ACHN 2017 Annual Report

In accruing service fees, we estimate the time period over which services will be provided and the level of effort in each period. If the actual timing of the provision of services or the level of effort varies from the estimate, we will adjust the accrual accordingly. The majority of our service providers invoice us monthly in arrears for services performed. Some of our service providers require upfront or milestone payments. If our estimate of services performed is less than the upfront or milestone payments, the difference is accounted for as a prepaid expense. In the event that we do not identify costs that have been incurred or we underestimate or overestimate the level of services performed or the costs of such services, our actual expenses could differ from such estimates. The date on which some services commence, the level of services performed on or before a given date and the cost of such services are often subjective determinations. Income Taxes We use an asset and liability approach for financial accounting and reporting of income taxes. Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax basis assets and liabilities and are measured by applying enacted rates and laws to taxable years in which differences are expected to be recovered or settled. Further, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the rate changes. A valuation allowance is required when it is “more likely than not” that all or a portion of deferred tax assets will not be realized. We apply the provisions of ASC 740, Income Taxes, which prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return, including a decision whether to file or not file a return in a particular jurisdiction. Our financial statements reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts. We do not have any unrecognized tax benefits as of December 31, 2017. We review all tax positions to ensure the tax treatment selected is sustainable based on its technical merits and that the position would be sustained if challenged. Results of Operations Results of operations may vary from period to period depending on numerous factors, including the progress of our research and development projects, technological advances, determinations as to the commercial potential of proposed products, and the timing of payments received under existing or future collaborations, strategic alliances, joint ventures or financings, if any. Revenues: During the year ended December 31, 2017, we did not recognize any revenue. During the years ended December 31, 2016 and 2015, we recognized revenue of $15.0 million and $66.1 million, respectively, under the Janssen Agreement which was terminated effective November 8, 2017. Comparison of the Years Ended December 31, 2017 and 2016 The decrease in collaboration revenue in 2017 is related to the recognition of revenue under the Janssen Agreement. During the year ended December 31, 2016, we recognized $15.0 million of revenue due to the achievement of a clinical enrollment milestone. The Janssen Agreement was terminated effective November 8, 2017 and there were no amounts recognized as revenue in 2017. Comparison of the Years Ended December 31, 2016 and 2015 The decrease in collaboration revenue in 2016 is related to the recognition of revenue under the Janssen Agreement. During the year ended December 31, 2016, we recognized $15.0 million of revenue under the 84