ACHIEVE LIFE SCIENCES, INC. INFORMATION REGARDING FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve a number of risks and uncertainties. We caution readers that any forward-looking statement is not a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statement. These statements are based on current expectations of future events. Such statements include, but are not limited to, statements about future financial and operating results, plans, objectives, expectations and intentions, costs and expenses, interest rates, outcome of contingencies, financial condition, results of operations, liquidity, business strategies, cost savings, objectives of management, the impact of the COVID-19 pandemic on our business and other statements that are not historical facts. You can find many of these statements by looking for words like "believes," "expects," "anticipates," "estimates," "may," "should," "will," "could," "plan," "intend" or similar expressions in this Quarterly Report on Form 10-Q or in documents incorporated by reference into this Quarterly Report on Form 10-Q. We intend that such forward-looking statements be subject to the safe harbors created thereby. Examples of these forward-looking statements include, but are not limited to:
• progress and preliminary and future results of any clinical trials;
• anticipated regulatory filings, requirements and future clinical trials;
• the effects of the COVID-19 pandemic on our business and financial results;
• the performance of, and our ability to obtain sufficient supply of
cytisinicline in a timely manner from, third-party suppliers and
manufacturers;
• timing and plans for the expansion of our focus to address other methods of
nicotine addiction;
• timing and amount of future contractual payments, product revenue and
operating expenses; and
• market acceptance of our products and the estimated potential size of these
markets.
These forward-looking statements are based on the current beliefs and
expectations of our management and are subject to significant risks and
uncertainties. If underlying assumptions prove inaccurate or unknown risks or
uncertainties materialize, actual results may differ materially from current
expectations and projections. Factors that might cause such a difference include
those discussed in Item 1A "Risk Factors," as well as those discussed elsewhere
in the Quarterly Report on Form 10-
All subsequent written or oral forward-looking statements attributable to us or
any person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this Quarterly Report on Form 10-Q or to reflect the occurrence of unanticipated
events, except as may be required under applicable
Overview
We are a clinical-stage pharmaceutical company committed to the global
development and commercialization of cytisinicline for smoking cessation and
nicotine addiction. With more than one billion smokers globally and over 30
million smokers in
We also plan to expand our focus to address other methods of nicotine addiction
such as e-cigarettes/vaping. The use of e-cigarettes continues to be widespread,
with most recent reports from the
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Our management team has significant experience in growing emerging companies focused on the development of under-utilized pharmaceutical compounds to meet unmet medical needs. We intend to use this experience to develop and ultimately commercialize cytisinicline either directly or via strategic collaborations.
Cytisinicline is an established smoking cessation treatment that has been
approved and marketed in Central and
Cytisinicline is a naturally occurring, plant-based alkaloid. Cytisinicline is structurally similar to nicotine and has a well-defined, dual-acting mechanism of action that is both agonistic and antagonistic. It is believed to aid in smoking cessation and the treatment of nicotine addiction by interacting with nicotine receptors in the brain by reducing the severity of nicotine withdrawal symptoms through agonistic effects on nicotine receptors and by reducing the reward and satisfaction associated with nicotine through antagonistic properties.
In 2018, the
We have no products approved for commercial sale and have not generated any
revenue from product sales to date. We have never been profitable and have
incurred operating losses in each year since inception. Our net loss was
Substantial doubt exists as to our ability to continue as a going concern. Our ability to continue as a going concern is subject to material uncertainty and dependent on our ability to obtain additional financing. We expect to incur significant expenses and increasing operating losses for at least the next several years as we continue our clinical development of, and seek regulatory approval for, cytisinicline and add personnel necessary to operate as a public company with an advanced clinical candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval. Without additional funds, we may be forced to delay, scale back or eliminate some of our research and development activities or other operations and potentially delay product development in an effort to provide sufficient funds to continue our operations. If any of these events occurs, our ability to achieve our development and commercialization goals would be adversely affected.
Our current resources are insufficient to fund our planned operations for the next twelve months. We will continue to require substantial additional capital to continue our clinical development activities. Accordingly, we will need to raise substantial additional capital to continue to fund our operations from the sale of our securities, partnering arrangements or other financing transactions in order to finance the commercialization of our product candidate. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. The uncertainty with respect to our operations and the market generally due to the COVID-19 pandemic and increasing interest rates and inflation may also make it challenging to raise additional capital on favorable terms, if at all. Failure to raise capital as and when needed, on favorable terms or at all, will have a negative impact on our financial condition and our ability to develop our product candidate.
Our accompanying financial results have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business. The financial results do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Such adjustments could be material.
Cytisinicline Ongoing and Recent Clinical Developments
Company-Sponsored Clinical Trials for a Smoking Cessation Indication
Completed Phase 3 ORCA-2 Trial
In
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cessation efficacy and safety profile of cytisinicline when administered for either 6 or 12 weeks, compared to placebo. All subjects received standard behavioral support and were assigned to one of the following groups:
• Arm A: 12 weeks of placebo • Arm B: 6 weeks of cytisinicline, followed by 6 weeks of placebo • Arm C: 12 weeks of cytisinicline
The ORCA-2 study had two independent primary endpoints that evaluated the success of smoking abstinence for both 6-week and 12-week durations of cytisinicline treatment, compared to placebo. The primary endpoints for ORCA-2 were biochemically verified continuous abstinence measured during the last 4 weeks of each treatment duration. Both the 6- and 12-week cytisinicline treatments demonstrated significantly better quit rates than placebo with odds ratios of 8.0 and 6.3, respectively. The odds ratio, or OR, is a standard measure of association between an exposure (cytisinicline treatment) and an outcome (continuous smoking abstinence).
• Subjects who received 12 weeks of cytisinicline treatment had 6.3 times
higher odds, or likelihood, to have quit smoking during the last 4 weeks of
treatment compared to subjects who received placebo (p<0.0001). The
abstinence rate during weeks 9-12 was 32.6% for cytisinicline compared to
7.0% for placebo.
• Subjects who received 6 weeks of cytisinicline treatment had 8 times higher
odds, or likelihood, to have quit smoking during the last 4 weeks of
treatment compared to subjects who received placebo (p<0.0001). The
abstinence rate during weeks 3-6 was 25.3% for cytisinicline compared to
4.4% for placebo.
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The secondary endpoints measured continuous abstinence after treatment out to 24 weeks. Both the 6- and 12-week secondary endpoints for continuous abstinence demonstrated significantly better quit rates for cytisinicline treated subjects than placebo. The continuous abstinence rate from week 9 to 24 was 21.1% for the 12-week cytisinicline arm compared to 4.8% for placebo, with an odds ratio of 5.3 (p<0.0001). The continuous abstinence rate from week 3 to 24 was 8.9% for the 6-week cytisinicline arm compared to 2.6% for placebo, with an odds ratio of 3.7 (p=0.0016).
A third secondary endpoint compared the two cytisinicline treatment arms and evaluated for an increased risk in relapse from week 6 to week 24 when subjects were switched to placebo during week 6 to week 12 (Arm B) instead of receiving cytisinicline for another 6 weeks during week 6 to week 12 (Arm C). The analysis showed that there was no increased risk of smoking relapse in subjects who had successfully quit smoking by week 3 through week 6 if they received placebo instead of continuing cytisinicline from week 6 to week 12.
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Cytisinicline was well tolerated with no treatment-related serious adverse events reported. The most commonly reported (less than 5% overall) adverse events for placebo, 6-week cytisinicline, and 12-week cytisinicline, respectively, were:
Placebo 6-Weeks Cytisinicline 12-Weeks Cytisinicline
Insomnia 4.8% 8.6% 9.6%
Abnormal Dreams 3.0% 8.2% 7.8%
Headaches 8.1% 6.7% 7.8%
Nausea 7.4% 5.9% 5.6%
We will continue to analyze the ORCA-2 results and expect to submit these data
for publication and presentation at future medical conferences.
Ongoing Phase 3 ORCA-3 Trial
In
• Arm A: 12 weeks of placebo • Arm B: 6 weeks of cytisinicline, followed by 6 weeks of placebo • Arm C: 12 weeks of cytisinicline
The primary outcome measure of success in the ORCA-3 trial is biochemically verified continuous abstinence during the last four weeks of treatment in the 6 and 12-week cytisinicline treatment arms compared with placebo. Each treatment arm will be compared independently to the placebo arm, and the trial will be determined to be successful if either or both of the cytisinicline treatment arms show a statistical benefit compared to placebo. Secondary outcome measures will be conducted to assess continued abstinence rates through six months from the start of study treatment. We expect to complete enrollment in the third quarter of 2022. Completed Phase 2 ORCA-1 Trial
In
ORCA-1 was initiated in
The primary endpoint in the study was the reduction in daily smoking, a self-reported measure. Three of the four cytisinicline treatment arms demonstrated a statistically significant reduction, p<0.05, compared to placebo. The fourth arm trended to significance (p= 0.052). Across all treatment arms, over the 25-day treatment period, subjects on cytisinicline experienced a 74-80% median reduction in the number of cigarettes smoked, compared to a 62% reduction in the placebo arms.
The secondary endpoint of the trial was a 4-week continuous abstinence rate, which is the relevant endpoint for regulatory approval. All cytisinicline treatment arms showed significant improvements in abstinence rates compared to the placebo arms. The most impressive results were observed in the 3 mg TID cytisinicline arm which demonstrated a 50% abstinence rate at week 4, compared to 10% for placebo (p<0.0001) and a continuous abstinence rate, weeks 5 through 8, of 30% for cytisinicline compared to 8% for placebo (p= 0.005). Smokers in the 3 mg TID arm had an OR of 5.04 (95% CI: 1.42, 22.32) for continuous abstinence from week 5 to week 8,
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compared with placebo, meaning, smokers receiving 3 mg cytisinicline TID were 5 times more likely to stop smoking compared to subjects on placebo.
At week 4, all four cytisinicline arms demonstrated statistically significant (p<0.05) reductions in expired carbon monoxide, or CO, a biochemical measure of smoking activity. Expired CO levels had declined by a median of 71-80% in the cytisinicline treatment arms, compared to only 38% in the placebo arms. The greater reductions in expired CO levels for the cytisinicline arms versus placebo suggest that placebo-treated subjects may have over-reported their reduction in cigarettes smoked or overcompensated with greater inhalation while smoking fewer cigarettes.
Cytisinicline was well-tolerated with no serious adverse effects, or SAEs, reported. The most commonly reported (>5%) adverse effects, or AEs, across all cytisinicline treatment arms versus placebo arms were abnormal dreams, insomnia, upper respiratory tract infections, and nausea. In the 3 mg TID treatment arm versus placebo arms, the most common AEs were abnormal dreams, insomnia, and constipation (each 6% vs 2%), upper respiratory tract infections (6% vs 14%), and nausea (6% vs 10%), respectively. Compliance with study treatment was greater than 94% across all arms.
We presented the ORCA-1 results in
In
Company-Sponsored Clinical Trials for an E-cigarette (nicotine vaping) Cessation Indication Ongoing Phase 2 ORCA-V1 Clinical Trial InJuly 2021 , we announced that we were awarded a grant from theNational Institute on Drug Abuse , or NIDA, of theNational Institutes of Health , orNIH , to evaluate the use of cytisinicline as a treatment for cessation of nicotine e-cigarette use. This initial grant award, in the amount of$320,000 , commenced onAugust 1, 2021 , and was utilized to complete critical regulatory and clinical operational activities, such as protocol finalization, clinical trial site identification, and submission of an Investigational New Drug Application, or IND, to the FDA for investigating cytisinicline in nicotine e-cigarette users. InNovember 2021 , we announced that the FDA had completed their review and accepted the IND application to investigate cytisinicline as a cessation treatment in this population. InJune 2022 , followingNIH review of completed milestones, we announced that we were awarded the next grant funding from the NIDA in the amount of approximately$2.5 million to conduct the ORCA-V1 Phase 2 Clinical trial.
In
The full grant award of
Other Recent Investigator-Sponsored Clinical Trials
In
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interest in participating in the study and a total of 679 were randomized to receive either cytisinicline or varenicline. The average age of participants in the trial was 43 years and approximately 70% of the participants were women.
The study compared cytisinicline administered on a schedule of 25 days of declining titration followed by twice-daily dosing for a total of 12 weeks with varenicline administered on a schedule of seven days of inclining titration followed by twice-daily dosing for a total of 12 weeks. The primary endpoint was a comparison of biochemically confirmed continuous abstinence rates at six months, and the trial was designed to assess if the two agents were non-inferior to each other.
The primary endpoint of the non-inferiority trial was to demonstrate that cytisinicline quit rates would be no less than 10% lower than the quit rates for varenicline. Topline results indicated that the RAUORA trial achieved its primary endpoint in showing that cytisinicline plus behavioral support was at least as effective as varenicline plus behavioral support at six months. Cytisinicline met the pre-specified non-inferiority endpoint and was trending towards superiority with an Absolute Risk Difference of +4.29 in favor of cytisinicline (95% CI -0.22 to 8.79), demonstrating a 4.29% improvement in quit rates in favor of cytisinicline. Specifically, continuous abstinence rates at six months, verified by expired CO, were 12.1% for cytisinicline compared to 7.9% for varenicline. The Relative Risk was 1.55 on an intent-to-treat basis, indicating that subjects in the cytisinicline arm were approximately one and a half times more likely to have quit smoking at six months compared to subjects who received varenicline.
Additionally, significantly fewer overall AEs were reported in cytisinicline-treated subjects (Relative Risk 0.56, 95% CI 0.49 to 0.65, p<0.001). Notably, of the subjects who experienced adverse events, cytisinicline subjects reported significantly less nausea, insomnia and vivid dreams (p<0.05).
The final RAUORA trial results and additional analyses were presented at the
SRNT European Annual Meeting in
Non-clinical Studies
Non-clinical toxicology studies were sponsored by the
Non-clinical toxicology studies that will be required for a New Drug Application, or NDA, include two longer-term chronic toxicology studies and two carcinogenicity studies, which are in distinct stages of execution as company-sponsored studies. Two chronic toxicology studies have been completed and submitted to the FDA. Additionally, both carcinogenicity studies have been completed and will be submitted to FDA during the third quarter of 2022.
Impact of COVID-19 Pandemic
As a result of the COVID-19 pandemic, we have experienced disruptions in our operations, liquidity, supply chain, facilities, and clinical trials. We may in the future experience more significant delays in enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis that could materially adversely impact our business, results of operations and overall financial performance in future periods. Specifically, we may experience impact from changes in how we and companies worldwide conduct business due to the COVID-19 pandemic, including but not limited to restrictions on travel and in-person meetings, delays in site activations and enrollment of clinical trials, prioritization of hospital resources toward pandemic effort, delays in review by the FDA, and disruptions in our supply chain for our product candidates. The extent of the impact on the COVID-19 pandemic on our operational and financial performance is uncertain and cannot be predicted. As of the filing date of this Quarterly Report on Form 10-Q, the extent to which the COVID-19 pandemic has impacted our financial condition, results of operations or guidance has been minimal. The effect of any additional COVID-19 pandemic issues will not be fully reflected in our results of operations and overall financial performance until future periods. See the section titled "Risk Factors" for further discussion of the possible impact of the COVID-19 pandemic on our business.
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License & Supply Agreements
Sopharma License and Supply Agreements
We are party to a license agreement, or the Sopharma License Agreement, and a supply agreement, or the Sopharma Supply Agreement, with Sopharma. Pursuant to the Sopharma License Agreement, we were granted access to all available manufacturing, efficacy and safety data related to cytisinicline, as well as a granted patent in several European countries related to new oral dosage forms of cytisinicline providing enhanced stability. Additional rights granted under the Sopharma License Agreement include the exclusive use of, and the right to sublicense, certain cytisinicline trademarks in all territories described in the Sopharma License Agreement. Under the Sopharma License Agreement, we agreed to pay a nonrefundable license fee. In addition, we agreed to make certain royalty payments equal to a mid-single digit percentage of all net sales of cytisinicline products in our territory during the term of the Sopharma License Agreement, including those sold by a third party pursuant to any sublicense which may be granted by us. To date, any amounts paid to Sopharma pursuant to the Sopharma License Agreement have been immaterial.
In
In consideration of rights granted by the
On
Research and Development Expenses
Research and development, or R&D, expenses consist primarily of costs for clinical trials, contract manufacturing, personnel costs, milestone payments to third parties, facilities, regulatory activities, non-clinical studies and allocations of other R&D-related costs. External expenses for clinical trials include fees paid to clinical research organizations, clinical trial site costs and patient treatment costs.
We manage our clinical trials through contract research organizations and independent medical investigators at our sites and at hospitals and expect this practice to continue. Due to our ability to utilize resources across several projects, we do not record or maintain information regarding the indirect operating costs incurred for our R&D programs on a program-specific basis. In addition, we believe that allocating costs on the basis of time incurred by our employees does not accurately reflect the actual costs of a project.
We expect our R&D expenses to increase for the foreseeable future as we continue to conduct our ongoing non-clinical studies, and initiate new clinical trials and registration-enabling activities. The process of conducting clinical trials and non-clinical studies necessary to obtain regulatory approval is costly and time consuming and we may never succeed in achieving marketing approval for cytisinicline. (See "Item 1A. Risk Factors-Risks Related to the Development of Our Product Candidate Cytisinicline.")
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Successful development of cytisinicline is highly uncertain and may not result in an approved product. We cannot estimate completion dates for development activities or when we might receive material net cash inflows from our R&D projects, if ever. We anticipate we will make determinations as to which markets, and therefore, which regulatory approvals, to pursue and how much funding to direct toward achieving regulatory approval in each market on an ongoing basis in response to our ability to enter into new strategic alliances with respect to each program or potential product candidate, the scientific and clinical success of each future product candidate, and ongoing assessments as to each future product candidate's commercial potential. We will need to raise additional capital and may seek additional strategic alliances in the future in order to advance our various programs.
Our projects or intended R&D activities may be subject to change from time to time as we evaluate results from completed studies, our R&D priorities and available resources.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for our personnel in executive, finance and accounting, corporate communications and other administrative functions, as well as consulting costs, including market research, business consulting, human resources and intellectual property. Other costs include professional fees for legal and auditing services, insurance and facility costs.
Results of Operations
For the three and six months ended
Research and development expenses
Our R&D expenses for our clinical development program for the three and six
months ended
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Clinical development programs:
Cytisinicline $ 7,207 $ 9,227 $ 11,595 $ 14,869 Total research and development expenses
R&D expenses for the three and six months ended
General and administrative expenses
Our general and administrative expenses for the three and six months ended
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Total general and administrative expenses
General and administrative expenses for the three and six months ended
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Liquidity and Capital Resources
We have incurred an accumulated deficit of
The financial results have been prepared assuming we will continue to operate as a going concern, which contemplates the realization of assets and liabilities and commitments in the normal course of business.
Substantial doubt exists as to our ability to continue as a going concern. Our ability to continue as a going concern is subject to material uncertainty and dependent on our ability to obtain additional financing. There is no assurance that we will obtain financing from other sources. The uncertainty with respect to our operations and the capital markets market generally may make it challenging to raise additional capital on favorable terms, if at all. The uncertainty with respect to our operations and the market generally due to the COVID-19 pandemic and increasing interest rates and inflation may also make it challenging to raise additional capital on favorable terms, if at all. We have historically financed our operations through equity and debt financings. Without additional funds, we may be forced to delay, scale back or eliminate some of our research and development activities or other operations and potentially delay product development in an effort to provide sufficient funds to continue our operations. If any of these events occur, our ability to achieve our development and commercialization goals would be adversely affected. In addition, we expect to incur significant expenses and increasing operating losses for at least the next several years as we continue our clinical development of, and seek regulatory approval for, cytisinicline and add personnel necessary to operate as a public company with an advanced clinical candidate. We expect that our operating losses will fluctuate significantly from quarter to quarter and year to year due to timing of clinical development programs and efforts to achieve regulatory approval.
Our current resources are insufficient to fund our planned operations for the next twelve months. We will continue to require substantial additional capital to continue our clinical development activities. Accordingly, we will need to raise substantial additional capital to continue to fund our operations from the sale of our securities, partnering arrangements or other financing transactions in order to finance the commercialization of our product candidate. The amount and timing of our future funding requirements will depend on many factors, including the pace and results of our clinical development efforts. Failure to raise capital as and when needed, on favorable terms or at all, will have a negative impact on our financial condition and our ability to develop our product candidate.
The consolidated financial results do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern. Such adjustments could be material.
We did not have during the periods presented, and we do not currently have, any commitments or obligations, including contingent obligations, arising from arrangements with unconsolidated entities or persons that have or are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, cash requirements or capital resources.
On
The underwritten public offering raised total gross proceeds of approximately
Convertible Debt and Term Loan
On
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in the Original Debt Agreement, pursuant to which SVB provided a commitment to
extend term loans having an aggregate original principal amount of up to
Under the terms of the agreement, the Convertible Debt matures on
Subject to certain terms and conditions, the Lenders may convert all or any part
of the outstanding Convertible Debt and accrued and unpaid interest at any time
prior to maturity into shares of our common stock at a conversion price equal to
We have the right, or Call Right, at any time to repay and retire all (but not less than all) of the outstanding Convertible Debt and accrued and unpaid interest, if any, prior to its conversion by payment of a premium determined based on the date of such repayment equal to:
• 125% of the principal amount of the Convertible Debt including accrued
paid-in-kind interest, or PIK, if the Call Right is exercised on or
before the 18-month anniversary of the date of the Debt Agreement; and
• 150% of the principal amount of the Convertible Debt including accrued
PIK, if the Call Right is exercised after the 18-month anniversary of the
date of the Debt Agreement,
in either case together with all accrued and unpaid interest on the principal balance of the Convertible Debt. If the Call Right is exercised by us, the Lenders will retain certain lookback rights in the event we enter into an agreement to be acquired in the twelve months following the exercise of the Call Right. We agreed to grant the Lenders a security interest in virtually all of our assets, including our patents and other intellectual property as security for our obligations under the Debt Agreement.
Subject to the terms and conditions of the Loan Agreement, we may borrow term
loans under the Loan Agreement until
Upon and after borrowing under the Loan Agreement, we must comply with certain
financial covenants as set forth in the Loan Agreement and the Amendment,
including a minimum liquidity ratio of at least 1.25 to 1.00, or at our election
after receiving at least
At-the-Market Sales Agreement
On
During the six months ended
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Cash Flows
Cash Used in Operating Activities
For the six months ended
Cash Provided in Financing Activities
For the six months ended
Commitments and Contingencies
We previously disclosed certain contractual obligations and contingencies and
commitments relevant to us within the financial statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations in our
Annual Report on Form 10-K for the year ended
Critical Accounting Policies and Estimates
The preparation of financial statements in accordance with
New Accounting Standards
See Note 2, "Accounting Policies," of the consolidated financial statements for information related to the adoption of new accounting standards in 2022, none of which had a material impact on our financial statements, and the future adoption of recently issued accounting standards, which we do not expect to have a material impact on our financial statements. Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that
material information required to be disclosed in our periodic reports filed or
submitted under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, is recorded, processed, summarized and reported within the time periods
specified in the
During the quarter ended
Changes in Internal Control Over Financial Reporting
We have not made any changes to our internal control over financial reporting
(as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the
quarter ended
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Limitations on Effectiveness of Controls
Our management does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
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