What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2022-03-01 compared with 2021-03-25 · 83 added, 81 removed, 145 unchanged (53% of the section changed)

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Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

We are a clinical-stage biopharmaceutical company developing a pipeline of novel therapies for patients with classical complement-mediated disorders of the body, brain and eye.

Our pipeline is based on our platform technology addressing well-researched classical complement-mediated autoimmune and neurodegenerative disease processes, both of which are triggered by aberrant activation of C1q, the initiating molecule of the classical complement pathway.

We are a clinical-stage biopharmaceutical company pioneering a new class of complement medicines designed to stop the classical complement pathway at its start, C1q, in order to bring therapies to patients suffering from serious complement-mediated autoimmune, neurodegenerative and ophthalmic disorders.

C1q, the initiating molecule of the classical complement pathway, is a core component to the body’s immune system that activates a powerful inflammatory cascade.

We believe that by stopping the classical complement pathway at its start, our approach may have the potential to provide more complete protection against complement-mediated disorders of the body, brain and eye.

Our proprietary platform leverages well-researched classical complement-mediated autoimmune and neurodegenerative disease processes, both of which are triggered by aberrant activation of C1q.

Evidence suggests that potent and selective inhibition of C1q can prevent tissue damage triggered in antibody-mediated autoimmune disease and preserve loss of functioning synapses associated with cognitive and functional decline in complement-mediated neurodegeneration.

Our upstream complement approach targeting C1q acts as an “on/off switch” designed to block all downstream components of the classical complement pathway that lead to excess inflammation, tissue damage and patient disability in a host of complement-mediated disorders, while preserving the normal immune function of the lectin and alternative complement pathways involved in the clearance of pathogens and damaged cells.

Our pipeline of product candidates is designed to block the activity of C1q and the entire classical complement pathway in a broad set of complement-mediated diseases.

Our first product candidate, ANX005, is a full-length monoclonal antibody formulated for intravenous administration in autoimmune and neurodegenerative disorders.

Our second product candidate, ANX007, is an antigen-binding fragment, or Fab, formulated for intravitreal administration for the treatment of neurodegenerative ophthalmic disorders.

We are also developing ANX009, an investigational, subcutaneous formulation of a Fab designed for the treatment of systemic autoimmune diseases.

We have completed Phase 1b safety and dose-ranging clinical trials for ANX005 and ANX007 in patients with Guillain-Barré Syndrome, or GBS, and glaucoma, respectively.

Both ANX005 and ANX007 were well-tolerated and showed full inhibition of C1q and the classical complement pathway in the Phase 1b trials.

We have advanced ANX005 into a Phase 2/3 trial in patients with GBS and a Phase 2 trial in patients with Huntington’s disease.

We plan to advance ANX005 into Phase 2 trials in patients with warm autoimmune hemolytic anemia and amyotrophic lateral sclerosis in 2021.

A Phase 2 trial of ANX007 is ongoing in patients with GA, and.

ANX009 is being evaluated in a first-in-human trial.

Based on learnings from our initial trials, we are evaluating additional orphan and large market indications that are driven by aberrant or excess classical complement activation.

Additionally, we are developing novel product candidates designed to inhibit C1q and other components of the early classical complement cascade with the goal of further broadening our portfolio.

Finally, we are leveraging our disciplined development strategy in early clinical trials utilizing established biomarkers to enhance patient selection, measure target engagement and assess our product candidates’ potential to meaningfully impact the disease process and improve the probability of technical success over shorter development timelines.

By taking an upstream complement approach targeting C1q, our treatments are designed to act as an “on/off switch” to block all downstream components of the classical complement pathway that lead to excess inflammation, tissue damage and patient disability in a host of complement-mediated disorders, while preserving the normal immune function of the lectin and alternative complement pathways involved in the clearance of pathogens and damaged cells.

We are advancing a broad pipeline of product candidates designed to block the activity of C1q and the entire classical complement pathway for a range of complement-mediated diseases.

Our development strategy is focused on areas where C1q and the classical complement pathway is the key driver of disease.

Our pipeline includes three clinical-stage assets across three therapeutic franchises:

We are advancing our lead candidate, ANX005, an investigational, full-length monoclonal antibody formulated for intravenous administration for several autoimmune indications.

ANX005 is currently being evaluated in a Phase 2/3 clinical trial for the potential treatment of patients with Guillain-Barré Syndrome (GBS) with data anticipated in 2023 and a Phase 2 trial in patients with warm autoimmune hemolytic anemia (wAIHA) with data anticipated in the second half of 2022.

Our ANX009 clinical candidate is a subcutaneous formulation of an antigen-binding fragment, or Fab.

ANX009 has been evaluated in a Phase 1 trial and based on the data from this trial, we plan to advance ANX009 into a Phase 1b trial in patients with lupus nephritis (LN) with initial data expected in the second half of 2022.

Neurodegeneration .

We are also developing ANX005 for the potential treatment of neurodegenerative indications .

ANX005 is currently being evaluated in Phase 2 trials in Huntington’s disease (HD) and amyotrophic lateral sclerosis (ALS).

Interim data from the HD trial showed improvements in clinical measures and that ANX005 had been generally well tolerated.

We plan to present the full data from our HD trial in the second quarter of 2022.

Data from Phase 2 trial of ANX005 in patients with ALS is expected to be reported in 2023.

Ophthalmology .

Our ANX007 program is a Fab formulated for intravitreal administration for the potential treatment of neurodegenerative diseases of the eye .

We are currently conducting a Phase 2 trial in patients with geographic atrophy (GA) with data expected in 2023.

Beyond our clinical-stage assets, our preclinical portfolio of next generation product candidates includes ANX105, an investigational monoclonal antibody targeting neurodegenerative indications, and ANX1502, an investigational oral small molecule in development for the treatment of certain autoimmune indications.

Based on learnings from our initial trials and our expertise in the role of C1q and the classical complement pathway, we are evaluating additional orphan and large market indications that are driven by aberrant or excess classical complement activation.

We hold worldwide development and commercialization rights, including through exclusive licenses, to all of our product candidates, which allows us to strategically maximize value from our product portfolio over time.

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To date, we have focused primarily on performing research and development activities, hiring personnel and raising capital to support and expand these activities.

Prior to our initial public offering, or IPO, we had funded our operations primarily from the

issuance and sale of redeemable convertible preferred stock.

In July 2020, we completed our IPO, pursuant to which we issued and sold 14,750,000 shares of our common stock at a public offering price of $17.00 per share and 2,139,403 shares of our common stock to the underwriters of the IPO pursuant to the partial exercise of their option to purchase additional shares at a price of $17.00 per share less underwriting discounts and commissions.

We received net proceeds of approximately $262.4 million from the IPO, after deducting underwriting discounts and commissions of $20.1 million and offering costs of $4.6 million.

We do not have any products approved for sale, and we have not generated any revenue from product sales.

We have incurred net losses each year since our inception.

Our net losses were $63.4 million and $37.2 million for the year ended December 31, 2020 and 2019, respectively.

Our net losses were $130.3 million and $63.4 million for the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had an accumulated deficit of $296.3 million and cash and cash equivalents and short-term investments of $242.7 million.

We do not expect to generate revenue from any product candidates that we develop until we obtain regulatory approval for one or more of such product candidates and commercialize our products or enter into collaboration agreements with third parties.

Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our operations through public or private equity offerings or debt financings, credit or loan facilities, collaborations or a combination of one or more of these funding sources.

As a result, we will need to raise additional capital.

Additional funds may not be available to us on acceptable terms or at all.

If we fail to obtain necessary capital when needed on acceptable terms, or at all, it could force us to delay, limit, reduce or terminate our product development programs, commercialization efforts or other operations.

Initial Public Offering

On July 28, 2020, we completed an initial public offering of our common stock on the Nasdaq Global Select Market, or the IPO.

As part of the IPO, we issued and sold 14,750,000 shares of our common stock at a public offering price of $17.00 per share and 2,139,403 shares of our common stock to the underwriters of the IPO pursuant to the partial exercise of their option to purchase additional shares at a price of $17.00 per share less underwriting discounts and commissions.

We received net proceeds of approximately $262.4 million from the IPO, after deducting underwriting discounts and commissions of $20.1 million and offering costs of $4.6 million.

Impact of COVID-19 Pandemic

The COVID-19 pandemic continues to rapidly evolve, and its ultimate impact is highly uncertain and subject to change.

We will continue to monitor the COVID-19 situation closely.

The extent of the impact of the COVID-19 pandemic on our business, operations and clinical development timelines and plans remains uncertain, and will depend on the duration of the outbreak and its impact on our clinical trial enrollment, trial sites, contract research organizations, or CROs, third-party manufacturers, regulatory authorities and other third parties with whom we do business.

The COVID-19 pandemic continues to rapidly evolve, and its ongoing impact is uncertain and subject to change.

For instance, we have experienced interruption in clinical trial activities, shortages in clinical site staff, longer timelines for clinical site initiation and temporary shortages in lab kits and supplies.

We will continue to monitor the COVID-19 pandemic situation closely.

The extent of the impact of the COVID-19 pandemic on our clinical trials, business, financial condition, results of operations and clinical development timelines and plans remains uncertain, and will depend on, among other factors, the duration of the outbreak, the emergence of new variants, rates of infection in the locations in which we do business, restrictions that may be requested or mandated by governmental authorities, and the impact of the COVID-19 pandemic on our clinical trial enrollment, trial sites, contract research organizations, or CROs, third-party manufacturers, regulatory authorities and other third parties with whom we do business.

Components of Operating Results

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General and administrative expenses consist primarily of compensation and personnel-related expenses (including stock-based compensation) for our personnel in executive, finance and other administrative functions.

General and administrative expenses also include professional fees paid for accounting, legal and tax services, allocated expenses for facilities, infrastructure costs and depreciation and other general and administrative costs.

General and administrative expenses also include professional fees paid for accounting, legal and tax services, allocated expenses for facilities and depreciation and other general and administrative costs.

We expect our general and administrative expenses to increase substantially for the foreseeable future as we continue to support our research and development activities, grow our business and, if any of our product candidates receive marketing approval, commercialization activities.

We will also incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC, Sarbanes-Oxley Act and the Nasdaq Stock Market, additional insurance expenses, investor relations activities and other administrative and professional services.

We also expect to increase the size of our administrative function and facility costs to support the growth of our business.

Loss on Remeasurement of Redeemable Convertible Preferred Stock Liability

Loss on remeasurement of redeemable convertible preferred stock liability consists of gains and losses from the remeasurement to fair value of the redeemable convertible preferred stock liability related to our Series C redeemable convertible preferred stock.

We remeasured the liability each reporting period from the date of issuance (December 2018) until the second closing of our Series C redeemable convertible preferred stock which occurred in August 2019.

Other Income, Net

Other income, net, primarily consists of interest income earned on our cash equivalents and short-term investments.

We also expect to increase the size of our administrative function to support the growth of our business.

Interest and Other Income, Net

Interest and other income, net, primarily consists of non-recurring income from research grants and interest income earned on our cash equivalents and short-term investments.

Results of Operations

Comparison of the Year Ended December 31, 2020 and 2019

Comparison of the Years Ended December 31, 2021 and 2020

The following tables summarize our results of operations for the periods presented:

Dollar Change

(in thousands)

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Loss from operations

Loss on remeasurement of redeemable convertible

preferred stock liability

Other income, net

Net loss before taxes

Provision for income taxes

Interest and other income, net

Not meaningful

Research and Development Expenses

Dollar Change

(in thousands)

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Clinical and nonclinical outside services

Professional services

Consulting and professional services

Contract manufacturing

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Total research and development expenses

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Research and development expenses increased by $50.8 million, or 103%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily due to an increase of $8.8 million in direct clinical outside services related to our ongoing and planned clinical trials for ANX005, ANX007 and ANX009 as well as preclinical outside services to support pre-IND activities for our ANX105 and small molecule program.

Contract manufacturing expense increased by $7.4 million related to the production of clinical trial materials to support our ongoing and planned clinical trials using ANX005 as well as pre-IND manufacturing activities to support ANX105.

Compensation and personnel-related expenses increased by $6.5 million due to an increase in headcount and related employee costs.

Direct professional services costs increased by $1.8 million related to external research and development during the year ended December 31, 2020.

The increase was primarily due to an increase of $23.7 million in direct clinical outside services related to our multiple ongoing and planned clinical trials in GBS, warm autoimmune hemolytic anemia, Huntington’s Disease, amyotrophic lateral sclerosis and geographic atrophy as well as preclinical outside services to support pre-IND activities for ANX105 and our small molecule program, ANX1502.

Contract manufacturing expense increased by $6.7 million related to the production of ANX005, ANX007, and ANX009 as well as pre-IND manufacturing activities for ANX105 and ANX1502.

Compensation and personnel-related expenses increased by $12.5 million, including an increase of $6.3 million in stock-based compensation, due to an increase in headcount.

Direct consulting and professional services costs increased by $4.1 million related to the support of multiple functions including clinical development, translational, regulatory and project management.

Facilities and depreciation costs increased by $3.7 million due to the commencement of our new office lease in Brisbane, California.

General and Administrative Expenses

Dollar Change

(in thousands)

Professional services

Consulting and professional services

Compensation and personnel-related (including

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Total general and administrative expenses

Not meaningful

General and administrative expenses increased by $16.4 million, or 116%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily due to an increase of $3.4 million in professional services for public company readiness efforts including accounting, legal and audit fees and directors and officers liability insurance required for a public corporation.

Compensation and personnel-related expenses increased by $2.3 million due to an increase in headcount and related employee costs.

Loss on Remeasurement of Redeemable Convertible Preferred Stock Liability

For the year ended December 31, 2019, we recorded a loss on remeasurement of redeemable convertible preferred stock liability of $5.7 million related to the change in fair value of the liability.

The liability was recognized in connection with the initial closing of our Series C redeemable convertible preferred stock financing in December 2018 and was settled upon completion of the second closing in August 2019.

Other Income, Net

Other income, net, decreased by $1.0 million for the year ended December 31, 2020 compared to the year ended December 31, 2019.

The decrease was primarily due to a decrease of $0.6 million in interest income and a $0.2 million grant received in 2019.

The increase was primarily due to an increase of $7.9 million in compensation and personnel-related expenses, including an increase of $5.0 million in stock-based compensation, due to an increase in headcount.

Consulting and professional services for accounting, legal and audit fees and directors and officers’ liability insurance increased by $6.4 million.

Facilities and depreciation costs increased by $1.6 million due to the commencement of our new office lease in Brisbane, California.

Liquidity and Capital Resources

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(in thousands)

Cash used in operating activities

Cash used in investing activities

Cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

(Decrease) increase in cash, cash equivalents and restricted cash

Cash Flows from Operating Activities

Cash used in operating activities for the year ended December 31, 2021 was $106.1 million, which consisted of a net loss of $130.3 million, partially offset by $20.9 million in non-cash charges and a net change of $3.3 million in our operating assets and liabilities.

The non-cash charges consisted of stock-based compensation of $16.3 million, depreciation and amortization of $2.1 million, accretion of discount on available-for-sale securities of $1.3 million, and reduction in the carrying amount of right-of-use assets of $1.3 million.

Cash used in operating activities for the year ended December 31, 2020 was $53.1 million, which consisted of a net loss of $63.4 million, partially offset by $5.6 million in non-cash charges and a net change of $4.7 million in our net operating assets and liabilities.

The non-cash charges consisted of stock-based compensation of $4.9 million and depreciation and amortization of $0.7 million.

Cash used in operating activities for the year ended December 31, 2019 was $28.4 million, which consisted primarily of a net loss of $37.2 million and a net change of $0.6 million in our net operating assets and liabilities, partially offset by $8.2 million in non-cash charges.

The non-cash charges pertained to the loss on remeasurement of the redeemable convertible preferred stock liability of $5.7 million, stock-based compensation of $2.0 million and depreciation and amortization of $0.5 million.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2021 was $88.2 million, which consisted of $225.6 million of purchases of available-for-sale securities and $1.7 million of purchase of property and equipment, partially offset by $133.0 million of proceeds from maturities of available-for-sale securities and $6.0 million of proceeds from sale of available-for-sale securities.

Cash used in investing activities for the year ended December 31, 2020 was $83.2 million, which consisted of $82.7 million of purchases of available-for-sale securities and $0.5 million of purchases of property and equipment.

Cash used in investing activities for the year ended December 31, 2019 was $0.3 million related to purchases of property and equipment.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2021 was $1.8 million, related to $1.8 million of proceeds from the exercise of common stock options and employee stock purchase plan purchases.

Cash provided by financing activities for the year ended December 31, 2020 was $360.9 million, which consisted of the net proceeds of $262.4 million from the IPO, net of underwriting discounts and expenses, the net proceeds received from sale and issuance of our Series D redeemable convertible preferred stock of approximately $96.8 million, and proceeds of $0.5 million from the Paycheck Protection Program loan which was repaid in full.

Cash provided by financing activities for the year ended December 31, 2019 was $28.4 million, which consisted of net proceeds received from the sale and issuance of our Series C redeemable convertible preferred stock of $30.0 million, partially offset by payments for deferred offering costs of $1.6 million.

Funding Requirements

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In addition, we expect our general and administrative expenses to increase substantially for the foreseeable future as we continue to support our research and development activities and to grow our business and as we expect to engage in commercialization activities, if any of our product candidates receive marketing approval.

We will also incur additional expenses as a result of operating as a public company and also expect to increase the size of our administrative function to support the growth of our business.

will also incur additional expenses as a result of operating as a public company and also expect to increase the size of our administrative function to support the growth of our business.

The timing and amount of our operating expenditures will depend on many factors, including:

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the timing, receipt and amount of sales of any future approved products.

Based upon our current operating plan, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through 2023.

Based upon our current operating plan, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2024.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect.

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Debt financing, if available, is likely to involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securities received any distribution of our corporate assets.

At-the-Market Offering

In August 2021, we entered into a sales agreement with Cowen and Company LLC, or Cowen, as sales agent, pursuant to which we may issue and sell shares of our common stock for an aggregate maximum offering price of $100.0 million under an at-the-market offering program, or 2021 ATM program.

We will pay Cowen up to 3% of gross proceeds for the common stock sold through the 2021 ATM program.

As of December 31, 2021, no shares of common stock have been sold under the 2021 ATM program.

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in 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.

We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.

As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles, or GAAP.

The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, expenses and related disclosures.

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Actual results may differ from these estimates under different assumptions or conditions and any such differences may be material.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies are the most critical for fully understanding and evaluating our financial condition and results of operations.

Accrued and Prepaid Research and Development Costs

We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf.

We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions, clinical research organizations, and clinical manufacturing organizations that conduct and manage preclinical studies and clinical trials on our behalf.

In recording service fees as either prepaid or accrued costs, we estimate the period over which services will be performed and the level of effort to be expended in each period.

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We evaluate such payments for current or long-term classification based on when such services are expected to be received.

Operating Lease Obligations

We determine if an arrangement is a lease at inception.

Upon adoption of Accounting Standards Codification 842, Leases , as of January 1, 2021, we include operating leases in operating lease right of use, or ROU, assets, current and noncurrent operating lease liabilities in our consolidated balance sheets.

The ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

We measure our ROU assets based on the associated lease liabilities adjusted for any lease incentives such as tenant improvement allowances.

As most of the leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the commencement date.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise the option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

As a practical expedient, we elected, for all facility leases, not to separate non-lease components from lease components and instead to account for each separate lease component and its associated non-lease components as a single lease component.

We elected to exclude from our balance sheets recognition of leases having a term of 12 months or less (short-term leases).

Stock-Based Compensation

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Our board of directors considered, among other things, valuations of our common stock which were prepared by an independent third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

After the completion of the IPO in July 2020, the fair value of each share of underlying common stock will be based on the closing price of our common stock as reported on the date of grant on the Nasdaq Global Select Market.

After the completion of our IPO, our board of directors determined the fair value of each share of underlying common stock based on the closing price of our common stock as reported on the date of grant on the Nasdaq Global Select Market.

Expected Term —The expected term represents the period that the stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term).

Expected Volatility —Because we were privately held and do not have sufficient trading history for our common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants.

Expected Volatility —We do not have sufficient trading history for our common stock, the expected volatility was estimated based on the average volatility for comparable publicly traded life sciences companies over a period equal to the expected term of the stock option grants.

The comparable companies were chosen based on the similar size, stage in life cycle or area of specialty.

We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Risk-Free Interest Rate —The risk-free interest rate is based on the U.S.

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As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.

We recognize deferred income taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes.

In evaluating our valuation allowance, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance.

Due to our lack of earnings history and uncertainties surrounding our ability to generate future taxable income, the net deferred tax assets have been fully offset by a valuation allowance.

The deferred tax assets were primarily comprised of federal and state tax net operating losses and tax credit carryforwards.

Recent Accounting Pronouncements Not Yet Adopted

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Not required for the Company as a smaller reporting company.

We remain eligible to take advantage of smaller reporting company reporting requirements through this Annual Report on Form 10-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis