Inhibikase Therapeutics, Inc. 10-K

Item 7. 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 financial statements and the related notes to those statements included elsewhere in this Annual Report on From 10-K (“Annual Report” or “Report”. This discussion and analysis and other parts of this Annual Report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Report. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.” Overview We are a clinical stage pharmaceutical company developing therapeutics for Parkinson’s Disease, or PD, and related disorders that arise inside and outside of the brain. We filed two Investigational New Drug, or IND, applications with the U.S. Food and Drug Administration, or FDA, in the first quarter of 2019 for our lead asset candidate, IkT-148009. One IND is for the treatment of Parkinson’s Disease, while the second is for treatment of gastrointestinal, or GI, complications that arise as early symptoms of PD in patients. We initiated clinical development of IkT-148009 for the treatment of PD in 2019. First dosing of patients for treatment of PD commenced in February 2021. Clinical development of IkT-148009 for the GI complications in PD patients will cross-reference the first human study of IkT-148009 for the treatment of PD. Our programs utilize small molecule, oral protein kinase inhibitors to treat PD and its GI complications. We have shown in animal models of progressive PD that our lead clinical candidate, IkT-148009, is a brain penetrant Abelson tyrosine kinase, or c-Abl inhibitor that halts disease progression and reverses functional loss in the brain and reverses neurological dysfunction in the GI tract. The ability to halt progression and restore function was shown in animal models of progressive disease that mimic the rate of disease progression and the extent of functional loss in the brain and/or the GI tract as found in patients with PD. We believe our therapeutic approach is disease-modifying. Our understanding of how and why PD progresses has led us to believe that functional loss in Parkinson’s patients may be at least partially reversed. Based on the measurements in animal models, we believe patients treated with IkT-148009 may have their disease progression slowed or halted, we may see a progressive reduction in the need for symptomatic or supportive therapy and/or we may ultimately eliminate the need for symptomatic therapy. However, it is unknown whether the disease modification seen in the animal models will occur in the human disease following treatment with IkT-148009. In our opinion, the multi-decade failures in the treatment of neurodegenerative diseases such as PD result from a lack of understanding of the biochemistry of the disease processes involved. Neurodegeneration is marked by a progressive degeneration and loss of function of neurons which send and receive signals from the brain. Historically, the cause of a neurodegenerative disease was thought to be a “plaque” made up of a misfolded and/or aggregated protein(s). Therapeutic approaches, therefore, sought to remove “plaque” from the brain. To our knowledge, a “plaque”-focused treatment strategy has not resulted in approval of any medication that can alter the course of a neurodegenerative disease, and has not resulted in a therapeutic benefit in PD. We believe we are different. We identified the proteins that become dysfunctional in a disease pathway and sought to understand how a dysfunctional protein causes disease. We believe our approach to PD and other neurological diseases has identified the underlying cause of disease and led to an understanding of how individual proteins are linked together to define the disease process. Using this strategy, we believe we have discovered at least one enzyme that plays a pivotal role in the disease process for PD, c-Abl. We have developed novel protein kinase inhibitors against c-Abl, which we believe can alter the disease course for PD. c-Abl chemically modifies one of the “plaque” proteins in PD, known as alpha-synuclein. Chemical modification creates what we believe to be the true toxic entity of the disease. Treatment with IkT-148009 may prevent chemical modification and, at least in animal models of progressive disease, leads to clearance of the toxic form of alpha-synuclein. In addition to programs in PD, our platform drug discovery and delivery technologies have identified additional opportunities, including a potential treatment for bacterial or viral infections in the brain using a single agent at fixed dose, and an oncology opportunity in stable-phase Chronic Myelogenous Leukemia, or CML. Our product for CML, IkT-001Pro, is a prodrug of the anticancer agent Imatinib. A prodrug is a compound that, after administration, is metabolized by the body into a pharmacologically active drug. Imatinib is an FDA designated Orphan Drug and is the standard-of-care treatment for stable-phase CML. In the United States, orphan drug designation entitles a party to incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. We plan to submit an IND to initiate clinical development for IkT-001Pro in the second quarter of 2021. Subject to future FDA agreements related to the clinical protocol design and execution of the clinical development program and additional funding, we believe that clinical development of IkT-001Pro could possibly be completed in 2022. We intend to submit a new drug application, or NDA, for IkT-001Pro pursuant to Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, which 71 specifies the requirements for approval. This pathway would allow us to rely, in part, on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of an approved compound. Consistent with FDA guidance on the 505(b)(2) pathway, we will seek input from the FDA as to what should be included in the application prior to submission of the 505(b)(2) application. Pursuit of this oncology opportunity will seek to validate the pharmacology advantage of our prodrug technology in a well understood patient population with an approved drug substance. If we are able to validate IkT-001Pro in oncology, we will evaluate whether the pharmacology advantages we discover about IkT-001Pro could be applied to novel drug substances, such as IkT-148009. We believe we are one of the pioneers of the application of protein kinase inhibitors to non-oncology indications, including neurodegeneration and infectious diseases, as well as their more traditional role in the treatment of cancer. As of the date of this Report, more than 90% of the Company’s total revenue has been received from Private, State and Federal granting agencies, including the National Institutes of Health, the Department of Defense and the Michael J. Fox Foundation. These agencies use extensive scientific peer review in deciding which projects to fund that could impact human disease. Our ability to advance the Company on the basis of scientific peer review reflects the potential our scientific peers see for the possible success of our therapeutic programs. The development of our product candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious disease like the recent outbreak of COVID-19. For example, as a result of measures imposed by the governments in regions affected by COVID-19, businesses and schools have been suspended due to quarantines or “stay at home” orders intended to contain this outbreak. COVID-19 continues to have a global impact. International stock markets continue to reflect the uncertainty associated with the slow-down in the world economies and the reduced levels of international travel experienced since the beginning of January 2020. As of the date of this Report, the COVID-19 pandemic has had an impact upon our operations, although we believe that impact is not material. We are still assessing our business plans and the impact COVID-19 may have on our ability to advance the development of our product candidates or to raise financing to support the development of our product candidates, but no assurances can be given that this analysis will enable us to avoid part or all of any impact from the spread of COVID-019 or its consequences, including downturns in business sentiment generally or in our sector in particular. The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver components or raw materials on a timely basis or materially and adversely affect our collaborators’ and potential strategic partners’ ability to perform preclinical studies and clinical trials. See “Risk Factors —  The recent and ongoing COVID-19 pandemic could materially affect our operations, as well as the business or operations of third parties with whom we conduct business. Our business could be adversely affected by the effects of other future health epidemics or pandemics in regions where we or third parties on which we rely have significant business operations. ” for a more detailed presentation of risks associated with the COVID-19 pandemic. On May 4, 2020, the Company issued a promissory note (the “PPP Note”) in the principal amount of $27,550 to Bank of America in connection with a loan in such amount made by Bank of America under the Payroll Protection Program (the “PPP Act”) administrated by the United States Small Business Administration (the “SBA”) under provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Note bears interest at a rate of 1% per annum. The PPP Note is payable over a five-year term commencing six months from the date of the PPP Note. The CARES Act provides that all or a portion of the PPP Note may be forgiven if the Company complies with the requirements of the PPP, including utilizing the proceeds of the PPP Note only for permitted purposes, such as payroll costs. Some or all of this loan may be forgiven if the Company expends not less than 60% of the loan proceeds on qualified payroll costs. The Company believes it has met the contractual conditions for forgiveness of the entire PPP loan and expects the PPP loan will be forgiven during 2021, although there can be no assurance of forgiveness until the lender makes its independent determination. Any portion of the note not forgiven under the PPP Act will become payable over up to a five-year term beginning in 2021. Our Programs Our portfolio is focused on developing protein kinase inhibitors to treat PD in the brain and GI tract that arise from dysfunctional alpha-synuclein in PD patients. Using IkT-148009, our lead c-Abl protein kinase inhibitor, we intend to clinically evaluate the impact of c-Abl inhibition on newly diagnosed PD patients, patients early in the course of their disease, and PD patients with GI complications. We are pursuing clinical development using a sequential Phase 1/ Phase 2 development approach, with the details of the Phase 2 studies subject to agreements with the FDA regarding trial design and the outcome of the Phase 1 clinical trial. The Phase 1/Phase 2 development program, subject to FDA approval, would be followed with one or more Phase 3 clinical trials that we believe could lead to completion of the clinical development program in 2024. IkT-148009 is intended to treat PD in treatment-naïve and early-stage PD patients, along with GI complications such as difficulty in swallowing, or dysphagia, and for treatment of neurogenic constipation. We have also developed an alternate delivery approach for oral kinase inhibitors by converting them into prodrugs. We developed IkT-001Pro of the anticancer drug Imatinib, to alter the way a protein kinase inhibitor is absorbed in the GI tract and believe it may result in a safer, better tolerated treatment for Imatinib-sensitive cancers. We believe demonstrating the benefits of this 72 technology in a well-known patient population will validate the utility of our prodrug technology. We plan to submit an IND for IkT-001Pro in the second quarter of 2021. Subject to future FDA agreements and additional funding, we will complete the requirements for submission related to the clinical protocol design and execution of the clinical development program. If positive clinical results are obtained, we believe that clinical development could possibly be completed in 2022. Approval of IkT-001Pro would be sought pursuant to FDA rule 505(b)(2). If approved by the FDA, we would seek to partner this program with a pharmaceutical company to produce and market IkT-001Pro to the CML treatment community. Depending on the terms of the partnership, we may realize revenue from this partnership that could financially contribute to our primary efforts in neurodegenerative disease. Successful validation of our prodrug approach in IkT-001Pro would enable extension of this technology to other development programs, including IkT-148009. In addition to the programs in PD and CML, we are evaluating development opportunities with other molecules that emerged from the RAMPTM discovery program. These opportunities include research programs in a Parkinson’s-related disease, Dementia with Lewy Body or DLB, that shares with Parkinson’s Disease the activation of c-Abl and the formation of alpha-synuclein aggregates that are chemically modified. DLB is related to Parkinson’s Disease but lacks an early manifestation of motor neuron dysfunction. It is characterized by progressive loss of cognitive function. We have also begun animal studies related to two orphan diseases, Multiple System Atrophy (MSA) and Progressive Multifocal Leukoencephalopathy (PML). An orphan disease is defined by the FDA as a disease or condition with a patient population of fewer than 200,000 in the United States. MSA is a rare disease characterized by alpha-synuclein chemical modification, but unlike Parkinson’s Disease itself, the chemically modified alpha-synuclein does not arise in neurons, rather, aggregates of chemically modified alpha-synuclein arise in oligodendroglial cells. There are approximately 15,000 to 50,000 cases of MSA in the United States. MSA is characterized by simultaneous central and autonomic nervous system failures across multiple organ systems. As MSA shares the hallmarks of c-Abl activation and alpha-synuclein chemical modification with Parkinson’s Disease, we believe that c-Abl inhibitor therapy holds promise as a treatment. We are working in collaboration with experts at Rush University on this research program. PML is a rare neurological infection that arises from the John Cunningham virus, or JCV, a human polyomavirus. JCV resides in most adult humans in both the kidney and bone marrow, but, when a patient undergoes treatment for certain autoimmune disorders, like MS or Crohn’s Disease, such treatments can stimulate JCV migration into the brain and result in a progressive, fatal disorder. PML is exceedingly rare and generally only arises in patients who have an underlying suppression of viral immune responses or take a primary treatment whose mode of action is to suppress cellular immunity. We are working in collaboration with experts at Louisiana State University to explore this development opportunity. Components of Operating Results Operating Expenses Research and Development Research and development activities account for a significant portion of our operating expenses. Research and development expenses accounted for 26% and 37% of our operating expenses for the years ended December 31, 2020 and 2019, respectively. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and prodrug technologies include: • external research and development expenses, including: expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants; • fees related to our license and collaboration agreements; • personnel related expenses, including salaries, benefits and non-cash stock-based compensation expense; and • other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. ​ A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis from inception of the program. Program expenses include expenses associated with our most advanced product candidates and the discovery and development of compounds that are potential future candidates. We also track external expenses associated with our third-party research and development efforts. All external costs are tracked by therapeutic indication. We do not track personnel or other operating expenses incurred for our research and development programs on a program-specific basis. These expenses primarily relate to salaries and benefits and stock-based compensation and office consumables. 73 At this time, we can only estimate the nature, timing and costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of: • our ability to add and retain key research and development personnel and other key employees; • our ability to successfully file IND and NDA applications with the FDA; • our ability to conduct and commence trials; • our ability to establish an appropriate safety profile with IND-enabling toxicology studies; • our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates; • our successful enrollment in and completion of our current and future clinical trials; • the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations; • our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules; • our ability to establish agreements with third party manufacturers for clinical supply for any future clinical trials and commercial manufacturing, if our product candidates are approved; • the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder; • our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved; • our receipt of marketing approvals from applicable regulatory authorities; • the impact of the outbreak of the novel coronavirus disease, COVID-19, pandemic which has had an adverse impact on our business, including our preclinical studies and clinical trials; • our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and • the continued acceptable safety profiles of the product candidates following approval. A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase for the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Selling, General and Administrative Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense, expenses for outside professional services and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expenses related to our offices in Cambridge, Massachusetts and Atlanta, Georgia not otherwise included in research and development expenses. We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to increase our administrative headcount when operating as a public company and as we advance our product candidates through clinical development, which will also likely require us to increase our selling, general and administrative expenses. 74 Interest Expense Interest expense consists primarily of our interest expenses related to outstanding debt instruments issued to McDaniel & Associates, PC, Flagship Consulting, Inc., and Dr. Werner. The debt instrument issued to Flagship Consulting, Inc. was subject to automatic conversion of the unpaid principal and accrued interest into shares of our common stock upon the closing of our December 2020 initial public offering. The Flagship Consulting, Inc. debt instrument plus accrued interest was converted into 44,143 shares of our common stock on December 28, 2020 upon consummation of the December 2020 initial public offering. The debt instrument issued to McDaniel & Associates, PC matured on January 1, 2021 or upon the occurrence of certain conditions including the consummation of an initial public offering. The principal and accrued interest on this debt instrument was settled in full in cash on January 1, 2021. The principal balance on the note to Dr. Werner was $248,911at December 31, 2020 and at the date of filing of this Report. Results of Operations Comparison of the Years Ended December 31, 2020 and 2019 The following table sets forth the significant components of our results of operations: Year Ended December 31, Change 2020 2019 ($) (%) Grant revenue $ 698,468 $ 1,122,740 $ (424,272 ) (37.8 ) Research and development (893,802 ) (2,552,711 ) 1,658,909 (65.0 ) Selling, general and administrative (2,623,158 ) (4,268,177 ) 1,645,019 (38.5 ) Loss from operations (2,818,492 ) (5,698,148 ) 2,879,656 50.5 Interest expense, net (29,402 ) (24,835 ) (4,567 ) 18.4 Net loss $ (2,847,894 ) $ (5,722,983 ) $ 2,875,089 50.2 Grant Revenue Grant revenue for the year ended December 31, 2020 decreased by $424,272 or 37.8% to $698,468 from $1,122,740 in the prior year. The decrease was driven by decreased grant research activity during 2020 compared to 2019. During 2020, the Company’s focus was shifted toward advancing its Phase I clinical trials which did not result in grant revenue. Research and Development Research and development expenses decreased by $1,658,909 or 65.0% to $893,802 from $2,552,711 in the prior year. The decrease was driven by a $0.3 million decline in grant related research expenditures and a $1.2 million decrease in non-grant related research. The non-grant related research was expended primarily in connection with preparation for the Company’s phase I PD clinical trials. Research and development related stock compensation expense decreased by approximately $0.1 million. Selling, General and Administrative Selling, general and administrative expenses decreased by $1,645,019 or 38.5% to $2,623,158 from $4,268,177 in the prior year. The decrease was primarily the result of expensing of deferred IPO costs of $1.59 million in 2019 from the abandoned 2018 IPO effort which was a one-time charge and a net decrease in other normal operating expenses in the amount of $0.16 million, partially offset by an increase of $0.1 million in stock and warrant compensation expense. Interest Expense Interest expense, increased by $4,567 or 18.4% to $29,402 from $24,835 in the prior year. The increase was due to an increase in average outstanding notes payable balances in the current year compared to the prior year. The increase in outstanding notes payable balances was primarily related to the increasing balance in the Flagship 2020 note until it was converted into common stock in December 2020 and the loan from our chief executive officer (“CEO”) in February 2020 which carried a balance of approximately $248,000 from February to December 31, 2020. 75 Liquidity and Capital Resources Sources of Liquidity From our inception through December 31, 2020, we have funded our operations primarily through private, state and federal contracts and grants. From our inception through December 31, 2020, we generated aggregate cash proceeds of approximately $20.4 million from private, state and federal contracts and grants, and $1.4 million in equity sales of unregistered common stock. On December 28, 2020, the Company completed its IPO, in which the Company sold and issued 1,800,000 shares of its common stock at a price to the public of $10.00 per share. The Company received aggregate net proceeds of approximately $14.6 million after deducting offering costs, underwriting discounts and commissions of $3.4 million. At December 31, 2020, the Company had working capital of $10,060,817, an accumulated deficit of $15,031,624, cash of $13,953,513 and accounts payable and accrued expenses of $2,353,614. The Company had active grants in the amount of $1,546,730, of which $772,420 remained available in accounts held by the U.S. Treasury as of February 28, 2021. Future Funding Requirements To date, we have not generated any revenue from the sale of commercial products. We do not expect to generate any significant revenue from product sales unless and until we obtain regulatory approval of and successfully commercialize any of our product candidates and we do not know when, or if, this will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any future approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, following the completion of the December 2020 initial public offering, we expect to incur additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, if ever, we expect to finance our incremental cash needs through a combination of equity offerings, debt financings, working capital lines of credit, grant funding and potential licenses and collaboration agreements. Additional working capital may not be available on commercially reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, reduce or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations. Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $15,031,624 at December 31, 2020. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities. We may seek to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional working capital, or if we are able to raise additional working capital we may be unable to do so on commercially favorable terms. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to continue to develop our product candidates. The Company had working capital of $10,060,817 at December 31, 2020 and active grants in the amount of $1,546,730, of which $772,420 remained available in accounts held by the U.S. Treasury as of February 28, 2021. The Company intends to raise additional working capital in order to carry on its operations and current clinical trials through the date that is 12 months from the filing of this Report. However, as certain elements of the Company’s operating plan are outside of the Company’s control, including the receipt of anticipated future grants and funding from a future capital raise, they cannot be considered probable. If the Company does not receive additional working capital from future anticipated grants and future anticipated capital raises, its operating plan will be limited in scope to operating at its pre-IPO levels which were limited to basic research and development but excluded current and planned future clinical trials. 76 These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date the financial statements included in this Report are issued. Our management’s plans to alleviate the conditions that raise substantial doubt include suspending or delaying certain research projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for us to continue as a going concern for a period of 12 months from the date the financial statements are issued. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above. The expected use of the net proceeds from the December 2020 offering represents our intentions based upon our current plans and business conditions. However, we have based these estimates on assumptions that may prove to be wrong, and we could deplete our working capital sooner than planned. The timing and amount of our operating expenditures will depend largely on: • the timing and progress of preclinical and clinical development activities; • the number and scope of preclinical and clinical programs we decide to pursue; • possible delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain due to the COVID-19 pandemic; • the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements; • our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements; • our ability and success in securing manufacturing relationships with third parties or, in the future, in establishing and operating a manufacturing facility; • the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims; • the cost and timing of regulatory approvals; • our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and • the costs and ongoing investments to in-license and/or acquire additional technologies. A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans. Cash Flows The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below: Year Ended December 31, 2020 2019 Net cash used in operating activities $ (1,129,355 ) $ (338,290 ) Net cash provided by (used in) financing activities 15,064,411 (22,810 ) Net increase (decrease) in cash $ 13,935,056 $ (361,100 ) Net Cash Flows Used in Operating Activities Net cash flows used in operating activities for the year ended December 31, 2020 totaled $(1,129,355), and consisted primarily of a net loss of $(2,847,894) adjusted for non-cash stock compensation of  $573,695, non-cash warrant expense of $1,443,426, non-cash 77 consulting fees of $ 148,795, non-cash interest expense of $17,260, decrease in prepaid expenses and other assets of $3 7,913 , decrease in accrued expenses and other current liabilities of $ 1,076,758 , decrease in accounts payable of $ 247,071 and an increase in deferred revenue of $ 897,105 . Net cash flows used in operating activities for the year ended December 31, 2019 totaled $(338,290), and consisted primarily of a net loss of $(5,722,983) adjusted for non-cash stock compensation of  $1,436,608, non-cash warrant expense of $574,324, decrease in deferred initial public offering costs expensed during 2019 of $1,591,989, non-cash consulting fees of $150,000, decrease in prepaid expenses of $382,162, decrease in accrued expenses of $437,060, increase in deferred revenue of $1,166,268, decrease in accounts receivable of $472,941 and a net change in other operating assets and liabilities of $47,461. Cash Provided by (Used in) Financing Activities Net cash flows provided by financing activities for the year ended December 31, 2020 totaled $15,064,411, which consisted of $14,786,741 in proceeds from issuance of common stock in connection with our December 2020 initial public offering and $272,800 in proceeds from a note payable issued to our CEO and $4,870 in proceeds from the issuance of unregistered common stock to a private accredited investor. Net cash flows used in financing activities for the year ended December 31, 2019 totaled $(22,810), which represented repayments of notes payable. Since our inception through December 31, 2020, we have raised an aggregate of approximately $21.8 million in net proceeds through awarded grants or contracts and equity sales. Approximately 90% of the aggregate proceeds raised came through awarded grants and contracts. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements. Contractual Obligations and Commitments In June 2018, the Company entered into a one-year, non-cancelable operating lease for space in Boston, Massachusetts. The total lease obligation was $54,000, payable in 12 equal monthly installments commencing August 1, 2018. Since the end of the one-year initial term on July 31, 2019, the lease continues on a month-to-month basis. Critical Accounting Policies and Significant Judgments and Estimates This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or 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 incurred during the reporting periods. Our estimates are based on our 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. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates. Research and Development Expenses We record research and development expenses to operations as incurred. Research and development expenses represent costs incurred by us for the discovery and development of our product candidates and the development of our RAMP™ drug discovery program and prodrug technologies and include: employee-related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense; external research and development expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants; costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; license fees; and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs. As part of the process of preparing financial statements, we are required to estimate and accrue expenses. A portion of our research and development expenses are external costs, which we track on a program-specific basis. We record the estimated expenses 78 of research and development activities conducted by third party service providers as they are incurred and provided within research and development expense in the statements of operations. These services include the conduct of preclinical studies and consulting services. These costs are a significant component of our research and development expenses. Costs for research and development activities are recognized based on costs incurred. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external clinical research organizations and other third-party service providers. Due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities. Stock-Based Compensation We have granted stock-based awards, consisting of non-qualified stock options, to our employees, certain non-employee consultants and members of our board of directors, both past and present. We measure stock-based compensation expense for stock options granted to our employees and directors on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. We estimate the fair value of stock options granted to our employees and directors on the grant date, and the resulting stock-based compensation expense, using the Black-Scholes-Merton option pricing model. The Black-Scholes-Merton option pricing model requires management to determine the fair market value of the common stock at the date of the award. Prior to our December 2020 initial public offering, the fair market value of the common stock was determined utilizing the risk adjusted net present value, or rNPV, option-pricing model as performed by an independent third-party consultant. Since December 22, 2020, the fair market value of the common stock is determined by reference to the closing price of our common stock on the Nasdaq Capital Market on the grant date of the option. For options or warrants granted to non-employee consultants prior to January 1, 2020, the fair value of these options was remeasured using the rNPV Black-Scholes-Merton option-pricing model reflecting the same assumptions as applied to employee options in each of the reported periods, other than the expected life, which is assumed to be the remaining contractual life of the option. Prior to January 1, 2020, we accounted for stock-based compensation arrangements with non-employee consultants using a fair value approach. The estimated fair value of unvested options granted to non-employee consultants was remeasured at each reporting date through the date of final vesting. As a result, the noncash charge to operations for non-employee options with vesting conditions was affected in each reporting period by changes in the estimated fair value of our common stock. We adjust for actual forfeitures as they occur. On January 1, 2020, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting (ASU 2018-07), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employee consultants. The estimated fair value of unvested options granted to non-employee consultants is no longer remeasured at each reporting date through the date of final vesting. The adoption of this ASU did not have a material impact on the Company’s financial statements. As there had been no public market for our common stock prior to our December 2020 initial public offering, the estimated fair value of our common stock had been determined by an independent third-party consultant using an rNPV process and approved by our board of directors. The factors utilized by such independent third-party consultant included, but were not limited to: our results of operations, financial position and capital resources; current business conditions and projections; the lack of marketability of our common stock; the hiring of key personnel and the experience of management; the risk inherent in the development of our products and our stage of development and material risks related to its business; the fact that the option grants involve illiquid securities in a private company; and the likelihood of achieving a liquidity event, such as an initial public offering or sale, in light of prevailing market conditions. All of our common stock valuations prior to our December 2020 initial public offering have been prepared by an independent third-party consultant using the rNPV method. 79 Following the closing of our December 2020 initial public offering, our board of directors will determine the fair market value of our stock-based awards based on the closing price of our common stock as reported on the date of grant on the Nasdaq Capital Market exchange on which our common stock is traded. The intrinsic value of all in the money outstanding options as of December 31, 2020 was approximately $17.6 million, based on the closing price of our common stock of $6.90 per share at December 31, 2020, of which approximately $17.4 million is related to vested options and approximately $.02 million is related to unvested options. July 24, 2020 Valuation Report and August 25, 2020 Warrant Grants On August 25, 2020, the Company granted a fully-vested warrant to purchase up to 21,854 shares of its common stock to Flagship Consulting, Inc. in connection with consulting services provided to the Company. The warrant is exercisable at a strike price of $5.90 per share and has a contractual term of seven years. The warrant is classified within stockholders' deficit at its fair value as a standalone instrument. The grant date fair value of the warrant was determined to be $87,597 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance and is included in selling, general and administrative expenses for the year ended December 31, 2020. On August 25, 2020, the Company granted a warrant to purchase up to 150,000 shares of its common stock to Flagship Consulting, Inc. in connection with consulting services to be provided to the Company. The warrant is exercisable at a strike price of $5.90 per share and has a contractual term of seven years. The warrant vests in full and becomes exercisable on the first anniversary of the grant date. The warrant will be classified within stockholders' deficit at its fair value as a standalone instrument. The aggregate grant date fair value of the warrant was determined to be $601,245 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance and will be included in selling, general and administrative expenses as services are rendered during its 12-month vesting period. $210,818 is included in selling, general and administrative expense for the year ended December 31, 2020. The exercise price of both such warrants was the fair value of our common stock on the date of grant and the aggregate stock-based compensation expense for both such warrants was determined to be $688,842 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance. To the extent the warrants fail to vest, the charges will be reversed against that period’s total stock-based compensation expense. Our board of directors determined the fair value of our common stock on the date of grant for such warrants based in part on an appraisal of the value of our common stock as of July 24, 2020 that was prepared by an independent third-party valuation specialist. The July 24, 2020 valuation resulted in the $5.90 fair value that was utilized for the warrant grants as our board of directors concluded that no significant internal or external value-generating events had taken place between the July 24, 2020 valuation report and the August 25, 2020 grant date. On September 24, 2020, the same independent third-party valuation specialist updated its July 24, 2020 valuation to assess the fair value of our common stock as of August 25, 2020. The updated appraisal resulted in a $5.87 fair value. JOBS Act The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards. We will remain an emerging growth company until the earliest of  (i) the last day of our first fiscal year in which we have total annual gross revenues of  $1.07 billion or more; (ii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years; or (iv) the last day of our fiscal year following the fifth anniversary of the date of the completion of our December 2020 public offering. Recent Accounting Pronouncements The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. 80 Accounting Standards Adopted In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASC 2016-15”), which provides guidance on the classification of certain specific cash flow issues including debt prepayment or extinguishment costs, settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certain insurance claims and distributions received from equity method investees. The standard requires the use of a retrospective approach to all periods presented but may be applied prospectively if retrospective application would be impracticable. The guidance is effective for public entities for fiscal years beginning after December 15, 2017 and interim periods within those years, and after December 31, 2018 and interim periods beginning after December 31, 2019 for all other entities. Early adoption is permitted. The Company adopted this standard effective January 1, 2019. The adoption of ASU 2016-15 did not have a material effect on the Company’s financial statements. In June 2014, the FASB issued amended guidance, ASU No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which is applicable to revenue recognition that will be effective for public entities for fiscal years beginning after December 31, 2017 and interim periods within those years, and after December 31, 2018 and interim periods beginning after December 31, 2019 for all other entities as a result of the deferral of the effective date adopted by the FASB in July 2015. The new guidance must be adopted using either a full retrospective approach for all periods presented or a modified retrospective approach. For public entities, early adoption prior to the original adoption date (annual reporting periods beginning after December 15, 2016) of ASU 2014-09 is not permitted. The new guidance applies a more principles-based approach to revenue recognition. The Company adopted the new standard, effective January 1, 2019, under the modified retrospective method. The Company’s adoption of this standard did not have a material effect on its financial statements. On January 1, 2020, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting (ASU 2018-07), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of Topic 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The adoption of this ASU did not have a material impact on the Company’s financial statements. Accounting Standards Issued, Not Yet Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing leases, while the statement of operations will reflect lease expense for operating leases and amortization and interest expense for financing leases. ASU 2016-02 is effective for public entities for fiscal years beginning after December 15, 2018 and interim periods within those years, and after December 15, 2020 and interim periods beginning after December 15, 2021 for all other entities. Early adoption is permitted. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The Company’s adoption of the new standard is not expected to have a material impact on its financial statements. 81 Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. As a smaller reporting company, we are not required to provide disclosure regarding quantitative and qualitative market risk. Item 8. Financial Statements and Supplementary Data. The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financial statements is found on page F-1 of this Annual Report on Form 10-K. Item 9. Changes in and Disagreements w ith Accountants on Accounting and Financial Disclosure. None.