Chemomab Therapeutics Ltd. 10-Q

Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 ANCHIANO THERAPEUTICS LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands, except share and per share data) June 30, December 31, 2020 2019 ASSETS Current assets: Cash and cash equivalents $ 8,824 $ 17,575 Prepaid expenses and other 848 636 Total current assets 9,672 18,211 Property and equipment, net 18 158 Operating lease right-of-use 275 1,199 Other non-current assets 51 187 Total assets $ 10,016 $ 19,755 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade payables $ 974 $ 875 Accrued expenses and other 609 2,855 Operating lease liability 168 391 Total current liabilities 1,751 4,121 Non-current operating lease liability 108 725 Total liabilities 1,859 4,846 Commitments and contingencies Shareholders' equity: Ordinary shares, no par value - authorized 500,000,000 shares as of June 30, 2020 and 100,000,000 shares as of December 31,2019; issued and outstanding 37,099,352 shares at June 30, 2020 and December 31,2019 - - Paid-in capital 119,732 119,468 Currency translation differences reserve 872 872 Accumulated deficit (112,447 ) (105,431 ) Total shareholders' equity 8,157 14,909 Total liabilities and shareholders' equity $ 10,016 $ 19,755 See accompanying notes to unaudited condensed consolidated financial statements 2 Condensed Consolidated Statements of Operations and Comprehensive Loss for the Six Months Ended June 30, 2020 and 2019 ANCHIANO THERAPEUTICS LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited, in thousands, except share and per share data) Three months ended June 30, Six months ended June 30, 2020 2019 2020 2019 Operating expenses: Research and development $ 1,307 $ 2,576 $ 2,357 $ 6,711 General and administrative 2,176 1,962 4,001 3,253 Restructuring expense - - 670 - Total operating expenses 3,483 4,538 7,028 9,964 Finance (income) expense, net (2 ) (99 ) (12 ) 4,388 Net loss and comprehensive loss $ (3,481 ) $ (4,439 ) $ (7,016 ) $ (14,352 ) Basic and diluted loss per share $ (0.09 ) $ (0.12 ) $ (0.19 ) $ (0.45 ) Weighted average number of shares outstanding - basic and diluted 37,099,352 37,099,352 37,099,352 31,748,163 The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 Condensed Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2020 and 2019 ANCHIANO THERAPEUTICS LTD. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited, in thousands, except share data) Currency Ordinary shares translation Number of Amounts Paid-in differences Accumulated shares (*) capital reserve deficit Total Balance at January 1, 2020 37,099,352 $ - $ 119,468 $ 872 $ (105,431 ) $ 14,909 Share-based compensation - - 186 - - 186 Net loss - - - - (3,535 ) (3,535 ) Balance at March 31, 2020 37,099,352 - 119,654 872 (108,966 ) 11,560 Share-based compensation - - 78 - - 78 Net loss - - - - (3,481 ) (3,481 ) Balance at June 30, 2020 $ 37,099,352 $ - $ 119,732 $ 872 $ (112,447 ) $ 8,157 Balance at January 1, 2019 15,575,682 $ - $ 87,240 $ 872 $ (78,307 ) $ 9,805 Issuance of shares, net 21,523,670 - 26,500 - - 26,500 Reclassification of warrants due to reassessment - - (3,628 ) - - (3,628 ) Reclassification of warrants due to modification - - 8,198 - - 8,198 Share-based compensation - - 380 - - 380 Net loss - - - - (9,913 ) (9,913 ) Balance at March 31, 2019 37,099,352 - 118,690 872 (88,220 ) 31,342 Share-based compensation - - 368 - - 368 Net loss - - - - (4,439 ) (4,439 ) Balance at June 30, 2019 37,099,352 $ - $ 119,058 $ 872 $ (92,659 ) $ 27,271 (*) No par value The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019 ANCHIANO THERAPEUTICS LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Six months ended June 30, 2020 2019 Operating activities: Net loss $ (7,016 ) $ (14,352 ) Adjustments required to reconcile net loss to net cash used in operating activities: Financing costs, net - 4,647 Depreciation 74 42 Gain on sale of property and equipment (19 ) - Share-based payments 264 748 Write-off of right-of-use related to restructuring 84 - Changes in operating asset and liabilities: Prepaid and other current (212 ) 1,828 Other non-current assets 6 - Trade payables 99 584 Accrued expenses and other (2,246 ) (534 ) Net cash used in operating activities (8,966 ) (7,037 ) Investing activities: Purchase of property and equipment (34 ) (91 ) Proceeds from sale of property and equipment 119 - Net cash provided by (used in) investing activities 85 (91 ) Financing activities: Proceeds from issuance of ordinary shares and warrants - 30,500 Issuance costs - (3,879 ) Net cash provided by financing activities - 26,621 Increase (decrease) in cash, cash equivalents and restricted cash (8,881 ) 19,493 Cash, cash equivalents and restricted cash at, beginning of period 17,705 7,640 Cash, cash equivalents and restricted cash at, end of period $ 8,824 $ 27,133 Reconciliation in amounts on consolidated balance sheets: Cash and cash equivalents $ 8,824 $ 27,003 Restricted cash - 130 Total cash, cash equivalents and restricted cash $ 8,824 $ 27,133 Supplemental disclosure of cash flow information: Reclassification of warrants due to reassessment $ - $ 3,628 Reclassification of warrants due to modification $ - $ 8,198 Taxes paid in cash $ - $ 605 Interest paid in cash $ - $ 4 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements 5 Notes to Condensed Consolidated Financial Statements 1. The Company and Basis of Presentation Anchiano Therapeutics Ltd. is an early-stage preclinical biopharmaceutical company committed to discovering and developing new cancer therapies designed to target the products of mutated genes that are drivers of human malignancies . The Company is developing small-molecule pan-mutant RAS inhibitors and inhibitors of PDE10 and the β-catenin pathway. In November 2019, the Company discontinued clinical development of inodiftagene vixteplasmid. After a thorough evaluation of the available data, the Company determined there was a low probability of surpassing the pre-defined futility threshold at the planned interim analysis of its Phase 2 Codex study, which was evaluating inodiftagene vixteplasmid in patients with BCG-unresponsive non-muscle-invasive bladder cancer (“NMIBC”), and announced the discontinuation of the study. In January 2020, the Board of Directors of the Company approved management’s recommendation to close the Company’s office and laboratories located in Israel. Following the closure of the Israeli facilities, the Company’s sole remaining office will be located in Cambridge, Massachusetts (for details, see Note 4 below). During the last two years, there has been a significant increase in the Company’s activities in the United States, resulting from the Company’s management’s strategic decision to shift its development, financing and ongoing operations from Israel to the United States. On July 2, 2020, the Company’s Chief Executive Officer Dr. Frank Haluska sent a letter to the Company’s Chairman outlining Dr. Haluska’s belief that events had occurred that were sufficient to trigger his ability to resign for “Good Reason” under his employment agreement. The Board informed Dr. Haluska that it disagreed with the letter’s assertions regarding “Good Reason” and treated the letter as a constructive resignation effective as of July 2, 2020. Until a new CEO is identified and appointed, the Board will handle all matters related to CEO duties. On July 12, 2020, Dr. Frank Haluska tendered his written resignation from the Company’s Board of Directors, effective immediately. Dr. Haluska referenced the matters articulated in his letter of July 2, 2020, and the Company’s response and actions following receipt of the letter as the basis for his resignation from the Board. With regards to the resignation of Dr. Frank Haluska the Company has a potential maximum exposure of up to $0.4 million relating to claims of “Good Reason” resignation. It is the Company’s position that the CEO resigned without Good Reason, is not entitled to severance, and the Company will contest any and all claims for severance. In light of business circumstances, and in order to conserve cash and preserve optionality while alternatives are being identified and assessed, the Company made a decision during July 2020 to undertake reductions in headcount and other cost saving measures. These include plans to temporarily pause its internal and external research and development work on the Company’s pan-RAS-inhibitor program until there is greater clarity regarding Anchiano’s ability to fund the program. In the third quarter of 2020 the Company anticipates taking a restructuring charge associated with severance, discontinuation of clinical development activities, and vacating the Company’s Cambridge facility. The Company is currently in the process of determining the amount of the restructuring charge. The Company is incorporated and registered in Israel. The Company's American Depositary Shares ("ADSs"), each representing five ordinary shares of the Company with no par value (the "ordinary shares"), began trading on the Nasdaq Capital Market (“Nasdaq”) in February 2019 under the symbol "ANCN". The Company’s ordinary shares traded on the Tel Aviv Stock Exchange (“TASE”) between August 2006 and June 2019, at which time the Company voluntarily delisted from the TASE. The Company wholly owns a subsidiary, Anchiano Therapeutics Israel Ltd., which itself wholly owns a Delaware-incorporated subsidiary, Anchiano Therapeutics, Inc. 6 Liquidity The condensed consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying condensed consolidated financial statements, the Company has incurred losses and cash flow deficits from operations since inception, resulting in an accumulated deficit at June 30, 2020 of $112.4 million. The Company has financed operations to date primarily through public and private placements of equity securities. The Company anticipates that it will continue to incur net losses for the foreseeable future. The Company believes that its existing cash and cash equivalents will only be sufficient to fund its projected cash needs into the first quarter of 2021. Accordingly, these factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. To meet future capital needs, the Company would need to raise additional capital through equity or debt financing or other strategic transactions. However, any such financing may not be on favorable terms or may not be available to the Company on any terms. The failure of the Company to obtain sufficient funds on commercially-acceptable terms when needed, would have a material adverse effect on the Company’s business, results of operations and financial condition. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of the Company’s expenses could vary materially and adversely as a result of a number of factors. The Company has based its estimates on assumptions that may prove to be wrong, and the Company’s expenses could prove to be significantly higher than it currently anticipates. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Unaudited Interim Financial Information The interim condensed consolidated financial statements included in this quarterly report are unaudited. The unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for a fair statement of the Company’s financial position as of June 30, 2020, and its results of operations for the three and six months ended June 30, 2020 and 2019, changes in shareholders’ equity for the three and six months ended June 30, 2020 and 2019, and cash flows for the six months ended June 30, 2020 and 2019. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other future annual or interim period. The December 31, 2019 balance sheet was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. These financial statements should be read in conjunction with the audited financial statements included in the Company’s Form 10-K for the year ended December 31, 2019 as filed with the SEC. The Company’s significant accounting policies are disclosed in the audited financial statements for the year ended December 31, 2019 included in the Company’s Form 10-K. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies. 2. Summary of Significant Accounting Policies a . Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company evaluates its assumptions on an ongoing basis, including those related to share-based compensation, leases and derivatives. The Company's management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the condensed consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. b. Reclassifications Certain prior year amounts shown in the accompanying unaudited condensed consolidated financial statements have been reclassified to conform to the 2020 presentation. These reclassifications did not have any effect on total current assets, total assets, total current liabilities, total liabilities, total shareholders’ equity, net loss, or loss per share. 7 c. Recent Accounting Pronouncements Recent accounting pronouncements, other than below, issued by the FASB (including its Emerging Issues Task Force), the AICPA and the SEC did not or are not believed by management to have a material effect on the Company’s present or future financial statements. In December 2019, the FASB issued “ASU 2019-12, Simplifying the Accounting for Income Taxes.” The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC 740 and clarifying existing guidance to facilitate consistent application. The standard will become effective for us beginning on January 1, 2021. The Company is currently evaluating the new standard to determine the potential impact on its financial condition, results of operations, cash flows, and financial statement disclosures. 3. Accrued expenses and other Accrued and other current liabilities consist of the following for the periods indicated (in thousands): June 30, December 31, 2020 2019 Accrued expenses $ 352 $ 372 Restructuring accrual 160 2,161 Payroll and related 97 60 Liability for employee rights upon retirement - 262 $ 609 $ 2,855 4. Leases In January 2018, the Company signed an agreement to rent a laboratory and offices in Jerusalem through May 2023. The Company had an option to extend the agreement by another five years. The annual rent (including management fees) is approximately $0.4 million and is linked to the Israeli Consumer Price Index. Pursuant to the agreement, bank guarantees of $0.1 million were provided to the property owner. In January 2020, pursuant to the Company’s decision to close its Israeli operations, the agreement was modified such that the Company vacated the facilities on May 30, 2020 but will continue to make scheduled lease payments through October 31, 2020. The Company recorded restructuring expense of $247,000 related to the modification of the Israeli lease agreement and settled all obligations associated with the lease. In May 2018, the Company signed an agreement to rent space for its headquarter offices in Cambridge, Massachusetts. This agreement was amended in October 2019 to reflect relocating to a new 2,400 square foot suite within the same facility effective February 1, 2020. The annual rent is approximately $0.2 million. The amended lease term ends January 31, 2022 and there are no options to extend the lease. Pursuant to the changes detailed in Note 1 above, in July 2020, the Company initiated discussions to vacate the Cambridge facility as part of its restructuring of operations. 5. License Agreement In September 2019, the Company announced that it entered into an option to license agreement with ADT Pharmaceuticals, LLC (“ADT”). Pursuant to the terms and conditions set forth in the agreement, the parties agreed to conduct research and development activities of novel small-molecule inhibitors (RAS and PDE10/β-catenin). As part of the arrangement, the Company is primarily responsible for the research, development, manufacturing and regulatory activities and ADT assists with the research activities as necessary in exchange for a quarterly fee from the Company. In connection with the agreement, ADT also granted the Company exclusive rights to research, develop, manufacture and commercialize the aforementioned compounds relating to patents owned by ADT and any products containing such compounds worldwide. In consideration for the rights granted under the agreement, the Company committed to pay ADT (i) a $3 million upfront fee; (ii) a fee upon transfer of the know-how and intellectual property rights to the Company; and then (iii) additional payments, including milestone and royalty payments. The Company has the ability to terminate the agreement at any time in its entirety or on a compound-by-compound basis after providing 90 days written notice to ADT. The upfront fee was paid in the third quarter of 2019. The Company accounted for the upfront fee and additional payments as a research and development expenses. In April 2020, the Company notified Yissum Technology Transfer Company of the Hebrew University Ltd. (“Yissum”) that as a result of the Company’s previous decision to discontinue clinical development of inodiftagene, it will cease payments to maintain intellectual property (“IP”) it licensed from Yissum that supported the development. Yissum informed the Company that it deems the Company’s decision a breach of the licensing and development agreement between the parties (“License Agreement”) and expects the Company to take steps necessary to return the licensed IP to Yissum promptly. Yissum did not assert any demands for monetary relief in its notice to the Company. Yissum and the Company have agreed on terms to terminate the License Agreement, return all IP documentation to Yissum and to mutually waive, release and discharge the other party from all claims of any type. 8 6. Restructuring Restructuring provisions are recognized for the direct expenditures arising from restructuring initiatives, where the plans are sufficiently detailed and where appropriate communication has been made to those affected. The Company has recorded restructuring expenses related principally to contract termination costs due to the discontinuation of the clinical trials to CROs and manufacturers and contractual involuntary termination benefits to employees which have been accounted for as ongoing benefit arrangements and associated termination costs related to the reduction of its workforce. One-time termination benefits are expensed at the date the employees are notified, unless the employees must provide future services beyond a minimum retention period, in which case the benefits are expensed ratably over the future service periods. A provision for contract termination costs, in which a contract is terminated or the entity will continue to incur costs pursuant to contract for its remaining term without economic benefit, is recognized only when the contract is terminated or when the entity permanently ceases using the rights granted under the contract. In November 2019, the Company decided to discontinue its Phase 2 Codex study in patients with BCG-unresponsive NMIBC. In connection with this decision, the Company is required to make certain payments under contracts with CROs and with manufactures of the drug in order to terminate the contracts and close the trials. This restructuring plan included a reduction in the workforce of seven employees. In January 2020, the Board of Directors approved management’s recommendation to close the Company’s office and laboratories located in Israel. In connection with this restructuring, the employment of the remaining five Israeli employees was terminated in the second quarter of 2020. As noted above, in conjunction with this decision the Company renegotiated its lease for Israeli laboratory and office space. In connection with this decision, the Company vacated the facilities on May 31, 2020 but will continue to make scheduled lease payments through October 31, 2020. In the first quarter of 2020, the Company recorded a restructuring charge to adjust its operating lease right of use asset and operating lease liability to reflect the loss on the early termination of the Israeli lease obligation. The following table represents a roll forward of the restructuring and other activities noted above (in thousands): CRO, Manufacturing and other related Severance- related Facility and Leases Total Balance, January 1, 2020 $ 2,572 $ 336 $ - $ 2,908 Expenses 423 - 247 670 Paid or consumed (2,835 ) (336 ) (247 ) (3,418 ) Balance, June 30, 2020 $ 160 $ - $ - $ 160 7. Shareholders’ Equity a. 2018 Private Placement In June 2018, the Company completed a $22.9 million fundraising round from investors in the United States and Israel. In consideration for the investment, the Company issued 5,960,787 ordinary shares at a price per share of approximately $3.842, as well as 2,713,159 warrants to acquire additional shares equal to 80% of the shares issued, at an exercise price per share of NIS 16.20 (approximately $4.32). The warrants are exercisable for five years from December 31, 2018, the closing date of the transaction, and may be exercised on a cashless basis. 9 In addition, the investors were granted price protection rights (to shares and warrants) in the event of a future share issuance by the Company wherein the price does not increase by at least approximately 42.86% over the price per share in the fundraising (or is less than the adjusted price per share, if the price has already been adjusted). For details of an allocation that took place in 2019 pursuant to these rights, see Note 7b below. The warrants and shares were recorded within equity on the issuance date. Effective January 1, 2019, the Company changed its functional currency from NIS to USD. Due to this change, the exercise price of the warrants was no longer denominated in the Company’s functional currency and therefore not considered indexed to the Company’s own stock according to ASC 815-40. Accordingly, the Company recorded the fair value of the warrants as a liability at January 1, 2019. Subsequently, upon the Company’s Nasdaq initial public offering on February 14, 2019, the warrants’ term was modified such that the exercise price currency was changed to USD. As a result, the warrants were once again considered indexed to the Company’s own stock according to ASC 815-40. Accordingly, the fair value of the warrants at February 14, 2019 was reclassified from a liability to equity on that date. The following table summarizes the activity for the warrants whose fair value measurements are estimated utilizing Level 3 inputs: 2019 Fair value on January 1, 2019 $ 3,628 Adjustments-finance expenses 4,570 Fair value on February 14, 2019 $ 8,198 The Company has determined the fair value of the warrants (a Level 3 valuation) as of January 1, 2019 and February 14, 2019. The fair value of these warrants was estimated by implementing the Probability-Weighted Expected Return Method or the Black-Scholes Method. The following parameters were used: Derivative Financial Instrument February 14, 2019 January 1, 2019 Stock price $ 1.84 $ 2.50 Expected term End of 2022 End of 2022 Risk free rate 2.49% 1.37% Volatility 52% 48% b. Public Offering On February 14, 2019, the Company raised gross proceeds of $30.5 million in its Nasdaq initial public offering (“IPO”), allocating 2,652,174 ADSs, each representing five ordinary shares of the Company. The ADSs are listed under the symbol “ANCN.” In accordance with price protection rights granted in 2018 and activated in the offering (see Note 7a above for details and accounting treatment), the Company issued an additional 8,262,800 ordinary shares (equivalent to 1,652,560 ADSs) to rights holders and adjusted their warrants to be exercisable for an additional 6,207,330 ordinary shares (equivalent to 1,241,466 ADSs). c. Share-based compensation The Company has two share-based compensation plans under which share options or other share-based awards have been granted: the 2011 Share Option Plan and the 2017 Share Option Plan (the “2017 Plan”). The 2017 Plan replaced the 2011 Share Option Plan with respect to future grants; and, therefore, no further awards may be made under 2011 Share Option Plan. The Compensation Committee of the Board of Directors and the Board of Directors administer these plans. 10 The fair value of each option granted is estimated using the Black-Scholes option pricing method. The volatility is based on the Company’s historical volatility. The risk-free interest rate assumption is based on observed Treasury yields over the expected term of the options granted with USD-denominated exercise prices (options granted in the past with NIS-denominated exercise prices used the equivalent Israeli government bond yields). The Company’s management uses the mid-point between the vesting date and the contractual term for each vesting tranche or its expectations, as applicable, of each option as its expected term. The expected term of the options granted represents the period of time that granted options are expected to remain outstanding The fair value of each option granted in the six months ended June 30, 2019 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: Six months ended June 30, 2019 Value of ordinary share $1.03 - $1.54 Dividend yield 0% Expected volatility 51.5% - 68.6% Risk-free interest rate 2.2% - 2.5% Expected term (years) 5.5 - 6.9 The fair value of each option granted in the six months ended June 30, 2020 was estimated on the grant date using the Black-Scholes option pricing model with the following assumptions: Six months ended June 30, 2020 Value of ordinary share $0.23 - $0.24 Dividend yield 0% Expected volatility 65.6% - 67.3% Risk-free interest rate 0.36% to 0.45% Expected term (years) 5.5 - 7.0 The following table summarizes the number of options outstanding and exercisable as of June 30, 2020: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life in Years Options outstanding - January 1, 2020 3,822,374 $ 2.50 8.5 Granted 775,000 Forfeited/expired/cancelled (418,096 ) Options outstanding - June 30, 2020 4,179,278 $ 2.31 8.3 Options exercisable - June 30, 2020 2,434,232 $ 3.06 7.7 The aggregate intrinsic value of both outstanding and exercisable options at June 30, 2020 is $0. 11 The following table illustrates the effect of share-based compensation on the statements of operations (in thousands): Three months ended Six months ended June 30, June 30, 2020 2019 2020 2019 Research and development $ 54 $ 142 $ 127 $ 284 General and administrative 24 226 137 464 $ 78 $ 368 $ 264 $ 748 8. Net Loss per share Basic loss per share is computed on the basis of the net loss for the period divided by the weighted-average number of ordinary shares outstanding during the period. Diluted loss per share is based upon the weighted-average number of ordinary shares and of ordinary shares equivalents outstanding when dilutive. Ordinary share equivalents include outstanding stock options which are included under the treasury stock method when dilutive. The following ordinary shares underlying stock options and warrants were excluded from the calculation of diluted net loss per ordinary share, because their effect would have been anti-dilutive for the three and six month periods presented: 2020 2019 Stock Options 4,179,278 3,973,858 Warrants 10,975,959 10,975,959 9. Subsequent events COVID-19 Outbreak In March 2020 the World Health Organization declared the global novel coronavirus (COVID-19) outbreak a pandemic. As of August 5, 2020, the Company’s operations have not been significantly impacted by the COVID-19 outbreak. However, the Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 outbreak will have on its financial condition and operations, including ongoing and planned pre-clinical development activities. 12