This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, including statements about our
expectations related to the progress, continuation, timing and success of drug
discovery and development activities conducted by the Company, other statements
regarding our future product development and regulatory strategies, including
with respect to specific indications; our ability to obtain additional capital
to fund our operations, changes in our research and development spending,
realizing new revenue streams and obtaining future out-licensing or
collaboration agreements that include up-front, milestone and/or royalty
payments, our ability to realize up-front milestone and royalty payments under
current and future agreements, future research and development spending and
projections relating to the level of cash we expect to use in operations, our
working capital requirements and our future headcount requirements. In some
cases, forward-looking statements can be identified by the use of terms such as
"anticipates," "believes," "hopes," "estimates," "looks," "expects," "plans,"
"intends," "goal," "potential," "may," "suggest," "will," or "continue," or the
negative thereof or other comparable terms. These statements are based on
current expectations, projections and assumptions made by management and are not
guarantees of future performance. Although we believe that the expectations
reflected in the forward-looking statements contained herein are reasonable,
these expectations or any of the forward-looking statements could prove to be
incorrect and actual results could differ materially from those projected or
assumed in the forward-looking statements. Our future financial condition, as
well as any forward-looking statements are subject to significant risks and
uncertainties including, but not limited to the factors set forth under the
heading "Item 1A. Risk Factors" under Part I of this Annual Report on Form 10-K,
and in other reports we file with the
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The following discussion of our financial condition and results of operations should be read in conjunction with our accompanying audited financial statements and related notes to those statements included elsewhere in this Annual Report on Form 10-K.
Our fiscal year ends on
Management's Plan of Operation
The Company historically devoted most of its efforts and resources on drug development, regulatory matters, and clinical trials. Presently, the Company does not have sufficient financial resources to advance our drug candidates meaningfully. Contingent upon sufficient funding, we anticipate that our efforts would primarily focus on advancement of our drug candidate Brilacidin for decreasing the incidence of severe oral mucositis as a complication of chemoradiation in Oral Mucositis. We expect to concentrate on product development and engage in a limited way in product discovery, avoiding the significant investment of time and financial resources that is generally required for a promising compound to be identified and brought into clinical trials.
In the ordinary course of business, we engage in a continual review of opportunities to license our drug compound(s)/ indications and enter into partnering, joint development or similar arrangements with other companies. We may generally at any time have such opportunities in various stages of active review, including, for example, entry into indications of interest and term sheets and participation in preliminary discussions and negotiations. Any such transaction could be material to us.
The Company is monitoring BeaMedical's progress in advancing its novel laser-based thermal ablation technology platform targeting epilepsy and oncology procedures, and we have been informed that BeaMedical's first FDA-related development milestone via the 510(k) pathway is anticipated to occur within the year.
Critical Accounting Policies and Estimates
Management's discussion and analysis of financial condition and results of
operations are based upon our accompanying financial statements, which have been
prepared in conformity with
Recently Issued Accounting Pronouncements
See Note 3. Significant Accounting Policies and Recent Accounting Pronouncements to the consolidated financial statements, included in Part II, Item 8 of this Annual Report on Form 10-K, for a discussion of recent accounting pronouncements and their effect, if any, on our financial statements.
Results of Operations
We expect to incur losses from operations for the next few years. Contingent
upon sufficient funding, we expect to incur increasing research and development
expenses, including expenses related to additional clinical trials for our
proprietary programs. We currently anticipate that future budget expenditures
will be approximately
34 Table of Contents Revenue
We generated revenue of
We incurred operating expenses of approximately
Research and Development Expenses for Proprietary Programs
Below is a summary of our research and development expenses for our proprietary programs by categories of costs for the fiscal years presented (rounded to nearest thousand): Year ended Change June 30, 2022 vs. 2021 2022 2021 $ % Clinical studies and development research$ 3,631,000 $ 6,056,000 (2,425,000 ) (40 )% Employees payroll and payroll tax expenses related to R&D department 641,000 398,000 243,000 61 % Stock-based compensation - employee 100,000 59,000 41,000 69 % Stock-based compensation - consultants 60,000 125,000 (65,000 ) (52 )% Depreciation and amortization expenses 382,000 378,000 4,000 1 % Total$ 4,814,000 $ 7,016,000 (2,202,000 ) (31 )%
Fiscal 2022 compared to Fiscal 2021 - Research and development expenses for
proprietary programs decreased during the year ended
Employees payroll and payroll tax expenses increased during the year ended
Stock-based compensation for employees increased during the year ended
Stock-based compensation - consultants decreased during the year ended
Our research and development expenses include costs related to preclinical and clinical trials, outsourced services and consulting, officers' payroll and related payroll tax expenses, other wages and related payroll tax expenses, stock-based compensation, depreciation and amortization expenses. Clinical studies and development expenses may decrease in future reporting periods depending on the Company's current and future financial liquidity. We manage our proprietary programs based on scientific data and achievement of research plan goals. Accordingly, the accurate assignment of time and costs to a specific project is difficult and may not give a true indication of the actual costs of a particular project. As a result, we do not report costs on an individual program basis.
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General and Administrative Expenses
General and administrative expenses consist mainly of compensation and associated fringe benefits not included in the cost of research and development expenses for proprietary programs and include other management, business development, accounting, information technology and administration costs, including patent filing and prosecution, recruiting, consulting and professional services, travel and meals, sales commissions, facilities, depreciation and other office expenses.
Below is a summary of our general and administrative expenses (rounded to nearest thousand): Year ended Change June 30, 2022 vs. 2021 2022 2021 $ % Insurance and health expense$ 277,000 $ 405,000 (128,000 ) (32 )% Directors' fees 150,000 150,000 - - % Rent and utility expense 74,000 100,000 (26,000 ) (26 )% Stock-based compensation - officers & directors 423,000 - 423,000 - % Business development expense 29,000 141,000 (112,000 ) (79 )% Patent write off 141,000 - 141,000 - % Other G&A 129,000 167,000 (38,000 ) (23 )% Total$ 1,223,000 $ 963,000 260,000 27 %
Fiscal 2022 compared to Fiscal 2021 - General and administrative expenses
increased during the year ended
Officers' payroll and payroll tax expenses
Below is a summary of our Officers' payroll and payroll tax expenses (rounded to nearest thousand): Year ended Change June 30, 2022 vs. 2021 2022 2021 $ %
Officers' payroll and payroll tax expenses
Fiscal 2022 compared to Fiscal 2021 - The decrease in officers' payroll and
payroll tax expenses for the Company during the year ended
Professional fees
Below is a summary of our Professional fees (rounded to nearest thousand):
Year ended Change June 30, 2022 vs. 2021 2022 2021 $ %
Audit Fee, legal and professional fees
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Fiscal 2022 compared to Fiscal 2021 - Professional fees decreased during the
year ended
Other Operating Income and (Loss)
There was an increase in other expense which represents equity in loss from an
investment for the period from
Other Income (Expense)
Below is a summary of our other income (expense) (rounded to nearest thousand):
Year ended Change June 30, 2022 vs. 2021 2022 2021 $ % Other Income$ 172,000 $ - 172,000 - % Change in fair value - - of preferred stock$ (177,000 ) $ (177,000 ) % Interest expense - debt (68,000 ) (155,000 ) 87,000 (56 )% Interest expense - preferred stock liability (47,000 ) (4,702,000 ) 4,655,000 (99 )% Other Income (Expense), net$ (120,000 ) $ (4,857,000 ) 4,737,000 (98 )%
Fiscal 2022 compared to Fiscal 2021
There was an increase in other income which represents the forgiveness of the PPP Loan.
There was an increase in change in fair value of preferred stock related to Series B-2 5% convertible preferred stock.
There was a decrease in interest expenses paid on the note payable - related
party, because the Company repaid
There was a decrease in interest expense - preferred stock liability during the
year ended
Net Losses
We incurred net losses of
Liquidity, Going Concern and Capital Resources
Projected Future Working Capital Requirements - Next 12 Months
As of
37 Table of Contents
This assessment is based on current estimates and assumptions regarding our clinical development programs and business needs. Actual working capital requirements could differ materially from this above working capital projection.
Our ability to successfully raise sufficient funds through the sale of equity securities, when needed, is subject to many risks and uncertainties and even if we are successful, future equity issuances would result in dilution to our existing stockholders. Our risk factors are described under the heading "Risk Factors" in Part I, Item 1A and elsewhere in this Annual Report on Form 10-K.
In the event that we are unable to raise additional funds from others, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our future business, operating results, financial condition and long-term prospects. The Company expects to seek to obtain additional funding through business development activities (for example licensing and partnerships) and future equity issuances. There can be no assurance as to the availability or terms upon which such financing and capital might be available to us.
Going Concern
Our financial statements were prepared assuming we will continue as a going
concern which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. We have negative working capital
of
Shelf Registration Statement - Current Status
The Company does not satisfy the conditions for use of Form S-3 for primary offerings of securities, and as a result, the Company generally may only utilize Form S-1 to register the sale of its securities. Form S-1 offers less flexibility on the timing and types of offerings compared to Form S-3.
Cash Flows The following table provides information regarding our cash position, cash flows and capital expenditures for the years endedJune 30, 2022 and 2021 (rounded to nearest thousand): Year ended Change June 30, Increase/ 2022 2021 (Decrease) % Net cash used in operating activities$ (6,280,000 ) $ (9,495,000 ) (34 )%
Net cash used in investing activities (4,080,000 ) (72,000 ) 5,567 % Net cash provided by financing activities 3,973,000 13,743,000
(71 )% Net increase (decrease) in cash$ (6,387,000 ) $ 4,176,000 (253 )% 38 Table of Contents
The decrease in net cash used in operating activities of
Investing activities
The increase in net cash used in investing activities of
Financing activities
The decrease in net cash provided by financing activities of
In 2022, we raised approximately
In 2021, we raised approximately
Requirement for
The Company, contingent on future sales of its securities, currently expects to
incur total operating expenses of approximately
In the event that we are unable to or raise additional funds from others, we may be required to delay, reduce or severely curtail our operations or otherwise impede our on-going business efforts, which could have a material adverse effect on our future business, operating results, financial condition and long-term prospects. The Company expects to seek to obtain additional funding through business development activities (for example licensing and partnerships) and future equity issuances. There can be no assurance as to the availability or terms upon which such financing and capital might be available to us.
Commitments and Contingencies
Please see Note 10. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 in this Annual Report on Form 10-K, for a discussion of contractual commitments and contingent liability - disputed invoices.
Equity Transactions
During the year ended
39 Table of Contents
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements, as defined in Item 304(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended.
Recently Issued Accounting Pronouncements
We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operation, financial position or cash flow.
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