The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Report. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those which are not within our control.

Background of Our Company



We are a pharmaceutical development company that is seeking to discover, develop
and ultimately commercialize innovative therapeutics for patients with certain
cancers and
non-cancerous
proliferation disorders. We also have explored and expect to continue to explore
acquiring or licensing other innovative
pre-clinical
and clinical stage therapeutics addressing unmet needs and orphan indications
for the treatment of cancer and other diseases.

Our current primary focus is on the development of therapies initially for prostate and lung cancers in the United States utilizing SUBA-Itraconazole, a patented, oral formulation of the currently marketed anti-fungal drug itraconazole to which we hold an exclusive U.S. license from our majority stockholder, Mayne Pharma, for certain cancers and non-cancerous proliferation disorders. We previously conducted a positive Phase 2b study of SUBA-Itraconazole for the treatment of Basal Cell Carcinoma Nevus Syndrome, and Mayne Pharma assumed control of the clinical and regulatory development of this indication in December 2018 as described elsewhere in this Report.

SUBA-Itraconazole was developed and is licensed to us by our majority stockholder Mayne Pharma under a supply and license agreement, originally dated September 3, 2013, and most recently amended and restated in December 2018. Mayne Pharma is an Australian specialty pharmaceutical company that develops and manufactures branded and generic products, which it distributes directly or through distribution partners and provides contract development and manufacturing services. In addition to being our licensor and supplier, under the Third Amended SLA and related agreements, Mayne Pharma holds a majority equity stake in our company and holds important rights with respect to our company, such as the right (in its discretion) to appoint and remove members of our Board of Directors.

We were founded under the name "Commonwealth Biotechnologies, Inc." in Virginia in 1992, and completed an initial public offering in October 1997. CBI previously provided, on a contract basis, specialized life sciences services to the pharmaceutical and biotechnology sector. On January 20, 2011, CBI filed a voluntary petition for bankruptcy. We recommenced our current operations in August 2013 as a Delaware corporation following the emergence of CBI from its voluntary bankruptcy proceedings.

Critical Accounting Policies and Estimates

Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

Revenue Recognition

We currently have no ongoing source of revenues. Any miscellaneous income is recognized when earned. Deferred revenue represents cash received for royalties in advance of being earned. Such payments are reflected as deferred revenue until recognized under our revenue recognition policy. Deferred revenue would be classified as current if management believes we will be able to recognize the deferred amount as revenue within twelve months of the balance sheet date. Deferred revenue will be recognized when the product is sold and the royalty is earned. Since all deferred revenue on our balance sheet is related to the BCCNS product which is yet to be approved by FDA, we have determined that 100% of the advances of the royalty received by Mayne Pharma should be classified as non-current.



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Cash and Cash Equivalents

We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. At times, we may maintain cash balances in excess of Federal Deposit Insurance Corporation insured amounts which is up to $250,000 for substantially all depository accounts. As of December 31, 2021, we had no cash in excess of the amount covered by Federal Deposit Insurance Corporation with two financial institutions.

Research and Development Expenses

Research and development costs are expensed in the period in which they are incurred and include the expenses paid to third parties who conduct research and development activities on our behalf as well as purchased in-process research and development.



Stock-Based Compensation

We account for stock-based awards to employees and non-employees using Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718 - Accounting for Share-Based Payments, which provides for the use of the fair value based method to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. Fair values of RSUs issued are determined based predominantly on the trading price of the common stock on the date of grant. Fair value of each common stock option is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatility is based on historical volatility of a peer group's common stock and other factors estimated over the expected term of the options. The expected term of the options granted is derived using the "simplified method" which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield.

Income taxes

Deferred tax assets and liabilities are recognized for future tax consequences attributed to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that are expected to apply to the differences in the periods that they are expected to reverse. We have evaluated the guidance relating to accounting for uncertainty in income taxes and determined that we had no uncertain income tax positions that could have a significant effect on the consolidated financial statements for the years ended December 31, 2021 or 2020. Deferred tax assets consist primarily of in-process research and development, net operating loss carryforward, and share-based compensation. We recorded a 100% valuation allowance against the deferred tax assets as we have determined such amounts will not be currently realizable.

Recent accounting pronouncements

We have considered all other recent accounting pronouncements that are issued, but not effective, and we do not believe that they will have a significant impact on the Company's results of operations or financial position.

Results of Operations

For the Year Ended December 31, 2021 Compared to the Year Ended December 31, 2020

Research and Development Expenses. We recognized $4,905 and $185,294 in research and development expenses during the years ended December 31, 2021 and 2020, respectively. The expense in 2021 is primarily patent expenses. The expenses in 2020 related primarily to the prostate cancer IND filing.

General and Administrative Expenses. We recognized $320,490 and $873,703 in general and administrative expenses during the years ended December 31, 2021 and 2020, respectively. The decrease of approximately $0.5 million was due primarily to a $0.2 million reduction of payroll and payroll related expenses due to a reduction in compensation and benefits to our two employees throughout the year. In addition, stock-based compensation declined by approximately $0.2 million due to the timing of the vesting of stock options issued in 2021 and 2020. All outstanding stock options at December 31, 2021 are fully vested.



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Gain on loan forgiveness. We recognized $41,600 in gain on loan forgiveness during the year ended December 31, 2021 and no gain on loan forgiveness during the year ended December 31, 2020. The gain in 2021 was related to the forgiveness of the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act").

Liquidity and Capital Resources

We are presently developing and conducting our clinical and regulatory business plans and are exploring the potential acquisition or license of additional product candidates. Our current cash on hand, approximately $30,626 million at December 31, 2021, is insufficient to develop our full clinical and regulatory business plan as currently anticipated or to acquire or license additional product candidates. Our only source of financial liquidity as of the date of this Report is a term debt facility pursuant to which, in December 2020, Mayne Pharma provided an aggregate $231,000 credit facility us as described under Item 13. Certain Relationships and Related Transactions, and Director Independence - 2020 Mayne Term Debt Facility. On January 13, 2022, the credit facility was increased by $50,000 and on March 9, 2022, the credit facility was increased by an additional $50,000.

Based on our current operational plan and budget, we expect that we will have sufficient cash to manage our business into June 2022, although this estimation assumes the only minimal continuing operations and that we do not begin any clinical trials, acquire other drug development opportunities or otherwise face unexpected events, costs or contingencies (including, without limitation, as a result of the ongoing litigations), any of which could affect our cash requirements A continued lack of cash resources resulting from an inability to generate cash flow from operations and royalties or to raise capital from external sources would force us to substantially curtail or cease operations and would, therefore, have a material adverse effect on our business and overall viability.

Our plan, if conditions allow, is to finance our research and development, commercialization and distribution efforts, any acquisitions or investments and our working capital needs primarily through:



     •    proceeds from public and private financings and, potentially, from other
          strategic transactions (including potential royalty-related financing
          transactions) although our attempts over the last year to secure such
          financing have not been successful, due to, among other factors, our
          ongoing litigations and the lack of market liquidity for our common
          stock;



     •    royalty revenue from Mayne Pharma from sales of SUBA-Itraconazole BCCNS
          upon approval by FDA (after earned royalties have been applied to any
          royalties advanced under the Supply and License Agreement, although it is
          uncertain if and when such FDA approval will be obtained);



     •    proceeds from the exercise of outstanding warrants previously issued in
          private financings (including, potentially, warrants held by our majority
          shareholder, Mayne Pharma);



     •    potential partnerships with other pharmaceutical companies to assist in
          the supply, manufacturing and distribution of our products for which we
          would expect to receive milestone and royalty payments;



     •    potential licensing and joint venture arrangements with third parties,
          including other pharmaceutical companies where we would receive funding
          based on
          out-licensing
          our product; and



     •    seeking government or private foundation grants which would be awarded to
          us to further develop our current and future anti-cancer therapies.

However, there is a significant risk that none of these plans will be implemented in a manner necessary to sustain us for an extended period of time and we will be unable to obtain additional financing when needed on commercially reasonable terms, if at all. In particular, we are presently subject to the Action and the Class Action (see the "Legal Proceedings" section of this Report for further information). The existence of the Action and the Class Action and the uncertainty surrounding the outcomes has impeded our ability to secure additional funding and may continue to do so for so long as the outcome of the Action is uncertain.

If adequate funds are not available to us when needed, we may be required to continue with reduced operations or to obtain funds through arrangements that may require us to relinquish rights to technologies or potential markets, any of which could have a material adverse effect on us. In addition, our inability to secure additional funding in the near future could cause our business to fail or become bankrupt or force us to wind down or discontinue operations.



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Contractual Obligations and Commercial Commitments



There are no
non-cancellable
contractual obligations as of December 31, 2021.

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