Celcuity Inc. 10-Q

ITEM 2. 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 with our unaudited condensed financial statements and the related notes appearing under Item 1 of Part I of this Quarterly Report on Form 10-Q (this “Quarterly Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly 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 our Annual Report on Form 10-K for the year ended December 31, 2019 and elsewhere in this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview 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 fixed (i.e., dead) cells. Using fixed cells 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, 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+ 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+ patients receive today. We have two interventional clinical trials underway to evaluate the efficacy of HER2 targeted therapies in breast cancer patients selected with our CELsignia 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. We completed development of our third CELsignia test for breast cancer during the fourth quarter of 2019. This new test evaluates PI3K signaling in HER2-negative breast cancer tumor cells. Our internal studies demonstrate how measurement of PI3K-node 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 detect PI3K mutations. During the first quarter of 2020, we made significant progress developing a new CELsignia test intended to diagnose cancers driven by dysregulated RAS signaling. We expect to complete development of this test for breast and ovarian cancer patients by the end of 2020. Dysregulation of RAS signaling, which includes the RAF/ERK and PI3K/AKT 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 the 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. 13 Table of Contents Once development of the new RAS test is completed, we intend to add it to our current CELsignia Pathway Activity test for breast cancer. This next generation CELsignia test for breast cancer would provide an analysis of 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 increase significantly. We reported pre-clinical study results for our first CELsignia test for ovarian cancer at the 2020 Annual Meeting of the American Association for Cancer Research in late June 2020.This new 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 would expect to initiate discussions with pharmaceutical companies about collaborating on clinical trials later in 2020. In addition to our CELsignia tests for HER2-negative breast cancer and ovarian cancer, we expect to develop CELsignia tests to diagnose nine new potential cancer sub-types we have discovered in breast, lung, colon, 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 identify new cancer sub-types and to seek collaborations with pharmaceutical companies, which can vary in scope. We have two collaborations underway that rely on the CELsignia test for breast cancer to select breast cancer patients for treatment with HER2 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 a third collaboration, we were selected by NSABP and Puma 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. This 35-patient study is expected to be completed in late 2022. Unlike the trial with NSABP and Genentech, 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 that evaluate the efficacy of various targeted therapies in combination with other targeted therapies or chemotherapy. Potential drug combinations under consideration for clinical trials include: 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 our inception in 2012. For the three months ended September 30, 2020 and 2019, we reported a net loss of approximately $2.5 million and $2.0 million, respectively, and for the nine months ended September 30, 2020 and 2019, we reported a net loss of approximately $6.9 million and $5.6 million, respectively. As of September 30, 2020, we had an accumulated deficit of approximately $12.6 million under Celcuity LLC and $23.8 million under Celcuity Inc. As of September 30, 2020, we had cash and cash equivalents of approximately $13.7 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. The impact of the COVID-19 pandemic on our business is discussed in further detail below: 14 Table of Contents 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 recent developments relating to the COVID-19 global 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 second half of 2021 and final results approximately nine months later. 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. 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 were postponed in conjunction with the delayed meeting schedules. Liquidity 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 II of this Quarterly 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 Revenue 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. 15 Table of Contents 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. 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; and · legal costs associated with patent applications. Internal and external research and development costs are expensed as they are incurred. As we initiate 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 sales 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, cash equivalents, and investment balances. 16 Table of Contents Results of Operations Three Months Ended September 30, Increase (Decrease) 2020 2019 $ Percent Change Statements of Operations Data: (unaudited) Operating expenses: Research and development $ 1,962,610 $ 1,711,597 $ 251,013 15 % General and administrative 517,465 379,718 137,747 36 Total operating expenses 2,480,075 2,091,315 388,760 19 Loss from operations (2,480,075 ) (2,091,315 ) (388,760 ) 19 Other income (expense) Interest expense (28 ) (39 ) 11 n/a Interest income 5,805 107,100 (101,295 ) (95 ) Other income, net 5,777 107,061 (101,284 ) (95 ) Net loss before income taxes (2,474,298 ) (1,984,254 ) (490,044 ) 25 Income tax benefits - - - - Net loss $ (2,474,298 ) $ (1,984,254 ) $ (490,044 ) 25 % Nine Months Ended September 30, Increase (Decrease) 2020 2019 $ Percent Change Statements of Operations Data: (unaudited) Operating expenses: Research and development $ 5,576,250 $ 4,772,286 $ 803,964 17 % General and administrative 1,428,578 1,135,251 293,327 26 Total operating expenses 7,004,828 5,907,537 1,097,291 19 Loss from operations (7,004,828 ) (5,907,537 ) (1,097,291 ) 19 Other income (expense) Interest expense (93 ) (123 ) 30 n/a Interest income 81,639 357,321 (275,682 ) (77 ) Other income, net 81,546 357,198 (275,652 ) (77 ) Net loss before income taxes (6,923,282 ) (5,550,339 ) (1,372,943 ) 25 Income tax benefits - - - - Net loss $ (6,923,282 ) $ (5,550,339 ) $ (1,372,943 ) 25 % 17 Table of Contents Research and Development Our research and development expenses for the three months ended September 30, 2020 were approximately $1.96 million, representing an increase of approximately $0.25 million, or 15%, compared to the same period in 2019. The increase primarily resulted from a $0.19 million increase in compensation related expenses, including approximately $0.09 million of non-cash stock-based compensation, to support development of our CELsignia platform. In addition, other research and development expenses increased $0.06 million due to clinical validation and laboratory studies, and operational and business development activities. Our research and development expenses for the nine months ended September 30, 2020 were approximately $5.57 million, representing an increase of approximately $0.80 million, or 17%, compared to the same period in 2019. The increase primarily resulted from a $0.71 million increase in compensation related expenses, including approximately $0.45 million of non-cash stock-based compensation, to support development of our CELsignia platform. In addition, other research and development expenses increased $0.09 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 Our general and administrative expenses for the three months ended September 30, 2020 were approximately $0.52 million, representing an increase of approximately $0.14 million, or 36%, compared to the same period in 2019. The increase primarily resulted from a $0.09 million increase in compensation related expenses, including approximately $0.06 million of non-cash stock-based compensation. In addition, other general and administrative expenses increased $0.05 million primarily due to professional fees associated with being a public company. Our general and administrative expenses for the nine months ended September 30, 2020 were approximately $1.43 million, representing an increase of approximately $0.30 million, or 26%, compared to the same period in 2019. The increase primarily resulted from a $0.24 million increase in compensation related expenses, including approximately $0.21 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 Interest expense for the three and nine months ended September 30, 2020 is related to finance lease liabilities. Interest Income Interest income for the three months ended September 30, 2020 was approximately $0.01 million, representing a decrease of approximately 95% compared to the same period in 2019. This decrease was primarily the result of lower market interest rates. Interest income for the nine months ended September 30, 2020 was approximately $0.08 million, representing a decrease of approximately 77% compared to the same period in 2019. This decrease was primarily the result of lower market interest rates. 18 Table of Contents Liquidity and Capital Resources Since our inception, we have incurred losses and cumulative negative cash flows from operations. Through September 30, 2020, we have 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 initial public offering 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 September 30, 2020, we generated approximately $0.05 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 September 30, 2020, our cash and cash equivalents were approximately $13.7 million, and we had an accumulated deficit of approximately $12.6 million under Celcuity LLC and approximately $23.8 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. Cash Flows Nine Months Ended September 30, 2020 2019 (unaudited) Net cash provided by (used in): Operating activities $ (5,038,438 ) $ (4,294,953 ) Investing activities (75,494 ) 4,392,510 Financing activities 75,317 227,429 Net increase (decrease) in cash and cash equivalents $ (5,038,615 ) $ 324,986 Operating Activities Net cash used in operating activities was approximately $5.04 million for the nine months ended September 30, 2020 and consisted primarily of a net loss of approximately $6.92 million, adjusted for working capital changes of approximately $0.26 million and non-cash expense items of approximately $1.62 million. The approximately $0.26 million of working capital changes was primarily due to decreases in prepaid assets and increases in accrued expenses. Non-cash expense items of approximately $1.62 million primarily consisted of depreciation expense of $0.29 million and $1.33 million of stock-based compensation expense. The net cash used in operating activities was approximately $4.29 million for the nine months ended September 30, 2019 and consisted primarily of a net loss of approximately $5.55 million, adjusted for working capital changes of approximately $0.31 million and non-cash expense items of approximately $0.95 million. The approximately $0.31 million of working capital changes was primarily due to decreases in prepaid assets and increases in accounts payable and accrued expenses. Non-cash expense items of approximately $0.95 million primarily consisted of depreciation expense of $0.25 million and stock-based compensation expense of approximately $0.68 million. 19 Table of Contents Investing Activities Net cash used in investing activities for the nine months ended September 30, 2020 was approximately $0.08 million and consisted of purchases of property and equipment. Net cash provided by investing activities for the nine months ended September 30, 2019 was approximately $4.39 million and consisted primarily of net proceeds from the sale of investments of approximately $4.74 million, offset by approximately $0.35 million for purchases of property and equipment. Financing Activities Net cash provided by financing activities for the nine months ended September 30, 2020 was approximately $0.08 million and primarily reflects net proceeds from the sale of shares of our common stock through the ATM Agreement and employee stock purchases. The net cash provided by financing activities for the nine months ended September 30, 2019 was approximately $0.23 million and primarily reflects the proceeds from the exercise of common 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 other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed in Note 2 to our unaudited condensed financial statements included in Item 1 of Part I of this Quarterly 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 unaudited condensed financial statements, which have been prepared in accordance with U.S. GAAP. 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 unaudited condensed financial statements included in Item 1 of Part I of this Quarterly Report. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Such forward-looking information is included in this Quarterly Report and in other materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us). Forward-looking statements include all statements based on future expectations. This Quarterly Report contains forward-looking statements that involve risks and uncertainties including, but not limited to, (i) our clinical trial plans and the estimated costs for such trials; (ii) our expectations with respect to costs and timelines to develop, validate and launch CELsignia tests; (iii) our beliefs related to the perceived advantages of our CELsignia tests compared to traditional molecular or other diagnostic tests; (iv) our expectations regarding the timeline of patient enrollment and results from clinical trials; (v) our expectations regarding partnering with pharmaceutical companies and other third parties; (vi) our expectations regarding revenue from sales of CELsignia tests and revenue from milestone or other payment sources; (vii) our plans with respect to research and development and related expenses for the foreseeable future; (viii) our expectations regarding business development activities, including companion diagnostic related activities with pharmaceutical companies, expanding our sales and marketing functions and the costs associated with such activities; (ix) our expectations with respect to the CELsignia tests and the analytical capabilities of such tests; (x) our beliefs regarding the ability of our 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 the increased costs associated with being a public company; and (xi) our expectations regarding the impact that the COVID-19 pandemic and related economic effects will have on our business and results of operations. In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on their interpretation of currently available information. 20 Table of Contents These statements involve known and unknown risks, uncertainties and other factors that may cause our results or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Certain risks, uncertainties and other factors include, but are not limited to, our limited operating history; the unknown impact of the COVID-19 pandemic on our business; our initial success being heavily dependent on the success of our CELsignia HER2 Pathway Activity Test; our inability to determine whether our CELsignia tests are currently commercially viable; challenges we may face in developing and maintaining relationships with pharmaceutical company partners; the complexity and timeline for development of CELsignia tests; the uncertainty and costs associated with clinical trials; the uncertainty regarding market acceptance by physicians, patients, third-party payors and others in the medical community, and with the size of market opportunities available to us; the pricing of molecular and other diagnostic products and services that compete with us; uncertainty with insurance coverage and reimbursement for our CELsignia tests; difficulties we may face in managing growth, such as hiring and retaining a qualified sales force and attracting and retaining key personnel; changes in government regulations; and obtaining and maintaining intellectual property protection for our technology and time and expense associated with defending third-party claims of intellectual property infringement, investigations or litigation threatened or initiated against us. These and additional risks, uncertainties and other factors are described more fully in our Annual Report on Form 10-K for the year ended December 31, 2019 and elsewhere in this Quarterly Report. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis and retrieval system (EDGAR) at www.sec.gov. You should read the cautionary statements made in this Quarterly Report as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report. We cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. You should read this Quarterly Report completely. Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future. ITEM 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, we are not required to provide disclosure pursuant to this item.