The accompanying
notes are an integral part of the interim consolidated financial statements.
Notes
to Consolidated Financial Statements
Note
1 - Basis of presentation
Galmed
Pharmaceuticals Ltd. (the “Company”) was incorporated in Israel on July 31, 2013 and commenced operations on February 2,
2014.
The
Company holds a wholly-owned subsidiary, Galmed International Ltd., which was incorporated in Malta. Galmed International Ltd. previously
held a wholly-owned subsidiary, Galmed Medical Research Ltd., which was incorporated in Israel, and had been an inactive company since
2015 and was liquidated in February 2019.
The
Company also holds two additional wholly-owned subsidiaries, Galmed Research and Development Ltd and Galtopa Therapeutics Ltd., both
of which are incorporated in Israel.
The
Company is a clinical-stage biopharmaceutical company primarily focused on the development of therapeutics for the treatment of liver
diseases. The Company has an operating history limited to pre-clinical and clinical drug development. To date, the Company has focused
almost exclusively on developing its product candidates, Aramchol and Amilo-5MER. The Company funded its research and development programs
and operations to date primarily through proceeds from private placements and public offerings. The Company currently has no products
approved for marketing and has not generated any revenue from product sales to date. As of March 31, 2022, the Company had cash and cash
equivalents of $3.7 million, restricted cash of $0.1 million, and marketable debt securities of $25.0 million.
The
Company has incurred operating losses in each year since inception. The Company’s loss attributable to holders of its ordinary
shares for the three months period ended March 31, 2022 was approximately $6.1 million. As of March 31, 2022, the Company had an accumulated
deficit of $174.3 million. Substantially all of its operating losses resulted from costs incurred in connection with the Company’s
development program and from general and administrative costs associated with its operations.
In
May 2022, the Company announced that the Company will expand into new anti-fibrotic indications to maximize the potential of Aramchol
while at the same time discontinuing the Open Label Part of the Armor Study having reached its objectives. Simultaneously, the Company
is initiating a cost reduction plan and is evaluating its strategic options alternatives and its structuring to best optimize its resources
to enhance shareholder value and achieve its goals.
The
Company will need to raise substantial, additional capital to fund its operations and to develop Aramchol for, and beyond its current
development stage and any future commercialization, as well as any additional indications.
Based
on the Company’s current operating plan, the Company’s management currently estimates that its cash position will support
its current clinical trials and operations as currently conducted for more than 12 months from the date of issuance of these financial
statements.
These
unaudited interim consolidated financial statements have been prepared as of March 31, 2022 and for the three months period then ended.
Accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with
U.S. GAAP have been omitted. These unaudited interim consolidated financial statements should be read in conjunction with the audited
financial statements and the accompanying notes of the Company for the year ended December 31, 2021 that are included in the Company’s
Annual Report on Form 20-F, filed with the Securities and Exchange Commission on May 2, 2022 (the “Annual Report on Form 20-F”).
The results of operations presented are not necessarily indicative of the results to be expected for the year ending December 31, 2022.
Note
2 - Summary of significant accounting policies
The
significant accounting policies that have been applied in the preparation of the unaudited consolidated interim financial statements
are identical to those that were applied in preparation of the Company’s most recent annual financial statements in connection
with its Annual Report on Form 20-F.
In
May 2021, the FASB issued Update 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus
of the FASB Emerging Issues Task Force). The amendments in this Update affect all entities that issue freestanding written call options
that are classified in equity. Specifically, the amendments affect those entities when a freestanding equity-classified written call
option is modified or exchanged and remains equity classified after the modification or exchange. The amendments that relate to the recognition
and measurement of EPS for certain modifications or exchanges of freestanding equity-classified written call options affect entities
that present EPS in accordance with the guidance in Topic 260, Earnings Per Share. The effect of implementing this ASU is immaterial.
Note
3 - Stockholders’ Equity
In
February 2022, the Company granted options to purchase 40,000 ordinary shares of the Company to one of its officers. The options are
exercisable at $1.61 per share, have a 10-year term and vest over a period of four years.
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
All
references to “we,” “us,” “our,” “the Company” and “our Company”, in this
Form 6-K are to Galmed Pharmaceuticals Ltd. and its subsidiaries, unless the context otherwise requires. All references to “shares”
or “ordinary shares” are to our ordinary shares, NIS 0.01 nominal par value per share. All references to “Israel”
are to the State of Israel. “U.S. GAAP” means the generally accepted accounting principles of the United States. Unless otherwise
stated, all of our financial information presented in this Form 6-K has been prepared in accordance with U.S. GAAP. Any discrepancies
in any table between totals and sums of the amounts and percentages listed are due to rounding. Unless otherwise indicated, or the context
otherwise requires, references in this Form 6-K to financial and operational data for a particular year refer to the fiscal year of our
company ended December 31 of that year.
Our
reporting currency and financial currency is the U.S. dollar. In this Form 6-K, “NIS” means New Israeli Shekel, and “$,”
“US$” and “U.S. dollars” mean United States dollars.
Cautionary
Note Regarding Forward-Looking Statements
This
Form 6-K contains forward-looking statements about our expectations, beliefs or intentions regarding, among other things, our product
development efforts, business, financial condition, results of operations, strategies or prospects. In addition, from time to time, we
or our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking statements can be identified
by the use of forward-looking words such as “believe,” “expect,” “intend,” “plan,” “may,”
“should,” “anticipate,” “could,” “might,” “seek,” “target,” “will,”
“project,” “forecast,” “continue” or their negatives or variations of these words or other comparable
words or by the fact that these statements do not relate strictly to historical matters. These forward-looking statements may be included
in, among other things, various filings made by us with the SEC, press releases or oral statements made by or with the approval of one
of our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or results
as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently
subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied
by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities
and results anticipated in forward-looking statements, including, but not limited to, the factors summarized below:
|
● |
the
timing and cost of our pivotal Phase 3 ARMOR trial, or the ARMOR Study, for our product candidate, Aramchol, or for any other pre-clinical
or clinical trials; |
|
|
|
|
● |
completion
and receiving favorable results of the ARMOR Study for Aramchol or any other pre-clinical or clinical trial; |
|
|
|
|
● |
the
impact of the COVID-19 pandemic on our operations; |
|
|
|
|
● |
regulatory
action with respect to Aramchol or any other product candidate by the U.S. Food and Drug Administration, or the FDA, or the European
Medicines Authority, or EMA, including but not limited to acceptance of an application for marketing authorization, review and approval
of such application, and, if approved, the scope of the approved indication and labeling; |
|
|
|
|
● |
the
commercial launch and future sales of Aramchol and any future product candidates; |
|
|
|
|
● |
our
ability to comply with all applicable post-market regulatory requirements for Aramchol or any other product candidate in the countries
in which we seek to market the product; |
|
|
|
|
● |
our
ability to achieve favorable pricing for Aramchol or any other product candidate; |
|
|
|
|
● |
our
expectations regarding the commercial market for non-alcoholic steato-hepatitis, or NASH, in patients or any other targeted indication; |
|
|
|
|
● |
third-party
payor reimbursement for Aramchol or any other product candidate; |
|
|
|
|
● |
our
estimates regarding anticipated capital requirements and our needs for additional financing; |
|
|
|
|
● |
market
adoption of Aramchol or any other product candidate by physicians and patients; |
|
|
|
|
● |
the
timing, cost or other aspects of the commercial launch of Aramchol or any other product candidate; |
|
|
|
|
● |
our
ability to obtain and maintain adequate protection of our intellectual property; |
|
|
|
|
● |
the
possibility that we may face third-party claims of intellectual property infringement; |
|
|
|
|
● |
our
ability to manufacture our product candidates in commercial quantities, at an adequate quality or at an acceptable cost; |
|
● |
our
ability to establish adequate sales, marketing and distribution channels; |
|
|
|
|
● |
intense
competition in our industry, with competitors having substantially greater financial, technological, research and development, regulatory
and clinical, manufacturing, marketing and sales, distribution and personnel resources than we do; |
|
|
|
|
● |
the
development and approval of the use of Aramchol or any other product candidate for additional indications or in combination therapy;
|
|
|
|
|
● |
our
expectations regarding licensing, acquisitions and strategic operations; |
|
|
|
|
● |
our
ability to maintain the listing of our common stock on The Nasdaq Capital Market; and |
|
|
|
|
● |
our
ability to identify, evaluate and complete any strategic alternative that yields value for our shareholders. |
We
believe these forward-looking statements are reasonable; however, these statements are only current predictions and are subject to known
and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance
or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in
our Annual Report on Form 20-F for the year ended December 31, 2021 filed with the SEC on May 2, 2022, in greater detail under the heading
“Risk Factors” and elsewhere in the Annual Report and this Form 6-K. Given these uncertainties, you should not rely upon
forward-looking statements as predictions of future events.
All
forward-looking statements attributable to us or persons acting on our behalf speak only as of the date hereof and are expressly qualified
in their entirety by the cautionary statements included in this report. We undertake no obligations to update or revise forward-looking
statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In
evaluating forward-looking statements, you should consider these risks and uncertainties.
Overview
We
are a clinical-stage biopharmaceutical company focused on the development of Aramchol, a liver targeted stearoyl-coenzyme A desaturase-1,
or SCD1, modulator, first in class, novel, oral therapy for the treatment of NASH for variable populations.
We
are also collaborating with the Hebrew University in the development of Amilo-5MER, a 5 amino acid synthetic peptide.
In
May 2022, we announced that we will expand into new anti-fibrotic indications to maximize the potential of Aramchol while at the same
time discontinuing the Open Label Part of the ARMOR Study having reached its objectives. Simultaneously, we are initiating a cost reduction
plan and are evaluating our strategic options alternatives and our structuring to best optimize our resources to enhance shareholder
value and achieve our goals.
Financial
Overview
To
date, we have funded our operations primarily through proceeds from private placements and public offerings. At March 31, 2022, we had
current assets of $29.7 million, which includes cash and cash equivalents of $3.7 million, marketable debt securities of $25.0 million,
other receivables of $0.8 million and restricted cash of $0.1 million. This compares with current assets of $36.0 million at December
31, 2021, which includes cash and cash equivalents of $2.9 million, marketable debt securities of $31.9 million, other receivables if
$1.1 million and restricted cash of $0.1 million. Although we provide no assurance, we believe that such existing funds will be sufficient
to continue our business and operations as currently conducted for more than 12 months from the date of issuance of this Form 6-K. However,
we will continue to incur operating losses, which may be substantial over the next several years, and we expect that we will need to
obtain additional funds to further develop our research and development programs.
Costs
and Operating Expenses
Our
current costs and operating expenses consist of two components: (i) research and development expenses; and (ii) general and administrative
expenses.
Research
and Development Expenses
Our
research and development expenses consist primarily of outsourced development expenses, salaries and related personnel expenses and fees
paid to external service providers, patent-related legal fees, costs of pre-clinical studies and clinical trials and drug and laboratory
supplies. We account for all research and development expenses as they are incurred. We expect our research and development expense to
remain our primary expense in the near future as we continue to develop Aramchol. Increases or decreases in research and development
expenditures are primarily attributable to the number and/or duration of the pre-clinical and clinical studies that we conduct.
We
expect that a substantial amount of our research and development expense in the future will be incurred in support of our current and
anticipated pre-clinical and clinical development projects. Due to the inherently unpredictable nature of pre-clinical and clinical development
studies and unpredictability of our evaluation of strategic alternatives, we are unable to estimate with any certainty the costs we will
incur in the continued development of Aramchol for NASH and other indications in our pipeline for potential partnering and/or commercialization.
Clinical development timelines, the probability of success and development costs can differ materially from expectations. We currently
expect to continue testing Aramchol in pre-clinical studies for toxicology, safety and efficacy, and to conduct additional clinical trials
for Aramchol. Nevertheless, we expect to decrease our research and development expenses as a result of the discontinuation of the Open
Label Part of the ARMOR Study and our evaluation of strategic alternatives.
The
lengthy process of completing clinical trials and seeking regulatory approval for Aramchol requires the expenditure of substantial resources.
Any failure or delay in completing clinical trials, or in obtaining regulatory approvals, could cause a delay in generating product revenue
and cause our research and development expenses to increase and, in turn, have a material adverse effect on our operations. Because of
the factors set forth above, we are not able to estimate with any certainty when we would recognize any net cash inflows from our projects.
General
and Administrative Expenses
General
and administrative expenses consist primarily of compensation for employees in executive and operational roles, including finance/accounting,
legal and other operating positions in connection with our activities. Our other significant general and administrative expenses include
non-cash stock-based compensation costs and facilities costs (including the rental expense for our offices in Tel Aviv, Israel), professional
fees for outside accounting and legal services, travel costs, investors relations, insurance premiums and depreciation.
We
anticipate increased costs associated with being a public company, including expenses related to services associated with maintaining
compliance with The Nasdaq Capital Market and SEC requirements, directors and officers insurance, increased legal and accounting costs
and investor relations costs. Our general and administrative expenses may also increase due to increases in professional and advisory
fees as we evaluate our strategic alternatives.
Financial
expenses (income), Net
Our
financial income, net consists mainly of interest income from marketable debt securities and foreign currency gains. Our financial expense
consists of fees associated with banking activities and losses from realization of marketable debt securities.
Results
of Operations
The
table below provides our results of operations for the three months ended March 31, 2022 as compared to the three months ended March
31, 2021.
| |
Three
months ended March 31, | |
| |
2022 | | |
2021 | |
| |
(unaudited) | |
| |
(In thousands,
except per share data) | |
Research and development
expenses | |
| 4,796 | | |
| 7,380 | |
General and administrative
expenses | |
| 1,296 | | |
| 1,752 | |
Total operating expenses | |
| 6,092 | | |
| 9,132 | |
Financial
expense (income), net | |
| 51 | | |
| (227 | ) |
Net
loss | |
| 6,143 | | |
| 8,905 | |
Other
comprehensive loss: | |
| 445 | | |
| 130 | |
Comprehensive
loss | |
| 6,588 | | |
| 9,035 | |
Basic
and diluted net loss per share | |
$ | 0.24 | | |
$ | 0.38 | |
Research
and Development Expenses
Our
research and development expenses amounted to approximately $4.8 million during the three months ended March 31, 2022, representing a
decrease of approximately $2.6 million, or 35%, compared to approximately $7.4 million for the comparable period in 2021.
The
decrease during the three months ended March 31, 2022 primarily resulted from a decrease in drug development expenses.
General
and Administrative Expenses
Our
general and administrative expenses amounted to approximately $1.3 million during the three months ended March 31, 2022, representing
a decrease of approximately $0.5 million, or 28%, compared to approximately $1.8 million for the comparable period in 2021. The decrease
in general and administrative expenses for the three months ended March 31, 2022 resulted primarily from a decrease in salaries and benefits
expenses.
Operating
Loss
As
a result of the foregoing, for the three months ended March 31, 2022, our operating loss was approximately $6.1 million, representing
a decrease of $3.0 million, or 33%, as compared to approximately $9.1 million for the comparable period in 2021.
Financial
expenses (Income), Net
Our
financial expenses, net amounted to approximately $0.05 million during the three months ended March 31, 2022, compared to a financial
income of $0.2 million for the comparable period in 2021.
The
financial expenses, net for the three months ended March 31, 2022 primarily relates to a loss from realization of marketable debt securities
partially offset by interest income from marketable debt securities.
Net
Loss
As
a result of the foregoing, for the three months ended March 31, 2022, our net loss was approximately $6.1 million, representing a decrease
of $2.8 million, or 31%, as compared to approximately $8.9 million for the comparable period in 2021.
Liquidity
and Capital Resources
To
date, we have funded our operations primarily through proceeds from private placements and public offerings and we have incurred substantial
losses since our inception. As of March 31, 2022, we had an accumulated deficit of approximately $174.3 million and positive working
capital (current assets less current liabilities) of approximately $24.1 million. We expect that operating losses will continue for the
foreseeable future.
As
of March 31, 2022, we had cash and cash equivalents of approximately $3.7 million, restricted cash of approximately $0.1 million and
marketable debt securities of approximately $25.0 million invested in accordance with our investment policy, totaling approximately $28.9
million, as compared to approximately $2.9 million, $0.1 million and $31.9 million as of December 31, 2021, respectively, totaling approximately
$34.9 million. The decrease is mainly attributable to the $5.5 million negative cash flow from operating activities during the three
months ended March 31, 2022.
We
had negative cash flow from operating activities of approximately $5.5 million for the three months ended March 31, 2022, as compared
to negative cash flow from operating activities of approximately $9.3 million for the three months ended March 31, 2021. The negative
cash flow from operating activities for the three months ended March 31, 2022 is mainly attributable to our net loss of approximately
$6.1 million.
We
had positive cash flow from investing activities of approximately $6.3 million for the three months ended March 31, 2022, as compared
to a negative cash flow from investing activities of approximately $1.6 million for the three months ended March 31, 2021. The positive
cash flow from investing activities for the three months ended March 31, 2022 was primarily due to the net sale of available for sale
securities.
We
had no cash flow from financing activities for the three months ended March 31, 2022, as compared to a positive cash flow from financing
activities of approximately $17.4 million for the three months ended March 31, 2021.
On
March 26, 2021, we entered into a Sales Agreement with Cantor Fitzgerald & Co. and Canaccord Genuity LLC, as sales agents, pursuant
to which we may offer and sell ordinary shares “at the market” having an aggregate offering price of up to $50.0 million
from time to time through the sales agents subject to the limits of General Instruction I.B.5 to Form F-3, also known as the baby shelf
rule.
Although
we provide no assurance, we believe that our existing funds will be sufficient to continue our business and operations as currently conducted
for more than 12 months from the date of issuance of this Report on Form 6-K. However, additional funding will be necessary to fund our
ARMOR Study, our Amilo-5MER program and ongoing research and development work, to advance our product candidates through regulatory approval
and into commercialization, if approved and the evaluation of our strategic alternatives. We intend to obtain additional funding through
debt or equity financings, governmental grants or through entering into collaborations, strategic alliances or license agreements to
increase the funds available to support our operating and capital needs. Although we have been successful in raising capital in the past,
there is no assurance that we will be successful in obtaining additional financing on terms acceptable to us. Specifically, the COVID-19
pandemic and the invasion of Ukraine has significantly disrupted global financial markets, and may limit our ability to access capital,
which could in the future negatively affect our liquidity. If funds are not available, we may be required to delay, reduce the scope
of or eliminate research or development plans for, or commercialization efforts with respect to Aramchol, Amilo-5MER and/or our other
pre-clinical and clinical programs. This may raise substantial doubts about our ability to continue as a going concern.
The
extent of our future capital requirements will depend on many other factors, including:
|
● |
the
progress and costs of our pre-clinical studies, clinical trials and other research and development activities; |
|
|
|
|
● |
the
impact of the COVID-19 pandemic on our operations; |
|
|
|
|
● |
the
scope, prioritization and number of our clinical trials and other collaboration, research and development programs; |
|
|
|
|
● |
the
amount of revenues and contributions we receive under future licensing, development and commercialization arrangements with respect
to Aramchol, Amilo-5MER or any other product candidate; |
|
|
|
|
● |
the
costs of the development and expansion of our operational infrastructure; |
|
● |
the
costs and timing of obtaining regulatory approval for Aramchol, Amilo-5MER or any other product candidate; |
|
|
|
|
● |
the
ability of us, or our collaborators, to achieve development milestones, marketing approval and other events or developments under
our potential future licensing agreements; |
|
|
|
|
● |
the
costs of filing, prosecuting, enforcing and defending patent claims and other intellectual property rights; |
|
|
|
|
● |
the
costs and timing of securing manufacturing arrangements for clinical or commercial production; |
|
|
|
|
● |
the
costs of contracting with third parties to provide sales and marketing capabilities for us; |
|
|
|
|
● |
the
costs of acquiring or undertaking development and commercialization efforts for any future products, product candidates or platforms; |
|
|
|
|
● |
the
magnitude of our general and administrative expenses; |
|
|
|
|
● |
any
cost that we may incur under future in- and out-licensing arrangements relating to Aramchol, Amilo-5MER or any other product candidate;
|
|
|
|
|
● |
market
conditions; and |
|
|
|
|
● |
our
ability to identify, evaluate and complete any strategic alternative that yields value for our shareholders. |
Trend
Information
We
are a development stage company, and it is not possible for us to predict with any degree of accuracy the outcome of our research, development
or commercialization efforts. As such, it is not possible for us to predict with any degree of accuracy any significant trends, uncertainties,
demands, commitments or events that are reasonably likely to have a material effect on our net loss, liquidity or capital resources,
or that would cause financial information to not necessarily be indicative of future operating results or financial condition. However,
to the extent possible, certain trends, uncertainties, demands, commitments and events are in this “Management’s Discussion
and Analysis of Financial Condition and Results of Operations”.
Controls
and Procedures
As
a “foreign private issuer”, we are only required to conduct the evaluations required by Rules 13a-15(b) and 13a-15(d) of
the Exchange Act as of the end of each fiscal year and therefore have elected not to provide disclosure regarding such evaluations at
this time.
Risks
Factors
Any
investment in our business involves a high degree of risk. Before making an investment decision, you should carefully consider the information
we include in this Report on Form 6-K, including our unaudited consolidated financial statements and accompanying notes, and the additional
information in the other reports we file with the Securities and Exchange Commission along with the risks described in our Annual Report
on Form 20-F for the fiscal year ended December 31, 2021. These risks may result in material harm to our business and our financial condition
and results of operations. In this event, the market price of our ordinary shares may decline and you could lose part or all of
your investment. We have described below those risks that reflect substantive changes from, or additions to, the risks described in our
Annual Report on Form 20-F for the fiscal year ended December 31, 2021.
Our
activities to evaluate and pursue strategic alternatives may not be successful.
In
May 2022, we announced that we will expand into new anti-fibrotic indications to maximize the potential of Aramchol while at the same
time discontinuing the Open Label Part of the ARMOR Study having reached its objectives. Simultaneously, we are initiating a cost reduction
plan and are evaluating our strategic options alternatives and our structuring to best optimize our resources to enhance shareholder
value and achieve our goals. We expect to devote significant time and resources to identifying and evaluating strategic transactions;
however, there can be no assurance that such activities will result in any agreements or transactions that will enhance shareholder value.
In addition, potential strategic transactions that require shareholder approval may not be approved by our shareholders or a counterparty’s
shareholders. Further, any strategic transaction that is completed ultimately may not deliver the anticipated benefits or enhance shareholder
value.
We
also may acquire additional businesses, products or product candidates. Integrating any newly acquired business, product or product candidate
could be expensive and time-consuming. We may not be able to integrate any acquired business, product or product candidate successfully.
If we do acquire any additional business, products, or product candidates, our future financial performance will depend, in part, on
our ability to manage any future growth effectively and our ability to integrate any such acquired businesses, products or product candidates.
Any
strategic transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may
pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial
results. For example, these transactions may entail numerous operational and financial risks, including:
|
● |
exposure
to unknown liabilities; |
|
|
|
|
● |
incurrence
of substantial debt or dilutive issuances of equity securities to pay for acquisitions; |
|
|
|
|
● |
higher
than anticipated acquisition and/or integration costs; |
|
|
|
|
● |
write
downs of assets or goodwill or impairment charges; |
|
|
|
|
● |
increased
amortization expenses; |
|
|
|
|
● |
difficulty
and cost in combining the operations and personnel of any acquired businesses with our operations and personnel; |
|
|
|
|
● |
impairment
of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and |
|
|
|
|
● |
the
inability to retain our key employees or our other service providers or those of any acquired businesses. |
Accordingly,
there can be no assurance that we will undertake or successfully complete any strategic transactions of the nature described above and
any transactions that we do complete may be subject to the foregoing or other risks and could have a material adverse effect on our business,
financial condition and prospects.
We
are substantially dependent on our remaining employees to facilitate the consummation of a strategic transaction. We could lose such
key employees.
Our
cash conservation activities may yield unintended consequences, such as attrition and reduced employee morale, which may cause remaining
employees to seek alternative employment. Our ability to successfully complete a strategic transaction depends in large part on our ability
to retain certain personnel. Despite our efforts to retain these employees, one or more may terminate their employment on short notice.
The loss of the services of any of these employees could potentially harm our ability to evaluate and pursue strategic alternatives,
as well as fulfill our reporting obligations as a public company.
EXHIBIT
INDEX