Note 1 - Description of Business and Summary of Significant Accounting Policies

Nature of Business - Actinium Pharmaceuticals, Inc. (the "Company", "Actinium", or "We") is a clinical-stage, biopharmaceutical company focused on developing and potentially commercializing therapies for targeted conditioning prior to cell therapies such as a BMT or Bone Marrow Transplant or CAR-T, a type of cellular therapy that genetically alters a patient's own T cells to target and kill their cancer cells, and for other adoptive cell therapies. In addition, the Company is also developing potential therapies for targeting and killing of cancer cells either as single agents or in combination with other drugs.

Going concern - The Company has never generated revenue. Currently it does not have a recurring source of revenue to cover its operating costs. The Company has incurred net losses and negative operating cash flows since inception. As of December 31, 2018 and 2017, the Company's accumulated deficit was $186.9 million and $163.2 million, respectively. The Company's net loss was $23.7 million, $26.6 million, and $24.3 million for the years ended December 31, 2018, 2017 and 2016, respectively. These conditions raise substantial doubt as to our ability to continue as a going concern. As of December 31, 2018, in the Company had a balance of its cash and cash equivalents of $13.7 million. The Company's consolidated financial statements are prepared using Generally Accepted Accounting Principles in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities should the Company be unable to continue as a going concern. As of the date of filing this report, the Company expects that its existing resources will be sufficient to fund its planned operations into the fourth quarter of 2019; however, additional capital resources will be needed to fund operations longer-term. If the Company is unsuccessful in accomplishing its plans, it may have to delay or terminate existing and/or planned clinical trials and other related activity, which could have a material adverse impact on its business. The Company plans to continue as a going concern include obtaining capital from the sale of its equity securities, potential exercise of outstanding warrants, fees from licensing one or more of our product candidates, additional collaborations with our Iomab-ACT program and AWE technology platform, and short-term borrowings from banks, stockholders or other related parties, if needed. However, the Company cannot provide any assurance that we will be successful in accomplishing any of our plans.

The Company's ability to continue as a going concern is dependent upon its ability to successfully accomplish the plans described above and eventually to secure other sources of financing and attain profitable operations.

Principles of Consolidation - The consolidated financial statements include the Company's accounts and those of the Company's wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates in Financial Statement Presentation - The preparation of these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Company considers all highly liquid accounts with original maturities of three months or less to be cash equivalents. Balances held by the Company are typically in excess of Federal Deposit Insurance Corporation insured limits.

Property and Equipment - Machinery and equipment are recorded at cost and depreciated on a straight-line basis over estimated useful lives of three to five years. Furniture and fixtures are recorded at cost and depreciated on a straight-line basis over estimated useful lives of seven years. When assets are retired, the cost and related accumulated depreciation are removed from the accounts, and any related gain or loss is reflected in operations. Repairs and maintenance expenditures are charged to operations. Capitalized lease assets are recorded at the lesser of the present value of minimum lease payments or fair value and amortized over the estimated useful life of the related property or term of the lease.

Fair Value of Financial Instruments - Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. As required by ASC 820 "Fair Value Measurements and Disclosures", financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity's own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. 

Income Taxes - The Company provides for income taxes using the liability method. Under this method, deferred income tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities at each year-end and their respective tax bases, and are measured using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Significant judgment is required by management to determine the Company's provision for income taxes, deferred tax assets and liabilities, and the valuation allowance to record against net deferred tax assets, which are based on complex and evolving tax regulations throughout the world.

Deferred tax assets and other tax benefits are recorded when it is more likely than not that the position will be sustained upon audit. There were no tax positions for which it is considered reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next year. The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in operating expenses.

The Tax Cuts and Jobs Act, or the Act, was enacted in December 2017. The Act reduces the U.S. federal corporate tax rate from 35% to 21%. As a result, the Company evaluated and adjusted its deferred tax assets to reflect the new corporate tax rates as of December 31, 2017. As of December 31, 2018, upon completing its analysis of the Act, the Company believes that its disclosures in its financial statements as of December 31, 2017 remain accurate.

Revenue Recognition - The Company adopted new accounting guidance for revenue recognition, effective January 1, 2018, which did not have a significant impact on the Company's financial statements. Beginning January 1, 2018, revenues are recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration expected to be entitled to in exchange for those goods or services.

Research and Development Costs - Research and development costs are expensed as incurred. Research and development reimbursements are recorded by the Company as a reduction of research and development costs. 

Share-Based Payments - The Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. The Company accounts for forfeitures of stock options as they occur.

Net Loss Per Common Share - Basic loss per common share is computed by dividing the net loss available to common stockholders by the weighted average number of common shares outstanding during the reporting period. For the years ended December 31, 2018, 2017 and 2016, the Company's potentially dilutive shares, which include outstanding common stock options and warrants have not been included in the computation of diluted net loss per share as the result would have been anti-dilutive.

Subsequent Events - The Company's management reviewed all material events through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

Reclassifications - Certain reclassifications have been made to the prior-year financial statements to conform to the current-year presentation, including the addition of restricted cash to cash and cash equivalents on the consolidated statements of cash flows as a result of the adoption of new accounting guidance.

Accounting Standards Recently Adopted - In November 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") amending the presentation of restricted cash within the consolidated statements of cash flows. The new guidance requires that restricted cash be added to cash and cash equivalents on the consolidated statements of cash flows. The Company adopted this ASU on January 1, 2018 on a retrospective basis with the impact to its consolidated statements of cash flows for the year ended December 31, 2017:

There was no impact to the cash flows from operating, investing and financing activities for the year ended December 31, 2016 as the amount of restricted cash did not change during 2016.

Following is a summary of cash and cash equivalents and restricted cash at December 31, 2018, 2017 and 2016, respectively:

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration for which the entity expects to be entitled for that specific good or service. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. The Company adopted this ASU on January 1, 2018 and the adoption did not have a significant impact to the Company's financial statements.

In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of April 1, 2018. See Note 2 for further discussion.

Recent Accounting Standards –

In February 2016, FASB issued ASU No. 2016-02 Leases (Topic 842), which creates new accounting and reporting guidelines for leasing arrangements. The standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize on its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. The Company's initial evaluation of its current leases does not indicate that the adoption of this standard will have a material impact on its consolidated statements of operations. However, the Company does expect that the adoption of the standard will have an impact on its consolidated balance sheets for the recognition of certain operating leases as right-of-use assets and lease liabilities.

In June 2018, the FASB issued ASU 2018-07 to expand the scope of ASC Topic 718, Compensation - Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees. The standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The Company is currently evaluating the impact of the new standard on its financial statements and related disclosures, but does not expect this ASU to have a material impact on its financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820). The updated guidance improves the disclosure requirements on fair value measurements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of the standard for disclosures modified or removed with a delay of adoption of the additional disclosures until their effective date. The Company is in the process of evaluating the provisions of the ASU but does not expect it to have a material effect on its consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606, which, among other things, provides guidance on how to assess whether certain collaborative arrangement transactions should be accounted for under Topic 606. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The Company is in the process of evaluating the impact the standard will have on its financial statements.

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The Company anticipates its first presentation of changes in stockholders' equity will be included in its Form 10-Q for the three months ended March 31, 2019.