Theriva Biologics, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock has traded on the NYSE American under the symbol “SYN” since February 16, 2012. Prior to February 16, 2012, our common stock traded under the symbol “AEN” since October 16, 2008. The last price of our common stock as reported on the NYSE American on March 3, 2021 was $0.6445 per share. Dividend Policy We have never paid or declared any cash dividends on our common stock to date, and do not anticipate paying such cash dividends on our common stock in the foreseeable future. Whether we declare and pay dividends is determined by our Board of Directors at their discretion, subject to certain limitations imposed under Nevada corporate law. The timing, amount and form of dividends, if any, will depend on, among other things, our results of operations, financial condition, cash requirements and other factors deemed relevant by our Board of Directors. The Series A Preferred Stock, none of which remains outstanding, ranked senior to the shares of our common stock and shares of our Series B Preferred Stock with respect to dividend rights and holders of Series A Preferred Stock were entitled to a cumulative dividend at the rate of 2.0% per annum, payable quarterly in arrears, as set forth in the Certificate of Designation of Series A Convertible Preferred Stock. Holders As of March 3, 2021, we had approximately 343 stockholders of record of our common stock. This number does not include stockholders for whom shares are held in a “nominee” or “street” name. Stock Performance Graph The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. Equity Compensation Plan Information See Part II–Item 12 under the heading “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Equity Compensation Plan Information” of this Annual Report on Form 10-K for equity compensation plan information. Recent Sales of Unregistered Securities We did not sell any equity securities during the quarter ended December 31, 2020 in transactions that were not registered under the Securities Act, other than as previously disclosed in our filings with the SEC. Issuer Purchases of Equity Securities There were no issuer purchases of equity securities during the year ended December 31, 2020. Item 6. Selected Financial Data The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item. 51 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion of our financial condition and results of operations should be read in conjunction with our audited financial statements and notes thereto for the years ended December 31, 2020 and 2019 included elsewhere in this Annual Report. In addition to historical information, the following discussion contains certain forward-looking statements that involve risks, uncertainties and assumptions. Where possible, we have tried to identify these forward-looking statements by using words such as “anticipate,” “believe,” “intends,” or similar expressions. Our actual results could differ materially from those expressed or implied by the forward-looking statements due to important factors and risks including, but not limited to, those set forth under “Risk Factors” in Part I, Item 1A of this Annual Report. Overview We are a diversified clinical-stage company developing therapeutics designed to treat gastrointestinal (GI) diseases in areas of high unmet need. Our lead clinical development candidates are: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the GI tract to prevent microbiome damage, Clostridioides difficile infection (CDI), overgrowth of pathogenic organisms, the emergence of antimicrobial resistance (AMR), and acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under cGMP conditions and intended to treat both local GI and systemic diseases. We plan to explore and evaluate a range of strategic options, which may include: in-licensing opportunities; evaluation of potential acquisitions; or other potential strategic transactions. In the meantime, we remain focused on working with our clinical development partners to advance the planned Phase 1b/2a clinical trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant (HCT) patients, and advancing the clinical development program for SYN-020 intestinal alkaline phosphatase (IAP) in multiple potential indications. We are continuing to assess the potential impact of the COVID-19 pandemic. We are in close contact with our clinical development partners in order to assess the impact of COVID-19 on our studies and current timelines and costs. While we currently do not anticipate any interruptions in our operations due to COVID-19, it is possible that if the COVID-19 pandemic persists, for an extended period of time, we could experience significant disruptions to our clinical development timelines due to the COVID-19 pandemic, which would adversely affect our business, financial condition, results of operations and growth prospects. In response to the spread of COVID-19 as well as public health directives and orders, we have implemented a number of measures designed to ensure employee safety and business continuity. We have limited access to our offices and are allowing our administrative employees to continue their work outside of our offices in order to support the community efforts to reduce the transmission of COVID-19 and protect employees, complying with guidance from federal, state and local government and health authorities. The full extent to which the COVID-19 outbreak will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted. The effects of the governmental orders and our work-from-home policies may negatively impact productivity, disrupt our business and delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. Our Product Pipeline aGVHD acute graft-vs-host disease; allogeneic-HCT allogeneic hematopoietic cell transplant patients; AMR antimicrobial resistance; CDI Clostridioides difficile infection. SAD single ascending dose ¹Additional products with preclinical proof-of-concept include SYN-006 (carbapenemase) designed to prevent aGVHD and infection by vancomycin resistant enterococci and SYN-007 (ribaxamase) DR designed to prevent antibiotic associated diarrhea with oral β-lactam antibiotics. ²Dependent on funding/partnership. ³Announced option-license agreement with Massachusetts General Hospital to develop SYN-020 in several potential indications related to inflammation and gut barrier dysfunction. *Based on management’s current beliefs and expectations. 52 Summary of Clinical and Preclinical Programs Therapeutic Area Product Candidate Current Status Prevention of microbiome damage, CDI, overgrowth of pathogenic organisms, AMR, and aGVHD in allogeneic HCT recipients (Degrade IV beta-lactam antibiotics) SYN-004 (ribaxamase) (oral enzyme) ·      Announced outcomes from End of Phase 2 meeting, including Food and Drug Administration (FDA)-proposed criteria for Phase 3 clinical efficacy and safety which, if achieved, may support submission for marketing approval on the basis of a single Phase 3 clinical trial (Q4 2018) ·        Clarified market/potential partner needs and identified potential additional indications in specialty patient populations such as allogeneic hematopoietic cell transplant (HCT) patients ·       Announced clinical trial agreement (CTA) with Washington University School of Medicine to conduct a Phase 1b/2a clinical trial to evaluate safety, tolerability and pharmacokinetics in up to 36 evaluable adult allogeneic HCT recipients (Q3 2019) ·       Received official meeting minutes from FDA Type-C meeting held on December 2, 2019 to discuss development in allogeneic HCT recipients who are administered IV beta-lactam antibiotics in response to fever (Q1 2020) ·      Received written notification from the FDA informing the Company that the FDA determined the Phase 1b/2a clinical program in adult allogeneic hematopoietic cell transplant (HCT) recipients may proceed per the submitted clinical program protocol (Q3 2020) ·       Washington University has begun screening patients for enrollment of the first of three antibiotic cohorts for the Phase 1b/2a clinical trial of SYN-004 in adult HCT recipients (Q1 2021) 53 Preserve gut barrier, treat local GI inflammation, and restore gut microbiome SYN-020 (oral IAP enzyme) ·       Generated high expressing manufacturing cell lines for intestinal alkaline phosphatase (IAP) (1H 2017) ·       Identified basic Drug Supply manufacturing process and potential tablet formulation (2H 2017) ·      Identified potential clinical indications with unmet medical need including enterocolitis associated with radiation therapy for cancer (Q1 2019) ·       Completed pre-IND (Investigational New Drug) meeting with the FDA to clarify requirements for IND-enabling toxicology studies and manufacturing requirements (Q2 2019) ·       Entered into an agreement with Massachusetts General Hospital (“MGH”) granting the Company an option for an exclusive license to intellectual property and technology related to the use of IAP to maintain GI and microbiome health, diminish systemic inflammation, and treat age-related diseases (Q2 2020) ·       Submitted IND application with U.S. FDA supporting an initial indication for the treatment of radiation enteropathy secondary to pelvic cancer therapy (Q2 2020) ·       Received study-may-proceed letter from U.S. FDA to conduct a Phase 1 single ascending dose study in healthy volunteers, designed to evaluate SYN-020 for safety, tolerability, and pharmacokinetic parameters (Q3 2020) ·       A Phase 1 single-ascending-dose (SAD) study is expected to commence during the second quarter of 2021. A topline data readout is anticipated during the third quarter of 2021, pandemic conditions permitting. Prevention of CDI, overgrowth of pathogenic organisms and AMR (Degrade IV carbapenem antibiotics) SYN-006 (oral enzyme) ·       Identified P2A as a potent carbapenemase that is stable in the GI tract ·       Manufactured a formulated research lot for oral delivery (2017) ·       Demonstrated microbiome protection in a pig model of ertapenem administration (Q1 2018) ·       Reported supporting data demonstrating SYN-006 attenuated emergence of antibiotic resistance in a pig model, including encoded beta-lactamases and genes conferring resistance to a broad range of antibiotics such as aminoglycosides and macrolides (Q1 2019) Prevention of CDI, overgrowth of pathogenic organisms and AMR (Degrade oral beta-lactam antibiotics) SYN-007 (oral enzyme) ·       Preclinical work ongoing to expand the utility of SYN-004 (ribaxamase) for use with oral beta-lactam antibiotics ·       Reported supportive data from a second canine animal model demonstrating that when co-administered with oral Amoxicillin and oral Augmentin, oral SYN-007 did not interfere with systemic absorption of antibiotics but did diminish microbiome damage associated with these antibiotics (Q2 2018) ·       Reported supportive data demonstrating SYN-007 mitigated antibiotic-mediated gut microbiome alterations and maintained gut microbiome integrity when co-administered with oral amoxicillin in a dose-response canine study (Q2 2019) ·       Reported supportive data demonstrating SYN-007 protected the gut microbiome of dogs from amoxicillin and the beta-lactam/beta-lactamase inhibitor combination amoxicillin/clavulanate and also reduced the emergence of antibiotic resistance in a canine study (Q1 2020) Prevention and treatment of pertussis SYN-005 (monoclonal antibody therapies) ·       Reported supportive preclinical data demonstrating that an extended half-life version of hu1B7, a component of SYN-005, provided protection from pertussis for five weeks in a neonatal non-human primate study (Q4 2017) ·       Collaboration with UT Austin 54 Financial Developments B Riley and AGP Securities Sales Agreement During the year ended December 31, 2020, we sold an aggregate of 9.2 million shares of our common stock and received net proceeds of approximately $3.4 million before deducting issuance expenses pursuant to that certain At Market Issuance Sales Agreement, dated August 5, 2016, with B. Riley Securities, Inc. (formerly known as B. Riley FBR, Inc.), as amended by amendment no. 1 thereto, dated May 7, 2018 (the “Original ATM Sales Agreement”). We entered into an Amended and Restated At Market Issuance Sales Agreement, dated February 9, 2021, with B. Riley Securities, Inc., or B. Riley, and A.G.P./Alliance Global Partners, or AGP and together with B. Riley, the sales agents (the “Amended and Restated ATM Sales Agreement”), which replaced the Original ATM Sales Agreement. Subsequent to year end through March 3, 2021 , we have sold approximately 76.3 million shares of our common stock and received net proceeds of approximately $63.8 million, pursuant to the Original ATM Sales Agreement and the Amended and Restated ATM Sales Agreement. Stock Warrants On November 16, 2020, the exercise price of warrants issued by us in October 2018 (the “2018 Warrants”) was reduced from $1.38 per Warrant per full share of the Company’s common stock, $0.001 par value per share (the “Common Stock”), to $0.69 per 2018 Warrant per full share of Common Stock pursuant to the terms of the Warrants. The reduction was the result of the issuance of shares of common stock by the us through its “at the market offering” facility. An entry to reduce the income available to common shareholders was recorded for $880,000 to recognize the value of the effect of the change in exercise price. During January and February 2021, 11,655,747 2018 Warrants were exercised for cash proceeds of $ 8. 0 million. Critical Accounting Policies and Estimates The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses, and related disclosures. We believe our estimates and assumptions are reasonable; however, actual results and the timing of the recognition of such amounts could differ from these estimates. There are accounting policies that we believe are significant to the presentation of our consolidated financial statements. The most significant accounting policies relate to stock-based compensation, warrants, grants and research and development costs. Stock-Based Compensation We recognize stock-based compensation expense under the provisions of ASC 718, Compensation—Stock Compensation (“ASC 718”) . The fair value of stock options granted is the fair market value on the grant date. We apply the Black-Scholes option pricing model to determine the fair value of our stock options. Inherent in this model are assumptions related to expected stock-price volatility, option life, risk-free interest rate and dividend yield. We estimate the volatility of our common stock at the date of grant based on historical volatility. We estimate the expected life of our stock options using the weighted average life between the dates that options become fully vested and the maximum life of options granted. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected life of the options. The dividend rate is based on our historical rate, which we anticipate to remain at zero. The assumptions used in calculating the fair value of stock options represent our best estimates, however these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and different assumptions are used, the stock-based compensation expense could be materially different in the future. In addition, we only recognize expense for those stock options expected to vest over the service period. Warrants We have issued common stock warrants in connection with the execution of certain equity financings. The fair value of certain warrants, deemed to be derivative instruments, is recorded as a derivative liability under the provisions of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 815, Derivatives and Hedging (“ASC 815”), upon issuance. Subsequently, the liability is adjusted to fair value as of each reporting period and the changes in fair value of derivative liabilities are recorded in the consolidated statement of operations under the caption “Change in fair value of warrant liability.” The fair value of warrants deemed to be derivative instruments is determined using Monte Carlo simulations using varying assumptions regarding volatility of our common share price, remaining life of the warrant and risk-free interest rates at each period end. We thus use model-derived valuations where significant value drivers are unobservable to third parties to determine the fair value and accordingly classify such warrants as Level 3 per ASC 820, Fair Value Measurement (Topic 820). In 2020 and 2019, the Monte Carlo simulations were not used as the value of the warrants were deemed to be minimal based on the historical fair value of the warrants and the Company’s current stock price. 55 Research and Development Costs We expense research and development costs associated with developmental products not yet approved by the FDA to research and development expense as incurred. Research and development costs consist primarily of license fees (including upfront payments), milestone payments, manufacturing costs, salaries, stock-based compensation and related employee costs, fees paid to consultants and outside service providers for laboratory development, legal expenses resulting from intellectual property prosecution and other expenses relating to the design, development, testing and enhancement of our product candidates. Research and development expenses include external contract research organization (“CRO”) services. We make payments to the CROs based on agreed upon terms and may include payments in advance of study services. We review and accrue CRO expenses based on services performed and rely on estimates of those costs applicable to the stage of completion of study as provided by the CRO. Accrued CRO costs are subject to revisions as such studies progress to completion. At December 31, 2020 and 2019, we have accrued CRO expenses of $0.7 million that are included in accrued expenses. As of December 31, 2020, and 2019, we have prepaid CRO costs of $470,000 and $48,000, respectively. Results of Operations Years Ended December 31, 2020 and 2019 General and Administrative Expenses General and administrative expenses increased to $5.0 million for the year ended December 31, 2020, from $4.6 million for the year ended December 31, 2019. This increase of 8.7% is due to increased legal costs related to business development, patent execution, employee contract matters, vacation expense, insurance costs and registration fees. The charge relating to stock-based compensation expense was $0.3 million for the year ended December 31, 2020, compared to $0.3 million for the year ended December 31, 2019. Research and Development Expenses Research and development expenses decreased to $5.1 million for the year ended December 31, 2020, from $11.1 million for the year ended December 31, 2019. This decrease of 54.1% is primarily due to a reduction in preclinical and manufacturing activity of SYN-020 IAP and the result of the response to the global COVID-19 pandemic by our clinical development partners which led to the postponement of the Phase 1b/2a clinical trial of SYN-004 (ribaxamase) in allogeneic HCT recipients and the SYN-010 clinical trial and to a lesser extent the discontinuation of the Phase 2b investigator sponsored clinical trial of SYN-010. Research and development expenses also include a charge relating to non-cash stock-based compensation expense of $66,000 for the year ended December 31, 2020, compared to $75,000 for the year ended December 31, 2019. The following table sets forth our research and development expenses directly related to our therapeutic areas for the years ended December 31, 2020 and 2019. These direct expenses were external costs associated with preclinical studies and clinical trials. Indirect research and development costs related to employee costs, facilities, manufacturing, stock-based compensation and research and development support services are not directly allocated to specific drug candidates. Therapeutic Areas December 31, 2020 (in thousands) December 31, 2019 (in thousands) SYN-010 $ 430 $ 450 SYN-004 245 254 Other therapeutic areas 40 30 Total direct costs 715 734 Total indirect costs 4,416 10,349 Total Research and development $ 5,131 $ 11,083 56 Total Other Income Total other income was $44,000 for the year ended December 31, 2020, compared to other income of $283,000 for the year ended December 31, 2019. Total other income for the year ended December 31, 2020 and 2019 is primarily comprised of interest income from investments. Net Loss Our net loss for the year ended December 31, 2020 was $10.1 million, or $0.66 per common share, compared to $15.4 million, or $0.98 per common share for the year ended December 31, 2019. Net loss attributable to common stockholders for the year ended December 31, 2020 excludes net loss attributable to non-controlling interest of $73,000 and includes the accretion of the Series B preferred stock deemed dividends of $1.4 million on converted shares and Series A preferred stock accrued dividends of $254,000. Net loss attributable to common stockholders for the year ended December 31, 2019 excludes net loss attributable to non-controlling interest of $77,000 and includes the accretion of the Series B preferred stock deemed dividends of $524,000 on converted shares and Series A preferred stock accrued dividends of $248,000. Liquidity and Capital Resources With the exception of the three months ended June 30, 2010 and the three months ended December 31, 2017, we have experienced significant losses since inception, incurred negative cash flows from operations, and have a significant accumulated deficit. We have incurred an accumulated deficit of $248.1 million as of December 31, 2020 and expect to continue to incur losses in the foreseeable future. Our cash and cash equivalents totaled $6.2 million as of December 31, 2020, a decrease of $8.8 million from December 31, 2019. During the year ended December 31, 2020, the primary use of cash was for working capital requirements and operating activities which resulted in a net loss of $10.1 million for the year ended December 31, 2020. Subsequent to year end through March 3, 2021, we have raised approximately $71.8 million from cash received via the exercise of the 2018 Warrants and sales of our common stock through the Original ATM Sales Agreement and the Amended and Restated ATM Sales Agreement. With the cash available in early March 2021 of $72.6 million, we believe these resources will be sufficient to fund our operations through at least the end of the first quarter of 2023. As a result of the global COVID-19 pandemic, management was able to extend the Company’s cash runway in 2020 since our clinical development partners (CSMC and Washington University) reduced their operating capacity to include only essential activities as part of their response to the pandemic. These delays impacted the timelines for our clinical programs, which included delaying commencement of the Phase 1b/2a clinical trial of SYN-004, as well as a temporary halting of enrollment for the since discontinued clinical trial of SYN-010. If enrollment in our ongoing Phase 1b/2a clinical trial being conducted by Washington University is further postponed due to COVID-19 developments, we expect to continue to experience reduced expenses until such time as enrollment resumes. On September 30, 2020, CSMC agreed to discontinue the ongoing Phase 2b investigator-sponsored clinical study of SYN-010 following the results of a planned interim futility analysis. Although it was concluded that SYN-010 was well tolerated, it was also concluded that SYN-010 is unlikely to meet its primary endpoint by the time enrollment is completed. Although we are experiencing limited, if any, adverse impact to our financial stability stemming from the global economic slowdown, the overall disruption of global healthcare systems and other risks and uncertainties associated with the COVID-19 pandemic, including uncertainty regarding our clinical timelines, our business, financial condition, results of operations and growth prospects could be materially adversely affected. Historically, we have financed our operations primarily through public and private sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. During the year ended December 31, 2020, our only source of financing other than warrant exercises was from sales of 9.2 million shares of our common stock utilizing our at-the-market offering program through the Original ATM Sales Agreement pursuant to which we received net proceeds of approximately $3.4 million. Subsequent to year end through March 3, 2021, the Company sold approximately 76.3 million shares of the Company’s common stock for net proceeds of approximately $63.8 million pursuant to the Original ATM Sales Agreement and the Amended and Restated ATM Sales Agreement. During the year ended December 31, 2019, we did not engage in financing activities as capital raised via a public offering of our common stock during the year ended December 31, 2018 was sufficient to satisfy our cash needs in 2019 and 2020. The Amended and Restated ATM Sales Agreement enables us to offer and sell shares of our common stock from time to time through B Riley and AGP as our sales agents. Sales of common stock under the Amended and Restated ATM Sales Agreement are made in sales deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act. B Riley and AGP are entitled to receive a commission rate of up to 3.0% of gross sales in connection with the sale of our common stock sold on our behalf. There can be no assurance that we will be able to continue to raise funds through the sale of shares of common stock through the Amended and Restated ATM Sales Agreement. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain funding for future clinical trials when needed, we will be unable to carry out our business plan and we will be forced to delay the initiation of future clinical trials until such time as we obtain adequate financing. We have committed, and expect to continue to commit, substantial capital in order to implement our business strategy, including our planned product development efforts, preparation for our planned clinical trials, and performance of clinical trials and our research and discovery efforts. We believe our cash position of $72.6 million in early March 2021 is sufficient to fund our operations through at least the end of the first quarter of 2023, including continuation of our ongoing Phase 1b/2a clinical study of SYN-004 (ribaxamase) in allogeneic HCT recipients for the prevention of aGVHD, as well as our planned Phase 1 and Phase 2s clinical programs for SYN-020. 57 Following the anticipated completion of our ongoing Phase 1b/2a clinical study of SYN-004 (ribaxamase) in allogeneic HCT recipients, the planned Phase 1 SAD and MAD studies and planned Phase 2a clinical trial of SYN-020, we will need to obtain additional funds for future clinical trials. We anticipate that our future clinical trials will be much larger in size and require larger cash expenditures than the aforementioned clinical programs. We do not have any committed sources of financing for future clinical trials at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. As the COVID-19 coronavirus continues to spread around the globe, we have experienced disruptions that impacted our business and clinical trials, including halting the enrollment of new patients in our ongoing Phase 2b investigator-sponsored clinical trial of SYN-010 clinical study and postponement of clinical site initiation of the Phase 1b/2a clinical trial of SYN-004. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report. As such, it is uncertain as to the full magnitude that the pandemic will have on our financial condition, liquidity, and future results of operations. We are actively monitoring the global situation and its potential impact on our financial condition, liquidity, operations, suppliers, industry, and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the future effects of the COVID-19 outbreak on our results of operations, financial condition, or liquidity. License and Contractual Agreement Obligations We have entered into several license and collaborative agreements for the right to use research, technology and patents. Some of these license and collaborative agreements may contain milestones. The specific timing of such milestones cannot be predicted and are dependent on future developments as well as regulatory actions which cannot be predicted with certainty (including actions which may never occur). Further, under the terms of certain licensing agreements, we may have the obligation to pay certain milestones contingent upon the achievement of specific levels of sales. Off-Balance Sheet Arrangements During the years ended December 31, 2020 and 2019, we did not have, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules. Contractual Obligations We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item. Consulting Fees In November 2017, we engaged a regulatory consultant to assist in our efforts to prepare, file and obtain FDA approval for ribaxamase. The term of the engagement was on a monthly basis, provided that either party may terminate the agreement at any time by providing the other party a six-month notice period. We are obligated to pay the consultant a monthly retainer in addition to the success fee payments of up to an aggregate of $4,500,000 for attainment of certain regulatory milestones. We do not deem the contingent fee is probable at this time. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under this item.