The following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company's Annual Report on Form 10-K for the year endedDecember 31, 2020 , as filed with theSecurities and Exchange Commission ("SEC") onMarch 29, 2021 , as amended onApril 29, 2021 (collectively, the "Form 10-K"), and certain other reports filed with theSEC as may be set forth below.
Forward Looking Statements
This quarterly report on Form 10-Q ("Quarterly Report") and other reports filed byScopus BioPharma Inc. (the "Company") from time to time with theSEC (collectively, the "Filings") contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, the Company's management, as well as estimates and assumptions made by Company's management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the Filings, the words "may", "will", "anticipate", "believe", "estimate", "expect", "future", "intend", "plan", or the negative of these terms and similar expressions as they relate to the Company or the Company's management are intended to identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and we caution you that these statements are not guarantees of future performance or events and are subject to risks, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Unless otherwise stated in this Quarterly Report, "we", "us", "our", "Company", "Scopus" and "Scopus BioPharma" refer toScopus BioPharma Inc. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws ofthe United States , the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States ("GAAP"). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. Our unaudited condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this Quarterly Report.
Overview
We are a clinical-stage biopharmaceutical company developing transformational therapeutics for serious diseases with significant unmet medical needs. Our mission is to improve patient outcomes and save lives. To achieve our mission, we are capitalizing on groundbreaking scientific and medical discoveries at some of the world's foremost research and academic institutions. OnSeptember 2, 2021 , we announced the launch of Duet Therapeutics ("Duet"). Duet integrates the management and clinical development of the immunotherapy assets of Scopus and Olimmune (the "Duet Platform"). Olimmune was acquired
by Scopus inJune 2021 . 21 Table of Contents The Duet Platform is comprised of three distinctive, complementary CpG-STAT3 inhibitors: ? RNA silencing CpG-STAT3siRNA ("DUET-01") ? Antisense CpG-STAT3ASO ("DUET-02") ? DNA-binding inhibitor CpG-STAT3decoy ("DUET-03") Our lead development program, DUET-01, is a novel, targeted immunotherapy for the treatment of multiple cancers. We have partnered with City of Hope ("COH") for DUET-01, which is aTRL9 agonist and STAT3 inhibitor. Pre-clinical testing at COH was designed to determine whether DUET-01 would reduce growth and metastasis of various pre-clinical tumor models, including melanoma, and colon and bladder cancers, as well as leukemia and lymphoma. Based upon such testing, an IND for DUET-01 for B-cell non-Hodgkin lymphoma ("B-cell lymphoma) was filed with and subsequently approved by theUnited States Food and Drug Administration ("FDA") inApril 2021 andMay 2021 , respectively. A first-in-human Phase 1 clinical trial for B-cell lymphoma is currently seeking to enroll patients. Duet expects to file two INDs for DUET-02 in Q4 2022 in genitourinary and head & neck cancers, with Phase 1 clinical trials beginning in Q1 2023 in the United States. Duet is also evaluating combination therapies with checkpoint inhibitors for its CpG-STAT3 inhibitors. Our pipeline of drug candidates also includes MRI-1867, a peripherally-restricted, dual-action cannabinoid-1 ("CB1") receptor inverse agonist and inhibitor of inducible nitric oxide synthase ("iNOS"). We have partnered with theNational Institutes of Health ("NIH") for MRI-1867 and are initially targeting systemic sclerosis ("SSc"). Over-activation of CB1 and iNOS has been implicated in the pathophysiology of SSc, which includes fibrosis of the skin, lung, kidney, heart, and the gastrointestinal tract. We are also partnered with TheHebrew University of Jerusalem ("Hebrew University ") on several additional research and development programs. These programs relate to a proprietary opioid-sparing anesthetic and synthesis of novel compounds and new chemical entities ("NCEs"). We are continually monitoring the impact of the on-going global pandemic on us. Until we are able to gain greater visibility as to the impact of the evolving pandemic, including emerging variants and responses thereto, we intend to commit greater resources to our existing and future programs inthe United States and may reduce resources for development programs outsidethe United States . Moreover, with respect to all of our programs, we continually evaluate them for feasibility and potential likelihood of success generally and relative to the cost of development, time for enrollment and development, patent life and market exclusivity. As such, we may seek to accelerate programs or terminate programs based on these analyses, our financial wherewithal, market dynamics and other factors. We have devoted substantially all of our resources to our development efforts relating to our drug candidates, including sponsoring research with world-renowned academic and medical research institutions, preparing to implement a Phase 1 clinical trial for B-cell lymphoma at COH, pursuing additional pre-clinical studies, securing and protecting our licensed intellectual property, and providing general and administrative support for these operations. We do not have any products approved for sale and have not generated any revenue from product sales. From inception (April 18, 2017 ) untilSeptember 30, 2021 , we have funded our operations primarily through the issuance of equity and debt securities. We have incurred net losses in each year since our inception. As ofSeptember 30, 2021 , we had an accumulated deficit of$34,936,289 . Substantially all of our net losses resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years. We anticipate that all our expenses will increase substantially as we:
? continue our research and development efforts;
? contract with third-party research organizations to manage our clinical and
pre-clinical trials for our drug candidates;
? outsource the manufacturing of our drug candidates for clinical trials and
pre-clinical testing;
? seek to obtain regulatory approvals for our drug candidates;
22 Table of Contents
? maintain, expand, and protect our intellectual property portfolio;
? add operational, financial and management information systems and personnel to
support our research and development and regulatory efforts; and
? operate as a public company, including involvement in legal proceedings.
We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our drug candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we will need to raise additional capital prior to the commercialization of any of our current or future drug candidates. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our operating activities through equity and debt offerings. We may also raise capital through government or other third-party funding and grants, collaborations and development agreements, strategic alliances, and licensing arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our drug candidates.
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are fully described in Note 2 to our consolidated financial statements appearing in our Form 10-K. We believe that the accounting policies are critical for fully understanding and evaluating our financial condition and results of operations.
JOBS Act
OnApril 5, 2012 , the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued after the enactment of the JOBS Act until such time as those standards apply to private companies. We have irrevocably elected to avail ourselves of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies. As a result of this election, our financial statements may not be comparable to companies that are not emerging growth companies. Subject to certain conditions set forth in the JOBS Act, as an "emerging growth company," we intend to rely on certain of these exemptions and reduced reporting requirements provided by the JOBS Act including without limitation, (i) providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an "emerging growth company" until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of$1 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (iii) the date on which we have issued more than$1 billion in non-convertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules
of theSEC . 23 Table of Contents Results of Operations
Three Months Ended
The following table summarizes our results of operations for the three months
ended
Three Months Ended September 30, 2021 2020 Change % Change Operating Expenses: General and Administrative$ 2,682,310 $ 806,045 $ 1,876,265 232.8 % Research and Development 77,527 69,421 8,106 11.7 % Loss from Operations (2,759,837) (875,466) (1,884,371) 215.2 % Other income (expense): Interest expense (110,669) (284,520) 173,851 61.1 % Change in fair value of common stock warrant liability 1,470,163 - 1,470,163 100.0 % Total other income (expense) 1,359,494 (284,520) 1,644,014 577.8 % Net Loss$ (1,400,343) $ (1,159,986) $ 240,357 20.7 % Our net losses were$1,400,343 and$1,159,986 for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$240,357 or 20.7%. We anticipate our net losses will continue as we advance our research and drug development activities and incur additional general and administrative expenses to meet the needs of our business.
Revenue
We did not have any revenue during the three months endedSeptember 30, 2021 or 2020. Our ability to generate product revenues in the future will depend almost entirely on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize a drug candidate.
Operating Expenses
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and benefits to our personnel, including the costs related to our management services agreements, directors and scientific and senior advisors; professional fees and services, including accounting and legal services; and expenses related to obtaining and protecting our intellectual property. We incurred general and administrative expenses in the three months endedSeptember 30, 2021 and 2020 of$2,682,310 and$806,045 , respectively, an increase of$1,876,265 or 232.8%. This increase in our general and administrative expenses is primarily attributable to increases in fees and stock compensation expenses totaling$183,712 associated with our directors and scientific and senior advisors, most of whom joined the company during the second half of 2020 and did not have a significant impact on our financial results during the three months endedSeptember 30, 2020 and$1,929,949 of certain professional fees and public company costs related to operating as a public company (including increased costs for investor relations, directors and officers insurance and to comply with corporate governance, legal proceedings, internal controls and similar requirements applicable to public companies), partially offset by a decrease in employee compensation expenses of$237,396 due to the reversal of executive bonuses, all of which have increased in 2021 following the completion of our IPO inDecember 2020 . Included in professional fees and public company costs are legal fees and expenses incurred in connection with legal services provided to the board of directors and certain committees thereof, including relating to former officers and directors. See Part II-Other Information, our Annual Report on Form 10-K, the Schedule 13D filed with theSEC by a former director onApril 7, 2021 , our Current Reports on Form 8-K filed with theSEC onJuly 9, 2021 andSeptember 30, 2021 and the materials filed by us on Schedule 14A for additional information concerning
such matters. 24 Table of Contents
Research and Development and Expenses
We recognize research and development expenses as they are incurred. Our research and development expenses consist of the costs associated with obtaining our intellectual property that are classified as in-process research and development and fees incurred under our agreements with COH, theNIH andHebrew University , including the expenses associated with securities issued in connection with such agreements, as applicable. For the three months endedSeptember 30, 2021 and 2020, we incurred research and development expenses of$77,527 and$69,421 , respectively, an increase of$8,106 or 11.7%. These expenses were incurred in connection with the preclinical work for the Duet Platform by COH. We anticipate that our research and development expenses, exclusive of any in-process research and development relating to our acquisitions, will increase for the foreseeable future as we continue the clinical development of DUET-01, DUET-02, DUET-03 and MRI-1867, and to further advance the development of our other research and development programs, subject to the availability of additional funding.
Other Income (Expense)
Other income (expense) consists of changes in the fair value of a warrant liability, as well as interest expense on our Convertible Notes. Other income (expense) was$1,359,494 and$(284,520) for the three months endedSeptember 30, 2021 and 2020, respectively, an increase of$1,644,014 or 577.8%. Other income related to the change in fair value of warrant liability was$1,470,163 for the three months endedSeptember 30, 2021 . There was no income or expense related to the warrant liability during the three months endedSeptember 30, 2020 . This income during the three months endedSeptember 30, 2021 is associated with the decrease of a liability related to certain warrants issued in August andSeptember 2020 which were reclassified from equity to warrant liability onJune 25, 2021 . Until their reclassification into equity onJuly 31, 2021 , we were required to revalue warrants classified on our balance sheet as a liability at the end of each reporting period and reflect a gain or loss from the change in fair value in the period in which the change occurred. We calculated the fair value of such warrants using aMonte Carlo daily price simulation. Interest expense was$110,669 and$284,520 for the three months endedSeptember 30, 2021 and 2020, respectively, a decrease of$173,851 or 61.1%. This decrease is attributable to the conversion of the Convertible Notes into the W Warrants onJuly 31, 2021 , with the Convertible Notes being outstanding during only one month during the three months endedSeptember 30, 2021 as compared to the entire three months endedSeptember 30, 2020 .
Nine Months Ended
The following table summarizes our results of operations for the nine months
ended
Nine Months Ended September 30, 2021 2020 Change % Change Operating Expenses: General and Administrative$ 6,228,103 $ 2,087,423 $ 4,140,680 198.4 % Research and Development 14,887,657 7,354,295 7,533,362 102.4 % Loss from Operations (21,115,760) (9,441,718) (11,674,042) 123.6 % Other income (expense): Interest expense (774,679) (369,665) (405,014) 109.6 % Change in fair value of common stock warrant liability 1,455,889 - 1,455,889 100.0 % Total other income (expense) 681,210 (369,665) 1,050,875 284.3 % Net Loss$ (20,434,550) $ (9,811,383) $ 10,623,167 108.3 % Our net losses were$20,434,550 and$9,811,383 for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$10,623,167 or 108.3%. We anticipate our net losses will continue as we advance our research and drug development activities and incur additional general and administrative expenses to meet the needs of our business.
Revenue
We did not have any revenue during the nine months endedSeptember 30, 2021 or 2020. Our ability to generate product revenues in the future will depend almost entirely on our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize a drug candidate. 25 Table of Contents Operating Expenses
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and benefits to our personnel, including the costs related to our employees, management services agreements, directors and scientific and senior advisors; professional fees and services, including accounting and legal services; and expenses related to obtaining and protecting our intellectual property. We incurred general and administrative expenses in the nine months endedSeptember 30, 2021 and 2020 of$6,228,103 and$2,087,423 , respectively, an increase of$4,140,680 or 198.4%. This increase in our general and administrative expenses is primarily attributable to increases in fees and stock compensation expenses totaling$615,784 associated with our directors and scientific and senior advisors, most of whom joined the company during the second half of 2020 and did not have a significant impact on our financial results during the nine months endedSeptember 30, 2020 and$3,715,329 of certain professional fees and public company costs related to operating as a public company (including increased costs for investor relations, directors and officers insurance and to comply with corporate governance, legal proceedings, internal controls and similar requirements applicable to public companies), partially offset by a decrease in employee compensation expenses of$192,918 due to the reversal of executive bonuses, all of which have increased in 2021 following the completion of our IPO inDecember 2020 . Included in professional fees and public company costs are legal fees and expenses incurred in connection with legal services provided to the board of directors and certain committees thereof, including relating to former officers and directors. See Part II-Other Information, Item 1. Legal Proceedings, our Annual Report on Form 10-K, the Schedule 13D filed with theSEC by a former director onApril 7, 2021 , our Current Reports on Form 8-K filed with theSEC onJuly 9, 2021 andSeptember 30, 2021 and the materials filed by us on Schedule 14A for additional information concerning such matters.
Research and Development and Expenses
We recognize research and development expenses as they are incurred. Our research and development expenses consist of the costs associated with our acquisition of intellectual property that are classified as in-process research and development and fees incurred under our agreements with COH, theNIH andHebrew University , including the expenses associated with securities issued in connection with such agreements, as applicable. For the nine months endedSeptember 30, 2021 and 2020, we incurred research and development expenses of$14,887,657 and$7,354,295 , respectively, an increase of$7,533,362 or 102.4%. These expenses increased primarily as a result of the costs related to our acquisition of Olimmune, the upfront costs under the Olimmune Licenses and costs associated with the filing of the IND and preparation for the Phase 1 clinical trial for DUET-01. Expenses relating to the acquisition of Olimmune, the Olimmune Licenses and the DUET-01 IND and Phase I clinical trial were$6,998,530 ,$1,081,622 and$1,503,277 , respectively. These new expenses were offset by a$1,995,702 decrease in in-process research and development costs related to our acquisition of Bioscience Oncology and DUET-01in 2020. We anticipate that our research and development expenses, exclusive of any in-process research and development relating to our acquisitions, will increase for the foreseeable future as we continue the clinical development of DUET-01, DUET-02, DUET-03 and MRI-1867, and to further advance the development of our other research and development programs, subject to the availability of additional funding.
Other Income (Expense)
Other income (expense) consists of changes in the fair value of a warrant liability, as well as interest expense on our Convertible Notes. Other income (expense) was$681,210 and$(369,665) for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$1,050,875 or 284.3%. Other income related to the change in fair value of warrant liability was$1,455,889 for the nine months endedSeptember 30, 2021 . There was no income or expense related to the warrant liability during the nine months endedSeptember 30, 2020 . This income during the nine months endedSeptember 30, 2021 is associated with the decrease of a liability related to certain warrants issued in August andSeptember 2020 which were reclassified from equity to warrant liability onJune 25, 2021 . Until their reclassification into equity onJuly 31, 2021 , we were required to revalue warrants classified on our balance sheet as a liability at the end of each reporting period and reflect a gain or loss from the change in fair value in the period in which the change occurred. We calculated the fair value of such warrants using aMonte Carlo daily price simulation. Interest expense was$774,679 and$369,665 for the nine months endedSeptember 30, 2021 and 2020, respectively, an increase of$405,014 or 109.6%. This increase is attributable to an increase in the principal amount of our Convertible Notes outstanding during the nine months endedSeptember 30, 2021 (until their partial repayment in cash and partial conversion into the W Warrants at the Maturity Date onJuly 31, 2021 ), versus during the nine months endedSeptember 30, 2020 . 26 Table of Contents
Liquidity and Capital Resources
SinceApril 18, 2017 (inception), we have incurred losses and, as ofSeptember 30, 2021 , we had an accumulated deficit of$34,936,289 . From inception throughSeptember 30, 2021 , we have funded our operations principally through the sale of equity and debt securities totaling$19.4 million in the aggregate. As ofSeptember 30, 2021 , we had cash of$3,632,080 and net working capital of$1,791,196 , compared to cash of$1,832,100 and net working capital of$(1,833,557) as ofDecember 31, 2020 . For the nine months endedSeptember 30, 2021 , we used$7,276,008 of cash in operations, which was attributable to our net loss of$20,434,550 and changes in operating assets and liabilities of$759,142 , offset by$12,399,400 of non-cash expenses. For the nine months endedSeptember 30, 2020 , we used$1,605,996 of cash in operations, which was attributable to our net loss of$9,811,383 and changes in operating assets and liabilities of$1,367,024 , offset by non-cash expenses of$6,838,362 .
In
The Company is party to litigation in several matters as of the date hereof.
Litigation is highly unpredictable and the costs of litigation, including legal fees and expenses, and the possible liabilities, including monetary damages, to which the Company could become subject could be significant. Any such liabilities could have a material adverse effect on the Company. The Company has not recorded any liability as ofSeptember 30, 2021 because a potential loss is not probable or reasonably estimable given the preliminary nature of the various proceedings. Subsequent toSeptember 30, 2021 , the Company has continued to commit significant capital resources relating to on-going litigation. The Company's existing capital resources will not be sufficient to fully implement its business plan, including the development of its drug candidates, while also continuing to be subject to or pursuing on-going litigation, especially on an expedited basis. The Company will require additional financing and there can be no assurance that any such financing will be available on satisfactory terms, or at all. Further, there can be no assurance that the absence of any additional financing, as necessary, will not have a material adverse effect on the Company. See "Note 8 - Commitments and Contingencies - Legal Proceedings" and "Part II - Other Information; Item 1. Legal Proceedings."
Future Funding Requirements
We have not generated any revenue. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize any of our drug candidates. We anticipate that we will continue to incur losses for at least the next several years. We expect that our research and development costs and general and administrative expenses will continue to increase as we advance our drug candidates through the pre-clinical and clinical development processes and hire additional personnel and/or consultants to support such activities. In addition, subject to obtaining regulatory approval of any of our drug candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. As a result, we anticipate that we will need substantial additional funding in connection with our continuing operations to fund future clinical trials and pre-clinical testing for our drug candidates, general and administrative costs and public company and other expenses, including potential indemnification obligations and legal fees (primarily related to litigation). See Part II-Other Information, Item 1. Legal Proceedings, our Annual Report on Form 10-K, the Schedule 13D filed with theSEC by a former director onApril 7, 2021 , our Current Reports on Form 8-K filed with theSEC onJuly 9, 2021 andSeptember 30, 2021 and the materials filed by us on Schedule 14A for additional information concerning such matters. We expect to finance our cash needs primarily through the sale of our debt and equity securities. We may also raise capital through government or other third-party funding and grants, collaborations and development agreements, strategic alliances and licensing arrangements. Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates, we are unable to estimate the amounts of additional capital outlays and operating expenditures necessary to complete the development of our drug candidates.
Our future capital requirements will depend on many factors, including:
the progress, costs, results and timing of our drug candidates' future clinical
? studies and future pre-clinical trials, and the clinical development of our
drug candidates for other potential indications beyond their initial target indications; 27 Table of Contents
the willingness of the FDA and the EMA to accept our future drug candidate
? clinical trials, as well as our other completed and planned clinical and
pre-clinical studies and other work, as the basis for review and approval of
our drug candidates;
? the outcome, costs and timing of seeking and obtaining FDA, EMA and any other
regulatory approvals;
? the number and characteristics of drug candidates that we pursue, including our
drug candidates in future pre-clinical development;
? the ability of our drug candidates to progress through clinical development
successfully;
? our need to expand our research and development activities;
? the costs associated with securing and establishing commercialization and
manufacturing capabilities;
? the costs of acquiring, licensing or investing in businesses, products, drug
candidates and technologies;
our ability to maintain, expand and defend the scope of our licensed
intellectual property portfolio, including the amount and timing of any
? payments we may be required to make, or that we may receive, in connection with
the licensing, filing, prosecution, defense and enforcement of any patents or
other intellectual property rights;
? our need and ability to hire additional management and scientific and medical
personnel;
? the effect of competing technological and market developments;
? our need to implement additional internal systems and infrastructure, including
financial and reporting systems;
? the costs associated with ongoing, and possibly future, legal proceeds and
related indemnification obligations;
? the duration and spread of the COVID-19 pandemic, and associated operational
delays and disruptions and increased costs and expenses; and
? the economic and other terms, timing and success of any collaboration,
licensing or other arrangements into which we may enter in the future.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of debt financings and equity offerings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of debt and equity securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or to grant licenses on terms that may not be favorable to us. We have considered the spread of the COVID-19 coronavirus outbreak, which theWorld Health Organization has declared a "Public Health Emergency of International Concern." The COVID-19 outbreak is disrupting supply chains and affecting production and sales across a range of industries. The extent of the impact of COVID-19 on our operational and financial performance will depend on certain developments, including the duration and spread of the pandemic and its impact on our employees and vendors, and our ability to raise capital, all of which are uncertain and cannot be predicted. At this point, the extent to which COVID-19 may impact our financial condition or results of operations remains uncertain. 28 Table of Contents
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements as defined under
Recent Accounting Pronouncements
The Company is an "emerging growth company", as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.
We have reviewed recent accounting pronouncements and concluded they are either not applicable to the business or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.
Effect of Inflation and Changes in Prices
We do not believe that inflation and changes in prices will have a material effect on our operations.
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