NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(in thousands,
except share and per share data)
Amarantus Bioscience Holdings, Inc.
(the “Company”) is a Nevada corporation that was formed to facilitate a merger with Amarantus BioScience, Inc., a Delaware
corporation that was incorporated on January 14, 2008. The Company is a development stage biopharmaceutical drug development
company dedicated to sourcing high-potential therapeutic platform technologies and aligning their development with complementary
clinical-stage compounds to reduce overall enterprise risk. Through March 31, 2014, the Company has been primarily engaged in biotechnology
research and development and raising capital to fund its operations.
Basis of Presentation
The accompanying unaudited condensed
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
The unaudited condensed consolidated
financial statements (Financial Statements) have been prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”) and reflect all adjustments (consisting of normal recurring adjustments unless
otherwise indicated) which, in the opinion of management, are necessary for a fair presentation of the results for the interim
periods presented. Certain prior year amounts have been reclassified to conform to current year presentation.
Certain information in footnote
disclosures normally included in the financial statements prepared in conformity with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to the SEC rules and regulations for interim reporting.
The financial results for the periods presented may not be indicative of the full year’s results. The Company believes the
disclosures are adequate to make the information presented not misleading.
These financial statements should
be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the fiscal
year ended December 31,, 2013 included in the Company’s Annual Report on Form 10K filed in April 2014.
Significant Accounting
Policies
There have been no material changes
in the Company’s significant accounting policies to those previously disclosed in the 2013 Annual Report.
Recently Issued Accounting
Pronouncements
There have been no recent
accounting pronouncements or changes in accounting pronouncements during the three months ended March 31, 2014, as compared
to the recent accounting pronouncements described in the Company’s Form 10-K for the year ended December 31, 2013,
that are of significance, or potential significance, to the Company.
|
2.
|
LIQUIDITY AND GOING CONCERN
|
The Company’s activities
since inception have consisted principally of acquiring product and technology rights, raising capital, and performing research
and development. The Company is considered to be in the development stage as of March 31, 2014, as our principal commercial operations
have not commenced. Successful completion of the Company’s development programs and, ultimately, the attainment of profitable
operations are dependent on future events, including, among other things, its ability to access potential markets; secure financing,
develop a customer base; attract, retain and motivate qualified personnel; and develop strategic alliances. From inception, the
Company has been funded by a combination of equity and debt financings.
The Company expects to continue
to incur substantial losses over the next several years during its development phase. To fully execute its business plan, the Company
will need to complete certain research and development activities and clinical studies. Further, the Company’s product candidates
will require regulatory approval prior to commercialization. These activities may span many years and require substantial expenditures
to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The
Company plans to meet its capital requirements primarily through issuances of debt and equity securities and, in the longer term,
revenue from product sales.
The accompanying financial statements
have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP), which contemplate
continuation of the Company as a going concern. As of March 31, 2014, the Company had cash and cash equivalents of approximately
$3,765. During the three months ended March 31, 2014, the Company incurred a net loss of approximately $5,542 and had negative
cash flows from operating activities of approximately $1,259. In addition, the Company had an accumulated deficit of approximately
$32,600 at March 31, 2014. The Company believes its current capital resources are not sufficient to support its operations. Management
intends to continue its research efforts and to finance operations of the Company through debt and/or equity financings. Management
plans to seek additional debt and/or equity financing through private or public offerings or through a business combination or
strategic partnership. There can be no assurance that the Company will be successful in obtaining additional financing on favorable
terms, or at all. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of these uncertainties.
At March 31, 2014, the Company
was in technical default on certain convertible notes with an aggregate principal balance outstanding of approximately $114, which
was due prior to March 31, 2014.
|
3.
|
RESTATEMENT OF PRIOR QUARTERS
|
In the fourth quarter of 2013,
we discovered that some of the amounts we had previously reported in prior quarters had not been recorded correctly. The adjustments
to correct for accounting differences were made in the fourth quarter of 2013 and are primarily related to our accounting for
convertible note obligations.
The following table sets forth the effects of the
restatement on affected items within our previously reported Condensed Consolidated Statement of Operations for the three months
ended March 31, 2013.
|
|
Three Months Ended March 31, 2013
|
|
|
|
As Reported
|
|
|
As Restated
|
|
Operating loss
|
|
$
|
(1,636
|
)
|
|
$
|
(1,885
|
)
|
Non-operating income (loss)
|
|
|
(3,906
|
)
|
|
|
(2,753
|
)
|
Net loss
|
|
|
(5,542
|
)
|
|
|
(4,638
|
)
|
Net loss per common share, basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
Deferred funding fees:
|
|
Period Ended
|
|
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
|
|
|
|
|
|
|
Total deferred funding fees
|
|
$
|
266
|
|
|
$
|
150
|
|
Amortization
|
|
|
(137
|
)
|
|
|
(41
|
)
|
Net deferred funding fees
|
|
$
|
129
|
|
|
$
|
109
|
|
The net deferred funding fees consist mainly of approximately
$116 relating to the commitment fee paid to Lincoln Park Fund, LLC.
As of March 31, 2014, amortization expense for the
next three years is expected to be as follows:
2014 (remaining nine months)
|
|
$
|
48
|
|
2015
|
|
|
46
|
|
2016
|
|
|
35
|
|
Total
|
|
$
|
129
|
|
Accrued liabilities:
|
|
Period Ended
|
|
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
|
|
|
|
|
|
|
Accrued compensation and related benefits
|
|
$
|
197
|
|
|
$
|
267
|
|
Series D Convertible Preferred dividend payable
|
|
|
26
|
|
|
|
26
|
|
Total
|
|
$
|
223
|
|
|
$
|
293
|
|
Related party liabilities:
|
|
Period Ended
|
|
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
|
|
|
|
|
|
|
Promissory note
|
|
$
|
222
|
|
|
$
|
222
|
|
Accrued interest
|
|
|
27
|
|
|
|
26
|
|
Total
|
|
$
|
249
|
|
|
$
|
248
|
|
This promissory note dated March 5, 2008 is due and payable
March 5, 2015 and carries an annual interest rate of 2%. At the option of the Company, the This note and the accrued interest owed
can be converted to the common stock of the Company based on the closing price on the day of the conversion as quoted on the exchange
on which the Company’s common stock is listed. The conversion price as at March 31, 2014 was $0.0775 and would convert to
approximately 3,213,000 shares.
|
5.
|
Fair Value Measurements
|
The Company’s financial
assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2014 and December 31, 2013, by level
within the fair value hierarchy, are as follows:
Fair Value
Measurements at March 31, 2014
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
409
|
|
|
$
|
409
|
|
Fair Value Measurements
at December 31, 2013
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,859
|
|
|
$
|
5,859
|
|
For certain convertible note obligations, the Company
is required to measure and record a related derivative liability, representing the estimated fair value of any embedded conversion
options. The following table provides a summary of changes in the fair value of the Company’s Level 3 financial liabilities
from December 31, 2013 to March 31, 2014:
Debenture issuance date
|
|
|
October
2, 2013
|
|
|
|
October
2, 2013
|
|
|
|
September
6, 2013
|
|
|
|
October
2, 2013
|
|
|
|
October
2, 2013
|
|
|
|
September
6, 2013
|
|
|
|
October
2, 2013
|
|
|
|
September
6, 2013
|
|
|
|
October
2, 2013
|
|
|
|
October
2, 2013
|
|
|
|
September
6, 2013
|
|
|
|
October
2, 2013
|
|
|
|
October
2, 2013
|
|
|
|
Total
|
|
Number of shares issued (000 omitted)
|
|
|
2,778
|
|
|
|
2,083
|
|
|
|
16,667
|
|
|
|
10,083
|
|
|
|
1,028
|
|
|
|
7,500
|
|
|
|
139
|
|
|
|
6,806
|
|
|
|
3,750
|
|
|
|
13,264
|
|
|
|
3,889
|
|
|
|
5,208
|
|
|
|
1,667
|
|
|
|
|
|
Debenture principal
|
|
$
|
111
|
|
|
$
|
83
|
|
|
$
|
667
|
|
|
$
|
403
|
|
|
$
|
41
|
|
|
$
|
300
|
|
|
$
|
6
|
|
|
$
|
272
|
|
|
$
|
150
|
|
|
$
|
531
|
|
|
$
|
156
|
|
|
$
|
208
|
|
|
$
|
67
|
|
|
$
|
2,995
|
|
Fair value of debenture at conversion date (1)
|
|
$
|
204
|
|
|
$
|
115
|
|
|
$
|
1,333
|
|
|
$
|
811
|
|
|
$
|
46
|
|
|
$
|
498
|
|
|
$
|
9
|
|
|
$
|
388
|
|
|
$
|
171
|
|
|
$
|
591
|
|
|
$
|
220
|
|
|
$
|
301
|
|
|
$
|
97
|
|
|
$
|
4,784
|
|
Date of valuation (conversion)
|
|
October
2, 2013
|
|
|
February
20, 2014
|
|
|
January
30, 2014
|
|
|
January
30, 2014
|
|
|
March
31, 2014
|
|
|
February
5, 2014
|
|
|
February
10, 2014
|
|
|
March
6,
2014
|
|
|
March
20, 2014
|
|
|
March
31, 2014
|
|
|
February
12, 2014
|
|
|
February
12, 2014
|
|
|
March
4, 2014
|
|
Dividend yield (per share)
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise price
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
Volatility (annual)
|
|
|
134
|
%
|
|
|
136
|
%
|
|
|
136
|
%
|
|
|
132
|
%
|
|
|
133
|
%
|
|
|
138
|
%
|
|
|
134
|
%
|
|
|
134
|
%
|
|
|
131
|
%
|
|
|
133
|
%
|
|
|
134
|
%
|
|
|
134
|
%
|
|
|
132
|
%
|
Risk-free rate
|
|
|
0.07
|
%
|
|
|
0.08
|
%
|
|
|
0.06
|
%
|
|
|
0.0006
|
|
|
|
0.0009
|
|
|
|
0.0007
|
|
|
|
0.001
|
|
|
|
0.0008
|
|
|
|
0.0009
|
|
|
|
0.0007
|
|
|
|
0.0009
|
|
|
|
0.009
|
|
|
|
0.0008
|
|
Remaining life (years)
|
|
|
0.66
|
|
|
|
0.61
|
|
|
|
0.60
|
|
|
|
0.67
|
|
|
|
0.51
|
|
|
|
0.58
|
|
|
|
0.64
|
|
|
|
0.50
|
|
|
|
0.54
|
|
|
|
0.51
|
|
|
|
0.56
|
|
|
|
0.64
|
|
|
|
0.58
|
|
The following table
are the Level 3 Weighted Average reports associated with the derivative liabilities at March 31, 2014:
Exercise Price
|
|
$
|
0.04
|
|
Volatility
|
|
|
129.00
|
%
|
Risk-free Rate
|
|
|
0.07
|
%
|
Contractual Life
|
|
|
0.50
|
|
Dividend Yield
|
|
|
0.0
|
%
|
|
|
Derivative
Liability
|
|
December 31, 2013
|
|
$
|
5,859
|
|
Conversion of 8% senior convertible debentures to common stock
(1)
|
|
|
(4,784
|
)
|
Change in fair value
|
|
|
(666
|
)
|
March 31, 2014
|
|
$
|
409
|
|
|
(1)
|
The $4,784 was included with the debt discount in the statement of equity as result of the
conversions of the convertible debt.
|
The following table sets forth the computation of
the basic and diluted net loss per share attributable to Amarantus common stockholders for the periods indicated:
|
|
For the Three Months Ended
March 31,
|
|
|
|
2014
|
|
|
2013
(restated)
|
|
Numerator
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(5,542
|
)
|
|
$
|
(4,638
|
)
|
Preferred stock dividend
|
|
|
26
|
|
|
|
—
|
|
Net loss applicable to common stockholders
|
|
$
|
(5,568
|
)
|
|
$
|
(4,638
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding during the period:
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
March 31,
|
|
|
|
2014
|
|
|
2013
(restated)
|
|
Common stock - basic
|
|
|
630,720,618
|
|
|
|
368,215,835
|
|
Common shares equivalents
|
|
|
—
|
|
|
|
—
|
|
Common stock - diluted
|
|
|
630,720,618
|
|
|
|
368,215,835
|
|
|
|
|
|
|
|
|
|
|
Net loss per share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
Potentially dilutive securities:
|
|
|
|
|
|
|
|
|
Outstanding time-based common stock options
(1)
|
|
|
14,296,000
|
|
|
|
-
|
(2)
|
Outstanding performance-based and market-based common stock options
(1)
|
|
|
4,000,000
|
|
|
|
-
|
(2)
|
Outstanding time-based preferred stock options
(1)
|
|
|
2,488,000
|
|
|
|
-
|
(2)
|
Warrants
(1)
|
|
|
69,553,000
|
|
|
|
-
|
(2)
|
Related party liability
(1)
|
|
|
3,214,000
|
|
|
|
-
|
(2)
|
Convertible promissory note(s)
(1)
|
|
|
5,655,000
|
|
|
|
-
|
(2)
|
8% Senior convertible debentures
|
|
|
8,776,000
|
|
|
|
-
|
(2)
|
Convertible preferred stock
(1) (3)
|
|
|
751,000
|
|
|
|
-
|
(2)
|
(1)
|
The impact of time-based, performance-based and market-based stock options, time-based restricted stock units, warrants, the convertible notes and the convertible preferred stock on earnings per share is anti-dilutive in a period of loss from continuing operations.
|
(2)
|
Total anti dilutive securities for the 3 months ended March 31, 2013 was approximately 71,000,000.
|
(3)
|
Includes convertible preferred Series C and D.
|
The following table summarizes our intangible assets:
|
|
Period Ended
|
|
|
|
March 31,
2014
|
|
|
December 31,
2013
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
1,431
|
|
|
$
|
681
|
|
Accumulated amortization
|
|
|
(93
|
)
|
|
|
(70
|
)
|
Total intangible assets net
|
|
$
|
1,338
|
|
|
$
|
611
|
|
These license costs will be amortized over the expected
remaining lives of the respective patents. As of March 31, 2014, amortization expense for the next five years is expected to be
as follows:
2014 (remaining nine months)
|
|
$
|
78
|
|
2015
|
|
|
102
|
|
2016
|
|
|
102
|
|
2017
|
|
|
102
|
|
2018
|
|
|
102
|
|
thereafter
|
|
|
852
|
|
Total
|
|
$
|
1,338
|
|
Eltoprazine License
On January 10, 2014, the Company entered into a license
agreement with PGI Drug Discovery, LLC (“PGI”), which granted the Company an exclusive license (with a right to sublicense)
to utilize certain licensed compounds and licensed products of PGI, which includes certain intellectual property and know how covering
the use of Eltoprazine and certain of its related compounds in all therapeutic indications.
The Company has agreed to: (i) pay PGI $100 in cash
for the License within 20 days of the execution of the License Agreement, (ii) pay a research support payment to PGI as partial
reimbursement for costs incurred for earlier research totaling up to $650 to be paid in a mixture of cash and stock, (iii) reimburse
PGI for the Eltoprazine clinical trial material up to $500 payable upon the earlier of the initiation of a Phase IIb clinical study
or 6 months after the date of the License Agreement, and (iv) pay PGI up to an aggregate of $4,000 in development milestones through
NDA submission. As further consideration for the License Agreement, the Company shall pay an 8% royalty to PGI of the annual aggregate
net sales by the Company.
Simultaneous with the execution of the license
agreement, the Company and PGI entered into a services agreement pursuant to which PGI will provide certain services to the
Company related to PGI’s proprietary analytical systems as will be set forth in certain study plans. The Company agreed
to a payment commitment of $450 at a minimum annual rate of $150 for each of three years. The Services Agreement is for a
term of the later of 3 years or the completion of any study plan accepted by the parties under the services agreement.
As of March 31, 2014, as a result
of the arrangement described above, the Company recorded the following: (i) $500 in cash payments along with 4,000,000 shares of
common stock valued at $250 as an intangible asset, (ii) $500 as an asset related to the transferred clinical trial material, and
(iii) liabilities of $500 to be paid to PGI for the clinical trial material and $22 for unissued shares.
|
8.
|
8% Senior convertible debentures
|
The following table summarizes
the Company’s outstanding 8% convertible promissory note obligations:
|
|
|
|
Stated
|
|
|
|
|
|
|
|
|
Maturity
|
|
Interest
|
|
|
|
|
Principal Balance Outstanding
|
|
Issue Date
|
|
Date
|
|
Rate
|
|
|
Conversion Terms
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
10/2/2013
|
|
10/2/2014
|
|
|
8.0
|
%
|
|
Variable conversion price currently at $0.04
|
|
$
|
150
|
|
|
$
|
1,789
|
|
9/6/2013
|
|
9/6/2014
|
|
|
8.0
|
%
|
|
Variable conversion price, currently at $0.04
|
|
|
189
|
|
|
|
1,544
|
|
|
|
Sub total
|
|
|
|
|
|
|
|
|
339
|
|
|
|
3,333
|
|
|
|
Discount
|
|
|
|
|
|
|
|
|
(161
|
)
|
|
|
(2,401
|
)
|
|
|
Current portion of 8% convertible promissory notes, net of debt discount
|
|
$
|
178
|
|
|
$
|
932
|
|
During the three months ended
March 31, 2014 approximately $3,091, consisting of approximately $2,995 of debentures and approximately $96 of accrued interest
of the 8% senior convertible debentures, converted to 77,405,866 shares of common stock of the Company. Additionally, $1,740
of the 8% senior convertible debentures related debt discount was reclassified from liability to additional paid in capital.
The Company entered into a registration
rights agreement with the Investors pursuant to which the Company filed a registration statement with the Securities and Exchange
Commission. The registration statement went effective February 4, 2014.
|
9.
|
Convertible Promissory Notes
|
The following table summarizes
the Company’s outstanding convertible promissory note obligations:
|
|
|
|
Stated
|
|
|
|
|
Principal Balance Outstanding
|
|
Issue
Date
|
|
Maturity
Date
|
|
Interest
Rate
|
|
|
Conversion
Terms
|
|
March
31,
2014
|
|
|
December
31,
2013
|
|
6/5/2013
|
|
12/2/2013
|
|
|
6.0
|
%
|
|
Fixed at $0.02
|
|
|
20
|
|
|
|
20
|
|
11/4/2012
|
|
5/3/2013
|
|
|
6.0
|
%
|
|
Fixed at $0.01
|
|
|
-
|
|
|
|
10
|
|
8/23/2012
|
|
2/19/2013
|
|
|
6.0
|
%
|
|
Fixed at $0.015
|
|
|
50
|
|
|
|
50
|
|
11/2012
|
|
On Demand
|
|
|
None
|
|
|
Refundable excess payment
|
|
|
1
|
|
|
|
1
|
|
6/6/2011
|
|
6/6/2013
|
|
|
5.0
|
%
|
|
Variable at $0.04
|
|
|
10
|
|
|
|
10
|
|
4/11/2011
|
|
4/11/2013
|
|
|
5.0
|
%
|
|
Variable
at $0.04
|
|
|
25
|
|
|
|
25
|
|
5/1/2011
|
|
5/1/2013
|
|
|
5.0
|
%
|
|
Fixed at $0.10
|
|
|
4
|
|
|
|
4
|
|
4/1/2011
|
|
4/1/2013
|
|
|
5.0
|
%
|
|
Fixed at $0.10
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible promissory notes
|
|
$
|
114
|
|
|
$
|
124
|
|
Convertible notes converted to common
stock
On February 10, 2014 Robert L. Harris, a member of
the Board of Directors, converted his $10 note and $1 accrued interest into 1,095,759 shares of restricted common stock.
Convertible notes in default
At March 31, 2014, the Company
was in technical default on certain convertible notes with an aggregate principal balance outstanding of approximately $114,which
was due prior to March 31, 2014.
|
10.
|
DEMAND PROMISSORY NOTE
|
On February 14, 2014, the Company executed a Demand
Promissory Note payable to Dominion Capital, LLC in the amount of $500 at an annual interest rate of 12% compounded monthly until
the note is repaid. On March 12, 2014, , the Company elected to extend the maturity of the Note from March 14, 2014 to August 14,
2014.
|
11.
|
commitments and contingencies
|
Commitments:
Lease Arrangements
— The Company
leases its main office facility and laboratory space in San Francisco, CA under a one-year lease agreement with QB3 Incubator Partners,
LP. The lease agreement was entered into in October 2013 and provides for rental payments of approximately $7 per month.
Rent expense for the three months
ended March 31, 2014 and 2013 was approximately $21 and $8, respectively.
The Company and PGI entered into a services
agreement pursuant to which PGI will provide certain services to the Company related to PGI’s proprietary analytical
systems (refer to Note INTANGABLE ASSETS). The Company agreed to a payment commitment of $450 at a minimum annual rate of
$150, for each of three years. The Services Agreement is for a term of the later of 3 years or the completion of any study
plan accepted by the parties under the services agreement.
Pursuant to the December 12, 2013 license agreement
between the Company and the University of Massachusetts, the Company is required to pay an annual license maintenance fee of $15
as long as the agreement remains in effect and the related patents remain valid. The Company is also obligated to reimburse the
university for all patent costs incurred that are related to the licensed patents for the duration of the agreement term.
Contingencies
:
On January 10, 2014, the Company
entered into a license agreement (“PGI License Agreement”) with PGI Drug Discovery, LLC (“PGI”). Pursuant
to the terms of the agreement, the Company agreed to pay PGI up to an aggregate of $4,000 in development milestones through NDA
submission. Milestone based payments payable by the Company under the PGI License Agreement are as follows: (i) $1,000 upon successful
completion of the first Phase 2b clinical study, and (ii) $3,000 million upon submission of a New Drug Application with the United
States Food and Drug Administration or a comparable submission outside of the United States.
Pursuant to the LPC Purchase Agreement (refer to
Note COMMON STOCK PRIVATE PLACEMENTS), the Company may be required to issue up to 3,500,000 shares of common stock to LPC on a
pro rata basis if and when the Company utilizes funding available under the agreement.
Pursuant to the MDx Purchase
Agreement (refer to Note SUBSEQUENT EVENTS) and contingent upon (i) the Company entering into a direct licensing agreement with
the University of Leipzig (“Leipzig”) pursuant to which Leipzig would grant the Company a direct license to certain
assets now licensed to MDx by Leipzig, and (ii) MDx terminating the license agreement it currently holds with Leipzig with the
Company’s prior written consent, the Company has agreed to issue to MDx 6,500,000 shares of the Company’s common stock
and will provide MDx with piggy-back registration rights as it relates to such shares.
Pursuant to the December 12,
2013 license agreement between the Company and the University of Massachusetts, the Company is obligated to pay the university
certain amounts in the event certain events occur or milestones are achieved. Milestones to be paid under the agreement are as
follows: (i) $50 upon first human dosing, (ii) $75 upon initiation of first Phase 2 clinical trial, (iii) $100 upon initiation
of first Phase 3 clinical trial, and (iv) $500 upon first product approval in the United States. Following commercial launch, the
Company is required to pay a royalty to the university equal to 2% of net sales, as defined under the agreement, subject to certain
royalty minimums ranging from $125 to $500 per year. The Company is also obligated to pay to the university 10% of any sub-license
income generated under the agreement.
The Company is in technical default of certain convertible
notes that were due prior to March 31, 2014, and is also late with regard to making payments to various trade account vendors for
goods and services received. Presently the Company is not aware of any accounts that have been turned over to collection agencies
or that might result in a lawsuit with the Company.
|
12.
|
COMMON STOCK WARRANTS
|
Stock Warrants
The Company issued 83,333,251
Warrants in 2013 in connection with the Debenture and Warrant transaction. The Warrants are exercisable for a term of three years
from the date of issuance at an exercise price of $0.06 per share. The Warrants are exercisable on a cashless basis if at any time
after the six months anniversary there is no effective registration statement or current prospectus available for the resale of
the shares underlying the Warrants. The Company may call the warrants at an exercise price of $.001 per share if certain conditions
as described in the Warrant are met. On February 4, 2014, the Company registered these warrants with the SEC.
On March 7, 2014, the Company
accepted elections by warrant holders to exercise certain warrants in the aggregate amount of 60,000,000 shares of common stock
for gross proceeds of $3,600. Pursuant to the offer to exercise dated February 13, 2014 as supplemented on March 6, 2014, the holders
of outstanding warrants to purchase shares of common stock of the Company at a price of $0.06 (the “Original Warrants”)
were offered the opportunity to exercise their Original Warrants and receive warrants (the “New Warrants”) to purchase
three (3) shares of common stock of the Company for every four (4) Original Warrants exercised. The New Warrants are exercisable
at any time at a price of $0.12 for a term of five (5) years. The New Warrants are callable by the Company if the Volume Weighted
Average Price (VWAP) of the Company’s common stock for each of 20 consecutive trading days exceeds $0.18 and certain equity
conditions are met. The Company may also call the New Warrants if the closing price of the Company’s common stock exceeds
$0.18 on the date that is the earlier of the receipt by the Company of an approval letter for listing of the Company’s common
stock on an exchange or actual listing of the common stock on an exchange. The holders of the New Warrants have piggy back –
registration rights. Upon the closing of the offer to exercise the Company issued New Warrants to purchase 45,000,000 shares of
common stock of the Company.
In accordance with ASC 815-40-25-10 the Company determined
that the appropriate accounting treatment of the New Warrants is to determine the Black-Scholes value of the warrant and to record
the fair value of the warrant as a loss upon Issuance of Warrants in the Other income (expense) section of the statement of operations
along with a credit to Additional paid-In capital. The fair value was determined to be approximately $3,867, using the Black-Scholes
model with the following weighted average assumptions at issuance:
Annualized volatility
(1)
|
|
|
305
|
%
|
Contractual term
|
|
|
5.0
|
|
Risk-free investment rate
|
|
|
1.65
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
(1) - The Company has three years of trading history
that was utilized in computing the annualized volatility as of the date of issuance.
The following table summarizes
the Company’s warrant activity for the three months ended March 31, 2014.
|
|
Number of
Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted Average
Remaining Contractual
Term
|
|
Outstanding warrants as of December 31, 2013
|
|
|
84,553,306
|
|
|
|
0.06
|
|
|
|
2.7
|
|
Exercised
|
|
|
(60,000,000
|
)
|
|
|
0.06
|
|
|
|
2.7
|
|
Issued as a result of the above exercise
|
|
|
45,000,000
|
|
|
|
0.12
|
|
|
|
4.9
|
|
Outstanding warrants as of March 31, 2014
|
|
|
69,553,306
|
|
|
|
0.10
|
|
|
|
4.0
|
|
|
13.
|
COMMON STOCK PRIVATE PLACEMENTS
|
On March 7, 2014, the Company entered into an equity
financing agreement (“LPC Purchase Agreement”) with Lincoln Park Capital Fund LLC (“LPC”) whereby LPC is
obligated to purchase up to $20,000 of the Company’s common stock from time to time over a 30 month period, as directed by
the Company and subject to certain requirements, restrictions and limitations. Under the agreement, the per share purchase price
will be the lesser of (1) the lowest sale price of common stock on the purchase date and (2) the average of the three lowest closing
purchase prices during the 10 consecutive business days prior to the purchase date. However, LPC is not obligated to purchase shares
from the Company on any date that the closing price of the common stock is below $0.04, subject to adjustment upon the occurrence
of certain stock related events. The Company may also request that LPC purchase shares under an accelerated purchase notice whereby
the per share purchase price will be the lower of (i) 94% of a volume weighted average price calculation as determined under the
agreement or (ii) the closing price of the common stock on the accelerated purchase date.
In consideration for entering into the agreement,
the Company agreed to issue 9,500,000 shares of common stock to LPC, 6,000,000 of which were issued upon entering into the agreement
and 3,500,000 of which are contingently issuable on a pro rata basis as the Company utilizes the financing arrangement. The agreement
will automatically terminate upon the earliest of 30 months or upon full utilization of the purchase commitment.
Pursuant to the agreement, the Company sold an
initial 4,000,000 shares to LPC for an aggregate gross purchase price of $400. The fair value of the 6,000,000
shares provided to LPC was approximately $516 and was treated as a deferred funding fee. $400 was considered a placement fee
against the $400 raised pursuant to execution of the LPC Purchase Agreement. The remaining $116 of deferred funding fees will
be offset against future capital raises.
2008 Stock Plan
The Company’s Board of Directors approved the
2008 Stock Plan (the “Plan”). Under the Plan, the Company may grant up to 38,242,127 options, including 10,000,000
the Board added to the plan in January, of incentive stock options, nonqualified stock options, or stock awards to eligible persons,
including employees, nonemployees, members of the Board of Directors, consultants, and other independent advisors who provide services
to the Company. In general, options are granted with an exercise price equal to the fair value of the underlying common stock on
the date of the grant. Options granted typically have a contractual life of 10 years and vest over periods ranging from being
fully vested as of the grant date to four years.
The following table is a summary of activity under
the Plan:
|
|
|
|
|
|
|
|
Outstanding
Options
Common
|
|
|
|
Common Stock
options
outstanding
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Balance – December 31, 2013
|
|
|
6,941,288
|
|
|
|
0.05
|
|
|
|
9.0
|
|
Options granted (weighted-average fair value of $0.057)
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
8,200,000
|
|
|
|
0.08
|
|
|
|
10.0
|
|
Non-Employee
|
|
|
3,154,839
|
|
|
|
0.08
|
|
|
|
10.0
|
|
Options cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Options Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance –March 31, 2014
|
|
|
18,296,127
|
|
|
|
0.07
|
|
|
|
9.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options vested as of March31, 2014
|
|
|
8,774,622
|
|
|
|
|
|
|
|
|
|
The 8,200,000 shares granted to Employees include
8,000,000 shares granted to the Company’s new Chief Financial Officer (See Note, Subsequent Events), 4,000,000 of which are
time-based and vest 25 percent upon grant and 1/36 per month thereafter during continued service; 2,000,000 of which are performance-based
and vest upon continued service and achievement of a specific goal; and 2,000,000 of which are market-based and vest upon continued
service and the Company’s achievement of certain stock price targets. All of the 8,000,000 shares are at an exercise price
of $0.0775 and were granted on March 31, 2014.
During the three months ended March 31, 2014, the
Company granted stock options and awards that were greater than the shares authorized, resulting in a deficit of shares available
in the Plan of 3,231,221 as of March 31, 2014. The Company expects the Board of Directors will authorize additional shares for
the Plan by June 2014 to offset the deficit.
2012 Preferred Stock Plan
In July 2012, our Board of Directors
adopted a new stock plan, the Management, Employee, Advisor and Director Preferred Stock Option Plan – 2012 Series B Convertible
Preferred Stock Plan (“Preferred Stock Plan”). The purposes of the Preferred Stock Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide additional incentive to Management, Employees,
Advisors and Directors and to promote the success of our business. These options currently vest over two or three years and cannot
be converted into common shares or sold for two years from the date of the Designation of the Series B Preferred shares. Each share
of Series B Preferred stock converts into fifty shares of common stock. The following table is a summary of activity under the
Preferred Stock Plan:
|
|
|
|
|
|
|
|
Outstanding
Preferred
Options
|
|
|
|
Preferred Stock
Options
Outstanding
|
|
|
Weighted Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
Balance – December 31, 2013
|
|
|
2,287,500
|
|
|
|
0.47
|
|
|
|
8.5
|
|
Preferred options cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Preferred options granted (weighted-average fair value of $1.61)
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
|
|
|
200,000
|
|
|
|
2.21
|
|
|
|
9.8
|
|
Non-Employee
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Balance – March 31, 2014
|
|
|
2,487,500
|
|
|
|
0.61
|
|
|
|
8.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred options vested as of March 31, 2014
|
|
|
1,482,161
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock,
$0.001 par value — 10,000,000 shares authorized, Series B, $0.001 par value:
As of March 31, 2014, Convertible
preferred stock, $0.001 par value — 10,000,000 shares authorized, Series B, $0.001 par value, indicates 3,000,000 shares
designated, but the Company’s Form 10-K for the year ended December 31, 2013 indicates 2,500,000 shares designated.
The Company’s Form 10-K for the year ended December 31, 2013, did not include the increase of 500,000 designated
shares approved by the Board of Directors on November 20, 2013. This oversight has no effect on any of the financial information
presented in the Company’s Form 10-K for the year ended December 31, 2013.
Stock-based compensation expense
for all plans is classified in the statements of operations as follows:
|
|
Three Months Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Research and development
|
|
$
|
78
|
|
|
$
|
282
|
|
General and administrative
|
|
|
124
|
|
|
|
226
|
|
Total
|
|
$
|
202
|
|
|
$
|
508
|
|
At March 31, 2014, there was
a total of approximately $1,043 of unrecognized compensation cost, net of estimated forfeitures of zero, as the Company has
not experienced any forfeitures to date, related to non-vested stock option awards, which is expected to be recognized over a weighted-average
period of approximately 2.5 years.
The fair value of the Company’s stock-based
awards during the three months ended March 31, 2014 and 2013 were estimated using the Black-Scholes option-pricing model with the
following assumptions:
|
|
Three Months Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Weighted-average volatility
|
|
|
89.2
|
%
|
|
|
108.0
|
%
|
Weighted-average expected term
|
|
|
5
|
|
|
|
5
|
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
Risk-free investment rate
|
|
|
1.65
|
%
|
|
|
0.5
|
%
|
|
15.
|
RElated-Party Transactions
|
On February 10, 2014 Robert L. Harris, a member of
the Board of Directors, converted his $10 note and $1 accrued interest into 1,095,759 shares of restricted common stock.
Appointment of the Company’s New Chief Financial
Officer
On April 1, 2014, Robert Farrell,
J.D. was appointed to serve as the Company’s Chief Financial Officer. Mr. Marc Faerber, the former CFO, will now serve as
the Company’s Corporate Controller and Vice President of Financial Operations.
Mr. Farrell served as Chief Financial
Officer of Titan Pharmaceuticals from 1996 to 2008, and as President and CEO from 2008 to 2010. During his tenure at Titan Mr.
Farrell was responsible for all SEC filings, fund raising, financial and tax planning strategies, mergers and acquisitions, corporate
partnerships, licensing transactions and financial operations. Mr. Farrell most recently served as CFO at Sanovas, Inc. Mr. Farrell
previously served as CFO, Corporate Group Vice President and General Counsel at Fresenius USA and Fresenius Medical Care. Mr. Farrell
also previously served as the CFO for the Institute for One World Health in San Francisco and currently serves on the Board of
Directors of Prime Genomics, Inc. Mr. Farrell holds a J.D. from the University of California's Hastings School of Law.
Mr. Farrell will initially
be engaged as a contract consultant but is expected to be a full-time employee by the end of June 2014 upon execution of an employment
agreement.
Asset purchase agreement
with Memory Dx, LLC
On April 29, 2014, the Company
entered into an asset purchase agreement (“MDx Purchase Agreement”) with Memory Dx, LLC (“MDx”), pursuant
to which the Company purchased all of the assets of MDx, including all right, title and interest in the LymPro Technology, (as
defined in the MDx Purchase Agreement). Such assets include all intellectual property, goodwill, patents and all copyrights owned
by MDx, subject to certain exclusions as further described in the MDx Purchase Agreement.
As consideration for transfer
of the assets, the Company agreed to pay to MDx (i) $50 upon execution of the MDx Purchase Agreement, (ii) $50 upon the date 60
days after execution of the MDx Purchase Agreement, and (iii) $50 on the date 120 days after execution of the MDx Purchase Agreement.
Additionally, the Company agreed to issue to MDx upon delivery of the assets, 1,500,000 shares of the Company’s common stock
and provide MDx with piggy-back registration rights as it relates to such shares.
Contingent upon (i) the Company
entering into a direct licensing agreement with the University of Leipzig (“Leipzig”) pursuant to which Leipzig would
grant the Company a direct license to certain assets now licensed to MDx by Leipzig, and (ii) MDx terminating the license agreement
it currently holds with Leipzig as it relates to such licensed assets with the Company’s prior written consent, the Company
has agreed to issue to MDx 6,500,000 shares of the Company’s common stock and will provide MDx with piggy-back registration
rights as it relates to such shares. The previous laboratory services agreement entered into between Amarantus and MDx on April
2, 2013 was terminated following execution of the MDx Purchase Agreement.
Asset purchase agreement with Provista Diagnostics,
Inc.
On May 1, 2014, the Company entered into an asset
purchase agreement with Provista Diagnostics, Inc.
(“PDI”) to acquire certain assets related to fluorescently
activated cell sorter (FACS) related equipment, software and data. In exchange for these assets, the Company agreed to pay to PDI
a one-time payment of $20.
Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Amarantus Bioscience Holdings, Inc.(”the Company”)
is a California-based development-stage biopharmaceutical company founded in January 2008. We focus on developing our intellectual
property and proprietary technologies to develop drug and diagnostic product candidates to treat human disease. We own or have
exclusive licenses to various product candidates in the biopharmaceutical and diagnostic areas of the healthcare industry, with
a specific focus on bringing these candidates to market in the areas of Alzheimer’s disease, Parkinson’s disease, Retinal
Degenerative disorders, and other ailments of the human body, with a particular focus on the nervous system. Our business model
is to develop our product candidates through various de-risking milestones that we believe will be accretive to shareholder value
and strategically partner with biopharmaceutical companies, diagnostic companies, investors, private foundations and other key
stakeholders in the specific sub-sector of the healthcare industry in which we are developing our products in order to achieve
regulatory approval in key jurisdictions and thereafter successfully market and distribute our products.
Overview
The Company’s philosophy is to acquire, in-license, discover
and develop drug candidates and diagnostics with the potential to address critically important biological pathways involved in
human disease.
LymPro Test ®
The Lymphocyte Proliferation Test (“LymPro Test ®”,
or “LymPro”) is a diagnostic blood test for Alzheimer’s disease originally developed by the University of Leipzig
in Germany. The test works by evaluating the cell surface marker CD69 on peripheral blood lymphocytes following a mitogenic stimulation.
The underlying scientific basis for LymPro is that Alzheimer’s patients have a dysfunctional cellular machinery that inappropriately
allows mature neurons in the brain to enter the mitotic process (cell division /cell cycle). When this happens the neurons start
the cell division process, but cannot complete that process. As a result, a number of cytokines and other genes are upregulated,
ultimately leading to cell death by apoptosis. This inappropriate cell division activation process is also present in the lymphocytes
of Alzheimer’s patients, as lymphocytes share a similar cellular division machinery with brain neurons. We measure the integrity
of this cellular division machinery process by measuring CD69 upregulation in response to the mitogenic stimulation. If CD 69 is
upregulated it means that the cellular division machinery process is correct and Alzheimer’s is not present. If CD69 is not
upregulated, it means there is a dysfunctional cellular division machinery process, and Alzheimer’s is more likely. To date,
data has been published in peer-reviewed publications on LymPro with 160 patients, demonstrating 92% co-positivity and 91% co-negativity
with an overall 95% accuracy rating for LymPro.
Eltoprazine
Eltoprazine is a small molecule drug candidate that is a selective
partial agonist on the 5HT1-A and 5HT1-B receptors of the serotonergic system in the brain originally discovered and developed
by Solvay Pharmaceuticals (now Abbvie). The serotonergic system has been associated with a wide range of disorders motor and behavioral
disorders including aggression, cognition, attention and control. The Company is developing Eltoprazine for the treatment of the
primary side effect of current Parkinson’s disease medication Levadopa-Induced Dyskinesia (“PD LID”), as well
as Adult Attention Deficit Hyperactivity Disorder (“Adult ADHD”). To date, over 700 patients have been dosed with Eltoprazine
at varying doses as high as 30mg; the active dose in both PD LID and Adult ADHD is 5mg. Primary and secondary endpoints have been
met for Eltoprazine in Phase 2 trials in PD LID and Adult ADHD
MANF
Mesencephalic Astrocyte-derived Neurotrophic Factor (“MANF”)
is an endogenous, evolutionally conserved and widely expressed protein that was discovered by the Company’s Chief Scientific
Officer Dr. John Commissiong. MANF acts on a variety of molecular functions, including as a part of the endoplasmic reticulum stress
response (“ER-SR”) system of the unfolded protein response (“UPR”). MANF has demonstrated efficacy as a
disease-modifying treatment in various animal models, including Parkinson’s disease, retinitis pigmentosa, cardiac ischemia
and stroke. The Company has made a strategic decision to focus the development of MANF in orphan indications and is currently evaluating
the most appropriate indication for development based on data currently being assembled internally, by contract research organizations
and academic collaborators.
Other
Exploration of the Company’s PhenoGuard platform for neurrotrophic
factor discovery and discovery and evaluation of external drug candidates for potential in-licensure or acquisition.
For the next 12 months, the Company intends to focus primarily
on the commercialization of LymPro, the further clinical development of Eltoprazine, and the preclinical development of MANF.
The Three Months Ended March 31, 2014
compared to Three Months Ended March 31, 2013
During the three months ended March 31, 2014 and 2013, we generated
no revenue.
Research and development costs for the three months ended March
31, 2014 (the “Current Quarter”) decreased $147 to $517 from $664 for the three months ended March 31, 2013 (the “Prior
Year Quarter”) due to reduced stock-based compensation expenses in the Current Quarter.
General and administrative expenses decreased $102 to $1,119
for the Current Quarter from $1,221 for the Prior Year Quarter primarily due to decreased spending on consulting and other professional
services as well as decreased stock-based compensation expenses.
For the Current Quarter, Other income (expense) increased $1,153
to an expense of $3,906 from $2,753 in the Prior Year Quarter. Interest expense decreased $235 to $638 for the Current Quarter from
$873 for the Prior Year Quarter primarily due to lower financing costs on new debt in the Current Quarter than in the Prior Year
Quarter.
In the Current Quarter there is a $3,867 charge related to the
issuance of new warrants offset by a gain of $666 in change in fair value of derivative liability. In the Prior Year Quarter there
was no charge related to the issuance of warrants, and the change in fair value of warrants and derivatives was an expense of $1,820.
Net loss for the Current Quarter was $5,542 as compared to a
net loss of $4,638 for the Prior Year Quarter. Stock based compensation from grants under the 2008 Stock Plan and the 2012 Series
B Convertible Preferred Stock Option Plan accounted for $202 of the $5,732 net loss for the Current Quarter and $508 of the $4,638
net loss for the Prior Year Quarter.
Inflation adjustments have had no material
impact on the Company.
Liquidity and Capital Resources
As of March 31, 2014, the Company had total
current assets of $4,525 consisting of $3,765 in cash and cash equivalents and $500 in clinical trial material, $131 in prepaid
expenses and other current assets, and $129 in deferred funding fees. As of March 31, 2014, the Company had current liabilities
in the amount of $3,473, consisting of:
Accounts payable
|
|
$
|
1,744
|
|
Related party liabilities and accrued interest
|
|
$
|
249
|
|
Accrued expenses
|
|
$
|
223
|
|
Accrued interest
|
|
$
|
56
|
|
Demand promissory note
|
|
$
|
500
|
|
8% Senior convertible debentures, net of discount
|
|
$
|
178
|
|
Convertible promissory notes
|
|
$
|
114
|
|
Derivative liability
|
|
$
|
409
|
|
As of March 31, 2014, the Company had a
working capital surplus in the amount of $1,052 compared to a deficit of $7,291 at December 31, 2013.
The table below sets forth selected cash flow data for the periods
presented:
|
|
Three Months Ended March 31,
|
|
|
|
2014
|
|
|
2013
(restated)
|
|
Net cash (used in) operating activities
|
|
$
|
(1,259
|
)
|
|
$
|
(940
|
)
|
Net cash (used in) investing activities
|
|
|
(509
|
)
|
|
|
(34
|
)
|
Net cash provided by financing activities
|
|
|
4,500
|
|
|
|
1057
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
$
|
2,732
|
|
|
$
|
83
|
|
The success of our business plan during
the next 12 months and beyond is contingent upon us generating sufficient revenue to cover our costs of operations, or upon us
obtaining additional financing. Should our revenues be less than anticipated, or should our expenses be greater than anticipated,
then we may seek to obtain business capital through the use of private and public equity fundraising or shareholder loans. There
can be no assurance that such additional financing will be available to us on acceptable terms, or at all. Similarly, there can
be no assurance that we will be able to generate sufficient revenue to cover the costs of our business operations. We will use
all commercially-reasonable efforts at our disposal to raise sufficient capital to run our operations on a go forward basis.
Off Balance Sheet Arrangements
Not applicable
Going Concern
We are a development stage company engaged in
biotechnology research and development. We have suffered recurring losses from operations since inception, we have a positive
working capital but have generated negative cash flow from operations. There is substantial doubt about our ability to
continue as a going concern.