Note 3 — Allocation

 

The expense allocations to Avenue, which represent Lucy Lu’s executive compensation, have been paid by Fortress and allocated by the Company between Avenue and Fortress based on time spent on Avenue projects versus time spent on Fortress projects. The allocations were based on assumptions that management believes are reasonable; however, these allocations are not necessarily indicative of the costs and expenses that would have resulted if Avenue had been operating as a stand-alone entity. Since Lucy Lu became a full-time employee for Avenue in June 2017, the allocations ceased as her time spent was 100% devoted to Avenue. For the years ended December 31, 2017 and 2016 and period from February 9, 2015 (Inception) to December 31, 2015, the allocated expenses related to Lucy Lu were approximately $0.2 million, $0.3 million and $0.1 million, respectively, and were recorded 50% to research and development and 50% to general and administration expenses. Upon the IPO, Fortress and Avenue agreed to extinguish the total amount accrued under these expense allocations. Therefore, the Company recorded the $0.6 million related to the allocation of Lucy Lu’s compensation as a contribution of capital on June 26, 2017.