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Item 7. Management’s Discussion and Analysis

2022-03-23 compared with 2021-02-16 · 439 added, 224 removed, 17 unchanged (98% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our financial statements and the related notes included elsewhere in this Annual Report.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties.

You should review the “Risk Factors” discussed in Item 1A of Part I of this Annual Report.

We are developing companion diagnostic tests designed to expand the eligible patient populations for targeted therapies by discovering new cancer sub-types molecular-based approaches cannot detect.

Our proprietary CELsignia diagnostic platform is the only commercially ready technology we are aware of that uses a patient’s living tumor cells to identify the specific abnormal cellular process driving a patient’s cancer and the targeted therapy that best treats it.

We believe our CELsignia platform provides two important improvements over traditional molecular diagnostics.

First, molecular diagnostics can only provide a snapshot of the genetic mutations present in a patient’s tumor because they analyze cell fragments.

Using cell fragments prevents molecular diagnostics from analyzing the dynamic cellular activities, known as cell signaling, that regulate cell proliferation or survival.

Cancer can develop when certain cell signaling activity becomes abnormal, or dysregulated.

Since genetic mutations are often only weakly correlated to the dysregulated signaling activity driving a patient’s cancer, a molecular diagnostic is prone to providing an incomplete diagnosis.

CELsignia tests overcome this limitation by measuring dynamic cell signaling activity in a patient’s living tumor cells.

When a CELsignia test detects abnormal signaling activity, a more accurate diagnosis of the patient’s cancer driver is obtained.

Second, molecular diagnostics can only estimate the probability of a patient’s potential drug response based on a statistical analysis of the drug’s clinical trial results.

Instead of this indirect estimate of drug response, CELsignia tests directly measure the effectiveness of a targeted therapy in a patient’s living tumor cells.

This enables physicians to confirm that the therapeutic matching the patient’s cancer driver is functional in the patient’s tumor cells before prescribing it, which significantly increases the likelihood of a positive clinical outcome.

Our first analytically validated and commercially ready test using our CELsignia platform, the CELsignia HER2 Pathway Activity Test for breast cancer, diagnoses two new sub-types of HER2-negative breast cancer that traditional molecular diagnostics cannot detect.

Our internal studies show that approximately 15-20% of HER2-negative breast cancer patients have abnormal HER2 signaling activity similar to levels found in HER2-positive breast cancer cells.

As a result, these HER2-negative patients have undiagnosed HER2-driven breast cancer and would be likely to respond to the same anti-HER2 targeted therapies only HER2-positive patients receive today.

We have three interventional clinical trials underway to evaluate the efficacy of HER2 targeted therapies in breast cancer patients selected with our CELsignia HER2 Pathway Activity Test.

Our second CELsignia test for breast cancer evaluates independent c-Met signaling activity and its involvement with HER family signaling in HER2-negative breast cancer tumor cells.

Our internal studies show that approximately 20%-25% of HER2-negative breast cancer patients have abnormal c-Met signaling activity that is co-activated with abnormal HER family signaling.

These studies suggest that this sub-group of HER2-negative breast cancer patients may best respond to treatment with a combination of HER family and c-Met inhibitors.

Our third CELsignia test for breast cancer evaluates PI3K signaling in HER2-negative breast cancer tumor cells.

Our internal studies demonstrate how measurement of PI3K-involved signaling may provide a more sensitive and specific method of identifying patients most likely to benefit from PI3K inhibitors than current genetic tests that measure PI3K mutations.

We intend to combine these three tests to create the CELsignia Multi-Pathway Activity Test, or CELsignia MP Test.

With this next generation CELsignia test, we plan to provide an analysis of EGFR/HER1, HER2, HER3, c-MET, and PI3K-node involved signaling activity for each patient tumor specimen received.

We completed development of our first CELsignia test for ovarian cancer in 2020.

This test identifies a new sub-group of ovarian cancer patients with tumors that have abnormal c-Met and HER2 signaling activity.

These findings suggest that a significant sub-group of ovarian cancer patients may respond to treatment with a combination of ErbB and c-Met inhibitors.

Nearly 15,000 women a year die from ovarian cancer, a disease that has less than a 50% five-year survival rate and a limited range of targeted therapy options.

There is thus a significant unmet need for additional therapeutic options for ovarian cancer patients.

As a companion diagnostic, our CELsignia test for ovarian cancer will be intended to help pharmaceutical companies obtain new drug indications and expand treatment options for this challenging tumor type.

We initiated discussions with pharmaceutical companies about collaborating on clinical trials in late 2020.

We also made significant progress in 2020 developing a new CELsignia test intended to diagnose cancers driven by dysregulated RAS signaling.

Dysregulation of RAS signaling, which includes the RAF/MEK/ERK and PI3K/AKT/mTOR pathways, is estimated to drive 30%-40% of all cancers.

Pharmaceutical companies have developed numerous drugs that target RAS-involved pathways.

However, the number of interactions amongst RAS-regulated pathways has made it extremely difficult to use molecular tests to identify patients with dysregulated RAS signaling tumors.

The challenge of diagnosing a cancer driven by a dysregulated RAS signaling network is magnified because two or more different pathways are typically involved.

Recent research has also found that RAS mutations play a much less important role in dysregulated RAS signaling than previously thought.

Our CELsignia platform is uniquely suited to untangle the complexity of dysregulated RAS signaling tumors and identify the targeted therapy combination capable of treating it.

Once development of the new RAS test is completed, we intend to add it to our current CELsignia Multi-Pathway Activity test for breast and ovarian cancer.

This next generation CELsignia test would provide an analysis of EGFR/HER1, HER2, HER3, c-MET, PI3K, and RAS-involved signaling activity for each patient tumor specimen received.

Our current CELsignia test has the potential to diagnose oncogenic signaling activity undetectable by molecular tests in up to one in three HER2-negative breast cancer patients.

If our efforts to develop a RAS dynamic signaling test are successful, the percentage of cancer patients who could benefit from a CELsignia test would further increase.

In addition to our CELsignia tests for HER2-negative breast cancer and ovarian cancer, we expect to develop CELsignia tests to diagnose eight new potential cancer sub-types we have discovered in lung, ovarian, kidney, and bladder cancers.

Approved or investigational drugs are currently available to treat these new potential cancer sub-types.

We expect to launch these additional tests on a staggered basis over the next few years while continuing our research to identify additional new cancer sub-types.

Our overall commercialization strategy is to develop diagnostics that expand the patient population eligible for targeted therapies.

We have four collaborations underway that rely on the CELsignia test for breast cancer to select breast cancer patients for treatment with HER2 or a combination of pan-HER and c-Met targeted therapies.

For the first one of these collaborations, we are fielding a prospective clinical trial with Genentech and NSABP (FACT-1) to evaluate the efficacy of Genentech’s HER2 targeted therapies in patients with abnormal HER2 signaling.

For the second of these collaborations, we are fielding a prospective clinical trial with Puma and West Cancer Center (FACT-2) to evaluate the efficacy and safety of Puma’s drug, Nerlynx, and chemotherapy, in breast cancer patients selected with our CELsignia test.

For our third collaboration, we are fielding a prospective open-label Phase II clinical trial with Puma Massachusetts General Hospital, the UCLA Jonsson Comprehensive Cancer Center and the Vanderbilt-Ingram Cancer Center to evaluate the efficacy of Puma’s drug, Nerlynx, and Faslodex, an AstraZeneca drug, in previously treated metastatic HR-positive, HER2-negative breast cancer patients selected with our CELsignia HER2 Pathway Activity Test.

For our fourth collaboration, we are fielding a prospective open-label Phase II clinical trial with Pfizer Inc.

and Sarah Cannon Research Institute to evaluate the efficacy of two Pfizer targeted therapies, Vizimpro, a pan-HER inhibitor, and Xalkori, a c-Met inhibitor, in previously treated metastatic HER2-negative breast cancer patients selected with our CELsignia Multi-Pathway Activity Test.

An additional collaboration to evaluate tissue samples from a Phase II study evaluating Puma’s pan-HER inhibitor, Nerlynx, Genentech’s HER2 antibody, Herceptin, and Bristol-Myers Squibb’s EGFR inhibitor, Erbitux, in metastatic colorectal cancer patients is expected to be completed in late 2022.

Unlike the four clinical trial collaborations, our CELsignia test will be used solely to evaluate tissue samples after they have been enrolled in this trial.

We will not receive payment for the testing we perform.

We expect our CELsignia test will provide critical insight after the trial is completed about the patient characteristics most correlative to drug response.

In conjunction with the development of our CELsignia tests, we will seek collaborations with pharmaceutical companies to field clinical trials to advance the clinical development of their targeted therapies with the eventual goal of obtaining U.S.

Food and Drug Administration (“FDA”) approval of a new drug indication.

Collaborations are expected to involve initially Phase I or Phase II interventional clinical trials to evaluate the efficacy of our collaboration partners’ targeted therapies patients selected with one of our CELsignia tests.

We are currently evaluating, or expect to evaluate, a variety of targeted therapies in combination with other targeted therapies, hormonal therapies, or chemotherapies, including:

i) pan-HER and c-Met inhibitors;

ii) pan-HER inhibitors and endocrine therapy;

iii) pan-HER inhibitors and chemotherapies;

and iv) PI3K inhibitors and endocrine therapy.

The FDA has approved three c-Met inhibitors, six HER-family inhibitors, and four PI3K inhibitors for cancer treatment.

Additional c-Met, HER-family, and PI3K inhibitors are being evaluated in on-going clinical trials.

We have not generated any revenue from sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations.

As a result, we are not and have never been profitable and have incurred losses in each period since we began operations in 2012.

For the years ended December 31, 2020 and 2019, we reported a net loss of approximately $9.5 million and $7.4 million, respectively.

As of December 31, 2020, we had a combined accumulated deficit of approximately $12.6 million under Celcuity LLC and $26.3 million under Celcuity Inc.

As of December 31, 2020, we had cash and cash equivalents of approximately $11.6 million.

Impact of COVID-19 on our Business

A novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by the World Health Organization.

should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our

financial statements and the related notes included elsewhere in this Annual Report.

Some of the information contained in this discussion

and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business

and expected financial results, includes forward-looking statements that involve risks and uncertainties.

You should review the “Risk

Factors” discussed in Item 1A of Part I of this Annual Report.

are a clinical-stage biotechnology company seeking to extend the lives of cancer patients by pursing an integrated therapeutic (Rx) and

companion diagnostic (CDx) strategy.

Our therapeutic efforts are focused on developing potential first-in-class or best-in-class molecularly

targeted therapies that address the same cancer driver a CELsignia companion diagnostic can identify.

CELsignia is uniquely able to analyze

live patient tumor cells to identify new groups of cancer patients likely to benefit from targeted therapies.

This enables a CELsignia

CDx to support advancement of new indications for already approved targeted therapies.

We believe this integrated Rx and CDx strategy

will maximize the impact our drug development efforts have on the treatment landscape for cancer patients.

first drug candidate we are developing internally is gedatolisib, a potent, well-tolerated, small molecule dual inhibitor, administered

intravenously, that selectively targets all class I isoforms of PI3K and mammalian target of rapamycin (mTOR).

In April 2021,

we obtained exclusive global development and commercialization rights to gedatolisib under a license agreement with Pfizer, Inc.

gedatolisib’s unique mechanism of action, favorable pharmacokinetic properties, and intravenous formulation offer distinct advantages

over currently approved and investigational therapies that target PI3K or mTOR alone or together.

limitations of therapies that only inhibit a single class I PI3K isoform or only one

mTOR kinase complex

is a pan-class I isoform PI3K inhibitor with low nanomolar potency for the p110α, p110β, p110γ, and p110δ isoforms.

Each isoform is known to preferentially affect different signal transduction events that involve tumor cell survival, depending upon

the aberrations associated with the linked pathway.

When a therapy only inhibits a single class I isoforms (e.g., alpelisib,

a PI3K-α inhibitor ) or only one mTOR kinase complex (e.g., everolimus, an mTORC1 inhibitor), numerous feedforward and feedback

loops between the PI3K isoforms and mTOR cross-activates the uninhibited sub-units.

This, in turn, induces compensatory resistance that

reduces the efficacy of isoform specific PI3K or single mTOR kinase complex inhibitors.

Inhibiting all four PI3K isoforms and both mTOR

complexes, as gedatolisib does, thus prevents the confounding effect of isoform interaction that may occur with isoform-specific PI3K

inhibitors and the confounding interaction between PI3K isoforms and mTOR.

tolerated by patients than oral PI3K and mTOR drugs.

is administered intravenously (IV) on a four-week cycle of three weeks-on, one week-off, in contrast to the orally administered pan-PI3K

or dual PI3K/mTOR inhibitors that are no longer being clinically developed.

Oral pan-PI3K or PI3K/mTOR inhibitors have repeatably been

found to induce significant side effects that were not well tolerated by patients.

This typically leads to a high proportion of patients

requiring dose reductions or treatment discontinuation.

The challenging toxicity profile of these drug candidates ultimately played a

significant role in the decisions to halt their development, despite showing promising efficacy.

By contrast, gedatolisib stabilizes

at lower concentration levels in plasma compared to orally administered PI3K inhibitors, resulting in less toxicity, while maintaining

concentrations sufficient to inhibit PI3K/mTOR signaling.

Isoform-specific

PI3K inhibitors administered orally were developed to reduce toxicities in patients.

While the range of toxicities associated with isoform-specific

inhibitors is narrower than oral pan-PI3K or PI3K/mTOR inhibitors, administering them orally on a continuous basis still leads to challenging

The experience with an FDA approved oral p110-α specific inhibitor, Piqray, illustrates the challenge.

3 pivotal trial Piqray was found to induce a Grade 3 or 4 adverse event (AE) related to hyperglycemia in 39% of patients evaluated.

addition, 26% of patients discontinued alpelisib due to treatment related adverse events.

By contrast, in the 103-patient dose expansion

portion of the Phase 1b clinical trial with gedatolisib, only 7% of patients experienced Grade 3 or 4 hyperglycemia and less than 10%

discontinued treatment.

of December 31, 2021, 492 patients with solid tumors have received gedatolisib in eight clinical trials sponsored by Pfizer.

patients, 129 were treated with gedatolisib as a single agent in three clinical trials.

The remaining 363 patients received gedatolisib

in combination with other anti-cancer agents in five clinical trials.

Additional patients received gedatolisib in combination with other

anti-cancer agents in nine investigator sponsored clinical trials.

Phase 1b trial (B2151009) evaluating patients with HR+/HER2- metastatic breast cancer was initiated in 2016 and subsequently

enrolled 138 patients.

Twelve patients from this study continue to receive study treatment, as of December 31, 2021, ten of whom

have received study treatment for more than three years.

The B2151009 clinical was an open label, multiple arm Phase 1b study that

evaluated gedatolisib in combination with palbociclib (CDK4/6 inhibitor) and fulvestrant or letrozole in patients with HR+/HER2-

advanced breast cancer.

Thirty-five patients were enrolled in two dose escalation arms to evaluate the safety and tolerability and

to determine the maximum tolerated dose (MTD) of gedatolisib when used in combination with the standard doses of palbociclib and

endocrine therapy (letrozole or fulvestrant).

The MTD was determined to be 180 mg administered intravenously once weekly.

103 patients were subsequently enrolled in one of four expansion arms (A, B, C, D).

objective overall response rates were observed in all four expansion arms and were comparable in each arm for PIK3CA WT and PIK3CA MT

In treatment-naïve patients (Arm A), ORR was 85%.

In patients who received prior hormonal therapy alone or in combination

with a CDK4/6 inhibitor (Arms B, C, and D), ORR ranged from 32% to 77%.

Each arm achieved its primary endpoint target, which was reporting

higher ORR in the study arm than ORR from either the PALOMA-2 (ORR=55%) study that evaluated palbociclib plus letrozole for Arm A or

the PALOMA-3 study (ORR=25%) that evaluated palbociclib plus fulvestrant for Arms B, C, and D.

For all enrolled patients, a clinical

benefit rate (CBR) of ≥79% was observed.

Median progression-free survival (PFS) was 31.1 months for patients receiving first-line

treatment (Arm A) and 12.9 months for patients who received a prior CDK4/6 inhibitor and were treated in the study with the Phase 3 dosing

schedule (Arm D).

combined with palbociclib and endocrine therapy demonstrated a favorable safety profile with manageable toxicity.

The majority of treatment

emergent adverse events were Grade 1 and 2.

The most frequently observed adverse events included stomatitis/mucosal inflammation, the

majority of which were Grade 1 and 2.

The most common Grade 4 AEs were neutropenia and neutrophil count decrease, which were assessed

as related to treatment with palbociclib.

No grade 5 events were reported in this study.

We are preparing to initiate VIKTORIA-1, a Phase 3, open-label, randomized clinical trial to evaluate the efficacy and safety of two regimens in adults

with HR+/HER2- advanced breast cancer whose disease has progressed after prior CDK4/6 therapy in combination with an aromatase

1) gedatolisib in combination with palbociclib and fulvestrant;

and 2) gedatolisib in combination with fulvestrant.

expect to initiate the VIKTORIA-1 study in the first half of 2022.

The clinical trial will

enable separate evaluation of subjects according to their PIK3CA status.

Subjects who meet eligibility criteria and are PIK3CA WT will

be randomly assigned (1:1:1) to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm A), gedatolisib

and fulvestrant (Arm B), or fulvestrant (Arm C).

Subjects who meet eligibility criteria and are PIK3CA MT will be randomly assigned (1:1)

to receive a regimen of either gedatolisib, palbociclib, and fulvestrant (Arm D) or alpelisib and fulvestrant (Arm E).

January 13, 2022, gedatolisib was granted Fast Track designation for the treatment of patients with ER+/HER2- metastatic breast cancer

after progression on CDK4/6 therapy.

Fast Track designation is granted by the FDA for products that are intended for the treatment of

serious or life-threatening disease or conditions and which demonstrate the potential to address an unmet medical need.

The designation

offers the opportunity for frequent interactions with the FDA to discuss the drug’s development plan and to ensure collection of

appropriate data needed to support drug approval, as well as eligibility for rolling submission of a New Drug Application.

proprietary CELsignia diagnostic platform is the only commercially ready technology we are aware of that uses a patient’s living

tumor cells to identify the specific abnormal cellular process driving a patient’s cancer and the targeted therapy that best treats

This enables us to identify patients whose tumors may respond to a targeted therapy, even though they lack a previously associated

molecular mutation.

By identifying cancer patients whose tumors lack an associated genetic mutation but have abnormal cellular activity

a matching targeted therapeutic is designed to inhibit, CELsignia CDx can expand the markets for a number of already approved targeted

Our current CDx identifies breast and ovarian cancer patients whose tumors have cancer drivers potentially responsive to treatment

with human epidermal growth factor receptor 2-negative (HER2), mesenchymal-epithelial transition factor (c-MET), or phosphatidylinositol

3-kinases (PI3K) targeted therapeutics.

Food and Drug Administration (“FDA”) approval or clearance is not currently

required for CELsignia tests offered as a stand-alone laboratory developed test, if we are partnered with a drug company to launch a

CELsignia test as a companion diagnostic for a new drug indication, we would be required to obtain premarket approval, or PMA, in conjunction

with the pharmaceutical company seeking a new drug approval for the matching therapy.

are supporting the advancement of new potential indications for four different targeted therapies, controlled by other pharmaceutical

companies, that would rely on a CELsignia CDx to select patients.

Five Phase 2 trials are underway to evaluate the efficacy and safety

of these therapies in CELsignia selected patients.

These patients are not currently eligible to receive these drugs and are not identifiable

with a molecular test.

the development of a potential first-in-class targeted therapy for breast cancer, like gedatolisib, with our CELsignia platform is a

natural extension of our strategy to use our CELsignia CDx to enable new indications for other companies’ targeted therapies.

combining companion diagnostics designed to enable proprietary new drug indications with targeted therapies that treat signaling dysregulation

our CDx identifies, we believe we are uniquely positioned to improve the standard-of-care for many early and late-stage breast cancer

Our goal is to play a key role in the multiple treatment approaches required to treat breast cancer patients at various stages

of their disease.

With each program, we are:

the proprietary insights CELsignia provides into live patient tumor cell function

a CELsignia CDx to identify new patients likely to respond to the paired targeted therapy

a new targeted therapeutic option for breast cancer patients

the probability of getting regulatory approval to market the targeted therapy indication

have not generated any revenue from sales to date, and we continue to incur significant research and development and other expenses related

to our ongoing operations.

As a result, we are not and have never been profitable and have incurred losses in each period since we began

operations in 2012.

For the years ended December 31, 2021 and 2020, we reported a net loss of approximately $29.6 million and

$9.5 million, respectively.

As of December 31, 2021, our cash and cash equivalents were approximately $84.3 million, and we had an accumulated

deficit of approximately $55.9 million.

of COVID-19 on our Business

novel strain of coronavirus (COVID-19) was first identified in Wuhan, China in December 2019, and subsequently declared a pandemic by

the World Health Organization.

The impact of the COVID-19 pandemic on our business is discussed in further detail below:

Health and Safety

To help protect the health and safety of our employees, suppliers and collaborators, we took proactive, aggressive action from the earliest signs of the outbreak.

We enacted rigorous safety measures in our laboratory and administrative offices, including implementing social distancing protocols, allowing working from home for those employees that do not need to be physically present in a lab to perform their work, suspending travel, implementing temperature checks at the entrances to our facilities, extensively and frequently disinfecting our workspaces and providing masks to those employees who must be physically present.

We expect to continue with these measures until the COVID-19 pandemic is contained and we may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, suppliers, and collaborators.

Clinical Trials and Collaborations

As a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders, and business shutdowns.

As we continue to advance our clinical trial collaborations, we are in close contact with our current clinical sponsors, and principal investigators, as well as prospective pharmaceutical company and clinical collaborators, to assess the impact of COVID-19 on our trial enrollment timelines and collaboration discussions.

In light of the COVID-19 pandemic, the focus of healthcare providers and hospitals on fighting the virus, and consistent with the FDA’s updated industry guidance for conducting clinical trials issued on March 18, 2020, we are experiencing delays in the enrollment of patients in our ongoing clinical trials.

We now expect interim results from the FACT-1 and FACT-2 trials to be delayed until the fourth quarter of 2021 or first quarter of 2022 and final results approximately nine months later.

help protect the health and safety of our employees, suppliers and collaborators, we took proactive, aggressive action from the earliest

signs of the outbreak.

We enacted rigorous safety measures in our laboratory and administrative offices, including implementing social

distancing protocols, allowing working from home for those employees that do not need to be physically present in a lab to perform their

work, suspending travel, implementing temperature checks at the entrances to our facilities, extensively and frequently disinfecting

our workspaces and providing masks to those employees who must be physically present.

We expect to continue with these measures until

the COVID-19 pandemic is contained and we may take further actions as government authorities require or recommend or as we determine

to be in the best interests of our employees, suppliers, and collaborators.

Trials and Collaborations

a result of the COVID-19 pandemic, governmental authorities have implemented and are continuing to implement numerous and constantly

evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place

orders, and business shutdowns.

As we continue to advance our clinical trial collaborations, we are in close contact with our current

clinical sponsors, and principal investigators, as well as prospective pharmaceutical company and clinical collaborators, to assess the

impact of COVID-19 on our trial enrollment timelines and collaboration discussions.

In light of the COVID-19 pandemic, the focus of healthcare

providers and hospitals on fighting the virus, and consistent with the FDA’s updated industry guidance for conducting clinical

trials issued on March 18, 2020, we are experiencing delays in the enrollment of patients in our ongoing clinical trials.

We now expect

interim results from the FACT-1 and FACT-2 trials to be delayed until the first half of 2023 and final results approximately nine months

As the impact of COVID-19 on our industry becomes clearer, we may need to reassess the timing of our anticipated clinical milestones.

Prospective clinical trial collaborations with pharmaceutical companies and sponsors may also be delayed but the impact on the timing of finalizing agreements is not yet known.

Research and Development

While our facility currently remains operational, the evolving measures to try to contain the virus have impacted and may further impact our workforce and operations, as well as those of our vendors and suppliers.

Our laboratory remains operational as of this date, but, in response to the COVID-19 pandemic, we have implemented protective policies that reduce the number of research and development staff operating in our laboratory at any one time.

While governmental measures may be modified or extended, we expect that our research and development and clinical laboratory will remain operational.

However, in light of the focus of healthcare providers and hospitals on fighting the virus, several of the clinical sites that provide us tumor tissue for research have halted this service, reducing the number of new tumor tissue specimens we would typically expect to receive.

Prospective clinical trial collaborations with pharmaceutical companies and sponsors may also be delayed but the impact on the timing

of finalizing agreements is not yet known.

and Development

our facility currently remains operational, the evolving measures to try to contain the virus have impacted and may further impact our

workforce and operations, as well as those of our vendors and suppliers.

Our laboratory remains operational as of this date, but, in

response to the COVID-19 pandemic, we have implemented protective policies that reduce the number of research and development staff operating

in our laboratory at any one time.

While governmental measures may be modified or extended, we expect that our research and development

and clinical laboratory will remain operational.

However, in light of the focus of healthcare providers and hospitals on fighting the

virus, several of the clinical sites that provide us tumor tissue for research have halted this service, reducing the number of new tumor

tissue specimens we would typically expect to receive.

These various constraints may slow or diminish our research and development activities.

In addition, cancer research-related industry meetings, such as the American Association for Cancer Research (AACR), were delayed for several months.

Our submissions to present research results at these meetings were accepted, but the release of the results was postponed in conjunction with the delayed meeting schedules.

Although there is uncertainty related to the anticipated impact of the recent COVID-19 outbreak on our future results, we believe our existing balance of cash and cash equivalents will be sufficient to meet our cash needs arising in the ordinary course of business for at least the next twelve months.

We continue to monitor the rapidly evolving situation and guidance from federal, state and local public health authorities and may take additional actions based on their recommendations.

In these circumstances, there may be developments outside our control requiring us to adjust our operating plan.

In addition, see Item 1A of Part I of this Annual Report for additional information on risks associated with pandemics in general and COVID-19 specifically and how those risks may impact our business and operations.

RESULTS OF OPERATIONS

Components of Operating Results

To date, we have not generated any revenue.

Initially, our ability to generate revenue will depend primarily upon our ability to obtain partnership agreements with pharmaceutical companies to provide companion diagnostics for such pharmaceutical partners’ existing or investigational targeted therapies.

We expect these partnerships to generate significant revenue from the sale of tests to identify patients eligible for clinical trials, from milestone payments, and, potentially, from royalties on the incremental drug revenues our tests enable.

Once a new drug indication is received that requires use of our companion diagnostic to identify eligible patients, we expect to generate revenues from sales of tests to treating physicians.

Research and Development

Since our inception, we have primarily focused on research and development of our CELsignia platform, development and validation of our CELsignia tests, and research related to the discovery of new cancer sub-types.

In addition, cancer research-related industry meetings, such as the American Association for Cancer Research (AACR), were delayed for

several months.

Our submissions to present research results at these meetings were accepted, but the release of the results was postponed

in conjunction with the delayed meeting schedules.

there is uncertainty related to the anticipated impact of the recent COVID-19 outbreak on our future results, we believe our existing

balance of cash and cash equivalents will be sufficient to meet our cash needs arising in the ordinary course of business for at least

the next twelve months.

We continue to monitor the rapidly evolving situation and guidance from federal, state and local public health

authorities and may take additional actions based on their recommendations.

In these circumstances, there may be developments outside

our control requiring us to adjust our operating plan.

In addition, see Item 1A of Part I of this Annual Report for additional information

on risks associated with pandemics in general and COVID-19 specifically and how those risks may impact our business and operations.

OF OPERATIONS

of Operating Results

date, we have not generated any revenue.

Initially, our ability to generate revenue will depend primarily upon our ability to obtain

partnership agreements with pharmaceutical companies to provide companion diagnostics for such pharmaceutical partners’ existing

or investigational targeted therapies.

We expect these partnerships to generate significant revenue from the sale of tests to identify

patients eligible for clinical trials, from milestone payments, and, potentially, from royalties on the incremental drug revenues our

tests enable.

Once a new drug indication is received that requires use of our companion diagnostic to identify eligible patients, we

expect to generate revenues from sales of tests to treating physicians.

With the execution of the Pfizer license agreement in April 2021,

whereby we acquired exclusive world-wide licensing rights to develop and commercialize gedatolisib, we expect to conduct clinical trials

to support potential regulatory approval to market gedatolisib.

If we obtain regulatory approvals to market gedatolisib, we expect to

generate revenue from sales of the drug for the treatment of breast cancer patients.

and Development

our inception, we have primarily focused on research and development of our CELsignia platform, development and validation of our CELsignia

tests, and research related to the discovery of new cancer sub-types.

Beginning in April 2021, we are also focusing on development of

gedatolisib, a PI3K/mTOR targeted therapy.

Research and development expenses primarily include:

employee-related expenses related to our research and development activities, including salaries, benefits, recruiting, travel and stock-based compensation expenses;

laboratory supplies;

consulting fees paid to third parties;

clinical trial costs;

facilities expenses;

legal costs associated with patent applications.

Internal and external research and development costs are expensed as they are incurred.

As we continue to expand clinical trials to evaluate efficacy of targeted therapies in cancer patients selected with one of our CELsignia tests, the proportion of research and development expenses allocated to external spending will grow at a faster rate than expenses allocated to internal expenses.

General and Administrative

General and administrative expenses consist primarily of salaries, benefits and stock-based compensation related to our executive, finance and support functions.

Other general and administrative expenses include professional fees for auditing, tax, and legal services associated with being a public company, director and officer insurance and travel expenses for our general and administrative personnel.

Sales and Marketing

Sales and marketing expenses consist primarily of professional and consulting fees related to these functions.

To date, we have incurred immaterial sales and marketing expenses as we continue to focus primarily on the development of our CELsignia platform and corresponding CELsignia tests.

We expect to begin to incur increased selling and marketing expenses in anticipation of the commercialization of our first CELsignia tests.

These increased expenses are expected to include payroll-related costs as we add employees in the commercial departments, costs related to the initiation and operation of our sales and distribution network and marketing related costs.

Interest Expense

Interest expense is the result of finance lease obligations.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents.

Results of Operations

Comparison of the Years Ended December 31, 2020 and 2019

Years Ended December 31,

Increase (Decrease)

Percent Change

Statements of Operations Data:

employee-related

expenses related to our research and development activities, including salaries, benefits, recruiting, travel and stock-based compensation

fees paid to third parties;

manufacturing

validation costs for gedatolisib

costs associated with patent applications.

and external research and development costs are expensed as they are incurred.

As we initiate a Phase 3 clinical trial for gedatolisib

and continue to expand clinical trials to evaluate efficacy of targeted therapies in cancer patients selected with one of our CELsignia

tests, the proportion of research and development expenses allocated to external spending will grow at a faster rate than expenses allocated

to internal expenses.

and Administrative

and administrative expenses consist primarily of salaries, benefits and stock-based compensation related to our executive, finance and

support functions.

Other general and administrative expenses include professional fees for auditing, tax, and legal services associated

with being a public company, director and officer insurance and travel expenses for our general and administrative personnel.

and Marketing

and marketing expenses consist primarily of professional and consulting fees related to these functions.

To date, we have incurred immaterial

sales and marketing expenses as we continue to focus primarily on the development of our first drug, gedatolisib, development of our

CELsignia platform and corresponding CELsignia tests.

We expect to begin to incur increased selling and marketing expenses in anticipation

of regulatory approval to market gedatolisib and the commercialization of our first CELsignia tests.

These increased expenses are expected

to include payroll-related costs as we add employees in the commercial departments, costs related to the initiation and operation of

our sales and distribution network and marketing related costs.

expense is primarily due to a loan agreement and finance lease obligations.

income consists of interest income earned on our cash and cash equivalents.

of Operations

of the Years Ended December 31, 2021 and 2020

of Operations Data:

and development

and administrative

operating expenses

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest expense

Interest income

Other income, net

Net loss before income taxes

Income tax benefits

from operations

(28,355,915 )

(18,799,751 )

income (expense)

on sale of fixed assets

income (expense), net

loss before income taxes

(29,605,266 )

Research and Development

For the year ended December 31, 2020, our total research and development expenses increased approximately $1.41 million, or 23%, to approximately $7.68 million from $6.27 million for the prior year.

The increase primarily resulted from a $1.15 million increase in compensation related expenses, including approximately $0.49 million in non-cash stock-based compensation to support development of our CELsignia platform.

In addition, other research and development expenses increased $0.26 million due to clinical validation and laboratory studies, and operational and business development activities.

Conducting a significant amount of research and development is central to our business model.

We plan to increase our research and development expenses for the foreseeable future as we seek to discover new cancer sub-types and to develop and validate additional CELsignia tests to diagnose such sub-types.

We also expect to incur increased expenses to support companion diagnostic business development activities with pharmaceutical companies as we develop additional CELsignia tests.

General and Administrative

For the year ended December 31, 2020, our total general and administrative expenses increased approximately $0.34 million, or 22%, to approximately $1.87 million from $1.53 million for the prior year.

The increase primarily resulted from a $0.28 million increase in compensation related expenses, including approximately $0.24 million of non-cash stock-based compensation.

In addition, other general and administrative expenses increased $0.06 million primarily due to professional fees associated with being a public company.

We anticipate that our general and administrative expenses will increase in future periods, reflecting both increased costs in connection with the potential future commercialization of CELsignia tests, an expanding infrastructure, and increased professional fees associated with being a public company.

Interest Expense

For the years ended December 31, 2020 and 2019, interest expense is related to finance lease liabilities.

Interest Income

For the year ended December 31, 2020, interest income decreased approximately $0.36 million, or 82%, to $0.08 million from $0.44 million for the prior year.

The decrease was primarily the result of lower market interest rates.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have incurred losses and cumulative negative cash flows from operations.

Through December 31, 2020, we raised capital of approximately $13.7 million and $7.5 million through private placements of common equity and unsecured convertible notes, respectively.

On September 22, 2017, we closed on the IPO of our common stock, which generated approximately $23.3 million of additional cash after taking into account underwriting discounts and commissions and offering expenses.

On June 5, 2020, we entered into an At Market Issuance Sales Agreement with B.

(20,131,091 )

$ (29,605,266 )

$ (9,474,175 )

$ (20,131,091 )

and Development

the year ended December 31, 2021, our research and development expenses were approximately $25.8 million, representing an increase of

approximately $18.1 million, or 235%, compared to the same period in 2020.

The increase primarily resulted from a $10.0 million upfront

license fee related to the execution of the Pfizer license agreement, which included $5.0 million of non-cash expense for the issuance

of common stock.

The remaining $8.1 million increase primarily resulted from expenses related to the support and development of gedatolisib.

Employee related expenses, including consulting fees, accounted for a $3.4 million increase.

The increase of $3.4 million included an

increase of $0.6 million in non-cash stock-based compensation.

The remaining increase of $4.7 million is related to clinical trials,

costs associated with the transfer of the gedatolisib-related activities from Pfizer to Celcuity and patent legal fees.

a significant amount of research and development is central to our business model.

We plan to increase our research and development expenses

for the foreseeable future as we seek to develop gedatolisib, discover new cancer sub-types, and develop and validate additional CELsignia

tests to diagnose such sub-types.

We also expect to incur increased expenses to support companion diagnostic business development activities

with pharmaceutical companies as we develop additional CELsignia tests and initiate a clinical trial for gedatolisib.

and Administrative

the year ended December 31, 2021, our total general and administrative expenses were $2.6 million, representing an increase of approximately

$0.7 million, or 39%, compared to the same period in 2020.

The increase primarily resulted from a $0.4 million increase in compensation

related expenses, including approximately $0.3 million of non-cash stock-based compensation.

In addition, other general and administrative

expenses increased $0.3 million primarily due to professional fees associated with being a public company and director and officer insurance.

anticipate that our general and administrative expenses will increase in future periods, reflecting both increased costs in connection

with the potential future commercialization of gedatolisib and CELsignia tests, an expanding infrastructure, and increased professional

fees associated with being a public company.

the year ended December 31, 2021, interest expense was $1.3 million and represents an increase of $1.3 million compared to the same period

The increase is due to the loan agreement that was executed in April 2021 and includes $0.6 million of non-cash interest expense.

the year ended December 31, 2021, interest income decreased approximately $0.1 million compared to the same period in 2020.

was primarily the result of lower market interest rates.

AND CAPITAL RESOURCES

our inception, we have incurred losses and cumulative negative cash flows from operations.

Through December 31, 2021, we raised capital

of approximately $13.7 million and $7.5 million through private placements of common equity and unsecured convertible notes, respectively.

On September 22, 2017, we closed on the IPO of our common stock, which generated approximately $23.3 million of additional cash after

taking into account underwriting discounts and commissions and offering expenses.

On June 5, 2020, we entered into an At Market Issuance

Sales Agreement with B.

Riley, FBR, Inc (the “ATM Agreement”).

The ATM Agreement allows us to sell shares of common stock up to an aggregate offering price of $10.0 million.

Through December 31, 2020, we generated approximately $0.08 million of additional cash through sales pursuant to the ATM Agreement, after taking into account commissions and offering expenses.

Cash from these capital raising activities has been our primary source of funds for our operations since inception.

As of December 31, 2020, our cash and cash equivalents were approximately $11.6 million, and we had a combined accumulated deficit of approximately $12.6 million under Celcuity LLC and $26.3 million under Celcuity Inc.

We expect that our research and development and general and administrative expenses will increase as we continue to develop our CELsignia platform and additional CELsignia tests, conduct research related to the discovery of new cancer sub-types, conduct clinical trials, and pursue other business development activities.

We will also start to incur sales and marketing expenses as we commercialize our CELsignia tests.

We expect to use cash on hand to fund our research and development expenses, capital expenditures, working capital, sales and marketing expenses, and general corporate expenses, as well as for the increased costs associated with being a public company.

Based on our current business plan, we believe that our current cash on hand will provide sufficient cash to finance operations and pay obligations when due for at least the next twelve months.

We may seek to raise additional capital to expand our business, pursue strategic investments, and take advantage of financing or other opportunities that we believe to be in the best interests of the Company and our stockholders.

Additional capital may be raised through the sale of common or preferred equity or convertible debt securities, entry into debt facilities or other third-party funding arrangements.

The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares.

Agreements entered into in connection with such capital raising activities could contain covenants that would restrict our operations or require us to relinquish certain rights.

Additional capital may not be available on reasonable terms, or at all.

The following table sets forth the primary sources and uses of cash for the years ended December 31:

Net cash provided by (used in):

Operating activities

The ATM Agreement allowed us to sell shares of common stock

up to an aggregate offering price of $10.0 million.

Through December 31, 2021, we generated approximately $0.1 million of additional

cash through sales pursuant to the ATM Agreement, after taking into account commissions and offering expenses.

On February 26, 2021,

we completed a follow-on offering of our common stock, which generated approximately $25.8 million of additional cash after taking into

account underwriting discounts and offering expenses.

In conjunction with the follow-on offering, the ATM Agreement was terminated.

April 8, 2021, we entered into a loan agreement with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”), whereby Innovatus

agreed to loan up to $25 million in three tranches consisting of (i) a $15.0 million non-contingent term A loan that was funded on April

8, 2021, (ii) a $5 million term B loan to be funded upon our request no later than March 31, 2022, and (iii) a $5 million term C loan

to be funded upon our request no later than March 31, 2023.

Funding of the term B and C loan is subject to our ability to achieve certain

Net proceeds generated from the loan agreement were $14.4 million.

On July 1, 2021, we completed a follow-on offering of

our common stock, which generated approximately $52.8 million of additional cash after taking into account underwriting discounts of

and offering expenses.

from these capital raising activities has been our primary source of funds for our operations since inception.

As of December 31, 2021,

our cash and cash equivalents were approximately $84.3 million, and we had an accumulated deficit of approximately $55.9 million.

February of 2022, we entered into an Open Market Sale Agreement SM with Jefferies LLC, as agent (“Jefferies”),

pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering

price of up to $50,000,000.

We will pay Jefferies a commission equal to 3.0% of the aggregate gross proceeds from each sale of such shares.

To date, we have not yet made any sales under this arrangement.

expect that our research and development and general and administrative expenses will increase as we continue development of gedatolisib,

development and validation of our CELsignia platform and additional CELsignia tests, conduct research related to the discovery of new

cancer sub-types, conduct clinical trials, and pursue other business development activities.

We will also start to incur sales and marketing

expenses as we commercialize our CELsignia tests and gedatolisib.

We expect to use cash on hand to fund our research and development

expenses, capital expenditures, working capital, sales and marketing expenses, and general corporate expenses, as well as for the increased

costs associated with being a public company.

on our current business plan, we believe that our current cash on hand will provide sufficient cash to finance operations and pay obligations

when due for at least the next twelve months.

may seek to raise additional capital to expand our business, pursue strategic investments, and take advantage of financing or other opportunities

that we believe to be in the best interests of the Company and our stockholders.

Additional capital may be raised through the sale of

common or preferred equity or convertible debt securities, entry into debt facilities or other third-party funding arrangements.

sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior

to those of our common shares.

Agreements entered into in connection with such capital raising activities could contain covenants that

would restrict our operations or require us to relinquish certain rights.

Additional capital may not be available on reasonable terms,

following table sets forth the primary sources and uses of cash for the years ended December 31:

cash provided by (used in):

$ (20,311,940 )

$ (7,145,689 )

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

increase (decrease) in cash and cash equivalents

$ (7,097,091 )

Operating Activities

Net cash used in operating activities was approximately $7.14 million for the year ended December 31, 2020 and consisted primarily of a net loss of approximately $9.47 million, adjusted for working capital changes of approximately $0.18 million and non-cash items of approximately $2.15 million.

The working capital change was primarily due to approximately $0.19 million increase in accrued expenses.

Non-cash expense items of approximately $2.15 million consisted of depreciation of approximately $0.39 million and stock-based compensation expense of approximately $1.76 million.

Net cash used in operating activities was approximately $6.0 million for the year ended December 31, 2019 and consisted primarily of a net loss of approximately $7.36 million and working capital changes of approximately $0.06 million, adjusted for non-cash items of approximately $1.42 million.

The working capital change was primarily due to approximately $0.19 million increase in payroll tax receivable, offset by a $0.11 million increase in accrued expenses.

Non-cash expense items of approximately $1.42 million consisted of depreciation of approximately $0.34 million, stock-based compensation expense of approximately $1.04 million and interest income of approximately $0.04 million.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2020 was approximately $0.09 million and consisted of purchases of property and equipment.

Net cash provided by investing activities for the year ended December 31, 2019 was approximately $8.53 million and consisted of approximately $8.91 million of net proceeds from investments in certificates of deposit and government securities (U.S.

Treasury Notes and U.S.

government agency securities), adjusted by approximately $0.38 million in purchases of property and equipment.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2020 was approximately $0.14 million and primarily reflects net proceeds from the sale of shares of our common stock through the ATM Agreement and employee stock purchases.

Net cash provided by financing activities for the year ended December 31, 2019 was approximately $0.26 million and consisted of proceeds from the exercise of common stock warrants and stock options, and employee stock purchases.

OFF-BALANCE SHEET ARRANGEMENTS

We do not currently have any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

RECENT ACCOUNTING PRONOUNCEMENTS

From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by us as of the specified effective date.

Unless otherwise discussed in Note 2 to our financial statements included elsewhere in this Annual Report, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.

CRITICAL ACCOUNTING POLICIES AND USE OF ESTIMATES

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or Generally Accepted Accounted Principles (“U.S.

The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods.

These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future.

We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances;

the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Changes in estimates are reflected in reported results for the period in which they become known.

cash used in operating activities was approximately $20.3 million for the year ended December 31, 2021 and consisted primarily of a net

loss of approximately $29.6 million, offset by non-cash expense items of approximately $8.5 million and working capital changes

of $0.8 million.

Non-cash expense items of approximately $8.5 million primarily consisted of $5.0 million for issuance of common stock

related to a license agreement, $2.6 million of stock-based compensation expense, non-cash interest expense of $0.6 million and depreciation

expense of $0.3 million.

The approximately $0.8 million of working capital changes was primarily due to an increase in accounts payable,

slightly offset by an increase in prepaid assets.

cash used in operating activities was approximately $7.1 million for the year ended December 31, 2020 and consisted primarily of a net

loss of approximately $9.5 million, adjusted for non-cash items of approximately $2.2 million and working capital changes of approximately

$0.2 million.

Non-cash expense items of approximately $2.2 million consisted of stock-based compensation expense of approximately $1.8

million and of depreciation of approximately $0.4 million.

The working capital change was primarily due to approximately $0.2

million in accrued expenses.

cash used in investing activities for the years ended December 31, 2021 and December 31, 2020 were flat at approximately $0.1 million

and consisted of purchases of property and equipment.

cash provided by financing activities for the year ended December 31, 2021 was approximately $93.0 million.

The $93.0 million primarily

consisted of net proceeds from the sale of shares of our common stock through two follow-on offerings totaling $78.5 million and $14.4

million from net proceeds related to the closing of a loan agreement.

The remaining $0.1 million was the result of proceeds from the

exercise of common stock warrants and employee stock options and proceeds from employee stock purchases.

cash provided by financing activities for the year ended December 31, 2020 was approximately $0.1 million and primarily reflects net

proceeds from the sale of shares of our common stock through the ATM Agreement and employee stock purchases.

ACCOUNTING PRONOUNCEMENTS

time-to-time new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting

bodies and adopted by us as of the specified effective date.

Unless otherwise discussed in Note 2 to our financial statements included

elsewhere in this Annual Report, we believe that the impact of recently issued standards that are not yet effective will not have a material

impact on our financial position or results of operations upon adoption.

ACCOUNTING POLICIES AND USE OF ESTIMATES

management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which

have been prepared in accordance with accounting principles generally accepted in the United States, or Generally Accepted Accounted

Principles (“U.S.

The preparation of these financial statements requires us to make estimates and assumptions that

affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial

statements, as well as the reported expenses during the reporting periods.

These items are monitored and analyzed by us for changes in

facts and circumstances, and material changes in these estimates could occur in the future.

We base our estimates on historical experience

and on various other factors that we believe are reasonable under the circumstances;

the results of which form the basis for making judgments

about the carrying value of assets and liabilities that are not readily apparent from other sources.

Changes in estimates are reflected

in reported results for the period in which they become known.

Actual results may differ materially from these estimates.

Our significant accounting policies are more fully described in Note 2 to our financial statements included elsewhere in this Annual Report.

Of our significant accounting policies, we believe that the following is the most critical:

Stock-Based Compensation

Our stock-based compensation consists of common stock options and restricted stock issued to certain employees and nonemployees and our Employee Stock Purchase Plan (“ESPP”).

We recognize compensation expense based on an estimated grant date fair value using the Black-Scholes option-pricing method.

significant accounting policies are more fully described in Note 2 to our financial statements included elsewhere in this Annual Report.

Of our significant accounting policies, we believe that the following are the most critical:

stock-based compensation consists of common stock options and restricted stock issued to certain employees and nonemployees and our Employee

Stock Purchase Plan (“ESPP”).

We recognize compensation expense based on an estimated grant date fair value using the Black-Scholes

option-pricing method.

We have elected to account for forfeitures as they occur.

The inputs for the Black-Scholes valuation model require management’s significant assumptions.

Prior to our IPO, the price per share of common stock was determined by our board based on recent prices of common stock sold in private offerings.

Subsequent to the IPO, the price per share of common stock is determined by using the closing market price on the Nasdaq Capital Market on the grant date.

The risk-free interest rates are based on the rate for U.S.

Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date.

The expected life was based on the simplified method in accordance with SEC Staff Accounting Bulletin Nos.

The expected volatility was estimated based on historical volatility information of peer companies that are publicly available in combination with our calculated volatility since being publicly traded.

All assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for options granted to employees.

In the event we terminate any of our consulting agreements, the unvested options issued in connection with such agreements would also be cancelled.

For grants of restricted stock, we record compensation expense based on the quoted fair value of the shares on the grant date over the requisite service period.

inputs for the Black-Scholes valuation model require management’s significant assumptions.

Prior to our IPO, the price per share

of common stock was determined by our board based on recent prices of common stock sold in private offerings.

Subsequent to the IPO,

the price per share of common stock is determined by using the closing market price on the Nasdaq Capital Market on the grant date.

risk-free interest rates are based on the rate for U.S.

Treasury securities at the date of grant with maturity dates approximately equal

to the expected life at the grant date.

The expected life was based on the simplified method in accordance with SEC Staff Accounting

Bulletin Nos.

The expected volatility was estimated based on historical volatility information of peer companies that are

publicly available in combination with our calculated volatility since being publicly traded.

assumptions used to calculate the grant date fair value of nonemployee options are generally consistent with the assumptions used for

options granted to employees.

In the event we terminate any of our consulting agreements, the unvested options issued in connection with

such agreements would also be cancelled.

grants of restricted stock, we record compensation expense based on the quoted fair value of the shares on the grant date over the requisite

service period.

Compensation expense for ESPP rights is recorded in line with each respective offering period.

Company records prepaid assets or accrued expenses for prepaid or estimated clinical trial costs conducted by third-party service providers,

which includes the conduct of preclinical studies and clinical trials.

These costs can be a significant component of the Company’s

research and development expenses.

The Company accrues for these costs based on factors such as estimates of the work completed and in

accordance with service agreements with its third-party service providers.

The Company makes significant judgments and estimates in determining

the accrued liabilities balance in each reporting period.

As actual costs become known, the Company adjusts its prepaid assets or accrued

The Company has not experienced any material differences between accrued costs and actual costs incurred.

However, the status

and timing of actual services performed, number of patients enrolled, and the rate of patient enrollments may vary from the Company’s

estimates, resulting in an adjustment to expense in future periods.

Changes in these estimates that result in material changes to the

Company’s prepaid assets or accrued expenses could materially affect the Company’s results of operations.

Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide disclosure pursuant to this item.

a smaller reporting company, we are not required to provide disclosure pursuant to this item.

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