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17. RESTATEMENT | 12 Months Ended
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Sep. 30, 2016
Restatement |
RESTATEMENT | The Company has restated its previously issued 2016, 2015 and 2014 financial statements to correct an error in the way it accounted for a lease entered into in October 2008. In October 2008, the Company entered into a lease arrangement whereby the Company leased a building owned by a third party, but to which the owner made tenant-directed improvements. Upon commencement of the lease, the Company accounted for the arrangement as an operating lease under ASC 840, Accounting for Leases, whereby the total minimum lease payment obligations under the leases were recognized as monthly rent expense on a straight-line basis over the term of the lease. The cost of the tenant improvements incurred were capitalized as deferred rent and amortized over the 20-year lease term. However, in November 2017, the Company discovered an error in the way it accounted for the lease for the building since it was determined that, as the terms of the original lease required the Company to be responsible for possible cost overruns, (but of which there were none), the Company was deemed to be the owner of the leased building for accounting purposes only under ASC 840-40-55. In addition to the costs it incurred and capitalized for the tenant improvements, the Company should have reflected an asset on its balance sheet for the costs paid by the lessor to purchase and improve the building, as well as a corresponding liability. Upon completion of the improvements, the Company did not meet the “sale-leaseback” criteria under ASC 840-40-25, Accounting for Leases, Sale-Leaseback Transactions due to the Company’s significant continuing involvement with the facility which is considered to be other than a normal leaseback as defined in ASC 840-40-25 and therefore should have treated the lease as a financing obligation and the asset and corresponding liability should not be derecognized. The correction to the historical financial statements to apply ASC 840-40-25 do not affect the total cash payments the Company has made or is obligated to make under the lease agreement, nor does it change the total expense to be recognized over the lease term. However, the timing and nature of expense is different under this treatment as compared to operating lease treatment. Specifically, the Company should have recognized depreciation, expense on the building it is deemed to own and interest expense on the associated lease financing obligation, instead of rental expense. Accordingly, the historical financial statements in this report have been restated. The accompanying financial statements for the three years in the period ended September 30, 2016 have been restated to reflect the correction of the error for the lease accounting. Accumulated deficit at October 1, 2013, was reduced by $326,827. On June 12, 2017, the Company’s shareholders approved a reverse split of the Company’s common stock which became effective on the NYSE American on June 15, 2017. On that date, every twenty five issued and outstanding shares of the Company’s common stock automatically converted into one outstanding share. As a result of the reverse stock split, the number of the Company’s outstanding shares of common stock decreased from 230,127,331 (pre-split) shares to 9,201,645 (post-split) shares. In addition, by reducing the number of the Company’s outstanding shares, the Company’s loss per share in all prior periods will increase by a factor of twenty five. The reverse stock split affected all stockholders of the Company’s common stock uniformly, and did not affect any stockholder’s percentage of ownership interest. The par value of the Company’s stock remained unchanged at $0.01 per share and the number of authorized shares of common stock remained the same after the reverse stock split. As the par value per share of the Company’s common stock remained unchanged at $0.01 per share, a total of $2,204,938 was reclassified from common stock to additional paid-in capital. In connection with this reverse stock split, the number of shares of common stock reserved for issuance under the Company’s incentive and non-qualified stock option plans, as well as the shares of common stock underlying outstanding stock options and warrants, were also proportionately reduced while the exercise prices of such stock options and warrants were proportionately increased. All references to shares of common stock and per share data for all periods presented in the accompanying financial statements and notes thereto have been adjusted to reflect the reverse stock split on a retroactive basis. The following is a summary of the restatements for 2016:
|  | 9/30/2016 |
| PREVIOUSLY REPORTED | ADJUSTMENT | RESTATED
Total current assets | $ 5,887,646 | $ (429,821) | $ 5,457,825
Other assets | 5,710,601 | 13,717,699 | 19,428,300
Total assets | 11,598,247 | 13,287,878 | 24,886,125
Total liabilities | 12,554,315 | 13,011,023 | 25,565,338
Stockholders' deficit, September 30, 2016 | (956,068) | 276,855 | (679,213)
|  | 9/30/2015 |
Balance Sheet | PREVIOUSLY REPORTED | ADJUSTMENT | RESTATED
Total current assets | $ 8,833,183 | $ (487,793) | $ 8,345,390
Other assets | 6,614,420 | 13,593,892 | 20,208,312
Total assets | 15,447,603 | 13,106,099 | 28,553,702
Total liabilities | 20,532,722 | 12,783,250 | 33,315,972
Stockholders' deficit, September 30, 2015 | (5,085,119) | 322,850 | (4,762,270)
| YEAR ENDED 9/30/2016
| PREVIOUSLY REPORTED | ADJUSTMENT | RESTATED
Research and development expenses | $ 19,351,779 | $ (1,906,397) | $ 17,445,382
Total operating expenses | 25,838,280 | (1,906,397) | 23,931,883
Operating loss | (25,553,225) | 1,906,397 | (23,646,828)
Interest income (expense), net | 73,001 | (1,952,391) | (1,879,390)
Net loss | (11,466,498) | (45,994) | (11,512,492)
Net loss per common share, basic and diluted | $ (2.36) |  | $ (2.37)
| YEAR ENDED 9/30/2015
| PREVIOUSLY REPORTED | ADJUSTMENT | RESTATED |
Research and development expenses | $ 21,098,147 | $ (1,906,397) | $ 19,191,750 |
Total operating expenses | 34,953,922 | (1,906,397) | 33,047,525 |
Operating loss | (34,296,545) | 1,906,397 | (32,390,148) |
Interest income (expense), net | (40,260) | (1,923,961) | (1,964,221) |
Net loss | (34,674,646) | (17,564) | (34,692,210) |
Net loss per common share, basic and diluted | $ (10.51) |  | $ (10.51) |
| YEAR ENDED 9/30/2014
| PREVIOUSLY REPORTED | ADJUSTMENT | RESTATED
Research and development expenses | $ 17,172,587 | $ (1,906,398) | $ 15,266,189
Total operating expenses | 27,838,145 | (1,906,398) | 25,931,747
Operating loss | (27,574,112) | 1,906,398 | (25,667,714)
Interest income (expense), net | (40,920) | (1,892,812) | (1,933,732)
Net loss | (27,366,265) | 13,586 | (27,352,679)
Net loss per common share, basic | $ (12.11) |  | $ (12.10)
Net loss per common share, diluted | $ (12.22) |  | $ (12.21)
| Accumulated | Total Stockholders'
| Deficit | Equity (Deficit)
PREVIOUSLY REPORTED, OCTOBER 1, 2013 | $ (212,160,568) | $ 6,700,090
ADJUSTMENT | 326,827 | 326,827
RESTATED BALANCE, OCTOBER 1, 2013 | (211,833,741) | 7,026,917
2014 equity transactions - unchanged | - | 31,109,575
Net loss – RESTATED | (27,352,679) | (27,352,679)
BALANCE, SEPTEMBER 30, 2014 | (239,186,420) | 10,783,813
2015 equity transactions - unchanged | - | 19,146,127
Net loss - RESTATED | (34,692,210) | (34,692,210)
BALANCE, SEPTEMBER 30, 2015 | (273,878,630) | (4,762,270)
2016 equity transactions - unchanged | - | 15,595,549
Net loss - RESTATED | (11,512,492) | (11,512,492)
BALANCE, SEPTEMBER 30, 2016 | $ (285,391,122) | $ (679,213)

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