Inhibikase Therapeutics, Inc. 10-Q

Item 1. Financial Statements. Inhibikase Therapeutics, Inc. Condensed Balance Sheets March 31, 2021 December 31, 2020 (unaudited) (Note 3) Assets ​ Current assets: ​ Cash $ 9,609,631 $ 13,953,513 Grants receivable 332,774 — Prepaid research and development 712,674 774,356 Prepaid expenses and other current assets 1,216,173 54,837 Total 11,871,252 14,782,706 Deferred offering costs 2,783 — Total assets $ 11,874,035 $ 14,782,706 Liabilities and stockholders’ equity ​ ​ Current liabilities: ​ ​ Accounts payable $ 715,016 $ 1,720,680 Accrued expenses and other current liabilities 627,399 632,934 Deferred revenue 1,251,349 2,325,741 Notes payable 994,789 42,534 Total 3,588,553 4,721,889 Notes payable, net of current portion 248,911 276,461 Total liabilities 3,837,464 4,998,350 Commitments and contingencies (see Note 11) ​ ​ Stockholders’ equity: ​ ​ Preferred stock, $ 0.001 par value; 10,000,000 shares authorized at March 31, 2021, and December 31, 2020; 0 shares issued and outstanding at March 31, 2021, and December 31, 2020 — — Common stock, $ 0.001 par value; 100,000,000 and 30,000,000 shares authorized; 10,059,849 and 10,050,849 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively. 10,060 10,051 Additional paid-in capital 25,695,203 24,805,929 Accumulated deficit ( 17,668,692 ) ( 15,031,624 ) Total 8,036,571 9,784,356 Total liabilities and stockholders’ equity $ 11,874,035 $ 14,782,706 See accompanying notes to condensed financial statements. 1 Inhibikase Therapeutics, Inc. Condensed Statements of Operations (Unaudited) Three Months Ended March 31, 2021 2020 Revenue: Grant revenue $ 1,407,165 $ 270,787 Total revenue 1,407,165 270,787 Costs and expenses: Research and development 2,431,860 283,114 Selling, general and administrative 1,600,576 527,688 Total costs and expenses 4,032,436 810,802 Loss from operations ( 2,625,271 ) ( 540,015 ) Interest expense ( 11,797 ) ( 7,425 ) Net loss $ ( 2,637,068 ) $ ( 547,440 ) Net loss per share – basic and diluted $ ( 0.26 ) $ ( 0.07 ) Weighted-average number of common shares – basic and diluted 10,053,949 8,181,734 See accompanying notes to condensed financial statements. 2 Inhibikase Therapeutics, Inc. Condensed Statements of Stockholders’ Equity (Deficit) (Unaudited) Common Stock Shares Amount Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity Balance at December 31, 2020 10,050,849 $ 10,051 $ 24,805,929 $ ( 15,031,624 ) $ 9,784,356 Stock-based compensation expense — — 591,124 — 591,124 Warrant expense — — 237,768 — 237,768 Issuance of common stock 9,000 9 60,382 — 60,391 Net loss — — — ( 2,637,068 ) ( 2,637,068 ) Balance at March 31, 2021 10,059,849 $ 10,060 $ 25,695,203 $ ( 17,668,692 ) $ 8,036,571 Common Stock Shares Amount Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity (Deficit) Balance at December 31, 2019 8,180,937 $ 8,181 $ 7,685,533 $ ( 12,183,730 ) $ ( 4,490,016 ) Stock-based compensation expense — — 139,758 — 139,758 Issuance of warrants — — 190,993 — 190,993 Issuance of common stock 874 1 4,870 — 4,871 Net loss — — — ( 547,440 ) ( 547,440 ) Balance at March 31, 2020 8,181,811 $ 8,182 $ 8,021,154 $ ( 12,731,170 ) $ ( 4,701,834 ) See accompanying notes to condensed financial statements. 3 Inhibikase Therapeutics, Inc. Condensed Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2021 2020 Operating activities Net loss $ ( 2,637,068 ) $ ( 547,440 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 591,124 139,758 Non-cash consulting fees 60,391 37,500 Non-cash PPP loan forgiveness ( 27,550 ) — Warrant expense 237,768 190,993 Changes in operating assets and liabilities: Grants receivable ( 332,774 ) — Prepaid expenses and other assets 200,581 3,043 Prepaid research and development 61,682 — Accounts payable ( 1,008,447 ) ( 255,922 ) Accrued expenses and other current liabilities ( 5,535 ) 133,684 Deferred revenue ( 1,074,392 ) 42,952 Net cash used in operating activities ( 3,934,220 ) ( 255,432 ) Financing activities Proceeds from notes payable — 245,250 Proceeds from issuance of common stock — 4,870 Repayments of note payable ( 409,662 ) — Net cash provided by (used in) financing activities ( 409,662 ) 250,120 Net decrease in cash ( 4,343,882 ) ( 5,312 ) Cash at beginning of period 13,953,513 18,457 Cash at end of period $ 9,609,631 $ 13,145 Supplemental disclosures of cash flow information Cash paid for interest $ 11,797 $ 1,772 Non-cash financing activities Notes payable settled with new notes payable $ — $ 98,419 Insurance premium financing $ 1,361,916 $ — PPP loan forgiveness $ 27,550 $ — Public offering costs $ 2,783 $ 7,759 See accompanying notes to condensed financial statements. 4 Inhibikase Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) 1. Nature of Business 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. In 2021, we commenced clinical development of IkT-148009, a small molecule Abelson Tyrosine Kinase inhibitor we believe can modify the course of Parkinson’s disease and its manifestation in the gastrointestinal tract, or GI. Results to date of our ongoing Phase 1 Single and Multiple Ascending Dose escalation study (SAD and MAD, respectively) in older and elderly healthy volunteers have revealed important insights into the metabolism of IkT-148009 in human subjects. IkT-148009 has a half-life of greater than 24 hours, and just a 25 mg once daily oral dose in older and elderly healthy subjects in our Phase 1 study reached exposures that are consistent with the exposure to the drug that resulted in therapeutic efficacy in animal models of progressive PD. This has led to an acceleration of the clinical development program by more than 6 months. Subject to discussions with the FDA, we plan to initiate dosing in a Parkinson’s patient population as part of the Phase 1 MAD study. Clinical development of IkT-148009 for the GI complications in PD patients will cross-reference the Phase 1 Study of IkT-148009 for the treatment of PD. 2. Liquidity and Going Concern The Company has recognized recurring losses. At March 31, 2021, the Company had working capital of $ 8,282,699 , an accumulated deficit of $ 17,668,692 , cash of $ 9,609,631 , accounts payable and accrued expenses of $ 1,342,415 and current notes payable of $ 994,789 . 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 April 30, 2021. The future success of the Company is dependent on its ability to successfully obtain additional working capital, obtain regulatory approval for and successfully launch and commercialize its product candidates and to ultimately attain profitable operations. Historically, the Company has funded its operations primarily through cash received in connection with revenue from its various grant programs. In addition, during December 2020, the Company raised approximately $ 14.6 million in working capital from its IPO. The Company is subject to a variety of risks similar to other early-stage life science companies including, but not limited to, the successful development, regulatory approval, and market acceptance of the Company’s product candidates, development by its competitors of new technological innovations, protection of proprietary technology, and raising additional working capital. The Company has incurred significant research and development expenses and general and administrative expenses related to its product candidate programs. The Company anticipates costs and expenses to increase in the future as the Company continues to develop its product candidates. The Company may seek to fund its operations through additional public equity, private equity, or debt financings, as well as other sources. However, the Company may be unable to raise additional working capital, or if it is able to raise additional capital, it may be unable to do so on commercially favorable terms. The Company’s failure to raise capital or enter into such other arrangements if and when needed, would have a negative impact on the Company’s business, results of operations and financial condition and the Company’s ability to continue to develop its product candidates. As certain elements of the Company’s operating plan are outside of the Company’s control, including the receipt of anticipated grants and funding from a future capital raise, they cannot be considered probable. If the Company does not receive additional capital from future anticipated grants and future anticipated capital raises, its business plan will be scaled down to preclinical activities and its Phase I PD trial in humans will be delayed. These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date the financial statements are issued. Management’s plan to alleviate the conditions that raise substantial doubt include additional equity raises, suspending or delaying certain research projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for the Company to continue as a going concern. 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. 5 3. Basis of Presentation and Significant Accounting Policies Basis of Presentation of Interim Financial Statements The accompanying unaudited condensed financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. The December 31, 2020 balance sheet was derived from December 31, 2020 audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for the interim periods are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2021. The condensed unaudited financial statements contained herein should be read in conjunction with the Company’s annual audited financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report filed on SEC Form 10-K. These condensed financial statements have been prepared on the assumption that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. On August 21, 2020, the Company filed a Certificate of Amendment of its Certificate of Incorporation with the Secretary of State of the State of Delaware that effected a one-for-1.14396 (1:1.14396) reverse stock split of its common stock, par value $ .001 per share, effective August 24, 2020. All warrant, option, share, and per share information in the Company’s financial statements gives retroactive effect to the one-for-1.14396 reverse stock split that was effected on August 24, 2020. The condensed financial statements have been prepared in conformity with US GAAP. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are generally adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended, or the JOBS Act. The JOBS Act permits an emerging growth company such as the Company 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. The Company has 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, the Company 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 it either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. Use of Estimates The preparation of the Company’s financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company utilizes certain estimates in the determination of the fair value of its stock options and warrants, deferred tax valuation allowances and revenue recognition, to record expenses relating to research and development contracts and accrued expenses. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from such estimates. Concentrations of Credit Risk For the three months ended March 31, 2021 and 2020, the Company derived more than 90 % of its total revenue from a single source, the United States Government, in the form of federal research grants. Revenue Recognition The Company generates revenue from research and development grants under contracts with third parties that do not create customer-vendor relationships. The Company’s research and development grants are non-exchange transactions and are not within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Contribution revenue earned from activities 6 performed pursuant to research and development grants is reported as grant revenue in the Company’s statements of operations. Revenues from these grants is recognized as the Company incurs qualifying expenses as stipulated by the terms of the respective grant. Cash received from grants in advance of incurring qualifying expenses is recorded as deferred revenue. The Company records revenue and a corresponding receivable when qualifying costs are incurred before the grants are received. 4. Supplemental Balance Sheet Information Accrued expenses and other current liabilities consist of the following: March 31, 2021 December 31, 2020 Accrued consulting $ 162,001 $ 115,405 Accrued legal and professional fees 82,802 383,286 Accrued research and development 378,775 83,491 Accrued interest 499 1,673 Accrued other 3,322 49,079 Total accrued expenses and other current liabilities $ 627,399 $ 632,934 5. Notes Payable Note payable outstanding were $ 1,243,700 and $ 318,995 at March 31, 2021 and December 31, 2020, respectively. March 31, 2021 December 31, 2020 AON $ 994,789 $ — Fifth Restated Note — 42,534 PPP Note — 27,550 CEO Restated Note 248,911 248,911 Total notes payable $ 1,243,700 $ 318,995 Future principal payments on the notes payable as of March 31, 2021, are as follows:  Year ended December 31, 2021 $ 994,789 2022 248,911 2023 — 2024 — 2025 — Total notes payable $ 1,243,700 Note Payable to AON In January 2021, the Company entered into an insurance premium financing and security agreement with AON Premium Finance, LLC (“AON”). Under the agreement, the Company financed $ 1,361,916 million of certain premiums at a 3.49 % annual interest rate. As of March 31, 2021, the outstanding principal of the loan was $ 994,789 and is included on the balance sheet in Notes payable. The final payment is due in November 2021 . Revolving Demand Promissory Note During 2019 and 2020, the Company entered into a series of promissory notes that were renegotiated and partially settled over 2019 and 2020. On January 1, 2020, the Company issued a note (the “2020 Note”) in the face amount of $ 103,586 bearing 5.25 % APR simple interest as settlement in full on the 2019 Note principal of $ 98,419 plus accrued interest of $ 5,167 that matured on January 1, 2020 . The 2020 Note was scheduled to mature on January 1, 2021 . Upon occurrence of certain conditions including the sale of a division of the Company or upon the date on which the Company closes on certain financings, the due date for some or all of the unpaid principal and accrued and unpaid interest may be accelerated. The Company assessed the terms and features of the 2020 Note and determined that none of the terms and features represented embedded derivatives that require bifurcation. 7 On June 30, 2020, the holder of the 2020 Note and the Company entered into an agreement to settle the 2020 Note early. As full consideration and settlement of the 2020 Note’s June 30, 2020 principal balance plus accrued and unpaid interest in the amount of $ 106,334 , the Company issued a new promissory note to the holder in the amount of $ 42,534 (the “Fifth Restated Note”) with substantially similar terms as the 2020 Note. In addition, the holder subscribed for the purchase of 11,594 unregistered shares of the Company’s common stock at a subscription price of $ 63,800 , or $ 5.50 per share. The issuance of shares under the subscription agreement and the issuance of the Fifth Restated Note satisfied the payoff of the 2020 Note without premium or discount. The balance of the Fifth Restated Note was $ 42,534 on December 31, 2020 and is included in Notes payable. The Fifth Restated Note was scheduled to mature on the earlier of a significant transaction, including an initial public offering, sale of substantially all assets or change of control, or January 1, 2021. The Company consummated its IPO on December 28, 2020 and the principal balance of the Fifth Restated Note plus accrued and unpaid interest was settled in full in cash on January 1, 2021. Note Payable to CEO On February 5, 2020 (the “Issue Date”), the Company issued a note payable to its CEO (the “CEO Note”) in the face amount of $ 245,250 bearing 1.59 % APR simple interest in exchange for cash. The net proceeds of $ 245,250 were used as working capital by the Company. The note carried an original maturity of the earlier of the sixth month following the Issue Date or the date the Company has sufficient funds to repay the CEO Note. If an event of default occurs and is continuing, the Company agrees to issue a warrant to the holder with a strike price of $ 4.87 per share for a number of shares equal to 150 % of the value of the loan. The Company assessed the terms and features of the CEO Note and determined that none of the terms and features represented embedded derivatives that require bifurcation. On June 13, 2020, the holder of the CEO Note and the Company entered into a restated agreement (the “CEO Restated Note”). The CEO Restated Note in the amount of $ 248,911 extends the stated maturity date of the CEO Note from the earlier of the sixth month following the (original) Issue Date or the date the Company has sufficient funds to repay the note to the earlier of the 30th month following the (original) Issue Date or the date the Company has sufficient funds to repay the CEO Restated Note. The Issue Date, February 5, 2020 , is unchanged. In addition, the interest rate was reduced, effective as of the Issue Date, from 1.59 % APR to 0.25 %. The CEO Restated Note also changed the exercise price of the warrant from $ 4.87 to $ 4.81 per share in the case of any default. The other provisions of the CEO Restated Note are the same, in all material respects, to the CEO Note. The Company and its CEO have agreed that the CEO Restated Note will not be repaid for a minimum of 12 months following the closing of its initial public offering. The principal balance of the CEO Note was $ 248,911 at March 31, 2021 and at December 31, 2020 and is included on the balance sheets in Notes payable, net of current portion. The Payroll Protection Program Loan (the “PPP Loan”) On May 4, 2020 the Company received $ 27,550 in loan proceeds as part of the Federal CARES Act Paycheck Protection Program (the “PPP Act” or “PPP”) with a 1 % annual interest rate. Some or all of this loan qualified for forgiveness if the Company expended not less than 60 % of the loan proceeds on qualified payroll costs. During the three months ended March 31, 2021, it was determined by the lender and by the Small Business Administration that the Company met the contractual conditions for forgiveness of the entire PPP Loan plus accrued interest and it was forgiven. The $ 27,550 principal balance of the PPP Loan at December 31, 2020 is included on the balance sheet in Notes payable, net of current portion. 6. Stockholders’ Deficit Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding. A total of 4,386,985 and 4,318,357 shares of common stock were reserved for issuance upon the exercise of outstanding stock options and warrants as of March 31, 2021 and December 31, 2020, respectively. Reverse Stock Split On August 20, 2020, the board of directors adopted resolutions proposing that each 1.14396 shares of the Company’s issued and outstanding common stock, par value $ 0.001 per share, be automatically converted into one fully paid and nonassessable share of common stock, par value $ 0.001 (the “Reverse Stock Split”) with cash in lieu of fractional shares. On August 21, 2020, shareholders representing a majority of the issued and outstanding common stock approved the Reverse Stock Split. On August 21, 2020, the Company filed with the Delaware Secretary of State its Certificate of Amendment to its Certificate of Incorporation, effective as of August 24, 2020. 8 Share Issuances In January 2020, an accredited investor subscribed for, and the Company issued, 874 shares of its stock in a private placement transaction at a per share price of $ 5.57 . Net proceeds were approximately $ 4,870 . Issuance costs were not material. No additional rights or options were granted to this accredited investor in connection with this issuance. During the three months ended March 31, 2021, an accredited investor subscribed for, and the Company issued, 9,000 shares of its stock in exchange for consulting services. The fair value of the stock was $ 60,391 based upon the closing price of the shares on the date of the transaction. Issuance costs were not material. No additional rights or options were granted to this accredited investor in connection with this issuance. The $ 60,391 fair value is a component of selling, general and administrative costs for the three months ended March 31, 2021. 7. Stock -Based Compensation 2020 Equity Incentive Plan The Company’s 2020 Equity Incentive Plan (the “2020 Plan”) was established for granting stock incentive awards to directors, officers, employees and consultants to the Company. Stock Options During the three months ended March 31, 2021 the Company granted 68,628 options to its scientific advisory board members with a strike price of $ 6.82 per share, vesting immediately, with an aggregate grant date fair value of $ 259,674 . No options were granted during the three months ended March 31, 2020. Stock-Based Compensation Expense The following table summarizes the stock-based compensation expense for stock options granted to employees and non-employees: Three Months Ended March 31, 2021 2020 Research and development $ 368,495 $ 65,020 Selling, general and administrative 222,629 74,738 Total stock-based compensation expense $ 591,124 $ 139,758 8. Warrants Warrants Issued On March 31, 2020, the Company issued a warrant to purchase up to 26,225 shares of its stock to one of its consultants in exchange for services. The warrant contains a strike price of $ 5.67 per share and has a seven-year contractual term. The warrant is classified within stockholders’ equity at its fair value and was treated as a standalone instrument. The fair value of the warrant was determined to be $ 101,478 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance and is included in selling, general and administrative expenses for the three months ended March 31, 2020. There were no warrants issued during the three months ended March 31, 2021. The company recognized $ 237,768 in warrant expense for the three months ended March 31, 2021 included in selling, general and administration expense. 9 Warrants Exercised No warrants were exercised for the three months ended March 31, 2021 and 2020. 9. Net Loss Per Share The following table presents the calculation of basic and diluted net loss per share applicable to common stockholders: Three Months Ended March 31, 2021 2020 Numerator: Net loss $ ( 2,637,068 ) $ ( 547,440 ) Denominator: Weighted-average number of common shares outstanding – basic and diluted 10,053,949 8,181,734 Net loss per share applicable to common stockholders – basic and diluted $ ( 0.26 ) $ ( 0.07 ) The following shares were excluded from the calculation of diluted net loss per share applicable to common stockholders, prior to the application of the treasury stock method, because their effect would have been anti-dilutive for the periods presented: Three Months Ended March 31, 2021 2020 Options to purchase shares of stock 3,665,072 3,369,144 Warrants to purchase shares of stock 721,913 474,723 Total 4,386,985 3,843,867 10. Income Taxes During the three months ended March 31, 2021 and 2020, there was no provision for income taxes as the Company incurred losses during those periods. Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company recorded a full valuation allowance against its deferred tax assets as the Company believes it is more likely than not the deferred tax assets will not be realized. 11. Commitments and Contingencies Impact of the COVID-19 Pandemic on Our Operations The novel coronavirus SARS-Cov2, or COVID-19, pandemic is causing significant, industry-wide delays in clinical trials. There are multiple causes of these delays, including reluctance of patients to enroll or continue in trials for fear of exposure to COVID-19, local and regional shelter-in-place orders and regulations that discourage, hamper, or prohibit patient visits, healthcare providers and health systems shifting away from clinical trials toward the acute care of COVID-19 patients and the FDA and other regulators making product candidates for the treatment of COVID-19 a priority over product candidates unrelated to the pandemic. As a result of the COVID-19 pandemic, commencement of enrollment of our clinical trials may be delayed. In addition, after enrollment in these trials, if patients contract COVID-19 during participation in the Company’s trials or are subject to isolation or shelter-in-place restrictions, this may cause them to drop out of the Company’s trials, miss scheduled doses or follow-up visits or otherwise fail to follow trial protocols. If patients are unable to follow the trial protocols or if the Company’s trial results are otherwise affected by the consequences of the COVID-19 pandemic on patient participation or actions taken to mitigate COVID-19 spread, the integrity of data from the Company’s trials may be compromised or not accepted by the FDA or other regulatory authorities, which could impact or delay a clinical development program. The Company anticipates that the COVID-19 pandemic may also impact manufacturing and distribution of materials necessary for the conductance of its clinical trials. Although the Company did not experience a material impact on its operations during the three months ended March 31, 2021 and 2020, the Company notes the high level of difficulty in determining the future potential adverse financial impact and other effects of COVID-19 on the Company and its programs, given the rapid and dramatic evolution in the course and impact of the pandemic and the societal and governmental response to it. 10 Litigation From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability would include probable and estimable legal costs associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. There is no pending litigation involving the Company at this time. 11