What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-09 compared with 2022-03-21 · 92 added, 92 removed, 368 unchanged (33% of the section changed)

13 unchanged sentences

We have audited the accompanying consolidated balance sheets of Cellectar Biosciences, Inc.

and Subsidiary (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders' equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

and Subsidiary (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note 1 of the consolidated financial statements, the Company has recurring losses from operations, an accumulated deficit, expects to incur losses for the foreseeable future and requires additional working capital.

These are the reasons that raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not contain any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We determined that there are no critical audit matters.

/s/ Baker Tilly US, LLP

Baker Tilly US, LLP

We have served as the Company's auditor since 2016.

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STOCKHOLDERS’ EQUITY:

Preferred stock, $ 0.00001 par value;

7,000 shares authorized;

Series C preferred stock:

0 and 215 shares issued and outstanding as of December 31, 2021 and 2020, respectively

Series D preferred stock:

111 and 1,519 shares issued and outstanding as of December 31,

2021 and 2020, respectively

111 shares issued and outstanding as of December 31, 2022 and 2021, respectively

Common stock, $ 0.00001 par value;

160,000,000 and 80,000,000 shares authorized;

160,000,000 shares authorized;

9,385,272 and 6,110,125 shares issued and outstanding as of December 31, 2022 and 2021, respectively

17 unchanged sentences

OTHER INCOME:

Gain on extinguishment of debt

Interest income, net

Total other income, net

LOSS BEFORE INCOME TAXES

( 28,661,254 )

( 24,122,362 )

INCOME TAX BENEFIT

( 28,601,254 )

( 24,122,362 )

BASIC AND DILUTED NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS PER COMMON SHARE

8 unchanged sentences

( 126,775,427 )

Issuance of common stock, preferred stock, pre-funded warrants and warrants, net of issuance costs

Stock-based compensation

Vested restricted stock

Retired shares

Conversion of preferred into common shares

( 18,653,826 )

Conversion of warrants into common shares

Issuance of common stock, net of issuance costs

( 24,122,362 )

2 unchanged sentences

( 150,897,789 )

Conversion of preferred into common shares

( 18,653,826 )

Conversion of warrants into common shares

Issuance of common stock, net of issuance costs

Issuance of common stock, pre-funded warrants and warrants, net of issuance costs

Stock-based compensation

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Stock-based compensation

Gain on extinguishment of debt

Loss on disposal of asset

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CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term obligations

Proceeds from issuance of common stock, net of underwriting issuance costs

1 unchanged sentence

Cash provided by financing activities

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

DECREASE IN CASH AND CASH EQUIVALENTS

( 15,837,617 )

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD

( 21,461,402 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

CASH AND CASH EQUIVALENTS AT END OF PERIOD

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest expense

Gain on extinguishment of debt

Conversion of preferred stock to common stock

7 unchanged sentences

During the year ended December 31, 2022, the Company generated a net loss of approximately $ 28,601,000 and the Company expects that it will continue to generate operating losses for the foreseeable future.

However, the Company believes that its cash balance as of December 31, 2021 is adequate to fund its basic budgeted operations for at least 12 months from the filing of these financial statements.

The Company’s ability to execute its current operating plan depends on its ability to obtain additional funding via the sale of equity and/or debt securities, a strategic transaction or otherwise.

The Company plans to continue to actively pursue financing alternatives, but there can be no assurance that it will obtain the necessary funding.

However, the Company believes that its cash balance as of December 31, 2022 is adequate to fund its basic budgeted operations into the fourth quarter of 2023.

In October 2022, the Company completed a registered direct offering and concurrent private placement of shares of the Company’s common stock, prefunded warrants and common warrants.

The offering and private placements resulted in total gross proceeds of approximately $ 10.7 million with net proceeds to the Company of approximately $ 9.6 million after deducting estimated offering expenses (see Note 8).

The Company’s ability to execute its current operating plan depends on its ability to obtain additional funding via the sale of equity and/or debt securities, a strategic transaction or other source of capital.

The Company plans to continue actively pursuing financing alternatives, however, there can be no assurance that it will obtain the necessary funding, raising substantial doubt about the Company’s ability to continue as a going concern within one year of the date these financial statements are issued.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Depreciation on property and equipment is provided using the straight-line method over the estimated useful lives of the assets ( 3 to 10 years ).

Due to the significant value of leasehold improvements, leasehold improvements are depreciated over 64 months (their estimated useful life), which represents the full term of the lease.

Our only long-lived assets are property and equipment.

Leasehold improvements are depreciated over 64 months (their estimated useful life), which represented the full term of the lease at the time the leasehold improvements were capitalized.

Our only long-lived assets are property, equipment and Right-of-Use (ROU) assets.

The Company periodically, and at a minimum annually, evaluates long-lived assets for potential impairment.

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Right-of-Use Asset and Lease Liability — The Company accounts for all material leases in accordance with FASB Accounting Standards Codification (ASC) Topic 842, Leases .

Right-of-use (ROU) assets are amortized over their estimated useful life, which represents the full term of the lease.

ROU assets are amortized over their estimated useful life, which represents the full term of the lease.

Stock-Based Compensation — The Company uses the Black-Scholes option-pricing model to calculate the grant-date fair value of stock option awards.

The resulting compensation expense, net of expected forfeitures, for awards that are not performance-based, is

recognized on a straight-line basis over the service period of the award, which for 2021 and 2020 ranged from twelve months to three years .

The resulting compensation expense, net of expected forfeitures, for awards that are not performance-based, is recognized on a straight-line basis over the service period of the award, which for 2022 and 2021 ranged from twelve months to three years .

Research and Development — Research and development costs are expensed as incurred.

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Valuation allowances are established when it is more-likely-than-not that some portion of the deferred tax assets will not be realized.

Management has provided a full valuation allowance against the Company’s gross deferred tax asset.

Management has provided a full valuation allowance against the Company’s net deferred tax asset.

Tax positions taken or expected to be taken in the course of preparing tax returns are required to be evaluated to determine whether the tax positions are more-likely-than-not to be sustained by the applicable tax authority.

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See Note 11 regarding long-term obligations.

Concentration of Credit Risk — Financial instruments that subject the Company to credit risk consist of cash and equivalents on deposit with financial institutions.

Concentration of Credit Risk — Financial instruments that subject the Company to credit risk consist of cash and cash equivalents on deposit with financial institutions.

The Company’s excess cash as of December 31, 2022 and 2021 is on deposit in interest-bearing accounts with well-established financial institutions.

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Under ASU 2020-06, convertible instruments that would have previously been subject to the BCF or cash conversion guidance no longer require separate accounting for the conversion feature.

Entities may elect to early adopt ASU 2020-06 for fiscal years beginning after December 15, 2020.

New Accounting Pronouncements – Issued but Not Yet Adopted — In December 2021, the FASB issued ASU No.

2021-10, Government Assistance (Topic 832), which aims to provide increased transparency by requiring business entities to disclose information about certain type of government assistance they receive in the notes to the financial statements.

The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

For the fiscal year beginning January 1, 2022, management adopted ASU 2021-10, Government Assistance (Topic 832), which aims to provide increased transparency by requiring business entities to disclose information about certain type of government assistance they receive in the notes to the financial statements.

Reimbursements of eligible expenditures pursuant to government assistance programs are recorded as reductions of operating costs when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and when the reimbursement has been claimed.

The determination of the amount of the claim, and accordingly the receivable amount, requires management to make calculations based on its interpretation of eligible expenditures in accordance with the terms of the programs.

The reimbursement claims submitted by the Company are subject to review by the relevant government agencies.

The Company currently has a cancer treatment research award through the National Cancer Institute (NCI) totaling approximately $ 2.0 million over a period of approximately three years.

During the year ended December 31, 2022, the Company received approximately $ 697,000 in NCI grants, all of which was reported as a reduction of research and development (R&D) expenses.

In accordance with Fair Value Measurements and Disclosures Topic of the FASB ASC 820, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

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A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying value of cash and cash equivalents approximates fair value as maturities are less than three months.

The carrying amounts reported for other current financial assets and liabilities approximate fair value because of their short-term nature.

Fixed assets consisted of the following as of December 31:

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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities approximately consist of the following:

Accounts payable and accrued liabilities approximately consist of the following as of December 31:

Incentive compensation

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STOCKHOLDERS’ EQUITY

October 2022 Public Offering and Private Placement

On October 25, 2022, we completed a registered direct offering of 3,275,153 shares of the Company’s common stock at $ 2.085 per share and warrants to purchase up to an aggregate of 3,275,153 shares of common stock in a concurrent private placement priced at-the-market under Nasdaq rules.

In a separate concurrent private placement transaction, the Company offered and sold pre-funded warrants to purchase an aggregate of 1,875,945 shares of common stock and warrants to purchase an aggregate of 1,875,945 shares of common stock.

The warrants are immediately exercisable at an exercise price of $ 1.96 per share and will expire on the fifth anniversary of the closing date.

Each pre-funded warrant had a purchase price of $ 2.08499 , is immediately exercisable at an exercise price of $ 0.00001 per share and will not expire until exercised in full.

The registered direct offering and private placements resulted in total gross proceeds of approximately $ 10.7 million with net proceeds to the Company of approximately $ 9.6 million after deducting estimated offering expenses.

In accordance with the concept of ASC 820 regarding the October 2022 public offering, the Company allocated the value of the proceeds to the common stock, common warrants, and pre-funded warrants utilizing a relative fair value basis.

Using the Nasdaq closing trading price for our stock on October 20, 2022, the Company computed the fair value of the shares sold.

This valuation did not impact the total gross increase to Stockholders’ Equity of $ 10.7 million, but is an internal, proportionate calculation allocating gross proceeds of approximately $ 4.0 million to common stock, $ 4.4 million to common warrants and $ 2.3 million to pre-funded warrants.

2022 Reverse Stock Split

At the annual stockholders’ meeting held on June 24, 2022, the Company’s stockholders approved an amendment to the Company’s certificate of incorporation to effect a reverse split of the Company’s common stock at a ratio between 1 -for-5 to 1 -for-10 in order to satisfy requirements for the continued listing of the Company’s common stock on Nasdaq.

The board of directors authorized the 1 -for-10 ratio of the reverse split on June 27, 2022, and effective at the close of business on July 21, 2022, the Company’s certificate of incorporation was amended to effect a 1 -for-10 reverse split of the Company’s common stock (the “Reverse Stock Split”).

The accompanying consolidated financial statements and notes to consolidated financial statements give retroactive effect to the Reverse Stock Split for all periods presented.

Authorized Share Increase

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(the Sales Agent).

Pursuant to the Sales Agreement, the Company may offer and sell from time-to-time through the Sales Agent, up to $ 14.5 million of shares of the Company’s common stock, par value $ 0.00001 per share (the ATM Shares).

Pursuant to the Sales Agreement, the Company may offer and sell from time-to-time through the Sales Agent, up to $ 14.5 million shares of the Company’s common stock, par value $ 0.00001 per share (the ATM Shares).

The Sales Agent will receive from the Company a commission of 3.0 % of the gross proceeds from the sales of the ATM Shares pursuant to the terms of the Sales Agreement.

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In June 2021, the Company issued and sold an aggregate of 4,169 ATM Shares pursuant to the Sales Agreement and received gross proceeds of approximately $ 69,000 and net proceeds of $ 35,000 after deducting commissions to the Sales Agent and other offering expenses.

In conjunction with the October 2022 offering, the Company filed a prospectus supplement suspending the ATM program.

The Company will not make any sales of its common stock pursuant to the Equity Distribution Agreement unless and until a new prospectus supplement is filed with the SEC;

however, the Equity Distribution Agreement remains in full force and effect.

December 2020 Public Offering and Private Placement

On December 23, 2020, the Company issued and sold 18,148,136 shares of common stock, par value $ 0.00001 per share, of the at a public offering price of $ 1.35 per share of common stock, prior to deducting underwriting discounts and commissions and estimated offering expenses.

On December 23, 2020, the Company issued and sold 1,814,813 shares of common stock, par value $ 0.00001 per share, at a public offering price of $ 13.50 per share of common stock, prior to deducting underwriting discounts and commissions and estimated offering expenses.

In a concurrent private placement, the Company issued and sold 1,518.5180 shares of Series D convertible preferred stock.

The preferred shares are convertible into a number of shares of common stock equal to $ 13,500 divided by $ 1.35 (or 10,000 shares of common stock for each share of Series D preferred stock converted) and were issued at a price of $ 13,500 per share of Series D preferred stock.

The preferred shares would only be convertible into common stock upon receipt of stockholder approval of the issuance of the underlying shares of common stock as required by Nasdaq Marketplace Rule 5635(d) at a special stockholder meeting to be called for that purpose.

These preferred shares are convertible into a number of shares of common stock equal to $ 13,500 divided by $ 13.50 (or 1,000 shares of common stock for each share of Series D preferred stock converted) and were issued at a price of $ 13,500 per share of Series D preferred stock.

The preferred shares were only convertible into common stock upon receipt of stockholder approval of the issuance of the underlying shares of common stock as required by Nasdaq Marketplace Rule 5635(d) at a special stockholder meeting to be called for that purpose.

At a special meeting of stockholders held on February 25, 2021, the stockholders approved, in accordance with Nasdaq Listing Rule 5635(d), the issuance of shares of the Company’s common stock upon the conversion of the Series D preferred stock.

During the twelve months ended December 31, 2021, the total Series D convertible preferred stock converted into 14,074,069 Common Stock at a rate of 1 to 10,000 shares.

The net proceeds of the offerings to the Company, after deducting the underwriting discounts and commissions, placement agency fees and estimated offering expenses payable by the Company, were approximately $ 41.4 million.

During the twelve months ended December 31, 2021, 1,407.4036 shares of our Series D convertible preferred stock were converted into 1,407,404 shares of common stock at the established conversion rate.

There were no preferred stock conversions in the twelve months ended December 31, 2022.

The net proceeds of the December 2020 public offering and private placement to the Company, after deducting underwriting discounts and commissions, placement agency fees, and estimated offering expenses payable by the Company, were approximately $ 41.4 million.

The common stock issued in the public offering was offered by the Company pursuant to a registration statement on Form S-3, which was declared effective by the SEC on August 20, 2020.

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The fair value of the preferred stock was estimated on a relative fair value basis.

This valuation did not impact total Stockholders’ Equity but is an internal proportionate calculation allocating gross proceeds of approximately $ 24.5 million to common stock and $ 20.5 million to preferred stock.

June 2020 Public Offering

On June 5, 2020, the Company issued and sold 14,601,628 shares of common stock, 2,789,700 pre-funded warrants exercisable for one share of our common stock at an exercise price of $ 0.00001 per share and 8,695,664 Series H warrants to purchase 8,695,664 shares of common stock.

The public offering price of a share of common stock, together with one -half of a Series H warrant to purchase one share of common stock, was $ 1.15 .

The public offering price of a pre-funded warrant together with one -half of a Series H Warrant was $ 1.1499 .

The Series H warrants have an exercise price of $ 1.2075 per share and are exercisable for five years from the date of issuance.

During the year ended December 31, 2020, all 2,789,700 pre-funded warrants and 482,375 Series H warrants were exercised.

During the year ended December 31, 2021, 1,005,320 Series H warrants were exercised.

In accordance with the concept of ASC 820 regarding the June 2020 public offering, the Company allocated value of the proceeds to the common stock and warrants utilizing a relative fair value basis.

Using the Nasdaq closing trading price for our stock on June 5, 2020, the Company computed the fair value of the shares sold.

The fair value of the warrants was estimated using the Black-Scholes option-pricing model at that same date.

This valuation did not impact total Stockholders’ Equity but is an internal proportionate calculation allocating the gross proceeds of approximately $ 12.1 million to common stock and $ 7.9 million to warrants.

Gross offering proceeds to the Company were $ 20.0 million, with net proceeds to the Company of approximately $ 18.3 million after deducting placement agent fees and related offering expenses.

The Company intends to use the net proceeds from the offering for research and development, funding clinical studies, working capital and general corporate purposes.

The common stock, pre-funded warrants and Series H warrants were offered by the Company pursuant to a registration statement on Form S-1 filed on May 8, 2020 with the SEC under the Securities Act of 1933 (the Act) and an additional registration statement filed on June 2, 2020 pursuant to Rule 462(b) under the Act.

This valuation did not impact the total increase to Stockholders’ Equity of $ 45.0 million, but is an internal, proportionate calculation allocating gross proceeds of approximately $ 24.5 million to common stock and $ 20.5 million to preferred stock.

Common Stock Warrants

The following table summarizes information with regard to outstanding warrants to purchase common stock as of December 31, 2021:

Number of Shares

Issuable Upon

The following table summarizes the outstanding warrants to purchase common stock as of December 31, 2022:

Shares Issuable

Expiration Date

2022 Common Warrants

October 25, 2027

2022 Pre-Funded Warrants

June 2020 Series H Warrants

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The 2021 Stock Incentive Plan (the “2021 Plan”) was adopted on June 23, 2021, authorizing an aggregate of 600,000 shares of common stock for grants of incentive or nonqualified stock options, rights to purchase restricted and unrestricted shares of common stock, stock appreciation rights and performance share grants.

The Compensation Committee determines exercise prices, vesting periods and any performance requirements on the date of grant, subject to the provisions of the 2021 Plan.

The Company’s Compensation Committee determines exercise prices, vesting periods and any performance requirements on the date of grant, subject to the provisions of the 2021 Plan.

Options are granted at or above the fair market value of the common stock at the grant date and expire on the tenth anniversary of the grant date.

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As of December 31, 2022, there are an aggregate of 635,753 shares available for future grants under the 2021 Plan.

At the 2022 annual meeting of stockholders held on June 24, 2022, the Company’s stockholders approved an increase in the number of shares of common stock available for issuance under our 2021 Stock Incentive Plan by 500,000 .

During the twelve-months ended December 31, 2022 and 2021, stock options granted were 440,250 and 353,750 , respectively.

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On March 4, 2021, we granted 281,000 contingent non-statutory stock option awards at an exercise price of $ 17.40 per share to our employees.

Each of these grants was contingent on approval of the 2021 Plan that was voted on and approved by the stockholders

at the Annual Meeting of Stockholders held on June 23, 2021.

Each of these grants was contingent on approval of the 2021 Plan that was voted on and approved by the stockholders at the Annual Meeting of Stockholders held on June 23, 2021.

In accordance with the timing of the stockholder approval, the Company recognized the compensation expense of the contingent non-statutory stock option awards issued in March 2021 beginning in June 2021 and continuing through the vesting period.

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The Company has not historically recorded dividends related to stock options.

The following table summarizes the weighted-average values and assumptions used for stock options granted to employees and directors in the periods indicated:

The following table summarizes the assumptions used for stock options granted to employees and directors in the periods indicated:

Year Ended December 31,

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Expected life (years)

Weighted-average exercise price

Weighted-average grant-date fair value

Exercise prices for all grants made during the twelve months ended December 31, 2022 and 2021 were equal to the market value of the Company’s common stock on the date of grant.

There were 3,537,500 stock options granted during the twelve months ended December 31, 2021.

Stock Option Activity

A summary of stock option activity is as follows:

Issuable Upon

Outstanding as of December 31, 2020

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Stock-based compensation expense

Depreciable assets

Total deferred tax assets

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Change in valuation allowance

As of December 31, 2021, the Company had federal net operating loss (NOL) carryforwards of approximately $ 155,697,000 .

Federal NOLs generated as of December 31, 2017 will expire in 2021 through 2037 , while NOLs generated during

2018 and later will be carried forward indefinitely until utilized.

As of December 31, 2022, the Company had federal net operating loss (NOL) carryforwards of approximately $ 110,571,000 generated as of December 31, 2017, and NOL carryforwards of approximately $ 60,661,000 after December 31, 2017.

Federal NOLs generated as of December 31, 2017, will expire in 2022 through 2037 , while NOLs generated during 2018 and later will be carried forward indefinitely until utilized.

As of December 31, 2022, the Company had state NOL carryforwards of approximately $ 77,241,000 .

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NET LOSS PER SHARE

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period.

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock and pre-funded warrants outstanding during the period.

The pre-funded warrants are considered common shares outstanding for the purposes of the basic net loss per share calculation due to the nominal cash consideration and lack of other contingencies for issuance of the underlying common shares.

Diluted net loss attributable to common stockholders per share is computed by dividing net loss attributable to common stockholders, as adjusted, by the sum of the weighted average number of shares of common stock and the dilutive potential common stock equivalents then outstanding.

Potential common stock equivalents consist of stock options, warrants, preferred shares convertible into common stock, and pre-funded warrants.

Potential common stock equivalents consist of stock options, warrants, and convertible preferred shares.

Since there is a net loss attributable to common stockholders for the years ended December 31, 2022 and 2021, the inclusion of common stock equivalents in the computation for those periods would be antidilutive.

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Stock options

Preferred shares convertible to common

Convertible preferred shares

Total potentially dilutive shares

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The HQ Lease commenced upon completion of certain improvements in October 2018 and terminates in February 2024 with an option to extend the term of the lease for one additional 60 -month period.

During 2018, the landlord made certain improvements to the facility.

As of December 31, 2018, the Company recorded a deferred lease liability of approximately $ 176,000 for the improvements funded by the landlord in the consolidated balance sheet which is being amortized as a reduction to rent expense in the consolidated statement of operations over the term of the lease.

Under the HQ Lease, the Company will pay monthly fixed rent based on approximate rate per rentable square foot which ranges between approximately $ 12,400 to $ 13,600 over the lease period.

In addition, the Company received certain rent abatements and lease incentives subject to the limitations in the HQ Lease.

The HQ Lease’s net ROU asset and lease liability are approximately $205,000 and ($ 302,000 ), respectively, as of December 31, 2021 and rental expense for the twelve months ended December 31, 2021 was approximately $ 113,000 .

On December 30, 2022, the Company entered into an Amended Agreement of Lease, with CAMPUS 100 LLC (the “Landlord”).

Under the Amended Lease, which was accounted for as a modification of the initial lease, as the Company will continue to lease 3,983 square feet of rentable area on the second floor of a building located at 100 Campus Drive in Florham Park, New Jersey, commencing on March 1, 2023 until April 30, 2029.

The Company also has an option to extend the term of the Amended Lease for one additional 60 -month period.

Under the terms of the Amended Lease, the Company’s previously paid security deposit of $ 75,000 will be reduced to $ 23,566 and the aggregate rent due over the term of the Amended Lease is approximately $ 918,000 , which will be reduced to approximately $ 893,000 after certain rent abatements.

The Company will also be required to pay its proportionate share of certain operating expenses and real estate taxes applicable to the leased premises.

After certain rent abatements the rent is approximately $ 11,800 per month for the first year and then escalates thereafter by 2 % per year for the duration of the term.

The Company has not entered into any leases with related parties.

Discount Rate

The Company has determined the interest rate implicit in the lease considering factors such as the Company’s credit rating, borrowing terms offered by the U.S.

The Company has determined an appropriate interest rate to be used in evaluating the present value of the Amended Lease liability considering factors such as the Company’s credit rating, borrowing terms offered by the U.S.

Small Business Administration, amount of lease payments, quality of collateral and alignment of the borrowing term and lease term.

The Company considers 10 % per annum as reasonable to use as the incremental borrowing rate for purposes of the calculation of lease liabilities.

The Company considers 14 % per annum as reasonable to use as the incremental borrowing rate for the purpose of calculating the liability under the Amended Lease.

In conjunction with the June 2018 lease, the Company had previously used a 10 % per annum incremental borrowing rate.

Maturity Analysis of Short-Term and Operating Leases

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The Company has not made any matching contributions under this plan.

On April 21, 2020, the Company received loan proceeds in the amount of approximately $ 184,000 under the Paycheck Protection Program (PPP).

The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business.

The loans and accrued interest are forgivable after 24 weeks as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels.

The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the 24-week period.

The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1 %, with a deferral of payments for the first six months.

The Company used the proceeds for purposes consistent with the PPP requirements.

On December 30, 2020, the principal loan amount of $ 184,000 and accrued interest of $ 1,280 were forgiven and recognized as a gain on extinguishment of debt in the fourth quarter of 2020.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

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 8. Financial Statements and Supplementary Data