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Document and Entity Information	12 Months Ended
Document and Entity Information	Dec. 31, 2018
Document and Entity Information
Entity Registrant Name	Liquidia Technologies Inc
Entity Central Index Key	0001330436
Document Type	S-1
Document Period End Date	Dec. 31, 2018
Current Fiscal Year End Date	--12-31
Amendment Flag	false
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	true

Balance Sheets - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash	$ 39,534,985	$ 3,418,979
Accounts receivable, less allowance of $0 and $48,108, respectively	272,557	1,622,179
Prepaid expenses and other current assets	219,057	443,460
Total current assets	40,026,599	5,484,618
Property, plant and equipment, net	8,130,708	8,243,012
Prepaid expenses and other assets	1,260,951	1,115,972
Total assets	49,418,258	14,843,602
Current liabilities:
Accounts payable	3,235,949	4,424,948
Accrued expenses	1,459,182	2,785,618
Accrued compensation	2,515,519	1,952,505
Accrued interest		1,408,869
Deferred rent	268,599	268,628
Current portion of capital lease obligations	452,703	469,798
Current portion of deferred revenue		3,605,199
Current portion of long-term debt	316,906	15,608,349
Total current liabilities	8,248,858	30,523,914
Long-term capital lease obligations	376,082	510,625
Long-term deferred rent	2,406,084	2,612,552
Long-term deferred revenue	8,071,920	5,527,296
Long-term debt	11,627,643	5,556,782
Deferred financing obligation		1,341,810
Warrant liabilities		2,462,859
Total liabilities	30,730,587	48,535,838
Commitments and contingencies (Note 10)
Stockholders' equity (deficit):
Additional paid-in capital	185,726,048	79,677,540
Accumulated deficit	(167,053,897)	(113,413,311)
Total stockholders' equity (deficit)	18,687,671	(33,692,236)
Total liabilities and stockholders' equity (deficit)	49,418,258	14,843,602
Preferred stock - Series A
Stockholders' equity (deficit):
Preferred stock		1,974
Preferred stock - Series A-1
Stockholders' equity (deficit):
Preferred stock		1,835
Preferred stock - Series B
Stockholders' equity (deficit):
Preferred stock		4,497
Preferred stock - Series C
Stockholders' equity (deficit):
Preferred stock		17,103
Preferred stock - Series C-1
Stockholders' equity (deficit):
Preferred stock		17,556
Preferred stock - Series D
Stockholders' equity (deficit):
Preferred stock
Common stock - Class B- Non-voting
Stockholders' equity (deficit):
Common stock		20
Common stock - Voting
Stockholders' equity (deficit):
Common stock	$ 15,520	$ 550

Balance Sheets (Parenthetical) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Allowance for accounts receivable	$ 0	$ 48,108,000
Preferred stock - Series A
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	0	1,974,430
Preferred stock, shares issued (in shares)	0	1,974,430
Preferred stock, shares outstanding (in shares)	0	1,974,430
Preferred stock - Series A-1
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	0	1,834,862
Preferred stock, shares issued (in shares)	0	1,834,862
Preferred stock, shares outstanding (in shares)	0	1,834,862
Preferred stock - Series B
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	0	4,620,123
Preferred stock, shares issued (in shares)	0	4,496,908
Preferred stock, shares outstanding (in shares)	0	4,496,908
Preferred stock - Series C
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	0	17,102,578
Preferred stock, shares issued (in shares)	0	17,102,578
Preferred stock, shares outstanding (in shares)	0	17,102,578
Preferred stock - Series C-1
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	0	91,000,000
Preferred stock, shares issued (in shares)	0	17,556,178
Preferred stock, shares outstanding (in shares)	0	17,556,178
Preferred stock - Series D
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	0	0
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock - Voting
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	40,000,000	175,000,000
Common stock, shares issued (in shares)	15,519,469	549,952
Common stock, shares outstanding (in shares)	15,519,469	549,952
Common stock - Class B- Non-voting
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	0	330,664
Common stock, shares issued (in shares)	0	19,645
Common stock, shares outstanding (in shares)	0	19,645

Statements of Operations and Comprehensive Loss - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Condensed Statements of Operations and Comprehensive Loss
Revenues	$ 2,706,981	$ 7,258,123
Costs and expenses:
Cost of sales	121,391	319,759
Research and development	28,699,576	24,753,876
General and administrative	8,754,088	10,212,774
Total costs and expenses	37,575,055	35,286,409
Loss from operations	(34,868,074)	(28,028,286)
Other income (expense):
Interest income	304,981	268
Interest expense	(18,988,176)	(13,010,475)
Gain on early extinguishment of long-term debt	137,695
Derivative and warrant fair value adjustments	277,715	11,884,253
Total other income (expense), net	(18,267,785)	(1,125,954)
Net loss	(53,135,859)	(29,154,240)
Comprehensive loss	$ (53,135,859)	$ (29,154,240)
Net loss per common share:
Basic (in dollars per share)	$ (7.42)	$ (51.78)
Diluted (in dollars per share)	$ (7.51)	$ (51.78)
Weighted average common shares outstanding:
Basic (in shares)	7,163,304	563,076
Diluted (in shares)	7,078,757	563,076

Statement of Stockholders' Equity (Deficit) - USD ($)	Preferred stock - Series A Preferred stock	Preferred stock - Series A-1 Preferred stock	Preferred stock - Series B Preferred stock	Preferred stock - Series C Preferred stock	Preferred stock - Series C-1 Preferred stock	Preferred stock - Series D Preferred stock	Common stock - Voting Common stock	Common stock - Voting	Common stock - Class B- Non-voting Common stock	Additional Paid-in Capital	Related Party Note Receivable from Shareholder	Accumulated Deficit	Total
Balance at beginning of period at Dec. 31, 2016	$ 1,974	$ 1,835	$ 4,497	$ 17,103	$ 17,556		$ 534		$ 20	$ 66,025,349	$ (55,000)	$ (84,259,071)	$ (18,245,203)
Balance at beginning of period (in shares) at Dec. 31, 2016	1,974,430	1,834,862	4,496,908	17,102,578	17,556,178		533,593		19,645
Increase (Decrease) in Stockholders' Equity
Exercise of stock options							$ 15			86,688			$ 86,703
Exercise of stock options (in shares)							15,170						15,169
Exercise of common stock warrants							$ 1			9,999			$ 10,000
Exercise of common stock warrants (in shares)							1,189
Stock-based compensation										514,092			514,092
Repayment of note to related party shareholder											$ 55,000		55,000
Beneficial conversion feature on Convertible Notes										13,041,412			13,041,412
Net loss												(29,154,240)	(29,154,240)
Balance at end of period at Dec. 31, 2017	$ 1,974	$ 1,835	$ 4,497	$ 17,103	$ 17,556		$ 550		$ 20	79,677,540		(113,413,311)	(33,692,236)
Balance at end of period (in shares) at Dec. 31, 2017	1,974,430	1,834,862	4,496,908	17,102,578	17,556,178		549,952		19,645
Increase (Decrease) in Stockholders' Equity
Adjustment to remove partial shares resulting from reverse split (in shares)							(63)
Exercise of stock options							$ 120			334,591			$ 334,711
Exercise of stock options (in shares)							119,793						119,793
Exercise of common stock warrants							$ 49			773			$ 822
Exercise of common stock warrants (in shares)							48,836	48,836
Stock-based compensation										2,195,075			2,195,075
Issuance of Series D preferred stock, net						$ 91,147				53,893,361			53,893,361
Issuance of Series D preferred stock, net (in shares)						91,147,482
Initial public offering							$ 4,833			53,159,256			53,164,089
Initial public offering (in shares)							4,833,099
Automatic conversion preferred stock and Class B common stock	$ (1,974)	$ (1,835)	$ (4,497)	$ (17,103)	$ (17,556)	$ (91,147)	$ 9,968		$ (20)	124,164			91,147
Automatic conversion preferred stock and Class B common stock (in shares)	(1,974,430)	(1,834,862)	(4,496,908)	(17,102,578)	(17,556,178)	(91,147,482)	9,967,852		(19,645)
Reclassification of warrant liabilities										2,185,144			2,185,144
IPO financing costs										(5,843,856)			(5,843,856)
Net loss												(53,135,859)	(53,135,859)
Balance at end of period at Dec. 31, 2018							$ 15,520			$ 185,726,048		(167,053,897)	18,687,671
Balance at end of period (in shares) at Dec. 31, 2018							15,519,469
Increase (Decrease) in Stockholders' Equity
Cumulative adjustment - adoption of ASC 606 \| ASU 2014-09												$ (504,727)	$ (504,727)

Condensed Statements of Cash Flows - USD ($)	12 Months Ended
Condensed Statements of Cash Flows - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Operating activities
Net loss	$ (53,135,859)	$ (29,154,240)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	2,195,075	514,092
Depreciation	1,543,667	931,931
Amortization of discount on long-term debt and convertible notes	17,550,541	9,837,985
Non-cash interest expense	343,103	2,859,102
Non-cash gain on early extinguishment of long-term debt	(137,695)
Derivative fair value adjustment		(9,872,990)
Warrant fair value adjustment	(277,715)	(2,011,263)
Non-cash rent (income) expense	(206,498)	233,449
Lease incentive		1,981,915
Changes in operating assets and liabilities:
Accounts receivable	1,349,622	(328,458)
Prepaid expenses and other current assets	(67,154)	25,206
Other non-current assets	2,408,097	(123,249)
Accounts payable	(1,281,784)	1,872,852
Accrued expenses	(1,055,564)	1,985,263
Accrued compensation	563,013	(1,310)
Accrued interest		(105,036)
Deferred revenue	(1,621,384)	(2,935,603)
Net cash used in operating activities	(31,830,535)	(24,290,354)
Investing activities
Purchases of property, plant and equipment	(870,943)	(2,544,064)
Net cash used in investing activities	(870,943)	(2,544,064)
Financing activities
Principal payments on capital lease obligations	(608,154)	(384,024)
Proceeds from issuance of convertible notes		27,388,524
Proceeds from issuance of long-term debt	11,000,000	4,000,000
Refund of principal payments on long-term debt	588,889
Principal payments on long-term debt	(12,406,010)	(888,890)
Payments for debt issuance costs	(397,000)	(1,397,628)
Proceeds from issuance of Series D preferred stock, net of issuance costs	25,106,896
Proceeds from initial public offering, net of underwriting fees and commissions	47,320,233
Payments for deferred offering costs	(2,122,903)
Proceeds from exercise of stock options and warrants	335,533	96,703
Net cash provided by financing activities	68,817,484	28,814,685
Net increase in cash	36,116,006	1,980,267
Cash, beginning of period	3,418,979	1,438,712
Cash, end of period	39,534,985	3,418,979
Supplemental disclosure of cash flow information
Cash paid for interest	1,094,532	313,390
Purchase of equipment with capital leases	456,517	796,508
Changes in purchases of equipment in accounts payable	25,934	144,852
Purchase of build-to-suit asset with deferred financing obligation	272,656	1,341,810
Reclassification of deferred financing obligation to long-term debt	277,009
Reclassification of financing costs on deferred financing obligation to discount on long-term debt	1,614,466
Recording of discount on long-term debt	168,174
Conversion of accrued interest to longterm debt	144,993	41,271
Recording of warrant liabilities with corresponding discount on convertible notes		4,474,122
Recording of derivative liabilities with corresponding discount on convertible notes		9,872,990
Conversion of convertible notes and accrued interest into Series D preferred stock	28,877,498
Recording of discount on convertible notes as paid-in capital for beneficial conversion feature		12,119,584
Debt issuance costs incurred but not paid		75,000
Deferred offering costs incurred but not paid	108,694
Exercise of stock options through exchange of vested stock options	$ 162,156
Issuance of convertible note for debt issuance costs		$ 442,356

Organization and Description of the Business	12 Months Ended
Organization and Description of the Business	Dec. 31, 2018
Organization and Description of the Business
Organization and Description of the Business	1. Organization and Description of the Business Liquidia Technologies, Inc. (“Liquidia” or the “Company”), is a late‑stage clinical biopharmaceutical company focused on the development and commercialization of human therapeutics using the Company’s proprietary PRINT technology to transform the lives of patients. PRINT is a particle engineering platform that enables precise production of uniform drug particles designed to improve the safety, efficacy and performance of a wide range of therapies. The Company is currently focused on the development of two product candidates for which it holds worldwide commercial rights: LIQ861 for the treatment of pulmonary arterial hypertension and LIQ865 for the treatment of local post‑operative pain. The development and commercialization activities are conducted at the Company’s headquarters located in Morrisville, North Carolina. The Company was incorporated under the laws of the state of Delaware in 2004.

Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Significant Accounting Policies

Significant Accounting Policies

2. Significant Accounting Policies

Basis of Presentation

The Company has prepared the accompanying financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Such financial statements reflect all adjustments that are, in management’s opinion, necessary to present fairly, in all material respects, the Company’s financial position, results of operations and cash flows and are presented in U.S. Dollars. Certain prior period amounts have been reclassified to conform to the current period presentation.

Reverse Stock Split

On July 12, 2018 and July 19, 2018, the Company’s Board of Directors and stockholders, respectively, approved an amendment to the Company’s amended and restated certificate of incorporation effecting a 1-for-16.8273325471348 reverse stock split of the Company’s issued and outstanding shares of common stock and convertible preferred stock. The reverse stock split was effective on July 19, 2018. The par value of the common and redeemable convertible preferred stock was not adjusted as a result of the reverse stock split. All issued and outstanding share and per share amounts included in the accompanying financial statements have been adjusted to reflect this reverse stock split for all periods presented.

Variable Interest Entities

The Company identifies entities (i) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support or (ii) in which the equity investors lack an essential characteristic of a controlling financial interest as variable interest entities (“VIE” or “VIEs”). The Company performs an initial and ongoing evaluation of the entities with which the Company has variable interests to determine if any of these entities are VIEs. If an entity is identified as a VIE, the Company performs an assessment to determine whether the Company has both (i) the power to direct activities that most significantly impact the VIE’s economic performance and (ii) the obligation to absorb losses from or the right to receive benefits of the VIE that could potentially be significant to the VIE. If both of these criteria are satisfied, the Company is identified as the primary beneficiary of the VIE and the entity must be consolidated. As of December 31, 2018, the Company determined that Envisia Therapeutics Inc. (“Envisia”) was a variable interest entity (“VIE”), although the Company does not consolidate it as the Company is not the primary beneficiary for Envisia. Envisia is accounted for under the equity method.

Envisia has operated at a net loss since inception in 2013 and therefore full impairment in the basis of the equity investment was recorded in 2013, the year of initial recognition of the investment. As such, the aggregate investment balance of this VIE as of December 31, 2017 and 2018, was $0. The initial investment amount recorded represents the Company’s maximum risk of loss related to the identified VIE. As of December 31, 2017 and 2018, Liquidia’s common equity ownership percentage in Envisia was approximately 75%, and its ownership percentage of voting shares was 4.4%. Although Liquidia’s common equity ownership in Envisia was greater than 50%, control did not rest with the Company; however, the Company had the ability to exercise significant influence over operating and financial policies of Envisia and for a limited time had certain management personnel in common with Envisia. The Company does not have the power to direct activities of Envisia that most significantly impact Envisia’s economic performance. Envisia has a board that is independent from Liquidia which approves all activities that affect Envisia’s performance, such as selling and purchasing of goods or services; selecting, acquiring or disposing of assets; and researching and developing new products or processes. Additionally, the license rights given to Envisia are irrevocable. Accordingly, the Company accounts for Envisia using the equity method.

In March 2017, the license related to the Otic field, along with other intellectual property rights, as defined, was purchased back by the Company from Envisia in exchange for 75,000 shares of its Envisia common stock. The purchase prices were not material. In October 2017, Envisia sold its license to the PRINT technology to Aerie Pharmaceuticals, Inc. (‘‘Aerie’’) for initial consideration of $25 million in the form of a combination of cash and Aerie common stock, with the potential to earn additional payments subject to achievement of certain product approval milestones. The Company did not receive any proceeds from this transaction at closing. There have been no activities between Envisia and the Company in 2018.

Going Concern

The Company’s financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company closed its initial public offering (“IPO”) in July and August 2018 resulting in total net proceeds of $49.4 million, after underwriting discounts but prior to payment of other offering expenses.

The Company's operations have consisted primarily of developing its technology, developing products, prosecuting its intellectual property and securing financing. The Company has incurred recurring losses and cash outflows from operations, has an accumulated deficit, and has debt maturing within twelve months. The Company expects to continue to incur losses in the foreseeable future and will require additional financial resources to continue to advance its products and intellectual property, in addition to repaying its maturing debt and other obligations.

These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to this matter include continuing attempts to obtain additional financing to sustain its operations. However, there is no assurance that the Company will be successful in obtaining sufficient financing on terms acceptable to the Company, and the failure of the Company to obtain sufficient funds on acceptable terms, when needed, could have a material adverse effect on the Company’s business, results of operations and financial condition. If sufficient financings are not obtained, this may necessitate other actions by the Company. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates.

Equity Method Investments

The Company holds investments in equity method investees. Investments in equity method investees are those for which the Company has the ability to exercise significant influence but does not control and is not the primary beneficiary. Significant influence typically exists if the Company has a 20% or more voting interest in the venture, unless predominant evidence to the contrary exists. Under this method of accounting, the Company records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Cash payments to equity method investees such as additional investments, loans and advances, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances, are recorded as adjustments to investment balances. The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.

Cash

The Company considers all highly liquid investments with a maturity of three months or less, when purchased, to be cash equivalents. The Company had no cash equivalents as of December 31, 2017 and 2018.

Accounts Receivable

Accounts receivable are stated at historical cost less an allowance for doubtful accounts as of each Balance Sheet date. The Company does not accrue interest on trade receivables. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance based on its history of collections and write offs and the current status of all receivables. The Company writes off customer receivables when it becomes apparent, based upon customer facts and circumstances, that such amounts will not be collected.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and accounts receivable. The Company is exposed to credit risk, subject to federal deposit insurance, in the event of default by the financial institutions holding its cash to the extent of amounts recorded on the Balance Sheet. With regards to cash, 100% of the Company’s cash is held on deposit with Pacific Western Bank. With regards to revenues and accounts receivable, GlaxoSmithKline plc (“GSK” and “GSK Inhaled”) accounted for 84% and 16% of the Company’s revenues for the years ended December 31, 2017 and 2018, respectively, and $1.1 million or 69% and $0 or 0% of the Company’s accounts receivable as of December 31, 2017 and 2018, respectively.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is computed using the straight-line method over the estimated useful lives of the assets beginning when the assets are placed in service. Estimated useful lives for the major asset categories are:


Lab and build-to-suit equipment	5 - 7	years
Office equipment	5	years
Furniture and fixtures	10	years
Computer equipment	3	years
Leasehold improvements	Lesser of life of the asset or remaining lease term

The Company has entered into grant agreements with governmental agencies to perform defined research activities. Under those grants, the Company purchases lab equipment required to perform the necessary research. Those specific assets are depreciated over the lesser of the useful life of the assets or the effective duration of the grant.

Major renewals and improvements are capitalized to the extent that they increase the useful economic life or increase the expected economic benefit of the underlying asset. Maintenance and repairs are charged to operations as incurred. When items of property, plant and equipment are sold or retired, the related cost and accumulated depreciation or amortization is removed from the accounts, and any gain or loss is included in operating expenses in the accompanying Statements of Operations and Comprehensive Loss.

Impairment of Long-Lived Assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write-down is recorded to reduce the related asset to its estimated fair value. To date, no such write-downs have occurred.

Deferred Rent

Rent expense is recognized on a straight-line basis over the life of the lease. The difference between rent expense recognized and rental payments, as stipulated in the lease, is reflected as deferred rent in the accompanying Balance Sheets and amortized over the life of the lease. In addition, deferred rent also includes landlord incentives on a portion of the leasehold improvement cost, which is amortized over the life of the lease.

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014‑09, Revenue from Contracts with Customers (“Topic 606”). The FASB issued Topic 606 to clarify the principles for recognizing revenue and to develop a common revenue standard for U.S. GAAP. The standard outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes the most current revenue recognition guidance. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs – Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer and certain contract fulfillment costs. The Company adopted this standard and all the related amendments (“new revenue standard”) on January 1, 2018, applying the modified retrospective method. The modified retrospective transition method is applied on a prospective basis from the adoption date and does not recast historical financial statement periods. Any contracts with customers that were not complete as of the adoption date are reviewed and the Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit as of January 1, 2018. Financial information in comparative periods have not been restated and continue to be reported under the accounting methods in effect for that period.

This adoption primarily affected the recognition of non-refundable up-front fees and milestone payments. The Company previously recognized non-refundable up-front fees as deferred revenue which was recognized into revenue on a straight-line basis over the estimated period of the Company’s substantive performance obligations, as a component of a multiple element arrangement. Milestone payments were previously accounted for under Accounting Standards Codification (“ASC”) 605-28-50-2(e), which had required recognition of a milestone payment when the applicable event was considered to be both substantive and achieved. The adoption of the new revenue standard generally requires licenses that are not considered distinct performance obligations from other goods or services within a contract to be bundled with those goods or services as a combined performance obligation. Revenue associated with the combined performance obligation is recognized over time as those goods or services are delivered.

The adoption of the new revenue standard also impacted the deferral of sublicense payments related to the milestone payments, which were previously expensed when the milestone payments were recognized, and the timing of recognition of deferred sublicense payments related to up-front license payments. Under the new revenue standard, the incremental sublicense payments related to milestone payments will be deferred as contract fulfillment costs and amortized over time, consistent with the method of recognition for the related revenues.

The cumulative effect of the changes made to the January 1, 2018 balance of accumulated deficit on the Balance Sheet for the adoption of Topic 606 was $0.5 million as follows:


	Balance at		Adjustments		Balance at
	December 31,		Due to		January 1,
	2017		Topic 606		2018
Balance Sheet:
Assets
Prepaid expenses and other current assets	$	443,460	$	10,550	$	454,010
Prepaid expenses and other assets		1,115,972		45,529		1,161,501

Liabilities
Current portion of deferred revenue		3,605,199		105,511		3,710,710
Long-term deferred revenue		5,527,296		455,295		5,982,591

Stockholders’ equity (deficit)
Accumulated deficit		(113,413,311)		(504,727)		(113,918,038)

In accordance with the new revenue standard requirements, the impact of adoption on the Statement of Operations and Comprehensive Loss and Balance Sheet was as follows:


	For the Year ended December 31, 2018
			Balances
			Without
			Adoption of		Effect of Change
	As Reported		Topic 606		Higher/(Lower)
Statement of Operations and Comprehensive Loss:
Revenues	$	2,706,981	$	5,436,630	$	(2,729,649)

Costs and expenses
Cost of sales		121,391		394,356		(272,965)

Net loss		(53,135,859)		(50,679,175)		2,456,684


	December 31, 2018
			Balances
			Without
			Adoption of		Effect of Change
	As Reported		Topic 606		Higher/(Lower)
Balance Sheet:
Assets
Prepaid expenses and other current assets	$	219,057	$	519,057	$	(300,000)
Prepaid expenses and other assets		1,260,951		657,092		603,859

Liabilities
Current portion of deferred revenue		—		3,000,000		(3,000,000)
Long-term deferred revenue		8,071,920		2,033,333		6,038,587

Stockholders’ equity (deficit)
Accumulated deficit		(167,053,897)		(164,319,169)		2,734,728

Segment Data

Up until the fourth quarter of 2018, the Company managed, reported and evaluated its business in the following two segments: Pharmaceutical Products and Partnering and Licensing. These reportable operating segments were determined in accordance with the Company’s internal management structure, which was organized based on operating activities, the manner in which the Company organized segments for making operating decisions and assessing performance and the availability of separate financial results.

In the fourth quarter of 2018, due to significantly diminished activities pursuant to collaborations, the Company changed the way it manages and operates the reporting entity and modified the Company’s information system to produce financial information for the CODM to support the new structure. The changes required the Company to revise its segment reporting. Management reorganized its operations and reporting structure and began to manage its operations under its new segment structure, resulting in a single reportable segment. The financial statements were adjusted to reflect this change in segment reporting for all periods presented.

All long‑lived assets are domiciled within the United States and all revenues were earned within the United States.

Research and Development Expense

Research and development costs are expensed as incurred and include direct costs incurred to third parties related to the salaries of, and stock-based compensation for, personnel involved in research and development activities, contractor fees, grant expenses, administrative expenses and allocations of research-related overhead costs. Administrative expenses and research-related overhead costs included in research and development expense consist of allocations of facility and equipment lease charges, depreciation and amortization of assets and insurance directly related to research and development activities.

Patent Maintenance

Liquidia is responsible for all patent costs, past and future, associated with the preparation, filing, prosecution, issuance, maintenance, enforcement and defense of United States patent applications. Such costs are recorded as general and administrative expenses as incurred. To the extent that the Company’s licensees share these costs, such benefit is recorded as a reduction of the related expenses.

Stock-Based Compensation

The Company accounts for stock-based compensation under the provisions of ASC 718, Compensation — Stock Compensation (“ASC 718”), which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees and directors, including employee stock options, based on estimated fair values. ASC 718 requires companies to estimate the fair value of share-based awards on the grant date using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recorded as expense over the requisite service periods in the Company’s Statements of Operations and Comprehensive Loss.

The Company accounts for equity instruments issued to nonemployees in accordance with the provisions of ASC 505 50, Equity-Based Payments to Non-Employees, under which the stock-based compensation expense is recognized in the financial statements based on their grant date fair values. The Company values equity instruments, stock options and warrants for common stock granted to lenders and consultants using the Black-Scholes option-pricing model. The measurement of non-employee stock-based compensation is recognized as an expense over the term of the related financing or the period over which services are received.

Defined Contribution Retirement Plan

The Company maintains a defined contribution 401(k) retirement plan for its employees, pursuant to which employees who have completed sixty days of service may elect to contribute a portion of their compensation on a tax-deferred basis up to the maximum amount permitted by the Internal Revenue Code, as amended. The Company provides a 4% matching contribution to eligible employee contributions. Matching contributions are made subsequent to the year to which they relate. The Company’s matching contributions due were $377,623 and $365,988 and were included in Accrued Expenses in the accompanying Balance Sheets as of December 31, 2017 and 2018, respectively.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares adjusted for the dilutive effect of common equivalent shares outstanding during the period. Common stock equivalents consist of preferred stock, stock options and stock warrants. Net loss per share attributable to common stockholders is calculated using the two‑class method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities. The Company’s convertible preferred stock contains participating rights in any dividend paid by the Company and are deemed to be participating securities. Net loss attributable to common stockholders and participating preferred shares are allocated to each share on an as‑converted basis as if all of the earnings for the period had been distributed. The participating securities do not include a contractual obligation to share in the losses of the Company and are not included in the calculation of net loss per share in the periods that have a net loss. Common equivalent shares are excluded from the computation in periods in which they have an anti‑dilutive effect on net loss per share.

Diluted net loss per share is computed using the more dilutive of (a) the two‑class method or (b) the if‑converted method. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti‑dilutive. Diluted net loss per share is equivalent to basic net loss per share for all years presented herein because common stock equivalent shares from unexercised stock options, outstanding warrants, preferred stock and common shares expected to be issued under the Company’s employee stock purchase plan were anti‑dilutive. Due to their dilutive effect, the calculation of diluted net loss per share for the years ended December 31, 2017 and 2018 does not include the following common stock equivalent shares:


	2017	2018
Preferred Stock	4,542,665	—
Stock Options	497,329	1,658,112
Warrants	279,281	170,925
Total	5,319,275	1,829,037

For the year ended December 31, 2017, there were no reconciling items between basic and diluted net loss per share. For the year ended December 31, 2018 the only reconciling item between basic and diluted net loss per share is the impact of the common stock warrants that are included in the calculation of basic net loss per share since their exercise price is de minimis, but excluded from the calculation of diluted net loss per share since the impact of such warrants is antidilutive.

Fair Value of Financial Instruments

The carrying values of cash, accounts receivable, and accounts payable at December 31, 2017 and 2018 approximated fair value due to the short maturity of these instruments.

The Company’s valuation of financial instruments is based on a three‑tiered approach, which requires that fair value measurements be classified and disclosed in one of three tiers. The fair value hierarchy defines a three‑level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities;

Level 2 — Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly; and

Level 3 — Unobservable inputs for the asset and liability used to measure fair value, to the extent that observable inputs are not available.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables present the placement in the fair value hierarchy of financial liabilities measured at fair value as of December 31, 2017 and 2018:


			Significant
	Quoted Prices		Other
	in Active		Observable		Significant
	Markets		Inputs		Unobservable		Carrying
December 31, 2017	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Pacific Western Bank Tranche I note - LSA	$	—	$	2,512,301	$	—	$	2,488,572
Pacific Western Bank Tranche II note - LSA		—		2,845,194		—		2,820,382
Pacific Western Bank Tranche III note - LSA		—		3,793,644		—		3,760,509
UNC Promissory Note		—		2,257,684		—		2,257,684
Convertible notes		—		—		28,702,268		9,837,984
Warrant liabilities		—		—		2,462,859		2,462,859
Total	$	—	$	11,408,823	$	31,165,127	$	23,627,990


			Significant
	Quoted Prices		Other
	in Active		Observable		Significant
	Markets		Inputs		Unobservable		Carrying
December 31, 2018	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Pacific Western Bank note - A&R LSA	$	—	$	10,412,650	$	—	$	10,802,355
CSC build-to-suit equipment financing		—		1,311,135		—		1,142,194
Total	$	—	$	11,723,785	$	—	$	11,944,549

The fair value of debt was measured as the present value of the respective future cash outflows discounted at a current interest rate as of the year‑end date, taking into account the remaining term of liabilities.

Convertible Instruments

The Company has utilized various types of financing to fund its business needs, including convertible debt and convertible preferred stock, in some cases with corresponding warrants. The Company considered guidance within FASB ASC 470-20, Debt with Conversion and Other Options, (“ASC 470-20”), ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”), when accounting for the issuance of convertible securities. Additionally, the Company reviews the instruments to determine whether they are freestanding or contain an embedded derivative and, if so, whether they should be classified in permanent equity, mezzanine equity or as a liability at each reporting period until the amount is settled and reclassified into equity.

When multiple instruments are issued in a single transaction, the Company allocates total proceeds from the transaction among the individual freestanding instruments identified. The allocation is made after identifying all the freestanding instruments and the subsequent measurement basis for those instruments. The subsequent measurement basis determines how the proceeds are allocated. Generally, proceeds are allocated based on one of the following methods:

•Fair value method — The instrument being analyzed is allocated a portion of the proceeds equal to its fair value, with the remaining proceeds allocated to the other instruments as appropriate.

•Relative fair value method — The instrument being analyzed is allocated a portion of the proceeds based on the proportion of its fair value to the sum of the fair values of all the instruments covered in the allocation.

•Residual value method — The instrument being analyzed is allocated the remaining proceeds after an allocation is made to all other instruments covered in the allocation.

Generally, when there are multiple instruments issued in a single transaction that have different subsequent measurement bases, the proceeds from the transaction are first allocated to the instrument that is subsequently measured at fair value (i.e., instruments accounted for as derivative liabilities) at its issuance date fair value, with the residual proceeds allocated to the instrument not subsequently measured at fair value. In the event both instruments in the transaction are not subsequently measured at fair value (i.e., equity-classified instruments), the proceeds from the transaction are allocated to the freestanding instruments based on their respective fair values, using the relative fair value method.

After the proceeds are allocated to the freestanding instruments, resulting in an initial discount on the host contract, those instruments are further evaluated for embedded features (i.e., conversion options) that require bifurcation and separate accounting as a derivative financial instrument pursuant to ASC 815. Embedded derivatives are initially and subsequently measured at fair value. Under ASC 815, a portion of the proceeds received upon the issuance of the hybrid contract is allocated to the fair value of the derivative.

The Company accounts for convertible instruments in which it is determined that the embedded conversion options should not be bifurcated from their host instruments in accordance with ASC 470-20. Under ASC 470-20, the Company records, when necessary, discounts to convertible notes or convertible preferred stock for the intrinsic value of conversion options embedded in the convertible instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the convertible instrument, unless limited by the proceeds allocated to such instrument.

Warrant Liabilities

The Company has classified warrants to purchase shares of preferred stock as liabilities on its Balance Sheets as these warrants were freestanding financial instruments that will require the Company to issue convertible securities upon exercise. The warrants were initially recorded at fair value on date of grant, and were subsequently remeasured to fair value at each reporting period. Changes in fair value of the warrants are recognized as a component of other income (expense) in the Statements of Operations and Comprehensive Loss. In conjunction with the Company’s IPO, the warrants were converted to warrants for common stock. Following that conversion, these warrants no longer meet the criteria to be presented as a liability and have been reclassified to additional paid-in capital. The Company will no longer include the warrants as liabilities or recognize changes in their fair value on the Statements of Operations and Comprehensive Loss.

The Company used the Black-Scholes option-pricing model, which incorporates assumptions and estimates, to value the preferred stock warrants. The Company assessed these assumptions and estimates on a quarterly basis as additional information impacting the assumptions was obtained. Estimates and assumptions impacting the fair value measurement included the fair value per share of the underlying preferred stock, the remaining contractual term of the warrant, the risk-free interest rate, the expected dividend yield and the expected volatility of the price of the underlying preferred stock. The Company determined the fair value per share of the underlying preferred stock by taking into consideration the most recent sales of its convertible preferred stock, results obtained from third-party valuations and additional factors that were deemed relevant. The Company estimated its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrant. The risk-free interest rate was determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrant. Expected dividend yield was based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Embedded Derivatives

Embedded derivatives that are required to be bifurcated from the underlying instrument are accounted for and valued as a separate financial instrument. In conjunction with the Company’s convertible notes (see Note 11), embedded derivatives exist associated with the future consummation of a qualified financing event, as defined in the notes, and a subsequent discounted conversion of the instrument to capital stock. The embedded derivatives were bifurcated and classified as derivative liabilities on the Balance Sheets and separately adjusted to their fair values at the end of each reporting period. Changes in fair values of the derivative liabilities are recognized as a component of other income (expense) in the Statements of Operations and Comprehensive Loss. These embedded derivatives were eliminated upon conversion of the underlying convertible notes into Series D preferred stock, $0.001 par value per share (“Series D”) (see Note 3).

Issuance Costs Related to Equity and Debt

The Company allocates issuance costs between the individual freestanding instruments identified on the same basis as proceeds were allocated. Issuance costs associated with the issuance of stock or equity contracts (i.e., equity-classified warrants and convertible preferred stock) are recorded as a charge against the gross proceeds of the offering. Any issuance costs associated with the issuance of liability-classified warrants are expensed as incurred. Issuance costs associated with the issuance of debt (i.e., convertible debt) is recorded as a direct reduction of the carrying amount of the debt liability, but limited to the notional value of the debt. The Company accounts for debt as liabilities measured at amortized cost and amortizes the resulting debt discount to interest expense using the straight-line method over the expected term of the notes pursuant to ASC 835, Interest (“ASC 835”). To the extent that the reduction from issuance costs of the carrying amount of the debt liability would reduce the carrying amount below zero, such excess is recorded as interest expense.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such equity financings are consummated. After consummation of the equity financing, these costs were recorded in stockholders’ equity (deficit) as a reduction of proceeds generated as a result of the offering. As of December 31, 2017 and 2018 the Company recorded deferred offering costs relating to its financing activities of $125,000 and $110,365, respectively, which is included in Prepaid Expenses and Other Assets in the accompanying Balance Sheets.

Income Taxes

The asset and liability method is used in the Company’s accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. The Company records a valuation allowance against deferred tax assets when realization of the tax benefit is uncertain.

A valuation allowance is recorded, if necessary, to reduce net deferred taxes to their realizable values if management does not believe it is more likely than not that the net deferred tax assets will be realized.

The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted into law. This new law includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate from 35% to 21%, limitations on the deductibility of interest expense and executive compensation and the transition of U.S. international taxation from a worldwide system to a territorial tax system. For taxpayers with revenues over a certain threshold, the TCJA also limits interest expense deductions to 30% of taxable income before interest, depreciation and amortization from 2018 to 2021 and then taxable income before interest thereafter. The TCJA permits disallowed interest expense to be carried forward indefinitely. The Company calculated its best estimate of the impact of the TCJA in its income tax provision for the year ended December 31, 2017 in accordance with its understanding of the TCJA and guidance available at the time. The overall impact of the TCJA resulted in a decrease to the deferred tax assets and a corresponding decrease to the valuation allowance of $14.1 million. Using the guidance issued by the SEC staff in Staff Accounting Bulletin No. 118, the Company completed its accounting for the TCJA during the fourth quarter of 2018. No changes to the provisional amounts as of December 31, 2017 were recorded.

Recent Accounting Pronouncements

In January 2016, the FASB issued ASU 2016‑01, Financial Instruments — Overall (Subtopic 825‑10) — Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016‑01”). The provisions of ASU 2016‑01 make targeted improvements to enhance the reporting model for financial instruments to provide users of financial statements with more useful information, including certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The guidance was effective for public companies with annual periods and interim periods within those annual periods beginning after December 15, 2017, and will be effective for the Company for the year ending December 31, 2018. The Company adopted this standard effective January 1, 2018 and the adoption of this standard did not have a material impact on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016‑02, Leases (Topic 842) (“ASU 2016‑02”). The provisions of ASU 2016‑02 set out the 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. 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 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in a similar manner as under existing guidance for operating leases. ASU 2016‑02 supersedes the previous lease standard, Topic 840, Leases. The guidance is effective for public companies with annual periods and interim periods within those annual periods beginning after December 15, 2018, and will be effective for the Company for the year ending December 31, 2019. The Company’s implementation efforts are ongoing, including the installation of an enhanced technology solution, which will aid in determining the magnitude of the increases in assets and liabilities and their impact on the financial statements. The Company expects to recognize lease liabilities and corresponding right-of-use assets related to predominantly all of the future minimum lease payments required under all leases as disclosed in Note 10 in addition to the CSC build-to-suite equipment financing disclosed in Note 11. Upon implementation, the balance sheet effects of the new lease accounting standard will also impact other measures which are dependent upon asset or liability balances. The Company expects the impact of this implementation to be material to the financial statements.

In August 2016, the FASB issued ASU 2016‑15, Statement of Cash Flows (Topic 230) — Classification of Certain Cash Receipts and Cash Payments (“ASU 2016‑15”). The provisions of ASU 2016‑15 address eight specific cash flow issues and how those certain cash receipts and cash payments are presented and classified in the statement of cash flows under Topic 230, Statement of Cash Flows, and other Topics. The guidance is effective for public companies with annual periods and interim periods within those annual periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018 and the adoption of this standard did not have a material impact on the Company’s financial statements.

In May 2017, the FASB issued ASU 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. The standard is effective for interim and annual reporting periods beginning after December 15, 2017, with early adoption permitted. The Company adopted this standard effective January 1, 2018 and the adoption of this standard did not have a material impact on the Company’s financial statements.

In July 2017, the FASB issued ASU 2017‑11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I of this update addresses the complexity of accounting for certain financial instruments with “down round” features. Down round features are features of certain equity‑linked instruments (or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part II of this update addresses the difficulty of navigating Topic 480, Distinguishing Liabilities from Equity, because of the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is evaluating the effect that ASU 2017‑11 will have on its financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820) (“ASU 2018‑13”). The provisions of ASU 2018‑13 set out modifications to the disclosure requirements regarding fair value measurements. The modifications removed certain disclosure requirements regarding transfers between levels of the fair value hierarchy and valuation processes for Level 3 fair value measurements. In addition, the modifications added requirements to disclose changes in unrealized gains and losses for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The guidance is effective for public companies with annual periods and interim periods within those annual periods beginning after December 15, 2019, and will be effective for the Company for the year ending December 31, 2020. The Company is currently evaluating the impact that the implementation of this standard will have on the Company’s financial statements.

In October 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606 ("ASU 2018-17"). The provisions of ASU 2018-18 clarify when certain transactions between collaborative arrangement participants should be accounted for under ASC 606 and incorporates unit-of-account guidance consistent with ASC 606 to aid in this determination. The guidance is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019, with early adoption permitted, and is effective for the Company for the year ending December 31, 2020. The Company is currently evaluating the impact that the implementation of this standard will have on the Company's financial statements.

Common and Preferred Stock	12 Months Ended
Common and Preferred Stock	Dec. 31, 2018
Common and Preferred Stock
Common and Preferred Stock	3. Common and Preferred Stock Authorized Capital As of December 31, 2018, in conjunction with the IPO and the reverse stock split, the authorized capital of the Company was decreased to consist of 50,000,000 shares of capital stock, $0.001 par value per share, of which 40,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. As of December 31, 2018 the Company had reserved a total of 422,640 shares of common stock for issuance under the Liquidia Technologies, Inc. Stock Option Plan, as amended (the “2004 Plan”), 1,011,138 shares of common stock for issuance under the Liquidia Technologies, Inc. 2016 Equity Incentive Plan, as amended (the “2016 Plan”), and 1,600,000 shares of common stock for issuance under the Liquidia Technologies, Inc. 2018 Long-Term Incentive Plan (the “2018 Plan”). During 2017, the Company issued an aggregate of $27.4 million in principal of convertible promissory notes (see Note 11). The convertible notes had an original maturity date of December 31, 2018, as amended, and bore interest at eight percent (8%) per annum. Interest was earned daily and computed on the actual number of days elapsed until all the amounts under the notes have been paid in full. The convertible notes carried multiple conversion scenarios into equity with various discounts. In February 2018, the Company received proceeds of $25.6 million in exchange for the corresponding sale of Series D and related rights offering to new and existing investors. The applicable issue price per share for the Series D was $0.59808, subject to adjustment as provided in the certificate of incorporation. In addition, all outstanding convertible notes, plus accrued interest, totaling $28.9 million were converted into Series D at the same price per share without a discount. Outstanding warrants to purchase shares of Series C-1 preferred stock, $0.001 par value per share (“Series C-1”), were converted to warrants to purchase the equivalent number of shares of Series D. All references herein to these warrants refer to them as warrants to purchase Series D. In total, 91,147,482 shares of Series D were issued. Each share of Series D was voting and was convertible at any time into a share of common stock with such conversion ratio subject to future adjustment. Conversion was automatic upon a qualified financing, as defined in the certificate of incorporation. Each series of preferred stock had anti‑dilution protection in the event of a dilutive issuance, as defined in the certificate of incorporation. The Series D bore an 8% per annum noncumulative dividend ($0.0478 per share of Series D) when and if declared. The Series D had a liquidation preference equal to the aggregate of the proceeds and the note conversions, or $54.5 million plus accrued but unpaid dividends, after which holders of Series D participate with all other stockholders in the remainder of liquidation proceeds on an as converted basis. The Series D was senior to all other series of preferred stock. In the third quarter of 2018, the Company closed the initial public offering of 4,833,099 shares of common stock, including the underwriters’ partial exercise of their over-allotment option in connection therewith, which resulted in aggregate net proceeds of $47.3 million, after underwriting discounts and the payment of other offering expenses. In conjunction with the Company’s IPO, all outstanding shares of convertible preferred stock were converted into an aggregate of 9,948,207 shares of common stock. Common Stock Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the holders of the common stock shall be entitled to receive that portion of the remaining funds to be distributed to the stockholders, subject to the liquidation preferences of any outstanding preferred stock, if any. Such funds shall be paid to the holders of common stock on the basis of the number of shares so held by each of them. The Class B non-voting common stock, $0.001 par value per share, was converted into shares of voting common stock in conjunction with the Company’s IPO. Warrants In connection with historical private placement offerings, the Company issued warrants to purchase its preferred stock with an exercise term of ten years from the date of issuance. Pursuant to the terms of the warrants, upon the conversion of the preferred stock underlying the warrant into common stock, the warrants automatically become exercisable for common stock-based upon the conversion ratio of the underlying preferred stock. As of December 31, 2017, there were outstanding warrants for 123,215 shares of Series B that were convertible into warrants for 14,663 shares of common stock at the same time as all outstanding shares of Series B were converted to common stock. These Series B warrants had an exercise price of $3.56 per share and expired on March 28, 2018. Upon closing of the Series D financing, the Company had warrants outstanding to purchase 3,698,128 shares of Series D. In conjunction with the IPO, these warrants were automatically converted into warrants to purchase 219,761 shares of common stock. During the year ended December 31, 2018, 48,836 warrants were exercised resulting in 170,925 warrants outstanding as of December 31, 2018. The exercise price of these warrants is $0.0168 per share.

Stock Options

12 Months Ended

Dec. 31, 2018

Stock Options

Stock Options

4. Stock Options

In November 2004, the Board of Directors adopted, and the stockholders approved, the 2004 Plan to create an additional incentive for employees, directors, consultants and advisors. The 2004 Plan authorized the issuance of stock options to be granted as incentive stock options along with nonqualified stock options, restricted stock and other stock‑based awards. The Board of Directors determines the exercise price of all options granted. The options vest based on terms provided for in the individual stock option agreements issued pursuant to the 2004 Plan. Options generally vest on a monthly basis over a period of up to 4 years and have a contractual life of ten years. The 2016 Plan is the successor to the 2004 Plan. The terms of the 2016 Plan are similar to the 2004 Plan. The 2016 Plan provides for accelerated vesting under certain change of control transactions.

On July 19, 2018, in conjunction with the Company’s IPO, the stockholders approved the 2018 Plan. A total of 1,600,000 shares of the Company’s common stock was initially authorized and reserved for issuance under the 2018 Plan. This reserve will automatically increase on January 1, 2019 and each subsequent anniversary through 2028, by an amount equal to the smaller of (a) 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or (b) an amount determined by the Board of Directors. In addition to stock options, the 2018 Plan provides for the granting of stock appreciation rights, stock awards, stock units, and other stock-based awards. The 2018 Plan provides for accelerated vesting under certain change of control transactions.

Determining the appropriate fair value model and the related assumptions requires judgment. The fair value of each option grant is estimated using a Black‑Scholes option-pricing model. The following table summarizes the assumptions used for estimating the fair value of stock options granted during:


	Year ended
	December 31,
	2017			2018
Expected dividend yield		—	%		—	%
Risk-free interest rate		1.34% - 1.99	%		2.67% - 3.01	%
Volatility		69% - 100	%		78% - 99	%
Expected life		6.25	years		6.25	years
Weighted-average fair value per share	$	13.97		$	7.25

The Company considers many factors when estimating expected forfeitures, including the employee or consultant class and historical experience. The Company estimates volatility based upon the identification of similar public entities for which option price information is available to consider the historical, expected or implied volatility of those entities’ share prices in estimating the Company’s expected volatility. The expected term of options and warrants granted represents the period that options and warrants granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option and warrant is based on the yield of the U.S. Treasury securities at the time of grant. The Company amortizes the fair value, net of estimated forfeitures, over the remaining vesting term on a straight-line basis.

The following table summarizes stock option activity under the 2004 Plan, the 2016 Plan, and the 2018 Plan:


			Weighted
	Shares		Average
	Available	Options	Exercise
	for Issuance	Outstanding	Price
Outstanding at December 31, 2016	45,275	728,344	$	4.38
Shares reserved for future issuance	—	—	$	—
Granted	(14,083)	14,083	$	20.36
Exercised	—	(15,169)	$	5.72
Cancelled/expired	—	(58,942)	$	2.19
Outstanding at December 31, 2017	31,192	668,316	$	4.54
Removal of partial options resulting from reverse split	—	(323)
Shares reserved for future issuance for 2016 Plan	979,446	—
Shares reserved for future issuance for 2018 Plan	1,600,000	—
Options granted	(1,231,541)	1,231,541	$	10.22
RSU's granted	(185,768)	—	$	11.04
Exercised	—	(119,793)	$	4.15
Cancelled/expired from 2004 Plan	—	(70,298)	$	7.39
Cancelled/expired from 2016 Plan	—	(51,331)	$	8.68
Outstanding at December 31, 2018	1,193,329	1,658,112	$	8.76

The following summarizes certain information about stock options vested and expected to vest as of December 31, 2018:


		Weighted
		Average
		Remaining	Weighted
	Number	Contractual	Average
	of	Life	Exercise
	Options	(In Years)	Price
Outstanding and expected to vest	1,442,803	8.09	$	8.49
Vested and exercisable	408,693	5.36	$	4.62

The weighted‑average grant date price per share was $20.36 and $10.22 and per share for the shares issued during the years ended December 31, 2017 and 2018, respectively.

During the year ended December 31, 2018, 119,793 stock options were exercised for the purchase of common stock for total cash proceeds of $334,711. The intrinsic value for the options exercised was $2,097,888.

As of December 31, 2018, the intrinsic value of options outstanding and exercisable was $21,397,470. The weighted average remaining contractual term of options outstanding and exercisable is 8.25 years as of December 31, 2018.

During the years ended December 31, 2017 and 2018, stock-based compensation expense for employee stock option awards totaled $514,092 and $2,195,075, respectively. As of December 31, 2018, there was $7,547,104 of total unrecognized compensation cost related to non-vested stock option grants, which is expected to be recognized over a weighted average period of 2.99 years.

During 2018, the Board of Directors approved grants of 185,768 non-performance based restricted stock units (“RSUs”). The weighted average fair value of such RSUs was $11.04 per share for the year ended December 31, 2018. RSUs represent the right to receive shares of common stock of the Company at the end of a specified time period. The RSUs vest over a four-year period similar to stock options. RSUs can only be settled in shares of the Company’s common stock. The Company also estimates forfeitures on RSUs and considers many factors when doing so, including the employee or consultant class and historical experience. RSUs are valued at the date of grant and recognized in compensation expense, net of estimated forfeitures, over the vesting period.

On February 6, 2019, the Board of Directors approved stock option grants to various employees in the aggregate amount of 395,408 shares of common stock underlying such grants, with an exercise price of $14.20 per share. In addition, on January 1, 2019, the number of shares of common stock available for issuance under the 2018 Plan automatically increased from 1,600,000 to 2,220,778 pursuant to the evergreen provision contained in the 2018 Plan.

Stock Option Modification

During the year ended December 31, 2018, certain stock options were modified pursuant to a separation agreement with one of the Company’s former Senior Vice Presidents. A total of 20,383 options had their term extended to include the term of the post separation consulting agreement of up to two months, resulting in additional stock option expense of $17,497 for the year ended December 31, 2018.

License Agreements	12 Months Ended
License Agreements	Dec. 31, 2018
License Agreements
License Agreements	5. License Agreements Liquidia performs research under a license agreement with The University of North Carolina at Chapel Hill (“UNC”) as amended to date (the “UNC Letter Agreement”). As part of the UNC Letter Agreement, Liquidia holds an exclusive license to certain research and development technologies and processes in various stages of patent pursuit, for use in its research and development and commercial activities, with a term until the expiration date of the last to expire patent subject to the UNC Letter Agreement, subject to industry standard diligence compliance. Under the UNC Letter Agreement, Liquidia is obligated to pay UNC royalties equal to a low single‑digit percentage of all net sales of Liquidia drug products whose manufacture, use or sale includes any use of the technology or patent rights covered by the UNC Letter Agreement. Liquidia may grant sublicenses of UNC licensed intellectual property in return for specified payments based on a percentage of any fee, royalty or other consideration received. In connection with the development and collaboration agreements (see Note 6) entered into with GSK in June 2012, Liquidia paid sublicense fees to UNC and amortized each into research and development expense over the period of specific performance with GSK. Also, in connection with that sublicense fee, Liquidia agreed to issue $1.2 million of Series C-1 preferred shares to UNC under the same terms provided to other Series C-1 holders and an unsecured promissory note for $0.6 million. Refer to Note 11 for additional details on the unsecured promissory note. In 2012 and 2015, GSK Vaccines and GSK Inhaled made up-front payments to the Company of $14.0 million and $20.0 million combined, respectively. On such payments, the Company incurred sublicense fees to UNC of $2.8 million and $2.5 million, respectively, which were amortized into Cost of Sales in the accompanying Statements of Operations and Comprehensive Loss on a straight-line basis over the corresponding periods of revenue recognition of the related payments. In June 2016, Liquidia entered into an amendment to the UNC Letter Agreement, whereby the date for completion of a milestone requiring launch of a commercial product was extended from January 1, 2018 to December 31, 2020. In addition, a 2016 letter agreement was accepted by UNC that detailed Liquidia’s efforts in satisfying the obligations of two milestones related to developing and commercializing the licensed technology under the UNC Letter Agreement as of December 31, 2015, and accepted such efforts as satisfying the two milestones dated January 1, 2016. The 2016 letter agreement also included extending the maturity date of the promissory note (see Note 11) to December 31, 2017 and payment of an additional $1.5 million fee in exchange for modifying these progress milestones required under the UNC Letter Agreement. In December 2017, the Company executed an amendment to the UNC Letter Agreement that extended the maturity date of the promissory note from December 31, 2017 to June 30, 2018. In June 2018, the Company executed an amendment to the UNC Promissory Note that extended the maturity date of the promissory note from June 30, 2018 to December 31, 2018 with the potential for acceleration depending on the proceeds of the IPO. The UNC Letter Agreement was repaid in full and extinguished in 2018 (see Note 11).

Revenue From Contracts With Customers

12 Months Ended

Dec. 31, 2018

Revenue From Contracts With Customers

Revenue From Contracts With Customers

6. Revenue From Contracts With Customers

The Company derives revenues primarily from licensing its proprietary PRINT technology and from performing research and development services. Revenues are recognized as services are performed in an amount that reflects the consideration we expect to be entitled to in exchange for those services and technology.

In September 2015, GSK Inhaled exercised the option to permanently license the technology for a non‑refundable payment to the Company of $15.0 million. Pursuant to the license provisions of the collaboration agreement, GSK Inhaled is potentially required to pay Liquidia for certain milestones reached in addition to tiered royalties on the worldwide sales of the licensed products at percentages ranging from the mid‑single digits to low-single digits depending on the total number of products developed and other royalty step-down events with a fixed low-single digit royalty floor. On July 20, 2018, GSK notified the Company of its plans to discontinue development of the inhaled antiviral for viral exacerbations in chronic obstructive pulmonary disease under the GSK Inhaled collaboration agreement after completion of the related Phase 1 clinical trial. The result of this change will likely be a delay in resumption of research services from when previously estimated but no change in estimate with regard to estimated progress under the collaboration. Therefore, there was no impact on the financial statements for the year ended December 31, 2018.

In June 2016, the Company entered into a development and license agreement with G&W Laboratories (“G&W”) to develop multiple products for topical delivery in dermatology using the Company’s PRINT technology (the “G&W Agreement”). The first non-refundable up-front fee of $1.0 million was received in June 2016. Research and development services commenced in July 2016 on the first program pursuant to this agreement. In April 2018, the Company and G&W mutually agreed to terminate the G&W Agreement. As a result, during the second quarter of 2018, the remaining unamortized balances in the related deferred revenue and deferred sublicense payments of $0.9 million and $0.1 million, respectively, were fully recorded as Revenues and Cost of Sales, respectively, in the accompanying Statement of Operations and Comprehensive Loss for the year ended December 31, 2018.

The Company’s research, development and licensing agreements provide for multiple promised goods and services to be satisfied by the Company and include a license to the Company’s technology in a particular field of study, participation in collaboration committees, performance of certain research and development services and obligations for certain manufacturing services. The transaction price for these contracts includes non-refundable fees and fees for research and development services. Non-refundable up-front fees which may include, for example, an initial payment upon effectiveness of the contractual relationship or payment to secure a right for a future license, are recorded as deferred revenue and recognized into revenue over time as the Company provides the research services under the contract required to advance the products to the point where the Company is able to transfer control of the licensed technology to the customer (‘‘Technology Transfer’’). The contract consideration may also include additional non-refundable payments due to the Company based on the achievement of research, development, regulatory or commercialization milestone events. In agreements involving multiple goods or services promised to be transferred to customers, the Company must assess, at the inception of the contract, whether each promise represents a separate performance obligation (i.e., is "distinct"), or whether such promises should be combined as a single performance obligation. As these goods and services are considered to be highly interrelated, they were considered to represent a single, combined performance obligation. The Company includes an estimate of the probable amount of milestone payments to which it will be entitled in the transaction price. The estimate requires evaluation of factors which are outside of the Company’s control and significantly limit the Company’s ability to achieve the remaining milestone payments. Therefore, the Company has not included any future milestone payments in the transaction price allocated to research, development and licensing agreements as of December 31, 2018. The Company revises the transaction price to include milestone payments once the specific milestone achievement is not considered to be subject to a significant reversal of revenue. At that time, the estimated transaction price is adjusted and a cumulative catch-up adjustment is recorded to adjust the amount of revenue to be recognized from the license inception to the date the milestone was deemed probable of achievement. The milestone is included with other non-refundable up-front fees and recognized into revenue over time as the Company continues to provide services under the contract prior to the Company’s Technology Transfer. The amount of revenue recognized is based on the proportion of total research services performed to date to the expected services to be provided until Technology Transfer is expected to occur.

The estimate of the research services to be provided prior to the Technology Transfer requires significant judgment to evaluate assumptions regarding the level of effort required for the Company to have performed sufficient obligations for the customer to be able to utilize the licensed technology without requiring further services from the Company. If the estimated level of effort changes, the remaining deferred revenue is recognized over the revised period in which the expected research services required to achieve Technology Transfer. Changes in estimates occur for a variety of reasons, including but not limited to (i) research and development acceleration or delays, (ii) customer prioritization of research projects, or (iii) results of research and development activities. The Company recognizes the consideration expected to be received for research and development services, which are primarily billed quarterly in arrears on a time and materials basis, as the services are performed and collection is reasonably assured.

Royalties related to product sales will be recognized as revenue when the sale occurs since payments relate directly to products that will have been fully developed and for which the Company will have satisfied all of its performance obligations.

The following tables represent a disaggregation of revenue by each significant research, development and licensing agreement and payment type for the years ended December 31, 2017 and 2018:


	2017 Revenue Recognized From
	Non-Refundable Payments				Research and
			Up-front		Development
Under Topic 605	Milestones		Payments		Services		Total
GSK Inhaled	$	—	$	3,000,000	$	3,114,311	$	6,114,311
Other		—		343,216		800,596		1,143,812
Total	$	—	$	3,343,216	$	3,914,907	$	7,258,123


	2018 Revenue Recognized From
	Non-Refundable Payments				Research and
			Up-front		Development
Under Topic 606	Milestones		Payments		Services		Total
GSK Inhaled	$	45,058	$	225,293	$	168,000	$	438,351
Other		—		943,419		1,325,211		2,268,630
Total	$	45,058	$	1,168,712	$	1,493,211	$	2,706,981

Deferred Revenue

The Company recognized $3.3 million of revenue during the year ended December 31, 2017 under ASC 605, and $1.2 million of revenue from non-refundable payments under Topic 606 during the year ended December 31, 2018, which was included in deferred revenue balances at the beginning of these respective periods.

Transaction Price Allocated to the Remaining Performance Obligations

In December 2017, the Company was made aware of delays and reduced requirements and budget for support for its GSK and G&W Laboratories collaborators and revised its estimate of the remaining estimated period of the performance obligations. As a result, approximately $3.0 million of deferred revenue previously considered current was reclassified to long-term deferred revenue as it was not expected to be recognized within 12 months. As of December 31, 2018, approximately $8.0 million of revenue is expected to be recognized from remaining performance obligations for non-refundable payments. The Company expects to recognize revenue on approximately 0%, 3% and 11% of these remaining performance obligations in 2019, 2020 and 2021 respectively, with the balance recognized thereafter. Revenue from remaining performance obligations for research and development services as of December 31, 2018 was not material.

Deferred Sublicense Payments

Sublicense payments to UNC are considered direct and incremental fulfillment costs of the Company’s research, development and licensing agreements as the PRINT technology resources used by the Company are continually researched by UNC. These costs are deferred and then amortized into Cost of Sales over the same estimated period of benefit as the period of the underlying revenue recognition. As of December 31, 2017, the balances of these unamortized payments under ASC 605 included in current and long-term prepaid expenses and other assets was $319,758 and $552,730, respectively. As of December 31, 2018, the balances of these unamortized payments included in current and long-term prepaid expenses and other assets was $0 and $807,192, respectively.

Property, Plant and Equipment

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment

Property, Plant and Equipment

7. Property, Plant and Equipment

Property, plant and equipment consisted of the following:


	2017		2018
Lab and build-to-suit equipment	$	3,847,546	$	6,123,194
Grant equipment		1,143,701		1,143,701
Office equipment		123,655		130,460
Furniture and fixtures		205,051		205,051
Computer equipment		677,569		799,515
Leasehold improvements		7,218,687		8,878,361
Construction-in-progress		2,830,407		155,148
Total property, plant and equipment		16,046,616		17,435,430
Accumulated depreciation		(7,803,604)		(9,304,722)
Property, plant and equipment, net	$	8,243,012	$	8,130,708

The Company recorded depreciation expense of $931,931 and $1,543,667 for the years ended December 31, 2017 and 2018, respectively. Maintenance and repairs are expensed as incurred and were $244,885 and $153,278, respectively, for the years ended December 31, 2017 and 2018.

In December 2016, the Company executed an agreement with a commercial manufacturer to build a PRINT particle fabrication line for the production in support of its products. The ultimate cost was approximately $1.6 million. The Company financed this transaction with a third-party vendor, CSC Leasing Company (“CSC”). CSC made payments to the manufacturer per the payment schedule in the agreement as the asset was fabricated. CSC charged the Company a monthly lease rate on the scheduled payments made to the manufacturer as interim financing costs until the asset was completed and placed in service. Upon completion of fabrication, the lease commenced on March 1, 2018.

In accordance with ASC 840, Leases, for build‑to‑suit arrangements where the Company is involved in the fabrication of an asset prior to the commencement of the ultimate financing or takes some level of construction risk, the Company is considered the accounting owner of the assets during the fabrication period. Accordingly, during the fabrication phase, the Company recorded a construction-in-progress asset within Property, Plant and Equipment and a corresponding deferred financing obligation liability for contributions by CSC toward fabrication. Upon completion of the fabrication in March 2018, since the Company maintained substantially all of the risk and rewards of ownership of the asset, the Company recorded the transaction as a financing, continuing to record the asset and reclassifying the deferred financing obligation to debt. As of December 31, 2017, $1,341,810 was recorded in construction-in-progress with an equal deferred financing obligation. As of December 31, 2018, the net book value of the build-to-suit asset was $1,422,268 and $1,142,194 was also recorded as long-term debt (see Note 11).

The following table details the activity of Construction in Progress (“CIP”) in 2017 and 2018 and and the associated transfer to Leasehold Improvements and Lab Equipment when the assets were placed in service:


	Leasehold		Build-to-suit		Lab
	Improvements		Equipment		Equipment		Total
Balance as of December 31, 2016	$	337,255	$	—	$	—	$	337,255
Add: Purchases related to CIP		2,298,714		1,583,054		39,246		3,921,014
Less: Transfer due to placed in service		(1,427,862)		—		—		(1,427,862)
Balance as of December 31, 2017		1,208,107		1,583,054		39,246		2,830,407
Add: Purchases related to CIP		425,438		82,687		114,102		622,227
Less: Transfer due to placed in service		(1,570,194)		(1,665,741)		(61,551)		(3,297,486)
Balance as of December 31, 2018	$	63,351	$	—	$	91,797	$	155,148

The Construction in Progress balance includes $57,625 and $3,925 of capitalized interest costs for the years ended December 31, 2017 and 2018, respectively.

Income Taxes

12 Months Ended

Dec. 31, 2018

Income Taxes

Income Taxes

8. Income Taxes

No provision for federal and state income tax expense has been recorded for the years ended December 31, 2017 and 2018 due to the valuation allowance recorded against the net deferred tax asset and recurring losses.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31, 2017 and 2018:


	2017		2018
Non-current deferred income tax assets:
Tax loss carryforwards	$	22,274,378	$	30,239,898
Deferred revenue		2,098,191		1,856,507
Research and development credits		2,382,047		2,382,047
Stock-based compensation		277,948		489,694
Bad debt		11,053		—
Compensation		9,766		431,649
Fixed assets		63,570		160,784
Patent amortization		106,622		97,942
Other		768,936		669,151
Valuation allowance		(27,992,511)		(36,327,672)
Total non-current deferred income tax assets	$	—	$	—

At December 31, 2017 and 2018, the Company established a full valuation allowance against its net deferred tax assets since, at the time, the Company could not assert that it was more likely than not that its deferred tax assets would be realized. As a result, there was an increase in the valuation allowance in 2018 of $8,335,161.

At December 31, 2018, the Company had federal and state income tax loss carryforwards of $97,268,927 and $132,387,480, respectively, which begin to expire in 2024 for federal purposes and in 2019 for state purposes. At December 31, 2018, the Company had federal and state income tax loss carryforwards of $34,183,499 and $293,910, respectively, which carryforward indefinitely. In addition, the Company has tax credit carryforwards for federal tax purposes of $2,382,047 as of December 31, 2018, which begin to expire in 2026. The utilization of the net operating loss and tax credit carryforwards to reduce future income taxes will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the loss and credit carryforwards.

On December 22, 2017, the Tax Cuts and Jobs Act (the "TCJA") was enacted into law. This new law includes significant changes to the U.S. corporate income tax system, including a permanent reduction in the corporate income tax rate from 35% to 21%, limitations on the deductibility of interest expense and executive compensation and the transition of U.S. international taxation from a worldwide system to a territorial tax system. For taxpayers with revenues over a certain threshold, the TCJA also limits interest expense deductions to 30% of taxable income before interest, depreciation and amortization from 2018 to 2021 and then taxable income before interest thereafter. The TCJA permits disallowed interest expense to be carried forward indefinitely. The Company calculated its best estimate of the impact of the TCJA in its income tax provision for the year ended December 31, 2017 in accordance with its understanding of the TCJA and guidance available at the time. The overall impact of the TCJA resulted in a decrease to the deferred tax assets and a corresponding decrease to the valuation allowance of $14.1 million. The Company completed its accounting for the TCJA during the fourth quarter of 2018. No changes to the provisional amounts as of December 31, 2017 were recorded.

The Internal Revenue Code of 1986, as amended, contains provisions which limit the ability to utilize the net operating loss and tax credit carryforwards in the case of certain events, including significant changes in ownership interests. If the Company’s net operating loss and tax credit carryforwards are limited, and the Company has taxable income which exceeds the permissible yearly net operating loss and tax credit carryforwards, the Company would incur a federal income tax liability even though net operating loss and tax credit carryforwards would be available in future years.

The reasons for the difference between actual income tax expense for the years ended December 31, 2017 and 2018 and the amount computed by applying the statutory federal income tax rate to income before income tax are as follows:


	2017				2018
			% of Pretax				% of Pretax
	Amount		Earnings		Amount		Earnings
Income tax benefit at statutory rate	$	(9,912,442)	34.0	%	$	(11,158,530)	21.0	%
State income taxes, net of federal tax benefit		(581,901)	2.0	%		(1,062,492)	2.0
Non-deductible expenses		12,757	(0.1)	%		6,810	—
Stock-based compensation		153,033	(0.5)	%		10,925	—
Non-deductible interest expense		3,795,060	(13.0)	%		4,074,501	(7.7)
Derivative and warrant fair value adjustments		(4,040,646)	13.9	%		(63,873)	0.1
Change in federal rate		14,113,550	(48.4)	%		—	—
Change in state rate		371,138	(1.3)	%		(2,842)	—
Other		24,235	(0.1)	%		(139,660)	0.3
Change in valuation allowance		(3,934,784)	13.5	%		8,335,161	(15.7)
Provision for income taxes	$	—	0.0	%	$	—	0.0	%

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. As of December 31, 2018, the Company had no unrecognized tax benefits. The Company’s policy for recording interest and penalties related to uncertain tax provisions is to record them as a component of the provision for income taxes. The Company did not have any accrued interest or penalties associated with any unrecognized tax positions as of December 31, 2017 and 2018, and there were no such interest or penalties recognized during the years ended December 31, 2017 and 2018.

The Company has all tax years open to examination by federal tax and state tax jurisdictions. No income tax returns are currently under examination by taxing authorities.

Related Party Transactions	12 Months Ended
Related Party Transactions	Dec. 31, 2018
Related Party Transactions
Related Party Transactions	9. Related‑Party Transactions In 2016 the Company’s Chief Executive Officer entered into a loan agreement with the Company to finance the exercise of stock options to purchase 29,713 shares of common stock for $94,271, which loan bore interest at 1.00% per annum. The balance of the note reeivable at the beginning of 2017 was $55,000, which was repaid in full in 2017. For shared services provided by Liquidia to Envisia, Liquidia recorded $105,623 and $0, respectively, for sharing of patent costs as a reduction of Research and Development Expenses in the accompanying Statements of Operations and Comprehensive Loss for the years ended December 31, 2017 and 2018, respectively. In March 2017, the license related to the Otic field, along with other intellectual property rights, as defined, was purchased back by the Company from Envisia in exchange for 75,000 shares of its Envisia common stock.

Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies

Commitments and Contingencies

10. Commitments and Contingencies

Operating Leases

The Company conducts its operations from leased facilities in Morrisville, North Carolina, the leases for which expire in 2026. The leases are for general office, laboratory, research and development and light manufacturing space. The lease agreements require the Company to pay property taxes, insurance, common area expenses and maintenance costs.

In November 2014 and November 2015, the Company executed the first and second extension period clauses, respectively, resulting in additional months to the lease for the related premises extending until October 2022. As part of these extensions, the Company received tenant allowances of $228,973 and $392,020, respectively, for expansion of laboratory and office space.

In January 2017, the Company signed a second extension to the lease of its primary building for an additional 48 months expiring October 31, 2026. A tenant allowance of approximately $2,000,000 was also made available for use to partially fund the expansion and build out of the primary building. This allowance was fully utilized as of December 31, 2018.

These allowance amounts were recorded as a long‑term deferred rent liability and amortized as a reduction in rent expense over the remaining term of the lease. The balance of all unamortized deferred rent and allowances totaled $2,881,180 and $2,674,683 as of December 31, 2017 and 2018, respectively.

In November 2018, the Company amended the lease of its primary building to expand by 8,264 additional square footage expiring October 31, 2026 in exchange for terminating the Company’s other lease with the same landlord for 4,400 noncontiguous square feet. A tenant allowance of approximately $1.0 million was also made available for use to help fund the build out related to the expansion of the primary building lease. The incremental rent over the terminated lease for the first 12 months of this lease expansion amounts to $0.1 million, subject to lease escalation in subsequent periods.

The Company also leases copier equipment under an operating lease, which expires in 2019.

As of December 31, 2018, future minimum lease payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year were as follows:


2019	$	1,077,532
2020		1,168,710
2021		1,203,658
2022		1,239,885
2023		1,276,356
Thereafter		3,818,795
Total	$	9,784,936

Rent expense, including other facility expenses, for the years ended December 31, 2017 and 2018 was $1,046,721 and $953,733, respectively.

Capital Leases

The Company leases specialized lab equipment under leases classified as capital leases. The related capitalized assets are amortized on a straight‑line basis over the estimated useful life of the asset. The interest rates related to these lease obligations range from 0.2% to 12.2%.

The following table shows the future minimum lease payments under the capital leases by year and the present value of the minimum lease payments:


Year ending December 31:
2019	$	464,797
2020		354,739
2021		33,774
Thereafter		—
Total minimum lease payments		853,310
Less: Amount representing interest		(24,525)
Present value of minimum lease payments	$	828,785

The net book value of assets under capital leases was $2,399,634 as of December 31, 2018. At December 31, 2018, the present value of minimum lease payments due within one year was $452,703.

Other

In March 2012, the Company entered into an agreement, as amended, with Chasm Technologies, Inc. for manufacturing consulting services related to the Company’s manufacturing capabilities during the term of the agreement. As future contingent consideration under the agreement, the Company agreed to pay $400,000 related to the timing of the Company’s first Phase 3 clinical trial which commenced site initiation in December 2017. The consideration of $400,000 is comprised of initial consideration of $20,000 paid in 2017, $80,000 to be paid upon first dosing of the first patient in the Phase 3 clinical trial, and $300,000 due no later than December 31, 2018. In addition, the Company also agreed to pay future contingent royalties on net sales totaling no more than $1,500,000. As of December 31, 2017 and 2018, $380,000 and $0, respectively, was recorded as Current Liabilities in the accompanying Balance Sheets.

In December 2017, GSK Inhaled made the Company aware of its modified plans under the GSK Inhaled Collaboration and Option Agreement, and the reduced requirement and budget for Liquidia support, commensurate with its research and development plans related to PRINT effective March 31, 2018. As a result, in December 2017, the Company committed to a plan to reduce its workforce which was communicated to the workforce and completed the plan in January 2018. The total employee severance expense paid for the plan was $404,407, which was recorded in Research and Development Expense in the accompanying Statements of Operations and Comprehensive Loss for the year ended December 31, 2018.

In June 2017, the Company was served with a lawsuit filed by Allergan, Inc., in the United States District Court for the Central District of California, naming Liquidia and Envisia as defendants. The lawsuit alleged that Envisia’s development efforts of one of its product candidates misused Allergan confidential information. The Company’s involvement results from its possibly related activities that occurred prior to November 8, 2013, the date of formation of Envisia. In October 2017, the Company settled the litigation with Allergan, Inc., with no financial payments due from the Company or other consideration that materially affects the operation of the Company. There was no accrual for this in the Balance Sheets as of December 31, 2017 and 2018.

Long Term Debt

12 Months Ended

Dec. 31, 2018

Long Term Debt

Long Term Debt

11. Long‑Term Debt

Long‑term debt consisted of the following as of:


		December 31,
	Maturity Date	2017		2018
Pacific Western Bank notes - LSA		$	9,069,463	$	—
Pacific Western Bank note - A&R LSA	October 25, 2022		—		10,802,355
UNC Promissory Note	December 31, 2018		2,257,684		—
Convertible notes, net of discounts	December 31, 2018		9,837,984		—
CSC build-to-suit equipment financing, net of discount	February 28, 2021		—		1,142,194
Less current portion			(15,608,349)		(316,906)
Long-term debt, less current portion		$	5,556,782	$	11,627,643

Pacific Western Bank

In January 2016 and October 2016, the Company entered into a Loan and Security Agreement (“LSA”) and an amendment, respectively, with Pacific Western Bank (“Pacific Western”). The LSA provided that the Company may borrow up to $10.0 million three tranches of a term loan (“Term Loan”) to supplement working capital and finance facility expansion and capital equipment purchases. The Term Loan was collateralized by a lien on all assets of the Company that are not otherwise encumbered, including a negative pledge on intellectual property prohibiting its sale without Pacific Western’s consent. Amounts borrowed under the Term Loan could be repaid at any time without penalty or premium. The Term Loan was interest‑only through July 6, 2017, followed by an amortization period of 30 months of equal monthly payments of principal plus interest, beginning on August 6, 2017 and continuing on the same day of each month thereafter until paid in full. Any amounts borrowed under the Term Loan bore interest at 3.75% during the initial 18‑month interest‑only period. Following the interest‑only period, the interest rate increased to 5.00%, which was to be fixed for the duration of the Term Loan. Subsequent to the Company closing its IPO, on August 6, 2018 the Company paid Pacific Western a liquidity event success fee of $400,000, which was recorded as Interest Expense in the accompanying Statement of Operations and Comprehensive Loss.

In early 2017, the Company breached a covenant in the LSA with Pacific Western Bank by failing to set mutually agreeable financial or milestone covenants on or before January 30, 2017. On March 30, 2017, pursuant to a Fourth Amendment to the LSA entered into between the Company and Pacific Western, Pacific Western waived the breach of this covenant and the covenant remains in effect.

In October 2017, the Company breached a covenant in its LSA with Pacific Western by failing to maintain minimum levels of cash. On November 30, 2017, pursuant to the Eighth Amendment to the LSA, Pacific Western waived the breach of this covenant and amended the LSA to require the Company to maintain a cash balance of at least $2.5 million monitored daily, from November 30, 2017 until the Company receives at least $12.0 million from the issuance of equity instruments by December 31, 2017. The Company was in breach of this covenant as of December 31, 2017. In February 2018, Pacific Western waived the breach of this covenant as a result of the Company receiving equity financing in excess of the requirement.

On March 29, 2018, the Company and Pacific Western executed the Ninth Amendment to the LSA (the “Ninth Amendment”). With the Ninth Amendment, new covenants were enacted requiring the Company to (1) at all times maintain a balance of cash at Pacific Western of at least $8.0 million, an increase of $5.5 million from its prior cash balance covenant, and (2) not observe any materially adverse data from its LIQ861 Phase 3 study on or before December 31, 2018. Pursuant to this Ninth Amendment, the interest-only period for the Tranche I loan was amended to include the period from January 7, 2018 to July 6, 2018, and the interest-only period for the Tranche II and Tranche III loans was amended to include the period from January 13, 2018 to July 12, 2018. Prior to executing the amendment, the Company had made principal payments of $0.6 million inside of the defined interest-only period, which were subsequently refunded on the same day. All amendments to the Pacific Western LSA were accounted for as a modification.

On October 26, 2018, the Company and Pacific Western entered into an Amended and Restated Loan and Security Agreement (the “A&R LSA”) in which the Company received an initial tranche of $11.0 million to extinguish its existing debt of $8.0 million under the LSA, repay in full the $1.8 million in outstanding indebtedness under the UNC Promissory Note (as described below) and for general corporate purposes. The indebtedness under the A&R LSA bears interest at the greater of the Prime rate or 5% and has a four-year term and maturity. The A&R LSA provides for access to a second tranche of up to $5.0 million available to be drawn at our option through June 30, 2019 upon the full enrollment of the LIQ861 Phase 3 clinical trial, provided that we have not observed any materially adverse data through the two-week endpoint. Both tranches require payments of interest-only through December 31, 2019, which interest-only period can be extended by six months if the Company closes on at least $40.0 million in new financing from either equity sales or licensing activities by October 31, 2019 (the “Financing Condition”). As a result of this refinancing, the Company recorded a gain of $0.1 million in accordance with ASC 470-50, Debt – Modifications and Extinguishments.

The A&R LSA carries a one-time success fee tiered by tranche totaling between $187,000 and $375,000 depending upon whether the Financing Condition is met, and a prepayment penalty of 1% to 2% for the first 24 months of the drawn tranche. The minimum cash covenant is $8.5 million, which can be reduced to $6 million in the event the Financing Condition is met and the Company has publicly disclosed its safety data analysis for LIQ861 with no materially adverse data observed. Pacific Western maintains a blanket lien on all assets excluding intellectual property, for which it has been provided a negative pledge. Pursuant to the A&R LSA, the Company is also obligated to comply with various other customary covenants, including, among other things, restrictions on its ability to dispose of assets, replace or suffer the departure of the CEO or CFO without delivering ten days’ prior written notification to Pacific Western, suffer a change on the Board of Directors which would result in the failure of at least one partner of either New Enterprise Associates or Canaan Partners or their respective affiliates to serve as a voting member in each case without having used best efforts to deliver at least 15 days’ prior written notification to Pacific Western, make acquisitions, be acquired, incur indebtedness, grant liens, make distributions to its stockholders, make investments, enter into certain transactions with affiliates or pay down subordinated debt, subject to specified exceptions.

CSC Build-To-Suit Equipment Financing

See Note 7 for further discussion of the background of the equipment financing (“CSC Financing”). The CSC Financing has a term of three years with equal monthly payments that by themselves imply an interest rate equal to approximately 5.4% per annum. The effective interest rate is 14.9%. The CSC Financing is collateralized by a lien on the related build-to-suit equipment and includes an option to purchase the build-to-suit equipment at maturity at an amount equal to the lesser of fair market value or 23% of the initial financed amount.

UNC Promissory Note

In September 2012, the Company issued an unsecured promissory note with principal amount of $0.6 million as a sublicense fee to UNC, with principal and interest due in full on September 1, 2016, bearing an interest rate equal to the one‑year LIBOR plus 2%, compounding annually or the UNC Promissory Note. In June 2016, the Company (as licensee) negotiated modifications to its license agreement with UNC in exchange for an increase of $1.5 million to the note payable and extension of the maturity to December 31, 2017. As the Company had previously recorded a contingent liability of $1.5 million related to this license, the increase to the note payable was recorded as a reduction to the accrued expense balance at this time. In addition, the initial note of $0.6 million plus accrued interest were extended under the same terms. The combined note payable interest rate was increased by 1%. In December 2017, the Company executed an amendment to the UNC Promissory Note that extended the maturity date of the promissory note from December 31, 2017 to June 30, 2018. All other terms and conditions of the Letter Agreement continue in force through the new maturity date. In June 2018, the Company executed an amendment to the UNC Promissory Note that extended the maturity date of the promissory note from June 30, 2018 to December 31, 2018 with the potential for acceleration depending on the proceeds of the IPO. All other terms and conditions of the Letter Agreement were to continue in force through the new maturity date. All such amendments to the UNC Promissory Note were accounted for as a modification. On August 2, 2018, the Company made a payment of $600,000 to UNC. The Company repaid the entire balance outstanding plus accrued interest pursuant to the closing of the A&R LSA with Pacific Western in October 2018. The balance of the promissory note at December 31, 2017 and 2018 was $2,257,684 and $0, respectively.

Convertible Notes

In January and February 2017, the Company issued an aggregate of $11.8 million in principal of convertible promissory notes (the “January and February Notes”). The January and February Notes were accompanied by warrants to purchase of up to 25% of the aggregate principal amounts of the notes, equal to 3,698,128 shares of Series D. The January and February Notes were scheduled to mature on December 31, 2018, as amended, and bore interest at eight percent (8%) per annum. Interest was earned daily and computed on the actual number of days elapsed until all the amounts under the notes had been paid in full. All unpaid principal and all accrued, but unpaid interest of each investor’s note was due and payable on demand at the request of the investor at any time after December 31, 2018. In addition, upon the consummation of an asset sale, acquisition, or IPO, as defined, the investors may have elected to accelerate the repayment of the note or convert into common stock or Series C‑1 based on various scenarios.

Singapore IPO

Upon the consummation of an IPO of the Company’s capital stock registered on the Singapore Exchange Securities Trading Limited (a “Singapore IPO”) after August 1, 2017, the holders had the right to elect to (i) receive payment from the Company equal to the outstanding principal plus all accrued but unpaid interest or (ii) convert the outstanding principal and accrued but unpaid interest into such shares of the Company’s capital stock at a price per share that was equal to 70% of the price per share paid by the purchasers of such shares in such IPO.

Domestic IPO

Upon the consummation of an IPO of the Company’s Common Stock registered under the Securities Act of 1933, after which such Common Stock is listed for trading on a United States national securities exchange (a “Domestic IPO”), the holders had the right to elect to (i) receive payment from the Company equal to the outstanding principal plus accrued but unpaid interest or (ii) convert all outstanding principal and accrued but unpaid interest into shares of the Company’s Common Stock at a price per share that was equal to 75% of the price per share paid by the purchasers of the shares in such IPO.

Automatic Conversion upon Qualified Financing

The principal and accrued but unpaid interest would have automatically converted into shares of Preferred Stock issued in a Qualified Financing, as defined. The number of shares of Preferred Stock issued would have been equal to the quotient of (i) the principal amount plus accrued but unpaid interest and (ii) 75% of the lowest price per share paid by investors participating in the Qualified Financing. If a Qualified Financing had not occurred prior to December 31, 2017, the holders of the notes had the right to elect to convert the outstanding principal plus accrued but unpaid interest into shares of the Company’s Series C-1 at $0.59808 per share. The holders did not exercise this right.

Conversion upon Non-qualified Financing

The holders may elect to convert the outstanding principal and accrued but unpaid interest on the notes into any shares of the Company’s capital stock that are issued in any financing transaction other than a Qualified Financing, a Domestic IPO or a Singapore IPO (a “Non-qualified Financing”). The number of shares issued would have been equal to the quotient of (i) the sum of the principal amount plus accrued but unpaid interest and (ii) 75% of the lowest price per share paid by investors participating in the Non-qualified Financing.

Strategic Transaction

Upon the consummation of an asset sale of all or substantially all of the Company’s assets or an acquisition, merger or change in control (a “Strategic Transaction”), the holders of the notes had the right to elect to (i) receive a payment from the Company equal to the sum of (1) 200% of the then outstanding principal and (2) accrued but unpaid interest or (ii) convert the outstanding principal and accrued but unpaid interest into shares of the Company’s Series C-1 at $0.59808 per share.

Additionally, upon the occurrence of certain Events of Default, as defined in the notes, each investor may have elected to accelerate the repayment of all unpaid principal and accrued interest under each note and the notes provide for automatic redemption upon the occurrence of certain bankruptcy related Events of Default, as defined in the notes.

In July 2017, the Company entered into a series of unsecured convertible note agreements of $10.4 million in the aggregate (the “July Notes”). The July Notes bore interest at a rate of 8% per annum with a scheduled maturity date of December 31, 2018. In conjunction with this financing, the Company also entered into a commitment with an advisor in the form of a convertible note amounting to $0.4 million with terms similar to the related transaction. The July Notes were not accompanied by warrants. Principal plus accrued interest were convertible into either preferred or common stock at the time of a qualified financing, as defined in the July Notes, at a discount to the share price, depending on the type of financing similar to the January and February Notes. Conversion discounts on these convertible notes were largely similar to the January and February Notes except that the discount for a Singapore and Domestic IPO were both 50%.

In November 2017, the Company issued a series of unsecured subordinated convertible notes with an aggregate principal amount of $5.2 million to new and existing investors (the “November Notes”). The November Notes bore interest at a rate of 8% per annum with a scheduled maturity date of December 31, 2018. Principal plus accrued interest were convertible into either preferred or common stock at the time of a qualified financing, as defined in the November Notes, at a discount to the share price, depending on the type of financing. In conjunction with this financing, the Company also incurred fees of $0.4 million. The November Notes were not accompanied by warrants. Conversion discounts on these convertible notes were largely similar to the July Notes except that there was no discount upon mandatory conversion into a private financing round. In addition, at maturity, the November Notes (principal plus accrued but unpaid interest) would have converted into shares of the Company’s Series C-1 at $0.72877 per share.

Accounting for Convertible Notes

The Company accounts for debt as liabilities measured at amortized cost and amortizes the resulting debt discount from allocation of proceeds to interest expense using the straight‑line method over the expected term of the notes pursuant to ASC 835, Interest (ASC 835).

In connection with the issuance of the convertible notes and warrants, the Company recorded discounts equal to the full amount of each series of notes based on an allocation of proceeds to the warrants, an allocation to bifurcated derivatives which consist of a contingent put option upon a change of control or acceleration upon event of default and a contingent call option upon a change of control included in the notes, and a beneficial conversion feature, before issuance costs, based on the difference between the fair value of the underlying common stock at the commitment date of each note transaction and the effective conversion price of the notes, as limited by the proceeds allocated to the notes. Since the initial carrying value of all three series of convertible notes was $0, the combined debt issuance costs of $1,397,624 were charged to Interest Expense. See Note 2 for discussion of the Company’s policies for accounting for convertible instruments with detachable liability‑classified warrants.

The following is a summary of the liability component of Convertible Notes as of December 31, 2017:


	February		July		November
	Notes		Notes		Notes		Total
Principal amount of Convertible Notes	$	11,796,168	$	10,442,356	$	5,150,000	$	27,388,524
Unamortized discount on the notes		(5,504,878)		(7,291,816)		(4,753,846)		(17,550,540)
	$	6,291,290	$	3,150,540	$	396,154	$	9,837,984

In February 2018, the Company received proceeds of $25.6 million in exchange for the corresponding sale of shares of Series D at a price per share of $0.59808. In addition, all outstanding convertible notes, plus accrued interest, totaling $28.9 million, were converted into Series D at the same price per share. The unamortized balances of the discounts on convertible notes of $17.6 million were then amortized to interest expense. Therefore, the balances of these notes at December 31, 2018 was $0. No gain or loss was recorded upon the conversion of the convertible notes.

Accounting for the Warrant Liabilities

The Company’s liability‑classified warrants were recorded as liabilities at their estimated fair value at the date of issuance, with the subsequent changes in estimated fair value recorded in derivative and warrant fair value adjustments in the Company’s Statements of Operations and Comprehensive Loss. The warrants, with a fair value of $4,474,122 at inception, were initially recorded as warrant liabilities on the Balance Sheets with a corresponding discount to the notes. The change in the estimated fair value of the warrant liabilities resulted in a fair value adjustment and is included in derivative and warrant fair value adjustments in the Statements of Operations and Comprehensive Loss. In conjunction with the IPO, the warrants automatically converted to warrants to purchase common stock. Therefore, upon IPO, the warrant liabilities were marked to fair market value and transferred to additional paid-in capital. Changes in the values of the warrant liabilities for the years ended December 31, 2017 and 2018 are summarized below:


	For the Year ended December 31,
	2017		2018
Fair value, beginning of period	$	—	$	2,462,859
Issuance of warrants		4,474,122		—
Change in fair value		(2,011,263)		(277,715)
Transfer to additional paid-in capital		—		(2,185,144)
Fair value, end of period	$	2,462,859	$	—

Assumptions Used in Determining Fair Value of Liability-classified Warrants

To estimate the fair value of the warrants, the Company used a combination of the Current Value Method, Option Pricing Method (“OPM”) and Black‑Scholes Option Pricing Model, in a Probability‑Weighted Expected Return Method (“PWERM”) context, or the Hybrid Method (“Hybrid Method”). The Company estimated the fair value of the most senior series of preferred stock and estimated the fair value of common stock in the various conversion scenarios. The Company used a Black‑Scholes option-pricing model to estimate the fair value of the warrants using the life of the warrants, assuming a sale of the Company does not occur, and the fair value of underlying equity values from the first step. The Company probability‑weighted each scenario to arrive at an estimated fair value of the warrants.

Depending upon the scenario, warrants could be exercised to purchase either common stock or the most senior series of preferred stock. To value the warrants in each scenario, the Company used either an OPM or the Black‑Scholes option-pricing model. The hybrid method is a useful alternative to explicitly modeling all PWERM scenarios in situations when the Company has transparency into one or more near‑term exits but is unsure about what will occur if the current plans fall through.

Key assumptions in the hybrid method include:

OPM‑various conversion scenarios

Probability

Timing (Each financing scenario)

Enterprise value

Type of Security

Estimated security value

Methodology of valuing warrant OPM

Accounting for the Derivative Liabilities

Management determined that the various conversion features discussed above represent, in substance, a put option (redemption feature) designed to provide the investor with a fixed monetary amount, settled in shares. Management determined that this put option and the contingent interest should be separated from the notes and accounted for as a compound derivative liability primarily because the notes were issued at a substantial discount because the warrants, put option, and the contingent interest meet the net settlement criterion. The compound derivative liabilities were initially recorded as derivative liabilities on the Balance Sheets and a corresponding discount to the notes. The change in the estimated fair value of the derivative liabilities for the year ended December 31, 2017 resulted in a fair value adjustment and is included in Derivative and Warrant Fair Value Adjustments in the Statements of Operations and Comprehensive Loss. As the estimated fair value of the derivative liabilities was $0 at December 31, 2017 and such derivatives did not exist as of December 31, 2018, no fair value adjustment was recorded for the year ended December 31, 2018.

Changes in the values of the derivative liabilities for the years ended December 31, 2017 and 2018 are summarized below:


	For the Year ended December 31,
	2017		2018
Fair value, beginning of period	$	—	$	—
Issuance of derivatives		9,872,990		—
Change in fair value		(9,872,990)		—
Fair value, end of period	$	—	$	—

Assumptions Used in Determining Fair Value of Compound Bifurcated Derivative

The Company assessed the accounting for the convertible notes and determined that there were several embedded derivatives that required bifurcation from the host debt instrument at fair value in accordance with ASC 815, Derivatives and Hedging. These embedded derivatives are more like equity instruments, and thus not “clearly and closely related” to the economic characteristics of the convertible notes. Further, they were determined not to meet the definition of being indexed to the Company’s own stock due to the variable number of shares to be converted under different scenarios. When a host instrument has multiple embedded derivative features that require bifurcation, ASC 815 requires that they be bundled as one and accounted for separately from the convertible notes at fair value.

To determine the fair value of such derivatives, the Company compared (1) the expected payout from the different conversion scenarios upon their expected date of occurrence, discounted to present value at a risk‑free rate, to (2) the fair value of the convertible notes if it were paid in cash or converted into Series C‑1 on December 31, 2017. The difference between these two results represents the fair value of the bundled derivative.

First, the Company estimated the expected payout under the various conversion scenarios. The principal and accrued interest on the convertible notes were calculated through the expected payout date, and divided by the stated conversion price discount to determine the amount that would be paid upon occurrence of the event. The payoff from each scenario was then discounted to present value at the risk‑free rate and the Company probability‑weighted each scenario to arrive at the expected payout value for purposes of the valuation. Next, it was assumed that if conversion under the certain financing scenarios did not occur by December 31, 2017, it would be most advantageous for the investors to convert the convertible notes into Series C‑1 or request payment of principal and interest in cash. The value of the convertible notes under these scenarios was modeled using the OPM. The difference between the payout value under the various conversion scenarios and the value of the convertible notes under the OPM, assuming the convertible notes are not converted or paid until December 31, 2017, results in the fair value of the bundled derivative.

Accounting for the Beneficial Conversion Feature

The Company did not separate from the notes the conversion feature in which the holders may convert the principal and interest on the notes into shares of the Company’s Series C‑1 at $0.59808 per share if a qualified financing, as defined in the notes, had not occurred prior to December 31, 2017. The Company concluded that this conversion feature is a beneficial conversion feature that should be recognized separately and measured initially at its intrinsic value. Since the intrinsic value of this beneficial conversion feature is greater than the proceeds allocated to the notes, the amount of the discount assigned to the beneficial conversion feature is limited to the amount of the proceeds allocated to the notes. The Company recorded the beneficial conversion feature of $2,956,166, $4,935,246, and $5,150,000 as additional paid-in capital upon issuance of the respective convertible notes and a corresponding discount to the notes on the Balance Sheet for the January and February Notes, July Notes and November Notes, respectively.

Scheduled annual maturities of long-term debt as of December 31, 2018 are as follows:


Year ending December 31:
2019	$	416,989
2020		4,483,486
2021		4,410,660
Thereafter		3,000,000
Total		12,311,135
Less: Unamortized discount		(326,246)
Less: Unamortized debt issuance costs		(40,340)
Less: Current portion of long-term debt		(316,906)
	$	11,627,643

Subsequent Events	12 Months Ended
Subsequent Events	Dec. 31, 2018
Subsequent Events
Subsequent Events	12. Subsequent Events On February 6, 2019, the Board of Directors approved stock option grants to various employees in the aggregate amount of 395,408 shares of common stock underlying such grants, with an exercise price of $14.20 per share. In addition, on January 1, 2019, the number of shares of common stock available for issuance under the 2018 Plan automatically increased from 1,600,000 to 2,220,778 pursuant to the evergreen provision contained in the 2018 Plan (see Note 4).

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Significant Accounting Policies

Basis of Presentation

Reverse Stock Split

Variable Interest Entities

Going Concern

Use of Estimates

Equity Method Investments

Cash

Accounts Receivable

Concentration of Credit Risk

Property, Plant and Equipment


Lab and build-to-suit equipment	5 - 7	years
Office equipment	5	years
Furniture and fixtures	10	years
Computer equipment	3	years
Leasehold improvements	Lesser of life of the asset or remaining lease term

Impairment of Long-Lived Assets

Deferred Rent

Revenue Recognition

The cumulative effect of the changes made to the January 1, 2018 balance of accumulated deficit on the Balance Sheet for the adoption of Topic 606 was $0.5 million as follows:


	Balance at		Adjustments		Balance at
	December 31,		Due to		January 1,
	2017		Topic 606		2018
Balance Sheet:
Assets
Prepaid expenses and other current assets	$	443,460	$	10,550	$	454,010
Prepaid expenses and other assets		1,115,972		45,529		1,161,501

Liabilities
Current portion of deferred revenue		3,605,199		105,511		3,710,710
Long-term deferred revenue		5,527,296		455,295		5,982,591

Stockholders’ equity (deficit)
Accumulated deficit		(113,413,311)		(504,727)		(113,918,038)

In accordance with the new revenue standard requirements, the impact of adoption on the Statement of Operations and Comprehensive Loss and Balance Sheet was as follows:


	For the Year ended December 31, 2018
			Balances
			Without
			Adoption of		Effect of Change
	As Reported		Topic 606		Higher/(Lower)
Statement of Operations and Comprehensive Loss:
Revenues	$	2,706,981	$	5,436,630	$	(2,729,649)

Costs and expenses
Cost of sales		121,391		394,356		(272,965)

Net loss		(53,135,859)		(50,679,175)		2,456,684


	December 31, 2018
			Balances
			Without
			Adoption of		Effect of Change
	As Reported		Topic 606		Higher/(Lower)
Balance Sheet:
Assets
Prepaid expenses and other current assets	$	219,057	$	519,057	$	(300,000)
Prepaid expenses and other assets		1,260,951		657,092		603,859

Liabilities
Current portion of deferred revenue		—		3,000,000		(3,000,000)
Long-term deferred revenue		8,071,920		2,033,333		6,038,587

Stockholders’ equity (deficit)
Accumulated deficit		(167,053,897)		(164,319,169)		2,734,728

Segment Data

All long‑lived assets are domiciled within the United States and all revenues were earned within the United States.

Research and Development Expense

Patent maintenance

Patent Maintenance

Stock-Based Compensation

Defined Contribution Retirement Plan

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.


	2017	2018
Preferred Stock	4,542,665	—
Stock Options	497,329	1,658,112
Warrants	279,281	170,925
Total	5,319,275	1,829,037

Fair Value of Financial Instruments

The carrying values of cash, accounts receivable, and accounts payable at December 31, 2017 and 2018 approximated fair value due to the short maturity of these instruments.

Level 1 — Quoted prices in active markets for identical assets or liabilities;

Level 2 — Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly; and

Level 3 — Unobservable inputs for the asset and liability used to measure fair value, to the extent that observable inputs are not available.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following tables present the placement in the fair value hierarchy of financial liabilities measured at fair value as of December 31, 2017 and 2018:


			Significant
	Quoted Prices		Other
	in Active		Observable		Significant
	Markets		Inputs		Unobservable		Carrying
December 31, 2017	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Pacific Western Bank Tranche I note - LSA	$	—	$	2,512,301	$	—	$	2,488,572
Pacific Western Bank Tranche II note - LSA		—		2,845,194		—		2,820,382
Pacific Western Bank Tranche III note - LSA		—		3,793,644		—		3,760,509
UNC Promissory Note		—		2,257,684		—		2,257,684
Convertible notes		—		—		28,702,268		9,837,984
Warrant liabilities		—		—		2,462,859		2,462,859
Total	$	—	$	11,408,823	$	31,165,127	$	23,627,990


			Significant
	Quoted Prices		Other
	in Active		Observable		Significant
	Markets		Inputs		Unobservable		Carrying
December 31, 2018	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Pacific Western Bank note - A&R LSA	$	—	$	10,412,650	$	—	$	10,802,355
CSC build-to-suit equipment financing		—		1,311,135		—		1,142,194
Total	$	—	$	11,723,785	$	—	$	11,944,549

Convertible Instruments

•Fair value method — The instrument being analyzed is allocated a portion of the proceeds equal to its fair value, with the remaining proceeds allocated to the other instruments as appropriate.

•Residual value method — The instrument being analyzed is allocated the remaining proceeds after an allocation is made to all other instruments covered in the allocation.

Warrant Liabilities

Embedded Derivatives

Issuance Costs Related to Equity and Debt

Deferred Offering Costs

Income Taxes

Recent Accounting Pronouncements

Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Schedule of estimated useful lives for the major asset categories


Lab and build-to-suit equipment	5 - 7	years
Office equipment	5	years
Furniture and fixtures	10	years
Computer equipment	3	years
Leasehold improvements	Lesser of life of the asset or remaining lease term

Schedule of common stock equivalent shares excluded from calculation of diluted net loss per share


	2017	2018
Preferred Stock	4,542,665	—
Stock Options	497,329	1,658,112
Warrants	279,281	170,925
Total	5,319,275	1,829,037

Schedule of fair value hierarchy of financial instruments measured at fair value

The following tables present the placement in the fair value hierarchy of financial liabilities measured at fair value as of December 31, 2017 and 2018:


			Significant
	Quoted Prices		Other
	in Active		Observable		Significant
	Markets		Inputs		Unobservable		Carrying
December 31, 2017	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Pacific Western Bank Tranche I note - LSA	$	—	$	2,512,301	$	—	$	2,488,572
Pacific Western Bank Tranche II note - LSA		—		2,845,194		—		2,820,382
Pacific Western Bank Tranche III note - LSA		—		3,793,644		—		3,760,509
UNC Promissory Note		—		2,257,684		—		2,257,684
Convertible notes		—		—		28,702,268		9,837,984
Warrant liabilities		—		—		2,462,859		2,462,859
Total	$	—	$	11,408,823	$	31,165,127	$	23,627,990


			Significant
	Quoted Prices		Other
	in Active		Observable		Significant
	Markets		Inputs		Unobservable		Carrying
December 31, 2018	(Level 1)		(Level 2)		Inputs (Level 3)		Value
Pacific Western Bank note - A&R LSA	$	—	$	10,412,650	$	—	$	10,802,355
CSC build-to-suit equipment financing		—		1,311,135		—		1,142,194
Total	$	—	$	11,723,785	$	—	$	11,944,549

ASU 2014-09

Schedule of financial statement impact for the adoption of Topic 606

The cumulative effect of the changes made to the January 1, 2018 balance of accumulated deficit on the Balance Sheet for the adoption of Topic 606 was $0.5 million as follows:


	Balance at		Adjustments		Balance at
	December 31,		Due to		January 1,
	2017		Topic 606		2018
Balance Sheet:
Assets
Prepaid expenses and other current assets	$	443,460	$	10,550	$	454,010
Prepaid expenses and other assets		1,115,972		45,529		1,161,501

Liabilities
Current portion of deferred revenue		3,605,199		105,511		3,710,710
Long-term deferred revenue		5,527,296		455,295		5,982,591

Stockholders’ equity (deficit)
Accumulated deficit		(113,413,311)		(504,727)		(113,918,038)

In accordance with the new revenue standard requirements, the impact of adoption on the Statement of Operations and Comprehensive Loss and Balance Sheet was as follows:


	For the Year ended December 31, 2018
			Balances
			Without
			Adoption of		Effect of Change
	As Reported		Topic 606		Higher/(Lower)
Statement of Operations and Comprehensive Loss:
Revenues	$	2,706,981	$	5,436,630	$	(2,729,649)

Costs and expenses
Cost of sales		121,391		394,356		(272,965)

Net loss		(53,135,859)		(50,679,175)		2,456,684


	December 31, 2018
			Balances
			Without
			Adoption of		Effect of Change
	As Reported		Topic 606		Higher/(Lower)
Balance Sheet:
Assets
Prepaid expenses and other current assets	$	219,057	$	519,057	$	(300,000)
Prepaid expenses and other assets		1,260,951		657,092		603,859

Liabilities
Current portion of deferred revenue		—		3,000,000		(3,000,000)
Long-term deferred revenue		8,071,920		2,033,333		6,038,587

Stockholders’ equity (deficit)
Accumulated deficit		(167,053,897)		(164,319,169)		2,734,728

Stock Options (Tables)

12 Months Ended

Dec. 31, 2018

Stock Options

Schedule of assumptions used for estimating the fair value of stock options granted


	Year ended
	December 31,
	2017			2018
Expected dividend yield		—	%		—	%
Risk-free interest rate		1.34% - 1.99	%		2.67% - 3.01	%
Volatility		69% - 100	%		78% - 99	%
Expected life		6.25	years		6.25	years
Weighted-average fair value per share	$	13.97		$	7.25

Schedule of stock option activity


			Weighted
	Shares		Average
	Available	Options	Exercise
	for Issuance	Outstanding	Price
Outstanding at December 31, 2016	45,275	728,344	$	4.38
Shares reserved for future issuance	—	—	$	—
Granted	(14,083)	14,083	$	20.36
Exercised	—	(15,169)	$	5.72
Cancelled/expired	—	(58,942)	$	2.19
Outstanding at December 31, 2017	31,192	668,316	$	4.54
Removal of partial options resulting from reverse split	—	(323)
Shares reserved for future issuance for 2016 Plan	979,446	—
Shares reserved for future issuance for 2018 Plan	1,600,000	—
Options granted	(1,231,541)	1,231,541	$	10.22
RSU's granted	(185,768)	—	$	11.04
Exercised	—	(119,793)	$	4.15
Cancelled/expired from 2004 Plan	—	(70,298)	$	7.39
Cancelled/expired from 2016 Plan	—	(51,331)	$	8.68
Outstanding at December 31, 2018	1,193,329	1,658,112	$	8.76

Schedule of stock options vested and expected to vest


		Weighted
		Average
		Remaining	Weighted
	Number	Contractual	Average
	of	Life	Exercise
	Options	(In Years)	Price
Outstanding and expected to vest	1,442,803	8.09	$	8.49
Vested and exercisable	408,693	5.36	$	4.62

Revenue From Contracts With Customers (Tables)

12 Months Ended

Dec. 31, 2018

Revenue From Contracts With Customers

Schedule of disaggregation of revenue by each significant research, development and licensing agreement and payment type


	2017 Revenue Recognized From
	Non-Refundable Payments				Research and
			Up-front		Development
Under Topic 605	Milestones		Payments		Services		Total
GSK Inhaled	$	—	$	3,000,000	$	3,114,311	$	6,114,311
Other		—		343,216		800,596		1,143,812
Total	$	—	$	3,343,216	$	3,914,907	$	7,258,123


	2018 Revenue Recognized From
	Non-Refundable Payments				Research and
			Up-front		Development
Under Topic 606	Milestones		Payments		Services		Total
GSK Inhaled	$	45,058	$	225,293	$	168,000	$	438,351
Other		—		943,419		1,325,211		2,268,630
Total	$	45,058	$	1,168,712	$	1,493,211	$	2,706,981

Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment

Summary of property, plant and equipment


	2017		2018
Lab and build-to-suit equipment	$	3,847,546	$	6,123,194
Grant equipment		1,143,701		1,143,701
Office equipment		123,655		130,460
Furniture and fixtures		205,051		205,051
Computer equipment		677,569		799,515
Leasehold improvements		7,218,687		8,878,361
Construction-in-progress		2,830,407		155,148
Total property, plant and equipment		16,046,616		17,435,430
Accumulated depreciation		(7,803,604)		(9,304,722)
Property, plant and equipment, net	$	8,243,012	$	8,130,708

Schedule of Construction in Progress


	Leasehold		Build-to-suit		Lab
	Improvements		Equipment		Equipment		Total
Balance as of December 31, 2016	$	337,255	$	—	$	—	$	337,255
Add: Purchases related to CIP		2,298,714		1,583,054		39,246		3,921,014
Less: Transfer due to placed in service		(1,427,862)		—		—		(1,427,862)
Balance as of December 31, 2017		1,208,107		1,583,054		39,246		2,830,407
Add: Purchases related to CIP		425,438		82,687		114,102		622,227
Less: Transfer due to placed in service		(1,570,194)		(1,665,741)		(61,551)		(3,297,486)
Balance as of December 31, 2018	$	63,351	$	—	$	91,797	$	155,148

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes

Schedule of components of the Company's deferred tax assets and liabilities


	2017		2018
Non-current deferred income tax assets:
Tax loss carryforwards	$	22,274,378	$	30,239,898
Deferred revenue		2,098,191		1,856,507
Research and development credits		2,382,047		2,382,047
Stock-based compensation		277,948		489,694
Bad debt		11,053		—
Compensation		9,766		431,649
Fixed assets		63,570		160,784
Patent amortization		106,622		97,942
Other		768,936		669,151
Valuation allowance		(27,992,511)		(36,327,672)
Total non-current deferred income tax assets	$	—	$	—

Summary of difference between actual income tax expense amount computed by applying the statutory federal income tax


	2017				2018
			% of Pretax				% of Pretax
	Amount		Earnings		Amount		Earnings
Income tax benefit at statutory rate	$	(9,912,442)	34.0	%	$	(11,158,530)	21.0	%
State income taxes, net of federal tax benefit		(581,901)	2.0	%		(1,062,492)	2.0
Non-deductible expenses		12,757	(0.1)	%		6,810	—
Stock-based compensation		153,033	(0.5)	%		10,925	—
Non-deductible interest expense		3,795,060	(13.0)	%		4,074,501	(7.7)
Derivative and warrant fair value adjustments		(4,040,646)	13.9	%		(63,873)	0.1
Change in federal rate		14,113,550	(48.4)	%		—	—
Change in state rate		371,138	(1.3)	%		(2,842)	—
Other		24,235	(0.1)	%		(139,660)	0.3
Change in valuation allowance		(3,934,784)	13.5	%		8,335,161	(15.7)
Provision for income taxes	$	—	0.0	%	$	—	0.0	%

Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies

Future minimum lease payments under operating leases

As of December 31, 2018, future minimum lease payments under operating leases having initial or remaining non-cancelable lease terms in excess of one year were as follows:


2019	$	1,077,532
2020		1,168,710
2021		1,203,658
2022		1,239,885
2023		1,276,356
Thereafter		3,818,795
Total	$	9,784,936

Future minimum lease payments under the capital leases

The following table shows the future minimum lease payments under the capital leases by year and the present value of the minimum lease payments:


Year ending December 31:
2019	$	464,797
2020		354,739
2021		33,774
Thereafter		—
Total minimum lease payments		853,310
Less: Amount representing interest		(24,525)
Present value of minimum lease payments	$	828,785

Long Term Debt (Tables)

12 Months Ended

Dec. 31, 2018

Long Term Debt

Summary of long term debt


		December 31,
	Maturity Date	2017		2018
Pacific Western Bank notes - LSA		$	9,069,463	$	—
Pacific Western Bank note - A&R LSA	October 25, 2022		—		10,802,355
UNC Promissory Note	December 31, 2018		2,257,684		—
Convertible notes, net of discounts	December 31, 2018		9,837,984		—
CSC build-to-suit equipment financing, net of discount	February 28, 2021		—		1,142,194
Less current portion			(15,608,349)		(316,906)
Long-term debt, less current portion		$	5,556,782	$	11,627,643

Summary of changes in the values of the warrant liabilities


	For the Year ended December 31,
	2017		2018
Fair value, beginning of period	$	—	$	2,462,859
Issuance of warrants		4,474,122		—
Change in fair value		(2,011,263)		(277,715)
Transfer to additional paid-in capital		—		(2,185,144)
Fair value, end of period	$	2,462,859	$	—

Summary of changes in the values of the derivative liabilities


	For the Year ended December 31,
	2017		2018
Fair value, beginning of period	$	—	$	—
Issuance of derivatives		9,872,990		—
Change in fair value		(9,872,990)		—
Fair value, end of period	$	—	$	—

Scheduled annual maturities of long-term debt

Scheduled annual maturities of long-term debt as of December 31, 2018 are as follows:


Year ending December 31:
2019	$	416,989
2020		4,483,486
2021		4,410,660
Thereafter		3,000,000
Total		12,311,135
Less: Unamortized discount		(326,246)
Less: Unamortized debt issuance costs		(40,340)
Less: Current portion of long-term debt		(316,906)
	$	11,627,643

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21506-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28551-108399

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
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-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21521-112644

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
-Topic 505
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-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21538-112644

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
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-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details

Organization and Description of the Business (Details)	12 Months Ended
Organization and Description of the Business (Details)	Dec. 31, 2018 product
Organization and Description of the Business
Number of products under development	2

Significant Accounting Policies - Reverse Stock Split (Details)	Jul. 19, 2018
Convertible preferred stock
Disclosures
Reverse stock split conversion ratio	0.0594
Common stock
Disclosures
Reverse stock split conversion ratio	0.0594

Significant Accounting Policies - Variable Interest Entities (Details) - USD ($) $ in Millions	1 Months Ended		12 Months Ended
	Oct. 31, 2017	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Envisia
Variable interest entities
Number of common shares of Envisia common stock exchanged by the Company as the result of the license related to the Otic field, along with other intellectual property rights, as defined, purchased back by the Company		75,000
Envisia \| Aerie
Variable interest entities
Amount of consideration transferred, in the form of a combination of cash and Aerie common stock, in the sale of the license to the PRINT technology to Aerie	$ 25.0
Envisia \| Variable Interest Entity, Not Primary Beneficiary
Variable interest entities
Investment in VIE			$ 0.0	$ 0.0
Equity ownership percentage			75.00%	75.00%
Voting percentage			4.40%	4.40%

Significant Accounting Policies - Going Concern (Details) $ in Millions	2 Months Ended
	Aug. 31, 2018 USD ($)
Significant Accounting Policies
Net proceeds from initial public offering ("IPO")	$ 49.4

Significant Accounting Policies - Cash (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Significant Accounting Policies
Cash equivalents	$ 0	$ 0

Significant Accounting Policies - Concentration of Credit Risk (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Concentration risk
Accounts receivable	$ 272,557	$ 1,622,179
Credit Concentration Risk \| Cash held on deposit \| Pacific Western Bank
Concentration risk
Concentration risk (as a percent)	100.00%
Credit Concentration Risk \| Accounts receivable \| GlaxoSmithKline ("GSK" and "GSK Inhaled")
Concentration risk
Concentration risk (as a percent)	0.00%	69.00%
Accounts receivable	$ 0	$ 1,100,000
Customer Concentration Risk \| Revenues \| GlaxoSmithKline ("GSK" and "GSK Inhaled")
Concentration risk
Concentration risk (as a percent)	16.00%	84.00%

Significant Accounting Policies - Property, Plant and Equipment (Details)	12 Months Ended
	Dec. 31, 2018
Lab and build-to-suit equipment \| Minimum
Property, plant and equipment
Useful life	5 years
Lab and build-to-suit equipment \| Maximum
Property, plant and equipment
Useful life	7 years
Office equipment
Property, plant and equipment
Useful life	5 years
Furniture and fixtures
Property, plant and equipment
Useful life	10 years
Computer equipment
Property, plant and equipment
Useful life	3 years
Leasehold improvements
Property, plant and equipment
Property plant and equipment estimated usefull lives	Lesser of life of the asset or remaining lease term

Significant Accounting Policies - Impairment (Details)	12 Months Ended
Significant Accounting Policies - Impairment (Details)	Dec. 31, 2018 USD ($)
Impairment of LongLived Assets
Impairment of long-lived assets	$ 0

Significant Accounting Policies - Revenue Recognition (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Jan. 01, 2018
Assets
Prepaid expenses and other current assets	$ 219,057	$ 443,460	$ 454,010
Prepaid expenses and other assets	1,260,951	1,115,972	1,161,501
Liabilities
Current portion of deferred revenue		3,605,199	3,710,710
Long-term deferred revenue	8,071,920	5,527,296	5,982,591
Stockholders' equity (deficit):
Accumulated deficit	(167,053,897)	(113,413,311)	(113,918,038)
Statement of Operations and Comprehensive Loss:
Revenues	2,706,981
Costs and expenses:
Cost of sales	121,391
Net loss	(53,135,859)	(29,154,240)
Without Adoption of Topic 606
Assets
Prepaid expenses and other current assets	519,057
Prepaid expenses and other assets	657,092
Liabilities
Current portion of deferred revenue	3,000,000
Long-term deferred revenue	2,033,333
Stockholders' equity (deficit):
Accumulated deficit	(164,319,169)
Statement of Operations and Comprehensive Loss:
Revenues	5,436,630	$ 7,258,123
Costs and expenses:
Cost of sales	394,356
Net loss	(50,679,175)
Adjustments
Assets
Prepaid expenses and other current assets	(300,000)		10,550
Prepaid expenses and other assets	603,859		45,529
Liabilities
Current portion of deferred revenue	(3,000,000)		105,511
Long-term deferred revenue	6,038,587		455,295
Stockholders' equity (deficit):
Accumulated deficit	2,734,728		$ (504,727)
Statement of Operations and Comprehensive Loss:
Revenues	(2,729,649)
Costs and expenses:
Cost of sales	(272,965)
Net loss	$ 2,456,684

Significant Accounting Policies - Segment Data (Details) - segment	3 Months Ended	9 Months Ended
	Dec. 31, 2018	Sep. 30, 2018
Significant Accounting Policies
Number of reportable segments	1	2

Significant Accounting Policies - Defined Contribution Retirement Plan (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Defined Contribution Retirement Plan
Employees service Period	60 days
Matching contribution (as a percent)	4.00%
Contributions due	$ 365,988	$ 377,623

Significant Accounting Policies - Net Loss Per Share (Details) - shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Antidilutive securities excluded from computation of earnings per share
Total	1,829,037	5,319,275
Reconciling items between Basic and Diluted loss per share	0	0
Preferred stock
Antidilutive securities excluded from computation of earnings per share
Total		4,542,665
Stock Options.
Antidilutive securities excluded from computation of earnings per share
Total	1,658,112	497,329
Warrants
Antidilutive securities excluded from computation of earnings per share
Total	170,925	279,281

Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Carrying Value
Significant Accounting Policies
Total financial instruments	$ 11,944,549	$ 23,627,990
Carrying Value \| A&R LSA
Significant Accounting Policies
Total financial instruments	10,802,355
Carrying Value \| Pacific Western Bank Tranche I note
Significant Accounting Policies
Total financial instruments		2,488,572
Carrying Value \| Pacific Western Bank Tranche II note
Significant Accounting Policies
Total financial instruments		2,820,382
Carrying Value \| Pacific Western Bank Tranche III note
Significant Accounting Policies
Total financial instruments		3,760,509
Carrying Value \| CSC build-to-suit equipment financing, net of discount
Significant Accounting Policies
Total financial instruments	1,142,194
Carrying Value \| UNC promissory note
Significant Accounting Policies
Total financial instruments		2,257,684
Carrying Value \| Convertible notes
Significant Accounting Policies
Total financial instruments		9,837,984
Carrying Value \| Warrant liabilities
Significant Accounting Policies
Total financial instruments		2,462,859
Level 2 \| Fair Value
Significant Accounting Policies
Total financial instruments	11,723,785	11,408,823
Level 2 \| Fair Value \| A&R LSA
Significant Accounting Policies
Total financial instruments	10,412,650
Level 2 \| Fair Value \| Pacific Western Bank Tranche I note
Significant Accounting Policies
Total financial instruments		2,512,301
Level 2 \| Fair Value \| Pacific Western Bank Tranche II note
Significant Accounting Policies
Total financial instruments		2,845,194
Level 2 \| Fair Value \| Pacific Western Bank Tranche III note
Significant Accounting Policies
Total financial instruments		3,793,644
Level 2 \| Fair Value \| CSC build-to-suit equipment financing, net of discount
Significant Accounting Policies
Total financial instruments	$ 1,311,135
Level 2 \| Fair Value \| UNC promissory note
Significant Accounting Policies
Total financial instruments		2,257,684
Level 3 \| Fair Value
Significant Accounting Policies
Total financial instruments		31,165,127
Level 3 \| Fair Value \| Convertible notes
Significant Accounting Policies
Total financial instruments		28,702,268
Level 3 \| Fair Value \| Warrant liabilities
Significant Accounting Policies
Total financial instruments		$ 2,462,859

Significant Accounting Policies - Embedded Derivatives (Details) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Preferred stock - Series D
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001

Significant Accounting Policies - Deferred Offering Costs (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Prepaid expenses and other assets
Deferred offering costs	$ 110,365	$ 125,000

Significant Accounting Policies - Income Taxes (Details) - USD ($) $ in Millions		12 Months Ended
	Dec. 22, 2017	Dec. 31, 2018	Dec. 31, 2017
Significant Accounting Policies
Corporate income tax rate (as a percent)	35.00%	21.00%	34.00%
Decrease in deferred tax assets			$ 14.1

Common and Preferred Stock - Authorized Capital (Details)	Dec. 31, 2018 $ / shares shares
Common and Preferred Stock
Stock, shares authorized (in shares)	50,000,000
Stock, par value (in dollars per share) \| $ / shares	$ 0.001
Common stock, shares designated (in shares)	40,000,000
Preferred stock, shares designated (in shares)	10,000,000

Common and Preferred Stock - 2004, 2016 and 2018 Plans (Details) - shares	Dec. 31, 2018	Jul. 19, 2018
2004 Plan
Common and Preferred Stock
Shares reserved for issuance	422,640
2016 Plan
Common and Preferred Stock
Shares reserved for issuance	1,011,138
2018 Plan
Common and Preferred Stock
Shares reserved for issuance	1,600,000	1,600,000

Common and Preferred Stock - Convertible Notes and Series D Financing (Details) - USD ($)	1 Months Ended	12 Months Ended
	Feb. 28, 2018	Dec. 31, 2018	Jul. 30, 2018	Dec. 31, 2017
Common and Preferred Stock
Proceeds from sale of preferred stock		$ 25,106,896
Convertible Notes
Common and Preferred Stock
Debt issued				$ 27,400,000
Interest rate (as a percent)				8.00%
Preferred stock - Series D
Common and Preferred Stock
Proceeds from sale of preferred stock	$ 25,600,000
Preferred stock, par value (in dollars per share)		$ 0.001		$ 0.001
Share price	$ 0.59808
Issuance of preferred stock (in shares)	91,147,482
Dividend (as percent)	8.00%
Dividend (in dollars per share)	$ 0.0478
Liquidation preference	$ 54,500,000
Preferred stock - Series D \| Convertible Notes
Common and Preferred Stock
Conversion of convertible debt	$ 28,900,000
Preferred stock - Series C-1
Common and Preferred Stock
Preferred stock, par value (in dollars per share)	$ 0.001	0.001		0.001
Share price				0.59808
Common stock - Class B- Non-voting
Common and Preferred Stock
Common stock, par value (in dollars per share)		$ 0.001	$ 0.001	$ 0.001

Common and Preferred Stock - Initial Public Offering (Details) - USD ($)	1 Months Ended	12 Months Ended
	Jul. 31, 2018	Dec. 31, 2018	Sep. 30, 2018
Common and Preferred Stock
Net proceeds of initial public offering ("IPO")		$ 47,320,233
Aggregate number of shares issued upon conversion of convertible preferred stock			9,948,207
IPO
Common and Preferred Stock
Share issuances (in shares)	4,833,099

Common and Preferred Stock - Common stock (Details) - $ / shares	Dec. 31, 2018	Jul. 30, 2018	Dec. 31, 2017
Common stock - Class B- Non-voting
Common and Preferred Stock
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001	$ 0.001

Common and Preferred Stock - Warrants (Details) - $ / shares		12 Months Ended
	Jul. 30, 2018	Dec. 31, 2018	Mar. 28, 2018	Feb. 28, 2018	Dec. 31, 2017
Warrants
Term		10 years
Preferred stock - Series D
Warrants
Warrants outstanding				3,698,128
Preferred stock - Series B
Warrants
Warrants outstanding					123,215
Exercise price			$ 3.56
Common stock - Voting
Warrants
Warrants outstanding		170,925
Number of common stock warrants issued in exchange for the original preferred stock warrants	219,761
Exercise of common stock warrants (in shares)		48,836
Exercise price		$ 0.0168
Warrants to purchase shares of common stock (in shares)					14,663

Stock Options - Other (Details) - shares		12 Months Ended
Stock Options - Other (Details) - shares	Jul. 19, 2018	Dec. 31, 2018
Stock Options
Vesting period		4 years
Contractual life		P10Y
2018 Plan
Stock Options
Shares reserved for issuance	1,600,000	1,600,000
Reserve increase, percentage of number of shares of common stock issued and outstanding	4.00%

Stock Options - FV Assumptions (Details) - $ / shares	12 Months Ended
Stock Options - FV Assumptions (Details) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Assumptions used for estimating the fair value of stock options granted
Risk-free interest rate, minimum	2.67%	1.34%
Risk-free interest rate, maximum	3.01%	1.99%
Volatility, minimum	78.00%	69.00%
Volatility, maximum	99.00%	100.00%
Expected life	6 years 3 months	6 years 3 months
Weighted-average fair value per share	$ 7.25	$ 13.97

Stock Options - Summary of Stock Option Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Shares Available for Issuance
Beginning Balance (in shares)	31,192	45,275
Options granted (in shares)	(1,231,541)	(14,083)
RSU's granted (in shares)	(185,768)
Ending Balance (in shares)	1,193,329	31,192
Options Outstanding
Beginning Balance (in shares)	668,316	728,344
Removal of partial options resulting from reverse split (in shares)	(323)
Options granted (in shares)	1,231,541	14,083
Exercised (in shares)	(119,793)	(15,169)
Cancelled/expired (in shares)		(58,942)
Ending Balance (in shares)	1,658,112	668,316
Weighted Average Exercise Price
Beginning Balance (in dollars per share)	4.54	4.38
Options granted (in dollars per share)	$ 10.22	$ 20.36
RSU's granted (in dollars per share)	11.04
Exercised (in dollars per share)	$ 4.15	5.72
Cancelled/expired (in dollars per share)		$ 2.19
Ending Balance (in dollars per share)	8.76	4.54
2004 Plan
Options Outstanding
Cancelled/expired (in shares)	(70,298)
Weighted Average Exercise Price
Cancelled/expired (in dollars per share)	$ 7.39
2016 Plan
Shares Available for Issuance
Shares reserved for future issuance (in shares)	979,446
Options Outstanding
Cancelled/expired (in shares)	(51,331)
Weighted Average Exercise Price
Cancelled/expired (in dollars per share)	$ 8.68
2018 Plan
Shares Available for Issuance
Shares reserved for future issuance (in shares)	1,600,000

Stock Options - Summary of Stock Options Vested and Expected to Vest (Details)	12 Months Ended
	Dec. 31, 2018 $ / shares shares
Stock options vested and expected to vest
Number of options, outstanding and expected to vest \| shares	1,442,803
Number of options, vested and exercisable \| shares	408,693
Weighted average remaining contractual life, outstanding and expected to vest	8 years 1 month 2 days
Weighted average remaining contractual life, vested and exercisable	5 years 4 months 10 days
Weighted average exercise price, outstanding and expected to vest \| $ / shares	$ 8.49
Weighted average exercise price, vested and exercisable \| $ / shares	$ 4.62

Stock Options - Narrative (Details) - USD ($)		12 Months Ended
Stock Options - Narrative (Details) - USD ($)	Feb. 06, 2019	Dec. 31, 2018	Dec. 31, 2017	Jan. 01, 2019	Jul. 19, 2018	Dec. 31, 2016
Stock Options
Weighted average grant date price per share		$ 10.22	$ 20.36
Exercise of stock options to purchase shares of common stock (in shares)		119,793	15,169
Proceeds from stock options exercised		$ 334,711
Intrinsic value of options exercised		2,097,888
Intrinsic value of options outstanding		21,397,470
Intrinsic value of options exercisable		$ 31,178,309
Weighted average remaining contractual term of options outstanding		9 years 7 days
Weighted average remaining contractual term of options exercisable		8 years 3 months
Stock based compensation expense for employee stock option awards		$ 514,092	$ 2,195,075
Total unrecognized compensation cost		$ 7,547,104
Stock based compensation expense, weighted average period		2 years 11 months 27 days
Options granted (in shares)		1,231,541	14,083
Options granted (in dollars per share)		$ 10.22	$ 20.36
Vesting period		4 years
Total options		1,658,112	668,316			728,344
2016 Plan
Stock Options
Shares reserved for issuance		1,011,138
2018 Plan
Stock Options
Shares reserved for issuance		1,600,000			1,600,000
Separation Agreement \| Former Senior Vice President
Stock Options
Total options		20,383
Additional stock option expense		$ 17,497
Restricted Stock Units \| 2016 Plan
Stock Options
Shares approved by board		185,768
Weighted average fair value (in dollars per share)		$ 11.04
Vesting period		4 years
Maximum \| Separation Agreement \| Former Senior Vice President
Stock Options
Post separation consulting agreement term		2 years
Subsequent event
Stock Options
Options granted (in shares)	395,408
Options granted (in dollars per share)	$ 14.20
Subsequent event \| 2018 Plan
Stock Options
Shares reserved for issuance				2,220,778

License Agreements (Details) $ in Millions	1 Months Ended		12 Months Ended
License Agreements (Details) $ in Millions	Jun. 30, 2016 USD ($) Milestone	Jun. 30, 2012 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2012 USD ($)	Sep. 30, 2012 USD ($)
UNC letter agreement
Collaborative arrangements and non-collaborative arrangement transactions
Number of milestone \| Milestone	2
Payment of additional fee	$ 1.5
UNC letter agreement \| Preferred stock - Series C-1
Collaborative arrangements and non-collaborative arrangement transactions
Preferred stock, value of shares issued		$ 1.2
UNC letter agreement \| UNC
Collaborative arrangements and non-collaborative arrangement transactions
Sub license fees			$ 2.5	$ 2.8
UNC letter agreement \| GlaxoSmithKline ("GSK" and "GSK Inhaled")
Collaborative arrangements and non-collaborative arrangement transactions
Up front payments received			$ 20.0	$ 14.0
UNC promissory note
Collaborative arrangements and non-collaborative arrangement transactions
Debt issued					$ 0.6
UNC promissory note \| UNC letter agreement
Collaborative arrangements and non-collaborative arrangement transactions
Debt issued		$ 0.6

Revenue From Contracts With Customers - Additional information (Details) - USD ($) $ in Millions	1 Months Ended		12 Months Ended
	Jun. 30, 2016	Sep. 30, 2015	Dec. 31, 2018
Revenue From Contracts With Customers
Non-refundable payment to be received		$ 15.0
Non-refundable up-front fee	$ 1.0
Unamortized balance of deferred revenue that was recorded as revenues due to the termination of the development and license agreement			$ 0.9
Unamortized balance of deferred sublicense payments that was recorded as cost of sales due to the termination of the development and license agreement			$ 0.1

Revenue From Contracts With Customers - Disaggregation of revenue (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Disaggregation of Revenue
Revenue	$ 2,706,981
Deferred Revenue
Revenue recognized which was included in deferred revenue at beginning or period		$ 3,300,000
GSK Inhaled
Disaggregation of Revenue
Revenue	438,351
Other
Disaggregation of Revenue
Revenue	2,268,630
Non-Refundable Payments - Milestones
Disaggregation of Revenue
Revenue	45,058
Non-Refundable Payments - Milestones \| GSK Inhaled
Disaggregation of Revenue
Revenue	45,058
Non-Refundable Payments - Up-front Payments
Disaggregation of Revenue
Revenue	1,168,712
Non-Refundable Payments - Up-front Payments \| GSK Inhaled
Disaggregation of Revenue
Revenue	225,293
Non-Refundable Payments - Up-front Payments \| Other
Disaggregation of Revenue
Revenue	943,419
Research and Development Services
Disaggregation of Revenue
Revenue	1,493,211	3,914,907
Research and Development Services \| GSK Inhaled
Disaggregation of Revenue
Revenue	168,000	3,114,311
Research and Development Services \| Other
Disaggregation of Revenue
Revenue	1,325,211	800,596
Without Adoption of Topic 606
Disaggregation of Revenue
Revenue	5,436,630	7,258,123
Deferred Revenue
Revenue recognized which was included in deferred revenue at beginning or period	$ 1,200,000
Without Adoption of Topic 606 \| GSK Inhaled
Disaggregation of Revenue
Revenue		6,114,311
Without Adoption of Topic 606 \| Other
Disaggregation of Revenue
Revenue		1,143,812
Without Adoption of Topic 606 \| Non-Refundable Payments - Up-front Payments
Disaggregation of Revenue
Revenue		3,343,216
Without Adoption of Topic 606 \| Non-Refundable Payments - Up-front Payments \| GSK Inhaled
Disaggregation of Revenue
Revenue		3,000,000
Without Adoption of Topic 606 \| Non-Refundable Payments - Up-front Payments \| Other
Disaggregation of Revenue
Revenue		$ 343,216

Revenue From Contracts With Customers - Performance Obligation (Details) - USD ($) $ in Millions	1 Months Ended
	Dec. 31, 2017	Dec. 31, 2018
Revenue From Contracts With Customers
Amount of deferred revenue previously considered current, reclassified to long-term	$ 3.0
Revenue, remaining performance obligation		$ 8.0
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2019-01-01
Revenue From Contracts With Customers
Percentage of remaining performance obligation to be recognized as revenue		0.00%
Remaining performance obligation period		12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-01-01
Revenue From Contracts With Customers
Percentage of remaining performance obligation to be recognized as revenue		3.00%
Remaining performance obligation period		12 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01
Revenue From Contracts With Customers
Percentage of remaining performance obligation to be recognized as revenue		11.00%
Remaining performance obligation period		12 months

Revenue From Contracts With Customers - Deferred Sublicense Payments (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Current and long-term prepaid expenses
Revenue From Contracts With Customers
Deferred sublicense payments	$ 0	$ 319,758
Other assets, net
Revenue From Contracts With Customers
Deferred sublicense payments	$ 807,192	$ 552,730

Property, Plant and Equipment - Summary (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Property, plant and equipment
Total property, plant and equipment	$ 17,435,430	$ 16,046,616
Accumulated depreciation	(9,304,722)	(7,803,604)
Property, plant and equipment, net	8,130,708	8,243,012
Lab and build-to-suit equipment
Property, plant and equipment
Total property, plant and equipment	6,123,194	3,847,546
Grant equipment
Property, plant and equipment
Total property, plant and equipment	1,143,701	1,143,701
Office equipment
Property, plant and equipment
Total property, plant and equipment	130,460	123,655
Furniture and fixtures
Property, plant and equipment
Total property, plant and equipment	205,051	205,051
Computer equipment
Property, plant and equipment
Total property, plant and equipment	799,515	677,569
Leasehold improvements
Property, plant and equipment
Total property, plant and equipment	8,878,361	7,218,687
Construction-in-progress
Property, plant and equipment
Total property, plant and equipment	$ 155,148	$ 2,830,407	$ 337,255

Property, Plant and Equipment - Depreciation and other expenses (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment
Depreciation expense	$ 1,543,667	$ 931,931
Maintenance and repairs expense	$ 153,278	$ 244,885

Property, Plant and Equipment - Build-to-Suit (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Property, plant and equipment
Build-to-suit asset, ultimate cost			$ 1,600,000
Build-to-suit asset, recorded in construction-in-progress		$ 1,341,810
Deferred financing obligation		$ 1,341,810
Build-to-suit asset cost	$ 1,422,268
CSC build-to-suit equipment financing, net of discount
Property, plant and equipment
Long-term debt	$ 1,142,194

Property, Plant and Equipment - CIP (Details) - USD ($)	12 Months Ended
Property, Plant and Equipment - CIP (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Construction-in-Progress Activity
Property, Plant and Equipment, Gross, Beginning Balance	$ 16,046,616
Property, Plant and Equipment, Gross, Ending Balance	17,435,430	$ 16,046,616
Interest capitalized to properties under development	3,925	57,625
Construction-in-progress
Construction-in-Progress Activity
Property, Plant and Equipment, Gross, Beginning Balance	2,830,407	337,255
Add: Purchases related to CIP	622,227	3,921,014
Less: Transfer due to placed in service	(3,297,486)	(1,427,862)
Property, Plant and Equipment, Gross, Ending Balance	155,148	2,830,407
Construction-in-Progress, Leasehold Improvements
Construction-in-Progress Activity
Property, Plant and Equipment, Gross, Beginning Balance	1,208,107	337,255
Add: Purchases related to CIP	425,438	2,298,714
Less: Transfer due to placed in service	(1,570,194)	(1,427,862)
Property, Plant and Equipment, Gross, Ending Balance	63,351	1,208,107
Construction in Progress, Build-to-suit Equipment
Construction-in-Progress Activity
Property, Plant and Equipment, Gross, Beginning Balance	1,583,054
Add: Purchases related to CIP	82,687	1,583,054
Less: Transfer due to placed in service	(1,665,741)
Property, Plant and Equipment, Gross, Ending Balance		1,583,054
Construction-in-Progress, Lab Equipment
Construction-in-Progress Activity
Property, Plant and Equipment, Gross, Beginning Balance	39,246
Add: Purchases related to CIP	114,102	39,246
Less: Transfer due to placed in service	(61,551)
Property, Plant and Equipment, Gross, Ending Balance	$ 91,797	$ 39,246

Income Taxes - Provision (Details) - USD ($)	12 Months Ended
Income Taxes - Provision (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Income Taxes
Provision for income taxes	$ 0	$ 0

Income Taxes - Deferred Tax Assets (Details) - USD ($)	12 Months Ended
Income Taxes - Deferred Tax Assets (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Non-current deferred income tax assets:
Tax loss carryforwards	$ 30,239,898	$ 22,274,378
Deferred revenue	1,856,507	2,098,191
Research and development credits	2,382,047	2,382,047
Stockbased compensation	489,694	277,948
Bad debt		11,053
Compensation	431,649	9,766
Fixed assets	160,784	63,570
Patent amortization	97,942	106,622
Other	669,151	768,936
Valuation allowance	(36,327,672)	$ (27,992,511)
Valuation allowance
Increase (Decrease) in the valuation allowance	$ 8,335,161

Income Taxes - Carryforwards (Details)	Dec. 31, 2018 USD ($)
Federal
Income Taxes
Income tax loss carryforwards, subject to expiration	$ 97,268,927
Income tax loss carryforwards, not subject to expiration	34,183,499
State
Income Taxes
Income tax loss carryforwards, subject to expiration	132,387,480
Income tax loss carryforwards, not subject to expiration	$ 293,910

Income Taxes - Tax Credit Carryforwards (Details)	Dec. 31, 2018 USD ($)
Federal
Income Taxes
Tax credit carryforward	$ 2,382,047

Income Taxes - Other (Details) - USD ($) $ in Millions		12 Months Ended
Income Taxes - Other (Details) - USD ($) $ in Millions	Dec. 22, 2017	Dec. 31, 2018	Dec. 31, 2017
Income Taxes
Corporate income tax rate (as a percent)	35.00%	21.00%	34.00%
Decrease in deferred tax assets			$ 14.1

Income Taxes - Reconciliation (Details) - USD ($)		12 Months Ended
Income Taxes - Reconciliation (Details) - USD ($)	Dec. 22, 2017	Dec. 31, 2018	Dec. 31, 2017
Income Tax Rate Reconciliation, Amount
Income tax benefit at statutory rate		$ (11,158,530)	$ (9,912,442)
State income taxes, net of federal tax benefit		(1,062,492)	(581,901)
Non-deductible expenses		6,810	12,757
Stockbased compensation		10,925	153,033
Non-deductible interest expense		4,074,501	3,795,060
Derivative and warrant fair value adjustments		(63,873)	(4,040,646)
Change in federal rate			14,113,550
Change in state rate		(2,842)	371,138
Other		(139,660)	24,235
Change in valuation allowance		8,335,161	(3,934,784)
Income Tax Expense (Benefit), Total		$ 0	$ 0
Income Tax Rate Reconciliation, Percent
Income tax benefit at statutory rate	35.00%	21.00%	34.00%
State income taxes, net of federal tax benefit		2.00%	2.00%
Non-deductible expenses			(0.10%)
Stockbased compensation			(0.50%)
Non-deductible interest expense		(7.70%)	(13.00%)
Derivative and warrant fair value adjustments		0.10%	13.90%
Change in federal rate			(48.40%)
Change in state rate			(1.30%)
Other		0.30%	(0.10%)
Change in valuation allowance		(15.70%)	13.50%
Provision for income taxes		0.00%	0.00%
Unrecognized Tax Benefits
Unrecognized Tax Benefits		$ 0
Interest or penalties recognized		$ 0	$ 0

Related Party Transactions (Details) - USD ($)	1 Months Ended	12 Months Ended
Related Party Transactions (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Jan. 01, 2017
Related party transaction
Number of stock options exercised that were financed through the issuance of a note receivable from an officer of the Company				29,713
Value of stock options exercised that were financed through the issuance of a note receivable from an officer of the Company				$ 94,271
Note receivable from Company's Chief Executive Officer, interest rate (as a percent)				1.00%
Note receivable from the Company's Chief Executive Officer for the financing of stock options					$ 55,000
Envisia
Related party transaction
Number of common shares of Envisia common stock exchanged by the Company as the result of the license related to the Otic field, along with other intellectual property rights, as defined, purchased back by the Company	75,000
Envisia \| Research and Development Expenses
Related party transaction
Sharing of patent costs		$ 0	$ 105,623

Commitments and Contingencies - Operating Leases (Details)	Dec. 31, 2018 USD ($)	Nov. 30, 2018 USD ($) ft²	Dec. 31, 2017 USD ($)	Jan. 31, 2017 USD ($)	Nov. 30, 2015 USD ($)	Nov. 30, 2014 USD ($)
Operating Leases
Unamortized deferred rent and allowances	$ 2,674,683		$ 2,881,180
Lease Extension, November 2014
Operating Leases
Tenant allowances recorded as long-term deferred rent liability						$ 228,973
Lease Extension, November 2015
Operating Leases
Tenant allowances recorded as long-term deferred rent liability					$ 392,020
Lease Extension, January 2017
Operating Leases
Tenant allowances recorded as long-term deferred rent liability				$ 2,000,000
Renewable lease term				48 months
Lease Extension, November 2018
Operating Leases
Additional square footage to be leased per the letter of intent to expand the lease of the Company's primary building \| ft²		8,264
Square footage under the current lease which is to be terminated in exchange for entering into a new lease for the expansion of space of the Company's primary building \| ft²		4,400
Tenant allowance available to help fund the build out per the letter of intent to expand the lease of the Company's primary building		$ 1,000,000
Incremental rent over the terminated lease for the first twelve months		$ 100,000

Commitments and Contingencies - Future Minimum Operating Lease Payments (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Operating Leases
2019	$ 1,077,532
2020	1,168,710
2021	1,203,658
2022	1,239,885
2023	1,276,356
Thereafter	3,818,795
Total	9,784,936
Rent expense	$ 953,733	$ 1,046,721

Commitments and Contingencies - Capital Leases (Details)	12 Months Ended
	Dec. 31, 2018 USD ($)
Capital Leases
2019	$ 464,797
2020	354,739
2021	33,774
Total minimum lease payments	853,310
Less: Amount representing interest	(24,525)
Present value of minimum lease payments	828,785
Net book value of assets under capital lease	2,399,634
Present value of minimum lease payments due within one year	$ 452,703
Minimum
Capital leased assets
Interest rate, capital lease (as a percent)	0.20%
Maximum
Capital leased assets
Interest rate, capital lease (as a percent)	12.20%

Commitments and Contingencies - Contingent Consideration (Details) - Agreement with Chasm Technologies, Inc. - USD ($)	1 Months Ended	12 Months Ended
	Mar. 31, 2012	Dec. 31, 2017	Dec. 31, 2018
Commitments and Contingencies
Contingent consideration	$ 400,000
Consideration paid		$ 20,000
Contingent consideration due upon first dosing of first patient in the Phase 3 clinical trial	80,000
Remaining amount of contingent consideration due			$ 300,000
Maximum net sales amount that is used as the basis in determining the payment of future contingent royalties	$ 1,500,000
Contingent consideration liability		$ 380,000	$ 0

Commitments and Contingencies - Severance (Details)	12 Months Ended
Commitments and Contingencies - Severance (Details)	Dec. 31, 2018 USD ($)
Research and Development Expenses
Other
Employee severance cost	$ 404,407

Long Term Debt - Summary (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Long term debt
Less current portion	$ (316,906)	$ (15,608,349)
Long-term debt, less current portion	11,627,643	5,556,782
LSA with Pacific Western
Long term debt
Long-term debt		9,069,463
A&R LSA
Long term debt
Long-term debt	10,802,355
UNC promissory note
Long term debt
Long-term debt	0	2,257,684
Convertible Notes
Long term debt
Long-term debt	0	$ 9,837,984
CSC build-to-suit equipment financing, net of discount
Long term debt
Long-term debt	$ 1,142,194

Long Term Debt - Loan and Security Agreement (Details)						1 Months Ended
Long Term Debt - Loan and Security Agreement (Details)	Oct. 26, 2018 USD ($)	Aug. 06, 2018 USD ($)	Mar. 29, 2018 USD ($)	Nov. 30, 2017 USD ($)	Aug. 06, 2017	Oct. 31, 2016 USD ($) tranche	Jan. 31, 2016	Sep. 30, 2012 USD ($)
UNC promissory note
Debt instrument
Repayment of debt	$ 1,800,000
Face amount								$ 600,000
LSA with Pacific Western
Debt instrument
Maximum borrowing capacity						$ 10,000,000
Extinguishment of debt, amount	$ 8,000,000
Number of tranches \| tranche						3
Amortization period of equal monthly payments of principal plus interest					30 months
Interest rate during the interest only period (as a percent)							3.75%
Interest only period (in months)							18 months
Interest rate (as a percent)							5.00%
Liquidity event success fee paid		$ 400,000
Minimum proceeds from the issuance of equity instruments to be received for minimum cash balance covenant to be waived				$ 12,000,000
Minimum cash balance to be maintained			$ 8,000,000	$ 2,500,000
Increase in prior cash balance			5,500,000
Periodic principal payments			$ 600,000
A&R LSA
Debt instrument
Threshold period of prior written notification to the bank for replacing or suffer the departure of the CEO or CFO	10 days
Interest rate (as a percent)	5.00%
Debt term	4 years
Interest only extension period upon the Company closing on at least $40 million in new financing	6 months
Minimum amount of new financing the Company is required to close on for the interest only period to be extended for a period of six months	$ 40,000,000
Recorded gain on refinancing	100,000
Minimum cash balance to be maintained	8,500,000
Minimum cash covenant upon new financing in addition to clinical milestones	6,000,000
A&R LSA \| Minimum
Debt instrument
Success fee tiered by tranche and also based upon new financing	$ 187,000
Prepayment penalty for first 24 months (as a percent)	1.00%
A&R LSA \| Maximum
Debt instrument
Success fee tiered by tranche and also based upon new financing	$ 375,000
Prepayment penalty for first 24 months (as a percent)	2.00%
A&R LSA \| Tranche One
Debt instrument
Maximum borrowing capacity	$ 11,000,000
A&R LSA \| Tranche Two
Debt instrument
Additional borrowing capacity upon the full enrollment of the LIQ861 Phase 3 clinical triales	$ 5,000,000

Long Term Debt - Equipment Financing (Details) - CSC build-to-suit equipment financing, net of discount	12 Months Ended
	Dec. 31, 2018
Debt instrument
Debt term	3 years
Implied interest rate (as a percent)	5.40%
Effective interest rate (as a percent)	14.90%
Purchase option amount of the build-to-suit equipment, expressed as a percentage of the initial financed amount	23.00%

Long Term Debt - UNC Promissory Note (Details) - UNC promissory note - USD ($)		1 Months Ended
	Aug. 02, 2018	Jun. 30, 2016	Sep. 30, 2012	Dec. 31, 2018	Dec. 31, 2017
Debt instrument
Debt issued			$ 600,000
Increase in notes payable		$ 1,500,000
Contingent liability		$ 1,500,000
Increase in interest rate of combined notes payable		1.00%
Long-term debt				$ 0	$ 2,257,684
Repayments of Debt	$ 600,000
one year LIBOR
Debt instrument
Spread on variable rate			2.00%

Long Term Debt - Convertible Notes (Details) - USD ($)		1 Months Ended				2 Months Ended	12 Months Ended
Long Term Debt - Convertible Notes (Details) - USD ($)	Aug. 02, 2017	Feb. 28, 2018	Nov. 30, 2017	Jul. 31, 2017	Jan. 31, 2017	Feb. 28, 2017	Dec. 31, 2018	Dec. 31, 2017
Debt instrument
Proceeds from sale of preferred stock							$ 25,106,896
Unamortized discount charged to interest expense upon conversion of notes							17,550,541	$ 9,837,985
Component of Convertible notes
Principal amount of Convertible Notes							12,311,135
Unamortized discount on the notes							(326,246)
Convertible Notes
Debt instrument
Debt issued								$ 27,400,000
Interest rate (as a percent)								8.00%
Debt issuance costs								$ 1,397,624
Outstanding convertible notes, plus accrued interest converted into preferred stock							28,900,000
Unamortized discount charged to interest expense upon conversion of notes							17,600,000
Gain (loss) on conversion of the convertible note							0
Component of Convertible notes
Principal amount of Convertible Notes								27,388,524
Unamortized discount on the notes								(17,550,540)
Carrying value of convertible notes							$ 0	$ 9,837,984
January and February Notes
Debt instrument
Debt issued					$ 11,800,000	$ 11,800,000
Warrants to purchase maximum percentage of the aggregate principal amounts of the notes					25.00%	25.00%
Interest rate (as a percent)					8.00%	8.00%
Percentage of price paid per share by purchasers of common shares in a Foreign IPO, in which holders of the convertible debt have the option to convert the outstanding principal and unpaid accrued interest into common shares as such price	70.00%
Percentage of price paid per share by purchasers of common shares in a Domestic IPO, in which holders of the convertible debt have the option to convert the outstanding principal and unpaid accrued interest into common shares as such price							75.00%	75.00%
Percentage of the lowest price per share paid by investors participating in a qualified financing to be used in the quotient to determine the number of shares of preferred stock to be issued for automatic conversion of the convertible debt								75.00%
Conversion rate of the convertible debt if a Qualified Financing does not occur prior to year end (in dollars per share)								$ 0.59808
Percentage of the lowest price per share paid by investors participating in a Non-Qualified financing to be used in the quotient to determine the number of shares of the Company's stock to be issued for the conversion of the convertible debt upon election of the holders of the debt							75.00%	75.00%
Percentage of the outstanding principal of the convertible notes in which the holders have the option to receive a payment equal to the sum of this percentage and accrued but unpaid interest upon the consummation of a Strategic Transaction							200.00%	200.00%
Conversion rate of the convertible debt upon the consummation of a Strategic Transaction and at option of the holders of the convertible debt							$ 0.59808	$ 0.59808
Component of Convertible notes
Principal amount of Convertible Notes								$ 11,796,168
Unamortized discount on the notes								(5,504,878)
Carrying value of convertible notes								6,291,290
July Notes
Debt instrument
Debt issued				$ 10,400,000
Interest rate (as a percent)				8.00%
Conversion discounts				50.00%
Component of Convertible notes
Principal amount of Convertible Notes								10,442,356
Unamortized discount on the notes								(7,291,816)
Carrying value of convertible notes								3,150,540
Convertible Note with Advisor
Debt instrument
Debt issued				$ 400,000
November Notes
Debt instrument
Debt issued			$ 5,200,000
Interest rate (as a percent)			8.00%
Debt issuance costs			$ 400,000
Component of Convertible notes
Principal amount of Convertible Notes								5,150,000
Unamortized discount on the notes								(4,753,846)
Carrying value of convertible notes								$ 396,154
Preferred stock - Series C-1
Debt instrument
Share price								$ 0.59808
Preferred stock - Series C-1 \| November Notes
Debt instrument
Share price			$ 0.72877
Preferred stock - Series D
Debt instrument
Warrants outstanding		3,698,128
Proceeds from sale of preferred stock		$ 25,600,000
Share price		$ 0.59808
Preferred stock - Series D \| January and February Notes
Debt instrument
Warrants outstanding						3,698,128

Long Term Debt - Warrant Liabilities (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Warrants
Fair value, beginning of period	$ 2,462,859
Change in fair value	(277,715)	$ (2,011,263)
Fair value, end of period		2,462,859
Warrants
Warrants
Fair value, beginning of period	2,462,859
Issuance of warrants		4,474,122
Change in fair value	(277,715)	(2,011,263)
Transfer to additional paid-in capital	$ (2,185,144)
Fair value, end of period		$ 2,462,859

Long Term Debt - Derivative Liabilities (Details) - Derivative - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Derivative
Fair value, beginning of period	$ 0	$ 0
Issuance of derivatives		9,872,990
Change in fair value	0	(9,872,990)
Fair value, end of period	$ 0	$ 0

Long Term Debt - Conversion Feature (Details) - USD ($)	1 Months Ended		2 Months Ended	12 Months Ended
Long Term Debt - Conversion Feature (Details) - USD ($)	Nov. 30, 2017	Jul. 31, 2017	Feb. 28, 2017	Dec. 31, 2017
Debt instrument
Beneficial conversion feature				$ 12,119,584
Preferred stock - Series C-1
Debt instrument
Share price				$ 0.59808
January and February Notes
Debt instrument
Beneficial conversion feature			$ 2,956,166
July Notes
Debt instrument
Beneficial conversion feature		$ 4,935,246
November Notes
Debt instrument
Beneficial conversion feature	$ 5,150,000
November Notes \| Preferred stock - Series C-1
Debt instrument
Share price	$ 0.72877

Long Term Debt - Maturities of long-term debt (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Annual maturities of long-term debt
2019	$ 416,989
2020	4,483,486
2021	4,410,660
Thereafter	3,000,000
Total	12,311,135
Less: Unamortized discount	(326,246)
Less: Unamortized debt issuance costs	(40,340)
Less: Current portion of long-term debt	(316,906)	$ (15,608,349)
Long-term debt	$ 11,627,643	$ 5,556,782

Subsequent Events (Details) - $ / shares		12 Months Ended
Subsequent Events (Details) - $ / shares	Feb. 06, 2019	Dec. 31, 2018	Dec. 31, 2017	Jan. 01, 2019	Jul. 19, 2018
Subsequent events
Options granted (in shares)		1,231,541	14,083
Options granted (in dollars per share)		$ 10.22	$ 20.36
2018 Plan
Subsequent events
Shares reserved for issuance		1,600,000			1,600,000
Subsequent event
Subsequent events
Options granted (in shares)	395,408
Options granted (in dollars per share)	$ 14.20
Subsequent event \| 2018 Plan
Subsequent events
Shares reserved for issuance				2,220,778