243)
 
Basic and diluted net loss per common share
 
 
(0.07)
 
 
(0.70)
 
 
(0.30)
 
 
(0.63)
 
 
Year Ended December 31, 2016
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Operating expenses
 
$
840
 
$
638
 
$
383
 
$
516
 
Other expenses
 
 
(207)
 
 
(133)
 
 
(161)
 
 
(299)
 
Net loss
 
 
(1,047)
 
 
(771)
 
 
(544)
 
 
(815)
 
Basic and diluted net loss per common share
 
 
(0.13)
 
 
(0.28)
 
 
(0.19)
 
 
(0.27)
 
Organization, Plan of Business Operations (Details Textual) (USD $)
1 Months Ended 12 Months Ended 1 Months Ended
Sep. 30, 2016
Dec. 31, 2017
Dec. 31, 2016
Jun. 26, 2017
IPO [Member]
Jun. 26, 2017
Over-Allotment Option [Member]
Stock Issued During Period, Value, New Issues
 
$ 948,000 
$ 5,000 
$ 6,325,000 
 
Stock Issued During Period, Shares, New Issues
250,000 
 
 
 
825,000 
Shares Issued, Price Per Share
 
 
 
$ 6.00 
 
Stockholders' Equity, Including Portion Attributable to Noncontrolling Interest
 
 
 
34,200,000 
 
Retained Earnings (Accumulated Deficit)
 
$ (20,661,000)
$ (8,403,000)
 
 
Significant Accounting Policies (Details)
11 Months Ended 12 Months Ended
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Total potential dilutive effect shares outstanding
366,666 
984,999 
524,999 
Restricted stock units/awards
 
 
 
Total potential dilutive effect shares outstanding
366,666 
714,999 
274,999 
Preferred shares
 
 
 
Total potential dilutive effect shares outstanding
250,000 
250,000 
Options
 
 
 
Total potential dilutive effect shares outstanding
20,000 
Significant Accounting Policies (Details Textual) (USD $)
1 Months Ended 11 Months Ended 12 Months Ended
Sep. 30, 2017
Jul. 31, 2017
Sep. 30, 2016
Oct. 31, 2015
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Stock Issued During Period, Shares, New Issues
 
 
250,000 
 
 
 
 
Preferred Stock, Dividend Rate, Percentage
 
 
2.50% 
 
 
 
 
Research and Development in Process
 
 
 
 
$ 3,040,000 
$ 1,103,000 
$ 49,000 
Debt Instrument, Decrease, Forgiveness
 
 
 
3,000,000 
 
 
 
Payments to Acquire Investments
5,000,000 
5,000,000 
 
 
10,000,000 
Short-term Investments
 
 
 
 
 
10,000,000 
Fortress Biotech, Inc [Member]
 
 
 
 
 
 
 
Annual Fee On Diluted Outstanding Equity Percentage
 
 
 
 
 
2.50% 
 
Research and Development Asset Acquired Other than Through Business Combination, Fair Value Acquired
 
 
 
 
$ 40,000 
$ 1,100,000 
$ 49,000 
Allocation (Details Textual) (USD $)
In Millions, unless otherwise specified
1 Months Ended 11 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended
Jun. 30, 2017
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Jun. 26, 2017
IPO [Member]
Dec. 31, 2017
Research and Development Expense [Member]
Dec. 31, 2017
General and Administrative Expense [Member]
Allocated Share-based Compensation Expense
 
$ 0.1 
$ 0.2 
$ 0.3 
$ 0.6 
 
 
Share Based Compensation Allocation Percentage
100.00% 
 
 
 
 
50.00% 
50.00% 
License Agreement (Details Textual) (USD $)
11 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2015
Dec. 31, 2017
Dec. 31, 2016
Jun. 17, 2015
IV Tramadol [Member]
Fortress Biotech, Inc [Member]
Jun. 17, 2015
IV Tramadol [Member]
Fortress Biotech, Inc [Member]
Upfront Payment [Member]
Jun. 17, 2015
IV Tramadol [Member]
Fortress Biotech, Inc [Member]
Additional Payment [Member]
Payments to Acquire in Process Research and Development
$ 3,000,000 
$ 0 
$ 0 
$ 3,000,000 
$ 2,000,000 
$ 1,000,000 
Contractual Obligation, Maximum Future Payments
 
 
 
$ 4,000,000 
 
 
Related Party Agreements (Details Textual) (USD $)
1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 0 Months Ended 11 Months Ended 12 Months Ended 1 Months Ended 0 Months Ended 0 Months Ended 12 Months Ended 0 Months Ended
Jul. 25, 2017
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Jun. 26, 2017
IPO [Member]
Dec. 31, 2017
Common Stock [Member]
Dec. 31, 2016
Common Stock [Member]
Dec. 31, 2017
Fortress Note [Member]
Dec. 31, 2016
Fortress Note [Member]
Dec. 31, 2015
Fortress Note [Member]
Mar. 15, 2015
Fortress Note [Member]
Dec. 31, 2017
Fortress Note [Member]
Maximum [Member]
May 17, 2017
Fortress Note [Member]
Maximum [Member]
Dec. 31, 2017
Fortress Note [Member]
Minimum [Member]
May 17, 2017
Fortress Note [Member]
Minimum [Member]
Jun. 26, 2017
Fortress Note [Member]
IPO [Member]
May 15, 2017
Fortress Note [Member]
IPO [Member]
Jul. 5, 2017
NSC Notes Memebers [Member]
Dec. 31, 2015
NSC Notes Memebers [Member]
Dec. 31, 2017
NSC Notes Memebers [Member]
Dec. 31, 2016
NSC Notes Memebers [Member]
Feb. 17, 2015
NSC Notes Memebers [Member]
Jun. 26, 2017
NSC Notes Memebers [Member]
IPO [Member]
Sep. 30, 2016
National Holdings, Inc. [Member]
Feb. 17, 2015
Asset Management Income [Member]
Jun. 26, 2017
Asset Management Income [Member]
IPO [Member]
Sep. 13, 2016
AR Founders Agreement [Member]
Sep. 13, 2016
AR Founders Agreement [Member]
Common Stock [Member]
Feb. 17, 2015
Fortress Biotech, Inc [Member]
Sep. 13, 2016
Preferred Class A [Member]
AR Founders Agreement [Member]
Dec. 31, 2017
Common Class A [Member]
Dec. 31, 2016
Common Class A [Member]
Sep. 13, 2016
Common Class A [Member]
AR Founders Agreement [Member]
Long-term Debt, Gross
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 3,000,000 
$ 0 
$ 3,000,000 
$ 3,000,000 
 
 
 
 
 
 
$ 3,000,000 
 
 
 
 
Agreement Description Terms
 
(i) issue annually to Fortress, on the anniversary date of the Founders Agreement, shares of common stock equal to two and one half percent (2.5%) of the fully-diluted outstanding equity of Avenue at the time of issuance; (ii) pay an equity fee in shares of Avenue common stock, payable within five (5) business days of the closing of any equity or debt financing for Avenue or any of its respective subsidiaries that occurs after the effective date of the Founders Agreement and ending on the date when Fortress no longer has majority voting control in Avenues voting equity, equal to two and one half percent (2.5%) of the gross amount of any such equity or debt financing; and (iii) pay a cash fee equal to four and one half percent (4.5%) of Avenues annual net sales, payable on an annual basis, within ninety (90) days of the end of each calendar year. In the event of a change in control (as it is defined in the Founders Agreement), Fortress will be paid a one-time change in control fee equal to five (5x) times the product of (i) net sales for the twelve (12) months immediately preceding the change in control and (ii) four and one-half percent (4.5%). 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of shares Exchanged
 
 
 
 
158,125 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,500,000 
 
250,000 
 
 
2,300,000 
Annual Consulting Fee
 
 
 
 
 
 
 
 
 
 
 
400,000 
 
100,000 
 
 
 
 
 
 
 
 
 
 
500,000 
 
 
 
 
 
 
 
 
Increase In Annual Consulting Fee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,000,000 
 
 
 
 
 
 
 
 
Excess In Net Assets Value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100,000,000 
 
 
 
 
 
 
 
 
Debt Instrument, Interest Rate, Stated Percentage
 
 
 
 
 
 
 
 
 
 
8.00% 
8.00% 
8.00% 
2.00% 
2.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,000,000 
 
 
 
 
 
 
 
 
 
Interest Expense, Debt
 
 
 
 
 
 
 
74,000 
200,000 
200,000 
 
 
 
 
 
 
 
 
200,000 
300,000 
400,000 
 
 
 
 
 
 
 
 
 
 
 
 
Business Acquisition, Percentage of Voting Interests Acquired
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
56.60% 
 
 
 
 
 
 
 
 
 
Placement Fee, Percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.00% 
 
 
 
 
 
 
 
 
 
Amended Founders Agreements Terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
15 years