CERENOME, INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the unaudited financial information and the notes thereto included herein, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed on February 22, 2021, as amended by the Form 10-K/A filed on February 26, 2021. This discussion contains forward-looking statements that involve risks and uncertainties. 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 caption “Cautionary Note Regarding Forward-Looking Statements” in this report, as well as under "Part I – Item 1A - Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2020, in other subsequent filings with the SEC, and elsewhere in this Quarterly Report on Form 10-Q. These statements, like all statements in this report, speak only as of the date of this Quarterly Report on Form 10-Q (unless another date is indicated), and we undertake no obligation to update or revise these statements in light of future developments. Our Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, includes the following sections: • Overview that discusses our operating results and some of the trends that affect our business. • Results of Operations that includes a more detailed discussion of our revenue and expenses. • Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our financial position and our financial commitments. • Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Significant Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements. Overview Plus Therapeutics is committed to developing and delivering innovative treatments for rare and difficult to treat cancers. Plus Therapeutics’ mission is to transform the clinical care of cancer patients through its innovative drugs that have the potential to improve survival and quality of life . Plus has a nanoscale drug development platform and the requisite expertise to innovate and produce new and better therapeutics for rare cancers. We believe that this approach will produce investigational drugs that provide unique benefits such as improved mechanism of action, better tumor targeting, improved pharmacokinetics and higher treatment doses to the tumor. Benefits such as these may then improve the overall efficacy of drugs while reducing the side effects associated with more traditional drug delivery methods. To support this goal, Plus Therapeutics has an established, GMP-validated nanoscale drug R&D and commercial scale manufacturing facility in San Antonio, TX. This facility is ideally suited to produce nanoliposomal drug candidates for research, development, clinical and commercial use . As part of our strategy to leverage our nanotechnology platform and expertise, we use a simple multi-step model that management believes allows Plus to best address unmet market needs or underserved medical conditions while managing risks and minimizing development costs. This model includes: (1) market landscape mapping, (2) internal drug redesign, (3) in house drug manufacturing, (4) performance of critical non-clinical (i.e. bench, animal) analyses, (5) scale-up manufacturing for commercial purposes and performance of early-stage clinical trials, and (6) partnering for late-stage clinical trials, regulatory approval, and, ultimately, commercial launch . Pipeline Plus Therapeutics’ lead investigational drug, Rhenium NanoLiposomes (RNL™), is a patented radiotherapy for patients with recurrent glioblastoma (rGBM). The RNL™ technology was a key part of the licensed radiotherapeutic portfolio that we acquired from NanoTx, Corp. (“NanoTx”) on May 7, 2020. The licensed radiolabeled nanoliposome platform can be applied toward several cancer targets. The licensed technology was previously funded by both the National Institutes of Health/National Cancer Institute (NIH/NCI) and the Cancer Prevention and Research Institute of Texas (CPRIT). In addition, the RNL research program has an active $3M award from NIH/NCI which will financially support the continued clinical development of RNL for recurrent glioblastoma through the completion of a Phase 2 clinical trial and enrollment of up to 55 patients. RNL™, is a novel injectable radiotherapy designed to deliver targeted high dose radiation directly into a brain tumor in a safe, effective, and convenient manner to optimize patient outcomes. RNL™, which is composed of radionuclide Rhenium-186 (186Re) and a nanoliposomal carrier, is infused directly into the brain tumor via precision brain mapping and convection enhanced delivery. The RNL radiation dose delivered to patients may be up to 15-20x greater than what is possible with external beam radiation therapy (EBRT). Some additional potential benefits of RNL compared to EBRT include: - RNL can be visualized in real-time during administration, possibly giving doctors better control of radiation dosing and distribution. - Potentially more effectively treats the bulk tumor and microscopic disease in surrounding healthy tissue. - Using a small catheter, RNL is infused directly into the targeted tumor, which may reduce radiation exposure to healthy cells. By contrast, EBRT is less targeted and selective. - RNL is given during a single 3- to 4-day in-patient hospital visit, while EBRT requires out-patient visits 5 days a week for approximately 6 weeks. Recurrent glioblastoma (GBM) affects approximately 12,000 patients annually in the U.S. and is the most common and lethal form of brain cancer. The average life expectancy with glioblastoma is less than 24 months, with a one-year survival rate of 40.8% and a five-year survival rate of only 6.8%. GBM can cause headaches, seizures, vision changes and other neurological complications. Despite the best available medical treatments to eliminate the initial brain tumor, some microscopic disease frequently remains, with tumor regrowth within months. In fact, approximately 90% of patients experience tumor recurrence. This tumor type is incredibly difficult to remove completely, and often is resistant or quickly develops resistance to most available therapies. The treatment of GBM remains a significant challenge and it has been nearly a decade since the FDA approved a new therapy for this disease. There is no clear standard of care for recurrent GBM and even the few currently approved treatments, in aggregate, provide only marginal survival benefit. Current approved therapies are associated with significant side effects, which limit dosing and prolonged use. By infusing the RNL™ drug directly into the tumor, bypassing the blood-brain barrier, normal brain and external tissues may be spared from radiation damage. We believe that radiation in the form of high energy electrons may be effective against glioblastoma if an adequate dose can be effectively delivered. For comparison, current EBRT protocols for recurrent glioblastoma typically recommend a total maximum dose of about 35 Gy. In contrast, the most recently dosed patient with RNL in our clinical trial received over 500 Gy without significant adverse effects to-date. RNL is currently being evaluated for the treatment of recurrent glioblastoma in the Phase 1 multi-center ReSPECT™ dose-finding clinical trial. ReSPECT is evaluating the safety, tolerability, and distribution of RNL for the treatment of recurrent glioblastoma. Thus far, RNL has demonstrated early potential efficacy signals in patients with adequate dosing and tumor coverage with two patients surviving more than 30 months, compared to a median survival of approximately 9 months with the current standard of care. The sixth dose escalation cohort of this trial is in progress, which increases the RNL drug volume to 8.8 milliliters and radiation dose to 22.3 millicuries. The increased treatment volume in the sixth cohort will allow treatment of tumors up to approximately 4.5 cm in size, which may include the majority of glioblastoma tumors that appear in the recurrent setting. No treatment-related SAEs have been observed thus far. ReSPECT is supported by an award from the National Cancer Institute (NCI), part of the U.S. National Institutes of Health (NIH). In September 2020, the FDA granted both Orphan Drug designation and Fast Track designations to RNL for the treatment of patients with glioblastoma. Based on substantial preclinical work completed and published, RNL is thought to have potential clinical benefits in other difficult to treat cancers such as leptomeningeal carcinomatosis, peritoneal carcinomatosis, recurrent head and neck cancer, and pediatric brain cancer. We are in the process of developing additional indications utilizing RNL, in particular pediatric brain cancer and leptomeningeal carcinomatosis pending FDA feedback. Plus Therapeutics also has two other clinical stage drugs in our pipeline which are: 1) DocePLUS™, a patented chemotherapy incorporating docetaxel for patients with solid tumors that has been evaluated in a completed U.S. single-center Phase 1 clinical trial; and 2) DoxoPLUS™, a generic chemotherapy incorporating doxorubicin that has been evaluated in a completed, bioequivalence clinical trial in the U.S., Canada, and Ukraine versus Janssen’s CAELYX® in patients with ovarian cancer. Current business activities related to both DocePLUS and DoxoPLUS are focused on identification of potential partners. In addition, Plus Therapeutics is developing a chemoradionuclide therapy with Rhenium-186-labeled NanoLiposomal doxorubicin. The pharmacokinetics, imaging, and biodistribution of this novel therapy were determined after intravenous administration in a head and neck cancer xenograft model in nude rats. Another study was performed to determine this therapy’s maximum tolerated dose and therapeutic effects, investigate associated toxicities, and calculate radiation absorbed dose in head and neck tumor xenografts and normal organs. The most recent preclinical study determined the efficacy of this therapy in combination with radiofrequency (RF) ablation of human head and neck squamous cell carcinoma xenograft in nude rats. 16 Recent Developments Piramal Master Services Agreement On January 8, 2021, we entered into a Master Services Agreement (the “MSA”) with Piramal Pharma Solutions, Inc. (“Piramal”), for Piramal to perform certain services related to the development, manufacture, and supply of our RNL-Liposome Intermediate Drug Product. The MSA includes the transfer of analytical methods, development of microbiological methods, process transfer and optimization, intermediate drug product manufacturing, and stability studies for us. The transfer will be performed at Piramal’s facility located in Lexington, Kentucky. The parties contemplate that the MSA will lead to clinical and commercial supply agreements between us and Piramal. The MSA has a term of five years and will automatically renew for successive one-year terms unless either party notifies the other no later than six months prior to the original term or any additional terms of its intention to not renew the MSA. We have the right to terminate the MSA for convenience upon thirty days’ prior written notice. Either party may terminate the MSA upon an uncured material breach by the other party or upon the bankruptcy or insolvency of the other party. Recent Financings At-the-Market Transaction On October 23, 2020, we entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $10,000,000 (the “ATM Shares”), depending on market demand, with Canaccord acting as an agent for sales. Refer to “Liquidity and Capital Resources” section below for additional details on the Distribution Agreement. During the year ended December 31, 2020, we issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million. During the three months ended March 31, 2021, we issued 1,137,193 shares under the Distribution Agreement for net proceeds of $3.2 million . Lincoln Park Purchase Agreement On September 30, 2020, we entered into a purchase agreement (the “2020 Purchase Agreement”) and registration rights agreement pursuant to which Lincoln Park Capital Fund, LLC (“Lincoln Park”) has committed to purchase up to $25.0 million of our common stock. Refer to “Liquidity and Capital Resources” section below for additional details on the 2020 Purchase Agreement. During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million. During the three months ended March 31, we issued 1,397,686 shares of our common stock under the 2020 Purchase Agreement for total proceeds of $3.9 million. During the period from April 1, 2021 through the date of the filing of this Quarterly Report on Form 10-Q, we issued 55,000 shares of its common stock under the Purchase Agreement for net proceeds of $124,000. Recent Exercise of Warrants In February 2021, certain warrant holders exercised warrants to purchase 896,500 shares of our common stock for total exercise proceeds of $2.0 million. COVID-19 Impact The COVID-19 pandemic has presented substantial public health and economic challenges and is affecting economies, financial markets, and business operations around the world. International and U.S. governmental authorities in impacted regions have taken action in an effort to slow the spread of COVID-19, including issuing varying forms of “stay-at-home” orders, and restricting business functions outside of one’s home. In response, we have put restrictions on employee travel and working from our executive offices with many employees continuing their work remotely. While we have implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines, we have not experienced a significant impact on our business and operations. However, we may experience disruptions that could adversely impact our business operations as well as our preclinical studies and clinical trials. We are currently continuing the clinical trials we have underway in sites across the U.S., and we expect that COVID-19 precautions may directly or indirectly impact the timeline for some of our clinical trials. Some of our clinical trial sites, including those located in areas severely impacted by the pandemic, have placed new patient enrollment into clinical trials on hold or, for patients traveling from out-of-state, have implemented a 14-day self-quarantine before appointments. In addition, some clinical trial sites have imposed limited accessibility to conduct clinical monitoring and training on-site. We considered the impacts of 17 COVID-19 on the assumptions and estimates used to prepare our financial statements and determined that there were no material adverse impacts on our results of operations and financial position at Ma r ch 31, 2021 . The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. For example, as certain states and regions across the United States have relaxed various restrictions on businesses and other activities, it is uncertain whether and to what extent federal, state, or local governments may reinstate additional restrictions and safety protocols in response to any increases in COVID-19 cases. Although there are vaccines available, the ability to obtain a vaccine or know when herd immunity will be met, is difficult to anticipate As such, it is uncertain as to the full magnitude that the pandemic will have on our operations, including our preclinical studies and clinical trials, financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation and its impact on our clinical program and timeline, financial condition, liquidity, operations, suppliers, industry, and workforce. We continue to evaluate the extent to which delays as a result of the COVID-19 pandemic will impact our ability to manufacture our product candidates for our clinical trials and conduct other research and development operations and maintain applicable timelines. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity for the remainder of fiscal year 2020 or beyond. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP). The CARES Act had no material impact on our income tax provision for the year ended December 31, 2020 or the three months ended March 31, 2021. We continue to evaluate the impact of the CARES Act on our financial position, results of operations, and cash flows. Results of Operations Development revenues Under our government contract with BARDA, we recognized a total of $0.1 million in revenues for the three months ended March 31, 2020 and $0.1 million in qualified expenditures. The BARDA contract was terminated in December 2019 and the close out process was completed in 2020. There were no revenue or expenses recognized relating to the BARDA contract during the three months ended March 31, 2021, and we do not expect additional BARDA revenue in the near future. Research and development expenses Research and development expenses include costs associated with the design, development, testing, and enhancement of our product candidates, payment of regulatory fees, laboratory supplies, pre-clinical studies, and clinical studies . The following table summarizes the components of our research and development expenses for the three months ended March 31, 2021 and 2020 (in thousands): For the Three Months Ended March 31, 2021 2020 Research and development $ 1,106 $ 937 Stock-based compensation 21 4 Total research and development expenses $ 1,127 $ 941 The increase of $0.2 million in research and development expenses for the three months ended March 31, 2021 as compared to the same period in 2020 was due primarily to an increase of $0.2 million related to the development of RNL for the phase 3 pivotal trial. We expect aggregate research and development expenditures to increase in absolute dollars during the remainder of 2021 due to the expected costs of development of the RNL™ therapy acquired from NanoTx . General and administrative expenses General and administrative expenses include costs for administrative personnel, legal and other professional expenses, and general corporate expenses. The following table summarizes the general and administrative expenses for the three months ended March 31, 2021 and 2020 (in thousands): For the Three Months Ended March 31, 2021 2020 General and administrative $ 1,266 $ 1,610 Stock-based compensation 86 8 Total general and administrative expenses $ 1,352 $ 1,618 18 General and administrative expenses decreased by $0.3 million during the three months ended March 31, 2021 , as compared to the same period in 2020. The decrease was primarily driven by a reduction of legal expenses of $0.2 million and a reduction of $0.1 million of recruiting expenses. We expect general and administrative expenditures to remain consistent on a quarterly basis for the remainder of 2021 as compared with 2020. Stock-based compensation expense Stock-based compensation expense includes charges related to options and restricted stock awards issued to employees, directors and non-employees. We measure stock-based compensation expense based on the grant-date fair value of any awards granted to our employees. Such expense is recognized over the requisite service period. The following table summarizes the components of our stock-based compensation expenses for the three months ended March 31, 2021 and 2020 (in thousands): For the Three Months Ended March 31, 2021 2020 Research and development $ 21 4 General and administrative 86 8 Total stock-based compensation $ 107 $ 12 The increase/decrease in stock-based compensation expense for the three months ended March 31, 2021 as compared to the same period in 2020 is primarily related to increased stock options grants in the three months ended March 31, 2021, as compared to the same period in 2020 . We expect to continue to grant stock options (which will result in an expense) to our employees, directors, and, as appropriate, to non-employee service providers. In addition, previously-granted stock options will continue to vest in accordance with their original terms. As of March 31, 2021, the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $1.1 million which is expected to be recognized as a result of vesting under service conditions over a weighted average period of 3.14 years. Financing items The following table summarizes interest income, interest expense, and other income and expense for the three months ended March 31, 2021 and 2020 (in thousands): Three Months Ended March 31, 2021 2020 Interest income $ 4 $ 36 Interest expense (247 ) (349 ) Change in fair value of warrants 2 1,667 Total $ (241 ) $ 1,354 The decrease in interest expense for the three months ended March 31, 2021 as compared to the same period in 2020 was primarily due to the repayment of debt principal of $5.0 million in April 2020. The changes in fair value of our warrant liabilities are primarily due to fluctuations in the valuation inputs for the warrants. See Note 4 to the unaudited consolidated condensed financial statements included elsewhere herein for disclosure and discussion of our warrant liabilities. We expect interest expense in 2021 to decrease as compared with 2020 due to the principal repayment of $5.0 million on April 1, 2020. In April, June, July and September 2020, we entered into revised warrant agreements with the holders of 3,447,500 Series U warrants and in September 2020, we entered into revised warrant agreements for 75,000 of Representative Warrants (defined below). In return for reducing the strike price of the warrants, the warrant holders agreed to amend the settlement provisions upon fundamental transactions. The amended Series U warrants meet the requirements for equity classification under authoritative accounting guidance and are no longer subject to fair value accounting post amendment. Liquidity and Capital Resources Short-term and long-term liquidity 19 The following is a summary of our key liquidity measures at March 31, 20 2 1 and December 31, 20 20 (in thousands): As of March 31, As of December 31, 2021 2020 Cash and cash equivalents $ 14,447 $ 8,346 Current assets $ 15,446 $ 9,175 Current liabilities 8,315 8,539 Working capital $ 7,131 $ 636 We incurred net losses of $2.7 million for the three months ended March 31, 2021. We have an accumulated deficit of $436.2 million as of March 31, 2021. Additionally, we used net cash of $3.0 million to fund our operating activities for the three months ended March 31, 2021. These factors raise substantial doubt about our ability to continue as a going concern. To date, these operating losses have been funded primarily from outside sources of invested capital in our common stock, proceeds raised from the Loan and Security Agreement, and gross profits. We have had, and we will continue to have, an ongoing need to raise additional cash from outside sources to fund our future clinical development programs and other operations. Our inability to raise additional cash would have a material and adverse impact on operations and would cause us to default on our loan . On October 23, 2020, we entered into the Distribution Agreement with Canaccord, pursuant to which we may issue and sell, from time to time, ATM Shares, depending on market demand, with Canaccord acting as an agent for sales. Sales of the ATM Shares may be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”), including, without limitation, sales made directly on or through the NASDAQ Capital Market. Canaccord will use its commercially reasonable efforts to sell the ATM Shares we request to be sold on our behalf, consistent with Canaccord’s normal trading and sales practices, under the terms and subject to the conditions set forth in the Distribution Agreement. We have no obligation to sell any of the ATM Shares. We may instruct Canaccord not to sell the ATM Shares if the sales cannot be effected at or above the price we designate from time to time and we may at any time suspend sales pursuant to the Distribution Agreement. During the year ended December 31, 2020, we issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million. During the three months ended March 31, 2021, we issued 1,137,193 shares under the Distribution Agreement for net proceeds of $3.2 million. On September 30, 2020, we entered into the 2020 Purchase Agreement and a registration rights agreement with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $25.0 million of our common stock. Under the terms and subject to the conditions of the 2020 Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of our common stock. Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing November 6, 2020, subject to satisfaction of certain conditions. The net proceeds under the 2020 Purchase Agreement will depend on the frequency and prices at which we sell shares of our common stock to Lincoln Park. We expect that any proceeds received from such sales to Lincoln Park will be used for working capital and general corporate purposes. During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million. During the three months ended March 31, 2021, we issued 1,397,686 shares of our common stock under the 2020 Purchase Agreement for net proceeds of $3.9 million. During the period from April 1, 2021 through the date of the filing of this Quarterly Report on Form 10-Q, we issued 55,000 shares of its common stock under the Purchase Agreement for net proceeds of $124,000. On March 29, 2020, we entered into the Ninth Amendment, pursuant to which, among other things, Oxford agreed to defer the start date of principal repayment from May 1, 2020 to May 1, 2021. In addition, on April 1, 2020, we made a $5.0 million paydown of principal upon execution of the Ninth Amendment. As a result of this Ninth Amendment, the term of the Term Loan has been extended from September 1, 2021 to September 1, 2024, with all other major terms remained consistent. We continue to seek additional capital through strategic transactions and other financing alternatives. Without additional capital, current working capital and cash generated from sales will not provide adequate funding for research and product development activities at their current levels. If sufficient capital is not raised, we will at a minimum need to significantly reduce or curtail our research and development and other operations, and this would negatively affect our ability to achieve corporate growth goals. Although the stock markets and our stock price have recovered to some extent in recent weeks, there may likely be continued market volatility due to the pandemic or other events, which could cause our stock price to decline. This in turn will likely negatively impact our ability to raise funds through equity-related financings. Further, a continued global economic downturn may impair our ability to obtain additional financing through other means, such as strategic transactions or debt financing. The overall deterioration of the credit and financial markets due to the COVID-19 pandemic will likely generally reduce our ability to obtain additional financing to fund our operations. Should we be unable to raise additional cash from outside sources or if we are unable to do so in a timely manner or on commercially reasonable terms, it would have a material adverse impact on our operations 20 Cash (used in) provided by operating, investing, and financing activities for the three months ended March 31, 20 21 and 2020 is summarized as follows (in thousands): For the March 31, 2021 2020 Net cash used in operating activities $ (3,006 ) $ (1,502 ) Net cash used in investing activities (84 ) (11 ) Net cash provided by (used in) financing activities 9,191 (18 ) Net increase (decrease) in cash and cash equivalents $ 6,101 $ (1,531 ) Operating activities Net cash used in operating activities for the three months ended March 31, 2021 was $3.0 million compared to $1.5 million in the same period of 2020. Our operational cash use increased during the three months ended March 31, 2021 as compared to the same period in 2020, due primarily to timing of cash payments made for operating assets and liabilities. Investing activities Net cash used in investing activities for the three months ended March 31, 2021 and 2020 were related to purchases of fixed assets. Financing Activities Net cash provided by financing activities for the three months ended March 31, 2021 was primarily related to sales of common stock of $7.2 million, net of offering cost through the 2020 Purchase Agreement with Lincoln Park and the Distribution Agreement with Canaccord, as well as $2.0 million from exercise of warrants. Net cash used for financing activities for the three months ended March 31, 2020 was related to cash payments for our finance leases. Critical Accounting Policies and Significant Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenues and expenses, and that affect our recognition and disclosure of contingent assets and liabilities. While our estimates are based on assumptions we consider reasonable at the time they were made, our actual results may differ from our estimates, perhaps significantly. If results differ materially from our estimates, we will make adjustments to our financial statements prospectively as we become aware of the necessity for an adjustment. Goodwill is reviewed for impairment annually or more frequently if indicators of impairment exist. We perform our impairment test annually during the fourth quarter. The Company operates in a single operating segment and reporting unit. We monitor the fluctuations in our share price and have experienced significant volatility during the year. We estimate the fair value of liability classified warrants using an option pricing model. Following the authoritative accounting guidance, warrants with potential cash settlement outside control of the Company are accounted for as liabilities, with changes in the fair value included in operating expenses. We believe it is important for you to understand our most critical accounting policies. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and there have been no material changes during the three months ended March 30, 2021. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable.