CONTEXT THERAPEUTICS INC. You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Form 10-K. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, and the potential impacts of the ongoing COVID-19 pandemic, contains forward-looking statements that involve risks and uncertainties. You should review the section titled "Risk Factors" in this Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described below. Please also see the section entitled "Note Regarding Forward-Looking Statements." OnApril 23, 2021 , we completed a reverse triangular merger, resulting inContext Therapeutics Inc. becoming the sole holder of 100% of the membership interests inContext Therapeutics LLC . In connection with the merger, all of the common units, preferred units and all options, warrants or other rights to purchase common or preferred units ofContext Therapeutics LLC converted into common stock, preferred stock and all options, warrants or other rights to purchase common or preferred stock ofContext Therapeutics Inc. Prior to the reorganization we operated asContext Therapeutics LLC . Based on this being a transaction between entities under common control, the carryover basis of accounting was used to record the assets, liabilities, and equity ofContext Therapeutics LLC . Further, as a common control transaction, the consolidated financial statements of the Company reflect the merger transaction as if it had occurred as of the earliest period presented herein.
Overview
We are a biopharmaceutical company dedicated to improving the lives of patients living with solid tumors.
Our preclinical program, CTIM-76, is an anti-CLDN6 bsAb that is intended to redirect T-cell-mediated lysis toward malignant cells expressing CLDN6. CLDN6 is a tight junction membrane protein target expressed in multiple solid tumors, including ovarian, lung and testicular, and absent from or expressed at low levels in healthy adult tissues. InNovember 2022 , we entered into the Lonza Development Agreement with Lonza, a global development and manufacturing partner to the pharma, biotech, and nutrition industries, to manufacture CTIM-76. IND-enabling studies on CTIM-76 have been initiated, and we expect to submit an IND application to support human clinical trials to the FDA in the first quarter of 2024. OnMarch 22, 2023 , we announced a portfolio prioritization and capital allocation strategy, including discontinuing the development of ONA-XR and focusing on the development of CTIM-76. Based upon the challenging market conditions for emerging companies, the increasingly competitive landscape for breast cancer treatments, recent study findings, and other factors, we decided to cease development and explore strategic options for ONA-XR. As a result, we will no longer primarily focus on female cancers. Recent advances in the treatment of metastatic breast cancer point toward a more competitive environment in the coming years, such as promising Phase 3 clinical data for emerging product candidates, including Enhertu and capivasertib. Additionally, in the ongoing Phase 2 OATH trial evaluating ONA-XR in combination with anastrozole, elevated LFTs were identified in three patients, including in one patient who discontinued treatment, although none of the elevated LFTs were considered serious adverse events. We determined that significant incremental program costs and delays were likely to be required to analyze and potentially mitigate future LFT abnormalities. By ceasing development of ONA-XR, we expect to have sufficient cash and cash equivalents to fund our operations into late 2024. We were incorporated inApril 2015 under the laws of theState of Delaware . Since inception, we have devoted substantially all of our resources to developing product and technology rights, conducting research and development, organizing and staffing our company, business planning and raising capital. We operate as one business segment and have incurred recurring losses, the majority of which are attributable to research and development activities, and negative cash flows from operations. We have funded our operations primarily through the sale of convertible debt, convertible preferred stock, common stock and warrants. InOctober 2021 , we closed an initial public offering ("IPO") onThe Nasdaq Stock Market , in which we issued and sold 5,750,000 shares at a public offering price of$5.00 per share. We received gross proceeds of approximately$28.8 million as a result of the offering. InDecember 2021 , we sold 5,000,000 shares of common stock together with warrants to purchase 5,000,000 shares of common stock in a private placement for gross proceeds of 54
--------------------------------------------------------------------------------
Table of Conten ts
approximately$31.3 million . Currently, our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, as well as general and administrative expenditures. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or any future product candidates. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance our current and any future product candidates through all stages of development and clinical trials and, ultimately, seek regulatory approval. In addition, if we obtain regulatory approval for any product candidate, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. Furthermore, we have incurred and continue to incur significant costs associated with operating as a public company, including legal, accounting, investor relations and other expenses that we did not incur as a private company. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenses on other research and development activities. Our net loss was$14.8 million for the year endedDecember 31, 2022 . As ofDecember 31, 2022 , we had an accumulated deficit of$44.1 million .We expect to continue to incur net operating losses for at least the next several years, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. We expect our expenses and capital requirements will increase significantly in connection with our ongoing activities as we:
•continue nonclinical studies and initiate clinical trials for CTIM-76 and for any additional product candidates that we may pursue;
•continue to scale up external manufacturing capacity with the aim of securing sufficient quantities to meet our capacity requirements for clinical trials and potential commercialization; •establish a sales, marketing and distribution infrastructure to commercialize any approved product candidate and related additional commercial manufacturing costs;
•develop, maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets and know how;
•acquire or in-license other product candidates and technologies, including related upfront, milestone and royalty payments;
•attract, hire and retain additional executive officers, clinical, scientific, quality control, and manufacturing management and administrative personnel;
•add clinical, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts;
•expand our operations in
•incur additional legal, accounting, investor relations and other expenses associated with operating as a public company.
As ofDecember 31, 2022 , we had cash and cash equivalents of$35.5 million , which we expect will be sufficient to fund our operations into late 2024. If the Company is unable to obtain additional financing, the lack of liquidity could have a material adverse effect on the Company's future prospects. We will need to raise substantial additional capital to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we plan to finance our operations through the sale of equity, debt financings and/or other capital sources, which may include collaborations with other companies or other strategic transactions. There are no assurances that we will be successful in obtaining an adequate level of financing as and when needed to finance our operations on terms acceptable to us, or at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to secure adequate additional funding, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more product candidates or delay our pursuit of potential in-licenses or acquisitions. 55
--------------------------------------------------------------------------------
Table of Conten ts
The COVID-19 Pandemic and its Impacts on Our Business
The spread of COVID-19 has caused worldwide economic instability and significant volatility in the financial markets. There is significant uncertainty as to the likely effects of this disease should novel variants emerge, which may, among other things, materially impact our ongoing or planned clinical trials. This pandemic and/or periodic outbreaks could result in difficulty securing clinical trial site locations, CROs, and/or trial monitors and other critical vendors and consultants supporting the trial. In addition, outbreaks or the perception of an outbreak near a clinical trial site location could impact our ability to enroll patients. These situations, or others associated with COVID-19, could cause delays in our clinical trial plans and could increase expected costs, all of which could have a material adverse effect on our business and financial condition. At the current time, we are unable to quantify the potential effects of this pandemic on our future consolidated financial statements.
Components of Our Results of Operations
Operating Expenses
Acquired in-process research and development expense consists of initial up-front and development milestone payments incurred in connection with the acquisition or licensing of products or technologies that do not meet the definition of a business under Accounting Standards Codification Topic 805, Business Combinations. Acquired in-process research and development expense reflects the cash paid and/or the estimated fair value of the equity consideration given.
Research and Development Expenses
Research and development expenses have consisted primarily of costs incurred in connection with the discovery and development of our product candidates. We expense research and development costs as incurred, including:
•expenses incurred to conduct the necessary discovery-stage laboratory work, preclinical studies and clinical trials required to obtain regulatory approval;
•personnel expenses, including salaries, benefits and share-based compensation expense for our employees and consultants engaged in research and development functions; •costs of funding research performed by third parties, including pursuant to agreements with CROs that conduct our clinical trials, as well as investigative sites, consultants and CROs that conduct our preclinical and clinical studies; •expenses incurred under agreements with contract manufacturing organizations, including manufacturing scale-up expenses, milestone-based payments, and the cost of acquiring and manufacturing preclinical study and clinical trial materials;
•fees paid to consultants who assist with research and development activities;
•expenses related to regulatory activities, including filing fees paid to regulatory agencies; and
•allocated expenses for facility costs, including rent, utilities and maintenance.
We track outsourced development costs and other external research and
development costs to specific product candidates on a program-by-program basis.
However, we do not track our internal research and development expenses on a
program-by-program basis as they primarily relate to compensation, early
research and other costs which are deployed across multiple projects under
development.
Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect our research and
56
--------------------------------------------------------------------------------
Table of Conten ts
development expenses to increase significantly over the next several years as we increase personnel costs, including share-based compensation, conduct our clinical trials, including later-stage clinical trials, for current and any future product candidates and prepare regulatory filings for our current and any future product candidates.
General and Administrative Expenses
General and administrative expenses have consisted primarily of personnel expenses, including salaries, benefits and share-based compensation expense, for employees and consultants in executive, finance and accounting, legal, operations support, information technology and business development functions. General and administrative expense also includes corporate facility costs not otherwise included in research and development expense, including rent, utilities and insurance, as well as legal fees related to intellectual property and corporate matters and fees for accounting and consulting services. We expect that our general and administrative expenses will increase in the future to support our continued research and development activities, potential commercialization efforts and increased costs of operating as a public company. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, legal support and accountants, among other expenses. Additionally, we will continue to incur significant costs associated with being a public company, including expenses related to services associated with maintaining compliance with the requirements of Nasdaq and theSecurities and Exchange Commission (the "SEC"), insurance and investor relations costs. If any of our current or future product candidates obtainU.S. regulatory approval, we expect that we would incur significantly increased expenses associated with building a sales and marketing team.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents.
Interest Expense
Interest expense has consisted primarily of interest related to our convertible promissory notes that converted to Series A stock in 2021. All of our previously outstanding convertible promissory notes were converted as ofFebruary 2021 .
Other Income
Other income is primarily due to the recognition of a gain on extinguishment of
debt as a result of the forgiveness of our outstanding Paycheck Protection
Program loan in
57--------------------------------------------------------------------------------
Table of Conten ts
Results of Operations
Comparison of the Years Ended
The following table sets forth our results of operations for the years ended
Year ended December 31,
2022 2021 $ Change % Change
Operating expenses:
Acquired in-process research and
development $ 500,000 $ 3,087,832 (2,587,832) (84) %
Research and development 7,091,163 3,805,067 3,286,096 86 %
General and administrative 7,790,040 3,632,920 4,157,120 114 %
Loss from operations (15,381,203) (10,525,819) (4,855,384) 46 %
Interest income (expense), net 547,268 (64,240) 611,508 (952) %
Change in fair value of convertible
promissory notes - 9,317 (9,317) (100) %
Other (expense) income (2,004) 123,872 (125,876) (102) %
Net loss $ (14,835,939) $ (10,456,870) $ (4,379,069) 42 %
Acquired in-process research and development expense of$0.5 million for the year endedDecember 31, 2022 reflects the expense recognized related to the development milestone achieved in 2022 under the collaboration and licensing agreement with Integral for the development of CTIM-76. Acquired in-process research and development expense of$3.1 million for the year endedDecember 31, 2021 reflects the fair value of the consideration paid/equity issued under the collaboration and licensing agreement with Integral for the development of CTIM-76.
Research and Development Expenses
Research and development expenses increased by approximately$3.3 million for the year endedDecember 31, 2022 as compared to the same period in 2021. The following table summarizes our research and development expenses for the year endedDecember 31, 2022 as compared to the same period in 2021: Year ended December 31, 2022 2021 $ Change % Change ONA-XR$ 4,641,936 $ 2,242,146 $ 2,399,790 107 % CTIM-76 948,716 642,030 306,686 48 % Personnel-related costs 1,372,376 916,371 456,005 50 % Other research and development 128,135 4,520 123,615 2735 %$ 7,091,163 $ 3,805,067 $ 3,286,096 86 % The increase in ONA-XR expenses of$2.4 million was primarily due to an increase of$1.0 million in contract manufacturing costs and an increase of$1.1 million in clinical trial costs, mostly as a result of initiating our Phase 1b/2 ELONA trial. CTIM-76 expenditures increased by$0.3 million primarily as a result of completing additional IND-enabling studies and higher contract manufacturing costs. Personnel-related costs, which include salaries, benefits and stock-based compensation expense, increased by approximately$0.5 million , primarily due to higher headcount over the prior year period. 58
--------------------------------------------------------------------------------
Table of Conten ts
General and Administrative Expenses
General and administrative expenses increased by$4.2 million from$3.6 million for the year endedDecember 31, 2021 to$7.8 million for the year endedDecember 31, 2022 . The increase was mainly due to an increase of$2.0 million in compensation and share-based compensation as a result of an increase in our general and administrative headcount and changes to compensation arrangements. Additionally, expenses increased due to higher insurance costs of$1.2 million and$1.0 million of other costs associated with operating as a public company.
Interest Income (Expense), net
Interest income (expense), net, increased by approximately$0.6 million for the year endedDecember 31, 2022 as compared to the year endedDecember 31, 2021 primarily due to higher interest income earned as a result of higher cash and cash equivalent balances and higher interest rates. In addition, interest expense was lower for the year endedDecember 31, 2022 due to the conversion of all convertible promissory notes during 2021.
Change in Fair Value of Convertible Promissory Notes
The change in fair value of convertible promissory notes was$9,317 for the year endedDecember 31, 2021 . This change was attributable to a decrease in the fair value of our common stock. Other Income (Expense) Other income (expense) of$0.1 million for the year endedDecember 31, 2021 was primarily due to the recognition of a gain on extinguishment of debt as a result of the forgiveness of our outstanding Paycheck Protection Program loan inJuly 2021 .
Liquidity and Capital Resources
Overview
We have incurred losses and negative cash flows from operations since inception and have an accumulated deficit of$44.1 million as ofDecember 31, 2022 . Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. Since our inception throughDecember 31, 2022 , we have funded our operations through the sale of convertible debt, convertible preferred stock, common stock and warrants. InOctober 2021 , we closed an IPO onThe Nasdaq Stock Market and received gross proceeds of approximately$28.8 million as a result of the offering. Additionally, inDecember 2021 , we sold 5,000,000 shares of our common stock together with warrants to purchase 5,000,000 shares of our common stock in a private placement and received gross proceeds of approximately$31.3 million . As ofDecember 31, 2022 , we had cash and cash equivalents of$35.5 million , which we expect will be sufficient to fund our operations into late 2024 as a result of our portfolio prioritization and capital allocation strategy, which includes discontinuing the development of ONA-XR. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.
Funding Requirements
Our primary use of cash is to fund operating expenses, which consist of research
and development expenditures and various general and administrative expenses.
Cash used to fund operating expenses is impacted by the timing of when we pay
these expenses, as reflected in the change in our outstanding accounts payable,
accrued expenses and prepaid expenses.
59--------------------------------------------------------------------------------
Table of Conten ts
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
•the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our current and for any additional product candidates that we may pursue;
•the costs of manufacturing our current and any future product candidates for clinical trials and in preparation for regulatory approval and commercialization;
•the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our current and any future product candidates that we may pursue;
•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;
•expenses needed to attract and retain skilled personnel;
•costs associated with being a public company;
•the costs required to scale up our clinical, regulatory and manufacturing capabilities;
•the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for our current and any future product candidates for which we receive regulatory approval; and
•revenue, if any, received from commercial sales of our current and any future product candidates, should any of our product candidates receive regulatory approval.
We will need additional funds to meet our operational needs and capital
requirements for clinical trials, other research and development expenditures,
and general and administrative expenses. We currently have no credit facility or
committed sources of capital.
Until such time, if ever, as we can generate substantial product revenue, we
expect to finance our operations through a combination of equity offerings, debt
financings, collaborations, strategic alliances and/or marketing, distribution
or licensing arrangements. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, the ownership
interests of our stockholders will be diluted, and the terms of these securities
may include liquidation or other preferences that adversely affect the rights of
our common stockholders. Debt financing and preferred equity financing, if
available, may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making
acquisitions or capital expenditures or declaring dividends. If we raise
additional funds through collaborations, strategic alliances or marketing,
distribution or licensing arrangements with third parties, we may have to
relinquish valuable rights to our technologies, future revenue streams, research
programs or product candidates, or grant licenses on terms that may not be
favorable to us. If we are unable to raise additional funds through equity or
debt financings or other arrangements when needed, we may be required to delay,
limit, reduce or terminate our research, product development or future
commercialization efforts, or grant rights to develop and market product
candidates that we would otherwise prefer to develop and market ourselves.
60--------------------------------------------------------------------------------
Table of Conten ts
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:
Year ended December 31,
2022 2021
Cash used in operating activities $ (13,549,234) $ (8,799,487)
Cash used in investing activities (536,836)
(250,000)
Cash (used in) provided by financing activities (102,071)
58,394,036
Net (decrease) increase in cash and cash equivalents
Comparison of the Years Ended
Operating Activities
During the year endedDecember 31, 2022 , we used$13.5 million of cash in operating activities. Cash used in operating activities reflected our net loss of$14.8 million , partially offset by non-cash share-based compensation of$1.0 million , in-process research and development charges of$0.5 million , and a net change in our operating assets and liabilities of$0.3 million . The primary uses of cash were to fund our operations related to the development of our product candidates, ONA-XR and CTIM-76. During the year endedDecember 31, 2021 , we used$8.8 million of cash in operating activities. Cash used in operating activities reflected our net loss of$10.5 million , a gain of$0.1 million from the extinguishment of debt and a net change in our operating assets and liabilities of$2.2 million . This was primarily offset by non-cash in-process research and development charges of$3.1 million , the non-cash fair value measurement of warrants for services of$0.4 million and share-based compensation of$0.5 million . The primary uses of cash were to fund our operations related to the development of our product candidates, ONA-XR and CTIM-76.
Investing Activities
During the year endedDecember 31, 2022 , cash used in investing activities was primarily attributable to the payment of a development milestone of$0.5 million under the collaboration and licensing agreement with Integral for the development of CTIM-76. In addition, we used approximately$37,000 of cash to purchase property and equipment. During the year endedDecember 31, 2021 , cash used in investing activities was attributable to the initial upfront license fee of$0.3 million related to our acquired in-process research and development..
Financing Activities
During the year ended
During the year endedDecember 31, 2021 , financing activities provided$58.4 million , consisting of net proceeds of$5.0 million from the sale of Series A Stock and warrants for common stock, net proceeds of$24.4 million from the sale of common stock in our IPO and net proceeds of$29.0 million from the sale of common stock and warrants in our private placement.
Off-Balance Sheet Arrangements
During the periods presented, we did not have, nor do we currently have, any
relationships with unconsolidated entities or financial partnerships, including
entities sometimes referred to as structured finance or special purpose entities
that were established for the purpose of facilitating off-balance sheet
arrangements or other contractually narrow or limited purposes. We do not engage
in off-balance sheet financing arrangements. In addition, we do not
61--------------------------------------------------------------------------------
Table of Conten ts
engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.
Critical Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance withU.S. generally accepted accounting principles ("GAAP"). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to prepaid/accrued research and development expenses and share-based compensation. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements included elsewhere in this Form 10-K, we believe the following accounting policies are the most critical to the judgments and estimates used in the preparation of our consolidated financial statements.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred.
We accrue an expense for preclinical studies and clinical trial activities performed by our vendors based upon estimates of the proportion of work completed. We determine the estimates by reviewing contracts, vendor agreements and purchase orders, and through discussions with our internal clinical personnel and external service providers as to the progress or stage of completion of trials or services and the agreed-upon fee to be paid for such services. However, actual costs and timing of clinical trials are highly uncertain, subject to risks and may change depending upon a number of factors, including our clinical development plan. We make estimates of our prepaid/accrued expenses as of each balance sheet date in our consolidated financial statements based upon facts and circumstances known at that time. If the actual timing of the performance of services or the level of effort varies from the estimate, we will adjust the prepaid/accrual accordingly. Nonrefundable advance payments for goods and services, including fees for clinical trial expenses, process development or manufacturing and distribution of clinical supplies that will be used in future research and development activities, are deferred and recognized as expense in the period that the related goods are consumed, or services are performed.
Share-Based Compensation
We measure compensation expense for all share-based awards based on the
estimated fair value of the share-based awards on the grant date. We use the
Black-Scholes option pricing model to value our share-based awards. We recognize
compensation expense on a straight-line basis over the requisite service period,
which is generally the vesting period of the award. We have not issued awards
for which vesting is subject to market or performance conditions.
The Black-Scholes option-pricing model requires the use of subjective
assumptions that include the expected stock price volatility and the fair value
of the underlying common stock on the date of grant. See Note 8 to our audited
consolidated financial statements included elsewhere in this Form 10-K for
information concerning certain of the specific assumptions we used in applying
the Black-Scholes option pricing model to determine the estimated fair value of
our awards granted.
62
--------------------------------------------------------------------------------
Table of Conten ts
Recent Accounting Pronouncements
See Note 3 to our audited consolidated financial statements found elsewhere in this Form 10-K for a description of recent accounting pronouncements applicable to our consolidated financial statements.
Disclosures About Market Risk
We are exposed to market risk related to changes in interest rates. As ofDecember 31, 2022 , we had cash and cash equivalents of$35.5 million consisting of bank deposits and money market accounts. Due to the short-term duration of our cash equivalents, an immediate 10% change in interest rates would not have a material effect on the fair market value. Beginning in the first quarter of 2023, we expect to have more significant foreign currency risks related to our operating expenses denominated in currencies other than theU.S. dollar due to the manufacturing of CTIM-76 under the Lonza Development Agreement. A hypothetical 10% increase or decrease in the value of foreign exchange rates relative to theU.S. dollar as ofDecember 31, 2022 would have had an immaterial impact on our net loss. To date, we have not entered into any foreign currency hedging contracts. Inflation generally affects us by increasing our labor and clinical trial costs. We do not believe inflation had a material effect on our business, financial condition or results of operations during the years endedDecember 31, 2022 and 2021.
Emerging Growth Company and Smaller Reporting Company Status
InApril 2012 , the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from complying with new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates. Other exemptions and reduced reporting requirements under the JOBS Act include, without limitation, the requirements for providing an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any requirement that may be adopted by thePublic Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. We will remain an emerging growth company until the earlier to occur of (a) the last day of the fiscal year (i) followingOctober 19, 2026 , (ii) in which we have total annual gross revenues of at least$1.235 billion or (iii) in which we are deemed to be a "large accelerated filer" under the rules of theSEC , which means that we have been required to file annual and quarterly reports under the Exchange Act for a period of at least 12 months and have filed at least one annual report pursuant to the Exchange Act and (b) either (i) the market value of our common stock that is held by non-affiliates exceeds$700.0 million as of the priorJune 30th , or (ii) the date on which we have issued more than$1.0 billion in non-convertible debt during the prior three-year period. We are also a "smaller reporting company," meaning that the market value of our stock held by non-affiliates is less than$700.0 million and our annual revenue is less than$100.0 million during the most recently completed fiscal year. We will continue to be a smaller reporting company while either (i) the market value of our stock held by non-affiliates is less than$250.0 million or (ii) our annual revenue is less than$100.0 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than$700.0 million . If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial 63
--------------------------------------------------------------------------------
Table of Conten ts
statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
64--------------------------------------------------------------------------------
Table of Conten ts
© Edgar Online, source
