Statements in this Form 10-K that are not strictly historical are
forward-looking statements and include statements about products in development,
results and analyses of pre-clinical studies, clinical trials and studies,
research and development expenses, cash expenditures, and alliances and
partnerships, among other matters. You can identify these forward-looking
statements because they involve our expectations, intentions, beliefs, plans,
projections, anticipations, or other characterizations of future events or
circumstances. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that may cause actual
results to differ materially from those in the forward-looking statements as a
result of any number of factors. These factors include, but are not limited to,
risks relating to our ability to conduct and obtain successful results from
ongoing clinical trials, commercialize our technology, obtain regulatory
approval for our product candidates, contract with third parties to adequately
test and manufacture our proposed therapeutic products, protect our intellectual
property rights and obtain additional financing to continue our development
efforts. Some of these factors are more fully discussed in Part I, Item 1A,
"Risk Factors" and in our consolidated financial statements and related notes,
included elsewhere herein. We do not undertake to update any of these
forward-looking statements or to announce the results of any revisions to these
forward-looking statements except as required by law. For further information
regarding forward-looking statements, please refer to the "Information Regarding
Forward-Looking Statements" at the beginning of Part I of this Form 10-K.



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Our Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is provided in addition to the accompanying financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flows.





Overview



We are a specialty pharmaceutical company focused on our clinically-validated
and patent-protected PLxGuard drug delivery platform to provide more effective
and safer products. Our PLxGuard drug delivery platform works by targeting the
release of active pharmaceutical ingredients to various portions of the
gastrointestinal tract. We believe this has the potential to improve the
absorption of many drugs currently on the market or in development, and to
reduce the risk of stomach erosions and ulcers associated with certain drugs.



VAZALORE, available in two doses, 325 mg and 81 mg, is an FDA-approved
liquid-filled aspirin capsule that provides patients with vascular disease and
diabetic patients who are candidates for aspirin therapy based on physician
recommendation, with fast, reliable and predictable platelet inhibition. It also
reduces the risk of stomach erosions and ulcers, as compared to immediate
release aspirin, common in an acute setting.



Our commercialization strategy will target the over-the-counter ("OTC') market,
taking advantage of the existing distribution channels for aspirin. We intend to
market VAZALORE to the healthcare professional and the consumer through several
sales and marketing channels. Our product pipeline also includes other oral
nonsteroidal anti-inflammatory drugs using the PLxGuard drug delivery system
that may be developed, including PL1200 Ibuprofen 200 mg and PL1200 Ibuprofen
400 mg, for pain and inflammation in Phase 1 clinical stage.



Critical Accounting Policies



Our consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America ("U.S.
GAAP"). The preparation of these financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Note 3 of the Notes to Consolidated
Financial Statements included elsewhere herein describes the significant
accounting policies used in the preparation of the financial statements. Certain
of these significant accounting policies are considered to be critical
accounting policies, as defined below.



A critical accounting policy is defined as one that is both material to the
presentation of our financial statements and requires management to make
difficult, subjective or complex judgments that could have a material effect on
our financial condition and results of operations. Specifically, critical
accounting estimates have the following attributes: (1) we are required to make
assumptions about matters that are highly uncertain at the time of the estimate;
and (2) different estimates we could reasonably have used, or changes in the
estimate that are reasonably likely to occur, would have a material effect on
our financial condition or results of operations.



Estimates and assumptions about future events and their effects cannot be
determined with certainty. We base our estimates on historical experience and on
various other assumptions believed to be applicable and reasonable under the
circumstances. These estimates may change as new events occur, as additional
information is obtained and as our operating environment changes. These changes
have historically been minor and have been included in the financial statements
as soon as they became known. Based on a critical assessment of our accounting
policies and the underlying judgments and uncertainties affecting the
application of those policies, management believes that our financial statements
are fairly stated in accordance with U.S. GAAP and present a meaningful
presentation of our financial condition and results of operations. We believe
the following critical accounting policies reflect our more significant
estimates and assumptions used in the preparation of our consolidated financial
statements:



Use of Estimates



The preparation of our consolidated financial statements in conformity with U.S.
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reporting period. In the
accompanying consolidated financial statements, estimates are used for, but not
limited to, the impairment assessment of goodwill, the fair value of warrant
liability, the fair value of stock-based compensation, allowance for inventory
obsolescence, contingent liabilities, fair value and depreciable lives of
long-lived assets, and deferred taxes and associated valuation allowance. Actual
results could differ from those estimates.

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Fair Value Measurements



Fair value is defined as the price that would be received in the sale of an
asset or that would be paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The Company has categorized
all investments recorded at fair value based upon the level of judgment
associated with the inputs used to measure their fair value.

Hierarchical levels, directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:





    ?  Level 1: Quoted prices in active markets for identical assets or
       liabilities that the organization has the ability to access at the
       reporting date.

    ?  Level 2: Inputs other than quoted prices included in Level 1, which are
       either observable or that can be derived from or corroborated by
       observable data as of the reporting date.




    ?  Level 3: Inputs include those that are significant to the fair value of

the asset or liability and are generally less observable from objective


       resources and reflect the reporting entity's assumptions about the
       assumptions market participants would use in pricing the asset or
       liability.




The Company's financial instruments (cash and cash equivalents, receivables,
accounts payable and accrued liabilities) are carried in the consolidated
balance sheet at cost, which reasonably approximates fair value based on their
short-term nature. The Company's warrant liability is recorded at fair value,
with changes in fair value being reflected in the statements of operations for
the period of change. The fair value of the term loan approximates its face
value of $0.6 million based on the Company's current financial condition and on
the variable nature of term loan's interest feature as compared to current
rates.

Research and Development Expenses





Costs incurred in connection with research and development activities are
expensed as incurred. Research and development expenses consist of direct and
indirect costs associated with specific projects, manufacturing activities, and
include fees paid to various entities that perform research related services for
the Company.



Stock-Based Compensation



The Company recognizes expense in the consolidated statements of operations for
the fair value of all stock-based compensation to key employees, nonemployee
directors and advisors, generally in the form of stock options and stock awards.
The Company uses the Black-Scholes option valuation model to estimate the fair
value of stock options on the grant date. Compensation cost is amortized on a
straight-line basis over the vesting period for each respective award. The
Company accounts for forfeitures as they occur.



Adopted Accounting Guidance



For a discussion of significant accounting guidance recently adopted or
unadopted accounting guidance that has the potential of being significant, see
Note 3 of the Notes to the Consolidated Financial Statements included elsewhere
herein.



Results of Operations



Revenue



Total revenues were $0.03 million and $0.6 million for the years ended December
31, 2020 and 2019, respectively. All the revenue recognized in 2020 and 2019 is
attributable to work performed under a federal grant from the National
Institutes of Health grant which came to an end in the second quarter of 2020.



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Operating Expenses



Total operating expenses were $13.5 million during the year ended December 31,
2020, a 9% decrease from operating expenses of $14.8 million during the year
ended December 31, 2019. Operating expenses for the years ended December 31,
2020 and 2019 were as follows:



                                             Years Ended December 31,            Increase (Decrease)
                                               2020             2019                $              %
Operating Expenses
Research and development expenses          $  4,338,974     $  4,741,130     $    (402,156 )        (8.5 )%
General and administrative expenses           9,150,568       10,026,627          (876,059 )        (8.7 )%
Total operating expenses                   $ 13,489,542     $ 14,767,757     $  (1,278,215 )        (8.7 )%

Research and Development Expenses





Research and development expenses totaled $4.3 million for the year ended
December 31, 2020, compared to $4.7 million for the year ended December 31,
2019, reflecting continued product development and manufacturing activities for
VAZALORE. This decrease was due to 2020 activities which included the
bioequivalence study to provide data for the sNDA filing, stability and
validation work compared to manufacture, packaging, stability, and analytical
costs related to the registration batches in 2019.  We expect the research and
development costs to be about the same in 2021 as manufacturing activities
continue with the development and stability of VAZALORE.

General and Administrative Expenses





General and administrative expenses totaled $9.2 million for the year ended
December 31, 2020, compared to $10.0 million for the year ended December 31,
2019. The decrease is due to lower compensation related expenses combined with
savings from COVID-19 restrictions on conference and travel costs. We expect our
selling, general and administrative expenses to increase as a result of the
expected commercial launch of VAZALORE.



Other expense



Other expense totaled $1.8 million for the year ended December 31, 2020,
compared to $6.3 million for the year ended December 31, 2019. The change is
primarily attributable to the non-cash change in fair value of warrant liability
primarily due to the fluctuation of the price of the Company's common stock
($1.4 million of other expense for the year ended December 31, 2020, as compared
to $5.7 million of other expense in the prior year).

Liquidity and Capital Resources





The following table summarizes the primary uses and sources of cash for the
periods indicated:



                                               Years Ended December 31,
                                                2020              2019

Net cash used in operating activities       $ (12,243,592 )   $ (12,659,035 )
Net cash used in investing activities       $    (102,000 )   $    (230,294 )
Net cash provided by financing activities   $  20,792,939     $  12,640,366

Net Cash Used in Operating Activities





Net cash used in operating activities was $12.2 million and $12.7 million for
the years ended December 31, 2020 and 2019, respectively. The decrease was due
to lower compensation and COVID-19 impacted conference and travel costs offset
somewhat by the increase in the settlement of 2019 year-end liabilities in 2020.



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Net Cash Used in Investing Activities

Net cash used in investing activities totaled $0.1million and $0.2 million for the years ended December 31, 2020 and 2019, respectively, and reflects the purchase of manufacturing equipment for VAZALORE.

Net Cash Provided by Financing Activities





Net cash provided by financing activities totaled $20.8 million and $12.6
million for the years ended December 31, 2020 and 2019, respectively, and
reflects $7.7 million net proceeds from the issuance of Series B Preferred Stock
and $16.8 million net proceeds from the issuance of common stock in the 2020
period, which was higher than the net proceeds of $13.7 million from the
issuance of Series A Preferred Stock and $2.1 million net proceeds from the sale
of common stock in the prior year. The current year period also includes higher
payments of the Term Loan as the prior year period reflected two less payments
due to the start of the payment amortization period.

Future Liquidity and Capital Needs





As of December 31, 2020, we had working capital of $19.4 million, including cash
and cash equivalents of $22.4 million. In addition, during March 2019, we
entered into an equity distribution agreement (the "Equity Distribution
Agreement") with JMP Securities, Inc. ("JMP") to issue and sell shares of our
common stock, having an aggregate offering price of up to $12.5 million, from
time to time during the term of the Equity Distribution Agreement, through an
"at-the-market" equity offering program (the "ATM Offering") at our sole
discretion, under which JMP acted as our agent. At December 31, 2020, we had
$10.2 million available under this ATM Offering. The JMP Equity Distribution
Agreement and related ATM Offering was terminated on March 2, 2021.



  On March 5, 2021 the Company completed an underwritten public offering (the
"Public Offering") in which we issued 7,875,000 shares of our common stock at a
price to the public of $8.00 per share. Gross proceeds of the Public Offering
were $63 million, before deducting underwriting discounts and commissions and
other offering expenses payable by the Company. Net proceeds of the Public
Offering were $59 million.  The underwriters retained a 30-day option to
purchase up to 1,181,250 shares of common stock at the public offering price,
less underwriting discounts and commission.



We have not generated any revenue from the sale of products and have incurred
operating losses in each year since we commenced operations. As of December 31,
2020, we had an accumulated deficit of $102.1 million. We expect to continue to
incur significant operating expenses and operating losses for the foreseeable
future as we continue the development and commercialization of VAZALORE.
Although these losses and expected losses give rise to substantial doubt, the
Company's cash on hand at December 31, 2020 combined with the proceeds from the
Public Offering support that the Company can fund its obligations for at least
one year from the date these financial statements were issued and mitigate the
substantial doubt consideration.



Our prior losses, combined with expected future losses, have had and will
continue to have an adverse effect on our stockholders' equity and working
capital. If we are unable to achieve and sustain profitability, the market value
of our common stock will likely decline. Because of the numerous risks and
uncertainties associated with developing biopharmaceutical products, we are
unable to predict the extent of any future losses or when, if ever, we will
become profitable. We may need to obtain additional financing in the future, in
addition to the proceeds from the Public Offering, to execute our
commercialization plan. We may obtain additional financing through public or
private equity offerings, debt financings (including related-party financings),
a credit facility or strategic collaborations.



Additional financing may not be available to us when we need it or it may not be
available to us on favorable terms, if at all. Our failure to raise capital as
and when needed could have a negative impact on our financial condition and our
ability to pursue our business strategies. We currently have no understandings,
commitments or agreements relating to any of these types of transactions, other
than in connection with the underwriters' over-allotment option as part of the
Public Offering. If we are unable to raise additional funds when needed, we may
be required to sell or license our technologies or clinical product candidates
or programs that we would prefer to develop and commercialize ourselves.

Impact of COVID-19 Pandemic on Financial Statements





On March 11, 2020, the World Health Organization declared the outbreak of
COVID-19 as a "pandemic", or a worldwide spread of a new disease. Many countries
imposed quarantines and restrictions on travel and mass gatherings to slow the
spread of the virus and have closed non-essential businesses.



  In response to COVID-19, the Company has not experienced a disruption or delay
in the development of VAZALORE™. However, the extent to which COVID-19 may
impact our business will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, such as the duration of the
pandemic, travel restrictions and social distancing in the United States and
other countries, business closures or business disruptions and the effectiveness
of actions taken in the United States and other countries to contain and treat
the pandemic.



The Company has not experienced any significant negative impact on the December
31, 2020 audited consolidated financial statements related to COVID-19. For more
discussion on our risks related to COVID-19, please see risk factors included
under "Item 1A. Risk Factors" herein.



Inflation

The Company believes that the rates of inflation in recent years have not had a significant impact on its operations.

Off-Balance Sheet Arrangements

The Company did not have any off-balance sheet arrangements as of December 31, 2020 or 2019.

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