Impact of Recently Issued Accounting Standards

The recent accounting pronouncements below may have a significant effect on the Company's financial statements. Recent accounting pronouncements that are not anticipated to have an impact on or are unrelated to the Company's financial condition, results of operations, or related disclosures are not discussed.

ASU No. 2014-09. In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers ("Topic 606”), which amended the existing accounting standards for revenue recognition, outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new standard requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. The amended guidance defines a five-step approach for recognizing revenue, which will require a company to use more judgment and make more estimates than under the current guidance. The Company adopted this new standard effective January 1, 2018, using the modified retrospective transition method. The impact of adoption of Topic 606 on the Company's existing agreements was as follows:

Collaboration Agreement with MedImmune

The Company has determined that no cumulative catch-up adjustment was required.

Grant Agreements

The Company has determined that as of January 1, 2018, accounting for the Company’s various grant agreements falls under the contributions guidance under Subtopic 958-605, Not-for-Profit Entities-Revenue Recognition, which is outside the scope of Topic 606, as the government agencies granting the Company funds are not receiving reciprocal value for their contributions. Beginning on January 1, 2018, all contributions received from current grant agreements have been recorded as a contra-expense as opposed to revenue on the consolidated statement of operations. For the three months ended March 31, 2018, $2.2 million was recorded as contra-research and development expense which previously would have been recorded as grant revenue.

The following table illustrates the impact that adopting Topic 606 has had on our reported results in the condensed consolidated statement of operations.



	Balances Without Adoption of Topic 606 at March 31, 2018		Impact of Adopting Topic 606			As reported at March 31, 2018
Revenues:
Revenue under collaborative research and development arrangements	$	1,289,046	$	—		$	1,289,046
Revenue under collaborative research and development arrangements with affiliated entities	148,008		—			148,008
Grants and miscellaneous revenue	1,850,341		(1,757,751		)	92,590
Grants and miscellaneous revenue from affiliated entity	464,400		(464,400		)	—
Total revenues	3,751,795		(2,222,151		)	1,529,644
Operating expenses:
Research and development	22,355,600		(2,222,151		)	24,577,751
General and administrative	9,698,015		—			9,698,015
Total operating expenses	$	32,053,615	$	(2,222,151	)	$	34,275,766

ASU No. 2016-01. In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amended guidance requires the Company to measure and record equity investments, except those accounted for under the equity method of accounting that have a readily determinable fair value, at fair value and for the Company to recognize the changes in fair value in its consolidated statements of operations, instead of recognizing unrealized gains and losses through accumulated other comprehensive income (loss), as done under the previous guidance. The amended guidance also changes several disclosure requirements for financial instruments, including the methods and significant assumptions used to estimate fair value. The standard was effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual reporting periods. The Company adopted this guidance on January 1, 2018 and recorded a $231,366 cumulative effect adjustment to reclassify the cumulative unrealized gain, net of tax effect, from its investment in Plumbline Life Sciences, Inc. ("PLS") from accumulated other comprehensive loss to accumulated deficit. After the adoption of ASU No. 2016-01, the Company recorded a gain on investment in affiliated entity related to PLS of $982,000 on the condensed consolidated statement of operations for the three months ended March 31, 2018.

The cumulative effect of the changes made to the Company's condensed consolidated balance sheet as of January 1, 2018 for the adoption of ASU No. 2016-01 are included in the table below:



Equity:	Balance at December 31, 2017			Adjustments due to ASU No. 2016-01			Balance at January 1, 2018
Accumulated deficit	$	(523,356,317	)	$	231,366		$	(523,124,951	)
Accumulated other comprehensive loss	$	(117,005	)	$	(231,366	)	$	(348,371	)

ASU No. 2016-02. In February 2016, the FASB issued ASU No. 2016-02, Leases. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective for the Company beginning January 1, 2019, with early adoption permitted. The Company is currently evaluating the impact of the application of this accounting standard update on its financial statements and related disclosures. The Company currently has three operating leases for its office and laboratory spaces in San Diego, California and Plymouth Meeting, Pennsylvania that are expected to be impacted by the standard and result in the present value of the future lease payment presented as right-to-use assets with a corresponding lease liability at the date of adoption.