Phio Pharmaceuticals Corp. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In this document, “we,” “our,” “ours,” “us,” “Phio” and the “Company” refers to Phio Pharmaceuticals Corp. and our subsidiary, MirImmune, LLC and the ongoing business operations of Phio Pharmaceuticals Corp. and MirImmune, LLC, whether conducted through Phio Pharmaceuticals Corp. or MirImmune, LLC. This management’s discussion and analysis of financial condition as of June 30, 2021 and results of operations for the three and six months ended June 30, 2021 and 2020 should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission (the “ SEC ”) on March 25, 2021. This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “intends,” “believes,” “anticipates,” “indicates,” “plans,” “expects,” “suggests,” “may,” “would,” “should,” “potential,” “designed to,” “will,” “ongoing,” “estimate,” “forecast,” “target,” “predict,” “could” and similar references, although not all forward-looking statements contain these words. Forward-looking statements are neither historical facts nor assurances of future performance. These statements are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Risks that could cause actual results to vary from expected results expressed in our forward-looking statements include, but are not limited to, the impact to our business and operations by the ongoing coronavirus outbreak, the development of our product candidates, our ability to execute on business strategies, our ability to develop our product candidates with collaboration partners, and the success of any such collaborations, the timeline and duration for advancing our product candidates into clinical development, results from our preclinical and clinical activities, the timing or likelihood of regulatory filings and approvals, the commercialization of our product candidates if approved, our ability to manufacture and supply our product candidates for clinical activities and for commercial use if approved, the scope of protection we are able to establish and maintain for intellectual property rights covering our technology platform, and our ability to obtain future financing. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements as a result of a number of important factors, including those identified in our Annual Report on Form 10-K for the year ended December 31, 2020 under the heading “Risk Factors” and in other filings the Company periodically makes with the SEC. Therefore, you should not rely on any of these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q speak as of the date hereof and the Company does not undertake to update any of these forward-looking statements to reflect a change in its views or events or circumstances that occur after the date of this report. Overview Phio Pharmaceuticals Corp. is a biotechnology company developing the next generation of immuno-oncology therapeutics based on our self-delivering RNAi (“ INTASYL™ ”) therapeutic platform. Our efforts are focused on silencing tumor-induced suppression of the immune system through our proprietary INTASYL platform with utility in immune cells and the tumor micro-environment. Our goal is to develop powerful INTASYL therapeutic compounds that can weaponize immune effector cells to overcome tumor immune escape, thereby potentially providing patients a powerful new treatment option that goes beyond current treatment modalities. Our development efforts are based on our broadly patented INTASYL technology platform. Our INTASYL compounds do not require a delivery vehicle to penetrate into tissues and cells and are designed to “silence” or down-regulate, the expression of a specific gene which is over-expressed in cancer. We believe that our INTASYL platform uniquely positions the Company in the field of immuno-oncology for the following reasons: · Efficient uptake of INTASYL by target cells obviating the need for facilitated delivery (mechanical or formulation); · Does not require permanent genetic modification; · Can target multiple genes (i.e. multiple immunosuppression pathways) in a single therapeutic entity; · Gene silencing by INTASYL has been shown to have a sustained, or long-term, effect in vivo ; · Favorable clinical safety profile of INTASYL with local administration; and · Can be readily manufactured under current good manufacturing practices. 16 In contrast to other RNA technologies and platforms, the self-delivering nature of our INTASYL platform makes it ideally suited for use with adoptive cell therapy (“ ACT ”) treatments as well as for direct therapeutic use. ACT consists of the infusion of immune cells with antitumor properties, after growing them in a lab to large numbers. These cells can be derived from unmodified (i.e. naturally occurring) immune cells, immune cells isolated from resected tumors or genetically engineered immune cells that recognize tumor cells. Regardless of the source of immune cells (ACT or naturally occurring immune cells), in patients with solid tumors, these cells have several shortcomings that inhibit their full therapeutic potential. By using INTASYL technology during the manufacturing of such ACT cell products we can improve the phenotype and function of these cells, potentially leading to better therapeutic outcomes. Multiple inhibitory mechanisms restrain immune cells from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence. Furthermore, the immunosuppressive tumor micro-environment (the “ TME ”) can pose a formidable barrier to immune cell infiltration and function. By using INTASYL based drugs administered directly, we can also reprogram cells in the TME to help overcome these immunosuppressive mechanisms. We have developed a product platform based on our INTASYL technology that allows easy, precise, rapid and selective non-genetically modified programming of ACT cells ( ex vivo , during manufacturing) and of the TME ( in vivo , by local application), resulting in reduced immune inhibition and in improved immunotherapy. INTASYL Use To Improve Adoptive Cell Therapy Products ACT is a form of immune therapy based on the use of immune cells, isolated from patients, donors or retrieved from allogeneic immune cell banks. They are grown in a lab to large numbers and subsequently administered to patients to fight cancer. Sometimes, immune cells that naturally recognize a tumor are used, while other times immune cells are modified or “genetically engineered” to make them recognize and kill the cancer cells. There are several types of ACT, including: a.) non-engineered cell therapy in which immune cells are grown from the patient’s tumor or blood, such as tumor infiltrating lymphocytes (“ TILs ”), or from donor blood or tissue such as natural killer (“ NK ”) cells, dendritic cells (“ DC ”) and macrophages, and b.) genetically engineered immune cells that are genetically modified to recognize specific tumor proteins and to remain in an activated state (such as T cell receptor technology (“ TCRs ”), chimeric antigen receptor (“ CAR ”) T cells, or CAR-NK cells). Multiple inhibitory mechanisms restrain immune cells used in ACT from effectively eradicating tumors, including immune checkpoints, reduced cell fitness and cell persistence, and other barriers to immune cell infiltration and function mainly in solid tumors. We believe our INTASYL compounds are ideally suited to be used in ACT products. With INTASYL compounds, we can unlock the full potential of ACT, by improving the immune cell function, differentiation and metabolism, in order to make these immune cells more effective without the need for additional complicated manufacturing steps and/or genetic engineering. Our approach builds on well-established methodologies of ACT and involves the treatment of immune cells with our INTASYL compounds ex vivo while they are grown in the lab and before administering them to the patient. Because our INTASYL compounds do not require a delivery vehicle to penetrate into the cells, in contrast to other RNA technologies, we are able to enhance the function of these cells by merely adding our INTASYL compounds during the expansion process and without the need for genetic engineering, complex delivery vehicles or formulations, and additional complex manufacturing steps. By adding INTASYL to the cell culture media used during the cell expansion, we can reduce or eliminate the expression of genes that make the immune cells less effective. For example, with our INTASYL compounds, we can reduce the expression of immunosuppressive proteins by the therapeutic immune cells, potentially enabling them to overcome tumor resistance mechanisms and thus improving their ability to destroy the tumor cells. In various types of immune cells tested to date, INTASYL treatment results in potent silencing with close to 100% transfection efficiency and while maintaining cell viability and cell growth rate. After expanding these cells and enhancing them with INTASYL ex vivo , they are returned to the patient for treatment. Our lead product candidate, and our most advanced program being developed in ACT, is PH-762, an INTASYL compound that targets the checkpoint protein PD-1. Checkpoint proteins, such as PD-1, normally act as a type of “off switch” that prevent T cells from attacking certain cells, such as cancer cells, in the body. T cells are immune cells that protect the body from cancer cells and infections. Data developed by Phio and with collaborators has shown that PH-762 silences PD-1 checkpoint expression, thereby removing the “off switch” and resulting in enhanced T cell activation and tumor cytotoxicity. Experimental data shows that PH-762 can silence the expression of PD-1 in target human T cells in a potent and durable manner, and can increase the function of patient derived TILs for use in ACT, and of CAR-T cells used in ACT, showing that PH-762 is applicable for use in both ACT and as a standalone direct therapeutic. 17 In March 2021, the Company announced that it entered into a clinical development collaboration with AgonOx, Inc. (“ AgonOx ”), a private company developing a pipeline of novel immunotherapy drugs targeting key regulators of the immune response to cancer. Under the agreement, the companies will collaborate on the development of novel T cell-based therapies using PH-762 and AgonOx’s “double positive” (DP) TIL technology. AgonOx has demonstrated that their DP CD8+ T cells isolated from human solid tumors (DP TILs) have increased tumor killing activity when compared to TILs that were not enriched prior to expansion. Preclinical data from AgonOx in collaboration with Phio has shown that treating DP TILs with PH-762 increases the tumor killing activity of the DP TILs even further (a two-fold increase). As a result, the use of PH-762 treated DP TILs is expected to enhance therapeutic responses in cancer data. Based on this data showing that the combination of our technologies can result in TIL therapeutics, our collaboration will focus on conducting a clinical study for PH-762 treated DP TILs. Under the terms of the collaboration agreement, AgonOx will receive financial support for the clinical trial from Phio, and Phio will be entitled to certain future development milestones and sales-related royalty payments from AgonOx’s DP TIL technology. In collaboration with AgonOx, we are planning a clinical trial in ACT with PH-762 and AgonOx’s DP TIL technology. As a result of impacts from the coronavirus pandemic, the availability of certain materials for the clinical trial are delayed. Based upon current information, the Company expects to start the clinical trial evaluating the use PH-762 and DP TILs in adoptive cell therapy in the second quarter of 2022. Our second product candidate in ACT is PH-894, an INTASYL compound that targets BRD4 which is a regulator of gene expression impacting cell differentiation. In previous studies, PH-894 has been shown to improve T cell function and persistence by differentiating T cells into a more active state (stem-cell like memory phenotype). Data, completed in partnership with the Karolinska Institutet in Sweden, demonstrated that the application of PH-894, was shown to silence BRD4 in human T cells during expansion for ACT, which has the potential to confer superior anti-tumor activity, for example by improving T cell persistence. With this data, we expanded our collaboration with the Karolinska Institutet to build upon these findings and develop INTASYL compounds for additional targets and cell types toward clinical application in areas of the Karolinska Institutet’s ongoing clinical research. We are also developing our INTASYL compound PH-804 for use in ACT. PH-804 targets the suppressive immune receptor TIGIT, which is a checkpoint protein present on T cells and NK cells. We have shown that PH-804 can silence the expression of TIGIT in NK cells and T cells, overcoming their “off switch” and the cells becoming “weaponized” to kill cancer cells. Direct Therapeutic Use of INTASYL Towards the Tumor Micro-Environment The TME is the environment that surrounds and feeds a tumor, including normal cells, blood vessels, immune cells and the extracellular matrix. The TME is an immunosuppressive environment that inhibits the immune system’s natural ability to recognize and destroy tumor cells by negatively impacting how immunosuppressive cells are being attracted and activated. Reprogramming different components of the TME may overcome resistance to immunotherapy. Such reprogramming of the TME by INTASYL compounds through direct local administration into the tumor could potentially become an important form of therapy. The Company has previously shown in a clinical setting that our INTASYL compounds are safe and well-tolerated following local administration; therefore, we believe that our INTASYL technology, in addition to being used in combination with ACT, can also be used as an independent therapeutic platform. We are developing our PH-762, PH-894 and PH-804 INTASYL compounds also for use as direct therapeutics to reprogram the TME, for example by in situ transfection and activation of immune cells in the TME. Animal studies conducted by the Company showed that local administration of PH-894 or the mouse version of PH-762 through intra-tumoral injection resulted in potent anti-tumoral effects. The treated animals showed a complete and statistically significant inhibition of tumor growth, whereas placebo treated animals displayed exponential tumor growth. In vivo studies performed by the Company with PH-804 showed that intra-tumoral injection of a mouse version of PH-804 reduced the tumor growth in colorectal carcinoma tumor bearing mice, which was shown to inhibit tumor growth and was correlated with the silencing of TIGIT mRNA expression and in increase in cytotoxic effector T cells in the TME. The combined PH-804, PH-762, and PH-894 data further shows that INTASYL compounds can trigger associated changes in the TME such as an increase of TILs, including CD8+ T cells responsible for tumor cell killing, and an increase of activation markers on these cells. These preclinical findings demonstrate that direct injection of INTASYL compounds can successfully infiltrate solid tumors and impact the TME by activating the immune response in animal models of solid tumors resulting in reduced tumor growth. A key challenge for many other immunotherapy platforms is to be able to achieve an adequate therapeutic effect in solid tumors with an acceptable safety profile. Many of the available systemic immuno-therapeutics come with dose limiting immune-related adverse events, which we believe can be mitigated with local INTASYL treatment. 18 Based on our positive preclinical data, the Company is preparing for a clinical study with PH-762 using intra-tumoral administration for patients with advanced melanoma. The required preclinical studies and regulatory submission needed to initiate the clinical trial with PH-762 as a direct therapeutic are being finalized. However, these timelines are impacted by limited availability in certain services and supplies as a consequence of the coronavirus pandemic. The clinical trial will be conducted at the Gustave Roussy Institute, which is one of the largest cancer centers in Europe, with Dr. Caroline Robert as our lead principal investigator. The Company currently expects to start the clinical trial evaluating the use of PH-762 as a direct therapeutic in the first quarter of 2022. We are also investigating other relevant compounds for TME targets, such as PH-790, an INTASYL compound targeting PD-L1. PD-L1 is a protein formed by cancer cells that activates the PD-1 “off switch” on immune cells. Our approach with PH-790 is to block the formation of the PD-L1 protein, which may prevent cancer cells from inactivating T cells and attack the cancer. Data has demonstrated that the antitumoral efficacy of our individual pipeline products, PH-762, PH-790 and PH-804, can be further improved by combining them in a single drug treatment. We have shown that we can efficiently and potently target multiple proteins in a single drug treatment. Animal data showed that the combination of our INTASYL compounds in a single formulation (at suboptimal doses of the individual agents) inhibited tumor growth without having a negative impact on the tolerability of the treatment. Impact of COVID-19 on our Business In December 2019, a novel strain of coronavirus that causes COVID-19 was reported to have surfaced in Wuhan, China and has since spread to other parts of the world, including the United States. In March 2020, the World Health Organization (the “ WHO ”) declared the outbreak a pandemic. Health and Safety From the first signs of the outbreak, we have taken proactive measures intended to protect the health and safety of our employees. We have implemented safety measures following the guidance provided by the WHO, the Centers for Disease Control (the “ CDC ”) and governmental authorities, such as working remotely and flexible scheduling. We expect to continue following these safety measures and may take further actions as we require, as government authorities require or recommend, or as we determine to be in the best interests of our employees. Operations Our operations are being conducted in accordance with federal and state government, WHO and CDC guidelines. While measures to contain and prevent the spread of coronavirus may be modified or extended, we expect that our activities, including our internal research and development functions, will continue to remain largely operational, though we have started to and may continue to experience delays in our clinical activities. Current and future pandemic-related restrictions may further impact our operations and may slow or diminish our research and development activities. Supply and Services As a result of the coronavirus pandemic, certain of our third-party suppliers and service providers on which we rely have seen impacts to their operations. The Company has undertaken efforts to mitigate potential future impacts by identifying and engaging alternative third-party service providers and suppliers, and because of that, the Company had been able to limit the impact of delays from our third-party service providers to our program’s anticipated timelines. However, the continued impacts to our third-party service providers, including, for example, limited availability in certain services and supplies, have now started to significantly affect our operations in the second quarter of 2021 resulting in delays to certain of our clinical program timelines. Further, while the steps required for us to initiate our clinical trials with PH-762 are continuing and ongoing, the commencement of new clinical trials and the enrollment and participation of patients in clinical trials were impacted as a result of the coronavirus pandemic, and the Company does not yet know the full extent of similar potential delays or impacts related to its planned clinical activities. If measures to contain the pandemic are insufficient, the availability of supplies and services that we purchase and rely on could be further reduced or delayed, which may in turn further slow or delay our preclinical and clinical activities. 19 Liquidity and Capital Resources While we believe that the coronavirus pandemic has not had a significant impact on our financial condition to date, the extent to which the coronavirus pandemic impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the actions to contain the coronavirus or treat its impact, among others. Due to our uncertainty about our ability to access the capital markets to provide the necessary working capital to fund our long-term operations as a result of the coronavirus pandemic, the Company applied for and received a loan of $231,252 in May 2020 under the Paycheck Protection Program (the “ PPP ”) as part of the Coronavirus Aid, Relief and Economic Security (the “ CARES Act ”). The Company carefully assessed the requirements for application under the program and believed that the loan was necessary to support our operations. The Company believed it used the loan proceeds for eligible purposes and applied for full loan forgiveness. In February 2021, the Small Business Administration (the “ SBA ”) approved the Company’s application for full loan forgiveness, and the full amount of the PPP loan was remitted to the lender for forgiveness. In connection with and addition to the PPP, the Company took other proactive steps to control costs in response to the coronavirus pandemic, which included the reduction of senior management salaries by 10% from May to December 2020. We believe these savings helped to mitigate the financial impact to us of the coronavirus pandemic on our financial condition. We do not yet know the full extent of potential delays or impacts on our business, financial condition or our preclinical and clinical trial activities, and there may be developments outside of our control that require us to adjust our operating plans and, therefore, given the nature of the situation, we cannot reasonably estimate the impact of the coronavirus on our financial condition, results of operations or cash flows in the future. Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States . The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions and could have a material impact on our reported results. There have been no material changes to our critical accounting policies and estimates as compared to those disclosed in the Company’s most recent Annual Report on Form 10-K for the year ended December 31, 2020. Results of Operations The following data summarizes the results of our operations for the periods indicated, in thousands: Three Months Ended June 30, Six Months Ended June 30, Description 2021 2020 Dollar Change 2021 2020 Dollar Change Operating expenses $ 2,684 $ 1,669 $ 1,015 $ 6,322 $ 4,025 $ 2,297 Operating loss (2,684 ) (1,669 ) (1,015 ) (6,322 ) (4,025 ) (2,297 ) Net loss (2,687 ) (1,672 ) (1,015 ) (6,094 ) (4,023 ) (2,071 ) 20 Comparison of the Three and Six Months Ended June 30, 2021 and 2020 Operating Expenses The following table summarizes our total operating expenses, for the periods indicated, in thousands: Three Months Ended June 30, Six Months Ended June 30, Description 2021 2020 Dollar Change 2021 2020 Dollar Change Research and development $ 1,663 $ 779 $ 884 $ 4,284 $ 1,997 $ 2,287 General and administrative 1,021 890 131 2,038 2,028 10 Total operating expenses $ 2,684 $ 1,669 $ 1,015 $ 6,322 $ 4,025 $ 2,297 Research and Development Expenses Research and development expenses relate to compensation and benefits for research and development personnel, facility-related expenses, supplies, external services, costs to acquire technology licenses, research activities under our research collaborations, expenses associated with preclinical and clinical development activities and other operating costs. Our research and development programs are focused on the development of immuno-oncology therapeutics based on our INTASYL therapeutic platform. Research and development expenses for the three months ended June 30, 2021 increased 113% as compared with the three months ended June 30, 2020. Research and development expenses for the six months ended June 30, 2021 increased 115% as compared with the six months ended June 30, 2020. The increase in research and development expenses for both periods was primarily due to manufacturing costs and fees for the required preclinical studies in support of the Company’s planned clinical trials for PH-762 as compared to the same period in the prior year. The Company expects its research and development expenses to continue to increase in support of, and as the Company commences its clinical trial activities with PH-762. General and Administrative Expenses General and administrative expenses relate to compensation and benefits for general and administrative personnel, facility-related expenses, professional fees for legal, audit, tax and consulting services, as well as other general corporate expenses. General and administrative expenses for the three months ended June 30, 2021 increased 15% as compared with the three months ended June 30, 2020, primarily due to an increase in stock-based compensation expense as no equity awards were granted in the same period in the prior year. General and administrative expenses for the six months ended June 30, 2021 increased less than 1% as compared with the six months ended June 30, 2020 primarily due an increase in stock-based compensation, as noted above, offset by a decrease in legal fees . Other Income Other income consists primarily of interest income and expense and various income or expense items of a non-recurring nature. Other income for the six months ended June 30, 2021 increased by $226,000 as compared with the six months ended June 30, 2020, primarily due to the full forgiveness of the Company’s PPP loan by the SBA in the first quarter of 2021. Liquidity and Capital Resources Historically, the Company’s primary source of funding has been through the sale of its securities. In the future, we will be dependent on obtaining funding from third parties, such as proceeds from the issuance of debt, sale of equity or strategic opportunities, in order to maintain our operations. We have reported recurring losses from operations since inception and expect that we will continue to have negative cash flows from our operations for the foreseeable future. At June 30, 2021, we had cash of $29,425,000 as compared with cash of $14,244,000 at December 31, 2020. 21 In August 2019, the Company entered into a purchase agreement (the “ Purchase Agreement ”) with Lincoln Park Capital, LLC (“ LPC ”), pursuant to which the Company has the right to sell to LPC up to $10,000,000 in shares of the Company’s common stock, subject to certain limitations and conditions set forth in the agreement. The Company is initially limited to the issuance of 19.99% of the Company’s shares outstanding on the date of the Purchase Agreement unless stockholder approval is obtained to issue more than such amount or the average price of all sales under the Purchase Agreement exceeds certain amounts set forth in the agreement. The Purchase Agreement expires in May 2022. To date, no shares of common stock have been sold to LPC under the Purchase Agreement. We believe that our existing cash at June 30, 2021 should be sufficient to fund operations for at least the next 12 months from the date of the release of the associated financial statements. The following table summarizes our cash flows for the periods indicated, in thousands: Six Months Ended June 30, 2021 2020 Net cash used in operating activities $ (6,288 ) $ (4,208 ) Net cash used in investing activities (21 ) (10 ) Net cash provided by financing activities 21,490 16,148 Net increase in cash and restricted cash $ 15,181 $ 11,930 Net Cash Flow from Operating Activities Net cash used in operating activities was $6,288,000 for the six months ended June 30, 2021 as compared with $4,208,000 for the six months ended June 30, 2020. The increase in cash used in operating activities was primarily due to increases in net loss and changes in operating assets and liabilities as a result of increased spending primarily related to the Company’s preclinical studies in support of and for the planned clinical trials for PH-762. Net Cash Flow from Investing Activities Net cash used in investing activities was $21,000 for the six months ended June 30, 2021 as compared with $10,000 for the six months ended June 30, 2020. The increase in cash used in investing activities was primarily related to laboratory and computer equipment purchases. Net Cash Flow from Financing Activities Net cash provided by financing activities was $21,490,000 for the six months ended June 30, 2021, as compared with $16,148,000 for the six months ended June 30, 2020. The increase in cash provided by financing activities was primarily due to the net proceeds received by the Company from capital raising activities and warrant exercises. Off-Balance Sheet Arrangements In connection with certain license agreements, we are required to indemnify the licensor for certain damages arising in connection with the intellectual property rights licensed under the agreement. In addition, we are a party to a number of agreements entered into in the ordinary course of business that contain typical provisions that obligate us to indemnify the other parties to such agreements upon the occurrence of certain events. These indemnification obligations are considered off-balance sheet arrangements in accordance with ASC Topic 460, “ Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others .” To date, we have not encountered material costs as a result of such obligations and have not accrued any liabilities related to such obligations in our financial statements. See Note 8 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 25, 2021, for further discussion of these indemnification agreements. 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, we are not required to provide this information.