Greenwich LifeSciences, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview We are a clinical-stage biopharmaceutical company focused on the development of GP2, an immunotherapy to prevent breast cancer recurrences in patients who have previously undergone surgery. GP2 is a 9 amino acid transmembrane peptide of the HER2/ neu protein, a cell surface receptor protein that is expressed in a variety of common cancers, including expression in 75% of breast cancers at low (1+), intermediate (2+), and high (3+ or over-expressor) levels. The combination of GP2 + GM-CSF is called GLSI-100. In a completed randomized, single-blinded, placebo-controlled, multi-center Phase IIb clinical trial led by MD Anderson Cancer Center, no recurrences were observed in patients treated with GLSI-100 in the HER2/ neu 3+ adjuvant setting after median 5 years of follow-up, if the patients were treated, followed, and remained disease free over the first 6 months, which is the time required to reach peak immunity and thus maximum efficacy and protection (p = 0.0338). For the 146 patients who have been treated with GLSI-100 to date over 4 clinical trials, treatment was well tolerated and no serious adverse events were observed related to the immunotherapy. We are planning to commence Flamingo-01, a Phase III clinical trial with Baylor College of Medicine as the global primary investigator site. Flamingo-01 is designed to evaluate the safety and efficacy of GLSI-100 in HER2 /neu positive patients with residual disease or high-risk pathologic complete response at surgery and who have completed both neoadjuvant and postoperative adjuvant trastuzumab based treatment. The Phase III clinical trial protocol including the patient population, trial size, statistical analysis plan, interim analysis, adaptive features, and manufacturing information are still under discussion with the FDA and therefore subject to change. We are also currently completing the last steps to manufacture GP2 clinical drug product and to open clinical sites. To date, we have not generated any revenue and we have incurred net losses. Our net losses were approximately $4.6 million and $1.9 million for the years ended December 31, 2021 and 2020, respectively. Our net losses have resulted from costs incurred in developing the drug in our pipeline, planning and preparing for clinical trials and general and administrative activities associated with our operations. We expect to continue to incur significant expenses and corresponding increased operating losses for the foreseeable future as we continue to develop our pipeline. Our costs may further increase as we conduct clinical trials and seek regulatory approval for and prepare to commercialize our product candidate. We expect to incur significant expenses to continue to build the infrastructure necessary to support our expanded operations, clinical trials, commercialization, including manufacturing, marketing, sales and distribution functions. We will also experience increased costs associated with operating as a public company. 51 Table of Contents Basis of Presentation The accompanying financial statements are presented in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and pursuant to the rules and regulations of the SEC. Results of Operations For the Years Ended December 31, 2021 and 2020 Research and Development Expenses Research and development expenses increased by $2,501,909, or 237%, to $3,559,515 for the year ended December 31, 2021 from $1,057,606 for the year ended December 31, 2020. The increase was primarily the result of preparation of manufacturing and clinical activities for the planned Phase III clinical trial. General and Administrative Expenses General and administrative expenses increased by $232,240, or 29% to $1,038,428 for the year ended December 31, 2021 from $806,188 for the year ended December 31, 2020. The increase was primarily due to increase in finance and corporate activities. Liquidity and Capital Resources Since our inception in 2006, we have devoted most of our cash resources to research and development and general and administrative activities. We have not yet achieved commercialization of our product and have a cumulative net loss from our operations. We will continue to incur net losses for the foreseeable future. Our financial statements have been prepared assuming that we will continue as a going concern. We will require additional capital to meet our long-term operating requirements. We expect to raise additional capital through the sale of equity and/or debt securities; however, there is no assurance that we will be successful at raising additional capital in the future. If our plans are not achieved and/or if significant unanticipated events occur, we may have to further modify our business plan, which may require us to raise additional capital. As of December 31, 2021 and December 31, 2020, our principal source of liquidity was our cash, which totaled $27,204,269 and $28,660,375, respectively, and additional loans and accrued unreimbursed expenses from related parties. Historically, our principal sources of cash have included proceeds from the sale of common stock and preferred stock and related party loans. Our principal uses of cash have included cash used in operations. We expect that the principal uses of cash in the future will be for continuing operations, funding of research and development, including our clinical trials, and general working capital requirements. Cash Flow Activities for the Years Ended December 31, 2021 and 2020 We incurred net losses of $4,570,576 and $1,862,962 during the years ended December 31, 2021 and 2020, respectively, and the increase was primarily due to an increase in compensation expense, license expenses, clinical trial expenses, and the GMP manufacturing of GP2. Cash was $28,660,375 at December 31, 2020 and $27,204,269 at December 31, 2021 and decreased due to the following reasons: Operating Activities Net cash used in operating activities was $4,291,548 for the year ended December 31, 2021 and $1,152,962 for the year ended December 31, 2020. The increase was primarily due to an increase in compensation expense, license expenses, clinical trial expenses, and the GMP manufacturing of GP2. Investing Activities We did not use or generate cash from investing activities during the year ended December 31, 2021 and December 31, 2020. Financing Activities Net cash provided by financing activities was $2,835,442 during the year ended December 31, 2021, attributable to the exercise of the underwriter’s over-allotment option from our follow-on offering and the partial exercise of underwriter warrants. Net cash provided by financing activities was $29,806,502 during the year ended December 31, 2020, attributable to the completion of our initial public offering and a follow-on offering. 52 Table of Contents Contractual Obligations and Commitments As of December 31, 2021, we did not have any material contractual obligations, other than employment and shareholder agreements, license for GP2 from HJF, and manufacturing and clinical trial obligations related to the planned Phase III clinical trial. Off-Balance Sheet Arrangements As of December 31, 2021, we did not have any off-balance sheet arrangements as described by Item 303(a)(4) of Regulation S-K. Critical Accounting Policies and Estimates Our financial statements are prepared in conformity with U.S. GAAP, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses in the periods presented. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of expenses that are not readily apparent from other sources. Actual results could differ from those estimates, particularly given the significant social and economic disruptions and uncertainties associated with the ongoing coronavirus pandemic and the COVID-19 control responses. Recent Accounting Pronouncements As of December 31, 2021, there were no recent accounting pronouncements applicable to our business. JOBS Act On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (“Securities Act”) for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards. Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board (“PCAOB”) regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. 53 Table of Contents ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company, as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, and are not required to provide the information required under this Item 7A. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA All financial information required by this Item is attached hereto at the end of this report beginning on page F-1 and is hereby incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.