STATERA BIOPHARMA, INC. 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
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
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
Prior to the closing of the Merger, we conducted business in the
The Company is developing therapies designed to directly elicit 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. Statera has clinical or preclinical programs for Crohn's disease (STAT-201), hematology (Entolimod), pancreatic cancer (STAT-401) and COVID-19 (STAT-205).
In the next 12 months, the Company expects to initiate several clinical trials, including a pivotal Phase 3 trial for its lead drug candidate, STAT-201, in pediatric Crohn's disease, as well as studies of STAT-205 in 'long haul' COVID-19, STAT-401 in pancreatic cancer, and the TLR5 agonist entolimod as a treatment for anemia and neutropenia in cancer patients.
19
--------------------------------------------------------------------------------
Table of Contents Recent Developments Nasdaq Noncompliance
On
On
On
Forbearance Agreement
On
Bankruptcy Petition
On
Lay Sciences
On
Continuing Capital Needs
We are a clinical-stage company and we have generated insignificant revenue from
product sales to date. Our ability to generate revenue sufficient to achieve
profitability will depend heavily on the successful development and eventual
commercialization of one or more of our product candidates. Since inception, we
have incurred significant operating losses. For the six months ended
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our lead candidates through clinical trials, progress our pipeline candidates from discovery through pre-clinical development, and seek regulatory approval and pursue commercialization of our candidates. In addition, if we obtain regulatory approval for any of our candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales, and distribution. In addition, we may incur expenses in connection with the in-license or acquisition of additional technology to augment or enable development of future candidates. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations and other expenses that Old Cytocom, our predecessor for accounting purposes, did not incur as a private company prior to the Merger.
As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity and debt financings or other sources, which may include collaborations with third parties. We do not expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements beyond the third quarter of 2022.
Adequate additional financing may not be available to us on acceptable terms, or at all. Our inability to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so. For these reasons, our financial statements contain a paragraph in substantial doubt is expressed about our ability to continue as a going concern within one year of the date of financial statements.
20--------------------------------------------------------------------------------
Table of Contents 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.
Revenue
The Company generates revenue from (i) its Clinical Research Organization
services ("CRO services") provided by its ImQuest subsidiary, and (ii) grant
awards from the
At the inception of a contract for CRO services, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
There is no explicit guidance within ASC 606 to account for grant revenue, and
since the Company is a for-profit entity, it must look to other
Under ASC 450, the recognition of a gain contingency occurs at the earlier of
when the gain has been realized or the gain is realizable. The gain is realized
when the Company performs the research under the grant and submits the expense
reimbursements to the
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, benefits 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.
Advertising and Marketing Costs
Advertising costs are expensed as incurred and included in operating expenses on
the statements of operations. The Company incurred advertising and marketing
expense for the six months ended
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 Estimates
The condensed consolidated financial statements include estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of operations. These significant accounting estimates include the inputs to level 3 valuation techniques for valuing the identified intangible assets in the ImQuest acquisition, valuation allowances associated with deferred tax assets, and revenue recognition in accordance with ASC 606.
21
--------------------------------------------------------------------------------
Table of Contents
Three Months Ended
Revenue
Revenue increased from
Cost of Revenues
Cost of revenue increased from
Research and Development Expenses
R&D expenses decreased from
Three Months Ended June 30,
2022 2021 Variance
STAT-201: Crohn's disease $ 639,060 $ 251,118 $ 387,942
STAT-205: Acute and post-acute Covid-19 159,982 484,259 (324,277 )
STAT-401: Pancreatic cancer 49,362 - 49,362
STAT-601: Entolimod for acute radiation 63,639 - 63,639
Other expenses 61,561 1,080,239 (1,018,678 )
Total research & development expenses
22
--------------------------------------------------------------------------------
Table of Contents
General and Administrative Expenses
G&A expenses decreased from
Three Months Ended June 30,
2022 2021 Variance
Payroll (including benefits) $ 1,259,899 $ 2,859,364 $ (1,599,465 )
Stock listing expenses 113,075 293,331 (180,256 )
Professional fees 307,316 763,223 (455,907 )
Consultants and contractors 195,482 339,274 (143,792 )
Insurance 220,387 143,132 77,255
Travel 3,338 30,012 (26,674 )
Other G&A expenses 328,937 79,538 249,399
Total general & administrative expenses
Payroll (including benefits) incudes salaries, health benefits and related
payroll costs. The decrease in payroll expense was primarily attributable to a
reduction of costs of
Stock listing expenses are made up of fees paid to maintain the listing of the
Company's common stock on The NASDAQ, the costs of an investor relations program
using outside consultants and databases, costs incurred with advisors to raise
new debt and equity required by the Company, and the costs charged by stock
transfer agents to maintain the Company's share registers. The decreased costs
in the three months ended
Professional fees comprise fees paid for services to lawyers (other than lawyers
who are engaged for services related to R&D), accountants, and the Company's
firm of auditors. Fees paid to lawyers in the three months ended
Fees paid to the audit firms engaged by the Company in the three months ended
Consultants and contractors are individuals and firms hired by the Company to
provide certain investment banking and advisory services, to assist the Company
with the implementation of a new enterprise resource planning ("ERP") system, to
provide valuation reports required to complete the accounting for the Merger and
to assist with other general matters. Fees paid to consultants and contractors
in the three months ended
Insurance expenses comprise fees and premiums paid to insurance companies from
which the Company purchased policies to protect against loss or damage to its
assets and intellectual property, to protect itself against claims for damage
caused to third parties by its clinical trials or products used in trials or
sold to customers, coverage for workers' compensation payable for injuries
suffered by its employees, and losses incurred by its directors and officers in
certain circumstances in the performance of their duties. Insurance premiums
and costs in the three months ended
Travel. The Company maintains offices in a number of locations in
Other G&A expenses comprise costs to operate and lease office space, non-capital
expenditures incurred for office furniture and equipment, telecommunication and
internet expenses, postage and courier costs, and bank charges. Other G&A
expenses increased year over year primarily as a result of the addition of new
office locations and employees in 2021 in
Other Income and Expenses
Interest and other expense of
Interest and other expense of
23
--------------------------------------------------------------------------------
Table of Contents
Six Months Ended
Revenue
Revenue increased from
Cost of Revenues
Cost of revenue increased from
Research and Development Expenses
R&D expenses increased from
Six Months Ended June 30,
2022 2021 Variance
STAT-201: Crohn's disease $ 639,060 $ 309,742 $ 329,318 STAT-205: Acute and post-acute Covid-19 556,815 676,141 (119,326 ) STAT-401: Pancreatic cancer
184,294 - 184,294
STAT-601: Entolimod for acute radiation 172,652 - 172,652
Other expenses 2,663,111 1,854,077 809,034
Total research & development expenses
24
--------------------------------------------------------------------------------
Table of Contents
General and Administrative Expenses
G&A expenses decreased from
Six Months Ended June 30,
2022 2021 Variance
Payroll (including benefits) $ 3,506,472 $ 5,494,554 $ (1,988,082 )
Stock listing expenses 331,211 384,907 (53,696 )
Professional fees 851,183 1,482,148 (630,965 )
Consultants and contractors 490,314 810,563 (320,249 )
Insurance 440,586 260,370 180,216
Travel 39,570 46,276 (6,706 )
Other G&A expenses 747,447 195,945 551,502
Total general & administrative expenses
Payroll (including benefits) incudes salaries, health benefits and related
payroll costs. The decrease in payroll expense was primarily attributable to a
reduction of costs of
Stock listing expenses are made up of fees paid to maintain the listing of the
Company's common stock on The NASDAQ, the costs of an investor relations program
using outside consultants and databases, costs incurred with advisors to raise
new debt and equity required by the Company, and the costs charged by stock
transfer agents to maintain the Company's share registers. The decreased costs
in the six months ended
Professional fees comprise fees paid for services to lawyers (other than lawyers
who are engaged for services related to R&D), accountants, and the Company's
firm of auditors. Fees paid to lawyers in the six months ended
Fees paid to accountants in the six months ended
Fees paid to the audit firms engaged by the Company in the six months ended
Consultants and contractors are individuals and firms hired by the Company to
provide certain investment banking and advisory services, to assist the Company
with the implementation of a new enterprise resource planning ("ERP") system, to
provide valuation reports required to complete the accounting for the Merger and
to assist with other general matters. Fees paid to consultants and contractors
in the six months ended
Insurance expenses comprise fees and premiums paid to insurance companies from
which the Company purchased policies to protect against loss or damage to its
assets and intellectual property, to protect itself against claims for damage
caused to third parties by its clinical trials or products used in trials or
sold to customers, coverage for workers' compensation payable for injuries
suffered by its employees, and losses incurred by its directors and officers in
certain circumstances in the performance of their duties. Insurance premiums
and costs in the six months ended
Travel. The Company maintains offices in a number of locations in
Other G&A expenses comprise costs to operate and lease office space, non-capital
expenditures incurred for office furniture and equipment, telecommunication and
internet expenses, postage and courier costs, and bank charges. Other G&A
expenses increased year over year primarily as a result of the addition of new
office locations and employees in 2021 in
Other Income and Expenses
Interest and other expense of
Interest and other expense of
25
--------------------------------------------------------------------------------
Table of Contents
Liquidity and Capital Resources
At
© Edgar Online, source
