This management's discussion and analysis of financial condition and results of
operations and other portions of this quarterly report on Form 10-Q contain
forward-looking statements that involve risks and uncertainties. All statements
other than statements of current or historical fact contained in this quarterly
report, including statements regarding our future financial position, business
strategy, new products, budgets, liquidity, cash flows, projected costs,
regulatory approvals, or the impact of any laws or regulations applicable to us
and plans and objectives of management for future operations are forward-looking
statements. The words "anticipate," "believe," "continue," "should," "estimate,"
"expect," "intend," "may," "plan," "project," "will," and similar expressions,
as they relate to us, are intended to identify forward-looking statements. We
have based these forward-looking statements on our current expectations about
future events. While we believe these expectations are reasonable, such
forward-looking statements are inherently subject to risks and uncertainties,
many of which are beyond our control. Our actual future results may differ
materially from those discussed here for various reasons. We discuss many of
these risks in Item 1A under the heading "Risk Factors" in our Annual Report on
Form 10-K for the year ended December 31, 2020. Factors that may cause such
differences include, but are not limited to, the outcome of any legal
proceedings that have been or may be instituted against the Company related to
the merger agreement or the Merger; unexpected costs, charges or expenses
resulting from the Merger; our need for additional financing to meet our
business objectives; our history of operating losses; our ability to
successfully develop, obtain regulatory approval for, and commercialize our
products in a timely manner; our plans to research, develop and commercialize
our product candidates; our ability to attract collaborators with development,
regulatory and commercialization expertise; our plans and expectations with
respect to future clinical trials and commercial scale-up activities; our
reliance on third-party manufacturers of our product candidates; the size and
growth potential of the markets for our product candidates, and our ability to
serve those markets; the rate and degree of market acceptance of our product
candidates; regulatory requirements and developments in the United States, the
European Union and foreign countries; the performance of our third-party
suppliers and manufacturers; the success of competing therapies that are or may
become available; our ability to attract and retain key scientific or management
personnel; our reliance on government funding for a significant portion of our
operating costs and expenses; government contracting processes and requirements;
the exercise of significant influence over our company by our largest individual
stockholder; the impact of the novel coronavirus ("COVID-19") pandemic on our
business, operations and clinical development; the geopolitical relationship
between the United States and the Russian Federation as well as general
business, legal, financial and other conditions within the Russian Federation;
our ability to obtain and maintain intellectual property protection for our
product candidates; our potential vulnerability to cybersecurity breaches; and
other factors discussed below and in our other SEC filings, including our Annual
Report on Form 10-K for the year ended December 31, 2020.
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. The forward-looking statements included in this
quarterly report are made only as of the date hereof. We do not undertake any
obligation to update any such statements or to publicly announce the results of
any revisions to any of such statements to reflect future events or
developments. This management's discussion and analysis of financial condition
and results of operations should be read in conjunction with our financial
statements and the related notes included elsewhere in this filing and with our
historical consolidated financial statements and the related notes thereto in
our Annual Report on Form 10-K for the year ended December 31, 2020.
OVERVIEW
We are a clinical-stage biopharmaceutical company developing multiple product
candidates to address unmet medical needs. Prior to the closing of the Merger,
we focused exclusively on developing novel approaches to activate the immune
system. Our proprietary platform of Toll-like immune receptor activators has
applications in mitigation of radiation injury and radiation oncology. We
combine our proven scientific expertise and our depth of knowledge about our
products' mechanisms of action into a passion for developing drugs to save
lives. Our most advanced product candidate in this field is entolimod, an
immune-stimulatory agent, which we are developing as a radiation countermeasure
and other indications in radiation oncology.
Following the closing of the Merger, as a result of the integration of Cytocom's
business, we are also now developing novel immunotherapies targeting autoimmune,
inflammatory, infectious diseases and cancers based on a proprietary, multi
receptor platform, or the AIMS platform, designed to rebalance the body's immune
system and restore homeostasis. These therapies are designed to elicit directly
within patients a robust and durable response of antigen-specific killer T cells
and antibodies, thereby activating essential immune defenses against autoimmune,
inflammatory, infectious diseases, and cancers. We believe that our technologies
can meaningfully leverage the human immune system for prophylactic and
therapeutic purposes by eliciting killer T-cell response levels not achieved by
other published immunotherapy approaches. Our immunomodulatory technology
restores the balance between the cellular (Th1) and the humoral (Th2) immune
systems. Immune balance is regulated through T-helper cells that produce
cytokines. The Th1 lymphocytes help fight pathogens within cells like cancer and
viruses through interferon-gamma and macrophages. The Th2 lymphocytes target
external pathogens like cytotoxic parasites, allergens, toxins through the
activation of B-cells and antibody production to effect to dendritic cells,
which are natural activators of killer T cells, also known as cytotoxic T
-cells, or CD8+ T cells. Furthermore, the Cytocom technology antagonizes the
toll-like receptors to inhibit proinflammatory cytokines.
Prior to the closing of the Merger, we conducted business in the U.S. directly
and in Russia through two subsidiaries, one of which is wholly owned, BioLab 612
(which was dissolved in November 2020), and one of which is owned in
collaboration with a financial partner, Panacela. As of the closing of the
Merger, we also now conduct business through Old Cytocom and its subsidiaries,
ImQuest Life Sciences Inc, ImQuest BioSciences Inc., ImQuest Pharmaceuticals,
Inc., and Lubrinovation Inc. In addition, we conduct business with a former
subsidiary, Incuron, which will pay us a 2% royalty on future commercialization,
licensing, or sale of certain technology we sold to Incuron. We also partner in
a joint venture, GPI, with Everon Biosciences, Inc ("Everon").
Recent Developments
Closing of the Merger
On July 27, 2021, the Company, Merger Sub, and Old Cytocom completed the Merger.
The Merger was completed pursuant to the Merger Agreement, pursuant to which,
Merger Sub merged with and into Old Cytocom, with Old Cytocom continuing as a
wholly owned subsidiary of the Company and the surviving corporation of the
Merger. In connection with the closing of the Merger. Old Cytocom was renamed
"Cytocom Subsidiary Inc." and the Company was renamed "Cytocom, Inc."
Upon completion of the Merger, each outstanding share of Old Cytocom common
stock, each outstanding share of Old Cytocom preferred stock that was not, by
its terms, converted into shares of Old Cytocom common stock immediately prior
to the Effective Time, and each vested restricted stock unit of Old Cytocom
(excluding, in each case, dissenting shares and shares held in treasury)
automatically converted into the right to receive a number of shares of
Company common stock determined by the application of an exchange ratio formula
set forth in the Merger Agreement.
The exchange ratio was calculated based on the total number of outstanding
shares of Company common stock and Old Cytocom common stock, each on a fully
diluted basis, and the respective valuations of the Company and Old Cytocom, as
of immediately prior to the Effective Time. As of the effective date of the
Merger Agreement, the valuation of the Company was assumed to be $39 million and
the valuation of Old Cytocom was assumed to be $61 million. For purposes of
calculating the exchange ratio, the respective valuations of Old Cytocom and the
Company at the Effective Time were increased or decreased, as applicable, based
on the amount of each company's net cash at closing, inclusive of certain short-
and long-term liabilities. From these imputed valuation amounts, the number of
shares to be issued as merger consideration to Old Cytocom securityholders will
be equal to a percentage of the fully diluted common stock of the combined
company determined by dividing the adjusted Old Cytocom valuation by
the adjusted combined company valuation.
Accordingly, based on the foregoing exchange ratio, the parties determined that
18,492,452 shares of Company common stock will be issued in the Merger,
resulting in the former Old Cytocom securityholders owning, or holding rights to
acquire, approximately 54% of the common stock of the combined company, on a
fully diluted basis, and legacy, pre-Merger Company securityholders owning, or
holding rights to acquire, approximately 46% of the common stock of the combined
company, on a fully diluted basis, in each case as of immediately following the
Effective Time.
In addition, at the Effective Time, each unvested Old Cytocom restricted stock
unit was converted into a number of restricted stock units of the Company, as
determined in accordance with the exchange ratio formula described above. The
terms (including, without limitation, the vesting terms) of each such substitute
restricted stock unit are substantially equivalent to those of the Old
Cytocom restricted stock unit being replaced.
Financing Arrangements
As a result of the Merger, the Company became party to the following material
definitive agreements:
• Loan and Security Agreement, dated as of April 26, 2021, between Avenue
Venture Opportunities Fund, L.P. ("Avenue") and Old Cytocom, as supplemented
by the Supplement to the Loan and Security Agreement, dated as of April 26,
2021, between Avenue and Old Cytocom, under which the Company will (i) issue
the warrant described in the next paragraph to Avenue and (ii) be obligated to
issue shares of common stock upon conversion of up to $3 million of principal
outstanding under the Avenue facility;
• Warrant to Purchase Shares of Common Stock of Cytocom Inc, issued at the
Effective Time, by the Company to Avenue, exercisable for up to 154,004 shares
of Company common stock;
• Share Purchase Agreement, dated as of May 21, 2021, by and among GEM Global
Yield LLC SCS, GEM Yield Bahamas Limited (such entities together, "GEM") and
the Company, as successor to Old Cytocom, under which the Company may sell,
from time to time, up to $75 million shares of its common stock at a price per
share equal to 90% of the recent trading price of the Company's common stock;
• Warrant to Purchase Shares of Cytocom Inc., dated as of May 21, 2021, issued
by Old Cytocom and assumed by the Company, exercisable for up to
1,720,083 shares, or 4.99% of the outstanding shares of common stock as of
immediately after the Effective Time;
• The Registration Rights Agreement, dated as of May 21, 2021, between Old
Cytocom, GEM Global Yield LLC SCS and GEM Yield Bahamas Limited ; and
• Warrants, issued immediately after the Effective Time, by the Company to the
purchasers of Old Cytocom's Series A-3 Preferred Stock and Series A-4
Preferred Stock, each of which were converted immediately prior to the
Effective Time, exercisable for up to an aggregate 952,000 shares of Company
common stock.
Certain of these arrangements are discussed in greater deal under the heading
" - Liquidity and Capital Resources."
COVID-19 Pandemic
The COVID-19 pandemic has continued to affect most countries around the world,
including the United States, where a national emergency was declared. The
continued spread of COVID-19 in the United States and worldwide, as well as the
government-ordered shutdown and shelter-in-place orders imposed to counter the
pandemic, led to severe disruptions to the global economy, especially for the
year ended December 31, 2020. In this connection, on March 20, 2020, the
Governor of New York announced that 100% of the workforce of all businesses,
excluding essential services, must stay home. During the effectiveness of this
order , we implemented a work-from-home policy for all employees based in our
Buffalo, New York headquarters. Under new applicable state orders, our offices
may be occupied at their normal capacity if other safety precautions are taken,
however, generally very few of our employees have returned to the office. We are
continuing to monitor the situation and will take such further action as may be
required by federal, state or local authorities, or that we determine are in the
best interests of our employees. The extent to which COVID-19 may impact our
business, research and development efforts, preclinical studies, clinical
trials, prospects for regulatory approval of our drug candidates, and operations
will depend on future developments, which are highly uncertain and cannot be
predicted with confidence, such as the effectiveness of vaccination efforts,
ultimate geographic spread of the disease, the duration of the outbreak, the
impact of any new variants of the virus, the extent and duration of travel
restrictions and social distancing in the United States and other countries,
business closures or business disruptions and the effectiveness of actions taken
in the United States and other countries to contain and treat the disease.
Furthermore, if we or any of the third parties with whom we engage were to
experience renewed shutdowns or other business disruptions, our ability to
conduct our business in the manner and on the timelines presently planned could
be materially and negatively impacted, which could have a material adverse
effect on our business, financial condition and results of operations.
Registered Direct Offering
As previously disclosed, on February 19, 2021, the Company entered into a
Securities Purchase Agreement (the "Purchase Agreement") with several
healthcare-focused and institutional investors for the sale by the Company of
2,000,000 shares (the "Shares") of the Company's common stock at a purchase
price of $7.00 per share in a registered direct offering. The closing of the
sale of the Shares under the Purchase Agreement occurred on February 23, 2021.
The gross proceeds to the Company from the transaction were $14 million, before
deducting the placement agent's fees and other estimated offering expenses. The
Shares were offered and sold by the Company under a prospectus supplement and
accompanying prospectus filed with the SEC pursuant to an effective shelf
registration statement on Form S-3, which was filed with the SEC on May 21, 2020
and subsequently declared effective on May 29, 2020 (File No. 333-238578). Under
the Company's engagement letter (the "Engagement Letter") with H.C. Wainwright &
Co., LLC ("Wainwright"), pursuant to which Wainwright agreed to serve as
exclusive placement agent for the issuance and sale of the Shares, the Company
agreed to pay Wainwright an aggregate fee equal to 7.25% of the gross proceeds
received by the Company from the sale of the securities in the transaction as
well as a management fee equal to 1.0% of the gross proceeds received by the
Company from the sale of the securities in the transactions. Pursuant to the
Engagement Letter, the Company also issued to designees of Wainwright warrants
to purchase up to 7.5% of the aggregate number of shares of Common Stock sold in
the transactions, or warrants to purchase up to 150,000 shares of Common Stock
(the "Placement Agent Warrants"). Subject to certain ownership limitations, the
Placement Agent Warrants are immediately exercisable at an exercise price of
$8.75 per share of Common Stock, subject to customary adjustments as provided
under the terms of the Placement Agent Warrants. The Warrants are exercisable
for five years from the commencement of sales of the shares being offered.
Financial Overview
Our discussion and analysis of our financial condition and results of operations
are based on our financial statements, which have been prepared in accordance
with GAAP. The preparation of these financial statements requires us to make
estimates and judgments that affect our reported amounts of assets, liabilities,
revenues, and expenses.
On an ongoing basis, we evaluate our estimates and judgments, including those
related to accrued expenses, income taxes, stock-based compensation,
investments, and in-process research and development. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities and the
reported amounts of revenues and expenses that are not readily apparent from
other sources. Actual results may differ from these estimates.
Our revenue, operating results, and profitability have varied, and we expect
that they will continue to vary on a quarterly basis, primarily due to the
timing of work completed under new and existing grants, development contracts,
and collaborative relationships. Additionally, we expect that as a result of the
Merger, our business, financial condition, results of operations and cash flows
will be materially different in future periods than in the past. Accordingly,
our past results are not likely to be indicative of our future performance.
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Revenue
Our revenue has historically originated from grants and contracts from both
United States ("U.S.") federal government sources and service contracts with
Incuron. U.S. federal grants and contracts have been provided to advance
research and development of entolimod, our lead product candidate, prior to the
Merger, which we believe is of interest for potential sale to the DoD, or the
Biomedical Advanced Research and Development Authority of the U.S. Department of
Health and Human Services ("BARDA"). We also have provided various research,
management, business development, and clinical advisory services to Incuron.
Research and Development Expenses
Research and development ("R&D") costs are expensed as incurred. Advance
payments are deferred and expensed as performance occurs. R&D costs include the
cost of our personnel (which consists of salaries and incentive and stock-based
compensation), out-of-pocket pre-clinical and clinical trial costs usually
associated with contract research organizations, drug product manufacturing and
formulation, and a pro-rata share of facilities expense and other overhead
items.
General and Administrative Expenses
General and administrative ("G&A") functions include executive management,
finance and administration, government affairs and regulations, corporate
development, human resources, and legal and compliance. The specific costs
include the cost of our personnel consisting of salaries, incentive and
stock-based compensation, out-of-pocket costs usually associated with attorneys
(both corporate and intellectual property), bankers, accountants, and other
advisors and a pro-rata share of facilities expense and other overhead items.
Other Income and Expenses
Other recurring income and expenses primarily consists of interest income on our
investments, changes in the market value of our derivative financial
instruments, and foreign currency transaction gains or losses.
Critical Accounting Policies and Significant Estimates
Our critical accounting policies and significant estimates are detailed in our
Annual Report on Form 10-K for the year ended December 31, 2020. Our critical
accounting policies and significant estimates have not changed substantially
from those previously disclosed in our Annual Report on Form 10-K for the year
ended December 31, 2020.
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Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020
Revenue
Revenue decreased from approximately $0.06 million for the three months ended
June 30, 2020 to $0.00 million for the three months ended June 30, 2021,
representing a 100% decrease. This decrease is primarily due to the cessation
of revenues from our JWMRP contract with the DoD for continued preclinical
development of entolimod, decreases in revenue from our PRMRP contract with the
DoD for continued clinical development of entolimod, and decreases in revenue
from our service contract with Incuron. The cessation of revenue is due to the
completion of the DoD contracts and grants in 2020 and the discontinuation of
all revenue and service contracts with Incuron. Accordingly, unless we obtain
new contract or grant awards, we may not generate significant revenue until we
can commercialize one or more of our product candidates. Differences in our
revenue sources, by program, between the years are set forth in the following
table.
Three Months Ended June 30,
Funding Source Program 2021 2020 Variance
DoD JWMRP Contract (1) $ - $ 44,544 $ (44,544 )
DoD PRMRP Contract (2) - 10,364 (10,364 )
Incuron Service contract - 8,347 (8,347 )
$ - $ 63,255 $ (63,255 )(1) The Congressionally Directed Medical Research Programs (CDMRP) Joint
Warfighter Medical Research Program (JWMRP) contract was awarded on
September 1, 2015.
(2) The CDMRP Peer Reviewed Medical Research Program (PRMRP) grant was awarded
effective as of September 30, 2015.
Research and Development Expenses
R&D expenses decreased from $0.17 million for the three months ended June 30,
2020 to $0.05 million for the three months ended June 30, 2021, representing a
decrease of $0.12 million, or 69.7%. Variances in individual development
programs are noted in the table below. The net decrease is primarily
attributable to a $0.11 million decrease in R&D spending for biodefense
applications of entolimod primarily due to a reduction in personnel costs. The
remaining variances are not significant.
Three Months Ended June 30,
2021 2020 Variance
Entolimod for Biodefense Applications $ 48,888 $ 163,505 $ (114,617 )
Curaxins
- 1,146 (1,146 )
Panacela product candidates 2,627 5,356 (2,729 )
Total research & development expenses $ 51,515 $ 170,007 $ (118,492 )
General and Administrative Expenses
G&A expenses increased from $0.50 million for the three months ended June 30,
2020 to $0.60 million for the three months ended June 30, 2021, representing an
increase of $0.10 million or 20.0%. This increase is primarily related to
professional fees primarily relating to negotiation and completion of the
Merger, as well as the defense against litigation incident thereto.
Other Income and Expenses
Other income decreased from $0.22 million for the three months ended June 30,
2020 to $0.002 million for the three months ended June 30, 2021, representing a
decrease of $0.22 million or approximately 100%. This decrease primarily related
to non-cash income during the three months ended June 30, 2020 resulting from a
$0.5 million extinguishment of an accrued liability, offset by $0.3 million in
expense related to the change in valuation of our warrant liability as a result
of stock price changes.
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Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020
Revenue
Revenue decreased from approximately $0.22 million for the six months ended June
30, 2020 to $0.00 million for the six months ended June 30, 2021, representing a
100% decrease. This decrease is primarily due to cessation in revenues from our
JWMRP contract with the DoD for continued preclinical development of entolimod,
cessation in revenue from our PRMRP contract with the DoD for continued clinical
development of entolimod, and cessation in revenue from our service contract
with Incuron. The decreases in revenues are due to the completion of the DoD
contracts and grants in 2020 and the discontinuation of all revenue and service
contracts with Incuron. Accordingly, unless we obtain new contract or grant
awards, we may not generate significant revenue until we can commercialize one
or more of our product candidates. Differences in our revenue sources, by
program, between the years are set forth in the following table.
Six Months Ended June 30,
Funding Source Program 2021 2020 Variance
DoD JWMRP Contract (1) $ - $ 113,555 $ (113,555 )
DoD PRMRP Contract (2) - 56,385 (56,385 )
Incuron Service contract - 49,357 (49,357 )
$ - $ 219,297 $ (219,297 )(1) The Congressionally Directed Medical Research Programs (CDMRP) Joint
Warfighter Medical Research Program (JWMRP) contract was awarded on
September 1, 2015.
(2) The CDMRP Peer Reviewed Medical Research Program (PRMRP) grant was awarded
effective as of September 30, 2015.
Research and Development Expenses
R&D expenses decreased from $0.39 million for the six months ended June 30,
2020 to $0.17 million for the six months ended June 30, 2021, representing a
decrease of $0.22 million, or 56.2%. Variances in individual development
programs are noted in the table below. The net decrease is primarily
attributable to a $0.20 million decrease in R&D spending for biodefense
applications of entolimod due to a reduction in personnel costs. The remaining
variances are not significant.
Six Months Ended June 30,
2021 2020 Variance
Entolimod for Biodefense Applications $ 164,441 $ 364,460 $ (200,019 )
Curaxins
- 12,690 (12,690 )
Panacela product candidates 5,332 11,065 (5,733 )
Total research & development expenses $ 169,773 $ 388,215 $ (218,442 )
General and Administrative Expenses
G&A expenses increased from $0.87 million for the six months ended June 30,
2020 to $1.05 million for the six months ended June 30, 2021, representing an
increase of $0.18 million, or 21.0%. This increase consisted primarily of an
increase of $0.18 million in professional fees in part for activities related to
the negotiation and completion of the Merger, as well as the defense
against litigation incident thereto.
Other Income and Expenses
Other income decreased from $0.06 million for the six months ended June 30,
2020 to $0.006 million for the six months ended June 30, 2021, representing a
decrease of $0.06 million or approximately 100%. This decrease primarily related
to non-cash income during the three months ended June 30, 2020 resulting from a
$0.5 million extinguishment of an accrued liability, offset by $0.45 million in
expense related to the change in valuation of our warrant liability as a result
of stock price changes.
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Liquidity and Capital Resources
We have incurred net losses of approximately $170 million from our inception
through June 30, 2021. Historically, we have not generated, and do not expect to
generate in the immediate future, revenue from sales of product candidates.
Since our founding in 2003, we have funded our operations through a variety of
means:
• From inception through June 30, 2021, we have raised $160.6 million of net
equity capital, including amounts received in connection with our February 2021
registered direct offering and from the exercise of options and warrants. We
have also received $7.3 million in net proceeds from the issuance of long-term
debt instruments;
• DoD and BARDA have funded grants and contracts totaling $49 million for the
development of entolimod for its biodefense indication;
• The government of the Russian Federation has funded a series of our
contracts totaling $17.3 million, based on the exchange rates in effect on the
date of funding. These contracts included a requirement for us to contribute
matching funds, which we have satisfied;
• We have been awarded $4.0 million in grants and contracts not described
above, all of which have been recognized at June 30, 2021;
• Incuron was formed to develop and commercialize the Curaxins product line,
including its lead oncology drug candidate CBL0137. In 2015, we sold our
ownership interest in Incuron for approximately $4.0 million and retain a 2%
royalty interest in the CBL0137 technology;
• Panacela was formed to develop and commercialize preclinical compounds,
which were transferred to Panacela through assignment and lease agreements.
RUSNANO contributed $9.0 million to Panacela and the Company contributed $3.0
million plus intellectual property to Panacela. As of the date of this filing,
the Company owns 67.57% of Panacela; and
• The Company formed its GPI joint venture with Everon. GPI, which is
currently 50% owned by the Company and 50% owned by Everon, is undertaking a
research and development program aimed at clinical testing of entolimod and
GP532 (a variant of our entolimod drug candidate) and the development of
medications with anti-aging and other indications associated with genome damage.
GPI has been funded by an initial investment of $10.5 million from venture
capital fund Norma Investments Limited.
Since the end of the fiscal quarter ended June 30, 2021, as a result of the
Merger, we have become party to several new financing arrangements, including a
credit facility and equity line-of-credit agreement, that have provided us with
additional cash in the aggregate amount of approximately $10 million. We have
the capacity to make further borrowings and drawings under these
facilities, which can provide us with additional working capital. See " - Avenue
Facility" and " - GEM Equity Line Agreement" below.
We have incurred cumulative net losses and expect to incur additional losses
related to our R&D activities. We do not have commercial products and have
limited capital resources and our contracts and grants with the DoD were
completed in 2020, meaning that we are currently not generating any revenues or
cash from operations. At June 30, 2021, we had cash and cash equivalents of
$13.8 million, which represents a increase of $11.5 million since the end of our
last fiscal year. This increase was caused by our capital raise, offset by
our net cash used in operations of $1.2 million during the six months ended June
30, 2021. We expect our cash and cash equivalents to fund our projected
operating requirements and allow us to fund our operating plan, in each case,
into August 2022. However, until we are able to commercialize our product
candidates at a level that covers our cash expenses, we will need to raise
substantial additional capital, which we may be unable to raise in sufficient
amounts, when needed and at acceptable terms. Our plans with regard to these
matters may include seeking additional capital through debt or equity financing,
the sale or license of drug candidates, the sale of certain of our tangible
and/or intangible assets, the sale of interests in our subsidiaries or joint
ventures, obtaining additional government research funding, or entering into
other strategic transactions. There can be no assurance that we will be able to
obtain future financing on acceptable terms, obtain additional government
financing for our operations, or enter into other strategic transactions. In
addition, the recent outbreak of the novel coronavirus known as COVID-19 has
significantly disrupted world financial markets, negatively impacted U.S. market
conditions and may reduce opportunities for us to seek out additional funding.
If we are unable to raise adequate capital and/or achieve profitable operations,
future operations might need to be scaled back or discontinued. The financial
statements do not include any adjustments relating to the recoverability of the
carrying amount of recorded assets and liabilities that might result from the
outcome of these uncertainties.
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