Basis of Presentation and Significant Accounting Policies
|3 Months Ended|
Mar. 31, 2014
|Basis of Presentation and Significant Accounting Policies [Abstract]|
|Basis of Presentation and Significant Accounting Policies||
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements include the accounts of XOMA and its subsidiaries. All intercompany accounts and transactions among consolidated entities were eliminated during consolidation. The unaudited financial statements were prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. As permitted under those rules certain footnotes or other financial information can be condensed or omitted. These financial statements and related disclosures have been prepared with the assumption that users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the U.S. Securities and Exchange Commission ("SEC") on March 12, 2014.
In management's opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the Company's consolidated financial position as of March 31, 2014, the consolidated results of the Company's operations and the Company's cash flows for the three months ended March 31, 2014 and 2013. The interim results of operations are not necessarily indicative of the results that may be expected for the full fiscal year or any other periods.
The Company has determined that a restatement is required to the previously reported diluted loss per share of common stock for the three months ended March 31, 2014, specifically as it relates to an error in the calculation and disclosure of diluted earnings (loss) per share as it applies to our March 2012 warrants. The correction has no impact on the Company's condensed consolidated balance sheets, net loss or comprehensive loss, basic loss per share of common stock or the condensed consolidated statements of cash flows as previously reported for the three months ended March 31, 2014.
In March 2012, in connection with an underwritten offering, the Company issued five-year warrants to purchase 14,834,577 shares of the Company’s common stock at an exercise price of $1.76 per share (the "2012 Warrants"). These warrants were recorded as a liability at fair value and are revalued at each reporting period until the earlier of the exercise of the warrants, at which time the liability will be reclassified to stockholders' equity, or expiration of the warrants. The revaluation gain or loss is recorded to the statement of comprehensive loss. The calculation of diluted loss per share requires that, if the average market price of the shares underlying the Company’s 2012 Warrants for the reporting period is greater than the exercise price of the 2012 Warrants and if the presumed exercise of such securities would be dilutive to loss per share for the period, then the reported net loss used in the calculation of diluted net loss per share must be adjusted to remove the change in fair value for the period of the 2012 Warrants from the numerator of the net loss calculation. Likewise, an adjustment to the denominator is required to reflect the related dilutive shares, if any, under the treasury stock method. The Company failed to make the adjustments to the diluted loss per share calculation for the three months ended March 31, 2014. No other previously reported periods require correction.
The impact of the restatement in the reported diluted loss per share of common stock for the three months ended March 31, 2014 is an increase of $(0.17) over the previously reported $(0.04) diluted loss per share, resulting in a corrected diluted loss per share of $(0.21) for the three months ended March 31, 2014.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. On an on-going basis, management evaluates its estimates including, but not limited to, those related to contingent warrant liabilities, revenue recognition, research and development expense, long-lived assets, derivative instruments and stock-based compensation. The Company bases its estimates on historical experience and on various other market-specific and other relevant assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates, such as the Company's billing under government contracts. Under the Company's contracts with the National Institute of Allergy and Infectious Diseases ("NIAID"), a part of the National Institutes of Health ("NIH"), the Company bills using NIH provisional rates and thus are subject to future audits at the discretion of NIAID's contracting office. These audits can result in an adjustment to revenue previously reported.
Certain reclassifications of prior period amounts have been made to the financial statements and accompanying notes to conform to the current period presentation. Prior period presentations of net product sales has been reclassified into contract and other revenue, and cost of sales has been reclassified into research and development expense, because the net product sales were not material for all periods presented. These reclassifications had no impact on the Company's previously reported net loss or cash flows.
Concentration of Risk
Cash equivalents and receivables are financial instruments, which potentially subject the Company to concentrations of credit risk, as well as liquidity risk for certain cash equivalents such as money market funds. The Company has not encountered such issues during 2014.
The Company has not experienced any significant credit losses and does not generally require collateral on receivables. For the three months ended March 31, 2014, three customers represented 47%, 40%, and 15% of total revenue and 57%, 28%, and 12% of the accounts receivable balance.
For the three months ended March 31, 2013, two customers represented 79% and 18% of total revenues. As of December 31, 2013, there were receivables outstanding from these two customers representing 73% and 13% of the accounts receivable balance.
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://www.xbrl.org/2003/role/presentationRef