Perspective Therapeutics, Inc. 10-Q

ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Caution Regarding Forward-Looking Information In addition to historical information, this Form 10- Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (PSLRA). This statement is included for the express purpose of availing Isoray, Inc. of the protections of the safe harbor provisions of the PSLRA. All statements contained in this Form 10- Q , other than statements of historical facts, that address future activities, events or developments are forward-looking statements, including, but not limited to, statements containing the words “believe,” “expect,” “anticipate,” “intends,” “estimate,” “forecast,” “project,” and similar expressions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new products, services, developments or industry rankings; any statements regarding future revenue, economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. These statements are based on certain assumptions and analyses made by us in light of our experience and our assessment of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, whether actual results will conform to the expectations and predictions of management is subject to a number of risks and uncertainties described under Item 1A - Risk Factors beginning on page 21 below that may cause actual results to differ materially. Consequently, all of the forward-looking statements made in this Form 10- Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. Readers are cautioned not to place undue reliance on such forward-looking statements as they speak only of the Company’s views as of the date the statement was made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Critical Accounting Policies and Estimates The discussion and analysis of the Company’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, management evaluates past judgments and estimates, including those related to bad debts, inventories, accrued liabilities, derivative liabilities and contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The accounting policies and related risks described in the Company’s annual report on Form 10-K as filed with the SEC on September 25, 2020 are those that depend most heavily on these judgments and estimates. As of March 31, 2021 there had been no material changes to any of the critical accounting policies contained therein. Overview Isoray is a brachytherapy device manufacturer with FDA clearance for a single medical device that can be delivered to the physician in multiple configurations as prescribed for the treatment of cancers in multiple body sites. The Company manufactures and sells this product as the Cesium-131 brachytherapy seed or Cesium Blu. 15 Table of Contents The brachytherapy seed utilizes Cesium-131, with a 9.7 day half-life, as its radiation source. The Company believes that it is the unique combination of the short half-life and the energy of the Cesium-131 isotope that are yielding the beneficial treatment results that have been published in peer reviewed journal articles and presented in various forms at conferences and tradeshows. The Company has distribution agreements outside of the United States. These distributors are responsible for obtaining regulatory clearance to sell the Company’s products in their territories, with the support of the Company. As of the date of this Report, the Company has distributors in the Russian Federation, Peru and India with nominal reported revenues in these locations during the nine months ended March 31, 2021. The Company has a supply agreement with The Open Joint Stock Company <<Isotope>>, a Russian company, for the supply of Cesium-131 for a term of August 2020 to December 2021. On March 18, 2021, the Company entered into a new supply contract (the “New Agreement”) with JSC Isotope pursuant to which the Company will purchase Cesium-131 for a term from March 18, 2021 through March 31, 2023. Our source of supply of Cesium-131 from Russia is historically produced using one of two nuclear reactors which supply the irradiation needed for Cesium-131 production. One of the Russian nuclear reactors was shut down from December 2017 until August 2018, and the other Russian nuclear reactor shut down in August 2019 and continues to be shut down in 2021 for an indeterminate period. As a result of these scheduled shutdowns only one of the Company's historic Russian suppliers of Cesium-131 is available during these periods. The Company also has a consignment inventory agreement with MedikorPharma-Ural LLC (“Medikor”) to process the Company’s enriched barium at another nuclear reactor in Russia. The term of this consignment agreement began in November 2017 and is for 10 years. The Company continues to explore how our proprietary isotope may be effective in the treatment of additional cancers. We recently entered into a research grant agreement with a leading cancer center to study the treatment of metastatic melanoma. In this immuno-oncology study, Cesium-131 will be used in combination with an immune checkpoint inhibitor. Metastatic melanoma is the most virulent form of skin cancer, often spreading to lymph nodes, the lungs, liver, brain, and tissue under the skin. This study follows our recently announced agreement with the University of Cincinnati to study the combination of Cesium-131 with the immunotherapy drug Keytruda® in recurrent head and neck cancers. The Company recently filed a provisional patent application for a device designed to achieve directional dosing using our Cesium-131 seeds. This device is a bed that holds the Cesium-131 seeds to focus the radiation to a specific treatment area. The device is fixed to a directional mesh that can be used to treat pancreatic cancers as well as retroperitoneal sarcomas. We see unidirectional brachytherapy utilizing Cesium-131 as a highly attractive potential therapy for advanced abdominal cancers as well. In this practical application, the device will be aimed at cancers of the abdomen that invade the abdominal wall and pelvic floor, such as advanced cancers of the colon and rectum and advanced GYN cancers such as ovarian and uterine cancers. The directional dosing device will likely be used initially with the recurrent cancers mentioned above where our competitors’ external beam radiation therapy has previously been administered. The Company recently received FDA 510k clearance for use of C4 Imaging's Sirius® positive-signal MRI (Magnetic Resonance Imaging) markers with the Company's Cesium-131 brachytherapy seeds. Sirius® is implanted during the treatment of prostate cancer with the Cesium-131 seeds and is used to facilitate seed localization within the prostate utilizing a single post-implant MRI procedure. Results of Operations Three months ended March 31, 2021 and 2020 (in thousands): Three months ended March 31, 2021 2020 2021 - 2020 Amount % (a) Amount % (a) % Change Sales, net $ 2,600 100 $ 2,880 100 (10 ) Cost of sales 1,238 48 1,174 41 5 Gross profit 1,362 52 1,706 59 (20 ) Operating expenses: Research and development expenses 362 14 294 10 23 Sales and marketing expenses 581 22 805 28 (28 ) General and administrative expenses 1,183 46 1,155 40 2 Loss on equipment disposal 2 - - - 100 Total operating expenses 2,128 82 2,254 78 (6 ) Operating loss $ (766 ) (29 ) $ (548 ) (19 ) 40 (a) Expressed as a percentage of sales, net Nine months ended March, 2021 and 2020 (in thousands): Nine months ended March 31, 2021 2020 2021 - 2020 Amount % (a) Amount % (a) % Change Sales, net $ 7,343 100 $ 7,401 100 (1 ) Cost of sales 3,568 49 3,348 45 7 Gross profit 3,775 51 4,053 55 (7 ) Operating expenses: Research and development expenses 959 13 804 11 19 Sales and marketing expenses 1,781 24 2,286 31 (22 ) General and administrative expenses 3,379 46 3,323 45 2 Loss on equipment disposal 9 - - - (100 ) Gain on change in estimate of asset retirement obligation (Note 10) - - (73 ) (1 ) Total operating expenses 6,128 83 6,340 86 (3 ) Operating loss $ (2,353 ) (32 ) $ (2,287 ) (31 ) 3 (a) Expressed as a percentage of sales, net Sales Sales, net for the three months ended March 31, 2021 decreased 10% compared to the three months ended March 31, 2020. Sales, net for the nine months ended March 31, 2021 decreased 1% compared to the nine months ended March 31, 2020. We believe that due to stay-at-home orders at times during the nine months ended March 31, 2021 in various states and hospitals’ focus on COVID-19, patients’ brachytherapy procedures were either delayed or cancelled. This led to a decrease in sales for both the three and nine months ended March 31, 2021 compared to the three and nine months ended March 31, 2020. The decrease in sales would have been even greater if the prostate market were the Company’s sole focus but the substantial increase in sales for other applications helped offset the prostate market decline. The sales breakdown between prostate and non-prostate applications is set forth below. Three months ended March 31, 2021 and 2020 (in thousands): Three months ended March 31, 2021 2020 2021 - 2020 Amount % (a) Amount % (a) % Change Prostate brachytherapy $ 2,033 78 $ 2,406 84 (16 ) Other sales 567 22 474 16 20 Sales, net 2,600 100 2,880 100 (11 ) (a) Expressed as a percentage of sales, net Nine months ended March 31, 2021 and 2020 (in thousands): Nine months ended March 31, 2021 2020 2021 - 2020 Amount % (a) Amount % (a) % Change Prostate brachytherapy $ 5,818 79 $ 6,443 87 (10 ) Other sales 1,525 21 958 13 59 Sales, net 7,343 100 7,401 100 (1 ) (a) Expressed as a percentage of sales, net 16 Table of Contents Prostate Brachytherapy Prostate sales decreased by approximately 16% and 10% during the three and nine months ended March 31, 2021 respectively compared to the three and nine months ended March 31, 2020. We believe that due to stay-at-home orders in various states and hospitals’ focus on COVID-19, patients’ brachytherapy procedures were either delayed or cancelled. This led to a decrease in sales for prostate treatments during the three and nine months ended March 31, 2021 compared to the three and nine months ended March 31, 2020. The decrease in sales volume was partially offset by a price increase that occurred in January 2020. Also during the nine months ended March 31, 2021, the Blu Build™ loader was launched into full market release resulting in increased revenue compared to the nine months ended March 31, 2020. Management believes continued growth in prostate brachytherapy revenues will be the result of physicians, payors, and patients increasingly considering overall treatment advantages including costs compared with non-brachytherapy treatments, better treatment outcomes and improvement in the quality of life for patients. The American Cancer Society estimates that nearly 250,000 new prostate cancer cases will be diagnosed in calendar year 2021, which represents an increase of approximately 30% over the calendar year 2020 estimate (American Cancer Society, 2021). This increase is due to patients being unable to access treatment or putting treatment off due to the COVID pandemic, but there is no assurance that this will occur and if it occurs that it will have a positive impact on the Company's performance. We believe the trend to use brachytherapy in lieu of other options is starting to improve our performance but there is no assurance as to how long this trend will continue. Other Sales Other sales includes, but is not limited to, brain, lung, head/neck, gynecological treatments, and services. Other sales, net increased by 20% for the three months ended March 31, 2021 and 59% for the nine months ended March 31, 2021 compared to the three and nine months ended March 31, 2020, respectively. The main driver of this growth was increased treatments for brain cancer including GammaTile™, and lung cancer. Initial applications for these other brachytherapy treatments are primarily used in recurrent cancer treatments or salvage cases that are generally difficult to treat aggressive cancers where other treatment options are either ineffective or unavailable. Other brachytherapy treatments are subject to the influence of a small pool of innovative physicians who are the early adopters of the technology who also tend to be faculty at teaching hospitals training the next generation of physicians. This causes the revenue created by these types of treatment applications to be more volatile and varies significantly from year to year. Individual centers weigh the value of the procedure with their other treatment priorities on a patient by patient basis. Other brachytherapy treatments, such as brain, lung, and head/neck are typically performed in the in-patient setting using the DRG or diagnostic related groups. DRGs are designed for Medicare to set payment levels for hospital in-patient services. Other health insurers may follow Medicare reimbursement when setting their payment rates. When these other types of brachytherapy are performed in the out-patient setting, existing codes for Cesium-131 that are also used for prostate brachytherapy are used to bill for these procedures. In May 2020, the Centers for Medicare and Medicaid Services (CMS) approved 64 ICD-10-PCS billing codes used for reimbursement of Cesium-131 for the hospital in-patient DRG setting. The codes allow hospitals to bill Medicare for specific surgical procedures that would benefit from the addition of Cesium-131. The 64 ICD-10-PCS codes are important for the growing surgical applications of Cesium-131 in treating a significant range of hard to treat cancers including brain, lung, head and neck, abdominal, gynecological, pelvic, and colorectal cancers. The new codes took effect on October 1, 2020 and management believes they will provide greater impetus for usage as now CMS will be able to track the additional cost of the Cesium-131 seed itself and be able to reimburse the hospital through the DRG payment system for these additional costs when an in-patient brachytherapy procedure is performed. Isoray believes that additional clinical data and these new billing codes will begin to build a compelling argument to support reimbursement and increased adoption of the procedures; however, any growth will be inconsistent in the near term. GammaTile™ For several years the Company has focused on many different applications of its Cesium-131 brachytherapy seeds in the cranial cavity to target many forms of brain cancer. Most recently, the Company has focused on using braided strand configurations and on being a contract manufacturer of GammaTile™ Therapy which is owned by GT Medical Technologies, Inc. (GT Med Tech). GammaTile™ Therapy uses biodegradable “tiles” to deliver Cesium-131 brachytherapy seeds into contact with cancerous tumors in the brain. GammaTile™ Therapy was originally cleared for treating recurrent brain cancers. GT Med Tech filed a 510k with the FDA on an expanded indication of GammaTile™ Therapy to include treatment of newly diagnosed brain tumors with an application of Cesium-131. On January 27, 2020, GT Med Tech announced that it had received clearance from the FDA for an expanded indication allowing patients of newly diagnosed malignant brain tumors to be treated by GammaTile™ Therapy. For the three and nine months ended March 31, 2021, total revenues from sales to GT Med Tech were less than ten percent (10%) of sales. GT Med Tech has indicated it intends to increase sales and marketing efforts during the Company’s fiscal year 2021, but there is no assurance that this will occur and in f act sales of GammaTile™Therapy were flat in the first three quarters of fiscal year 2021 which Management believes was primarily due to the effects of the COVID pandemic and hospital access. Cost of sales Cost of sales consists primarily of the costs of manufacturing and distributing the Company’s products. Contributing to the increase in the three and nine months ended March 31, 2021 and 2020 comparison were increases in isotope costs as well as in labor. Higher freight costs for isotope were due to the use of cargo flights rather than passenger flights to transport the isotope from Russia to our facility. In addition, due to lower than anticipated sales volumes we had excess isotope on hand which went unused. Labor costs increased slightly mainly due to annual merit increases for production personnel. Gross Profit Contributing to the three and nine months ended March 31, 2021 and 2020 gross profit decline was a decrease in sales due to orders being cancelled or postponed due to COVID-19 impacts as well as increases in isotope costs due to higher freight costs and payroll due to annual merit increases. Research and development Research and development consists primarily of employee and third party costs related to research and development activities. Contributing to the three months ended March 31, 2021 and 2020 research and development comparison was an increase in payroll due to annual merit increase as well as additional headcount and an increase in protocol expense primarily relating to new research agreements. This increase was offset by a reduction in investment in the development of the Blu Build™ delivery system for real-time prostate brachytherapy. Contributing to the nine months ended March 31, 2021 and 2020 research and development comparison was an increase in protocol expense primarily relating to new research agreements as well as during the nine months ended March 31, 2020 the Company mutually-agreed to terminate a grant agreement which resulted in a reversal of the accrual which was not repeated during the nine months ended March 31, 2021. Also contributing to the nine months ended March 31, 2021 and 2020 comparison were increased payroll costs due to annual merit increases and expansion of the research and development team through additional headcount. These increases were offset by a reduction in investment in the development of the Blu Build™ delivery system for real-time prostate brachytherapy. 17 Table of Contents The Company recently received FDA 510k clearance for use of C4 Imaging's Sirius® positive-signal MRI (Magnetic Resonance Imaging) markers with the Company's Cesium-131 brachytherapy seeds. Sirius® is implanted during the treatment of prostate cancer with the Cesium-131 seeds and is used to facilitate seed localization within the prostate utilizing a single post-implant MRI procedure. We are beginning a limited market release on this technology in our fourth quarter of fiscal 2021 and expect it to be available for full market release later this calendar year but there is no assurance this timing will occur. Management believes that research and development expenses will continue at this level as we do not anticipate accrual reversals in the future and we continue to explore for new projects and collaborations. Sales and marketing expenses Sales and marketing expenses consist primarily of the costs related to the internal and external activities of the Company’s sales, marketing and customer service functions of the Company. Contributing to the quarters ended March 31, 2021 and 2020 comparison was a decrease in travel and tradeshow costs due to COVID-19 restrictions. Incentive compensation decreased for the quarter ended March 31, 2021 in connection with the decrease in revenue. Contributing to the nine months ended March 31, 2021 and 2020 comparison was a decrease in travel and tradeshow costs due to COVID-19 restrictions. Incentive compensation decreased for the nine months ended March 31, 2021 in connection with the decrease in revenue. General and administrative expenses General and administrative expenses consist primarily of the costs related to the executive, human resources/training, quality assurance/regulatory affairs, finance, and information technology functions of the Company. Contributing to the three and nine months ended March 31, 2021 and 2020 comparison were increased director and officer insurance expense, increased payroll due to annual merit increases, IT consulting expenses, and bad debt expense, partially offset by decreased travel costs due to COVID-19 restrictions as well as decreased employee hiring costs and legal fees . Impact of COVID-19 From the onset of the COVID-19 global pandemic we have been proactive in implementing plans to ensure the health and well-being of our employees, while remaining focused on providing uninterrupted product flow to the physicians and patients who count on us. We transitioned many employees to work from home and made other adjustments to ensure the continuity of our business through this time. At the beginning of the pandemic, we moved quickly to ensure that our inventory of non-isotope supplies were appropriate in case our supply chain was disrupted. In addition, we set in motion a strategy to maintain a continuous and uninterrupted supply of isotope from our suppliers in Russia including the review and use of alternative freight services due to the cancellation of many international flights. As COVID-19 spread, many states implemented new guidelines in an attempt to mitigate the spread of the virus and to conserve certain medical supplies. Those guidelines led to the cancellation or postponement of elective and non-emergency surgical procedures, including prostate brachytherapy procedures. During the first nine months of fiscal 2021, our sales revenues decreased 1% compared to the first nine months of fiscal 2020, and we were still below the average monthly prostate revenues attained in our third quarter of fiscal 2020 prior to the outset of COVID-19's impact on our operations. We believe this is due to stay-at-home orders and hospitals’ focus on COVID-19, resulting in a delay or cancellation of patients scheduled to be seen by physicians. This resulted in fewer or delayed urology referrals for prostate brachytherapy treatment. As states gradually lifted restrictions on non-essential surgeries and other activities, we received customer feedback of anticipated increases in implant volumes as patients begin returning from quarantines for office visits and consultations, but there is no assurance this will occur or be sustained. We continue to tightly manage our expenses and make adjustments to isotope orders to meet potential increased treatment demands. Liquidity and capital resources The Company assesses its liquidity in terms of its ability to generate cash to fund its operating, investing and financing activities. The Company has historically financed its operations through selling equity to investors. During the nine months ended March 31, 2021 and 2020, the Company used existing cash reserves to fund its operations and capital expenditures (in thousands except current ratio): Nine months ended March 31, 2021 2020 Net cash (used) by operating activities $ (1,719 ) $ (2,793 ) Net cash (used) by investing activities (272 ) (248 ) Net cash provided (used) by financing activities 64,441 120 Net (decrease) in cash and cash equivalents $ 62,450 $ (2,921 ) As of March 31, 2021 June 30, 2020 Working capital $ 66,158 $ 3,932 Current ratio 35.53 3.50 Cash flows from operating activities Net cash used by operating activities in the nine months ended March 31, 2021 was primarily due to a net loss of approximately $2.33 million net of approximately $428,000 in adjustments for non-cash activity such as share-based compensation, depreciation and amortization expense, accretion of asset retirement obligation, and loss on equipment disposal. Changes in operating assets and liabilities provided approximately $179,000 from operating activities; increases in accounts payable, accrued protocol expense, accrued vacation, and accrued radioactive waste disposal, and decreases in accounts receivable due to increased collection efforts and decreased sales, were partially offset by increases in inventory and prepaid expenses and other current assets, and a decrease in accrued payroll and related taxes. Net cash used by operating activities in the nine months ended March 31, 2020 was primarily due to a net loss of approximately $2.26 million, net of approximately $367,000 in adjustments for non-cash activity such as depreciation and amortization expense, asset retirement obligation accretion, change in estimate of asset retirement obligation, and share-based compensation. Changes in operating assets and liabilities used approximately $904,000 to fund operating activities; increases in accounts receivable, prepaid expenses and other current assets, and inventory and decreases in accrued protocol expense were partially offset by increases in accounts payable and accrued expenses, accrued payroll and related taxes, accrued vacation, and accrued radioactive waste disposal. 18 Table of Contents Cash flows from investing activities Investing activities for the nine months ended March 31, 2021, consisted of transactions related to the purchase of fixed assets and other assets, including automation of production processes, enterprise resource planning software implementation, as well as proceeds from sale of equipment. Management will continue to invest in technology and machinery that improves and streamlines production processes and to invest in low-risk investment opportunities that safeguard assets and provide greater assurance those resources will be liquid and available for business needs as they arise. Investing activities for the nine months ended March 31, 2020, consisted of transactions related to the purchase of fixed assets, including automation of production processes. Cash flows from Financing activities Financing activities in the nine months ended March 31, 2021, included payment of preferred dividends and net proceeds of approximately $56,375,000 from the sale of 59,669,230 shares of common stock pursuant to two underwritten offerings (see note 9 to the financial statements). Also included are net proceeds of approximately $7,784,000 pursuant to exercise of the 12,318,877 warrants to purchase common stock as well as net proceeds of approximately $291,000 pursuant to the exercise of 520,315 options to purchase common stock. Financing activities in the nine months ended March 31, 2020 included payment of preferred dividends and proceeds of common stock, pursuant to exercise of options to purchase common stock. Projected fiscal 2021 liquidity and capital resources Operating activities Assuming no extraordinary expenses occur (whether operating or capital), if management is successful at implementing its strategy of renewed emphasis on driving the consumer to the prostate market, meets or exceeds its annual growth targets of about twenty-five percent increase in revenue in fiscal 2021 and this annual growth continues, the Company anticipates reaching cash flow break-even in three to four years. The Company missed that target of twenty-five percent increased revenue in the first nine months of fiscal 2021. There is no assurance that targeted sales growth will continue over the next three to four years. Capital expenditures Management has completed the design of a future production and administration facility but has not determined when or if it will move ahead with construction. If financing is obtained and the facility constructed, it is believed that the new facility will have non-cash depreciation cost equal to or greater than the monthly rental cost of the current facility. Management is reviewing all aspects of production operations (including process automation), research and development, sales and marketing, and general and administrative functions to evaluate the most efficient deployment of capital to ensure that the appropriate materials, systems, and personnel are available to support and drive sales. During the nine months ended March 31, 2021, the Company invested nominally in the automation of production processes. Beginning in fiscal 2017 and continuing through March 31, 2021 , the Company has invested approximately $1,064,000 in the automation of five production processes, four of which have been placed in service as of the end of March 31, 2021. Management expects to invest approximately $10,000 more over the next three months on the remaining automation projects, but there is no assurance that this amount will not be revised. This investment is designed to allow the Company to significantly increase the output of Cesium-131 brachytherapy seeds, while allowing the Company to decrease the labor costs related to seed production and also improving the overall safety of our operations. 19 Table of Contents Financing activities On January 23, 2020, the Company filed a Form S-3 registration statement which became effective on February 4, 2020, with the potential to register up to $80 million of equity securities. On March 31, 2020, the Company entered into an Equity Distribution Agreement (the “Agreement”) with Oppenheimer & Co., Inc. (“Oppenheimer”). The common stock sold pursuant to the Agreement was distributed at the market prices prevailing at the time of sale. The Agreement provided that Oppenheimer will be entitled to compensation for its services at a commission rate of 3.0% of the gross sales price per share of common stock sold plus reimbursement of certain expenses. As of September 30, 2020, the Company had sold an aggregate of 1,247,232 shares under the Agreement at an average price of approximately $0.738 per common share for gross proceeds of approximately $920,000 and net proceeds of approximately $850,000. On October 19, 2020, the Company terminated the Agreement, effective on the same date. On October 22, 2020, the Company sold 18,269,230 shares of its common stock at a price of $0.52 per share, for aggregate gross proceeds of $9,500,000, pursuant to the registration statement on Form S-3 that became effective on February 4, 2020. The net proceeds from the offering were approximately $8,595,000. The Company has not yet used any proceeds from this offering. Additionally, the Company issued to the purchasers warrants to purchase up to 9,134,615 shares of common stock. The warrants have an exercise price of $0.57 per share of common stock, are exercisable immediately, and expire five years from the date of issuance. If exercised for cash, future exercises of these warrants will provide additional capital to the Company. Between January 1, 2021, and March 31, 2021, the Company received approximately $8.1 million as a result of the exercise of warrants and options. On February 8, 2021, the Company sold shares of its common stock at a price of $1.25 per shares for aggregate gross proceeds of approximately $45,000,000, pursuant to the registration statement on Form S-3 that became effective on February 4, 2020. Additionally, the Company granted the underwriters an option to purchase an additional 5,400,000 shares of common stock at a purchase price of $1.25 per share for the purpose of covering overallotments, which was exercised on February 8, 2021 and generated gross proceeds of approximately $6,750,000. The Company has not yet used any proceeds from this offering. As a result of this recent capital raise, the Company does not anticipate the need to finance its operations for the next fiscal year from additional capital raises. The Company expects to finance its future cash needs through sales of equity, possible strategic collaborations, debt financing or through other sources that may be dilutive to existing stockholders, Management anticipates that if it raises additional financing that it will be at a discount to the market price and it will be dilutive to stockholders. Other commitments and contingencies The Company presented its other commitments and contingencies in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020. There have been no material changes outside of the ordinary course of business in those obligations during the nine months ended March 31, 2021 other than those previously disclosed in note 7 of the financial statements contained in this filing. Off-balance sheet arrangements The Company has no off-balance sheet arrangements. Critical accounting policies and estimates The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as revenue and expenses during the reporting periods. The Company evaluates its estimates and judgments on an ongoing basis. The Company bases its estimates on historical experience and on various other factors the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities. Actual results could therefore differ materially from those estimates if actual conditions differ from our assumptions. During the nine months ended March 31, 2021, there have been no changes to the critical accounting policies and estimates discussed in Part II, Item 7 of our Form 10-K for the year ended June 30, 2020. ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable.