In the latter part of April 2016, the Company wrote off its patent rights to Delparantag. Delparantag was acquired by Cellceutix in the purchase of assets from the Polymedix Estate. The Company believes the compound which had clinical activity but also safety concerns in a prior clinical trial by Polymedix, is now a low priority compound for further development among the compounds in the Company’s portfolio. The decision by management was made after factoring in today’s regulatory and litigious climate. The Company recorded impairment loss on the patent costs of Delparantag and for various patents totaling approximately of $648,000 (i.e. the cost of $782,000 less $134,000 of accumulated amortization) in the fourth quarter of its fiscal year end June 30, 2016.
These things SHOULDN'T have anything to do with each other: "and was required to give up potentially valuable patents to help fund operations and defense costs"
"The Company recorded impairment loss on the patent costs of Delparantag and for various patents totaling approximately of $648,000 (i.e. the cost of $782,000 less $134,000 of accumulated amortization) in the fourth quarter of its fiscal year end June 30, 2016."
Hopefully you're email will elicit the answer to what patents were given up. As to the second quote, apparently CTIX attributed $782,000 of the total Polymedix acquisition cost to Delparantag. They have abandoned its development and are writing off the remaining asset value. That is an accounting entry which resulted in $648,000 in losses in the last quarter. It in no way acted "to help fund operations and defense costs".
I hope this isn't what happened because it would be a mistaken understanding, but for your consideration I'll propose the possibility: The Cash flow Statement is the most confusing of the financial statements and it could be the source of this particular confusion. Its purpose is to reconcile (account for) the difference between the cash balance at the beginning of the period and the balance at the end. Unfortunately it does it an a very convoluted way, using counter-intuitive terms. I won't try to explain it, but... https://www.sec.gov/Archives/edgar/data/1355250/000147793216012448/ctix_10k.htm
It groups the different reconciling items in several categories, the first of which is CASH FLOWS FROM OPERATING ACTIVITIES: The first item is the net loss, which is the foundation for the reduction of cash in the period. Then there is a list of items under the heading Adjustments to reconcile net loss to net cash used in operating activities: Perhaps the most recognized of these items is depreciation. As you can see there is no parenthesis around that number...but that DOESN'T mean we can think of it as a CASH FLOW FROM OPERATING ACTIVITIES...obviously it is an expense, but it isn't a CASH expense. And since it has already been reflected in the net loss it has to be added back to "correct" the fact that the net loss includes an amount that didn't actually reduce cash. As you can see the Impairment of patent costs of $648,000 is treated the same way depreciation is treated in this section of the statement. It too is NOT a CASH FLOW FROM OPERATING ACTIVITIES in spite of the fact that the Cash Flow Statement seems to indicate that it is. It is simply a non-cash cost.
Maybe a misunderstanding of the above led to the "and was required to give up potentially valuable patents to help fund operations and defense costs" conclusion. Or maybe it was something else. I would expect that someone with an accounting background reviewed his comments, in which case it must have been something else.
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